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SMCI vs. CSCO: Which Server Stock is the Better Buy Now?
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Key Takeaways
SMCI's AI-focused server sales rose 10% in Q4 FY25, hitting $5.62B and 97.6% of its revenues.
CSCO logged over $1B in AI infrastructure orders YTD, with $600M in Q3 FY25 alone.
CSCO's forward sales multiple of 0.86X is far below SMCIs 4.72X, making it more attractive.
Super Micro Computer (SMCI - Free Report) and Cisco Systems (CSCO - Free Report) are leading players in the server space, performing designs, development, and manufacturing of server systems for data centers, cloud computing, artificial intelligence (AI) and edge computing workloads.
As AI and high performance computing (HPC) workloads are getting more demanding, the server market is gaining more traction as a support system. Per a report by Grand View Research, the Global Server market is anticipated to witness a CAGR of 9.8% from 2024 to 2030.
Supported by future prospects and strong industry growth forecasts, the question remains: Which stock has more upside potential? Let’s break down their fundamentals, growth opportunities, market challenges and valuation to determine which offers a more compelling investment case.
The Case for SMCI Stock
SMCI is benefiting from the strong adoption of its high-performance and energy-efficient servers among AI data centers, HPC and hyperscalers. This growth is reflected in SMCI’s server and storage system segmental revenues, which grew 10% year over year in the fourth quarter of fiscal 2025 to reach a $5.62 billion milestone and account for 97.6% of its top line.
SMCI’s deep penetration in handling AI workloads is likely to continue driving its top-line growth. In the fourth quarter of fiscal 2025, more than 70% of the company’s revenues came from AI-focused systems. These include servers built to handle GPU-heavy workloads needed for training and running AI models. This shows that the company has become a top vendor for AI infrastructure.
Traction in direct liquid cooling racks used in data centers is also an upside for the company. Super Micro Computer’s recent launches like Data Center Building Block Solutions, petascale storage systems for AI workloads, and its integration of NVIDIA Blackwell GPUs in its solutions to achieve high compute power, will keep it at the forefront of the server and storage space.
Irrespective of the massive potential of SMCI’s server offerings, the company is facing some near-term challenges, including delayed purchasing decisions from customers as they are evaluating the adoption of next-generation AI platforms. SMCI is also facing margin contraction due to the growing price competition and price adjustments as companies are second-guessing their shift from older to newer platforms like Blackwell.
All of these factors are weighing on SMCI’s bottom line in the near term. The Zacks Consensus Estimate for SMCI’s first-quarter fiscal 2026 earnings is pegged at 47 cents per share, indicating a decline of 37.3% year over year. The Zacks Consensus Estimate for SMCI’s fiscal 2026 earnings is pegged at $2.54 per share, indicating a year-over-year increase of 23.3%.
Image Source: Zacks Investment Research
The Case for CSCO Stock
Cisco offers a comprehensive networking solution integrating switching, routing, wireless, and server technology under the umbrella of Cisco Unified Computing System (UCS). CSCO’s currently popular server line includes Blade servers like UCS B200 M6/M7 and UCS X-Series and rack servers like C220 M6/M7, C240 M6/M7 and C480 M5/M6, covering aspects like balanced compute and storage, storage-heavy workload and GPU support.
CSCO has also pivoted around AI workloads with its next-generation UCS C845A M8 servers, which come integrated with NVIDIA RTX PRO 6000 Blackwell GPUs that are designed for both enterprise AI and visual computing applications in data centers.
Cisco hasn’t remained a pure-play server provider; the company has taken the strategy of tightly coupling compute, network, and virtualization through hardware-powered vNICs and logic to enable enterprises with dynamic, secure, and high-performance virtual machine networking under the hood of Cisco Server Access Virtualization.
This strategy is driving the demand for Cisco’s products in developing AI infrastructure, with CSCO receiving a rising number of AI infrastructure orders from web-scale customers in excess of $600 million in third-quarter fiscal 2025 alone. Year to date, Cisco received more than $1 billion in orders. Cisco’s networking revenues climbed 8% in the third quarter of fiscal 2025.
The Zacks Consensus Estimate for CSCO’s fiscal 2025 revenues is pegged at $56.59 billion, indicating an increase of 5.2% year over year. The Zacks Consensus Estimate for CSCO’s fiscal 2025 earnings is pegged at $3.79 per share, indicating a year-over-year increase of 1.6%.
Image Source: Zacks Investment Research
Stock Price Performance and Valuation of SMCI & CSCO
Shares of SMCI and CSCO have gained 48.3% and 19.4%, respectively, in the year-to-date period.
Image Source: Zacks Investment Research
SMCI is trading at a forward 12-month Price to Sales ratio of 4.72X, while CSCO is trading at a forward sales multiple of 0.86X. The lower valuation of CSCO stock compared to SMCI makes it more attractive at present.
Image Source: Zacks Investment Research
Conclusion: SMCI vs. CSCO
While SMCI and CSCO are both benefiting from the AI and HPC proliferation, SMCI is facing some near-term headwinds, like delays in purchasing decisions from customers and margin contraction. CSCO’s lower valuation also makes it more attractive than SMCI at present. Considering all these factors, CSCO is a better buy at present.
Furthermore, CSCO carries a Zacks Rank #2 (Buy) at present, making the stock a stronger pick compared with SMCI, which has a Zacks Rank #3 (Hold).
Image: Bigstock
SMCI vs. CSCO: Which Server Stock is the Better Buy Now?
Key Takeaways
Super Micro Computer (SMCI - Free Report) and Cisco Systems (CSCO - Free Report) are leading players in the server space, performing designs, development, and manufacturing of server systems for data centers, cloud computing, artificial intelligence (AI) and edge computing workloads.
As AI and high performance computing (HPC) workloads are getting more demanding, the server market is gaining more traction as a support system. Per a report by Grand View Research, the Global Server market is anticipated to witness a CAGR of 9.8% from 2024 to 2030.
Supported by future prospects and strong industry growth forecasts, the question remains: Which stock has more upside potential? Let’s break down their fundamentals, growth opportunities, market challenges and valuation to determine which offers a more compelling investment case.
The Case for SMCI Stock
SMCI is benefiting from the strong adoption of its high-performance and energy-efficient servers among AI data centers, HPC and hyperscalers. This growth is reflected in SMCI’s server and storage system segmental revenues, which grew 10% year over year in the fourth quarter of fiscal 2025 to reach a $5.62 billion milestone and account for 97.6% of its top line.
SMCI’s deep penetration in handling AI workloads is likely to continue driving its top-line growth. In the fourth quarter of fiscal 2025, more than 70% of the company’s revenues came from AI-focused systems. These include servers built to handle GPU-heavy workloads needed for training and running AI models. This shows that the company has become a top vendor for AI infrastructure.
Traction in direct liquid cooling racks used in data centers is also an upside for the company. Super Micro Computer’s recent launches like Data Center Building Block Solutions, petascale storage systems for AI workloads, and its integration of NVIDIA Blackwell GPUs in its solutions to achieve high compute power, will keep it at the forefront of the server and storage space.
Irrespective of the massive potential of SMCI’s server offerings, the company is facing some near-term challenges, including delayed purchasing decisions from customers as they are evaluating the adoption of next-generation AI platforms. SMCI is also facing margin contraction due to the growing price competition and price adjustments as companies are second-guessing their shift from older to newer platforms like Blackwell.
All of these factors are weighing on SMCI’s bottom line in the near term. The Zacks Consensus Estimate for SMCI’s first-quarter fiscal 2026 earnings is pegged at 47 cents per share, indicating a decline of 37.3% year over year. The Zacks Consensus Estimate for SMCI’s fiscal 2026 earnings is pegged at $2.54 per share, indicating a year-over-year increase of 23.3%.
Image Source: Zacks Investment Research
The Case for CSCO Stock
Cisco offers a comprehensive networking solution integrating switching, routing, wireless, and server technology under the umbrella of Cisco Unified Computing System (UCS). CSCO’s currently popular server line includes Blade servers like UCS B200 M6/M7 and UCS X-Series and rack servers like C220 M6/M7, C240 M6/M7 and C480 M5/M6, covering aspects like balanced compute and storage, storage-heavy workload and GPU support.
CSCO has also pivoted around AI workloads with its next-generation UCS C845A M8 servers, which come integrated with NVIDIA RTX PRO 6000 Blackwell GPUs that are designed for both enterprise AI and visual computing applications in data centers.
Cisco hasn’t remained a pure-play server provider; the company has taken the strategy of tightly coupling compute, network, and virtualization through hardware-powered vNICs and logic to enable enterprises with dynamic, secure, and high-performance virtual machine networking under the hood of Cisco Server Access Virtualization.
This strategy is driving the demand for Cisco’s products in developing AI infrastructure, with CSCO receiving a rising number of AI infrastructure orders from web-scale customers in excess of $600 million in third-quarter fiscal 2025 alone. Year to date, Cisco received more than $1 billion in orders. Cisco’s networking revenues climbed 8% in the third quarter of fiscal 2025.
The Zacks Consensus Estimate for CSCO’s fiscal 2025 revenues is pegged at $56.59 billion, indicating an increase of 5.2% year over year. The Zacks Consensus Estimate for CSCO’s fiscal 2025 earnings is pegged at $3.79 per share, indicating a year-over-year increase of 1.6%.
Image Source: Zacks Investment Research
Stock Price Performance and Valuation of SMCI & CSCO
Shares of SMCI and CSCO have gained 48.3% and 19.4%, respectively, in the year-to-date period.
Image Source: Zacks Investment Research
SMCI is trading at a forward 12-month Price to Sales ratio of 4.72X, while CSCO is trading at a forward sales multiple of 0.86X. The lower valuation of CSCO stock compared to SMCI makes it more attractive at present.
Image Source: Zacks Investment Research
Conclusion: SMCI vs. CSCO
While SMCI and CSCO are both benefiting from the AI and HPC proliferation, SMCI is facing some near-term headwinds, like delays in purchasing decisions from customers and margin contraction. CSCO’s lower valuation also makes it more attractive than SMCI at present. Considering all these factors, CSCO is a better buy at present.
Furthermore, CSCO carries a Zacks Rank #2 (Buy) at present, making the stock a stronger pick compared with SMCI, which has a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.