Switching & Networking Silicon/Systems

Cisco Systems reported fiscal fourth-quarter product revenue of $13.459 billion, up from $10.886 billion a year earlier, while services revenue was nearly unchanged at $3.793 billion versus $3.787 billion. The August 12 results cover the quarter ended July 25. Services costs fell to $1.160 billion from $1.199 billion, lifting calculated gross margin to 69.4% from 68.3% and producing $45 million more gross profit on just $6 million of incremental sales. Product revenue supplied almost the entire $2.579 billion increase in consolidated quarterly sales, and a 10% decline in quarterly product sales would remove $1.35 billion of revenue, which services would need to grow 35.5% from their current base to offset. At the October 8 closing price of $114.89, Cisco traded at 22.6 times the $5.08 midpoint of management's fiscal 2027 adjusted EPS guidance and 28.5 times the $4.03 midpoint of GAAP guidance, while total product orders grew 35%, or 25% excluding hyperscalers.

Arista Networks has unveiled a new open Ethernet rack-scale portfolio designed to support high-density artificial intelligence infrastructure across both scale-up and scale-out environments, developed with AMD, Arm, Broadcom, d-Matrix, Meta, Microsoft and Qualcomm. The company's Etherlink SU-14 architecture extends Ethernet into scale-up environments, supporting up to 144 accelerators in a single rack and up to 1,024 XPUs through cross-rack configurations. For scale-out AI environments, the rack-scale solutions support technologies such as ESUN, NVIDIA's NVLink, NVLink Fusion and PCIe, built on Arista's Netdi foundation using Ultra Ethernet Consortium standards. The rack designs integrate liquid-cooled 7060EX7 switches with up to 102.4 Tbps of capacity per switch, and the company's next-generation optics, including XPO and open CPO/NPO, can raise networking capacity from 1.6 Pb/s to 6.5 Pb/s per rack compared with current OSFP-based switches. Arista faces competition from Cisco Systems, which is expanding its AI infrastructure business through its Secure AI Factory with NVIDIA, and from NVIDIA, which is advancing its Vera Rubin platform and developing Spectrum-6 Ethernet.

Upscale, Inc. introduced Upscale Token Fabric, an open, standards-based networking architecture that unifies scale-up and scale-out networking for AI factories. The portfolio combines SkyFabriX scale-up switch silicon, which delivers 115.2 Tbps with a roadmap to multi-petabits per second, and scale-out systems powered by NVIDIA Spectrum-X, all unified by the SkyOS software foundation and SkyCMD orchestration plane. Upscale said the architecture is an industry-first open design that connects any GPU or XPU over one fabric, supporting standards including OCP ESUN, UALoE, SUE-T, and evolving protocols such as UALink. The company cited Dell'Oro forecasts of nearly $1 trillion in AI back-end switch spending through 2030 and 650 Group projections that AI networking will surpass $200 billion by 2030. General availability is planned for early 2027, with early-access and joint-validation programs already underway, and customers can adopt silicon, systems, software, or the full stack.

Hewlett Packard Enterprise has drawn fresh attention after a US$1.2 billion AMD Helios AI Rack order from Vultr and plans to run self-driving networking at the 2027 Ryder Cup in Ireland. The company's shares have returned 38.63% over the past month and gained 198.26% year to date, with a 1-year total shareholder return of 181.39% and a 5-year total shareholder return of 460.84%. The stock closed at $72.09 against a narrative fair value of $68.08, a view held by 87 investors who see the shares as 6% overvalued. On simple P/E math, Hewlett Packard Enterprise trades at 35.8x earnings, below its peer average of 76.9x and a fair ratio of 39x, though above the broader Global Tech industry at 19.5x. Strategic acquisitions and expansion in high-growth technologies, including the integration of Juniper, launches of next-gen Gen12 servers, and AI-driven management platforms, are cited as enhancing HPE's competitive positioning in edge, networking, and AI.

Marvell unveiled its plan at Investor Day 2026, targeting fiscal 2031 revenue of as much as $70–90 billion, highlighting custom-designed chips and high-speed interconnect systems as key drivers. The company aims for roughly $20 billion in fiscal 2028 revenue, above the $18.2 billion analysts had expected, and raised its fiscal 2029 target for its custom chip business to $12 billion from $10 billion. Its collaboration with Google spans AI compute chips as well as networking, memory, and storage chips, reflecting how AI investment is spreading across multiple parts of the data center. The revenue targets are long-term goals for Marvell and do not mean other companies in the supply chain, such as Astera Labs and Lumentum, will grow at the same rate.

Keysight Technologies announced the Keysight Velocity 4900 Series, a new line of cost-effective Layer 1 automation switches designed to automate physical connectivity in network test labs supporting AI, 6G, and next-generation services. The series launches with two models: the Keysight Velocity 4902, a high-speed switch supporting Ethernet speeds from 100 megabits per second to 100 gigabits per second with 72 QSFP28 ports and 288 connections with breakouts, and the Keysight Velocity 4906, a high-density switch with 288 SFP28 ports supporting speeds from 100 megabits per second to 25 gigabits per second. Both switches provide true Layer 1 forwarding through an ultra-low-latency, fully transparent switching matrix and support single-mode fiber, multimode fiber, direct-attach copper, and active optical cables, with port tapping and one-to-many traffic replication. Keysight said the platform replaces manual testbed configuration with software-controlled connectivity, letting teams provision complex topologies in seconds or minutes instead of hours or days of manual cabling, share scarce equipment remotely, and integrate physical test environments into CI/CD workflows. Anil Kollipara, Vice President and General Manager of Automated Testing and Assurance at Keysight, said engineering teams need test environments that can change as rapidly as the technologies they are creating. The Keysight Velocity 4902 and 4906 are available for order immediately, with initial deliveries planned for January 2027.

ClearBridge Investments named Arista Networks as a leading contributor in its third-quarter 2026 commentary for its Large Cap Growth Strategy, citing solid execution and new customer scaling. The firm said Arista was a positive outlier among AI infrastructure names and raised full-year guidance in its latest update, easing concerns created by earlier supply constraints and uneven revenue trends. Arista Networks closed at $215.36 per share on October 6, 2026, returning 11.63% over the past month and 64.36% over the past year, with a market capitalization of $271.62 billion and a 52-week range of $114.52 to $216.07. The ClearBridge Large Cap Growth Strategy outperformed its Russell 1000 Growth Index benchmark, which gained 0.9%, while the Russell 1000 Value Index rose 2.6%. According to the firm's database, 91 hedge fund portfolios held Arista Networks at the end of the second quarter, up from 85 in the previous quarter.

Ciena Corp. rebounded as much as 14.3 percent in intraday trading on Tuesday to $445.36 apiece, helped by peer Marvell Technology's growth outlook for the optical interconnects sector. At its recent Investor Day, Marvell said it expects the industry to grow by 60 to 70 percent to about $65 billion through 2030, with switching and storage alone reaching $85 billion, or a compounded annual growth rate of 40 percent. Those figures were markedly higher than Ciena's own 30 percent growth outlook for its business by 2029. Bernstein initiated coverage with an outperform rating and a $440 price target, acknowledging near-term supply constraints but calling the stock undervalued, while Evercore maintained an outperform rating and a $550 price target, citing optimism that Ciena can achieve more than $25 in earnings per share. Hedge fund holders in Ciena rose to 81 in the second quarter from 73 in the first, with combined holdings up 2 percent to $3.997 billion from $3.913 billion quarter-on-quarter.

Marvell Technology is expanding its partnership with Nvidia across advanced networking, silicon photonics and optical interconnect technologies, with Nvidia investing $2 billion in Marvell as part of the March 2026 agreement. The collaboration began in 2025 to give hyperscalers more flexibility in building custom AI computing infrastructure, and was expanded in 2026 to connect Marvell to Nvidia's AI factory and AI-RAN ecosystems through NVLink Fusion. Under the expanded arrangement, Marvell will supply custom XPUs and NVLink Fusion-compatible scale-up networking, while Nvidia provides Vera CPUs, ConnectX NICs, BlueField DPUs, NVLink interconnects, Spectrum-X switches and rack-scale AI compute. Marvell also worked with Microsoft and Utimaco to launch Azure Payment HSM v2, a cloud-native payment security platform built on Marvell's LiquidSecurity hardware security modules, with Utimaco contributing Atalla Payments Module software and Microsoft providing Azure. Marvell competes with Astera Labs and Broadcom in networking, and its shares have gained 239.5% year to date, trading at a price-to-sales multiple of 14.78X versus the Zacks Electronics - Semiconductors industry's 5.15X, while the Zacks Consensus Estimate for fiscal 2027 earnings implies year-over-year growth of 48.2%.

Arista Networks raised its 2026 revenue guidance to US$12.60 billion, including at least US$3.50 billion from AI-related business, after reporting second-quarter fiscal 2026 revenue of US$3.00 billion, a 37.7% year-over-year increase. The higher outlook underscores how AI-driven cloud networking has become a central revenue pillar for the company, shaping its growth mix across hyperscale and enterprise customers. Arista was also added to the S&P 100 in September 2026, a move that reflects its growing weight in large-cap U.S. equity indices just as management ties more of its outlook to AI-related revenue. The company's longer-range narrative projects US$21.4 billion in revenue and US$8.2 billion in earnings by 2029, requiring 26.6% yearly revenue growth and an earnings increase of about US$4.2 billion from US$4.0 billion today. Some of the lowest-ranked analysts had already assumed about US$18.6 billion of 2029 revenue and US$6.9 billion of earnings before this guidance, illustrating how differently Arista's AI exposure and long-term supply commitments can be read.

Hewlett Packard Enterprise raised its fiscal 2027 networking revenue growth forecast to between high-teens and low-20s percent, up from the 14% to 17% projection it gave earlier in September, and secured a $1.2 billion order from cloud infrastructure provider Vultr for AMD-based artificial intelligence server racks paired with Juniper networking switches. The company also lifted its annual cost-synergy target from the Juniper Networks acquisition to $800 million by the end of fiscal 2028, up from at least $600 million, and projected Data Center Networking revenue to grow at a low-to-high 50s percent compound annual rate through fiscal 2029. Following the networking investor day presentation, Citigroup raised its price target on the stock to $92 from $76 while keeping a Buy rating, citing confidence in durable demand and expanding AI infrastructure orders. A cooler-than-expected U.S. jobs report added secondary momentum, with the Bureau of Labor Statistics reporting that employers added 29,000 nonfarm payroll jobs in September, trailing the 84,000 consensus estimate from economists polled by Dow Jones. HPE shares jumped 7.8% in the afternoon session and are up 189% since the beginning of the year, reaching a new 52-week high of $69.77 per share.

Celestica Inc. reported second-quarter revenue growth of 62% year over year and an 83% rise in adjusted EPS, then raised its 2026 outlook and said revenue growth should accelerate again in 2027. The company expects its 1.6T networking programs to ramp significantly in 2027, is preparing to deliver custom racks for OpenAI, and expects its AMD Helios opportunity to ramp in the first half of next year, with management describing both as multibillion-dollar opportunities. Celestica trades at about 18.5 times forward earnings while consensus calls for roughly 75% EPS growth next year, though three customers accounted for 32%, 17% and 14% of Q2 revenue and roughly $1 billion of capital expenditures is planned for 2026. Hedge fund interest weakened slightly in the second quarter, with the number of funds holding the stock falling from 67 in Q1 to 63 in Q2 while the total value of their positions rose from approximately $4.38 billion to $4.84 billion. Management says customers are already discussing requirements for 2027, 2028 and even 2029, making the upcoming October 27 investor day particularly important.

Coherent shares jumped 10.5% in the afternoon session after Bernstein rated the materials and photonics company Outperform with a $350 price target, citing optical-module upside as data-center switches move to higher speeds. According to Streetinsider, Bernstein framed $350 as roughly 24% upside, valuing the stock at 22 times estimated 2028 earnings per share of $16, and argued optical-module demand should keep expanding with faster networking gear. Citi commentary tagging Coherent as an AI hardware beneficiary reinforced the bullish AI-infrastructure read-across, alongside investor focus on Coherent's PhotonLink optics platform and an AI security demo amid a broader bid in networking names. The move follows a 5.2% gain two days earlier on news that Coherent demonstrated scalable physical-layer security for artificial intelligence infrastructure developed alongside CUbIQ Technologies. Coherent is up 63.1% since the start of the year, but at $317.01 per share it still trades 25.7% below its 52-week high of $426.89 from June 2026.

Optical networking stocks rallied Thursday after Bernstein initiated coverage of the group with an Outperform rating, calling the companies structural AI winners. Coherent jumped 11%, Lumentum rose 7%, Ciena gained 7%, and Arista added 0.4%. Coherent led the move after launching PhotonLink, an optics platform for AI infrastructure that packages its services, photonics technologies, and components including lasers, fibers, and detectors into one platform for AI data centers. The company said it already has 20 customer engagements split between co-packaged optic and near-packaged optic assemblies, plus five engagements in emerging chip-to-chip connectivity. The gains extend a strong 2026 rally for the group, with Coherent up 73%, Lumentum up 183%, Ciena up 62%, and Arista up 56% year to date.

Marvell Technology shares jumped 4.7% in the afternoon session after Citi reiterated a Buy rating and a $275 price target on the networking chips designer ahead of its October 6 Investor Day. Citi analyst Atif Malik highlighted artificial intelligence data center infrastructure networking opportunities, pointing to raised fiscal 2027 and 2028 revenue targets of approximately $12 billion and $18 billion, as well as potential 2030 earnings of $15 to $20 per share. The note also cited an update on a custom revenue target of more than $10 billion for fiscal 2029 resulting from an agreement with Google, along with approximately $300 million in scale-up optics sales. After the initial pop, the shares cooled down to $261.81, up 3.9% from the previous close. Marvell Technology is up 193% since the beginning of the year, but at $261.81 per share it is still trading 17.3% below its 52-week high of $316.43 from June 2026.

Nokia Oyj shares rose 3% to $10.98 on September 9 after Google announced a €13 billion investment to expand its AI infrastructure and cloud footprint in Hamina, Finland. Google said its Hamina site, part of a 43-region network, lets local entities like Nokia deliver high-performance, low-latency services and scale AI solutions, though the announcement is not a direct contract win for Nokia. In Q2 2026, Nokia recorded a 105% year-over-year surge in net sales to AI and Cloud customers, supported by €2.8 billion in AI and Cloud order intake, while its Network Infrastructure division grew 12%, led by a 20% jump in Optical Networks and a 16% rise in IP Networks. Nokia closed Q2 2026 with €2.8 billion in net cash and interest-bearing financial investments, but the quarter also brought a reported operating loss of €50 million, a negative 1.0% reported operating margin, and a 95% year-over-year decline in reported profit to €5 million. Management said supply remains the main industry constraint relative to strong demand, and Nokia must manage negative short-term free cash flow, restructuring costs, and optical supply limits to convert hyperscaler demand into sustainable earnings growth.

Arista Networks is rated Zacks Rank #1 (Strong Buy), with consensus estimates pointing to earnings of $1.06 per share for the current quarter, up 41.3% year over year. For the current fiscal year, the consensus earnings estimate of $4.04 implies a 35.6% increase from the prior year, while the next fiscal year's estimate of $4.99 indicates 23.6% growth. Revenue is forecast at $3.31 billion for the current quarter, up 43.6% year over year, with full-year estimates of $12.53 billion and $15.8 billion for the current and next fiscal years. In its last reported quarter, Arista posted revenues of $3.04 billion, up 37.7% year over year, and EPS of $1.02 versus $0.73 a year earlier, beating consensus revenue and EPS estimates by 7.14% and 14.61%, respectively. The stock has returned 2.3% over the past month, and carries a Zacks Value Style Score of F, indicating it trades at a premium to peers.

Seaport Research Partners initiated coverage on Marvell Technology with a Buy rating and a $270 price target, citing AI data-center demand for its custom silicon and interconnect businesses. Seaport said Marvell's optical connection technologies are used in accelerator platforms including those from Nvidia, giving the company access to ongoing data center expansion. The firm projected a current quarter non-GAAP gross margin of 58.25% to 59.25%, compared with 59.4% a year ago, and expects operating leverage to come mostly from managing operating expenses rather than meaningful gross-margin expansion. Seaport also started coverage on Semtech with a $200 target, saying its increasing focus on data-center optical devices should drive AI-related demand in 2027 and 2028. On Semiconductor received a $100 objective based on growing industrial and automotive demand with an expected 800-volt data-center build-out, and Seaport also liked ON's planned acquisition for Synaptics.

Supermicro is now shipping NVIDIA Vera Rubin NVL72 racks integrated with its Data Center Building Block Solutions and DLC-2 direct liquid cooling stack, the company announced from San Jose, California. Each NVL72 rack holds 72 NVIDIA Rubin GPUs and 36 NVIDIA Vera CPUs operating as one machine, with 20.7 TB of HBM4 memory and up to 54 TB of LPDDR5X, connected through nine sixth-generation NVIDIA NVLink switch trays delivering 216 TB/s of scale-up bandwidth. Supermicro's DCBBS Blueprint defines a balanced bill-of-materials for a given power envelope, from 5 MW to gigawatt scale, and one Vera Rubin NVL72 Scalable Unit provides 1,152 NVIDIA Rubin GPUs with 331 TB of HBM4 memory across 16 compute racks. The company said its in-row cooling distribution units are rated at 1.8MW per CDU and deployed with N+1 redundancy, with optional Rear Door Heat Exchangers capturing residual heat load. President and CEO Charles Liang said Supermicro designs and builds every layer between the cold plate and the cooling tower, and that customers can now order a Scalable Unit and receive production-ready systems with end-to-end integration.

Cisco released new research, conducted independently by Omdia, showing that 51% of enterprises now run agentic AI that acts in production, with 84% expecting an AI-led operating model within twelve months. The study surveyed 1,000 IT and network operations leaders at organizations with 500 or more employees across North America, Western Europe, and Asia-Pacific. It found that 95% of organizations say their existing, non-agentic AIOps tools fall short in one or more significant areas, while 86% say a single integrated platform is the most effective path forward and 69% require detailed explainability for agent-driven actions. The average organization generates about 4,100 monitoring alerts and events each day, more than half of them network related, a volume that would require roughly 100 IT specialists to clear manually. Cisco said its analysis of aggregated direct-to-AI network telemetry shows AI traffic is on a trajectory to double every six months, and its testing found that tasks performed by agents can generate up to 450% more total network traffic.

Hewlett Packard Enterprise reported networking revenues of $2.89 billion, up 74.9% year over year on a reported basis and 10% on a normalized basis, with a segment operating margin of 22%. Within that segment, Campus & Branch revenues were $1.44 billion and Routing contributed $788 million, while normalized networking orders rose 36%, faster than revenue growth. Networks for AI orders reached $700 million in the quarter, bringing cumulative orders to $2.2 billion, and the company signed a gigawatt-scale deal with Oracle for routers and switches supporting a major AI cloud infrastructure buildout. HPE's third-quarter fiscal 2026 revenues of $12.21 billion rose 33.7% year over year, and management said networking purchase commitments more than doubled sequentially to improve supply availability and convert the elevated backlog. The Juniper acquisition is broadening HPE's reach across campus and branch, data center switching, routing and security, with integration ahead of schedule prompting HPE to raise its fiscal 2026 target to $2.5-$3 billion. HPE competes with Cisco and Arista Networks in AI networking; Cisco closed fiscal 2026 with $9.3 billion in hyperscaler AI infrastructure orders, about 4.5 times fiscal 2025, and expects hyperscaler AI revenues to reach $7.5 billion in fiscal 2027. HPE shares have rallied 159.4% year to date, and the Zacks Consensus Estimate for fiscal 2026 earnings suggests year-over-year growth of 96.4%.

Apple is developing enterprise AI servers built around future M8 Ultra processors, with designs under consideration using either two or four of the chips and a possible 2029 launch aimed primarily at AI inference, The Information reported on September 16. Apple has also considered using Nvidia's NVLink Fusion technology to connect those processors, though neither the server nor Nvidia's involvement is finalized and the project could still change or disappear entirely. For Nvidia, NVLink Fusion extends its interconnect strategy to custom CPUs and accelerators made by other companies, creating a second line of defense around its AI franchise; networking equipment can represent 10% to 15% of AI data-center hardware costs, giving Nvidia a meaningful revenue pool beyond GPUs even if it loses higher-value compute sales. Apple's M-series chips already combine performance with relatively efficient power consumption, and selling complete servers would let it pursue AI developers, governments and businesses that want local inference, but a 2029 target leaves years for competitors to improve and would mark a re-entry into a server business Apple abandoned when Xserve disappeared in 2011. Insider Monkey tracked 169 hedge funds holding Apple in the second quarter versus 170 in the first, with Arrowstreet Capital increasing its position 54% to roughly 29.9 million shares, while Nvidia rose to 285 hedge-fund holders from 275 as Arrowstreet increased its NVDA stake 10% to about 34.7 million shares.

Broadcom projected $21.7 billion in fiscal fourth-quarter AI semiconductor revenue, a forecast that would lift AI chips to roughly 62.4% of companywide sales. The custom-chip and infrastructure-software maker said AI semiconductor revenue surged 221% to $16.7 billion in the third quarter, about 56.4% of its $29.59 billion in total sales. Management now expects companywide fourth-quarter revenue of approximately $34.8 billion alongside a 66% non-GAAP operating margin. Shares gained approximately 0.2% to $358.13, a price that sits 12.42% below the $408.91 GF Value. The company's growth remains tied to custom accelerators and high-speed networking, deepening its exposure to a relatively small group of hyperscale customers.

Broadcom shares rose about 2% early Monday as investors regained confidence in the company's AI chip outlook. The move follows CEO Hock Tan's rejection of concerns that slower AI development could weaken demand for Broadcom's custom processors and networking products, with Tan maintaining that AI infrastructure spending should continue to support the business as inference workloads expand. Broadcom reported $29.6 billion in fiscal third-quarter revenue, up 86% from a year earlier, while AI semiconductor revenue climbed 221% to $16.7 billion. Anthropic is expected to become Broadcom's largest XPU customer in 2027, and management projects AI semiconductor revenue of about $115 billion in fiscal 2027 and $230 billion in fiscal 2028. The rebound comes after Broadcom shares faced pressure alongside other AI-related stocks amid debate over the pace of future AI spending.

Nvidia CEO Jensen Huang said the company could sell twice as many chips next year compared to this year, speaking during a speech in Scotland last Thursday. Nvidia just started shipping its next-generation data center system, Vera Rubin, which includes the Rubin GPU, the Vera central processing unit, and upgraded networking components, and can deliver up to 30 times more performance than the equivalent Blackwell Ultra system while cutting inference token costs by 97%. Huang said every frontier AI company planned to adopt Vera Rubin at launch, unlike Blackwell Ultra. Nvidia is on track to deliver around $411 billion in total revenue during its current 2027 fiscal year, based on Wall Street's average estimate, and management recently told shareholders to expect 70% revenue growth in fiscal 2028, implying almost $700 billion next year. Nvidia stock trades at a price-to-earnings ratio of 28.1, less than half its 10-year average of 61.4, though risks include roughly $175 billion of fiscal 2028 sales potentially funded by Nvidia's own balance sheet, about 25% of that year's revenue according to CFO Colette Kress.