Cisco Gains on Strong Results. Is It the “Safer” AI Play?

Cisco stood out as a stalwart on an ugly day for tech stocks, after announcing stellar earnings, with the stock rising 4%.

For its first quarter of fiscal year 2026, Cisco reported earnings that exceeded both its own guidance as well as Wall Street estimates. Revenue grew 8% from last year’s comparable quarter to $14.9 billion, with earnings per share of $0.72, up 6% year/year. Non-GAAP net income for the quarter was an impressive $4 billion. The company also raised its full-year guidance to $60-$61 billion in revenue from the prior $59-$60 billion.

Most importantly, Cisco demonstrated broad growth across several market segments ranging from campus networking to AI and hyperscaler infrastructure.

"We are seeing strong demand across all customer markets and geographies," said Chuck Robbins, CEO of Cisco. Robbins attributed the growth to the twin engines of AI infrastructure as well as growth in traditional demand for enterprise networking infrastructure.

Cisco shares were up 4% in midday trading, up $347 to $77.43, a new 52-week high. The stock gains might have been larger if the tech-heavy Nasdaq hadn’t been a sea of red, with the index down 2%. Investors have been selling some of the high-fliers in the recent AI boom, including NVIDIA and CoreWeave.

This might raise a question: Is Cisco emerging as a “safer” way to play AI infrastructure? With it now growing in safer segments such as enterprise networking, it might offer some diversification from concentrated AI bets. We’ll dive into that a little more in a bit.

Campus Refresh Helps Drive Growth

The numbers were impressive—with Cisco showing the most growth in years. Cisco executives attributed the numbers to “growth in product orders across all geographies and customer markets.” Product orders grew 13% y/y. Cisco also said in its quarterly statement that a “major multi-year multi-billion-dollar campus networking refresh cycle is underway."

The strength came across the board in most infrastructure segments. Product orders from service provider and cloud customers were up 45% year-over-year, driven by high double-digit order growth and hyperscalers. There was even strong demand from telco customers, which have long been a drag on Cisco’s earnings. Telco orders grew more than 25% y/y.

The only disappointing results came in the security segment. Security sales declined 2% y/y, missing most analyst estimates. Some analysts attributed the slump in security to a bumpy transition in Cisco's Splunk integration.

Cisco as the Blue Chip AI Play?

What do the earnings tell us? First of all, Cisco executives spent a lot of time talking about the strength in the enterprise refresh cycle, which covered everything from switching to enterprise wireless linked to the rollout of WiFi 7 products. It's clear that this refresh cycle is now real, and Cisco has demonstrated that it is taking advantage of that.

Secondly, it shows that Cisco’s reorganization of the networking division at the end of 2024 as well as its pivot toward AI infrastructure and a partnership with NVIDIA are starting to pay dividends. Today's results show the company has made enormous progress in addressing flaws in its strategy that we pointed out in June of 2024, when its stock was badly underperforming in the midst of the AI boom. (That article now has more than 40,000 page views.)

Some Wall St. analysts have increasingly highlighted Cisco as an AI play. For example, here's what Raymond James analyst Simon Leopold wrote in an investor note:

AI remains a focus for Cisco and investors, and Cisco secured $1.3B of new AI orders up from $800M last quarter from webscale operators, bringing the total to ~$3.3B. Cisco called out routing and optical strength, elements that support scale-across applications. Beyond webscale, Cisco highlighted neo-clouds, sovereigns, and enterprises with a +$2B AI pipeline. We include it in our AI basket.

On a day when most technology stocks were being sold, Cisco’s strength comes at a time when anxiety has been increasing about the growing risks of the AI boom. It might demonstrate to investors that Cisco could be a more conservative way to play AI, with diversification in other segments.

There is no doubt that AI infrastructure powers such as NVIDIA and Arista Networks have seen explosive gains from the AI infrastructure cycle, but their stocks are volatile, they have rich valuations, and they don’t pay large dividends. Cisco pays out a 2% dividend.

Then there is valuation. Let’s compare Cisco’s revenue and market cap to NVIDIA and Arista Networks:

But some Wall St. analysts cautioned that you shouldn't get carried away. The weakness in security points to the fact that Cisco continues to play catchup to security giants such as Palo Alto Networks and CrowdStrike. In addition, some analysts questioned the sustainability of the results.

Jason Ader and Sebastian Naji, analysts with William Blair, had this to say:

Cisco reported solid beat-and-raise results for its fiscal first quarter, driven by AI and campus networking strength. While Cisco should continue to benefit from Ethernet adoption in AI data centers as well as a fast-ramping upgrade cycle in the enterprise, we remain concerned about the intense competition across its major segments (security, networking, optics/silicon) and the sustainability of current growth.

Despite these reservations, Cisco's results were nonetheless impressive and cheered by investors who now are happy to see the stock at a yearly high. In fact, in a bizarre twist, Cisco's shares are approaching its all-time peak of $80 at the end of the dot-com era in 2000.

Futuriom Take: Cisco's results prove it is seeing benefits from an enterprise refresh cycle as well as hyperscaler growth in AI infrastructure. In addition, for investors it is emerging as a more diversified and less risky play on AI.