Cisco Systems CSCO is riding on strong demand for its artificial intelligence (AI) infrastructure products, with orders worth more than $700 million at the end of the first half of fiscal 2025. CSCO remains on track to surpass $1 billion in AI infrastructure orders in fiscal 2025. 

Cisco is benefiting from an innovative portfolio. AI-based enterprises have been signing deals to buy integrated systems, including Nexus, UCS and additional solutions to power AI applications. The NVIDIA NVDA-based CSCO AI POD product, which comprises hardware and software, is gaining traction. The launch of 800 gig Nexus switches based on Cisco’s 51.2 terabit Silicon One chip in April is expected to drive orders from AI-based cloud customers. 

Increasing deployment of AI-powered robotics and industrial security bodes well for CSCO’s industrial Internet-of-Things business. In the first half of fiscal 2025, orders grew more than 40%, with growth of over 50% in the recently reported second-quarter fiscal 2025 alone. Cisco’s security orders more than doubled in the fiscal second quarter, driven by the advanced data management, analytics and threat detection capabilities of Splunk. Strong demand for its refreshed firewall solution has been a key catalyst.

Overall, product orders jumped 29% year over year (11% organically excluding Splunk) in the second quarter of fiscal 2025. Annualized Recurring Revenues (ARR) were $30.1 billion, up 22% on a year-over-year basis, with product ARR growth of 41%. Remaining performance obligations at the end of the second quarter of fiscal 2025 were $41.3 billion, up 16% year over year, reflecting strong prospects.

CSCO’s Expanding AI Business to Drive Prospects

Cisco is benefiting from an expanding portfolio, with the combination of Cisco 8K, Silicon One, optics and optical systems. These solutions are currently being deployed by five of the largest webscalers in their back-end training networks.

Strong adoption of Nexus switches, AI servers, AI PODs, and Hyperfabric and AI Defense software is noteworthy. These solutions are designed to simplify and smoothen up AI infrastructure deployment.

Cisco’s strategy of infusing AI across Security and Collaboration platforms and developing Agentic capabilities across the portfolio is a key catalyst. It is leveraging Agentic AI to improve customer experience (CX). The launch of Renewals Agent, an Agentic AI-driven solution co-developed with Mistral, and a new Assistant to help customers digitize and de-risk Network Change Management have been noteworthy developments in this regard.

The acquisition of Deeper Insights is noteworthy as it expands Cisco’s CX AI capabilities and services.

CSCO Benefits From Strong Security Offerings

In the second quarter fiscal 2025, security revenues jumped 117% year over year to $2.11 billion, driven by Splunk, SASE and Network Security. 

Cisco’s security business is benefiting from strong demand for both Cisco Secure Access and XDR. On a combined basis, both solutions have gained more than 1,000 customers in the trailing 12 months, and each of the products roughly has one million enterprise users. Hypershield is also gaining traction. 

Cisco integrated Talos into Splunk’s newly released Enterprise Security 8.0 solution and AppDynamics into Splunk’s on-prem log observer in the fiscal second quarter. The company also launched Splunk on Azure, Splunk Federated Analytics, and AI Assistant for Splunk Observability.

Its latest launch, Cisco AI Defense, enables and safeguards AI transformation within enterprises. With the exponential growth of AI, risks like data leaks, misuse of AI tools and sophisticated threats are also on the rise. Cisco AI Defense aims to address these challenges using its advanced network visibility and control, ensuring that enterprises can adopt AI while staying protected against security concerns.

AI & Security to Push Cisco Stock Higher

CSCO shares have surged 34% in the trailing 12 months, outperforming the Zacks Computer and Technology sector’s return of 27.4% and the Zacks Computer – Networking industry’s return of 32.5%.

Cisco’s expanding footprint across diverse sectors, including security, AI infrastructure, cloud solutions and enterprise networking, is driving its growth and aiding its share performance.

CSCO Stock’s Performance

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The stock is currently trading above the 50-day and 200-day moving averages, indicating a bullish trend.

CSCO Stock Trades Above the 50-Day and 200-Day SMA

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However, CSCO stock is not so cheap, as its Value Score of D suggests a stretched valuation at this moment.

In terms of the forward 12-month price/sales, CSCO is trading at a premium of 4.48X, higher than its median of 3.74X and the industry’s 4.09X.

Price/Sales Ratio (F12M)

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CSCO Offers Positive 2025 Guidance

For fiscal 2025, CSCO expects revenues to be $56-$56.5 billion (up from previous guidance of $55.3-$56.3 billion). Non-GAAP earnings are expected to be between $3.68 per share and $3.74 per share (up from previous guidance of $3.60-$3.66 per share).

The Zacks Consensus Estimate for CSCO’s 2025 revenues is pegged at $56.54 billion, indicating growth of 5.09% on a year-over-year basis. The consensus mark for CSCO’s 2025 earnings is currently pegged at $3.67 per share, up a couple of cents over the past 30 days, indicating a year-over-year decline of 1.61%.

CSCO beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average surprise being 4.07%. 
 

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Conclusion

An expanding and innovative portfolio makes Cisco well-positioned for sustained growth in an evolving tech landscape. AI push is noteworthy, along with a growing footprint in the security space. Cisco’s strong growth prospects justify its premium valuation.

CSCO currently carries a Zacks Rank #2 (Buy), suggesting that it may be wise for investors to start accumulating the stock now. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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