This name "continues to screen as the clear leader" in networking: Morgan Stanley

Investing.com -- Morgan Stanley says its latest survey of value-added resellers (VAR) shows one networking company pulling further ahead of its peers, pointing to accelerating spending intentions across both campus and data center customers.

Networking equipment maker Cisco Systems "continues to screen as the clear leader" in the bank’s second-quarter VAR survey, with average growth expectations for the company rising to 3.0% from 0.6% in the prior survey, analyst Meta Marshall said. He reiterated an Overweight rating on the stock with a $130 price target.

According to the survey, 43% of VARs identified Cisco as best positioned to capture incremental AI and data center modernization spending over the next 12 months, ahead of Nvidia and white-box or specialist networking vendors at 30%.

Cisco’s networking pipeline also strengthened, with 67% of VARs expecting sales to increase, up from 48% in the prior survey, pushing the net pipeline score to +60% from +39%.

Growth expectations broadened across both segments of the business. Campus-led growth expectations rose to 17% from 3%, while data center expectations increased to 20% from 13%.

Refresh activity is also translating into actual purchases, with 30% of VARs reporting customers had recently completed a Catalyst 9000 switching refresh, up from just 6% previously, with security cited as the leading refresh driver at 53%, versus 29% in the prior survey.

Marshall said 70% of VARs expect Cisco’s security sales to increase, up from 45% a year earlier, lifting the net pipeline score to +63% from +39%.

Sentiment around cybersecurity and analytics firm Splunk, which Cisco acquired, also improved, with 33% of VARs reporting customers are positive and purchasing more, up from 20% previously, while the share reporting purchasing declines eased to 7% from 10%.

Quoting CIOs directly, the analyst cited one respondent who said: "We have seen positive growth for both Cisco and Juniper. Primary drivers are usually campus and data center refresh cycles, increasing security requirements, and customer interest in automation and AI-assisted network management."

Another respondent attributed some of Cisco’s strength to platform consolidation, noting that "when clients want fewer vendors, Cisco often wins because of its broader platform coverage."

Marshall said overall, the results "reinforce durable demand, improving wallet share" and support the bank’s Overweight rating on the stock.

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