Cisco Systems, once regarded as an artificial intelligence leader, continues to face skepticism on Wall Street despite its declining stock value. In addition to issuing underwhelming guidance for the next two quarters, the company recently announced a reduction of over 4,000 jobs, equivalent to approximately 5% of its workforce. Although CEO Charles Robbins mentioned a tripling of AI orders to around $3 billion since the previous quarter, this growth does not factor in the revenue generated through its collaboration with Nvidia.
Unfortunately, the benefits of this AI expansion may not be realized until 2025, which clashes with the impatience surrounding the current AI frenzy.
As a result, the stock experienced a 3.9% decline before the market opened on Thursday, widening the gap between Cisco and its competitor Arista Networks. Despite this decline, analysts remain largely neutral on the stock, with 71% issuing Hold ratings while waiting for more evidence of future growth.
Melius Research analyst Ben Reitzes emphasizes that although Cisco’s stock is becoming increasingly inexpensive, it still lags behind Arista Networks in terms of growth. Reitzes explains, “While Cisco could potentially benefit from an ‘AI halo effect’ by 2025, it will remain a show-me story for a few more quarters.”
Overall, Cisco Systems faces challenges in convincing investors of its AI potential amidst disappointing guidance and the need for substantial evidence of future growth.
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