Cisco Shares Climb 6% Following AI-Driven Demand and Positive Revenue Outlook
(Reuters) – Cisco Systems saw a 6% rise in its shares on Thursday after the company revised its annual revenue forecast upward, citing strong demand fueled by artificial intelligence (AI). Additionally, Cisco reassured investors that the latest U.S. tariffs would have minimal impact on its business operations.
The increased demand for Cisco’s ethernet switches and routers, which are widely used in data centers, has been driven by companies expanding their AI infrastructure investments. Analysts at J.P. Morgan noted that the company has benefited from triple-digit order growth from large cloud service providers, as well as telecom firms upgrading their networks, helping Cisco navigate economic uncertainty.
In an effort to ease concerns about new tariffs imposed by U.S. President Donald Trump on imports from Canada, Mexico, and China, Cisco emphasized that its diversified global supply chain would keep the financial impact negligible.
Despite this positive outlook, Cisco anticipates a slight decline in gross margins for the third quarter as the company adjusts to tariff-related costs.
Following supply chain disruptions during the pandemic, Cisco has actively diversified its production sources to reduce reliance on China for electronic components. However, potential U.S. government budget cuts, particularly efforts led by the Trump administration and Elon Musk to reduce federal spending, add some uncertainty to its future revenue.
Morgan Stanley analysts estimate that the public sector contributes around 20% of Cisco’s total revenue, with the U.S. federal government accounting for less than 10%, of which 75% comes from defense contracts.
“Cisco observed some recovery in previously paused federal projects during the quarter, but we do not expect a major rebound in the near term given the evolving conditions in government spending,” Morgan Stanley analysts stated.
If Cisco’s stock gains hold, its market capitalization is set to increase by nearly $15 billion.
At least 10 analysts have raised their price targets for Cisco’s stock, according to data compiled by LSEG. Currently, Cisco’s 12-month forward price-to-earnings ratio stands at 16.23, compared to 43.21 for Arista Networks.
(Reporting by Kanchana Chakravarty, Siddarth S, and Zaheer Kachwala in Bengaluru; Editing by Sriraj Kalluvila.)
