Cisco Expands Secure AI Factory: Can it Outpace PANW & FTNT?

Cisco Systems CSCO is strengthening its security business through the expansion of its Secure AI Factory with NVIDIA NVDA, as the platform embeds security directly into the AI infrastructure stack rather than treating it as a separate layer. The expanded architecture combines Cisco networking, NVIDIA AI infrastructure and Supermicro rack-scale compute, with security and resiliency built from silicon through applications and AI agents. This should help Cisco address rising enterprise, neocloud and sovereign-cloud demand for AI infrastructure that protects sensitive data while supporting increasingly complex workloads. The expansion strengthens Cisco’s competitive prowess against the likes of Palo Alto Networks PANW and Fortinet FTNT.

The expansion is particularly important as agentic AI broadens the cyberattack surface. Cisco noted that agentic AI is increasing the threat landscape and driving demand for security and observability tools capable of monitoring agent behavior and mitigating evolving threats. The Secure AI Factory gives Cisco an opportunity to attach products such as AI Defense, Secure Access, Hypershield, firewalls and Splunk to customers' AI infrastructure deployments. Cisco is already seeing greater adoption of AI Defense and Secure Access guardrails as customers seek unified protection across users, applications and agents.

Cisco can also benefit from tighter integration between networking and security. The expanded Secure AI Factory uses Cisco Silicon One-based front-end switches and NVIDIA Spectrum-X-based back-end switches, unified through Cisco Nexus One. The expansion comes as Cisco’s security business is gaining momentum. Security revenues increased 14% year over year to $2.23 billion in the fourth quarter of fiscal 2026, while firewall orders grew more than 30%. Cisco also added more than 6,400 net new customers for products such as Secure Access, XDR, Hypershield and AI Defense since launch. The company expects security and observability growth to improve to high single digits in fiscal 2027.

CSCO Faces Tough Competition

Fortinet is challenging Cisco’s Secure AI Factory strategy by combining high-performance network security, SASE and AI-driven security operations on a unified FortiOS platform. Fortinet’s SASE Firewall business grew 34% to more than $2 billion in the second quarter of 2026, while secure networking billings also increased 34%. Fortinet’s FortiGate appliances, proprietary FortiASIC technology and hybrid/on-premise sovereign SASE capabilities provide strong price-performance and local security enforcement, potentially competing with Cisco for enterprises and cloud providers building secure AI infrastructure.

Palo Alto poses an even broader challenge through its AI-focused platformization strategy. PANW’s Prisma AIRS platform secures AI models, applications and agents from development through runtime, while XSIAM provides automated security operations and Cortex Cloud strengthens cloud protection. Prisma AIRS surpassed 300 customers in the third quarter of fiscal 2026, while Palo Alto’s next-generation firewall bookings increased nearly 40% year over year amid early AI data-center deployments. Palo Alto also operates more than 125 million sensors across network, endpoint and cloud environments, processing over 17 petabytes of telemetry daily, strengthening its ability to detect and respond to AI-driven attacks in real time.

CSCO’s Share Price Performance, Valuation & Estimates

Cisco shares have appreciated 44.2% year to date, outperforming the broader Zacks Computer and Technology sector’s rise of 15.4%.

CSCO Stock Outperforms Sector

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The Cisco stock is trading at a premium, with a forward 12-month price/earnings of 22.73X compared with the broader sector’s 20.83X. CSCO has a Value Score of F.

CSCO’s Valuation

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The Zacks Consensus Estimate for fiscal 2027 earnings is currently pegged at $5.11 per share, up 7% over the past 30 days, suggesting 18.01% growth from the fiscal 2025 reported figure.
 

Cisco currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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