Cisco's Networking Lead Widens on AI and Data Center Demand, Morgan Stanley Survey Finds

A Morgan Stanley survey of value-added resellers (VARs) indicates that Cisco Systems is solidifying its position as the dominant player in the networking sector, driven by accelerating spending on AI infrastructure and data center upgrades.

Analyst Meta Marshall noted that Cisco "continues to screen as the clear leader" in the bank's second-quarter survey. In response to the findings, Morgan Stanley reiterated its Overweight rating on Cisco stock with a $130 price target.

Key Survey Findings

The report highlights a significant uptick in sentiment and sales expectations for the networking giant. According to the survey, VARs' average growth expectations for Cisco rose to 3.0%, a substantial increase from 0.6% in the previous survey.

• AI & Data Center Positioning: 43% of resellers identified Cisco as best positioned to capture spending on AI and data center modernization over the next year, placing it ahead of Nvidia and white-box vendors, who were both cited by 30% of respondents.
• Strengthening Sales Pipeline: The percentage of VARs expecting Cisco sales to increase grew to 67% from 48% previously. This pushed the net pipeline score up to +60% from +39%.
• Broad-Based Demand: Growth expectations improved across key business segments, with campus-led growth forecasts rising to 17% (from 3%) and data center expectations increasing to 20% (from 13%).

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Security and Refresh Cycles Drive Growth

The survey suggests that customers are actively upgrading their infrastructure, with security being a primary catalyst. The share of VARs reporting that customers had recently completed a Catalyst 9000 switching refresh jumped to 30%, up from just 6% in the prior survey. Security was cited as the leading driver for these upgrades by 53% of respondents.

Cisco's security business shows a particularly strong outlook, with 70% of VARs anticipating an increase in security sales, lifting the net pipeline score for that segment to +63%. Sentiment around Splunk, which Cisco recently acquired, has also improved, with 33% of VARs reporting positive customer engagement and increased purchasing.

One CIO quoted in the report attributed the growth to "campus and data center refresh cycles, increasing security requirements, and customer interest in automation and AI-assisted network management." Another noted that Cisco often benefits from vendor consolidation, as its broad platform appeals to clients seeking to work with fewer suppliers.