Cisco Surprise: Push Into AI Servers With Nvidia Chips Will Take On Dell Cisco Stock Surprise: Push Into AI Servers Will Take On Dell, HPE

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When reporting fiscal first quarter earnings, Cisco Systems (CSCO) told Wall Street analysts it’s selling data center servers equipped with Nvidia (NVDA) chips for processing artificial-intelligence workloads. But Cisco stock fell on fiscal Q1 results anyway.

With the push into AI servers, Cisco is moving into a hot market with players such as Dell (DELL), Hewlett-Packard Enterprise (HPE), and others. Meanwhile, embattled server maker Super Micro Computer (SMCI) has told regulators that it will be unable to file its quarterly report for SMCI stock for the period ended Sept. 30.

Cisco Unveils AI Server Strategy

Cisco released earnings after the market close on Wednesday. Financial results included recently acquired software maker Splunk.

Referring to management’s earnings conference call, Jefferies analyst George Notter in a report said: “Cisco also disclosed a bit more about their relationship with Nvidia where they’re going to sell an AI server based on Nvidia GPUs as well as a rack-based ‘Pod’ product, also based on Nvidia. Importantly, we believe the company isn’t willing to significantly degrade corporate margins in order to play in this business. They’ll pick and choose their spots.”

Further, Cisco could be targeting the enterprise market with AI servers. Also, Nvidia reports third quarter earnings on Wednesday, Nov. 20.

At Raymond James, analyst Simon Leopold said in a report: “Cisco has introduced new AI optimized products including servers featuring Nvidia GPUs. We believe Cisco is well positioned when enterprises refresh IT infrastructure and embrace their own AI initiatives.”

Excluding Splunk, product orders in fiscal Q1 rose 9%, Cisco said. In the July quarter, product orders rose 6%.

For the period ended Oct. 26, Cisco earnings per share fell 18% to 91 cents, including a one-time tax benefit. Revenue fell 6% to $13.8 billion.





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Cisco stock analysts projected adjusted EPS of 87 cents for Cisco stock, down 21%. Analysts expected revenue to fall 6% to $13.8 billion.

On the stock market today, Cisco stock fell 3.2% to 57.25 in early trades. Shares had advanced 16% in 2024 heading into the Cisco earnings report.

Cisco Stock: Revenue Guidance

For the second quarter of fiscal 2025 ending in January, Cisco forecast sales of $13.85 billion at the midpoint of its outlook. Analysts predicted that sales would rise 8% to $13.8 billion from a year earlier.

Cisco now expects full-year fiscal 2025 revenue to be in a range of $55.3 billion to $56.3 billion, vs. its earlier forecast of $55 billion to $56.2 billion.

Cisco fiscal 2025 revenue forecast includes $1 billion of artificial-intelligence-driven product orders, mostly from Ethernet networking and fiber-optic devices used to connect computer servers in data centers.

Raymond James’ Leopold said: “Webscale customers placed 300 million in AI orders (in fiscal Q1). Cisco remains confident it will exceed $1 billion in AI orders with web scale customers in fiscal 2025. Although a lower percent of sales, Cisco’s AI related business is comparable to Arista‘s (ANET), which we suspect is not appreciated.”

Also, Cisco and Nvidia have teamed in Ethernet networking.

In fiscal Q1, the company repurchased $3.6 billion worth of Cisco stock.

On a technical basis, Cisco stock has formed a saucer-with-handle base with an entry point of 57.05.

Cisco Stock Technical Ratings

Meanwhile, Cisco stock owns an IBD Composite Rating of 75 out of a best-possible 99, according to IBD Stock Checkup. The best growth stocks have a Composite Rating of 90 or better.

Shares have an Accumulation/Distribution Rating of A-, according to IBD MarketSurge analysis. The rating analyzes price and volume changes in a stock over the past 13 weeks of trading.

In addition, Cisco has shifted away from its core business of selling network switches and routers. With acquisitions, Cisco aims to increase revenue from software and services.

Cisco recently closed the acquisition of software company Splunk for $25 billion in cash. With roots in data analytics software, Splunk has expanded into cybersecurity.

Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.

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