Cisco Stock Rises 8% in 3 Months: Will the Rally Continue in 2026?

Cisco Systems CSCO shares returned 7.7% in the trailing 3-month period, outperforming the broader Zacks Computer & Technology sector, as well as close peers, Hewlett Packard Enterprise HPE and Arista Networks ANET, driven by an aggressive AI push and growing security dominance. While the broader sector has appreciated 5.1%, shares of Hewlett Packard Enterprise and Arista Networks have dropped 1.8% and 14.4%, respectively. Is there more room for Cisco stock to rise this year? Let’s find out.

CSCO Stock’s Performance

AI Push Aids Cisco’s Prospects; Justifies Premium Valuation

Aggressive AI push, strong networking growth and expanding security footprint justifies CSCO’s premium valuation as suggested by the Value Score of D. In terms of the forward 12-month price/sales, CSCO is trading at a premium of 4.77X, higher than the Zacks Computer Networking industry’s 4.63X and Hewlett Packard Enterprise’s 0.72X but lower than Arista Networks’ 14.57X.

CSCO Stock’s Valuation

In the first quarter of fiscal 2026, AI infrastructure orders from hyperscalers hit $1.3 billion, and Cisco expects $3 billion in AI infrastructure revenues from hyperscalers in fiscal 2026. The company sees a growing pipeline of more than $2 billion in orders for its high-performance networking products across sovereign, Neocloud and enterprise customers. While total Annual Recurring Revenues hit $31.4 billion, up 5% year over year, the remaining performance obligations at the end of the first quarter of fiscal 2026 were $42.9 billion, up 7% year over year. Both these metrics suggest a strong top-line growth prospect over the remainder of the year.

Networking Growth to Drive Cisco’s Top-Line

Robust demand for AI infrastructure and campus networking solutions is expected to drive CSCO’s top-line growth. The company’s networking portfolio, powered by Silicon One, AI-native security solutions and operating systems, is expanding CSCO’s AI footprint. Networking product orders grew in the high teens, which marked the fifth consecutive quarter of double-digit growth driven by hyperscale infrastructure, enterprise routing, campus switching, wireless, industrial IoT and servers. This bodes well for Networking revenues in fiscal 2026.

Increasing AI workloads at the network edge and the emergence of physical AI are benefiting the industrial IoT portfolio. Orders in the first quarter of fiscal 2026 grew more than 25% year over year. Campus networking is benefiting from strong demand for next-gen solutions, including smart switches, secure routers and Wi-Fi 7 wireless products, which CSCO expects to be the start of a multi-year, multibillion-dollar refresh opportunity as 4K and 6K switches support ends.

Rapid acceleration in the capacity requirements of the network due to unprecedented levels of network traffic and an ever-evolving threat landscape bodes well for Cisco’s prospects. In October, Cisco introduced the Cisco 8223, the industry's most optimized routing system for efficiently and securely connecting data centers and powering the next generation of AI workloads. The company also announced the P200 chip, which powers 8223. 

The AI opportunity further gets a boost from Cisco’s partnership with NVIDIA NVDA. Integration of Cisco Nexus switches with NVIDIA’s Spectrum-X architecture is offering low-latency, high-speed networking for AI clusters, driving enterprise AI orders. The Cisco Secure AI factory with NVIDIA provides a trusted blueprint for building secure AI-ready data centers for enterprises, sovereign cloud providers and newly emerging Neocloud providers.

CSCO Offers Positive Q2 & FY26 Guidance

Cisco expects non-GAAP earnings between $1.01 per share and $1.03 per share for the second quarter of fiscal 2026. Revenues are expected to be in the range of $15 billion-$15.2 billion.

The Zacks Consensus Estimate for CSCO’s second quarter fiscal 2026 revenues is pegged at $15.12 billion, indicating growth of 8.1% on a year-over-year basis. The consensus mark for CSCO’s earnings is currently pegged at $1.02 per share, unchanged over the past 30 days, indicating year-over-year growth of 8.5%.
 

Cisco Systems, Inc. Price and Consensus

Cisco Systems, Inc. price-consensus-chart | Cisco Systems, Inc. Quote

For fiscal 2026, CSCO expects revenues to be in the $60.2-$61 billion range compared with $56.7 billion reported in fiscal 2025. Non-GAAP earnings are expected between $4.08 per share and $4.14 per share compared with $3.81 per share reported in fiscal 2025.

The Zacks Consensus Estimate for CSCO’s fiscal 2026 revenues is pegged at $60.59 billion, indicating growth of 7% from fiscal 2025. The consensus mark for CSCO’s fiscal 2026 earnings is currently pegged at $4.10 per share, unchanged over the past 30 days, indicating year-over-year growth of 7.6%.

Here’s Why CSCO Stock is a Buy Right Now

An expanding portfolio makes Cisco well-positioned for sustained growth in an evolving tech landscape. AI push is noteworthy, along with a growing footprint in the security space. These trends are expected to help the stock rally and bode well for CSCO’s long-term prospects. 

CSCO currently carries a Zacks Rank #2 (Buy), suggesting that it is the right time to start accumulating the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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