Investors are bailing on Cisco (NASDAQ: CSCO) this morning despite it posting “record” revenue and coming in ahead of earnings estimates in its fiscal Q2.
What’s dampening sentiment is the management’s conservative guidance for the current quarter, and the rising memory and AI hardware costs-driven decline in adjusted gross margins to 67.5%.
However, Constellation Research founder and chairman Ray Wang argues the market’s reaction is “definitely not warranted,” adding Cisco stock is being unfairly punished amidst a temporary bout of “anti-AI” narrative.
Is it worth buying Cisco stock on a post-earnings dip?
While investors are fixating on a slight decline in margins and “in-line” outlook, Wang pointed to a “much larger tailwind” that could drive CSCO stock to record levels this year as he spoke with CNBC today.
US hyperscalers have signalled a massive surge in infrastructure spending in 2026, with total capex seen exceeding $700 billion.
As these tech titans build out the backbone of the generative AI era, they require the very high-end networking gear that Cisco specialises in. According to Ray Wang:
“The challenge isn’t that CSCO is in a bad position. In fact, they are in a really good position to capture this capex spend. When you look at the supply chain, Cisco is squarely in the middle of the AI boom.”
Cisco has already started seeing the fruits of this labour, reporting $2.1 billion in AI infrastructure orders from hyperscalers in Q2 – a remarkable number that matches its total artificial intelligence orders for the entire fiscal 2025.
AI laggard narrative surrounding CSCO shares is wrong
The narrative that Cisco is a “legacy” player playing catch-up is, according to Wang, a fundamental misunderstanding of the current landscape.
And the company’s announcement of a new G300 chip today was a testament to that, he added.
On “Squawk Box”, Constellation Research’s founder reiterated that “CSCO has been catching the AI wave”, which makes it inexpensive to own at a forward price-to-earnings (P/E) ratio of about “26” only.
Despite the post-earnings plunge, Cisco shares remain handily above their major moving averages (100-day, 200-day) as well, reinforcing that the broader uptrend remains intact.
What the G300 chip means for Cisco Systems Inc
Finally, Wang cited the launch of a brand new Silicon One G300 chip as one of the reasons to buy CSCO shares on the dip.
This 102.4 Tbps powerhouse is designed to solve the “congestion” currently strangling AI clusters.
Built on TSMC’s cutting-edge 3nm process, the G300 allows for seamless data movement between inference and training, effectively turning the network into a part of the compute itself.
By integrating a chip and a router into a single high-efficiency “switch box,” Cisco Systems is introducing much-needed competition in a market currently dominated by Nvidia and Broadcom.
With a 33% increase in network utilisation and a 28% improvement in job completion times, Wang dubbed the G300 a major turning point for the legacy tech stock’s long-term value.
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