Cisco holds significant revenue opportunity on next-gen products: JP Morgan

Cisco Systems (NASDAQ:CSCO) is gearing up for a “revenue acceleration opportunity” due to a Campus upgrade and refresh cycle after the launch of its next-generation Catalysts switch series, which is expected next week, according to an in-depth analysis by J.P. Morgan.

“We expect to see the launch of Catalyst-2026 switches to support revenue tailwinds for the company, driven largely by an ASP uplift associated with the next-generation product and a faster adoption ramp for Catalyst-2026 relative to the Catalyst 9K series,” said J.P. Morgan analysts, led by Samik Chatterjee. “We forecast +3% port shipment growth, in line with historical trends for Cisco, to remain consistent going forward, and to lead to a medium-term revenue growth CAGR of +6% in Campus revenue for Cisco relative to +3% in the past few years.”

J.P. Morgan rates Cisco at Overweight with a $73 price target.

Cisco’s third quarter fiscal 2025 financial results, which were released in mid-May, prompted multiple price target increases and a ratings upgrade due to its networking growth and momentum in the artificial intelligence space. Wells Fargo upgraded the stock to Overweight from Equal-weight and nudged its price target to $75 from $72.

The rise of AI has been a boon for Cisco, including new deals in Saudi Arabia and the United Arab Emirates. Cisco has also recently entered the quantum computing market.

“Historically, Cisco has tended to upgrade its flagship Catalyst campus portfolio every 6-7 years,” Chatterjee said. “The company is likely to launch their next-generation Catalyst product portfolio—the next generation of the Catalyst 9K series—later this year (likely at Cisco Live 2025 next week) with the products being commercially available in 2026.”

Cisco Live runs from June 8-12 in San Diego.

Cisco’s last Catalyst upgrade occurred in 2017. That upgrade cycle took longer to penetrate the market due in part to the Covid-19 pandemic.

“We are assuming a modestly faster ramp led by expectations of Catalyst-2026 products comprising about 50% of the total Cisco Campus port shipments by 2028, i.e., Year 3, roughly a year ahead of the prior cycle,” Chatterjee noted. “However, as stated earlier, we expect this will primarily lead to an ASP-led revenue tailwind, rather than expectations for significant volume-led upsides.”

“Total Campus switch related revenues for Cisco to ramp from $9.8 bn in 2024 to $10.6 in 2026 and $12.8 bn in 2029, with 2024-2029 revenue CAGR of 6% as opposed to 3% CAGR previously,” he added.