Cisco Systems, Inc. (CSCO.US) self-developed chip platform gains supply chain advantage and receives target price upgrades from JP Morgan and other Wall Street institutions.

In the backdrop of the continuous explosion of demand for artificial intelligence infrastructure, Cisco Systems, Inc. (CSCO.US) has gained a supply chain advantage with its self-developed chip platform Silicon One, prompting multiple Wall Street institutions to raise their target prices after the company's latest financial report. CEO of Cisco Systems, Inc., Charles Robbins, stated during the third quarter performance conference call that the company has received AI infrastructure orders from hyper-scale cloud service providers amounting to $19 billion, compared to only $6 billion in the same period last year. The growth in orders is primarily driven by the strong performance of the Silicon One system and the Acacia optical communication business. Chief Financial Officer of Cisco Systems, Inc., Mark Patterson, pointed out that the self-developed chips enable the company to have stronger control over the supply chain. He said, "We directly manage wafer, substrate, packaging, and testing processes, thus we have greater control over the supply chain." Patterson also revealed that the company has already secured chip supply for the next eight months of the 2026 calendar year, with supply negotiations for 2027 also in progress. Robbins further stated, "This is one of the biggest advantages of Cisco Systems, Inc. We have more control over the supply chain and rely less on external suppliers compared to other companies." Wall Street analysts generally agree with this view. Analysts at JPMorgan Chase stated that Cisco Systems, Inc. has successfully avoided the supply chain constraints currently plaguing the networking equipment industry through long-term investment in the Silicon One roadmap, giving it a stronger competitive edge compared to competitors relying on third-party commercial chips. JPMorgan Chase maintained a "Hold" rating for Cisco Systems, Inc. and raised the target price from $96 to $120. KeyBanc, a subsidiary of KeyCorp, also maintained a "Hold" rating and raised the target price from $87 to $125. KeyBanc pointed out that Cisco Systems, Inc. exceeded expectations in the third quarter performance, with order growth accelerating to 35%; even excluding the factors of AI hyper-scale customers, orders still grew by 19%. In addition, the company's performance guidance for the 2026 fiscal year also exceeded market expectations. The institution believes that by 2027, the revenue growth of Cisco Systems, Inc. may significantly exceed the previous long-term growth target of 4% to 6%. Bank of America Corp maintained a "Buy" rating and raised the target price from $95 to $114. The institution noted that Cisco Systems, Inc. has maintained a stable gross profit margin level of around 66%, mainly supported by factors such as product price increases, product portfolio optimization, and some products upgrading from DDR4 to DDR5. Analysts also stated that Cisco Systems, Inc.'s chip strategy has kept the supply chain environment stable, without the supplier order cutbacks generally faced by peers. Citigroup also maintained a "Buy" rating and raised the target price from $90 to $112. Citigroup pointed out that most of Cisco Systems, Inc.'s systems currently use the Silicon One architecture, with the company planning to migrate all high-performance systems to the Silicon One platform by the 2029 fiscal year. Furthermore, Piper Sandler raised the target price from $86 to $132, but maintained a "Neutral" rating; Truist Financial maintained a "Buy" rating and a target price of $94; Barclays raised the target price significantly from $76 to $121; and Evercore raised the target price from $110 to $150. Among competitors, Cisco Systems, Inc.'s competitor Arista Networks (ANET.US) rose more than 3% in Thursday morning trading, Hewlett Packard Enterprise Co. (HPE.US) rose 5%, and Dell Technologies, Inc. Class C (DELL.US) rose 1.7%.