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By Juby Babu
(Reuters) -Cisco Systems raised its annual revenue forecast on Wednesday, betting on higher demand for its cloud networking gear amid an artificial intelligence boom, sending its shares up nearly 7% in extended trading.
Corporate customers have been investing heavily to build their AI infrastructure, boosting demand for data centers, which use Cisco's products such as ethernet switches and routers.
"Cisco's solid forecast should lift its share price and be a boost in the arm for AI and technology companies in general," said Michael Ashley Schulman, chief investment officer at Running Point Capital.
Earlier this week, Cisco partnered with French AI firm Mistral to jointly launch an AI agent for automating tasks and streamlining workflow. It launched Cisco AI Defense in January to safeguard enterprises against the misuse of AI tools.
"Business customers are upgrading their networks to support AI initiatives, offsetting reduced federal government spending following the administration change; this shift in customer mix has helped maintain momentum despite Washington's project delays," Schulman said.
Cisco also approved an increase of $15 billion for its share buyback program, taking the total remaining authorized fixed amount for stock repurchases to $17 billion.
The company expects fiscal 2025 revenue to be between $56 billion and $56.5 billion, compared with the $55.3 billion to $56.3 billion forecast earlier. Analysts estimate $55.99 billion, according to data compiled by LSEG.
It forecast third-quarter revenue at $13.9 billion to $14.1 billion, compared with the estimate of $13.87 billion.
Cisco's adjusted gross margin forecast for the quarter has the cost of the proposed tariffs built into it, Chief Financial Officer Scott Herren said on a conference call.
U.S. President Donald Trump announced 25% tariffs on most goods from Canada and Mexico on February 1, but then paused them for a month while he negotiates with the country's two biggest trading partners. An additional 10% tariff on China was effective February 4.
Cisco's second-quarter revenue was $14 billion, ahead of analysts' estimate of $13.87 billion.
(Reporting by Juby Babu in Mexico City; Editing by Shilpi Majumdar)
