(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
Cisco Shares Surge Amid AI Demand and Tariff Relief
(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)
