We’re increasing our Cisco Systems price target after an AI-fueled beat and
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 ,…
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