Cisco Systems Surges on AI Infrastructure Boom, Targets $3 Billion in Hyperscaler Revenue

We're increasing our Cisco Systems price target after an AI-fueled beat and raise

Cisco Systems shares spiked higher Wednesday evening after the networking company delivered a quarterly beat and outlook raise. Another quarter of double-digit order growth proves Cisco is an underrated winner from the AI infrastructure buildout. Revenue in the company's fiscal 2026 first quarter, which ended Oct. 25, increased 8% year over year to $14.88 billion, exceeding the LSEG-complied analyst consensus estimate of $14.76 billion. Non-GAAP earnings increased 10% on an annual basis to $1 per share, beating expectations of 98 cents, LSEG data showed. GAAP stands for generally accepted accounting principles. CSCO YTD mountain Cisco Systems YTD Look at the shares of Cisco go. They surged more than 7% in after-hours trading to just about $80 per share. That's on top of a 3% move in regular trading hours. If the stock can take out $80.06, it will make its first all-time high since March 2000. Shares, as of Wednesday's close, rose roughly 25% year to date. Bottom line It's a deserving move after an excellent quarter, highlighted by accelerating product order growth, especially from artificial intelligence customers. During the post-earnings call, Cisco CEO Chuck Robbins attributed the strength in AI orders to a "deepening" relationship with existing customers. The company also called out that a "major multi-year, multi-billion-dollar campus networking refresh cycle" is underway. It wasn't all perfect, however, as the security business missed estimates, with revenue falling year over year. According to management, some revenue recognition timing issues need to be sorted out. Security weakness was our main concern ahead of the quarter. The business also missed revenue estimates in the prior quarter, and we didn't think a quick turnaround was likely. Our fear of this repeat was the main reason why we took some profits in this position Monday at around $71. Even though we were right to be cautious on security, the market was turning a blind eye to this issue because of how fast networking is growing. A rebound in security also isn't needed for management to hit on its outlook, which was raised well above Street estimates Wednesday evening. Another concern of the bears entering earnings was that Cisco would be negatively impacted by the government shutdown due to its large federal agencies business. Despite the closed government, Robbins noted this business managed to grow orders by a high single-digit percentage in the quarter. He's anticipating upside in orders once the government reopens. Why we own it Cisco Systems is an enterprise networking equipment provider that has made big strides to appeal to cloud customers. The company has also increased its presence in the security market through its acquisition of Splunk. In addition, Cisco's long-term transition toward subscription software sales, which are sticky and come with higher margins, should help improve the stock's undemanding price-to-earnings multiple. Competitors : Arista Networks , Hewlett Packard Enterprise , Juniper Networks Most recent buy : Aug. 19, 2025 Initiated : July 17, 2025 The story remains that Cisco has turned into a sleeper AI play thanks to the billions of dollars it is taking in from hyperscaler customers. That surge of orders is converting to big revenue. In fiscal year 2025, Cisco recognized roughly $1 billion of AI revenue from hyperscalers, which are the biggest of the Big Tech names, such as the major cloud companies. On the call, Robbins said he expects to recognize roughly $3 billion from hyperscalers in fiscal year 2026. Despite this accelerating growth and subscription revenue making up more than half of its total revenue, the stock still trades at a reasonable price-to-earnings multiple of about 19.5 times based on the new midpoint of management's full-year adjusted earnings-per-share (EPS) outlook. We're reiterating our 2 rating because we don't like to chase stock spikes, but we are increasing our price target to $85 per share from $78. Commentary Total Product orders increased 13% year over year - an acceleration from 7% growth in the prior quarter - with growth across all geographies and customer markets. When we review Cisco, we always focus on orders because that's the best leading indicator of where revenue is headed. Product revenue grew 10% year over year to $7.77 billion, beating estimates of about $7.47 billion. Starting with the Networking sub-segment, product orders increased by a high teens rate, representing the fifth consecutive quarter of double-digit growth. AI infrastructure orders from hyperscaler customers were a big driver of that growth. Cisco took in $1.3 billion of orders in the quarter, an acceleration from the more than $800 million in the prior quarter. The company also saw strong orders for enterprise routing, campus switching, wireless, industrial IoT, and servers. Credit Cisco's close relationships with portfolio name Nvidia and Advanced Micro Devices for its recent AI success. Last month, Cisco announced the N9100, which they called the first Nvidia partner developed data center switch based on Nvidia Spectrum-X Ethernet switch silicon. "The N9100, available in the second half of fiscal year 2026, will provide the operational consistency and flexibility needed for sovereign and neocloud providers to build and manage AI at scale," Robbins explained. Neoclouds are next-generation specialized clouds for accelerated computing. CoreWeave , which rents cloud-based Nvidia chips for AI tasks, is an example of a neocloud. Cisco is also helping G42, leading United Arab Emirates AI firm, with powering, connecting, and securing its large-scale AI clusters with AMD graphics processing units (GPUs) The enterprise AI story is starting to emerge, too. Cisco experienced strong demand for switching, routing, and wireless products, which Robbins said is an indication of customers "investing in the connectivity needed for AI deployments." Across sovereign, neocloud, and enterprise customers, Robbins called out a growing pipeline above $2 billion for its high performance networking products. This comes after Cisco booked $200 million of orders in its fiscal first quarter from these customers. By division, Networking revenue increased 15% to $7.77 billion, beating estimates. The largest driver of this increase in sales was from service provider routing, which is mostly from AI infrastructure. Data center switches and enterprise routing were also up double digits, while campus switching revenue increased by a high single digit percentage. In the Security division, revenue fell 2% year over year and missed analysts' forecasts again. It's disappointing to see a sizeable miss in back-to-back quarters, but management attributed the decline to a timing issue. Robbins explained that more customers are using Splunk's offerings through cloud subscriptions instead of on-premise deals, leading to a timing change of when revenue is recognized. Ultimately, this transition isn't a bad thing. The company is in favor of more subscription-based revenue. Cisco completed its $28 billion acquisition of Splunk in March 2024. "We are actually pleased to see more cloud subscriptions for Splunk as they enable greater adoption and expansion, and allow us to deliver innovation faster to enable customers to unlock value from AI Now " Robbins explained on the call. More broadly. Cisco said it continued to see order growth for some of it newer and refreshed security products, which make up about one third of the portfolio, while its order products are in decline. Importantly, management doesn't believe Security's stumbles will last long. They expect revenue growth to accelerate and end the year at a much higher rate. But even if that doesn't happen and the results don't materially improve from here, Cisco said it's still confident in its ability to deliver on its fiscal Q2 and full year 2026 outlook. The Collaboration and Observability units saw revenue drop 3% and rise 6%, respectively, with Collaboration missing estimates and Observability matching expectations. Services revenue increased 2% year over year to $3.81 billion, slightly beating estimates. As always, we appreciate Cisco's consistent approach to returning cash to shareholders. The company repurchased $2 billion worth of shares in the quarter at an average price of $68.28. That looks like a great trade since the stock is knocking on the door of $80 in after-hours trading. It has $12.2 billion remaining under its authorization. Cisco stock, as of Wednesday's closing price, has a 2.2% annual dividend yield. Guidance Cisco expects fiscal 2026 second-quarter revenue of $15 billion to $15.2 billion, which is well above the consensus estimate of $14.62 billion. It also sees non-GAAP EPS of $1.01 to $1.03 cents, which is nicely above the consensus estimate of 98 cents. For full year 2026, Cisco now expects revenue of $60.2 billion to $61 billion, which is about a $1 billion increase from the prior outlook of $59 billion to $60 billion. This revised outlook exceeds the consensus estimate of $59.64 billion. On the bottom line, management raised its EPS forecast to $4.08 to $4.14 from its prior outlook of $4.00 to $4.06. This new midpoint of $4.11 is better than the consensus analyst estimate by 7 cents. (Jim Cramer's Charitable Trust is long CSCO, NVDA. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Cisco's focus on AI infrastructure pays off with strong earnings and revenue beat - SiliconANGLE

Cisco's focus on AI infrastructure pays off with strong earnings and revenue beat Networking giant Cisco Systems Inc. delivered better-than-expected profit and revenue in its fiscal first quarter earnings results today and offered solid guidance for the current period, demonstrating progress in its efforts to capture more artificial intelligence spending. The encouraging results helped boost Cisco's stock by more than 7% after-hours, adding to a gain of just over 3% during the regular trading session. The company reported earnings before certain costs such as stock compensation of exactly $1 per share, edging past Wall Street's target of a 98 cent-per-share profit. Revenue for the period was up 8% from a year earlier to $14.88 billion, surpassing the analysts consensus estimate of $14.77 billion. The beat helped to drive an increase in Cisco's overall profit, with net income rising to $2.86 billion, up from $2.71 billion in the year-ago quarter. Cisco Chair and Chief Executive Chuck Robbins (pictured) said the solid results suggest the company is on track to deliver its strongest year in history in terms of revenue and profit. "The widespread demand for our technologies highlights the critical role of secure networking and the value of our portfolio as customers move quickly to unlock the potential of AI," he said. The results were the fourth consecutive quarter of revenue growth for Cisco, following a period during which it had suffered four successive quarters of decline. A year ago, the company had struggled with economic uncertainty that weighed on customer spending, especially in the case of government agencies. But the last year has been a different story, with Cisco vying to capture a share of the increased spending on data center infrastructure to fuel enterprise AI workloads. Cisco has been busy updating much of its networking gear, including its routers and network switches that are required to connect data center server racks in enormous clusters to support complex workloads. There's a real and growing demand for this kind of infrastructure, although the company faces competition from rivals such as Broadcom Inc., Hewlett-Packard Enterprise Co., which acquired former Cisco rival Juniper Networks Inc., and Arista Networks Inc. Still, Cisco has been doing well and remains the overall leader in the networking segment. Its main business unit, which spans network switches, routers and the software used to manage them, racked up more than $7.7 billion in revenue during the most recent quarter, up 15% from a year earlier. That surpassed Wall Street's expectations, with analysts looking for sales of just $7.47 billion. During the quarter, at Cisco's annual partner summit, it unveiled various new products and services, including the Cisco Unified Edge platform, which aims to support AI workloads at the network edge and modernize how companies deploy and secure distributed applications. In addition, the company also announced the new Cisco N9100 network switch, which it described as a pivotal enabler for next-generation AI workloads in the data center. The N9100 runs Cisco's Nexus and SONiC operating systems and is built on Nvidia Corp.'s Spectrum ASIC. By combining its software and networking stack with Nvidia's high-performance silicon, it provides greater flexibility, scalability and customizability for AI-native workloads, ensuring they can run more efficiently across the compute, networking and storage layers. Cisco has high hopes for the new switch and although it's too early to tell how successful it will be, the company is certainly making traction with its most important market, which it calls "hyperscale customers." In a conference call with analyst, Cisco Chief Financial Officer Mark Patterson said AI infrastructure orders from this customer segment reached $1.3 billion during the quarter, reflecting a "significant acceleration" from the year before. "We have a multi-year, multi-billion-dollar campus refresh opportunity starting to ramp, with strong demand for our refreshed networking products," he insisted. That opportunity appears to be the driving force behind Cisco's optimistic guidance. For the second quarter, the company said it's looking for sales of between $15 billion and $15.2 billion, topping the analysts' average forecast of $14.6 billion. It's also looking for earnings of between $1.01 and $1.03 per share, versus the Street's 99-cent target. For the full year, Cisco said it's aiming for total revenue of between $60.2 billion and $61 billion, with earnings pegged at $4.08 to $4.14. Analysts are looking for just $59.7 billion in annual sales and earnings of $4.04. Cisco needs the networking business to stay strong because the results from its other two business segments were disappointing. Revenue in the security software unit declined 2% from a year earlier to $1.98 billion, falling short of the Street's target of $2.16 billion. Cisco has made a big bet on its security business in an effort to diversify its revenue base, notably acquiring Splunk Inc. for $28 billion in 2024, but it may be some time until that investment pays off. Meanwhile, in the collaboration segment, sales slipped to $1.06 billion, down 3% from a year earlier and below the Street's forecast of $1.09 billion. Fortunately for Cisco, investors were prepared to overlook the company's struggles outside of its core networking business, and the after-hours stock bump means that its shares are now up 25% in the year to date, outpacing the 21% gain of the broader Nasdaq index.

Cisco To Hit One-Millionth Silicon One Chip Milestone In Q2 Amid AI Boom - Cisco Systems (NASDAQ:CSCO)

Cisco Systems Inc. (NASDAQ:CSCO) is set to ship its one-millionth Silicon One chip next quarter, a milestone fueled by a massive AI boom that saw the company book $1.3 billion in AI infrastructure orders in the first quarter alone. Check out CSCO's stock price here. Cisco Targets $3 Billion In FY26 AI Revenue The surge in AI-related demand helped Cisco deliver a strong first-quarter earnings beat and raise its full-year forecast, prompting CEO Chuck Robbins to declare the company is on track to deliver the "strongest year yet." The $1.3 billion in first-quarter orders from hyperscalers underpins the company's aggressive forecast. Cisco announced it now expects to recognize roughly $3 billion in AI infrastructure revenue from these major cloud customers in fiscal year 2026. Pipeline Swells To $2 Billion Beyond Hyperscalers This momentum is also building beyond its largest customers. Robbins highlighted a separate, growing pipeline "in excess of $2 billion" for its high-performance networking products from sovereign, Neocloud, and enterprise customers. "We had a solid start to fiscal 2026," Robbins said on the company's earnings call. "The widespread demand for our technologies highlights the critical role of secure networking... as customers move quickly to unlock the potential of AI." See Also: Cisco Rolls Out Splunk AI Upgrades to Boost Security, Cut Downtime, and Improve Business Decisions Campus Networking 'Ramping Faster' Than Prior Launches Beyond the data center, Robbins said this AI-driven demand is sparking a "multiyear, multibillion-dollar refresh opportunity" in its core campus networking portfolio. He noted that according to a Cisco index, "only 1/3 of organizations feel their IT infrastructure can accommodate the needs of their planned AI projects," creating a massive runway for growth as companies upgrade their core networks. Cisco Q1 2026 Snapshot Cisco's strong outlook follows a solid first-quarter performance: Revenue: $14.88 billion (beating estimates of $14.77 billion). Adjusted EPS: $1.00 per share (beating estimates of 98 cents per share). Shares of CSCO rose 3.14% to end at $73.96 apiece on Wednesday, and the stock rose 7.46% in after-hours trading. Higher by 25.14% year-to-date, the stock was also up 24.97% over the year. It maintains a stronger price trend over the short, medium, and long terms, with a moderate quality ranking. Additional performance details, as per Benzinga's Edge Stock Rankings, are available here. Read Next: Cisco Beats Q1 Earnings, Driven By 'Widespread' Demand -- Strong Outlook Sends Shares Higher Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. Photo courtesy: Sergiy Palamarchuk / Shutterstock.com CSCOCisco Systems Inc$79.4810.8%OverviewMarket News and Data brought to you by Benzinga APIs

Cisco CEO: Standout Networking Segment's Double-Digit Growth Driven By AI Preparation Plans

Cisco CEO Chuck Robbins also took to his company's Q1 2026 earnings call to highlight Cisco 360, the company's soon-to-be fully reconstructed partner program, saying it was a "recognition of the growth opportunities ahead of us." Cisco Systems ended its first fiscal quarter of 2026 on a high note led by double-digit strength in its core networking portfolio. That's because there's a major multi-year, multibillion-dollar campus networking refresh cycle underway right now, driven by the need for infrastructure that can support AI, according to Cisco executives. Cisco's entire campus networking portfolio, which includes switching, routing, wireless and IoT, saw accelerated order growth during the first quarter of the year. What's more, Cisco's next-generation networking offerings, including smart switches, secure routers and Wi-Fi 7 products, are ramping faster than prior product launches, the company said. "Cisco's strong start to fiscal 26 is a testament to the critical role of secure networking and the strength of our portfolio as organizations look to deploy AI across their businesses. That said, we know many customers still have a lot of work to do to ensure they have the modern, scalable secure networking infrastructure to support their AI goals," CEO Chuck Robbins said during the tech giant's Q1 2026 earnings call on Wednesday. The last 18 months has seen an emergence of the importance of networking relative to the AI wave, Robbins told investors. "That's what we do best. Driving a lot of innovation in the network, I think, at a time where the network is becoming more important, is huge. It's just the beginning," he said. [Related: Cisco Partner Summit 2025: Top Execs Sounds Off On Cisco 360 And AI] The why behind Cisco's next-gen networking offerings quickly gaining popularity in the market has to do with AI preparation and the belief that security and networking go hand-in-hand, Robbins said. "We're the only ones who have both security and networking. You've seen some of our competitors announce partnerships with security vendors, and those are hard to pull off. It's hard to get the level of integration you're going to need to have when you don't own each of the technologies, so, we feel like we're well positioned there," he said. The AI infrastructure orders Cisco received from web scale customers totaled $1.3 billion during the company's first quarter of its fiscal year. Robbins said that Cisco expects to recognize roughly $3 billion in AI infrastructure revenue from hyperscalers in fiscal year 2026. Robbins also took to the earnings call to address Cisco 360, the completely remodeled channel partner program that's launching in January and replacing the company's iconic, 23-year-old program. The CEO called Cisco 360 a "recognition of the growth opportunities ahead of us." It's about aligning Cisco's programs so that its teams and its partners are incented in the same way to go after the growth opportunities that Cisco's sees as the future, such as campus refresh, AI, security and premium services. The feedback on Cisco 360 coming out of Partner Summit 2025 earlier this month has been "generally positive," Robbins said. "We've launched tools to help [partners] assess the monetary impact of the new program versus the old program. 'Does it get better? Does it hurt you? And if it's hurting you, how can you adjust your go to market strategy to actually increase your performance in the program?'" He said. "Every time we do one of these major changes, we know there's a reasonable chance that we miss something along the way, and our commitment to [partners] is that if we miss something, we'll fix it. And we've got a long history of doing that." Cisco Q1 2026 Financial Results Cisco's networking segment includes the core switching and routing businesses, as well as the company's telecommunications, cloud, and optical networking products. The Networking segment climbed 15 percent with revenues of $7.77 billion compared to Q1 2025's result, which the company said was driven by strength across the portfolio, which was largely driven by revenue from AI infrastructure. Q1 2026 marked the fifth consecutive quarter of double-digit growth in Networking product orders, Cisco said. Cisco's security segment declined 2 percent year over year with revenue of $1.98 billion, which was attributed to demand for Cisco's next generation firewalls in Q1 that was offset by declines in Cisco's prior-generation security platforms. The observability segment posted 6 percent revenue growth year over year of $274 million, led by growth in Splunk and ThousandEyes, said Cisco CFO Mark Patterson, who took on the CFO role on July 27. Cisco's collaboration segment sales fell 3 percent year over year to $1.06 billion compared to Q1 2025, driven by declines in devices, Patterson said. The company's product revenue, which is led by the networking business, increased 10 percent and service revenue increased 2 percent during Q1 2026. For Cisco's fiscal Q1 2026, which ended October 25, revenue was up 8 percent to $14.9 billion compared to the same period a year ago. Cisco posted non-GAAP earnings per share of $1.00, a 9 percent increase compared to a year ago and non-GAAP net income of $4 billion in the first fiscal quarter of the year, which was up 10 percent year over year. Cisco's stock climbed 3.14 percent on Wednesday to $73.96 and was up 7 percent in after-hours trading.