Cisco shares climb as network gearmaker raises forecast, eases tariff worries (updated)

Arista Networks

13/02/2025 13:45

(Rewrites, adds details and analysts comments throughout)
       Feb 13 (Reuters) - Cisco Systems  CSCO.O  shares rose
6.3% 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 more than $15 billion to its market cap
if premarket gains hold.
    At least eight 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  ANET.N  43.21.     

 (Reporting by Kanchana Chakravarty, Siddarth S and Zaheer
Kachwala in Bengaluru; Editing by Sriraj Kalluvila)
 ((Kanchana.Chakravarty@thomsonreuters.com;))