Cisco Systems Inc. CSCO has been benefiting from strong product orders from hyperscalers, enterprises, service providers, the public sector and cloud customers. In fiscal 2026, CSCO generated record-high revenues primarily due to its networking portfolio, powered by Silicon One, AI-native security solutions and operating systems. Increasing AI workloads at the network edge and the emergence of physical AI are benefiting the industrial IoT portfolio.
The chart below shows the price performance of CSCO year to date.
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CSCO Rides on AI Networking Strength
Cisco closed fiscal 2026 with $9.3 billion in hyperscaler AI infrastructure orders, about 4.5 times fiscal 2025, and roughly $4 billion in related revenues. CSCO expects hyperscaler AI revenues to reach $7.5 billion in fiscal 2027. In the fourth quarter of fiscal 2026, networking product orders rose 40% year over year, the eighth straight quarter of double-digit growth.
Company-wide orders excluding hyperscalers rose 25% in the fourth quarter of fiscal 2026. CSCO links this demand to AI traffic, infrastructure modernization and security requirements, reinforcing its view of a multi-year networking cycle.
AI hyperscaler behemoths like Amazon.com Inc. AMZN, Microsoft Corp. MSFT, Meta Platforms Inc. META and Alphabet Inc. GOOGL are using CSCO’s AI-enabled networking infrastructure and switching equipment for their data centers.
Silicon & Optics Positioning
Cisco’s vertically integrated networking stack is expanding across scale-out and scale-across AI architectures. In the fourth quarter of fiscal 2026, the company won three new hyperscaler designs, covering a P200 scale-across system, a G200 scale-out system and an optical line system. Fiscal 2026 hyperscaler AI orders were about 60% Silicon One-based systems and 40% optics, while Acacia generated more than $1 billion in orders in the last reported quarter.
Security and Collaboration Business
In the fourth quarter of fiscal 2026, security revenues increased 14% year over year. More than 1,500 customers bought newer security products, while firewall orders grew more than 30% for the second consecutive quarter. CSCO expects security growth to move from low single digits in fiscal 2026 to high single digits in fiscal 2027 and reach double-digit growth as the year progresses.
Cisco is extending AI into operations. Nearly 4,500 enterprises had signed up for Cisco Cloud Control by the end of the fourth quarter of fiscal 2026, while Cisco IQ had more than 8,600 customers. Management said AI use across customer experience is raising renewal rates. In September 2026, management said services should turn positive in fiscal 2027 and reach mid-single-digit growth by the year-end as hardware-related services attach.
Solid Guidance
For the first quarter of fiscal 2027, CSCO expects revenues between $18 billion and $18.2 billion. Non-GAAP earnings are projected at $1.32-$1.34 per share, with a non-GAAP gross margin of 65-66% and an operating margin of 35.5-36.5%.
For fiscal 2027, Cisco projects revenues of $72.2-$73.4 billion and non-GAAP earnings of $5.05-$5.11 per share. Hyperscaler AI infrastructure revenues are expected to reach $7.5 billion, up from approximately $4 billion in fiscal 2026.
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Impressive Estimate Revisions
For first-quarter fiscal 2027 (ending July 2027), the Zacks Consensus Estimate currently shows revenues of $18.09 billion, suggesting an improvement of 21.5% year over year and earnings per share of $1.32, indicating an increase of 32% year over year. The Zacks Consensus Estimate for the current year has improved 14.8% in the last 60 days.
For 2027 (ending July 2027), the Zacks Consensus Estimate currently shows revenues of $73.03 billion, suggesting an improvement of 15.3% year over year and earnings per share of $5.11, indicating an increase of 18% year over year. The Zacks Consensus Estimate for the current year has improved 6.9% in the last 60 days.
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Strong Price Upside Potential
The stock price has rallied 49.2% year to date. Despite this, the stock is currently trading at a forward P/E of 22.97X compared with 23.35X of the industry. The short-term average price target of brokerage firms represents an increase of 16.2% from the last closing price of $114.89. The brokerage target price is currently in the range of $100-$165. This indicates a maximum upside of 43.6% and a downside of 13%.
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Investment Thesis
Cisco Systems currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. CSCO offers an opportunity to invest in a company with substantial unrealized potential in the AI revolution. The astonishing growth potential of the global AI-powered data centers and management’s business visibility offer near-term potential.
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Cisco Systems, Inc. (CSCO): Free Stock Analysis Report
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