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HPE vs. CSCO: Which Stock Has an Edge in the Networking Space?
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Key Takeaways
Cisco's networking revenues rose 28%, with product orders up 40% in fiscal 2026.
Hyperscaler AI orders reached $9.3 billion, while fiscal 2027 AI revenues are expected at $7.5 billion.
HPE's networking growth accelerated after Juniper, but Cisco offers a stronger competitive position.
Hewlett Packard Enterprise (HPE - Free Report) and Cisco Systems (CSCO - Free Report) are increasingly competing for enterprise and data center networking spending as artificial intelligence (AI) accelerates demand for high-performance infrastructure. HPE strengthened its position with the acquisition of Juniper Networks, while Cisco is benefiting from rising hyperscaler demand, campus networking upgrades and a broad security portfolio.
With both companies positioned to benefit from the networking cycle, investors must weigh growth, profitability, risks and valuation. Let’s dig deeper into the fundamentals of both stocks and see which is worth investing in.
The Case for HPE Stock
HPE’s networking business includes wired and wireless local area networks, data center switching, software-defined wide-area-networks, cellular network software, network security and HPE Aruba Networking. HPE provides comprehensive solutions for AIOps, enterprise connectivity, SASE and next-generation firewalls, data center and AI-native networking.
The networking business has become a more potent growth and margin driver following the Juniper acquisition. In the second quarter of fiscal 2026, Networking revenues reached $2.7 billion, up 148% year over year, while operating profit margin was 21.6%. Campus & Branch revenues increased 50.2%, Data Center Networking grew 233.3%, and Security rose 155.1%. Routing also expanded sharply following the Juniper combination.
The integration is progressing ahead of schedule, with management highlighting record campus and branch orders and normalized growth of nearly 20% in enterprise data center switching orders and nearly 30% in routing orders. HPE also raised its cumulative Networks for AI order target to at least $2 billion by the end of fiscal 2026 and expects $450 million of annual run-rate cost synergies within three years of the acquisition.
Beyond networking, HPE is benefiting from AI infrastructure and hybrid cloud adoption. Cloud & AI revenues rose 22.9% in the second quarter to $7.7 billion, while GreenLake now manages more than 6.7 million systems for approximately 50,000 customers. HPE raised its fiscal 2026 revenue growth outlook to 29-33% and expects non-GAAP earnings per share of $3.35-$3.45. The Zacks Consensus Estimate for HPE’s fiscal 2026 earnings reflects year-over-year growth of 77%. The estimates have been revised upward in the past 30 days.
Image Source: Zacks Investment Research
The Case for CSCO Stock
Cisco has established its dominance in the networking space with strong hyperscaler AI momentum, a large security business and significant operating leverage. Cisco Systems’ offerings cover a full-stack portfolio of switching, routing, wireless, servers, software and SaaS services designed to support on-prem, cloud-managed and hybrid systems. The company, with its deep expertise, supports the networking requirements of campus, branch, mobile and data center networks.
Cisco retains a broad networking, security, collaboration and observability portfolio, giving it exposure to both infrastructure upgrades and recurring software-led opportunities. The company closed fiscal 2026 with networking revenues of $9.79 billion in the fourth quarter, up 28% year over year. Networking product orders rose 40%, marking the eighth consecutive quarter of double-digit growth, while campus networking orders increased 20% and data center networking orders rose more than 35%.
AI is becoming a major growth engine for Cisco. Hyperscaler AI infrastructure orders reached $9.3 billion in fiscal 2026, about 4.5 times the prior-year level, and management expects related revenues to reach $7.5 billion in fiscal 2027. Cisco also secured three new hyperscaler design wins involving P200, G200 and optical line systems. Its Silicon One and Acacia optics portfolio further strengthens its position in high-performance AI networking.
Cisco is also expanding its security opportunity through Splunk and newer products. Security revenues increased 14% in the fourth quarter, while firewall orders rose more than 30%. For fiscal 2027, Cisco projects revenues of $72.2-$73.4 billion and non-GAAP earnings of $5.05-$5.11 per share. The Zacks Consensus Estimate for fiscal 2027 earnings has been pegged at $4.09 per share, indicating a year-over-year decline of 7.4%.
Image Source: Zacks Investment Research
HPE vs. CSCO: Price Performance and Valuation
Year to date, HPE shares have appreciated 130% compared with the 45.9% rise in CSCO shares.
YTD Performance Chart
Image Source: Zacks Investment Research
On the valuation front, HPE trades at a forward 12-month P/S multiple of 1.47X, higher than its median of 0.80X. Cisco has a forward 12-month P/S multiple of 6.17X, significantly higher than its median of 5.02X.
Forward 12-Month (P/S) Valuation Chart
Image Source: Zacks Investment Research
Conclusion: HPE vs. CSCO
While HPE is benefiting from the Juniper acquisition, strong AI infrastructure demand and rapid networking growth, CSCO appears to offer a more compelling investment opportunity. Cisco’s strong hyperscaler AI orders, accelerating data center networking, campus refresh cycle and expanding security portfolio provide multiple avenues for sustained growth. Its operating leverage and robust cash generation further strengthen the investment case. Although CSCO’s valuation is higher than HPE’s, the premium appears justified by its scale, diversified portfolio and stronger competitive position. Therefore, despite valuation risks and margin pressure from higher hardware costs, CSCO looks more lucrative for investors seeking long-term exposure to the networking and AI infrastructure opportunity. HPE and CSCO carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
View the Zacks #1 Rank List
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HPE vs. CSCO: Which Stock Has an Edge in the Networking Space?
Key Takeaways
Hewlett Packard Enterprise (HPE - Free Report) and Cisco Systems (CSCO - Free Report) are increasingly competing for enterprise and data center networking spending as artificial intelligence (AI) accelerates demand for high-performance infrastructure. HPE strengthened its position with the acquisition of Juniper Networks, while Cisco is benefiting from rising hyperscaler demand, campus networking upgrades and a broad security portfolio.
With both companies positioned to benefit from the networking cycle, investors must weigh growth, profitability, risks and valuation. Let’s dig deeper into the fundamentals of both stocks and see which is worth investing in.
The Case for HPE Stock
HPE’s networking business includes wired and wireless local area networks, data center switching, software-defined wide-area-networks, cellular network software, network security and HPE Aruba Networking. HPE provides comprehensive solutions for AIOps, enterprise connectivity, SASE and next-generation firewalls, data center and AI-native networking.
The networking business has become a more potent growth and margin driver following the Juniper acquisition. In the second quarter of fiscal 2026, Networking revenues reached $2.7 billion, up 148% year over year, while operating profit margin was 21.6%. Campus & Branch revenues increased 50.2%, Data Center Networking grew 233.3%, and Security rose 155.1%. Routing also expanded sharply following the Juniper combination.
The integration is progressing ahead of schedule, with management highlighting record campus and branch orders and normalized growth of nearly 20% in enterprise data center switching orders and nearly 30% in routing orders. HPE also raised its cumulative Networks for AI order target to at least $2 billion by the end of fiscal 2026 and expects $450 million of annual run-rate cost synergies within three years of the acquisition.
Beyond networking, HPE is benefiting from AI infrastructure and hybrid cloud adoption. Cloud & AI revenues rose 22.9% in the second quarter to $7.7 billion, while GreenLake now manages more than 6.7 million systems for approximately 50,000 customers. HPE raised its fiscal 2026 revenue growth outlook to 29-33% and expects non-GAAP earnings per share of $3.35-$3.45. The Zacks Consensus Estimate for HPE’s fiscal 2026 earnings reflects year-over-year growth of 77%. The estimates have been revised upward in the past 30 days.
Image Source: Zacks Investment Research
The Case for CSCO Stock
Cisco has established its dominance in the networking space with strong hyperscaler AI momentum, a large security business and significant operating leverage. Cisco Systems’ offerings cover a full-stack portfolio of switching, routing, wireless, servers, software and SaaS services designed to support on-prem, cloud-managed and hybrid systems. The company, with its deep expertise, supports the networking requirements of campus, branch, mobile and data center networks.
Cisco retains a broad networking, security, collaboration and observability portfolio, giving it exposure to both infrastructure upgrades and recurring software-led opportunities. The company closed fiscal 2026 with networking revenues of $9.79 billion in the fourth quarter, up 28% year over year. Networking product orders rose 40%, marking the eighth consecutive quarter of double-digit growth, while campus networking orders increased 20% and data center networking orders rose more than 35%.
AI is becoming a major growth engine for Cisco. Hyperscaler AI infrastructure orders reached $9.3 billion in fiscal 2026, about 4.5 times the prior-year level, and management expects related revenues to reach $7.5 billion in fiscal 2027. Cisco also secured three new hyperscaler design wins involving P200, G200 and optical line systems. Its Silicon One and Acacia optics portfolio further strengthens its position in high-performance AI networking.
Cisco is also expanding its security opportunity through Splunk and newer products. Security revenues increased 14% in the fourth quarter, while firewall orders rose more than 30%. For fiscal 2027, Cisco projects revenues of $72.2-$73.4 billion and non-GAAP earnings of $5.05-$5.11 per share. The Zacks Consensus Estimate for fiscal 2027 earnings has been pegged at $4.09 per share, indicating a year-over-year decline of 7.4%.
Image Source: Zacks Investment Research
HPE vs. CSCO: Price Performance and Valuation
Year to date, HPE shares have appreciated 130% compared with the 45.9% rise in CSCO shares.
YTD Performance Chart
Image Source: Zacks Investment Research
On the valuation front, HPE trades at a forward 12-month P/S multiple of 1.47X, higher than its median of 0.80X. Cisco has a forward 12-month P/S multiple of 6.17X, significantly higher than its median of 5.02X.
Forward 12-Month (P/S) Valuation Chart
Image Source: Zacks Investment Research
Conclusion: HPE vs. CSCO
While HPE is benefiting from the Juniper acquisition, strong AI infrastructure demand and rapid networking growth, CSCO appears to offer a more compelling investment opportunity. Cisco’s strong hyperscaler AI orders, accelerating data center networking, campus refresh cycle and expanding security portfolio provide multiple avenues for sustained growth. Its operating leverage and robust cash generation further strengthen the investment case. Although CSCO’s valuation is higher than HPE’s, the premium appears justified by its scale, diversified portfolio and stronger competitive position. Therefore, despite valuation risks and margin pressure from higher hardware costs, CSCO looks more lucrative for investors seeking long-term exposure to the networking and AI infrastructure opportunity. HPE and CSCO carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.