Cisco's AI Expansion and Cloud Growth Drive Analyst Upgrades And Price Hikes, Citing Growth Like Extreme & Juniper
Wall Street analysts rerated Cisco Systems, Inc (NASDAQ:CSCO) for its upbeat quarterly report Wednesday amid an exciting earnings season.
Cisco Systems reported quarterly earnings of 94 cents per share, topping the analyst consensus estimate of 91 cents. Quarterly revenue of $13.9 billion beat the $13.87 billion consensus estimate.
Cisco Systems expects third-quarter EPS of 90 cents-92 cents, versus the 92 cent estimate, and revenue of $13.9 billion-$14.1 billion, versus the $13.86 billion estimate.
JP Morgan analyst Samik Chatterjee maintained Cisco Systems with an Overweight and raised the price target from $69 to $73.
Piper Sandler analyst James Fish reiterated Cisco Systems with a Neutral and raised the price target from $57 to $72.
Rosenblatt analyst Mike Genovese upgraded Cisco Systems to Buy from Neutral with an $80 price target.
BofA Securities analyst Tal Liani maintained Cisco Systems with a Buy and raised the price target to $76 from $72.
Goldman Sachs analyst Michael Ng reiterated Cisco Systems with a Neutral and raised the price target from $56 to $63.
JP Morgan: Cisco’s second-quarter results reinforced the improvement in the demand cycle, revenue upsides for Core Networking driving greater confidence in upsides for fiscal 2025, alleviating concerns around increased scrutiny on Public Sector and Fed spending, highlighting moderate cost headwinds for tariffs, while also noting mitigation levers in the form of both pricing and supply chain flexibility, and downplaying concerns of temporary dislocations in demand trends from the pull-forward of orders to avoid tariffs.
While the macro backdrop remains mixed, Cisco noted priority from Enterprise customers to spend towards modernizing infrastructure and strong Cloud demand, including triple-digit order growth from Hyperscalers and improving demand trends from Telco customers to get their networks ready for AI-led traffic demand.
Regarding Enterprise adoption of AI, Cisco highlighted a significant uptick in interest for integrated systems, which Chatterjee expects to build to be a key driver of improvement in demand for the portfolio with the broader proliferation of AI investments to the Enterprises alongside continued momentum from Hyperscalers.
Additionally, the analyst expects Core Networking to benefit from Enterprise AI adoption and a pull-through of other parts of the portfolio, including Security, as securing data remains a top priority for Enterprises while pursuing AI deployments, where Cisco’s broader portfolio stands well positioned to benefit.
Piper Sandler: Cisco faced a good setup as Fish previewed, which, given the upside, guide-up, and narrative around data center refresh, AI-traction with hyperscalers, Splunk integration, new product launches, and Campus refresh potentially down the road, has sent shares >5% higher after hours.
The debate from here will center around how much the lead-metric upside had been more straightforward compared to incremental demand versus Splunk contribution.
Estimates are still set up well following the guide raise, and Fish noted that Cisco could sustain mid-single-digit sales growth as the cycles contribute and the business transition is nearing an inflection point. Fish sought a better entry point and preferred other names.
Rosenblatt: Genovese had been arguing that Extreme Networks Inc
(NASDAQ:EXTR) and Juniper Networks Inc (NYSE:JNPR) deserve multiple expansions due to growth in software subscriptions, ARR, RPOs, and AI becoming a more significant driver of total business.
The analyst upgraded Cisco and raised the price target for the same reasons. For the second quarter, Cisco increased revenues by 9% to $14.0 billion and produced EPS of $0.94, exceeding consensus on each.
Total product orders grew 29% and 11%, excluding Splunk, with substantial improvement in Service Provider and Cloud orders. There was double-digit growth in ARR, RPOs, and subscriptions, which accounted for 56% of total revenue.
AI infrastructure orders with Web Scalers were more than $350 million in the quarter, bringing the year-to-date total to ~$700 million and putting Cisco on track to exceed $1 billion of AI infrastructure orders in fiscal 2025.
Other positives were triple-digit growth in Web-Scale orders and greater than 20% in Telco orders. Security revenues and orders more than doubled year-over-year. Cisco said it is starting to see AI orders from Enterprise customers.
BofA Securities: The second-quarter results and third-quarter guidance are above expectations. Excluding Splunk, orders were up 11%, Service Provider and Cloud orders up 63%, and double-digit Data Center and Campus order growth.
Demand is picking up on the back of high network utilization at the macro level following a few years of inventory absorption. AI infrastructure buildouts drive demand across Cloud, Service Provider, and Enterprise verticals.
Cisco was well prepared to address the improving demand, offering a solid portfolio of Optical, Routing, Silicon, and other solutions that cater to these needs. Liani expects continued growth in the second half and 2026.
The rerating reflects Liani’s belief that Networking should see renewed growth on normalization of Campus switching demand and Ethernet-based AI buildouts, new product announcements should support growth re-acceleration of its Security business, and noted Splunk synergies supporting growth initiatives in Security and Observability.
Additionally, Cisco’s shift to recurring and subscription revenue is positive and helps support the stock, with 50% of revenue now recurring.
Goldman Sachs: The strength in data center switching and improving Campus switching demand drove the upbeat quarter. Service Provider & Cloud orders strength was driven by AI infrastructure readiness projects, with 20%+ growth in telco and triple-digit growth in webscale, including >$350 million of back-end AI orders, which puts Cisco on track to exceed its $1 billion AI fiscal 2025 order target.
Public Sector orders were up on strength in international public sector demand. U.S. federal represents <10% of total revenue, of which ~75% is the Department of Defense, which Cisco noted is less impacted by government efficiency efforts than civilian agencies.
Ng is encouraged by Cisco’s order momentum year-to-date, which increases visibility into fiscal 2026 and 2027 targets for 4%-6% annual revenue growth and its conservative outlook for gross margins, which reflect the full potential impacts for tariffs on China, Mexico, and China.
Price Action: CSCO stock is up 2.81% at $64.29 at last check Thursday.
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