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Cisco's Hyperscaler Partnerships Paying Off Amid AI Order Surge, Morgan Stanley Says

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Cisco's Hyperscaler Partnerships Paying Off Amid AI Order Surge, Morgan Stanley Says

Cisco Systems' (CSCO) expanded hyperscaler partnerships are paying dividends for the networking equipment maker, as evidenced by management expectations for a surge in artificial intelligence orders, Morgan Stanley said in a note emailed Thursday.

Total product orders climbed 35% year-over-year in the fiscal third quarter, driven by hyperscaler orders that grew triple digits, Chief Executive Chuck Robbins said on an earnings call Wednesday, according to a FactSet transcript.

AI infrastructure orders from hyperscalers, or the big technology companies, rose to $1.9 billion from $600 million the year prior, taking the year-to-date tally above the company's prior expectation of $5 billion for fiscal 2026, Robbins told analysts.

Cisco is now targeting about $9 billion in AI infrastructure orders from hyperscalers in fiscal 2026, 4.5 times the 2025 level, Robbins added.

"Efforts made over the last (more than five) years to improve hyperscaler relationships and find avenues to differentiate through optics and silicon are paying dividends," Morgan Stanley said.

The brokerage raised Cisco's price target to $120 from $91 and maintained its overweight rating. The company's shares soared 15% in Thursday trade, bringing their year-to-date gains to 52%.

Cisco reported stronger-than-expected fiscal third-quarter results late Wednesday, while the networking equipment maker announced a restructuring plan that involves thousands of layoffs.

"The path from here for the stock will be ability to deliver/continue to see orders on AI side, capitalize on enterprise investment in AI, improve the security business results, as well as show ability to manage mix impact to gross margins through operating efficiencies, allowing EPS estimates to move higher," according to the Morgan Stanley note.

Price: $117.27, Change: $+15.40, Percent Change: +15.11%

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