Cisco’s AI Push Gains Traction — But Will Security Deliver?

Forward-Looking Analysis

Cisco Systems (CSCO) is projected to report adjusted earnings per share (EPS) of $1.02 for its fiscal 2026 second quarter, a 9% year-over-year increase, with revenue expected to rise 8% to $15.1 billion. Analysts attribute this growth to surging AI infrastructure demand and robust product sales, particularly in networking hardware and security. A key catalyst is the enterprise partnership with Nvidia for AI networking products, which could drive long-term upside. Despite a lagging security business in Q1 (post-Splunk acquisition), a rebound is anticipated. Analyst sentiment remains positive, with 14 of the last 16 EPS revisions upward. The stock, trading near a 52-week high of $84.82, offers a favorable risk-reward profile. A modest beat or stable guidance could propel shares higher, with a trade setup targeting $90-$95 (5.8%-10.8% gain) and a stop-loss at $80.

Historical Performance Review

In Q1 2026, Cisco reported revenue of $14.88 billion, net income of $2.86 billion, and EPS of $0.72. Gross profit stood at $9.74 billion. These results reflect steady growth, with revenue up 5.3% year-over-year and net income rising 1.36%. The performance underscores resilience in core networking and AI-driven product lines, though the security segment underperformed, prompting investor focus on Q2 recovery.

Cisco recently announced AI Canvas, a generative UI platform for real-time telemetry and collaboration. The company also expanded its AI infrastructure portfolio with the Secure AI Factory partnership with Nvidia, targeting enterprise AI adoption. Analysts upgraded price targets, with J.P. Morgan and Citigroup maintaining "Buy" ratings at $90 and $85, respectively. Insider activity shows mixed trading, but recent buy-ins by executives like Robbins Charles and Patel Jeetendra I suggest confidence. The stock’s 2.14% dividend yield and strong free cash flow further bolster its appeal.

Summary & Outlook

Cisco’s financial health remains robust, with revenue, net income, and EPS growth supported by AI infrastructure and enterprise demand. Key catalysts include AI partnerships and product innovation, while risks include security segment performance and macroeconomic headwinds. The bullish outlook hinges on Q2 results exceeding $1.02 EPS and $15.1 billion revenue, with long-term upside from AI adoption. Investors should monitor guidance for AI networking and security rebound, as well as valuation metrics. The stock’s current momentum and strategic positioning in AI infrastructure justify a bullish stance, with a target range of $90-$95.