Cisco Systems (CSCO) is benefiting from broad-based strength across its core enterprise business and hyperscaler AI infrastructure, with improved supply availability helping drive market-share gains and stronger growth, Morgan Stanley said Thursday in a report.
Cisco's core business, excluding hyperscalers, is expected to grow 10% in fiscal 2027, while hyperscaler AI revenue is projected to reach $7.5 billion, almost 90% higher from a year earlier, Morgan Stanley said. Overall full-year revenue growth is estimated at 15%, the report said.
Demand remains strong as enterprises and hyperscalers invest in networking and security equipment to support AI workloads, while Cisco's security business also improved, the report said.
Faster hardware growth and higher memory costs are expected to keep gross margins under pressure through much of fiscal 2027, though lower operating-expense "intensity" and stronger operating leverage may offset some of that pressure, the report said.
Morgan Stanley raised full-year estimates to EPS of $5.09 on revenue of $72.8 billion from EPS of $4.78 on revenue of $68 billion.
Morgan Stanley raised its price target on Cisco stock to $135 from $130 and maintained its overweight rating.
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