Cisco Systems Lands $700M AI Gold Rush Amid Increased Appetite From Tech Giants: 'Build More And We Will Buy More,' Customers Tell CEO

Cisco Systems Inc. CSCO exceeded analyst expectations for the second quarter that ended on Jan. 25 and raked over $700 million in artificial intelligence orders in the six months. Massive demand from web-scale clients and inference potential were the central themes that are expected to lead the AI-driven infrastructure boom.

What Happened: Responding to a question by an analyst during the earnings call, CEO Chuck Robbins delved into demand from web-scale clients versus the deployments and deliveries by the company.

He said that many clients have already increased their initial order targets for 2025 by 50% and they say, “If you can build more, we will buy more.” However, Robbins said the demand was “very dynamic” and depended on their clients’ evolving strategies.

Cisco’s ‘Silicon One’ technology provides scalable network infrastructure solutions, helping web-scale companies efficiently manage the immense traffic demands of their data centers and optimize costs.

“On the $700,000,000 in AI orders, it’s a combination of systems, silicon optics and optical systems,” said Robbins. About half of these orders belong to the silicon and systems segments, he added.

Robbins further highlighted the massive potential of AI inference, suggesting the opportunity in inferencing “is an order of magnitude higher” than the training stage that the company has seen to date.

Why It Matters: Cisco beat earnings and revenue estimates for the quarter, reporting earnings of $0.94 per share on the revenue $13.9 billion. Guidance for next quarter is $0.90-$0.92 EPS and $13.9-$14.1 billion in revenue. Full-year guidance is $3.68-$3.74 EPS and $56-$56.5 billion in revenue.

Price Action: Cisco rose by 0.16%% on Wednesday and advanced further by 6.59%% in after-hours after reporting earnings. The exchange-traded fund tracking the Nasdaq 100 index, Invesco QQQ Trust, Series 1 QQQ rose by 0.059%.

Cisco shares have gained 5.80% on a year-to-date basis, whereas it was up by 25.97% over the last year.

The average price target among 28 analysts tracked by Benzinga is $59.5 with a ‘hold' rating. The estimates range from $44 to $78 apiece. Recent ratings from Citigroup, Morgan Stanley, and Citigroup suggest a $66.67 target, implying a potential upside of 0.03%.