Cisco Stock Rises 17% in 6 Months: Will AI Endeavors Fuel More Gains?

Cisco Systems CSCO shares have returned 17.2% in the trailing six-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 expanding networking portfolio. While the broader sector has appreciated 11.7%, shares of Arista Networks climbed 3.9%. Hewlett Packard shares have dropped 2% over the same timeframe. Will AI endeavors help in sustaining the ongoing rally in CSCO shares? Let’s find out.

CSCO Stock’s Performance

AI Push Aids Cisco’s Long-Term Prospects

In the second quarter of fiscal 2026, AI infrastructure orders from hyperscalers hit $2.1 billion, and Cisco expects over $3 billion in AI infrastructure revenues from hyperscalers in fiscal 2026. The company shipped its one millionth Silicon One chip in the reported quarter and plans to deploy Silicon One architecture across high-performance networking systems by fiscal year 2029. An expanding portfolio with the introduction of a 102.4 terabit per second G300 chip and two new pluggable optics, a 1.6 terabit per second OSFP and an 800-gig LPO (both built with Cisco silicon photonics technology), is driving CSCO’s footprint in high-performance AI infrastructure. 

Cisco sees a growing pipeline of more than $2.5 billion in orders for its high-performance networking products across sovereign, Neocloud and enterprise customers ($350 million worth of orders in the second quarter of fiscal 2026). The joint venture with AMD and HUMAIN plans to deliver up to 1 gigawatt of AI infrastructure by 2030. Sovereign solutions are gaining traction as rapid AI adoption is accelerating concerns related to privacy, data governance and regulatory compliance.

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 20% in the reported quarter, which marked the sixth 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. Product orders in the second quarter of fiscal 2026 grew more than 18% year over year, with product orders from service providers and cloud customers surging 65%. Campus networking is benefiting from strong demand for next-gen solutions, including smart switches, secure routers and wireless products. 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. 

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 Q3 & FY26 Guidance

Cisco expects non-GAAP earnings between $1.02 per share and $1.04 per share for the third quarter of fiscal 2026. Revenues are expected to be in the range of $15.4-$15.6 billion.

The Zacks Consensus Estimate for CSCO’s third-quarter fiscal 2026 revenues is pegged at $15.52 billion, indicating growth of 9.7% on a year-over-year basis. The consensus mark for CSCO’s earnings is currently pegged at $1.03 per share, up by a penny over the past 30 days, indicating year-over-year growth of 7.3%.
 

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 $61.2-$61.7 billion range compared with $56.7 billion reported in fiscal 2025. Non-GAAP earnings are expected between $4.13 per share and $4.17 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 $61.54 billion, indicating growth of 8.6% from fiscal 2025. The consensus mark for CSCO’s fiscal 2026 earnings is currently pegged at $4.13 per share, up by 3 cents over the past 30 days, indicating year-over-year growth of 8.4%.

Cisco’s Prospects Justify Premium Valuation

Aggressive AI push is driving strong networking growth and 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 4.95X, higher than the Zacks Computer Networks industry’s 4.74X and Hewlett Packard Enterprise’s 0.69X but lower than Arista Networks’ 15.71X.

CSCO Stock’s Valuation

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 an expanding networking portfolio. 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.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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

Zacks Investment Research