This Company Gets Paid to Connect Every Chip.
Research Desk · October 6, 2026
Cisco Systems headquarters, San Jose, California. Photo via Wikimedia Commons.
- Cisco Systems (NASDAQ: CSCO) booked $9.3 billion in AI infrastructure orders in fiscal 2026, beating its own $9 billion target, as the largest cloud companies bought its networking chips and optics to wire their data centers together.
- Management guided fiscal 2027 revenue to $72.2 to $73.4 billion, roughly 15% growth, with about $7.5 billion of that expected from AI infrastructure.
- The stock trades near $113, about 13% below its 52-week high, at roughly 22 times next year's guided earnings, and pays $1.68 a share in annual dividends.
The Nasdaq closed at a record high on Monday, and once again artificial intelligence did the lifting.
Nvidia set its own record close at $238.90. It is the name on every business channel and every dinner-party conversation about AI.
But an AI data center is not just a warehouse full of chips. Those chips have to talk to one another, thousands at a time, at enormous speed.
The company that sells much of that connection is one many retirees already know well: Cisco Systems (NASDAQ: CSCO). On Friday it was the top gainer in the Dow, up more than 3%.
The Highway System Behind the AI Boom
Think of Nvidia's chips as the engines in a fleet of very fast cars. Impressive, but useless without roads.
Cisco builds the roads. Its Silicon One networking chips act as the interchanges that route traffic, and its optical components are the high-speed lanes that carry data between machines.
When a cloud giant adds another building full of AI processors, it has to add the networking to match. Every new engine needs more highway.
That is showing up in the order book. In the fiscal fourth quarter alone, Cisco took in about $4 billion of AI infrastructure orders, and orders from the largest cloud customers grew at a triple-digit pace.
A Record Year, and a Bigger One Guided
Cisco reported fiscal fourth-quarter results on August 13. Revenue rose 18% to about $17.3 billion, and adjusted earnings of $1.22 a share beat the $1.17 estimate.
Networking revenue, the heart of the AI story, jumped 28% to $9.8 billion. Full-year revenue reached about $63.3 billion, up 12%.
The outlook is even stronger. Management expects fiscal 2027 revenue of $72.2 to $73.4 billion and adjusted earnings of $5.05 to $5.11 a share, roughly 17% growth at the midpoint.
For income investors, the cash return matters as much as the growth. Cisco sent $12.7 billion back to shareholders last fiscal year: $6.6 billion in dividends and $6.1 billion in buybacks.
The quarterly dividend stands at $0.42 a share, or $1.68 a year, a yield near 1.5%. The next payment is due October 21.
The Margin Footnote Worth Watching
Honesty requires naming the blemish. AI hardware carries thinner margins than the software and services Cisco has spent a decade building.
Adjusted gross margin slipped to 66.3% in the fourth quarter from 68.4% a year earlier, and guidance for the current quarter is 65% to 66%. Higher memory costs and a heavier hardware mix are the reasons.
Investors noticed. The shares fell about 4.6% in after-hours trading on the night of the report, even as revenue and orders beat expectations.
More revenue at a slightly lower margin is a trade most companies would take. But it is the number to watch each quarter.
Not the Cisco of 2000
Many readers remember Cisco for a less pleasant reason. In March 2000 it was briefly among the most valuable companies in the world, trading at well over 100 times earnings, and then it collapsed with the dot-com bust.
The difference today is the price tag. At about $113, Cisco trades near 22 times the midpoint of next year's earnings guidance and pays a dividend backed by roughly half of its profits.
Wall Street's average price target sits near $128.50, about 14% above today's price. Not everyone agrees: Bernstein started coverage last week at Market Perform with a $110 target.
The bear case has a number too. The lowest target on the Street sits near $88, roughly 22% below today's price. That is where the stock could head if AI spending slows or margins keep sliding.
The Bottom Line
Cisco is the networking backbone of the AI buildout, collecting on every data center the cloud giants add, whichever chip ends up winning.
It has record orders, a guided year of double-digit growth, and a dividend that keeps arriving every quarter.
The trade-off is thinner margins and a stock that has already climbed sharply from its 52-week low of $66.81. For investors who want AI exposure with a paycheck attached, a 13% discount to the high is worth a close look.
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