Evercore upgraded Cisco's (CSCO.US) rating from "In Line" to "Outperform" on Monday, also raising its price target from $80 to $100. The core rationale for this upgrade hinges on Cisco's robust growth momentum in the artificial intelligence (AI) sector and the cyclical opportunity presented by corporate network equipment upgrades. The analyst team, led by Amit Daryanani, stated, "While the market continues to debate whether Cisco is a cyclical stock or a structural growth story, we believe multiple tailwinds are sufficient to support high-single-digit revenue growth and low-double-digit EPS growth for the company over the coming years; considering its P/E ratio is still below 20 times, the stock appears attractive compared to other large-cap tech peers."

The analysts pointed out that the core logic for the upgrade includes, first, the campus network refresh cycle. Channel checks indicate that customers are upgrading to next-generation campus solutions, with this market expected to grow until 2026 (industry CAGR of approximately 6%–8%), marking over eight years since the last major refresh. An incremental catalyst is Cisco's impending End of Life (EOL) and End of Services (EOS) for older solutions. Furthermore, strong Wi-Fi 7 demand is driving enterprises to migrate to higher-bandwidth ports and generating increased Power over Ethernet (PoE) demand.

Second, AI business momentum is exceeding expectations. The analysts stated that Cisco is expected to achieve approximately $3 billion in AI-related revenue in fiscal year 2026 (about 5% of sales), with an order backlog exceeding $4 billion (compared to $2 billion in the same period last year). Daryanani's team noted that this growth is currently driven by the four major hyperscalers, and with new products like the P200 and expansion into enterprise/sovereign clients, this business still has further upside potential.

The analysts further explained, "Against a backdrop of lingering supply-side risks, customers are seeking diversified solutions beyond TH5/TH6, leading to accelerated adoption of Silicon One. The P200 opens up markets based on Scale and Jericho architectures for Cisco, and as cloud providers seek to diversify their full-stack suppliers, this could drive orders and revenue to new heights. Additionally, driven by 800G pluggable optical module deployments, Cisco's optics business is also set for a strong tailwind (growing over 25%)."

Third, recovery in the telecom and core enterprise markets. The analysts believe the recovery in traditional enterprise and telecom markets is currently underestimated and will provide Cisco with more diversified growth sources, especially as enterprises begin adapting their network architectures for AI workloads.

Finally, EBIT margin expansion. Daryanani's team stated, "Driven by mid-to-high single-digit revenue growth, Cisco has the potential to achieve approximately 50–100 basis points of annual EBIT margin expansion. Risks include potential underperformance of the security and collaboration businesses relative to their mid-teens growth targets; furthermore, volatility in the storage industry could also present unforeseen challenges." The stock closed up over 3% on Monday at $77.01.