Cisco Systems (NASDAQ:CSCO) is facing a notable pullback, dropping below its 50-day moving average on Feb. 12 despite posting record fiscal Q2 revenue and beating earnings estimates. Investor concern stems from the company’s in-line guidance and a slight decline in non-GAAP gross margins, which triggered the selloff. Yet, analysts and tech experts suggest that this dip may be a prime opportunity for long-term investors seeking exposure to AI infrastructure growth.
Why Cisco Stock Could Recover Strongly
According to Ray Wang, founder and chairman of Constellation Research, the post-earnings weakness in Cisco stock is largely unwarranted. He points to Cisco’s strategic positioning in the artificial intelligence (AI) market, where U.S. hyperscalers plan to spend more than $700 billion in 2026 on AI infrastructure. Cisco, headquartered in San Jose, California, manufactures high-end networking equipment that forms the backbone of AI clusters, making the company a key beneficiary of AI-driven growth.
CSCO ended its fiscal Q2 with a record $2.1 billion in AI infrastructure orders, highlighting its successful transition from a legacy networking company to a major player in AI technology. Wang notes that this strong positioning, combined with ongoing innovation, makes the dip in Cisco stock a potential buying opportunity for long-term investors.
G300 Chip Could Drive Further Upside
Cisco recently unveiled its Silicon One G300 chip, a 102.4 Tbps switch designed to eliminate network congestion and optimize AI cluster performance. Analysts believe the G300 could unlock additional revenue opportunities for Cisco throughout 2026, especially as data center demand intensifies.
The introduction of the G300 not only strengthens Cisco’s competitive edge but also demonstrates the company’s ability to innovate within a fast-evolving technology landscape. With AI adoption accelerating, large enterprises and hyperscalers may increase orders for Cisco’s high-capacity networking solutions, potentially boosting both top-line growth and investor confidence in CSCO stock.
Cisco Stock Valuation and Dividend Appeal
Cisco shares currently trade at a forward price-to-earnings (P/E) multiple of around 26x. This valuation is attractive for a company directly benefiting from AI infrastructure expansion. In addition to its growth potential, CSCO stock offers a dividend yield of 2.17%, providing income-oriented investors with a steady return while holding shares through short-term market volatility.
Investors who have avoided Cisco due to the recent pullback may view this as a chance to enter at a lower price, benefiting from both potential capital appreciation and ongoing dividend payments.
Analyst Sentiment on CSCO Stock
Wall Street largely agrees with the bullish outlook. The consensus rating on Cisco stock is currently “Moderate Buy,” with a mean price target of approximately $86. This suggests upside potential of roughly 14% from current levels, reinforcing the notion that the recent dip may be temporary.
Analysts cite Cisco’s strong market positioning in AI, ongoing product innovation, and steady revenue growth as key reasons to consider buying CSCO stock at these levels. Even with near-term volatility, the combination of a reasonable valuation, dividend yield, and AI tailwinds makes Cisco an appealing option for both growth and income-focused portfolios.
AI Infrastructure Spending Supports Long-Term Growth
Cisco’s strategic involvement in AI infrastructure provides a long-term growth catalyst. The company’s networking equipment is critical for high-performance AI workloads, ensuring that CSCO remains central to the AI investment plans of major U.S. tech firms and hyperscalers.
Furthermore, ongoing enhancements to its data center solutions, including high-capacity switches like the G300, position Cisco to capture additional market share. As AI adoption accelerates across industries, demand for reliable, high-speed networking solutions will likely grow, benefiting companies like Cisco that provide critical infrastructure.
Risks to Consider
While the long-term thesis for Cisco stock remains strong, potential risks exist. Near-term guidance that comes in line with expectations may limit upside momentum. Margin pressures could persist, particularly if supply chain costs or hardware expenses rise. Additionally, broader market volatility, regulatory changes, or unexpected competition from other networking providers could impact stock performance in the short term.
Investors should weigh these risks against the potential benefits of buying the dip in Cisco stock. Those with a long-term investment horizon, particularly focused on AI infrastructure growth, may find the current valuation appealing relative to the company’s growth potential.
Conclusion
Cisco’s recent pullback below its 50-day moving average represents a potential entry point for investors looking to capitalize on AI-driven growth. Record AI infrastructure orders, the launch of the high-performance G300 chip, and steady dividends provide multiple reasons to consider buying CSCO stock.
With analysts projecting a 14% upside and Wall Street maintaining a “Moderate Buy” rating, Cisco stock offers a balanced risk-reward profile. For investors focused on long-term technology trends and exposure to AI infrastructure, the current dip may be an opportune moment to buy shares in one of the most established networking companies in the market.
Cisco stock’s combination of innovation, recurring revenue from enterprise customers, and attractive valuation underscores its potential as both a growth and income investment. While near-term volatility may persist, the fundamentals and AI-driven tailwinds suggest that long-term investors could benefit from acting now.
Featured Image: Megapixl @ Wolterk
