Shares of Cisco Systems surged 17.2% to a fresh all-time high of $119.36 on Thursday, 14 May, after the software and networking giant reported strong third-quarter results and raised its annual revenue forecast, driven by a sharp increase in hyperscaler orders. The company also announced plans to cut nearly 4,000 jobs as part of a restructuring exercise.
Thursday’s rally marked the stock’s fifth consecutive day of gains, taking its cumulative rise to nearly 30% and putting it on track for its biggest single-day jump in more than two decades. The surge has lifted the stock’s May gains to around 30%, while its year-to-date return has climbed sharply to 52%.
The tech giant reported quarterly profit and revenue that exceeded analysts’ expectations, with CEO Chuck Robbins saying the company witnessed “very strong, broad-based demand for our products.”
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Cisco’s stock price surged due to strong third-quarter earnings that exceeded analysts’ expectations and an increased annual revenue forecast. This positive performance was significantly driven by a sharp rise in orders from hyperscalers for AI infrastructure.
Cisco is benefiting from the AI spending boom by supplying critical networking equipment essential for data center operations. The company has secured substantial AI infrastructure orders from hyperscalers and has raised its full-year expectations for such orders.
Cisco is cutting nearly 4,000 jobs as part of a restructuring exercise. This move involves shifting investments toward areas with strong demand and long-term value creation, particularly focusing on AI and related growth areas like silicon, optics, and security.
Following a surge in hyperscaler orders for AI infrastructure, Cisco has raised its annual revenue forecast. The company expects fourth-quarter revenue in the range of $16.7 billion to $16.9 billion, an increase from its previous guidance.
While the AI tailwind is real and driving Cisco’s performance, the stock is trading at a high valuation compared to its historical average. Investors are advised to consider this rich valuation alongside the company’s growth prospects.
Meanwhile, Cisco’s rally also boosted the Dow Jones Industrial Average, putting the index on track to reclaim the 50,000 level it first touched earlier this year.
Firm emerges as new AI winner
The company, which generates the bulk of its revenue from its networking business, reported record quarterly revenue of $15.8 billion for the quarter ended April, up 12% year-over-year. Revenue from its networking segment stood at $8.82 billion, while net income rose to $3.37 billion from $2.49 billion a year earlier.
Cisco has emerged as one of the major beneficiaries of Big Tech’s AI spending boom, thanks to its critical role in supplying networking equipment essential for data centre operations.
The company said it has secured $5.3 billion in artificial intelligence infrastructure orders from hyperscalers so far this fiscal year and raised its full-year expectations for such orders to $9 billion, up from the earlier projection of $5 billion.
Hyperscalers such as Meta Platforms, Amazon, Google, and Microsoft are collectively spending hundreds of billions of dollars to expand their artificial intelligence infrastructure. That spending is increasingly benefiting companies such as Cisco, which provide critical components needed to power AI systems and data centres.
While the company also announced around 4,000 job cuts — representing less than 5% of its workforce — as part of a restructuring effort, it is the surge in AI-related orders that appears to be driving investor optimism.
Robbins said the company is shifting investments toward areas “where demand and long-term value creation are strongest” to remain competitive.
Last month, Cisco unveiled new switches designed to connect different types of quantum computers, advancing its push toward a broader network of quantum machines, in line with similar efforts by peers such as Alphabet’s Google and IBM, according to Reuters.
Amid rising demand for AI infrastructure, the California-based company expects fourth-quarter revenue in the range of $16.7 billion to $16.9 billion, higher than the guidance range of $16.2 billion to $16.7 billion issued in February.
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