Shares of Cisco Systems Inc. were flat in late trading today after the networking infrastructure giant reported first-quarter earnings and revenue that came in ahead of Wall Street’s expectations.

The company also raised its guidance for fiscal 2027, citing strong demand for artificial intelligence network infrastructure.

Cisco reported earnings before certain costs such as stock compensation of $1.40 per share, comfortably beating the Street’s target of $1.33 per share. Revenue for the quarter jumped 24% from the same period one year earlier, to $18.5 billion, ahead of the $18.1 billion analyst consensus estimate. All told, Cisco’s net income rose to $4.6 billion, up from just $2.9 billion a year ago.

Although the stock was flat in extended trading, it’s still up 32% in the year to date, way ahead of the broader Nasdaq index, which has gained just 9% over the same stretch.

Cisco has been pushing to gain a foothold in the AI infrastructure buildout that’s dominating the technology industry these days after failing to capitalize on the generative AI boom in the early days. However, its push has come at a critical juncture, as investors have become increasingly concerned over the prospects of a slowdown in data center building following the Democratic party’s sweeping victory in the U.S. midterm elections. Additionally, there are growing fears about the impact rising borrowing costs will have on debt-fueled data center construction projects.

Still, Cisco Chief Executive Chuck Robbins (pictured) expressed confidence in the company’s ability to maintain its momentum. He told analysts on a conference call that we’re still in the “very early stages of a multiyear network supercycle.” He said he’s confident Cisco’s AI networking technology is strong enough to continue to capture a portion of the multibillion-dollar opportunity that presents.

“Organizations are turning to Cisco for our trusted, market-defining technology and our expertise to help them scale, secure and optimize their environments for the agentic AI era,” Robbins added.

Cisco is also building out its software portfolio with new tools that can help businesses to build armies of autonomous AI agents that can perform work on behalf of humans. It also sells the security software necessary to protect those agents and their underlying infrastructure against cyberattacks.

The company said it’s increasing its AI infrastructure revenue forecast for the fiscal year to $9 billion, which would be more than double what it earned in fiscal 2026. According to Chief Financial Officer Mark Patterson, the company is “unlocking significant operating leverage,” and this is what’s enabling it to grow its earnings “much faster” than its revenue.

Investors may still be worried about Cisco’s gross margins, though. This has been a concern for many companies, as the global shortage of memory chips has steadily increased the cost of the components that hardware makers need to build their data center infrastructure products.  Cisco’s gross margin of 65.6% in the quarter was in-line with the Street’s estimates, but down from 68.1% in the year-ago period.

TECHnalysis Research analyst Bob O’Donnell told Reuters that the decline was unlikely to worry too many people, though. “A small dip in gross margin is not a major concern given higher memory and component costs,” he said. He added that the company’s raised forecast and strong earnings and revenue was the main thing the market wanted to see.

For the current quarter, Cisco said it’s looking for earnings of between $1.34 and $1.36 per share on sales of $18 billion to $18.2 billion. That’s a strong forecast, with the Street looking for earnings of just $1.23 per share on revenue of $17.88 billion.

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