Can Cisco Systems Sustain Its 8% Stock Surge Into 2026? Market Signals Look Promising

Cisco Systems CSCO has emerged as a standout performer in the technology sector, with shares climbing 7.7% over the past three months. This outperformance becomes even more striking when compared to competitors—Hewlett Packard Enterprise HPE declined 1.8% while Arista Networks ANET dropped 14.4% in the same period. Meanwhile, the broader Computer & Technology sector gained a more modest 5.1%, underscoring Cisco’s relative strength.

What’s Driving the Stock’s Momentum?

The company’s rally is anchored in two strategic pillars: aggressive artificial intelligence infrastructure expansion and a commanding position in cybersecurity. These developments justify CSCO’s valuation premium of 4.77X in forward 12-month price-to-sales ratio—higher than the Computer Networking industry average of 4.63X and substantially exceeding HPE’s 0.72X, though trailing Arista’s 14.57X.

Cisco’s AI infrastructure opportunity appears substantial. In the first quarter of fiscal 2026, hyperscaler orders reached $1.3 billion, with management projecting $3 billion in AI-related revenues for the full fiscal year. The company is also tracking a growing pipeline exceeding $2 billion across sovereign, Neocloud, and enterprise customers.

Financial Metrics Signal Continued Growth Trajectory

Two key metrics bode particularly well for sustained momentum throughout fiscal 2026. Annual Recurring Revenues hit $31.4 billion, reflecting 5% year-over-year growth, while remaining performance obligations climbed to $42.9 billion (up 7% year-over-year). This expanding backlog suggests the company has visibility into strong top-line performance for the remainder of the fiscal year.

Networking Infrastructure: The Growth Engine

Cisco’s networking portfolio continues expanding rapidly, powered by Silicon One chip architecture and AI-native security solutions. Product orders grew in the high teens during the latest quarter—the fifth consecutive quarter of double-digit gains. This momentum encompasses multiple verticals: hyperscale infrastructure, enterprise routing, campus switching, wireless systems, and industrial IoT platforms.

Industrial IoT orders particularly impressed, growing more than 25% year-over-year, driven by increasing AI workloads at the network edge and emerging physical AI applications. Campus networking is experiencing significant tailwinds from demand for next-generation solutions including smart switches, secure routers, and Wi-Fi 7 technology, which management views as the opening phase of a multi-year, multibillion-dollar modernization cycle.

Management Guidance Reinforces Bullish Thesis

For the second quarter of fiscal 2026, Cisco projects revenues between $15 billion and $15.2 billion, with non-GAAP earnings guidance of $1.01 to $1.03 per share. The Zacks consensus estimate sits at $15.12 billion (8.1% year-over-year growth) and $1.02 per share earnings (8.5% growth).

Full-year fiscal 2026 guidance appears equally constructive. The company expects revenues in the $60.2-$61 billion range compared to $56.7 billion in fiscal 2025, representing approximately 7% growth. Non-GAAP earnings are projected at $4.08 to $4.14 per share versus $3.81 in the prior year, indicating 7.6% growth at the consensus mark of $4.10.

Investment Case: Why CSCO Merits Accumulation

Cisco’s expanding technology portfolio positions the company well for sustained growth amid evolving market dynamics. The company’s dual focus on AI infrastructure and security leadership creates multiple vectors for continued strength. These fundamental drivers bode well for long-term shareholder returns.

With a Zacks Rank #2 (Buy) rating, the current environment appears opportune for investors to build positions in the stock. The combination of strong order momentum, robust guidance, and secular tailwinds in AI infrastructure and networking suggests the recent rally may have further room to extend through 2026.