CSCO Stock: Dot-com Darling Rides the AI Wave

How many companies can boast that they’ve ridden to the top of two major tech surges? 

Cisco [CSCO] can. 

Founded in 1984, this multinational network technology company made its name manufacturing and selling modems and routers during the dot-com bubble of the late 1990s and early 2000s. It has since diversified to provide cloud services and cyber security solutions, as well as network connectivity services and hardware for businesses, including data center switching. This last item is key to its recent foray back into the limelight. 

Now, as tech companies race to get a slice of the $600bn-plus artificial intelligence (AI) infrastructure buildout pie, Cisco has set its sights high. With a new AI networking chip and quantum computing software in the works, Cisco could be the tech darling of yesterday, today and tomorrow. OPTO examines the most recent updates for this stock, plus what its recent earnings could signal to investors.  

The Once and Future Network

On February 10, Cisco announced its new Silicon One G300 switch chip. Set to go on sale in the second half of 2026, the chip essentially allows AI systems to communicate. It utilizes a “shock absorber” designed to prevent bottlenecks when AI networks experience spikes in data traffic. The technology will reportedly boost the speed of some AI computing jobs by 28%. Manufactured by Taiwan Semiconductor Manufacturing Co [TSM], the Silicon One chip makes Cisco the latest entrant into the networking semiconductors space, putting it into competition with semiconductor giants such as Nvidia [NVDA] and Broadcom [AVGO]. 

But AI data centers are not the only growth area Cisco is targeting. In September 2025, the company launched software for connecting quantum computers, in a follow-up to its quantum entanglement chip unveiled earlier in the year. Then, in November, Cisco announced a collaboration with IBM [IBM] to create a network that can support large-scale, fault-tolerant quantum computers. But, as with much in the quantum space, demonstrations of the tech are still at least five years off, with the groundwork for the so-called “quantum computing internet” not likely to be deployed before the late 2030s. 

In the meantime, Cisco is clearly caught up in the current AI tech boom — and the corresponding bubble fears. 

Reporting earnings on February 11, Cisco saw revenue grow 10% year-over-year to $15.3bn and GAAP EPS grow 31% to $0.80 in Q2 2026, both above guidance. Networking product orders grew 20%, while AI infrastructure orders from hyperscalers reached $2.1bn. However, its adjusted gross margin of 67.5% came in below Wall Street expectations, as the company raises prices and revises contracts to deal with memory cost increases. While these moves spooked some investors, others were cheered by management’s AI order guidance for 2026: $5bn in total for the year, with $3bn recognized revenue from hyperscalers’ AI infrastructure orders.

Dot-com Echoes

CSCO stock’s ups and downs over its 35-year history have mirrored the boom-and-bust cycles of the wider tech landscape. It went public in February 1990, with a market capitalization of $224m. However, its success during the dot-com bubble allowed it to push past Microsoft [MSFT] to become the world’s most valuable company in March 2000, with a market capitalization of $500bn. 

While a steep decline in 2001 pushed it lower in the ranks, CSCO stock has since climbed its way back up, shattering its previous all-time high of $82.00 — set in March 2000 — in early February 2026. A wider pullback from tech stocks and disappointment surrounding Cisco’s latest earnings have seen the stock dip once again. As of February 13, CSCO’s share price is up 25.88% in the past 12 months, and up a marginal 0.3% in the year to date.  

Connectivity Czars: CSCO vs ANET vs PANW 

While Cisco’s chip ambitions put it on a collision course with the likes of Nvidia and Broadcom, it has a number of more similarly sized competitors in the network connectivity and security sectors. 

Arista Networks [ANET], which we covered in August 2025, is another cloud networking solutions provider that has benefited from the accelerating demand for data center network switches. As of December 2025, the company had a market share of 12.8% for the Ethernet switch market, compared to Cisco’s 29.8%, according to a report from the International Data Corporation. 

In contrast to CSCO’s drop, ANET surged after Q4 2025 earnings, reported on February 12. Management highlighted record revenue of $9bn for 2025, up 28.6%, and an adjusted gross margin of 64.6%. The revenue target for 2026 was set at $11.25bn, representing growth of 25%. 

Palo Alto Networks [PANW], meanwhile, is a direct competitor to Cisco’s network security solutions, offering AI-enhanced security for data centers. On February 11, the company closed its $25bn deal to acquire CyberArk, an Israeli firm set to bolster Palo Alto’s identity security offerings. Palo Alto reports after markets close on February 17, with analysts forecasting growth of 14–16% in both revenue and earnings, compared to a contraction of 4% in Cisco’s security segment in the most recent earnings. 

Here are how the three stocks’ fundamentals compare: 

Source: Yahoo Finance

CSCO Stock: The Investment Case

The Bull Case for Cisco

Despite the nearly 7% share price drop following earnings, Q2 was a solid quarter for Cisco, and guidance presents a bullish picture for medium-term growth. Bank of America analyst Tal Liani noted that the guidance even seemed conservative, given Cisco’s growth metrics are consistently beating expectations. He maintained a ‘buy’ rating and a price target of $95, representing an upside of 23.62% from the February 13 close.

Citi analyst Atif Malik, meanwhile, raised his price target from $85 to $90 on optimism surrounding AI momentum. “While higher memory costs were partly to blame for [gross margins, management] cited a significantly higher hardware mix as the primary culprit,” he wrote in a note seen by Seeking Alpha. 

While elevated hardware sales may push down margins in the short term, new products are a silver lining. Programmable silicon offerings furnish higher profit margins than many of Cisco’s revenue streams, so success in that space could mean better financial health in the long term. 

The Bear Case for Cisco

Regardless of the cost, flagging profitability despite a concurrent sales boom sounded the alarm for some. Investors are clearly concerned about the company’s ability to manage costs, even as it debuts new products and targets high-performance AI workloads. 

Competition is another key headwind for Cisco. By wading into the AI networking space, Cisco has to defend itself against both smaller players such as Arista and heavyweights such as Broadcom. If its solutions do not offer a clear advantage in terms of price tag or performance, its sales could suffer accordingly. 

Conclusion

Cisco has consistently kept pace with — and often outperformed — the wider tech field throughout both the dot-com and AI boom. With its share price hovering near all-time highs and a number of forward-looking offerings in the works, Cisco is positioning itself to win big. That said, medium-term DRAM shortage headwinds and significant competition could halt the company’s expansion into new territories.