Cisco shares climb as network gearmaker raises forecast, eases tariff worries

(Reuters) - Cisco Systems shares rose 6% on Thursday after the networking gear maker lifted its annual revenue forecast on strong AI-driven demand and reassured investors that U.S. tariffs would not have a big impact on its business.

Demand for the telecom equipment maker's ethernet switches and routers used in data centers has surged as companies ramp up their investments in artificial-intelligence infrastructure.

Triple-digit order growth from large-scale cloud companies and strong demand from telecom companies upgrading their networks has helped Cisco in an uncertain economic environment, J.P. Morgan analysts said.

Cisco also moved to ease worries about the fallout from the tariffs U.S. President Donald Trump has imposed on imports from Canada, Mexico and China. It expects "negligible impact" owing to its diversified global supply chain.

However, it forecast a slight decline in gross margins in the third quarter, as the cost of the duties is built into it.

After the pandemic wreaked havoc on its business, Cisco has been working to diversify its supply chain and reduce dependence on China for its electrical components.

Still, a push by the Trump administration and billionaire Elon Musk to slash federal government budgets adds uncertainty for Cisco, a large supplier to the U.S. government.

Morgan Stanley analysts estimated that the public sector makes up close to 20% of the company's overall revenue with the U.S. federal government making up less than 10% - of which 75% comes from the defense department.

"Cisco noted there was a resumption in the quarter of some of the paused business last quarter. However, we are not anticipating significant improvement in the near term as federal government conditions remain dynamic," Morgan Stanley analysts said.

Cisco was set to add nearly $15 billion to its market cap if gains hold.

At least 10 analysts raised their price targets on the stock, according to data compiled by LSEG.

Cisco has a 12-month forward price-to-earnings ratio of 16.23, compared with Arista Networks 43.21.

(Reporting by Kanchana Chakravarty, Siddarth S and Zaheer Kachwala in Bengaluru; Editing by Sriraj Kalluvila)

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• Citrini flags overheating concerns as leverage, chip rally weigh on KOSPI
• Carnival Corp. (CCL) Tops Q2 EPS by 8c, Beats on Revenue; Offers Guidance
• BofA lists top 5 themes driving next $1tn in incremental semi sales