Cisco Systems Inc. has provided an update on its anticipated revenue from artificial intelligence (AI) orders, revealing that it may be a late bloomer in the AI space. The company expects to generate $1 billion in orders related to AI infrastructure products by fiscal 2025, with the majority of that translating into revenue during that period. While this may seem like a delay, Cisco executives have noted that the pipeline of opportunities has tripled in the past 90 days.
This news comes amidst a challenging quarter for Cisco, which saw disappointing guidance and job cuts. The company is also facing uncertainty due to cautious and scrutinizing deals from other companies. In contrast to its chip-making partners like Nvidia Corp. and Advanced Micro Devices Inc., which have already seen significant revenue from AI-related chip sales, Cisco’s expectations are more modest. In fiscal 2023, Cisco reported $56.9 billion in revenue.
Currently, the standard technology used in high-performance data centers for AI systems is Infiniband, a proprietary technology by Nvidia. However, this may change as companies begin to develop their own internal infrastructures for AI in their proprietary data centers. Unlike Meta Platforms, which is investing billions in AI infrastructure for its web services, other companies aim to build their own infrastructure to keep their information and data secure.
Cisco’s CFO, Scott Herren, believes that ethernet will ultimately become the industry-standard networking protocol for AI, replacing Infiniband. While Cisco’s current revenue forecasts for AI include minimal product sales from its partnership with Nvidia, Herren sees this collaboration as a tailwind that will contribute to future revenue growth. He refrained from providing specific projections but acknowledged that the partnership with Nvidia is indeed an upside force.
Although Cisco faces competition from other networking companies looking to build their own AI-capable data centers, it is premature to count Cisco out when it comes to AI. The company’s growing pipeline of opportunities and its potential partnership with Nvidia position it well for future success in the AI market.
In conclusion, while Cisco may be experiencing a delay in generating significant revenue from AI, its recent update reveals promising growth opportunities. With a growing pipeline and a potential partnership with Nvidia, Cisco has the potential to make its mark in the AI space, despite facing challenges from competitors. As the industry evolves and companies build their own AI infrastructures, Cisco’s expertise in networking may prove to be a valuable asset.
