Cisco shares rise on strong demand for AI gear as Trump tariffs weigh

Arista Networks

13/02/2025 09:40

Feb 13 (Reuters) - Cisco Systems  CSCO.O  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 potential impact from the
latest U.S. tariffs.
    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.
    Despite macro uncertainty, Cisco is seeing strong cloud
demand including triple-digit order growth from hyperscalers and
improving demand from telco customers to equip their networks
for AI-led traffic demand, said J.P.Morgan analysts led by Samik
Chatterjee.
    U.S. businesses have warned of the fallout from the tariffs
President Donald Trump has imposed on Canada, Mexico and China,
as well as on steel and aluminum. Levies on Canada and Mexico
have been paused for a month, but not on China. 
    Chief Financial Officer Scott Herren said on a conference
call that the company's adjusted gross margin forecast for the
third quarter has the cost of the proposed tariffs built into
it. 
    "We would expect the majority of the reason for the slightly
weaker gross margin outlook for Q3 is due to expected tariff
impact in the near term," said Morgan Stanley analysts.
    At least six analysts have 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. Cisco has
gained over 17% in 2024, while ANET has risen more than 87% in
the same period.
    

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