Cisco Up 35% in a Year: Is There More Room for the Stock to Rise?

Core Insights - Cisco Systems (CSCO) shares increased by 34.6% over the past 12 months, driven by a strong focus on AI and growing security capabilities [1] - The company's stock performance outpaced the broader Zacks Computer & Technology sector and competitors like Hewlett Packard Enterprise (HPE) and Arista Networks (ANET) [1] AI Infrastructure Growth - AI infrastructure orders from webscale customers reached $2 billion in fiscal 2025, doubling initial expectations [6] - In Q1 fiscal 2026, product orders from service providers and cloud customers surged by 45% year-over-year, with hyperscaler AI infrastructure orders hitting $1.3 billion [6][7] - Cisco anticipates $3 billion in AI infrastructure revenues from hyperscalers in fiscal 2026, supported by a robust pipeline exceeding $2 billion for high-performance networking products [6][7] Networking and Security Demand - The first-quarter fiscal 2026 results were bolstered by strong demand for AI infrastructure and campus networking solutions [7] - Networking product orders grew in the high teens for five consecutive quarters, driven by hyperscale infrastructure and enterprise routing [7][8] - The industrial IoT portfolio benefited from increased AI workloads, with orders growing over 25% year-over-year in Q1 fiscal 2026 [9] Product Innovations - Cisco introduced the Cisco 8223 routing system and the P200 chip, aimed at enhancing network capacity and security for AI workloads [10] - New features in Cisco AI Assistant and enhancements to the Webex Customer Experience portfolio are set to improve organizational efficiency [11] Strategic Partnerships - Cisco's collaboration with NVIDIA enhances networking capabilities for AI clusters, driving enterprise AI orders [12] - The Cisco Secure AI factory with NVIDIA aims to provide secure AI-ready data centers for various providers [12] Financial Outlook - For fiscal 2026, Cisco expects revenues between $60.2 billion and $61 billion, up from $56.7 billion in fiscal 2025 [13] - The Zacks Consensus Estimate for fiscal 2026 revenues is $60.81 billion, indicating a year-over-year growth of 7.34% [14] Valuation Concerns - Cisco shares are considered overvalued, with a Value Score of D and a forward price/sales ratio of 5.01X, higher than industry peers [15] - The stock is currently rated as a Hold, suggesting a cautious approach for investors [18][19]