Cisco Systems, Inc. designs, manufactures, and sells Internet Protocol based networking and other products related to the communications and information technology industry in the Americas, Europe, the Middle East, Africa, the Asia Pacific, Japan, and China. The company also offers switching portfolio encompasses campus switching as well as data center switching; enterprise routing portfolio interconnects public and private wireline and mobile networks, delivering highly secure, and reliable connectivity to campus, data center and branch networks; wireless products include wireless access points and controllers; and compute portfolio including the cisco unified computing system, hyperflex, and software management capabilities, which combine computing, networking, and storage infrastructure management and virtualization. In addition, it provides Internet for the future product consists of routed optical networking, 5G, silicon, and optics solutions; collaboration products, such as meetings, collaboration devices, calling, contact center, and communication platform as a service; end-to-end security product consists of network security, cloud security, security endpoints, unified threat management, and zero trust; and optimized application experiences products including full stack observability and network assurance. Further, the company offers a range of service and support options for its customers, including technical support and advanced services and advisory services. It serves businesses of various sizes, public institutions, governments, and service providers. The company sells its products and services directly, as well as through systems integrators, service providers, other resellers, and distributors. Cisco Systems, Inc. has strategic alliances with other companies. Cisco Systems, Inc. was incorporated in 1984 and is headquartered in San Jose, California.

Cisco looks like a high-quality but no longer cheap business: profitability and returns are noticeably above industry medians, but the market valuation is also high. P/E is slightly below the industry median, but P/S, P/B, and especially P/FCF are significantly higher, which suggests a premium for stability and quality rather than clear undervaluation. At the same time, valuation multiples have generally declined from their peaks in recent periods, which has partially improved the picture, but it does not remove concerns about expensiveness relative to cash flow and the balance sheet. The company’s margins are strong: gross margin is around 64.5%, operating margin 24.3%, and net margin 21.0%, with all three metrics improving year over year, which supports the valuation. ROE, ROA, and ROI are also well above the industry and continue to improve, which is an important positive for a long-term investor. Revenue, operating income, net income, and EBITDA show steady growth, confirming the quality of the current business model and its ability to generate cash flow. The balance sheet does not look aggressive: debt/equity is moderate and declining, and long-term debt is decreasing, which lowers financial risk. The weak point is liquidity: the quick ratio and current ratio are below industry benchmarks and remain below 1, which requires attention, although for a mature company this is not critical. Dividend yield has declined compared with previous periods, so the dividend factor currently supports the stock less than before. Net worth and equity are growing, and assets are increasing, confirming business expansion without signs of deteriorating quality. Overall, the fundamentals rather justify maintaining a premium to the market, but do not provide grounds for aggressively raising the target, since the valuation already reflects strong operating metrics. For an investor, this is a story of durable quality, moderate growth, and disciplined balance sheet management, but with limited upside from re-rating due to high multiples.

Cisco Systems, Inc.

Сильный индекс, значительно упал. Быки в растерянности.

Strong index, significantly down. The bulls are confused.

Сильный индекс, незначительно упал. Медведи в растерянности.

Strong index, slightly down. The bears are confused.

Средний индекс, значительно вырос. Рынок на стороне быков.

Medium index, significantly up. The market is on the bulls' side.

Средний индекс, значительно упал. Рынок не поддерживает медведей.

Medium index, significantly down. The market does not support the bears.

Слабый индекс, незначительно упал. Приток средств в лонги остался положительным, но снизился.

Weak index, slightly down. The inflow of funds into longs remained positive, but decreased.

Слабый индекс, незначительно вырос. Приток средств в шорты остается на невысоком уровне.

Weak index, slightly up. The inflow of funds into shorts remains at a low level.

Cisco demonstrates strong profitability and growth, but trades at a premium on P/S, P/B, and P/FCF; the fundamentals support the stock, however upside from revaluation is limited.

Ciena Corporation CIEN shares have dropped 15.2% in the past week, even as fiscal third-quarter 2026 results and the AI-driven demand outlook strengthened. Adjusted earnings and revenues beat expectations, while backlog and cloud-provider business expanded.
The disconnect puts execution risk at center stage. Supply constraints, customer concentration and a valuation above Ciena's historical median leave less room for disappointment despite stronger growth indicators.
CIEN's Earnings Momentum Is Still Accelerating
Fiscal third-quarter adjusted earnings jumped 215% year over year to $2.11 per share, beating the Zacks Consensus Estimate of $1.74.
Revenues rose 37% to $1.67 billion and topped the $1.65 billion consensus mark.
Operating leverage improved sharply. Adjusted operating margin reached 22.5%, up from 10.7% a year earlier.
Ciena also raised fiscal 2026 revenue guidance to $6.42 billion (+/-$50 million), implying 35% growth at the midpoint.
Ciena's AI Demand Backdrop Remains Powerful
Direct cloud-provider revenues increased 82% year over year and represented 53% of quarterly sales. Backlog reached $8.5 billion and is expected to top $10 billion at fiscal year-end, while customer commitments extend through 2029.
Peers are seeing similar AI infrastructure activity. Cisco Systems, Inc. CSCO took $9.3 billion of AI infrastructure orders from hyperscalers in fiscal 2026 and expects $7.5 billion of AI infrastructure revenue in fiscal 2027. Lumentum Holdings Inc. LITE reported $1.01 billion in fiscal fourth-quarter revenue as management cited rising AI bandwidth needs and advancing 1.6T cloud-module adoption.
CIEN Still Faces a Tight Supply Backdrop
Ciena's demand visibility comes with a bottleneck. Management expects supply-demand constraints to persist through 2027 and likely 2028, even after securing certain key components through 2029.
Those agreements improve access but require upstream investment. Ciena expects related disbursements to reduce fiscal fourth-quarter operating cash flow. It also had $3.3 billion of outstanding purchase orders as of Aug. 1, only a portion of which were firm and non-cancelable, while nine-month inventory excess and obsolescence provisions reached $72.4 million.
Ciena's Valuation Leaves Less Room for Error
After the recent weakness, Ciena still trades at 35.7X forward 12-month earnings, close to the Zacks sub-industry's 36.3X but above the Zacks Computer and Technology sector's 20.4X.
That multiple also sits well above Ciena's five-year median of 25.5X. The premium does not negate the improved outlook, but it raises the bar for sustained growth, margin delivery and supply execution.
CIEN's Hyperscaler Exposure Cuts Both Ways
Concentration is the other side of the AI opportunity. Two cloud providers generated 41.7% of fiscal third-quarter revenue, and management said roughly half of the business now comes directly from hyperscalers.
That exposure can make product mix and order timing more volatile. Ciena's fiscal 2027 framework also assumes cloud providers continue AI infrastructure spending at levels consistent with recent public commitments, making sustained capital spending an important sensitivity for growth.
Ciena's Momentum Signal Stays Strong
Bottom line, the 15.2% weekly drop has not changed the fundamental tension. Ciena's earnings and AI demand indicators are strengthening, but supply, concentration and valuation risks still make execution central to the investment case.
The stock currently carries a Zacks Rank #1 (Strong Buy), which reflects favorable earnings estimate-revision trends over the one- to three-month horizon. Its Momentum Score of A and Growth Score of B indicate favorable momentum and growth characteristics.
The Value Score of F points to weak value characteristics, while the VGM Score of C signals a more mixed composite profile. Together, the ratings leave the near-term signal favorable but not uniformly strong, with execution risks still relevant after the recent volatility. You can see the complete list of today’s Zacks Rank #1 stocks here.
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CIEN Falls 15.2% in a Week as AI Growth Faces Persistent Supply Risks

Ciena Corporation CIEN has put concrete targets behind the surge in AI-related networking demand. Fiscal third-quarter results showed faster growth, expanding cloud exposure and improving profitability as customers added optical capacity.
The next test is conversion. Backlog and multiyear customer commitments support visibility, but component availability and manufacturing capacity will help determine how much demand becomes revenue in fiscal 2027.
Ciena Corporation Price and Consensus
Ciena's Q3 Results Set the 2027 Baseline
Fiscal third-quarter revenues increased 37% year over year to $1.67 billion. Adjusted earnings rose 215% to $2.11 per share, while adjusted operating margin reached 22.5%, up from 10.7% a year earlier.
Direct cloud-provider revenues represented 53% of quarterly sales and jumped 82% year over year. That mix underscores how hyperscaler spending is becoming more important to Ciena's growth trajectory.
CIEN's 2027 Guide Points to Another Step Up
Ciena expects fiscal 2027 revenues to grow at least 30%, following projected fiscal 2026 growth of 35% at the midpoint of its $6.42 billion revenue guidance. Management sees fiscal 2027 revenues reaching at least $8.3 billion to $8.4 billion.
Profitability is expected to scale with that growth. Ciena projects an adjusted gross margin of 45%-46% and an adjusted operating margin of 25%-27%, which would extend the operating leverage evident in the latest quarter.
Ciena's Backlog Extends Visibility Into 2029
Backlog reached $8.5 billion at the end of the fiscal third quarter and is expected to exceed $10 billion at fiscal year-end. Ciena has also secured increased customer commitments that extend through 2029.
The timing matters for the 2027 framework. Management said the vast majority of the expected year-end backlog carries customer-request dates in fiscal 2027 and covers most of the company's revenue guide for that year.
CIEN's Optical Products Are Broadening the AI Bet
RLS and Waveserver revenues each increased more than 55% year over year, while pluggables revenues more than doubled. WaveLogic 6 Nano 800ZR shipments more than doubled sequentially, and Ciena secured a second multi-rail win for high-density photonic infrastructure.
The broader market is showing similar AI networking investment. Cisco Systems, Inc. CSCO took $9.3 billion of AI infrastructure orders from hyperscalers in fiscal 2026 and expects $7.5 billion of related revenue in fiscal 2027. Lumentum Holdings Inc. LITE reported $1.01 billion of fiscal fourth-quarter 2026 revenues while highlighting advancing 1.6T cloud-module adoption as AI bandwidth requirements rise.
Ciena's Capacity Limits Could Shape the Ramp
Demand remains ahead of available supply. Management does not expect the constrained supply-demand balance to normalize before 2028, making component availability and manufacturing expansion central to the pace of fiscal 2027 growth.
Ciena has secured certain key components through 2029 and is investing upstream to increase capacity. Those agreements strengthen supply visibility but are expected to reduce fiscal fourth-quarter 2026 cash from operations as related investments are disbursed.
CIEN's Growth and Momentum Scores Back the Theme
The bottom line is that Ciena's 2027 guide gives the AI optical theme a measurable financial target. Backlog and product demand support the growth case, while supply constraints remain an important limit on how quickly the company can convert that demand.
CIEN currently carries a Zacks Rank #1 (Strong Buy). The rank reflects favorable earnings estimate-revision trends over the one- to three-month horizon, while a Growth Score of B and Momentum Score of A indicate favorable growth and momentum characteristics.
The Value Score of F signals a weaker value profile, and the VGM Score of C provides a more mixed composite reading. Those scores keep valuation discipline relevant even as Ciena's operating outlook and AI-related demand remain favorable. You can see the complete list of today’s Zacks Rank #1 stocks here.
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Ciena's 2027 Growth Guide Raises the Stakes for AI Optical Demand

Ciena Corporation CIEN is entering fiscal 2027 with a growth outlook few networking peers can match. Management expects at least 30% revenue growth as AI-driven bandwidth demand expands across cloud and data-center networks.
The question is valuation. CIEN trades well above its own five-year median, so the investment case depends on whether earnings leverage and sustained hyperscaler spending can offset supply and concentration risks.
Ciena's 2027 Growth Case Is Hard to Ignore
Management expects fiscal 2027 revenues to grow at least 30% to between $8.3 billion and $8.4 billion. Adjusted gross margin is projected at 45%-46%, while adjusted operating margin is expected to reach 25%-27%.
Cisco Systems, Inc. CSCO reported $9.3 billion of fiscal 2026 AI infrastructure orders from hyperscalers and expects $7.5 billion of AI infrastructure revenues in fiscal 2027. Hewlett Packard Enterprise Company HPE reported fiscal third-quarter 2026 Cloud & AI revenues of $9 billion, up 25.4%, while AI systems orders rose more than 30% sequentially to $2.4 billion.
Ciena's Premium Multiple Demands Execution
Ciena trades at 35.7X forward 12-month earnings, versus its five-year median of 25.5X. That gap means investors are paying a materially higher multiple than the stock has typically commanded over the past five years.
The multiple is slightly below the Zacks sub-industry's 36.3X, but well above the Zacks Computer and Technology sector's 20.4X and the S&P 500's 19.7X. The premium leaves less room for execution setbacks.
CIEN's Supply Commitments Add Cash-Flow Risk
Ciena has secured supply of certain key components through 2029, but the arrangements require upstream investment. Management expects related disbursements to reduce fiscal fourth-quarter 2026 operating cash flow.
Purchase orders totaled $3.3 billion as of Aug. 1, 2026, with only a portion firm and non-cancelable. Nine-month inventory excess and obsolescence provisions were $72.4 million, adding working-capital and execution risk if demand shifts.
Ciena's Cloud Mix Raises Concentration Stakes
Direct cloud-provider revenues represented 53% of fiscal third-quarter sales, while two cloud providers generated 41.7% of total revenues. Management also indicated that roughly half of the business now comes directly from hyperscalers.
The fiscal 2027 outlook assumes cloud providers continue AI infrastructure spending at levels consistent with recent commitments. That makes hyperscaler budgets and order timing important variables for delivering the projected growth.
CIEN's Factor Scores Favor Growth Over Value
Ciena's growth and earnings outlook is favorable, but the premium multiple means investors must weigh that upside against supply and customer-concentration risk. The shares are better aligned with investors willing to accept execution volatility than with those seeking a clear value entry.
The stock currently carries a Zacks Rank #1 (Strong Buy), reflecting favorable earnings estimate-revision trends over the one- to three-month horizon. Its Momentum Score of A and Growth Score of B also indicate favorable momentum and growth characteristics.
The Value Score of F points to a weaker value profile, while the VGM Score of C is less favorable than an A or B composite reading. That mix supports a constructive near-term view without removing the need for valuation discipline. You can see the complete list of today’s Zacks Rank #1 stocks here.
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Is Ciena a Buy as 30% Growth Meets Its Premium Forward Valuation?

A month has gone by since the last earnings report for Cisco Systems (CSCO). Shares have lost about 5.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Cisco due for a breakout? Well, first let's take a quick look at the latest earnings report in order to get a better handle on the recent drivers for Cisco Systems, Inc. before we dive into how investors and analysts have reacted as of late.
Cisco's Q4 Earnings Beat Estimates, Strong Networking Aids Revenues
Cisco Systems reported fourth-quarter fiscal 2026 non-GAAP earnings of $1.22 per share, up 23% year over year and beating the Zacks Consensus Estimate by 4.27%. Broad networking demand and operating leverage supported the year-over-year growth.
Revenues increased 18% year over year to $17.252 billion, topping the consensus mark by 2.36%. Product revenues increased 24% year over year.
Product orders increased 35% year over year (up 25% excluding hyperscalers), while annualized recurring revenue (ARR) reached $32.1 billion, up 3% year over year, highlighting broad demand.
Remaining performance obligations (RPO) totaled $46.7 billion, up 7% year over year, with product RPO rising 9%, while services RPO increased 6% year over year. Total software revenues increased 11% year over year to $6.183 billion, while subscription revenues represented 48% of total revenues.
CSCO’s Networking Growth Accelerates
Networking revenues surged 28% year over year to $9.791 billion. The increase reflected triple-digit growth in AI infrastructure, double-digit growth in data center switching and continued growth in campus networking.
Networking product orders jumped 40%, marking the eighth consecutive quarter of double-digit growth. Campus networking orders advanced 20%, while data center networking orders increased more than 35%. Wi-Fi 7 accounted for more than half of total wireless orders in the quarter.
Hyperscaler AI infrastructure orders totaled $4 billion in the fourth quarter, taking fiscal 2026 orders to $9.3 billion, roughly 4.5 times the fiscal 2025 level. The fiscal-year mix was approximately 60% Silicon One-based systems and 40% optics.
Cisco also secured three new hyperscaler design wins, covering P200-powered scale-across systems, G200-powered scale-out systems and an optical line system. AI infrastructure orders from neocloud, sovereign and enterprise customers exceeded $400 million in the quarter and totaled $1.3 billion for fiscal 2026.
CSCO Security and Software Trends Improve
Security revenues increased 14% year over year to $2.226 billion. The entire security portfolio, including Splunk, recorded double-digit order growth. Firewall orders increased more than 30%, while more than 1,500 customers purchased newer offerings such as Secure Access, XDR, Hypershield and AI Defense during the quarter.
Collaboration revenues advanced 12% to $1.167 billion, while Observability revenues rose 6% to $275 million. Services revenues were essentially flat at $3.793 billion.
Cisco Balances Margin Pressure With Leverage
Non-GAAP gross margin was 66.3%, down 210 basis points (bps) year over year. Product gross margin fell 270 bps to 64.8%, primarily due to a higher hardware mix and memory costs, partly offset by productivity improvements and price increases. Services gross margin improved 80 bps to 71.6%.
Non-GAAP operating expenses were $5.243 billion, up 5%, but declined to 30.4% of revenues from 34.1% a year earlier.
Consequently, non-GAAP operating margin expanded to 35.9% from 34.3%, demonstrating operating leverage despite gross-margin pressure.
CSCO Cash Flow and Recurring Metrics
Cash, cash equivalents and investments totaled $15.918 billion at the end of the fiscal fourth quarter compared with $16.6 billion at the end of the third quarter of fiscal 2026.
Operating cash flow increased 27% year over year to $5.386 billion.
CSCO returned $3.161 billion to shareholders through $1.502 billion of share repurchases and $1.659 billion of dividends. The current program has $8.1 billion under remaining authorization.
Cisco Sets Strong Fiscal 2027 Outlook
For the first quarter of fiscal 2027, Cisco expects revenues between $18 billion and $18.2 billion. Non-GAAP earnings are projected at $1.32-$1.34 per share, with non-GAAP gross margin of 65-66% and operating margin of 35.5-36.5%.
For fiscal 2027, Cisco projects revenues of $72.2-$73.4 billion and non-GAAP earnings of $5.05-$5.11 per share. Hyperscaler AI infrastructure revenues are expected to reach $7.5 billion, up from approximately $4 billion in fiscal 2026.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a upward trend in estimates revision.
The consensus estimate has shifted 19.25% due to these changes.
VGM Scores
Currently, Cisco has a average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock has a score of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Cisco has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Cisco (CSCO) Down 5.3% Since Last Earnings Report: Can It Rebound?

In early trading on Friday, shares of Honeywell International topped the list of the day's best performing Dow Jones Industrial Average components, trading up 7.5%. Year to date, Honeywell International registers a 42.2% gain.
And the worst performing Dow component thus far on the day is Amgen, trading down 0.1%. Amgen Inc is showing a gain of 16.7% looking at the year to date performance.
Two other components making moves today are UnitedHealth Group, trading flat on the day, and Cisco Systems, trading up 2.1% on the day.
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Dow Movers: AMGN, HONIV

For Immediate Release
Chicago, IL – September 9, 2026 – Today, Zacks Investment Ideas feature highlights NVIDIA NVDA, Alphabet GOOGL, Advanced Micro Devices AMD, Micron MU, Dell DELL and Cisco CSCO.
Why Today's AI Boom Differs from the Internet Bubble
AI: The Largest Industrial Buildout Since the Railroad
As a percentage of GDP, the current artificial intelligence buildout is the largest industrial buildout since the American railroad buildout of the 19th century.
However, for many investors, the pain and the memory of the late-1990s internet boom and the subsequent bust 2000 bust are still fresh in their minds. Which begs the question for investors: "What part of the AI cycle are we in currently?" In today's commentary, I will be contrasting the AI boom to the internet boom of the 1990s, providing evidence and data that underscored my belief that we are merely in the third inning of nine in the AI boom.
AI: There is No "Dark Fiber"
During the dot-com bubble of the late 1990s, telecom companies invested more than $500 billion (financed through cheap corporate debt) to dig trenches across land and under oceans, believing that internet traffic would create permanent demand for bandwidth. However, these telecom companies overestimated the need for fiber and overinvested. By the time the internet bubble popped, more than 90% of transcontinental and transatlantic fiber sat "dark" and unused, leading to plunging stock prices and widespread bankruptcies.
Today, a key part of the bear argument is that history is repeating itself, except this time, the overinvesting is occurring in NVIDIA GPUs. However, the evidence contradicts such a sentiment. The NVIDIA H1000 is a three-year-old training chip. Its rental price is up a staggering 22% month-over-month to $3.28 an hour. Instead of these outdated chips sitting "dark," hyperscalers are paying a premium for them.
AI Companies More Profitable than Internet Companies
In 1999, a massive wave of internet initial public offerings hit. Of these new issues, roughly 75% operated at a net loss. Today, tech IPOs have a GAAP profitability rate of ~50% due to because private markets have stricter expectations. Today's top AI companies like Alphabet, Advanced Micro Devices and Micron are highly profitable. For instance, last quarter, Micron generated $28.86 billion in net income.
AI Valuations are Reasonable
At the peak of the internet bubble, the average price-to-earnings ratio was over 200x. Conversely, leading AI names have extremely reasonable P/E ratios, as valuations have been held down recently by geopolitical concerns. For example, Dell has a P/E ratio of 28.52x. On the other hand, Cisco, one of the leading internet-related names of the time, peaked with a 200x P/E.
Bottom Line
While the sheer scale of the AI buildout naturally draws comparisons to the internet bubble of the late-90s, equating the two overlooks key economic realities. Backed by immediate hardware utilization, robust profitability, and low valuations, the AI boom rests on a far stronger foundation than the internet boom.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.
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This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Ideas feature highlights: NVIDIA, Alphabet, AMD, Micron, Dell and Cisco

AI: The Largest Industrial Buildout Since the Railroad
As a percentage of GDP, the current artificial intelligence buildout is the largest industrial buildout since the American railroad buildout of the 19th century.
However, for many investors, the pain and the memory of the late-1990s internet boom and the subsequent bust 2000 bust are still fresh in their minds. Which begs the question for investors: “What part of the AI cycle are we in currently?” In today’s commentary, I will be contrasting the AI boom to the internet boom of the 1990s, providing evidence and data that underscored my belief that we are merely in the third inning of nine in the AI boom.
AI: There is No “Dark Fiber”
During the dot-com bubble of the late 1990s, telecom companies invested more than $500 billion (financed through cheap corporate debt) to dig trenches across land and under oceans, believing that internet traffic would create permanent demand for bandwidth. However, these telecom companies overestimated the need for fiber and overinvested. By the time the internet bubble popped, more than 90% of transcontinental and transatlantic fiber sat “dark” and unused, leading to plunging stock prices and widespread bankruptcies.
Today, a key part of the bear argument is that history is repeating itself, except this time, the overinvesting is occurring in NVIDIA (NVDA) GPUs. However, the evidence contradicts such a sentiment. The NVIDIA H1000 is a three-year-old training chip. Its rental price is up a staggering 22% month-over-month to $3.28 an hour. Instead of these outdated chips sitting “dark,” hyperscalers are paying a premium for them.
Image Source:TradingView
AI Companies are More Profitable than Internet Companies
In 1999, a massive wave of internet initial public offerings hit. Of these new issues, roughly 75% operated at a net loss. Today, tech IPOs have a GAAP profitability rate of ~50% due to because private markets have stricter expectations. Today’s top AI companies like Alphabet (GOOGL), Advanced Micro Devices (AMD), and Micron (MU) are highly profitable. For instance, last quarter, Micron generated $28.86 billion in net income.
AI Valuations are Reasonable
At the peak of the internet bubble, the average price-to-earnings ratio was over 200x. Conversely, leading AI names have extremely reasonable P/E ratios, as valuations have been held down recently by geopolitical concerns. For example, Dell (DELL) has a P/E ratio of 28.52x. On the other hand, Cisco (CSCO), one of the leading internet-related names of the time, peaked with a 200x P/E.
Image Source: Zacks Investment Research
Bottom Line
While the sheer scale of the AI buildout naturally draws comparisons to the internet bubble of the late-90s, equating the two overlooks key economic realities. Backed by immediate hardware utilization, robust profitability, and low valuations, the AI boom rests on a far stronger foundation than the internet boom.
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This article originally published on Zacks Investment Research (zacks.com).

Why Today's AI Boom Differs From the Internet Bubble

Ciena Corporation’s CIEN shares have plunged 14.1% in the past month, underperforming the Zacks Computer & Technology sector’s growth of 0.5% and the Zacks Communication - Components industry’s decline of 3%. The S&P 500 composite is down 0.6% over the same time frame.
The company has also underperformed its peers, Corning Incorporated GLW, Arista Networks, Inc. ANET and Cisco Systems, Inc. CSCO. GLW and CSCO have lost 2% and 10.9%, respectively, while ANET inched up 1.1% in the same time frame.
Ciena is grappling with supply constraints and limited industry capacity, which are restricting its ability to fully meet strong customer demand. However, the company is benefiting from strong AI-driven demand for high-speed optical connectivity and growing customer order flow.
Let us take a closer look at CIEN’s fundamentals, key growth drivers, competitive strengths and potential risks to assess whether the stock remains an attractive investment.
Factors to Consider
Ciena faces supply constraints that could limit its ability to fully capitalize on the strong demand environment. On the lastearnings call management stated that the company cannot satisfy all customer requirements for fiscal 2027, with supply remaining the key factor limiting revenue growth. The industry is expected to remain supply constrained through at least 2028, while Ciena continues to work on securing additional capacity.
The company also expects its supply investments to weigh on cash generation in the near term. Ciena plans to invest upstream to strengthen supply security and support its long-term agreements for key components, which is expected to result in a reduction in cash from operations in the fourth quarter. In addition, working-capital investments have already increased inventory levels, while cash conversion declined sequentially during the quarter.
Tariffs remain another potential hurdle for Ciena. While the overall tariff impact is currently considered relatively neutral, management is monitoring the new Canadian tariff regime, which could have an adverse impact of around $10 million per quarter. The company is still working through mitigation actions, while the 70 basis points (bps) gross-margin benefit from tariff refunds in the third quarter was a one-time accounting adjustment and is not expected to continue.
Nevertheless, Ciena is benefiting from an accelerating demand environment driven by AI and rising bandwidth requirements. Management expects the total addressable market for its business to effectively double from approximately $25 billion currently to around $50 billion by 2029, supported by increasing network infrastructure spending across traditional WAN, AI WAN and data center markets.
Strong customer demand and order flow are supporting Ciena's growth outlook. The company reported a third-quarter fiscal 2026 book-to-bill ratio significantly above 1, while backlog increased by $800 million to $8.5 billion. Management expects backlog to exceed $10 billion by the end of fiscal 2026, with orders booked in the first month of fourth quarter approaching the level booked during the entire third quarter.
Ciena's technology leadership and expanding portfolio are also supporting its growth prospects. WaveLogic 6 Extreme adoption has exceeded that of the prior generation, while its intelligent line systems hold roughly 70% market share. Hyper-Rail is expected to reach initial customer standardization by the end of 2026 and generate material revenue during 2027. Meanwhile, strong adoption of WaveLogic 5 Nano, progress in Nitro and sample orders for Vesta are expanding the company's interconnect opportunity.
For fourth-quarter fiscal 2026, Ciena expects revenue of $1.75 billion (+/- $50 million). Ciena raised fiscal 2026 revenue guidance to $6.42 billion (+/- $50 million), implying 35% year-over-year growth at the midpoint. For fiscal 2027, management’s early view indicates at least 30% revenue growth, an adjusted gross margin of 45-46%, and an adjusted operating margin of 25-27%.
CIEN’s Valuation
CIEN trades at a forward 12-month price-to-earnings (P/E) of 40X, above the industry’s 35.7X. CSCO, GLW and ANET trade at a forward 12-month P/E of 24.43X, 38.95X and 45.19X, respectively.
CIEN’s Upward Estimates
The Zacks Consensus Estimate for CIEN’s earnings for fiscal 2026 has been revised marginally upward over the past 30 days.
Image Source: Zacks Investment Research
What Should You Do With CIEN Stock Now?
Ciena is benefiting from strong AI-driven demand, robust customer order flow and expanding opportunities in optical connectivity. However, supply constraints, capacity limitations and near-term cash flow pressures remain key concerns.
Existing investors should hold the stock, while new investors may consider waiting for a better entry point.
Currently, Ciena carries a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).

Ciena Stock Down 14% in the Past Month: Time to Buy, Hold or Sell?

Arista Networks, Inc. ANET has gained 37.3% in six months compared with the Internet software industry’s growth of 7.8%. The stock has outperformed the Zacks Computer & Technology sector and the S&P 500 during the same time frame.
It has underperformed its peers like Hewlett Packard Enterprise Company HPE but outperformed Cisco Systems, Inc. CSCO. HPE has gained 153.6%, and Cisco has increased 35.7% during this period.
Solid AI Momentum, Growing Customer Base are Positives
Arista Networks is benefiting from the rapid expansion of AI infrastructure. Cloud providers and hyperscalers are investing heavily in networking capacity to support growing compute workloads. Backed by these factors, Arista disclosed that its AI fabrics business has expanded to more than 100 cumulative customers compared with only four to five customers in 2024. Management also expects AI revenues to reach at least $3.6 billion in 2026, supported by scale-up, scale-out and scale-across deployments.
Organizations are increasingly preferring an integrated hardware-and-software approach as complex AI deployments require reliability, simplicity and specialized networking features. This shift toward integrated networking is beneficial for Arista’s EOS platform, which is closely integrated with switching hardware solutions.This positions Arista favorably against major networking rivals such as Cisco and HPE.
The transition toward higher-speed networking is another long-term catalyst. Arista has introduced the 7060XE7 with 100-terabit capacity and 1.6-terabit throughput, along with liquid-cooling options designed for next-generation AI infrastructure. Management expects 1.6T products to enter customer trials in the second half of 2026. Production is expected to ramp in 2027.
Improvement in Supply Chain and Strong Cash Flow Growth are Tailwinds
The company has expanded supplier qualification, secured additional component sources and strengthened strategic supplier relationships. It has also secured memory supply for 2026. In previous quarters, supply constraints restricted Arista’s ability to fully address demand. Its proactive approach to resolving those issues will increase its ability to convert higher demand into higher shipments.
Arista’s strong liquidity and cash generation provide financial flexibility to support continued AI networking investment. During the first six months of 2026, operating cash flow increased to $2.78 billion from $1.84 billion in the same period of 2025. As of June 30, 2026, cash and cash equivalents stood at $2.3 billion, while marketable securities totaled $11.1 billion. This financial capacity supports continued investment in product development, manufacturing expansion and working capital as AI networking deployments scale.
Estimate Revision Trend
Earnings estimates for Arista for 2026 and 2027 have increased over the past 60 days.
Image Source: Zacks Investment Research
Key Valuation Metric of ANET
From a valuation standpoint, Arista appears to be relatively more premium than the industry. Going by the price/sales ratio, the company's shares currently trade at 16.62 book value, higher than 3.97 of the industry average.
End Note
Arista strengthens its position in AI networking as enterprises and hyperscale customers expand Ethernet-based AI infrastructure. Improving supply-chain resilience has boosted the company’s reliability among customers, amid growing geopolitical volatility. Strong cash flow growth and robust liquidity will allow it to invest in innovation, manufacturing capacity expansion and generate greater value for shareholders. These factors have strengthened Arista’s growth outlook. With a Zacks Rank #1 (Strong Buy), Arista seems to be a good investment option at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
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This article originally published on Zacks Investment Research (zacks.com).

ANET Rises 37.3% in Six Months: Is There More Room to Grow?

Astera Labs ALAB shares have plunged 24.2% over the past month, underperforming the broader Zacks Computer & Technology sector’s 2.5% decline and the Zacks Internet - Software industry’s 1.8% rise over the same period.
The company’s shares have also underperformed its peers, which include Marvell Technology MRVL and Cisco Systems CSCO. Both Marvell Technology and Cisco Systems are expanding their footprint in the AI infrastructure space. Shares of Marvell Technology and Cisco Systems have lost 5.6% and 10.1%, respectively, over the past month.
The underperformance can be attributed to higher operating expenses due to continued investment in its product roadmap. Challenging macroeconomic uncertainties and stiff competition remain headwinds.
However, Astera Labs shares have outperformed its peer, Credo Technology CRDO, which is also expanding its footprint in the AI infrastructure space. Credo Technology stock has plunged 30.6% over the past month. The outperformance can be attributed to strong demand for its AI connectivity products, especially the Scorpio, Aries and Taurus portfolios.
ALAB Stock Performance
ALAB Rides on Strong Scorpio Demand
Astera Labs is benefiting from robust demand for its Scorpio X-Series fabric switches, which is helping the company to fend off its competitors like Marvell Technology, Cisco Systems and Credo Technology. In the second quarter of 2026, ALAB reported record revenues of $392.4 million, up 104% year over year, with Scorpio X-Series entering volume production and set to become the company’s largest product line by the third quarter of 2026.
This momentum is fueled by Scorpio’s advanced features, such as hardware-accelerated Hypercast and In-Network Compute, which deliver up to 2x performance improvements for AI workloads. The COSMOS software platform further enhances customer loyalty by enabling dynamic traffic shaping and real-time performance management.
The Scorpio product family delivered significant growth as the X-Series began shipping in initial production volumes across multiple lane configurations. The high-radix Scorpio X-Series entered volume production and is expected to scale materially during the second half of 2026. Management expects Scorpio to become the company’s largest product family in the third quarter, one quarter earlier than previously projected. The transition will be led by the 320-lane Scorpio X-Series fabric switch, which supports larger accelerator clusters and includes hardware-based Hypercast and in-network compute capabilities.
ALAB Rides on Strong Aries and Taurus Demand
Astera Labs rides on robust demand for its Aries and Taurus product lines, which are driving significant growth and positioning the company for further upside.
Aries delivered record second-quarter revenues, supported by rising adoption of PCIe 6 retimers and gearboxes across scale-up and scale-out AI architectures. Growth is being fueled by larger accelerator clusters, higher unit attach rates and increased average selling prices associated with the PCIe 6 transition. PCIe 5 demand also remains resilient as inference workloads create additional use cases. In the second quarter of 2026, PCIe 6 products, including the Scorpio AI Fabric Switches and Aries Retimers, accounted for more than 50% of total revenues, highlighting the market leadership of ALAB’s Gen 6 portfolio.
In the second quarter of 2026, Taurus revenues grew strongly on increased unit shipments across AI and general-purpose computing platforms. The company also delivered preproduction volumes of 100-gigabit-per-lane Taurus Smart Cable Modules for 800-gigabit active electrical cables.
Astera Labs expanded its Taurus signal conditioning portfolio with 3.2T Smart Retimers and Smart Redrivers for 224G Ethernet and UALink connectivity, strengthening AI infrastructure capabilities. The new OCP-compatible design enables Smart Swap flexibility, while Unified COSMOS software adds advanced telemetry, diagnostics and intelligent link management across high-speed interconnects.
ALAB Offers Strong Q3 Guidance
Astera Labs is benefiting from strong demand for its Aries, Taurus, and Scorpio product families, all of which are expected to drive growth in the third quarter of 2026.
For the third quarter of 2026, revenues are expected to be between $540 million and $560 million. The midpoint implies sequential growth of approximately 40%, driven by the Scorpio X-Series production ramp, continued Aries PCIe 6 retimer strength and preproduction Taurus shipments for 800-gigabit Ethernet applications. The Zacks Consensus Estimate for third-quarter revenues is pegged at $550.39 million, representing year-over-year growth of 138.71%.
Management projects non-GAAP earnings between $1.16 and $1.21 per share in the third quarter of 2026. The Zacks Consensus Estimate for third-quarter 2026 earnings is pegged at $1.19 per share, which has increased 54.5% over the past 30 days. The figure implies a year-over-year increase of 142.86%.
Astera Labs, Inc. Price and Consensus
ALAB Shares Trade at a Premium
Astera Labs’ stock is trading at a premium, as suggested by the Value Score of F.
In terms of the forward 12-month Price/Sales, ALAB is trading at 17.81X, higher than the Computer & Technology sector’s 6.03X.
ALAB's Valuation
Conclusion
Astera Labs is well-positioned to benefit from strong AI infrastructure spending, supported by the rapid adoption of its Scorpio, Aries and Taurus product families. These factors justify its premium valuation.
Astera Labs stock currently sports a Zacks Rank #1 (Strong Buy), which implies that investors should start accumulating the stock right now. You can see the complete list of today’s Zacks #1 Rank stocks here.
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