Cisco Jumps Most Since 2011 on Sales Outlook

Summary

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Bloomberg Intelligence Podcast Episode Summary

Episode Title: Cisco Jumps Most Since 2011 on Sales Outlook
Date: May 14, 2026
Hosts: Paul Sweeney, Stacey Vanek Smith (in for Scarlet Fu)
Guests: Ryan Vestelica (Bloomberg News), Dan Ives (Wedbush Securities), Joni Lurie (Bloomberg Intelligence)

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Episode Overview

This episode explores Cisco's significant stock surge following a strong sales outlook, highlighting the company's transformation into a critical player in the artificial intelligence (AI) infrastructure space. The hosts and guests analyze Cisco's pivot, the broader AI-driven market surge, implications of tech leadership’s engagement with China, the divide between US and China in the tech cold war, and the effect of current geopolitical turmoil on the travel industry, with insights based on recent survey data.

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Key Discussion Points and Insights

1. Cisco’s Breakout Quarter and AI Pivot

• Cisco Surges:

  • Cisco's stock is up 15% in a single day—its largest gain since 2011.
  • The stock is up 52% year-to-date and 91% on a trailing twelve-month basis.
    Paul Sweeney (01:51):

    "Cisco’s so almost a 500, let's call it $465 billion market cap stock. It's up 15% today, the most since 2011… This is just ripping."

• Earnings & AI Focus:

  • Cisco reported robust growth and an optimistic forecast.
  • Announced job cuts to streamline and focus more on AI.
  • The market now sees Cisco as integral to AI infrastructure, not just legacy networking.
    • Ryan Vestelica (02:26):

      "Pretty blowout report... Very strong growth, very strong forecast and the company also announced some job cuts as it is focusing even more on artificial intelligence... Cisco is now a real part of the AI infrastructure trade."

• Layoffs Coinciding With High Earnings:

  • Noted trend of layoffs accompanying positive earnings, reflecting a pivot to higher-growth, AI-centric areas, not simply automation or cost-cutting.
    • Ryan Vestelica (03:12):

      "They are making a lot of investments into this... They are seeing so much demand from hyperscaler customers from the data center build out. So they are really transitioning... to focus on the opportunity that they see there."

• Product Strategy:

  • Cisco benefits from rising demand for networking and optical components—core to AI-optimized data centers.
    • Ryan Vestelica (03:52):

      "A lot of Cisco's products—networking components, optical products—are really a critical part of building out these data centers... All of a sudden these are all really catching a bid as it does seem like we’re at the stage of the AI build out where these kinds of components are really in demand."

• Why Infrastructure is Thriving in AI:

  • The current phase of the AI boom prioritizes data center infrastructure over rapid algorithmic or consumer-facing AI breakthroughs.
    • Ryan Vestelica (04:54):

      "Infrastructure... is where we are seeing the most clear cut demand and really the strongest growth... All the hyperscalers... doubled down on their AI spending plans and that is really translating almost directly into revenue at companies... building out the data centers."

• Re-rating Growth Prospects:

  • For years, Cisco was a “sleepy legacy company.” Now, it's expected to achieve higher forward growth rates.
    • Ryan Vestelica (06:07):

      "They are going to be a real significant winner within artificial intelligence; the demand they’re seeing isn’t just going to be a blip—... they will continue to benefit."

• Right Place, Right Time – Or Strategic Pivot?

  • Combination of being a longtime networking leader and making timely acquisitions, with greater focus on AI.
    • Ryan Vestelica (06:57):

      "Their long term focus has been in networking products... It does seem like they are just sort of in the right place at the right time and... made some acquisitions with optical companies."

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2. The US-China Tech Dynamic and Global AI Competition

• Silicon Valley’s Leadership in China:

  • Prominent tech executives, including major CEO figures, are with President Trump in Beijing for pivotal talks.
    • Paul Sweeney (10:19):

      "Half of the leadership of Silicon Valley is with President Trump in Beijing..."

• Significance of the China Summit:

  • The talks could mark a 'grand opening' for US AI and tech trade with China, especially around chip sales (Nvidia) and robotics.
    • Dan Ives (11:33):

      "It's really like a grand opening to what could be a next chapter of AI... The one black cloud over the AI trade has really been China—raw materials, chips... When you start to clear this path... it's another leg up."

• Apple’s Leadership Shift:

  • Tim Cook steps down as CEO, retains chairman role with focus on managing China relations.
    • Dan Ives (12:35):

      "If Cook has been 10% politician, 90% CEO, now they're probably 90% politician... that's a huge part of his value because he has the ears... in D.C."

• Potential Outcomes:

  • Hopes for an “official green light” on Nvidia chip sales to China.
  • Focus on AI, robotics, and further technological trade opening.
    • Dan Ives (13:21):

      "I think it's about official green light for Nvidia to sell chips in the China with no caveats... When you see an opening of China for businesses, I think this is really about robotics..."

• US-China ‘Tech Cold War’:

  • US and China are the only true contenders in the global AI race; Europe lags due to privacy and regulatory focus.
    • Dan Ives (14:19):

      "It's a two horse race... Europe... continue to be stuck in regulatory data privacy and... nowhere when it comes to AI... It's a true fourth industrial revolution that's playing out and US and China both know no one wants to mess that up."

• Europe’s Position and Poland’s Potential:

  • Europe risks missing the AI revolution unless regulatory priorities shift; Poland viewed as a rare breakout candidate.
    • Dan Ives (15:26):

      "If I had to bet on a country that's going to break out of this, it's probably Poland. I think they're the one that's kind of showing the most... vision when it comes to AI."

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3. Geopolitical Turmoil and the Travel Industry

• Impact on Travel Sentiment:

  • Ongoing Middle East conflicts and rising energy prices are increasing concerns over personal safety and impacting travel preferences.
    • Joni Lurie (19:30):

      "Personal safety is a concern among about two thirds of survey participants and that's the highest level since we started running this survey in December of 23."

• Resilient Consumer Budgets:

  • Despite concerns, most travelers still plan to increase budgets and prioritize experiences over luxury accommodations.
    • Joni Lurie (20:40):

      "We're seeing still that people, despite knowing that inflation is a big factor, they're still planning on increasing their budgets... if costs exceed budgets, they're willing to cut back on accommodations. But they aren't willing to sacrifice activities and experiences."

• Shift to Domestic Travel:

  • There’s a clear trend away from international travel toward domestic destinations—especially beaches and national parks.
  • Mexico and the Caribbean see decreased demand; UK is a notable exception, seeing increased interest.
    • Joni Lurie (20:40, 23:35):

      "What we are seeing... is that things like outdoors and national parks are high up on the list... Mexico and the Caribbean have decreased... UK actually bumped up in terms of priority."

• World Cup & Travel Sector:

  • Early expectations of a significant travel boost from the World Cup are mixed; traditional vacation planning remains prioritized over sporting events.
    • Joni Lurie (22:04):

      "Some of the companies... are seeing a little bit of an uptick in some of their markets... but we do have some survey data that it is mixed... we aren't necessarily seeing that's the top priority for how people are going to spend their vacations."

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Notable Quotes & Memorable Moments

• On Cisco’s comeback:
  Paul Sweeney (01:51):

  “This was the stock in the 90s. This was the one to own big time. It’s been finding its way ever since and I think it kind of found a little AI love here today.”

• On AI Infrastructure Demand:
  Ryan Vestelica (04:54):

  “All the hyperscalers... doubled down on their... AI-related spending plans and that is really translating almost directly into revenue at the companies that are involved with building out the data centers.”

• On US-China AI Race:
  Dan Ives (14:19):

  “It’s a two horse race, right?... It’s a true fourth industrial revolution that’s playing out and US and China both know no one wants to mess that up.”

• On Europe’s Challenges:
  Dan Ives (15:26):

  “It’s taken Europe many years behind where everyone else is... if they don’t [change]... you’ll see a lot of entrepreneurs and innovators move to Middle East, US and obviously other markets.”

• On Summer Travel:
  Joni Lurie (20:40):

  “If costs exceed budgets, they’re willing to cut back on accommodations. But they aren’t willing to sacrifice activities and experiences.”

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Important Timestamps

• 01:51 – Cisco’s big market move, setup for discussion
• 02:26 – Cisco’s blowout quarter and AI plans (Ryan Vestelica)
• 03:12 – Layoffs and AI investment focus
• 04:54 – Why AI infrastructure excitement is high
• 06:07 – Cisco’s revenue outlook and Street reaction
• 10:19 – US tech leaders in China, context for tech/AI summit
• 11:33 – Importance of the China-US tech summit (Dan Ives)
• 12:35 – Tim Cook’s evolving role for Apple
• 13:21 – Specifics on expectations from China summit
• 14:19 – The ‘Tech Cold War’ and Europe’s lag
• 15:26 – Poland as a potential European AI breakout
• 19:30 – Summer travel outlook, risks and consumer sentiment (Joni Lurie)
• 20:40 – Budget priorities among travelers
• 22:04 – World Cup travel prospects
• 23:35 – International vs. domestic travel trends

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Summary

This episode offers a rich analysis of Cisco’s explosive growth and its newfound position as an AI infrastructure leader. The discussion expands to the broader technology landscape, including US-China relations, Europe’s lag in AI innovation, and the shifting dynamics of the travel sector amidst global uncertainties. The expert guests provide insider perspectives and data-driven insights, making this a must-listen for investors, tech enthusiasts, and industry observers interested in the intersection of AI, geopolitics, and consumer trends.

Transcript

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[Paul Sweeney]

I'm looking at Cisco Systems to stock here. Remember folks, Cisco's so almost a 500, let's call it $465 billion market cap stock. It's up 15% today, the most since 2011. Stocks up 52% year to date, up 91% on a trailing twelve month basis. This is just ripping. And for those of us back in the day, this was the stock in the 90s. This was the one to own big time. It's been finding its way ever since and I think it kind of found a little AI love here today. Ryan Vestelica joins us here, equities reporter for Bloomberg News. Ryan, I know Cisco reported some numbers. Wow. What did they say?

[Ryan Vestelica]

Hey, thanks for having me. Yeah, pretty blowout report across the board last night. Very strong growth, very strong forecast and the company also announced some job cuts as it is focusing even more on artificial intelligence. So it really seems like there is a growing consensus that Cisco is now a real part of the AI infrastructure trade. It's a real part of that firmament. And it does seem like people are really glomming onto the idea that this is going to be a company that's going to be showing very strong demand trends, really for a while.

[Stacey Vanek Smith]

I have to say, I feel like there's a trend happening of layoffs being announced very close to really high earnings. What is going on here? Is this part of a growth plan? Is this, are we back to the days of Jack Welch or what do you think?

[Ryan Vestelica]

It does seem like this is really part of their prioritizing AI right now. They are making a lot of investments into this. It doesn't really seem like they're talking about AI is replacing these workers or anything like that. It doesn't seem like that's really the focus here. It does seem like more. They are seeing so much demand from hyperscaler customers from the data center build out. So they are really transitioning as much of the company as they can to focus on the opportunity that they see there.

[Paul Sweeney]

Is this a story of new products? Are they repositioning existing products to meet, you know, some of this demand that may be coming from the AI build out? How are they achieving this, this pivot here?

[Ryan Vestelica]

Well, there is a growing appreciation that a lot of Cisco's products, we're talking networking components, optical products, all of these are really a critical part of building out these data centers and having them be optimized for AI related workloads. We've seen a lot of these kinds of companies really skyrocketing this year, including in the optical space. So companies like Lumentum, Coherent, Corning, the Specialized Glass company, all of these types of components, which have historically been on maybe the sleepier side of the tech trade, not nearly as exciting as, you know, higher growth areas. All of a sudden these are all really catching a bed as it does seem like we're at the stage of the AI build out where these kinds of components are really in demand. It started with processing chips, now it's moving on to networking chips and other kinds of components like that.

[Stacey Vanek Smith]

Yeah, it does seem like there's a lot of excitement around infrastructure for data centers. Why is there so much excitement over that aspect of it as opposed to kind of AI breakthroughs and innovations?

[Ryan Vestelica]

Well, right now we are really seeing infrastructure being where we are seeing the most clear cut demand and really the strongest growth. So if you're looking for AI pure plays right now this is the really the best place to look for that kind of thing. All of the hyperscalers, which is companies like Microsoft and Amazon and Alphabet and Meta, when they reported a couple of weeks ago, they all really doubled down on their really aggressive AI related spending plans and that is really translating almost directly into revenue at the companies that are involved with building out the data centers. So you have all these huge cloud computing companies and all the equipment that is needed to actually run those. So we've seen it in servers and chips, in memory and storage in and in all these different sort of optical and networking components, very sort of technical and specialized products, but ones that are really coming more and more critical to this stage of the build out.

[Paul Sweeney]

So I'm just looking at the historical financials. Ryan of Cisco, it's been kind of the last four or five years, kind of a mid single digit revenue growth story. Mid to mid to high single digit revenue growth. I guess the Street's kind of rerating the top line growth outlook for the company. What's the company saying about their, their revenue outlook?

[Ryan Vestelica]

Well, it does seem like they are very much encouraging the idea that they are going to be a real significant winner within artificial intelligence, that the demand they're seeing isn't just going to be a blip, that as we see the AI infrastructure build out over the coming quarters and maybe even years that they will continue to benefit. So we are looking at a higher rate of forward growth for them than I think investors have gotten used to in the past. I mean this has been, you know, even a few years ago considered a pretty sleepy legacy company. Slower growth, lower multiple pays, a dividend, not exciting the way it was in the dot com era when it was like you said, the most exciting company out there. It's starting getting some of that momentum again.

[Stacey Vanek Smith]

Did it pivot at some point? Was it in the right place at the right time or was there a decision that it made that kind of put it on the path to see this kind of growth.

[Ryan Vestelica]

I think that their long term focus has been in sort of these networking products and things that were just not quite in focus in the pre AI era. It does seem like they are just sort of in the right place at the right time and they are able to pivot to focus on this in a more direct way. But I know they've made some acquisitions with optical companies. They've certainly been making a greater push to focus on AI and it does seem like that is paying off for them.

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[Paul Sweeney]

Stacey Vanek Smith sitting in for Scarlet Fu. I'm Paul Sweeney. We're live here in our Bloomberg Interactive Broker studio, streaming live on YouTube. All right, you're a technology analyst, you follow technology companies. So where do you go? Poland. Dan Ives, global head of technology research at Wedbush securities, finds himself in Poland. I'm not even going to ask Dan. What I want to get to is it's seemingly like half of the leadership of Silicon Valley is with President Trump in Beijing as we speak. What do you make of it?

[Dan Ives]

I mean, look, it's a pivotal moment for AI and tech because it's about being able to for video, sell their chips into China, but also just more of an opening, you know, in China, which is important for Tesla, it's important for Apple, it's important for chip makers. And look, this is, this is a moment in time where it's important that when they come back from that trip that it's been a huge step forward. And I think it's going to be another leg up in this market. And you're seeing it from the godfather of AI and video today.

[Stacey Vanek Smith]

We've been talking this morning about how important AI and tech are to the economy right now. They are hugely fundamental. How important is this summit for tech and AI in the US right now?

[Dan Ives]

I think it's, it's, it's really like a grand opening to what could be a next chapter of AI because when you think about the one black cloud over the AI trade has really been China raw materials, chips in the China from Nvidia. When you start to clear this path and this passes and you get the green light, I think it's another leg up. And what that means is more data center build out more chips more. And again, for the first time in 30 years, US is ahead of China when it comes to tech. And that's very important in terms of the global market is more and more you're going to own US Tech stocks.

[Paul Sweeney]

Dan, I guess this trip highlights once again kind of the change in power that we saw at Apple with Tim Cook giving up the CEO post but retaining the chairman post. And I think as you've told us before, part of his responsibility is managing the relationship with China. Just give us a summary of kind of how that stands right now.

[Dan Ives]

Look, if Cook has been 10% politician, 90% CEO, now they're probably 90% politician. Right. I mean that's a huge part of his value because he has the ears within D.C. from Trump to others. And that's so important for Apple as it navigates the political landscape. And China, look, China's heart's on that 20% iPhones as well as where the massive amount of production happens with tariffs and everything else. It's not coincidental that Cook is on Air Force One.

[Stacey Vanek Smith]

Are there any specific deals or announcements that might come out of the summit or is it more of a general breaking of bread?

[Dan Ives]

I think it's more than a breaking of bread. I think it's about official green light for Nvidia cell chips in the China with no caveats. And I think Jensen, he's the biggest poker chip there because that's really what China wants. I think when you see an opening of China for businesses, I think this is really about robotics because right now China's leading in robotics, the big area obviously testing, getting into, in terms of optimism, humanoid robots. And it's very important that you have an opening of that market for us to compete rather than just China winning in that market.

[Paul Sweeney]

Dan, it's become, I guess increasingly clear of the last four or five, six years that there's a technology cold war between China and let's call it just the West. Is there any way to change that, make it less difficult for both sides? How do you see that playing out?

[Dan Ives]

Look, I think Paul, the problem is, is that it's a two horse race, right? I mean Europe, you know, where I am today, I mean they continue to be stuck in regulatory data privacy and really nowhere when it comes to AI but then you look at Middle East, India, they're trying to be obviously, you know, the number three players. But that's also why like US Needs China, China needs U. S When it comes to the trade. They look, it's an arms race that's going to play out and you're going to kind of see a splitting of these two powerhouses when they go after other markets. But it's a true fourth industrial revolution that's playing out and US and China both know no one wants to mess that up. Relative to, we continue to believe, third innings, top of the third, one out in this nine inning bull market.

[Paul Sweeney]

Hey Dan, you know better than anybody and plus you're in Europe as we speak, other than SAP and maybe one or two other companies, there is almost no technology in Europe. They've missed the last 50 years. Are they going to miss AI as well?

[Dan Ives]

Look, that's, I mean I just thought this impact conference and born you have people from all around the world speaking. I mean that's, that's a big topic because, you know, in terms of Big Brother privacy worries about, you know, what we've seen from a technology perspective, it's taken Europe many years behind where everyone else is. And I think there's a huge battle going on between innovators, entrepreneurs because otherwise if they don't privacy and some of the regulatory Europe's going to miss out on this and you'll see a lot of entrepreneurs and innovators move to Middle East, US and obviously other markets. But look, I believe about betting on a country that's going to break out of this, it's probably Poland. I think they're the one that's kind of showing the most maybe vision when it comes to AI.

[Paul Sweeney]

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[Paul Sweeney]

All right, Stacey Vanek Smith sitting in for Scarlet Fu. I'm Paul Sweeney live here in our Bloomberg Interactive Broker studio, streaming live on YouTube as well. Given the turmoil coming out of the Middle East East, a lot of folks are a lot of companies are wondering kind of how that's impact their business. One of those industries is generally kind of the travel business or people change their travel habits given what's going on out there in the world. And our good friends at Bloomberg Intelligence, they survey folks out there in the marketplace to figure out what they're doing and how that may impact hotels, cruise lines, all that type of stuff, airlines, that type of thing. Joni Lurie, senior credit analyst for Bloomberg Intelligence, joins us here. Jody, what should latest survey tell you about maybe as we kind of head into this summer travel season, how people are thinking about how they might travel, where they might travel. How's that looking?

[Joni Lurie]

So I don't think you'll be surprised to hear this, Paul, but we are seeing some of the effects of the Iran war, the energy prices enter our survey data. So, for example, personal safety is a concern among about two thirds of survey participants and that's the highest level since we started running this survey in December of 23. So that's not so surprising. What is surprising is how resilient the consumer has been, at least in terms of increasing budgets, in terms of planning to increase budgets and in terms of still traveling despite the backdrop. That said, we are seeing a little bit of a bias towards domestic over international, which again, I think given the climate, given, you know, the Trump administration stance on immigration and and all the sort of components of that, the geopolitical risk. It's not so surprising to us what we're seeing, but it's, it's very evident in the data.

[Stacey Vanek Smith]

I mean, obviously we're coming up on the big travel season in the US Summer. How do you expect that to start impacting all of the businesses that rely on the travel industry? I mean, if people are going domestic, that could be positive news. But also gas prices are way up.

[Joni Lurie]

Sure, Stacey. So I think we're seeing still that people, despite knowing that inflation is a big factor, they're still planning on increasing their budgets. And so I do wonder at what point we start seeing a shift in terms of how people travel. One of the things that came out of the survey is if costs exceed budgets, they're willing to cut back on accommodations. So going for not as luxury accommodations, but they aren't willing to sacrifice activities and experiences. But what we are seeing, though, even so, is that things like outdoors and national parks are high up on the list in terms of where people are traveling, as well as beach vacations. Marrying that into the conversation, we are seeing that Mexico and the Caribbean have decreased in terms of where people are traveling for the second half of the year versus what we saw in November. So we are, you know, there is sort of a give and take in this scenario. Are people going to the Jersey Shore over the Caribbean? I'm not sure.

[Paul Sweeney]

You know, it. Come on down to the Jersey Shore.

[Joni Lurie]

Atlantic City finally getting the boom.

[Paul Sweeney]

Exactly, exactly. Talk to us about the World Cup. Jody, there's been some reporting that the World cup is a little underwhelming from the hotel perspective here, maybe Airbnb as well. What are you hearing from the companies you cover about the World Cup?

[Joni Lurie]

Yeah, so it depends on the company you're talking about. So some of the companies, from the gaming companies to the hotels, are commenting that they are seeing a little bit of an uptick in some of their markets. And, and what's so interesting about the way that the World cup is run is just how North America is, right? You're talking Vancouver, you're talking la, you're talking New York and Philadelphia, you're talking Mexico. I mean, there's so many areas in which the World cup is going to be penetrating the, the North American landscape. But. But I'm curious to see how much of that is going to equate in terms of travel budgets and people going places for it. You are seeing, I mean, you know, just anecdotally, I am starting to see locally some of the promotions happening at restaurants and at different sort of attractions as we lead into the World Cup. I'm not sure what that's going to equate in terms of actual dollars spent by people as they sort of go to the matches and celebrate it. But we do have some survey data that it is mixed. You know, we have some people who are prioritizing sporting events over vacation, but by and large, we aren't necessarily seeing that that's the top priority for how people are going to spend their vacations for the second half of the year.

[Stacey Vanek Smith]

So you mentioned that people are kind of switching to domestic. Overall, how is international travel looking right now, is it, are we seeing it decrease a little bit? Is that maybe part of why there's a little bit of softness around the World cup bookings?

[Joni Lurie]

Correct? Yes. So Stacy, I mean, I think, I think more so than, you know, the World cup bookings per se. I think it's just we're seeing a decline, decline in terms of travel internationally. Overall, we're seeing fewer people planning on three or more vacations or two or more vacations internationally than we did in November. So that's a big, big sort of cutback. Right. And then we're also seeing that, that the key places that were, you know, attractive spots going into this year, including Canada, including Italy, including Portugal, Japan, all of them Dubai, of course, you know, all of them are sort of seeing a little bit of a decline from November in terms of loc people are planning on traveling to now. What is surprising is the UK actually bumped up in terms of priority of where people are planning on traveling next year. I don't know if that has to do anything with, you know, USA 250. So people feel celebratory and want to show our independence for 250 years.

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