Morgan Stanley has upgraded Cisco Systems (CSCO) to 'Overweight' amid growing demand for AI-driven networking infrastructure. The firm forecasts strong revenue growth in the company's data center and cloud networking segments, driven by AI expansion.
- Cisco’s data center networking revenue forecasted to grow at 18% CAGR through 2027
- 30% year-over-year increase expected in order volume for Nexus and Catalyst products by Q1 2026
- Hyperscalers like Microsoft Azure, AWS, and Google Cloud driving infrastructure demand
- CSCO stock up 5.2% in pre-market trading post-upgrade
- Strong margin performance maintained despite supply chain pressures
- AI workload growth increasing need for low-latency, high-throughput networking
Cisco Systems (CSCO) is poised to capture significant upside from rising global investments in artificial intelligence infrastructure, according to a recent report from Morgan Stanley. Analysts highlight that as hyperscale data centers expand to support generative AI workloads, demand for high-performance switching and routing solutions is accelerating rapidly. The firm projects Cisco’s data center networking revenue will grow at a compound annual rate of 18% through 2027, fueled by increased spending from major cloud providers including Microsoft Azure, Amazon Web Services, and Google Cloud. This growth trajectory reflects a broader shift in IT spending toward network capacity upgrades capable of handling massive AI training and inference traffic. Specifically, Morgan Stanley estimates that Cisco’s Nexus and Catalyst product lines—key components in modern data center architectures—will see order volume increase by over 30% year-over-year in Q1 2026. These systems are critical for low-latency connectivity between GPUs within AI clusters, making them essential to any large-scale AI deployment. The market reaction has been positive: CSCO shares rose 5.2% in pre-market trading following the report, outperforming the S&P 500’s 1.4% advance. Investors are particularly focused on Cisco’s ability to integrate its hardware with leading AI frameworks and maintain strong margins despite supply chain complexities.