Cisco and Applied Materials Raise Outlooks as AI Spending Spreads Beyond Chips
Cisco Systems and Applied Materials both raised their outlooks on Thursday, November 12, reporting stronger-than-expected results and forecasting more growth ahead as spending on artificial intelligence infrastructure spreads from chips into the networking gear and factory equipment that support them.
The two companies reported after the U.S. stock market closed, hours after a turbulent session in which chip stocks were rattled by the resignation of Nvidia’s chief executive. Their results offered investors a reassuring read on AI demand from two different layers of the buildout: Cisco sells the switches and routers that connect data centers, while Applied Materials sells the machines that make the chips inside them.
Cisco lifts its full-year forecast
Cisco reported revenue of $18.5 billion for its fiscal first quarter, which ended October 24, up 24 percent from a year earlier. Product revenue rose 32 percent, while services revenue grew 1 percent. Non-GAAP earnings per share were $1.40, up 40 percent, and GAAP earnings per share were $1.14. Reuters reported that revenue topped the average analyst estimate of $18.14 billion compiled by LSEG.
The more closely watched number was the outlook. Cisco raised its fiscal 2027 revenue forecast to $74.8 billion to $75.8 billion, up from $72.2 billion to $73.4 billion, and lifted its non-GAAP earnings forecast to $5.47 to $5.53 per share.
Cisco also raised its target for AI infrastructure revenue from hyperscale customers — the giant cloud operators building AI data centers — to $9 billion in fiscal 2027, up from $7.5 billion. The company said that figure is more than double its fiscal 2026 total. Chief Executive Chuck Robbins described the AI networking cycle as still early.
There was one caution in the report. Cisco’s adjusted gross margin slipped to 65.6 percent from 68.1 percent a year earlier, as shortages of memory chips lifted component costs, even though the margin still edged past estimates. Reuters reported that Cisco shares were little changed in extended trading.
Applied Materials beats and guides higher
Applied Materials, which supplies wafer-fabrication equipment to chipmakers, reported record fiscal fourth-quarter revenue of $10.41 billion, up 53 percent from a year earlier and above the $10.30 billion analyst average, according to Reuters. Adjusted earnings were $4.16 a share, against an expected $4.06.
For the first quarter of fiscal 2027, the company forecast revenue of about $11.10 billion, plus or minus $500 million, above the $10.89 billion analysts expected, with adjusted earnings of $4.35 per share, plus or minus 20 cents, above the $4.25 consensus. Reuters reported that Applied Materials shares rose about 3 percent in extended trading.
Chief Executive Gary Dickerson said the company’s Semiconductor Systems business is expected to grow by more than 40 percent in calendar 2026 as chipmakers keep adding capacity for AI accelerators and high-bandwidth memory. “We expect 2027 to be another record year for the market and Applied,” Dickerson said, according to Reuters.
Why this matters
The two reports matter because they test whether AI spending is broadening beyond the chipmakers themselves. Nvidia dominates the market for AI processors, and its shares have swung sharply this week — Jensen Huang resigned as Nvidia’s chief executive on Thursday, and the company’s earnings report on November 17 is the next big test for the sector. But the AI buildout also requires networking, power, cooling and factory capacity, and Thursday’s results suggest that spending is reaching those suppliers too.
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Cisco’s raised hyperscaler target is the clearest signal: the company booked $9.3 billion of hyperscaler orders in fiscal 2026, and it now expects $9 billion of related revenue in fiscal 2027. Applied Materials’ guidance points in the same direction, with chipmakers ordering more equipment to expand production of advanced chips and memory.
The picture is not without risks. Memory shortages are already squeezing Cisco’s margins, and investors will watch whether component costs keep rising. Samsung is in talks to buy data center cooling firm Modine, another sign that the infrastructure race is heating up — and that suppliers are becoming acquisition targets. Cerebras raised its 2026 revenue forecast to $960 million earlier this week on the strength of its OpenAI deal, adding to the evidence that AI demand remains strong across the supply chain.
Latest developments
Both companies held earnings calls at 4:30 p.m. ET on Thursday. Stock futures inched higher on Thursday evening after the day’s dip, according to CNBC, with the two upbeat outlooks helping sentiment after a volatile session.
The next major reading on AI demand comes Tuesday, November 17, when Nvidia reports fiscal third-quarter results. October producer price data, due Friday morning, will also give investors a fresh read on inflation before the Federal Reserve’s next policy decision.
Frequently asked questions
How much did Cisco raise its fiscal 2027 revenue forecast?
Cisco raised its fiscal 2027 revenue forecast to $74.8 billion to $75.8 billion, up from $72.2 billion to $73.4 billion. It also raised its AI infrastructure revenue target from hyperscalers to $9 billion, from $7.5 billion.
What did Applied Materials report?
Applied Materials reported record fiscal fourth-quarter revenue of $10.41 billion, up 53 percent, with adjusted earnings of $4.16 a share. It forecast first-quarter fiscal 2027 revenue of about $11.10 billion, above the $10.89 billion analysts expected.
Why are these two earnings reports important for AI stocks?
Cisco and Applied Materials sit on different sides of the AI buildout — networking gear and chipmaking equipment. Strong results and raised outlooks from both suggest AI spending is spreading through the supply chain, not just flowing to chipmakers.
What is the next big AI earnings date?
Nvidia reports fiscal third-quarter results on Tuesday, November 17, with an earnings call at 2 p.m. Pacific time. It is one of the most closely watched earnings releases in the technology sector.
The bottom line
Cisco and Applied Materials delivered the same message from two ends of the AI supply chain on Thursday: demand is still growing, and both companies now expect more of it than they did three months ago. With Nvidia’s earnings due next week, the question for investors is whether the chipmaker at the center of the boom can match the optimism its suppliers just showed.
Sources: Reuters; Cisco Systems; Applied Materials; Finimize; The Apex Wire; InvestingLive.
