Cisco's AI Expansion and Cloud Growth Drive Analyst Upgrades And Price Hikes, Citing Growth Like Extreme & Juniper

Core Insights - Cisco Systems reported quarterly earnings of 94 cents per share, exceeding the analyst consensus estimate of 91 cents, with quarterly revenue of $13.9 billion surpassing the $13.87 billion estimate [1] - Analysts have rerated Cisco positively following the earnings report, with several raising their price targets due to strong demand signals and growth prospects [9] Financial Performance - Cisco's second-quarter revenue increased by 9% to $14.0 billion, with total product orders growing by 29% and 11% excluding Splunk [8][10] - The company expects third-quarter EPS of 90-92 cents and revenue of $13.9 billion-$14.1 billion, compared to the estimates of 92 cents and $13.86 billion respectively [1] Demand Trends - There is a notable improvement in demand from Enterprise customers focused on modernizing infrastructure, with strong Cloud demand and triple-digit order growth from Hyperscalers [3][4] - AI infrastructure orders with Web Scalers exceeded $350 million in the quarter, contributing to a year-to-date total of approximately $700 million, positioning Cisco to exceed $1 billion in AI infrastructure orders for fiscal 2025 [10][14] Market Positioning - Cisco's shift towards recurring and subscription revenue is seen as a positive development, with 50% of total revenue now recurring [13] - The company is well-prepared to meet the increasing demand across Cloud, Service Provider, and Enterprise verticals, supported by a solid portfolio of Optical, Routing, and Silicon solutions [12] Analyst Sentiment - JP Morgan maintained an Overweight rating and raised the price target from $69 to $73, while Piper Sandler reiterated a Neutral rating with a price target increase from $57 to $72 [9] - Rosenblatt upgraded Cisco to Buy from Neutral with an $80 price target, reflecting confidence in the company's growth potential driven by AI and software subscriptions [8][9] Sector Dynamics - The macroeconomic backdrop remains mixed, but Cisco's performance indicates a recovery in the demand cycle, particularly in Core Networking and AI-related projects [2][12] - Public Sector orders showed strength, particularly from international demand, with U.S. federal revenue being less impacted by government efficiency efforts [15]