In a transformative session for the networking giant, Cisco Systems (NASDAQ: CSCO) saw its shares climb to levels not seen in over two decades during trading on January 13, 2026. The stock, which spent much of the early 2020s labeled as a "legacy" hardware provider, is currently trading near $78.50, marking a significant rally fueled by the company’s aggressive pivot toward artificial intelligence (AI) infrastructure and high-margin software subscriptions.
The market's enthusiasm is reflected in a dramatic expansion of Cisco’s valuation. Long characterized by a price-to-earnings (P/E) ratio in the mid-teens, Cisco is now trading at a trailing P/E of approximately 28.4x. This re-rating suggests that investors have finally embraced the "New Cisco"—a company where recurring software revenue now accounts for over 50% of total sales, largely thanks to the successful integration of its $28 billion acquisition of Splunk.
The AI Infrastructure Surge and the Splunk Synergy
The current momentum is the result of a multi-year strategy to decouple Cisco’s fortunes from the cyclical nature of hardware sales. Throughout 2025, Cisco capitalized on the massive industry shift from proprietary networking standards like InfiniBand to open-standard Ethernet for AI back-end fabrics. This shift has placed Cisco’s Silicon One chips at the heart of the world’s largest AI training clusters. In its most recent quarterly report, Cisco revealed that AI-related orders from "hyperscale" customers like Meta Platforms (NASDAQ: META) and Microsoft (NASDAQ: MSFT) reached a staggering $1.3 billion in a single quarter, putting the company on track to exceed $3 billion in AI revenue for fiscal year 2026.
The integration of Splunk has also reached a critical milestone. By merging Splunk’s data analytics with Cisco’s networking hardware, the company has created a "Data Fabric" that allows enterprises to monitor and secure their AI workloads in real-time. This synergy has been a primary driver of the P/E expansion, as the market rewards the higher predictability of Cisco’s subscription-based model. Furthermore, the upcoming launch of the "Cisco 360 Partner Program" on January 25 is expected to further streamline this software-led approach by unifying thousands of global partners under a single, simplified incentive structure.
Winners and Losers in the New Networking Era
While Cisco is riding high, the competitive landscape in 2026 is more polarized than ever. Arista Networks (NYSE: ANET) remains a formidable challenger, having officially surpassed Cisco in high-speed data center switching market share earlier this year. Arista’s lean, cloud-native approach continues to win over "AI Factory" operators, putting pressure on Cisco to maintain its innovation pace in the Silicon One roadmap. However, Cisco’s massive installed base in the enterprise "campus" market—where it still holds over 70% share—acts as a protective moat that Arista has struggled to fully breach.
On another front, the recently consolidated Hewlett Packard Enterprise (NYSE: HPE), following its acquisition of Juniper Networks, has emerged as the primary rival in the "AI-Ops" space. The integration of Juniper’s Mist AI platform into HPE’s GreenLake ecosystem has created a powerful alternative for enterprises seeking automated, AI-driven wireless networking. This duopoly between Cisco and HPE-Juniper has squeezed smaller players out of the market, leading to a period of relative price stability but intense competition for large-scale digital transformation contracts.
Broad Industry Trends and the InfiniBand-to-Ethernet Pivot
Cisco’s current valuation is a bellwether for a broader trend: the "Ethernetization" of AI. As AI models grow in complexity, the need for high-throughput, low-latency networking has moved from a niche requirement to a foundational necessity. Historically, NVIDIA (NASDAQ: NVDA) dominated this space with its proprietary InfiniBand technology. However, the industry’s collective push toward Ethernet—championed by the Ultra Ethernet Consortium, of which Cisco is a founding member—has leveled the playing field.
This transition mirrors historical shifts in the technology sector, such as the move from proprietary mainframe protocols to TCP/IP in the 1990s. By positioning itself as the leader of the "Open AI" networking movement, Cisco has managed to avoid the "commodity trap" that often plagues hardware vendors. Additionally, regulatory scrutiny over AI safety and data sovereignty has played into Cisco’s hands; its integrated security and observability stack (via Splunk) offers a "sovereign AI" solution that appeals to government and highly regulated financial institutions.
What Lies Ahead: The Path to $100
In the short term, market participants are looking toward Cisco’s next earnings call to see if the company can sustain its "beat-and-raise" trajectory. The immediate catalyst will be the enterprise "refresh cycle" driven by Wi-Fi 7. As companies bring employees back to offices and upgrade their local networks to handle AI-integrated applications, Cisco is poised to capture the lion's share of this multi-billion dollar hardware upgrade.
Longer-term, the challenge for Cisco will be maintaining its premium P/E ratio. To do so, it must prove that its AI revenue is not just a one-time infrastructure build-out but a sustained growth engine. Strategic pivots toward "Agentic AI"—where software agents automatically manage and repair networks—will be the next frontier. If Cisco can successfully transition from being a provider of "pipes" to a provider of "intelligence," analysts believe a $100 share price and a $400 billion market capitalization are well within reach by 2027.
Final Assessment for Investors
Cisco’s performance on January 13, 2026, marks the culmination of a successful multi-year transformation. The company has moved beyond its reputation as a slow-moving dividend play to become a central pillar of the AI infrastructure trade. With a P/E ratio now approaching 30x, the stock is no longer "cheap" by traditional standards, but it reflects a higher quality of earnings and a dominant position in the next generation of networking.
Investors should closely monitor the adoption rates of the Cisco 360 Partner Program and the continued growth of the Silicon One portfolio. While competition from Arista and the HPE-Juniper entity remains fierce, Cisco’s scale, security integration, and software-first strategy have provided it with its strongest market position in decades. For the first time in a generation, Cisco is not just reacting to the market—it is defining it.
This content is intended for informational purposes only and is not financial advice.