Key Highlights
- Bank of America increased Cisco’s stock price target to $135 from $114 and Ciena’s to $660 from $550
- Both companies maintain “Buy” ratings from BofA analysts
- Cisco’s Acacia division secured more than $1 billion in optical orders during Q3, with AI-related optics surging to $950 million—a nearly 4x increase
- The 800G optics sector is anticipated to expand almost tenfold during 2026, with Cisco commanding over 50% market share
- BofA forecasts the ZR/ZR+ optics market to expand 35% year-over-year in 2026 and 26% in 2027
Bank of America Securities has upgraded its price objectives for both Cisco Systems and Ciena, citing robust and accelerating demand for optical networking equipment driven by artificial intelligence infrastructure expansion.
BofA analyst Tal Liani increased Cisco’s price objective to $135 from $114 while elevating Ciena’s target to $660 from $550. Both firms retained their “Buy” recommendations from the investment bank.
Artificial Intelligence Drives Optical Equipment Demand
Cisco disclosed that its Acacia optical division received orders exceeding $1 billion throughout its third fiscal quarter ending in 2026. Within this total, demand for AI-related optical components surged nearly fourfold to approximately $950 million.
Hyperscale cloud providers also drove expansion through investments in non-AI optical infrastructure. This dual demand stream propelled Cisco’s optical segment performance significantly beyond previous forecasts.
BofA now anticipates the worldwide 800G ZR/ZR+ optics market will expand nearly tenfold throughout 2026. This segment is expected to constitute 35.5% of total optical networking revenue in 2026, compared to merely 4.6% in 2025.
The overall ZR/ZR+ market is projected to climb 35% year-over-year in 2026, followed by an additional 26% expansion in 2027. BofA noted this growth trajectory significantly exceeds the broader optical networking industry’s expansion rate.
Market Positioning of Cisco and Ciena
Cisco currently commands over 50% of the 800G market segment, based on BofA’s research analysis. The investment bank attributes this leadership position to Cisco’s prior experience in scaling 400G deployments.
Ciena maintains approximately 30% of the 800G segment. Analysts project Ciena will capture additional market share due to its 3nm DSP technology, which delivers superior power efficiency compared to existing alternatives.
Both organizations are viewed as strategically positioned for the industry transition from 400G to 800G pluggable optical components. BofA indicates that regardless of market share fluctuations between competitors, the overall market expansion should generate substantial revenue growth for both companies.
BofA revised its financial projections upward for both enterprises. For Cisco, the bank increased fiscal 2027 revenue estimates by approximately $700 million, accompanied by elevated earnings forecasts.
For Ciena, BofA raised fiscal 2028 revenue projections by nearly $747 million and increased profit expectations. The bank anticipates demand from both AI infrastructure and conventional cloud customers will sustain this growth trajectory.
Liani noted that Cisco’s recent quarterly performance and management commentary regarding sustained strong Acacia demand reinforce the bank’s optimistic outlook on the optical networking demand environment.
The updated price targets reflect revised valuation multiples. Cisco’s new target employs a 29x 2027 EV/FCF multiple, increased from 25x. Ciena’s target utilizes a 69x CY27 P/E ratio, elevated from 62x.
These upgrades arrive as both companies position themselves to compete in what BofA characterizes as a rapidly expanding optical cycle directly linked to AI infrastructure deployment.
