TLDRs;
- Cisco shares fell 4.5% despite strong AI demand and an increased Wall Street price target.
- KeyBanc raised its Cisco target to $130, implying further upside despite Friday’s decline.
- Cisco boosted its fiscal 2026 AI orders outlook to $9 billion from $5 billion.
- Investors remain concerned that Cisco’s valuation already reflects much of its AI growth potential.
Cisco Systems (NASDAQ: CSCO) shares slid sharply on Friday, declining 4.5% even as the networking giant continues to report accelerating artificial intelligence demand and receives renewed support from Wall Street analysts.
The stock closed at $113.77 on June 26, shedding approximately $5.41 per share during the session. The decline erased roughly $21 billion from Cisco’s market capitalization as investors weighed the company’s rapidly expanding AI business against concerns surrounding valuation and broader market volatility.
Trading activity in Cisco was particularly elevated, with nearly 50.1 million shares changing hands, significantly above the company’s average daily volume of about 28 million shares.
Wall Street Remains Optimistic
KeyBanc analyst Jackson Ader recently reiterated an “Overweight” rating on the stock while increasing his price target to $130 from $125. The revised target sits just below Cisco’s 52-week high of $130.37 and suggests potential upside of roughly 14% from current levels.
The bullish stance reflects growing confidence in Cisco’s ability to capitalize on rising enterprise and hyperscaler spending tied to artificial intelligence infrastructure. However, investors appear increasingly focused on whether the company’s current valuation already incorporates much of that expected growth.
At Friday’s closing price, Cisco trades at approximately 26.6 times the midpoint of its fiscal 2026 non-GAAP earnings guidance of between $4.27 and $4.29 per share. Should shares reach KeyBanc’s $130 target, that earnings multiple would expand to more than 30 times forward earnings.
AI Orders Continue Accelerating
Management recently disclosed that AI infrastructure orders from hyperscale customers have already reached $5.3 billion this year. Encouraged by continued demand, Cisco raised its fiscal 2026 AI orders forecast to approximately $9 billion, up substantially from its previous expectation of $5 billion.
The company also expects AI infrastructure revenue from major cloud providers to approach $4 billion during fiscal 2026. While impressive, that figure would still account for only a modest portion of Cisco’s projected total annual revenue guidance of between $62.8 billion and $63 billion.
This dynamic helps explain why some investors remain cautious. Although AI growth is accelerating, Cisco’s traditional networking operations still represent the majority of overall sales and remain critical to sustaining earnings growth.
Core Networking Business Stays Strong
Beyond artificial intelligence, Cisco continues to post solid performance across its legacy networking businesses.During fiscal third-quarter results, the company reported total product orders increased 35% year-over-year. Excluding hyperscaler customers, orders still climbed 19%.
Networking product orders rose more than 50%, while campus networking orders advanced over 25%. Data-center switching demand also remained robust, increasing by more than 40%.
Chief Executive Officer Chuck Robbins highlighted strong customer appetite for AI-related networking and security solutions, noting that Cisco delivered record quarterly revenue.
Third-quarter revenue climbed 12% year-over-year to $15.8 billion, while non-GAAP earnings per share increased 10% to $1.06. Chief Financial Officer Mark Patterson added that non-GAAP operating income also reached a record level during the quarter.
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