(Reuters) – Cisco Systems shares rose 6.4% in premarket trading on Thursday after the company raised its annual revenue forecast on robust demand for its cloud networking gear, while addressing any potential impact from the latest U.S. tariffs.
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.
Despite macro uncertainty, Cisco is seeing strong cloud demand including triple-digit order growth from hyperscalers and improving demand from telco customers to equip their networks for AI-led traffic demand, said J.P.Morgan analysts led by Samik Chatterjee.
U.S. businesses have warned of the fallout from the tariffs President Donald Trump has imposed on Canada, Mexico and China, as well as on steel and aluminum. Levies on Canada and Mexico have been paused for a month, but not on China.
Chief Financial Officer Scott Herren said on a conference call that the company’s adjusted gross margin forecast for the third quarter has the cost of the proposed tariffs built into it.
“We would expect the majority of the reason for the slightly weaker gross margin outlook for Q3 is due to expected tariff impact in the near term,” said Morgan Stanley analysts.
At least six analysts have 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. Cisco has gained over 17% in 2024, while ANET has risen more than 87% in the same period.
(Reporting by Kanchana Chakravarty and Siddarth S in Bengaluru; Editing by Sriraj Kalluvila)
