Cisco Systems CSCO is expanding its portfolio with the unveiling of AI factory architecture developed in collaboration with NVIDIA NVDA. This is expected to drive up Cisco’s AI-driven revenues. Cisco had AI infrastructure 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.

AI-driven enterprises have been signing deals to buy Cisco’s integrated systems, including Nexus, UCS and additional solutions to power AI applications. 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 second quarter of fiscal 2025 alone. 

However, can strong AI-driven growth push the stock higher in 2025? Cisco shares have declined 6.2% year to date amid a challenging macroeconomic background and rising threat of recession due to tariffs on China, Mexico and Canada that have increased the possibility of a trade war. Apart from these factors, CSCO has been suffering from stiff competition in the networking business.

CSCO Stock’s Performance

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Cisco’s aggressive AI push and growing security dominance are expected to boost prospects. Let’s dig deep to find out more.

Cisco Benefits From NVIDIA Collaboration

In late February, Cisco inked an expanded partnership with NVIDIA, under which the companies plan to offer solutions that help build AI-ready data center networks. Cisco Secure AI Factory with NVIDIA is founded on the NVIDIA Spectrum-X Ethernet networking platform. Security is at the core of the solution and helps enterprises simplify, deploy, manage and secure AI infrastructure at any scale. 

The NVIDIA-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.

Expanding Agentic AI Footprint Benefits Cisco

The networking giant is expanding its Agentic AI footprint with the introduction of Webex AI Agent, Cisco AI Assistant for Webex Contact Center, Workflow Automation in Cisco AI Assistant for Webex, AI Capabilities in Webex Control Hub and Webex Calling Customer Assist.

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.

Growing Security Orders Bodes Well for CSCO

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. 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 has roughly 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.

CSCO Offers Positive 2025 Guidance

For fiscal 2025, CSCO expects revenues to be $56-$56.5 billion and non-GAAP earnings between $3.68 per share and $3.74 per share.

The Zacks Consensus Estimate for CSCO’s 2025 revenues is pegged at $56.43 billion, indicating growth of 4.88% on a year-over-year basis. The consensus mark for CSCO’s 2025 earnings is currently pegged at $3.72 per share, up by a penny over the past 30 days, indicating a year-over-year decline of 0.27%.

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.

CSCO Stock: Buy or Hold?

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.

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 4.13X, higher than its median of 3.77X and the industry’s 3.94X.

Price/Sales Ratio (F12M)

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The stock is currently trading below the 50-day moving average, indicating a bearish trend.

CSCO Stock Trades Below the 50-Day SMA

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CSCO currently carries a Zacks Rank #3 (Hold), suggesting that it may be wise for investors to wait for a better entry point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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