Cisco's AI-Push Aids Networking Revenue: Is There More Upside Ahead?

Core Insights - Cisco Systems' first-quarter fiscal 2026 networking revenues increased by 15% year-over-year to $7.77 billion, driven by strong demand for AI infrastructure and campus networking solutions [1] - The company anticipates $3 billion in AI infrastructure revenues from hyperscalers in fiscal 2026, with AI infrastructure orders from hyperscalers reaching $1.3 billion [1][9] - Cisco is expanding its AI footprint through its networking portfolio, which includes Silicon One and AI-native security solutions [1][9] Networking Product Demand - Cisco has a growing pipeline of over $2 billion in orders for high-performance networking products across various customer segments, including sovereign, Neocloud, and enterprise [2] - The increasing AI workloads at the network edge and the rise of physical AI are positively impacting Cisco's industrial IoT portfolio [2] Technological Advancements - The integration of Cisco Nexus switches with NVIDIA's Spectrum-X architecture is providing low-latency, high-speed networking for AI clusters, boosting enterprise AI orders [3] - Cisco's upcoming N9100 switch, based on Spectrum-X silicon, is expected to enhance its presence among sovereign and neocloud providers [3] - The launch of Cisco Unified Edge, a converged platform for the network edge, is anticipated to facilitate real-time inferencing for AI workloads, promoting enterprise adoption [3] Competitive Landscape - Cisco faces significant competition from Arista Networks and Hewlett Packard Enterprise in the networking domain [4] - Arista Networks is gaining traction in high-performance switching products and has partnered with Fortinet to enhance security for AI data centers [5] - Hewlett Packard Enterprise is focusing on AI, Industrial IoT, and distributed computing, linking these areas to its networking business, Aruba Networks [6] Stock Performance and Valuation - Cisco shares have appreciated by 30.3% over the past 12 months, outperforming the broader Zacks Computer and Technology sector, which returned 22.6% [7][8] - Cisco's stock is trading at a premium, with a trailing 12-month price/book ratio of 6.58X compared to the industry average of 6.21X [11] - The Zacks Consensus Estimate for Cisco's second-quarter fiscal 2026 earnings is $1.02 per share, indicating an 8.5% growth from the previous year [13]