Is Cisco’s AI Surge Sustainable Growth or a Bubble in the Making?

Cisco finds itself at a pivotal moment, navigating a landscape transformed by artificial intelligence. The company is posting monumental revenues from its AI infrastructure operations, yet a cautionary voice from an analyst draws parallels to the dotcom bubble, leaving investors to ponder whether this represents a new growth epoch or a cyclical repetition.

The technology giant's most recent quarterly earnings surpassed market expectations, reporting revenue of $14.67 billion and earnings of $0.99 per share. Looking further ahead, management has issued a confident revenue forecast for fiscal 2026, projecting $59 to $60 billion.

Despite this strong performance, skepticism exists on the sidelines. Jay Goldberg, an analyst with Seaport Global Securities, has raised a concerning historical comparison. He suggests that the current spending frenzy on AI infrastructure will eventually cease, potentially leading to a significant downturn. Goldberg reminds investors that Cisco's share price has still not reclaimed its peak from the year 2000, serving as a sobering reminder for those who assume the present AI boom has enduring power.

The AI and Security Engine Driving Growth

A primary catalyst for Cisco's current momentum is the explosive demand for artificial intelligence. Orders for AI infrastructure from its cloud customers reached a substantial $2 billion in fiscal 2025, doubling initial corporate projections. This surge underscores the massive investments the tech sector is making in data centers and foundational networking equipment.

Should investors sell immediately? Or is it worth buying Cisco?

Running in parallel is a rapidly expanding security division, which has become a major growth pillar:
* The company onboarded 750 new clients for its cybersecurity solutions in the fourth quarter alone.
* Products like Secure Access, Hypershield, and XDR are experiencing robust demand.
* A strategic collaboration with NVIDIA is focused on developing secure AI data centers.

Core Business Challenges and Market Performance

While its new initiatives flourish, Cisco's traditional networking business is facing headwinds. Revenue from this core segment declined by 3% over the past year, a clear indicator that the company's expansion is now being fueled by its newer technology ventures.

This dynamic is reflected in its stock valuation. Cisco's shares are trading near their 52-week high and have advanced more than 22% since the start of the year. Market researchers, on average, see further potential, maintaining a price target of $74.72. The central question for investors remains whether Cisco is riding the AI wave to unprecedented heights or if the networking pioneer is on the cusp of a dangerous historical replay.