Morgan Stanley expects several networking and telecom equipment companies to outperform in 2026 due to the continued buildout for artificial intelligence infrastructure.
Cisco Systems (CSCO) and Arista Networks (ANET) present an opportunity in 2026 due to Ethernet continuing to gain share, they remain at an attractive price among AI names, and they are not dependent on price increases for earnings upsides, Morgan Stanley said.
“For CSCO, we think the opportunity with sovereigns and optical are likely to drive upside to the name,” said Morgan Stanley analysts Meta Marshall and Mary Lenox in a 2026 outlook. “For ANET, we think messaging has turned particularly negative of late around share, with possibility for this to reverse around the Q1 print as opportunity once deployments start being turned on become more clear.”
Morgan Stanley retains its Overweight rating on Cisco and Arista. It increased its price target on Cisco to $91 from $82 but slightly reduced its price target on Arista to $159 from $171.
“Cisco outperformed with $1.3bn of orders, with the company seeing strong demand for optics across the hyperscalers for DCI/scale across,” Marshall and Lenox noted. “With the company now expecting ~$3bn of revenue in FY26 from AI, Cisco’s AI business has gone from ~2% of the company to almost 5% in a couple of years, becoming a more meaningful contributor to growth.”
Morgan Stanley also upgraded Motorola Solutions (MSI) to Overweight from Equal-weight but nudged down its price target to $436 from $471.
Motorola shares have declined 20% year to date, likely due to concerns over the government shutdown that ended in mid-November after lingering for 43 days, which was the longest in U.S. history.
“We view the MSI selloff as more than explainable and see an attractive entry point as MSI valuation gap to the S&P 500 has closed,” Marshall and Lenox said.
Morgan Stanley also expects Corning (GLW), Ciena (CIEN), Lumentum Holdings (LITE) and Coherent (COHR) to outperform in 2026.
“Reason being, lasers and optics are heavy investment areas, with pricing particularly attractive on 800ZR, EML lasers and other optical componentry,” Marshall and Lenox said. “With the number of market participants investing in capacity, we are more cautious that this pricing will hold for the entire year, but if AI capex data points continue to get revised meaningfully positively, our short-term expectations for optical names will hold for the entire year (as it did in 2025).”
Morgan Stanley increased Corning’s price target to $98 from $82, Ciena to $213 from $195, Lumentum to $304 from $190 and Coherent to $180 from $150.