What is Cisco's strategy with the Splunk acquisition?

Cisco acquired Splunk for $28 billion to integrate observability and security, aiming to enhance its software and AI platform capabilities.

How has Cisco's stock performed recently?

Cisco's stock has risen approximately 30% year-to-date in 2025, nearing its dot-com era levels.

What were Cisco's Q1 FY26 financial highlights?

Q1 FY26 revenue reached $14.9 billion, up 8% YoY, with product orders increasing 13% due to AI hardware demand.

Home / Business and Economy / Cisco's AI Surge: Hype or Sustainable Growth?

Cisco's AI Surge: Hype or Sustainable Growth?

16 Dec

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Summary

Cisco's Q1 FY26 revenue grew 8% YoY to $14.9 billion.
The $28 billion Splunk acquisition aims to enhance software and AI offerings.
Product orders surged 13% YoY, driven by AI hardware demand.

Cisco's AI Surge: Hype or Sustainable Growth?

Cisco Systems is experiencing a significant surge, with its stock climbing nearly 30% year-to-date in 2025, approaching dot-com era valuations. The company's Q1 FY26 financial results revealed an 8% year-over-year revenue increase to $14.9 billion, with product revenue rising 10%. This growth was substantially driven by demand for AI-ready switches and Wi-Fi 7 gear, contributing to a 13% year-over-year rise in overall product orders.

The integration of Splunk, acquired for $28 billion, marks a strategic pivot for Cisco towards higher-margin software and AI platforms. Splunk's tools for log management, SIEM, and observability are expected to complement Cisco's existing offerings, providing a unified view of application performance and security. Management highlighted a significant deal secured through joint Cisco-Splunk sales efforts in Q1 FY26.

Despite impressive headline figures and a growing annual recurring revenue of $31.4 billion, concerns linger regarding the long-term sustainability of Cisco's growth. Skeptics point to its hardware-intensive nature and competition from agile rivals, questioning whether the recent stock performance is driven by genuine transformation or market hype. The company's ability to transition into a high-margin software and AI business will be crucial.