Cisco Jumps Most Since 2011 on Sales Outlook

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1:15Go to Sonesta.com to book your stay and unlock the best rates with Sonesta Travel Pass. Here today, roam tomorrow. Join now at Sonesta.com. Terms and conditions apply. Bloomberg Audio Studios, podcasts, radio, news. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. I'm looking at Cisco Systems stock here. Remember, folks, Cisco, it's almost a 500, it's called a$465 billion market cap stock. It's up 15 % today, the most since 2011.

2:01Stock's up 52 % year-to-date, up 91 % on a trailing 12-month basis. This is just ripping. And for those of us back in the day, this was the stock in the 90s. This was the one to own big time. It's been finding its way ever since, and I think you've kind of found a little AI love here today. Ryan Vestelica joins us here, equities reporter for Bloomberg News. Ryan, I know Cisco reported some numbers. Wow, what did they say? Hey, thanks for having me. Yeah, pretty blowout report across the board last night. Very strong growth, very strong forecast. And the company also announced some job cuts as it is focusing even more on artificial intelligence.

2:38So it really seems like there's a growing consensus that Cisco is now a real part of the AI infrastructure trade. It's a real part of that firmament. And it does seem like people are really glomming onto the idea that this is going to be a company that's going to be showing very strong demand trends really for a while. I have to say, I feel like there's a trend happening of layoffs being announced very close to really high earnings. What is going on here? Is this part of a growth plan? Are we back to the days of Jack Welch? Or what do you think? It does seem like this is really part of their prioritizing AI right now.

3:14They are making a lot of investments into this. It doesn't really seem like they're talking about AI is replacing these workers or anything like that. It doesn't seem like that's really the focus here. It does seem like more. They are seeing so much demand from hyperscaler customers, from the data center build out. So they are really transitioning as much of the company as they can to focus on the opportunity that they see there. So is this a story of new products? Are they repositioning existing products to meet some of this demand that may be coming from the AI build out? How are they achieving this pivot here?

3:50Well, there is a growing appreciation that a lot of Cisco's products, we're talking networking components, optical products, all of these are really a critical part of building out these data centers and having them be optimized for AI-related workloads. We've seen a lot of these kinds of companies really skyrocketing this year, including in the optical space. So companies like Lumentum, Coherent, Corning, the specialized glass company, all of these types of components, which have historically been on maybe the sleepier side of the tech trade, not nearly as exciting as, you know, higher growth areas.

4:25All of a sudden, these are all really catching a bed as it does seem like we're at the stage of the AI buildout where these kinds of components are really in demand. It started with processing chips. Now it's moving on to networking chips and other kinds of components like that. Yeah, it does seem like there's a lot of excitement around infrastructure for data centers. Why is there so much excitement over that aspect of it as opposed to kind of AI breakthroughs and innovations? Well, right now we are really seeing infrastructure being where we are seeing the most clear cut demand and really the strongest growth.

5:00So if you're looking for AI pure plays right now, this is the really the best place to look for that kind of thing. All of the hyperscalers, which is companies like Microsoft and Amazon and Alphabet and Meta, when they reported a couple of weeks ago, they all really doubled down on their really aggressive AI-related spending plans. And that is really translating almost directly into revenue at the companies that are involved with building out the data centers. So you have all these huge cloud computing companies and all the equipment that is needed to actually run those. So we've seen it in servers, in chips, in memory, in storage, and in all these different sort of optical and networking components.

5:40Very sort of technical and specialized products, but ones that are really becoming more and more critical to this stage of the build-outs. So I'm just looking at the historical financials, Ryan, of Cisco. It's been kind of the last four or five years, kind of a mid-single-digit revenue growth story, mid-to-high single-digit revenue growth. I guess the street's kind of re-rating the top-line growth outlook for the company. What's the company saying about their revenue outlook? Well, it does seem like they are very much encouraging the idea that they are going to be a real significant winner within artificial intelligence, that the demand they're seeing isn't just going to be a blip, that as we see the AI infrastructure build out over the coming quarters and maybe even years, that they will continue to benefit.

6:22So we are looking at a higher rate of forward growth for them than I think investors have gotten used to in the past. I mean, this has been, even a few years ago, considered a pretty sleepy legacy company, slower growth, lower multiple, pays a dividend, not exciting the way it was in the dot-com era when it was, like you said, the most exciting company out there. It's starting getting some of that momentum again. Did it pivot at some point? Was it in the right place at the right time? Or was there a decision that it made that kind of put it on the path to see this kind of growth? I think that their long-term focus has been in sort of these networking products and things that were just not quite in focus in the pre-AI era.

7:05It does seem like they are just sort of in the right place at the right time, and they are able to pivot to focus on this in a more direct way. But I know they've made some acquisitions with optical companies. They've certainly been making a greater push to focus on AI, and it does seem like that is paying off for them. Stay with us. More from Bloomberg Intelligence coming up after this. If your finance team spends more time finding data than using it, if there's one entity here and one here and one here and one here, if scaling your business feels like starting over, you need the Intuit ERP. Intuit Enterprise Suite is the AI-native ERP solution that's powerful, painless, and proven.

7:45Learn more at Intuit.com slash ERP. Support for the show comes from Public. Public is an investing platform that offers access to stocks, options, bonds, and crypto. And they've also integrated AI with tools that can assist investors in building customized portfolios. One of these tools is called Generated Assets. It allows you to turn your ideas into investable indexes. So let's say you're interested in something specific like biotech companies with high R &D spend, small cap stocks with improving operating margins, or the S &P 500 minus high debt companies. Chances are there isn't an ETF that fits your exact criteria.

8:22But on public, you just type in a prompt and their AI screens thousands of stocks and build a one-of-a-kind index. You can even backtest it against the S &P 500. Then you can invest in a few clicks. Go to public.com slash market and earn an uncapped 1 % bonus when you transfer your portfolio. That's public.com slash market.

8:48SEC Registered Advisor. Crypto services by zero hash. Sample prompts are for illustrative purposes only, not investment advice. All investing involves risk of loss. See complete disclosures at public.com slash disclosures. These days, it seems like AI agents are just about everywhere you turn, every field and every function. But without identity, you can't trust they'll serve your business instead of jeopardizing it. Fortunately, Okta helps you get identity right by securing your AI agents' identities, giving you a single layer of control, a single standard of trust. So whether an AI agent supports a single user or your entire enterprise, with Okta, you'll turn risk into opportunity.

9:27Secure every agent. Secure any agent. Okta secures AI. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts. or watch us live on YouTube. We've got Stacey Banik-Smith sitting in for Scarlet Fu. I'm Paul Sweeney. We're live here in our Bloomberg Interactive Brokers studio, streaming live on YouTube. All right, you're a technology analyst. You follow a technology company. So where do you go? Poland. Dan Ives, Global Head of Technology Research at Wedbush Securities, finds himself in Poland.

10:03I'm not even going to ask. Dan, what I want to get to is, it's seemingly like half of the leadership of Silicon Valley is with President Trump in Beijing as we speak. What do you make of it?

10:16Dan Ives:I mean, look, it's a pivotal moment for AI and tech because it's about being able to refer to NVIDIA and other chips into China, but also just more of an opening in China, which is important for Tesla. It's important for Apple. It's important for chip makers. And look, this is a moment in time where it's important that when they come back from that trip, that it's been a huge step forward. And I think it's going to be another leg up in this market. And you're seeing it from the godfather of AI and video today. We've been talking this morning about how important AI and tech are to the economy right now.

10:54They are hugely fundamental. How important is this summit for tech and AI in the U.S. right now?

11:02Dan Ives:I think it's really like a grand opening to what could be a next chapter of AI. Because when you think about the one black cloud over the AI trade has really been China, raw materials, chips in the China from NVIDIA. When you start to clear this path and this passes and you get the green light, I think it's another leg up. And what that means is more data center build out, more chips, more. And again, for the first time in 30 years, U.S. is ahead in China when it comes to tech. And that's very important in terms of the global market is more and more you're going to earn U.S. tech stocks. Dan, I guess this trip highlights once again kind of the change in power that we saw at Apple with Tim Cook giving up the CEO post, but retaining the chairman post.

11:53And I think as you've told us before, part of his responsibility is managing the relationship with China. Just give us a summary of kind of how that stands right now.

12:03Dan Ives:Look, if Cook has been 10 percent politician, 90 percent CEO, you know, probably 90 percent politician. I mean, that's a huge part of his value because he has the ears within D.C. from Trump to others. And that's so important for Apple to navigate the political landscape. And China, look, China's hearts and hearts at 20 percent iPhones, as well as, you know, where the massive amount of production happens with tariffs and everything else. It's not coincidental that Cook is on Air Force One. Are there any specific deals or announcements that might come out of the summit or is it more of a general breaking of bread?

12:49Dan Ives:I think it's more than a break in a bread. I think it's about the official green light for NVIDIA cell chips in China with no caveats. And I think Jensen, he's the biggest poker chip there because that's really what China wants. I think when you see an opening of China for businesses, I think this is really about robotics because right now China's leading in robotics. The big area, obviously, I'm getting into in terms of optimists and humanoid robots. And it's very important that you have an opening of that market for U.S. to compete rather than just China winning in that market. Dan, it's become, I guess, increasingly clear over the last four, five, six years that there's a technology cold war between China and let's call it just the West.

13:39Is there any way to change that, make it less difficult for both sides? How do you see that playing out?

13:47Dan Ives:Look, I think, Paul, the problem is that it's a two-horse race, right? I mean, Europe, you know where I am today. I mean, they continue to be stuck in regulatory data privacy and really nowhere when it comes to AI. But then you look at Middle East, India, they're trying to be obviously the number three players. But that's also why, like, U.S. needs China, China needs U.S. when it comes to the trade. It's an arms race that's going to play out, and you're going to kind of see a splitting of these two powerhouses when they go after other markets. But it's a true fourth industrial revolution that's playing out.

14:24Dan Ives:And U.S. and China both know no one wants to mess that up relative to, we continue to believe, third inning, top of the third one out in this nine-inning bull market. Hey, Dan, you know better than anybody. And plus, you're in Europe as we speak. Other than SAP and maybe one or two other companies, there is almost no technology in Europe. They've missed the last 50 years. Are they going to miss AI as well? Look, that's, I mean, I just heard this Impact Conference in Porn. You have people from all around the world speaking. I mean, that's a big topic because, you know, in terms of Big Brother privacy, worries about what we've seen from a technology perspective, it's taken Europe many years behind where everyone else is.

15:14Dan Ives:And I think there's a huge battle going on between innovators, entrepreneurs, because otherwise, if they don't use privacy and some of the regulatory, Europe's going to miss out on this. And you'll see a lot of entrepreneurs and innovators move to Middle East, U.S. You're in obviously other markets. But look, I believe if I'm betting on a country that's going to break out of this, it's probably Poland. I think they're the one that's kind of showing the most kind of maybe vision when it comes to AI. Stay with us. More from Bloomberg Intelligence coming up after this. Support for the show comes from Public.

15:53Public is an investing platform that offers access to stocks, options, bonds and crypto. And they've also integrated AI with tools that can assist investors in building customized portfolios. One of these tools is called Generated Assets. It allows you to turn your ideas into investable indexes. So let's say you're interested in something specific like biotech companies with high R &D spend, small cap stocks with improving operating margins, or the S &P 500 minus high debt companies. Chances are there isn't an ETF that fits your exact criteria. But on Public, you just type in a prompt and their AI screens thousands of stocks and build a one-of-a-kind index.

16:32You can even backtest it against the S &P 500. Then you can invest in a few clicks. Go to public.com slash market and earn an uncapped 1 % bonus when you transfer your portfolio. That's public.com slash market.

16:55Sample prompts are for illustrative purposes only, not investment advice. All investing involves risk of loss. See complete disclosures at public.com slash disclosures. These days, it seems like AI agents are just about everywhere you turn, every field and every function. But without identity, you can't trust they'll serve your business instead of jeopardizing it. Fortunately, Okta helps you get identity right by securing your AI agent's identities, giving you a single layer of control, a single standard of trust. So whether an AI agent supports a single user or your entire enterprise, with Okta, you'll turn risk into opportunity.

17:30Secure every agent. Secure any agent. Okta secures AI. From coast to coast, unlock adventure at Red Lion Hotels by Sonesta, where restful sleep, friendly service, and trusted local knowledge are part of every stay. Red Lion makes it easy to feel welcomed, comfortable, and connected wherever the road takes you. Whether you're traveling for business or pleasure, you can spend less and make more of every trip. When you sign up for Sinesta Travel Pass, you'll get their best rates instantly. Go to Sinesta.com to book your stay and unlock the best rates with Sinesta Travel Pass. Here today, roam tomorrow.

18:06Join now at Sinesta.com. Terms and conditions apply. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. All right, Stacey Vanek-Smith sitting in for Scarlet Fu. I'm Paul Sweeney live here in our Bloomberg Interactive Broker Studio streaming live on YouTube as well. Given the turmoil coming out of the Middle East, a lot of folks or a lot of companies are wondering kind of how that's going to impact their business.

18:40One of those industries is generally kind of the travel business. People change their travel habits given what's going on out there in the world. And our good friends at Bloomberg Intelligence, they survey folks out there in the marketplace to figure out what they're doing and how that may impact hotels, cruise lines, all that type of stuff, airlines, that type of thing. Joni Lurie, Senior Credit Analyst for Bloomberg Intelligence, joins us here. Joni, what's your latest survey tell you about, maybe as we kind of head into this summer travel season, how people are thinking about how they might travel, where they might travel.

19:11How's that looking? So I don't think you'll be surprised to hear this, Paul, but we are seeing some of the effects of the Iran war, the energy prices enter our survey data. So for example, personal safety is a concern among about two thirds of survey participants. And that's the highest level since we started running this survey in December of 23. So that's not so surprising. What is surprising is how resilient the consumer has been, at least in terms of increasing budgets, in terms of planning to increase budgets and in terms of still traveling despite the backdrop. That said, we are seeing a little bit of a bias towards domestic over international, which, again, I think given the climate, given, you know, the Trump administration stance on immigration and and all the sort of components of that, the geopolitical risk, it's not so surprising to us what we're seeing.

20:02But it's very evident in the data. I mean, obviously, we're coming up on the big travel season in the U.S. summer. How do you expect that to start impacting all of the businesses that rely on the travel industry? I mean, if people are going domestic, that could be positive news, but also gas prices are way up. Sure, Stacey. So I think we're seeing still that people, despite knowing that inflation is a big factor, they're still planning on increasing their budgets. And so I do wonder at what point we start seeing a shift in terms of how people travel. One of the things that came out of the survey is if costs exceed budgets, they're willing to cut back on accommodations.

20:45So going for not as luxury accommodations, but they aren't willing to sacrifice activities and experiences. But what we are seeing though, even so, is that things like outdoors and national parks are high up on the list in terms of where people are traveling, as well as beach vacations. Now, even marrying that into the conversation, we are seeing that Mexico and the Caribbean have decreased in terms of where people are traveling for the second half of the year versus what we saw in November. So we are, you know, there is sort of a give and take in this scenario. Are people going to the Jersey Shore over the Caribbean?

21:25I'm not sure. No, come on down to the Jersey Shore. Atlantic City finally getting the boom. Exactly. Exactly. Talk to us about the World Cup, Jodi. You know, there's been some reporting that the World Cup is a little underwhelming from the hotel perspective here, maybe Airbnb as well. What are you hearing from the companies you cover about the World Cup? Yeah, so it depends on the company you're talking about. So some of the companies from the gaming companies to the hotels are commenting that they are seeing a little bit of an uptick in some of their markets. And what's so interesting about the way that the World Cup is run is just how North America is, right?

22:04You're talking Vancouver. You're talking L.A. You're talking New York and Philadelphia. You're talking Mexico. I mean, there's so many areas in which the World Cup is going to be penetrating the North American landscape. But I'm curious to see how much of that is going to equate in terms of travel budgets and people going places for it. You are seeing, I mean, you know, just anecdotally, I am starting to see locally some of the promotions happening at restaurants and at different sort of attractions as we lead into the World Cup. I'm not sure what that's going to equate in terms of actual dollars spent by people as they sort of go to the matches and celebrate it.

22:47But we do have some survey data that it is mixed. You know, we have some people who are prioritizing sporting events over vacation. But by and large, we aren't necessarily seeing that that's the top priority for how people are going to spend their vacations for the second half of the year. So you mentioned that people are kind of switching to domestic. Overall, how is international travel looking right now? Is it are we seeing it decrease a little bit? Is that maybe part of why there's a little bit of softness around the World Cup bookings? Correct. Yes. So, Stacey, I mean, I think more so than, you know, the World Cup bookings per se, I think it's just we're seeing a decline in terms of travel internationally overall.

23:28We're seeing fewer people planning on three or more vacations or two or more vacations internationally than we did in November. So that's a big, big sort of cutback. Right. And then we're also seeing that the key places that were attractive spots going into this year, including Canada, including Italy, including Portugal, Japan, all of them Dubai, of course, all of them are sort of seeing a little bit of a decline from November in terms of locations that people are planning on traveling to. Now, what is surprising is the UK actually bumped up in terms of priority of where people are planning on traveling next year.