Deutsche Bank Upgrades Cisco Stock (CSCO) to Buy on ‘Tailwinds from AI’

Deutsche Bank turned bullish on networking giant Cisco (CSCO) and upgraded the stock to Buy from Hold, citing several positives, including “tailwinds from AI.” Analyst Matthew Niknam raised CSCO stock’s price target to $73 from $65, indicating an 11.4% upside potential from current levels.

Last month, Cisco reported upbeat results for the third quarter of Fiscal 2025 and issued solid guidance, backed by the demand for its artificial intelligence (AI) infrastructure. CSCO stock rose 2.2% on Monday and is up nearly 11% year-to-date.

Deutsche Bank Confident About CSCO Stock’s Prospects

Niknam highlighted three important aspects for his upgrade.

• Improved Visibility: Firstly, the analyst noted improved visibility towards Cisco generating durable mid-single-digit growth in upcoming years, supported by AI tailwinds across webscale, enterprise, and sovereign, a Campus portfolio refresh, more encouraging competitive dynamics in Networking over the near term, and enhanced scale in the Security business.
• Solid Earnings and Cash Flows: Secondly, Niknam expects Cisco to deliver a high-single-digit (7% to 8%) compound annual growth rate (CAGR) in EPS, fueled by improved revenue mix, with 56% of the top line coming from subscription software and services, and steady margins. Niknam expects the company’s growth in higher-margin revenues to mitigate the impact of incremental tariffs and support growth investments. Further, the analyst expects significant free cash flow generation in the range of $15 billion to $20 billion annually over the next three years. He believes that solid cash flows should enable incremental cash returns to shareholders through buybacks and dividends.
• Attractive Valuation: Finally, Niknam noted that CSCO stock is trading at a relatively “undemanding valuation” at 15x 2026 EPS estimate, reflecting a 25% discount to the S&P 500 (SPX), despite an enhanced revenue mix with additional tailwinds and improved execution in recent quarters.

Is Cisco Stock a Buy or Sell?

Overall, Wall Street has a Moderate Buy consensus rating on Cisco stock based on 10 Buys and seven Hold recommendations. The average CSCO stock price target of $71.21 indicates about 9% upside potential from current levels.

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