Cisco Systems gave investors plenty to like in its fiscal fourth-quarter report, but the market’s reaction showed how high expectations have become for one of 2026’s strongest AI infrastructure trades.
Cisco Systems (CSCO) reported record quarterly revenue and stronger-than-expected earnings, while management laid out another year of double-digit growth. The stock still fell sharply after the report and closed Aug. 18 at $112.90, leaving shares well below the $123.88 price used in Bank of America’s latest research note.
BofA analyst Tal Liani sees an opportunity in that disconnect. Liani reiterated a Buy rating and $150 price target on Cisco in a note given to TheStreet, arguing that broad networking demand and growing AI revenue could leave room for further upside.
The target now implies roughly 33% upside from Cisco’s Aug. 18 closing price.
Cisco’s networking business is gaining momentum
Cisco reported fiscal fourth-quarter revenue of $17.3 billion, up 18% from a year ago, while adjusted earnings reached $1.22 per share. Networking revenue jumped 28% to $9.8 billion as customers continued spending on data center and AI infrastructure.
Orders were even stronger. Total product orders rose 35%, while networking orders climbed 40%. Cisco said product orders still increased 25% when hyperscaler customers were excluded, giving investors another sign that demand is spreading beyond the largest cloud companies.
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Management expects that strength to carry into the new fiscal year. Cisco guided for first-quarter revenue of $18 billion to $18.2 billion and adjusted earnings of $1.32 to $1.34 per share, while full-year revenue is expected to rise to as much as $73.4 billion.
That broader strength sits at the center of BofA’s bullish view.
Liani noted that ex-hyperscaler order growth accelerated from 19% in the fiscal third quarter to 25% in the fourth quarter. Orders from Cisco’s four largest hyperscalers grew more than 100%, according to the note.
BofA believes those trends support Cisco’s decision to double its core growth outlook for fiscal 2027 to 10% from an earlier 5% estimate.
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BofA thinks Cisco’s AI target could be conservative
Cisco booked $4 billion of AI infrastructure orders from hyperscalers during the fourth quarter, lifting full-year orders to $9.3 billion. The company generated about $4 billion in AI infrastructure revenue during fiscal 2026 and expects that figure to reach $7.5 billion in fiscal 2027.
BofA thinks that target could leave room for upside.
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The bank expects stronger networking revenue as recent orders convert into sales and sees fiscal 2027 AI orders materially exceeding the $9 billion level reached this year. Improving momentum in Cisco’s security business could provide another boost as the company moves beyond pricing changes associated with Splunk.
BofA raised its fiscal 2027 adjusted earnings estimate to $5.08 from $4.77 and lifted its fiscal 2028 estimate to $5.47 from $5.21.
Cisco itself expects fiscal 2027 revenue of $72.2 billion to $73.4 billion, with adjusted earnings between $5.05 and $5.11 per share.
Cisco still has a margin problem to watch
The bullish demand outlook comes with a trade-off. Cisco’s adjusted gross margin slipped to 66.3% in the fourth quarter from 68.4% a year earlier as faster hardware growth changed the company’s sales mix.
BofA expects gross margin to fall to roughly 64.5% in fiscal 2027, about 150 basis points below the Street’s outlook. Strong hardware sales and a greater cloud mix could keep pressure on profitability, even as revenue accelerates.
Valuation also leaves less room for mistakes. Liani estimates Cisco trades near 25 times calendar 2027 enterprise value to free cash flow, well above its five-year average of roughly 16 times.
BofA still believes the demand cycle can outweigh those concerns. With orders accelerating inside and outside the hyperscaler market, Cisco may have more growth ahead than its fiscal 2027 targets currently suggest.
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