Cisco (CSCO) Leans on Splunk to Broaden Its Share of Enterprise AI Spending. It Faces a Big Test
Cisco Systems, Inc. (CSCO) is eyeing the potential of Splunk to grow its share of enterprise AI spending. This could provide Cisco an additional revenue stream beyond hardware sales as it builds out AI infrastructure. At Splunk's 2026 conference in Denver, Cisco unveiled the Cisco AI POD for Splunk. This solution incorporates Splunk AI features into customers' on-premises, private-cloud, and air-gapped environments using Cisco hardware and Nvidia's accelerated computing.
By enabling self-hosting of AI models, Cisco aims to capture a larger portion of AI spending as enterprises increasingly monitor, secure, and manage these workloads. Cisco's latest financial results highlight the growing significance of AI infrastructure demand for the company, with $9.3 billion in AI infrastructure orders, including $4 billion in Q4.
The company generated $4 billion in AI infrastructure revenue in total during 2026 and expects it to nearly double to $7.5 billion in 2027. Splunk has an opportunity to extend Cisco's AI presence from infrastructure into software and security. Cisco has also signed a multi-year agreement with AWS to develop Splunk-centered security products for AI-driven threats, opening another avenue for Splunk's growth as AI workloads become more complex.
However, Cisco's infrastructure business is currently driving the growth in AI-related revenue, and this transition to higher-value software and security revenue is yet to be fully realized. Hedge fund positioning has shifted positively, with the number of hedge funds holding Cisco increasing from 77 to 101 in Q2. This development, along with significant stake increases from major investors, suggests confidence in Cisco's potential.
Nevertheless, successful execution will determine how much of the additional AI spending opportunity translates into Cisco's bottom line. While we recognize the potential in CSCO, we believe certain AI stocks offer greater upside potential with lower risk.
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