Meta Platforms ( META ) has just committed to a new AI development catalyst to buy advanced chips from Advanced Micro Devices ( AMD ) in a deal reportedly worth up to $100 billion over several years, focused on large-scale AI data centers. Such budgets are reshaping chip demands and forcing a rethinking of networks, switches and security layers to feed data to AI models at high speeds.
As the landscape shifts, the AMD-Meta deal sent tape targeting network names tied to AI infrastructure, and Cisco Systems ( CSCO ) quickly emerged as a clear winner. CSCO stock has pushed to new highs on growing AI-focused orders and still offers an annual dividend payout of $1.64 per share. That combination is exactly why this network stock is set to benefit from the AMD-Meta deal while continuing to pay a respectable dividend. Let’s dive in.
Cisco Systems is a San Jose, California-based networking and cybersecurity company that develops hardware and software that tracks global Internet and data center traffic. It has a market capitalization of about $313 billion and returns cash to shareholders through an annual dividend of $1.64 per share, which translates to a yield of 2.06%.
Shares hovered around $78 as of February 26, up 3% year-to-date (YTD) and up 24% over the past 52 weeks.
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This valuation trades at a price-to-earnings (P/E) ratio of 21.8 times versus a sector median of 21.8 times and a price-to-sales (P/S) ratio of 5.5 times versus a sector median of 3.1, suggesting that investors are willing to pay a fair price for Cico Networks’ high-quality earnings.
The latest earnings release on February 11 detailed record quarterly revenue of $15.3 billion, up 10% year-over-year (YOY) as customers accelerated spending on high-performance networks and AI-ready infrastructure. It also showed GAAP EPS rising to $0.80, up 31% YoY, while non-GAAP EPS reached $1.04, an 11% gain that highlights profitable growth rather than just top-line development.
The report indicated a GAAP gross margin of 65.0% and a non-GAAP gross margin of 67.5%, levels that reflect strong pricing power and effective cost management. The update reported a GAAP operating margin of 24.6% and a non-GAAP operating margin of 34.6%, both above the high end of prior guidance. This momentum is further supported by AI infrastructure orders from hyperscalers reaching $2.1 billion in the quarter.
The company has partnered with Sharon AI and Nvidia (NVDA) to launch Australia’s first Cisco Secure AI Factory, an independent AI platform designed to handle all data and AI processing in the country while still delivering high-performance computing. The facility is powered by 1,024 Nvidia Blackwell Ultra GPUs, supported by VAST data storage and NEXTDC data centers, with Cisco UCS servers, security stack, and Nexus Hyperfabric providing the networking and management layer. This combination is strongly aimed at enterprises and governments that want AI capabilities comparable to hyperscalar but with tighter control over data residency and security.
Hardware innovation is aligned with this strategic thrust. Cisco recently unveiled its Silicon One G300 AI networking chip, a device designed to handle brutal east-west traffic inside large AI clusters. The G300 offers a throughput of 102.4 terabits per second, more than double that of the previous generation, and uses an intelligent cluster network to efficiently communicate between GPUs by reducing dropped packets and rerouting traffic around congestion.
This design, according to Cisco, can improve network utilization by 33% and reduce AI task completion time by 28%, effectively reducing the most useful tasks per GPU dollar spent. The platform is assembled with 1.6 terabit optics and 800G linear pluggable optics that reduce power consumption by up to 50%, reduce switch power by about 30% and help data centers stay within power and space constraints as AI workloads scale.
With Cisco’s next earnings release scheduled for May 13, 2026, Wall Street is looking for fourth-quarter fiscal 2026 EPS to average $0.78 versus $0.85 a year ago, generating an estimated YOY growth rate of about 9%. The company’s own Q3 2026 financial guidance supports this optimism, with revenue between $15.4 billion and $15.6 billion and GAAP EPS of $0.73 to $0.77, with non-GAAP EPS of $1.02 to $1.04.
That insider’s belief is echoed and amplified by Evercore ISI analyst Amit Dariani, who recently upgraded CSCO stock to “outperform” and raised his price target to $100 from $80. Drianani sees a clear growth outlook and a strong multi-year revenue path driven by AI network demand, campus refresh cycles, and margin improvement, respectively.
This is not the only external call either. A group of 25 covering analysts have a “moderate buy” rating on CSCO stock. They tell the same story in numbers, as the 12-month average price target sits at $88.45, indicating a potential upside of about 11% from current levels.
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All told, Cisco stands out as a straightforward way to tap into AMD’s meta-AI infrastructure push while gathering a credible dividend stream. The company is booking meaningful AI orders, driving steady earnings growth, and pulling the bullseye from Wall Street. For potential investors, CSCO stock still relies more on “buying the dips” than “calling and going.”
As of the date of publication, Ebob Jones had no positions (either directly or indirectly) in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. This article was originally published on Barchart.com
