Investment firm Piper Sandler has maintained a "Neutral" rating on Cisco (CSCO.US) while reducing its price target from $132 to $125. Analyst James Fish noted that the revised valuation reflects growing concerns that growth within the networking equipment sector might be approaching its peak, leading to a reduction in expected price-to-earnings multiples.
Cisco's stock hit an all-time high in June, with shares climbing 57% over the past twelve months. During this period, the company's revenue has surged alongside the artificial intelligence (AI) boom. The most recent earnings report showed that Cisco posted record quarterly revenue of $17.3 billion for the fourth quarter ending July 25, 2026, marking an 18% year-over-year increase. Adjusted earnings per share (EPS) came in at $1.22, with both metrics surpassing analyst expectations.
AI emerged as the standout highlight of the fiscal fourth quarter. Cisco secured $4 billion in AI infrastructure orders from hyperscale cloud providers during the period, representing 43% of the full-year 2026 total of $9.3 billion in such orders. Meanwhile, product orders rose 35% year-over-year, and even excluding hyperscalers, orders grew 25%, indicating that demand is not solely dependent on major AI customers.
Cisco's role in AI data center construction is becoming increasingly significant. Historically viewed as a traditional networking equipment giant, with its core business concentrated in enterprise networking, campus networks, switches, and routers, the company is now seeing the rising importance of networking hardware driven by the need for high-speed connectivity, low-latency links, and data center interconnect in AI training and inference clusters. Cisco is actively seeking to capture a larger share of this AI infrastructure capital expenditure cycle.
Earlier this year, Cisco announced a restructuring plan to redirect more resources toward the AI market, along with plans to cut less than 5% of its workforce. The company has indicated the restructuring could result in severance and other one-time costs of up to $1 billion. In other words, AI is not a single-quarter theme but a strategic direction for resource reallocation at Cisco.
Cisco's guidance for fiscal 2027 came in significantly above analyst estimates. The company projects fiscal 2027 revenue between $72.2 billion and $73.4 billion, with the midpoint approximately 6% higher than market consensus. Adjusted EPS is expected to range from $5.05 to $5.11, also with the midpoint nearly 6% above expectations. However, Cisco provided its first full-year AI revenue forecast at approximately $7.5 billion for fiscal 2027, representing only about 10% of total expected revenue. Given that the company has accumulated approximately $9.3 billion in AI-related orders over the past year, this gap has raised market concerns regarding the efficiency of order conversion.
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