Cisco Systems (CSCO) delivered a fiscal Q3 beat driven by accelerating AI-related networking demand and deeper engagement with hyperscalers, Morgan Stanley said Thursday in a report.
The technology company's five-year effort to deepen cloud partnerships and differentiate through optics and silicon is now paying off, the report said. AI revenue and orders are expected to quadruple in fiscal 2026 from a year earlier, and management has committed to at least 50% AI revenue growth in fiscal 2027, reaching about $6 billion, or a high-single-digit share of total revenue, Morgan Stanley said.
Cisco booked $2.1 billion in AI orders from hyperscalers during the quarter, and networking revenue rose 25%, supported by AI infrastructure demand and ongoing enterprise network upgrades, the report said.
The next leg for the stock hinges on Cisco's ability to sustain AI order momentum, capture enterprise AI spending, and improve security results, while offsetting gross-margin pressure through operating efficiencies, the report said.
Morgan Stanley raised its price target on Cisco stock to $120 from $91 and maintained its overweight rating.
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