Cisco (NASDAQ: CSCO) is benefiting from the surge in investments in artificial intelligence, as its chips power artificial intelligence used in massive data centers.
The tech company reported four consecutive quarters of growth in its revenue, partly from more demand from the construction of data centers and other infrastructure builders from the “Magnificent Seven.” Cisco had previously reported four consecutive year-over-year declines.
The networking equipment and services company is reaping the rewards of investors pouring their money into companies ramping up AI across various industries. Cisco’s advanced switches and routers are powered by its Silicon One chips.
Large investments are made by tech companies in servers, which include graphics processing units, the majority of which are manufactured by Nvidia (NASDAQ: NVDA). In October, Cisco launched an Ethernet switch that is based on silicon from Nvidia.
The company reported an increase of 8% in revenue during its fiscal first quarter to $14.9 billion, beating the FactSet consensus estimates for $14.8 billion. Cisco also reported that its AI infrastructure orders from hyperscaler customers totaled $1.3 billion, while its networking product orders increased at a double-digit rate for the fifth consecutive quarter.
Shares of Cisco have increased by 30% during the past year, with a 14% rise in the past month.
“We’re impressed with Cisco’s broad-based growth,” wrote William Kerwin, a senior equity analyst for Morningstar. “Artificial intelligence is a rising growth driver, but we also see strong results across campus and enterprise customers.”
Revenue from legacy business rises
Cisco’s largest unit, the networking business, reported sales rose by 15% to $7.77 billion, compared to the $7.47 billion that was estimated by analysts.
Enterprise networking and campus are the drivers of “Cisco’s bread and butter,” which is expected to see a “significant growth year for networking, spurred by a campus refresh cycle and a rising AI pipeline,” he said.
“Many customers are up for networking equipment refreshes five years after COVID, which should spur higher growth in the mid or high single digits for this business over the next two years,” Kerwin said.
The greater demand for AI and cloud customers will drive revenue increases, increasing profit margins for the company.
“Profitability remains highly positive for Cisco, with non-GAAP gross and operating margins of 68% and 34%, respectively,” he wrote. “We expect these levels to be steady into the medium term, though we foresee some modest gross margin pressure from a higher mix of cloud and AI customers.”
UBS analyst David Vogt has raised the price target of the stock twice to $90 from $88 with a buy rating, “following the combination of solid F1Q results led by strong ‘Product’ orders, a F2Q guide better than feared, and a bump to the FY26 revenue and EPS outlook.”
Cisco also increased its revenue for the entire fiscal year to generate between $60.2 billion and $61 billion, with earnings per share of $4.08 to $4.14, Cisco said. Cisco increased its fiscal 2026 sales guidance by $1 billion, or about 2%. Wall Street analysts predict sales of $59.7 billion and EPS of $4.04.
“We like Cisco’s rising AI momentum,” Kerwin said. “It guided to $3 billion in AI revenue in fiscal 2026, and more than $4 billion in AI orders, both implying immense growth. In addition, it announced a wholly incremental pipeline of enterprise and government AI orders in the future. We see AI driving significant growth, with low-single-digit growth for the rest of networking.”
Cisco could be on track to generate more growth as sales ramp up and produce its strongest year in performance for investors.
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