Bank of America boosts forecasts for networking giants as artificial intelligence fuels surge in optical technology demand

Table of Contents Bank of America Securities has elevated its valuation targets for Cisco Systems and Ciena Corporation, driven by accelerating demand for optical networking equipment linked to artificial intelligence data center expansion. Tal Liani, the firm’s lead analyst covering the sector, increased Cisco’s target from $114 to $135 per share while boosting Ciena’s projection from $550 to $660. The investment bank maintained “Buy” recommendations on both equities. Cisco disclosed that Acacia optical orders exceeded $1 billion throughout its fiscal third quarter of 2026. Within that total, AI-specific optics demand surged almost fourfold, climbing to approximately $950 million. Cisco Systems, Inc., CSCO Hyperscale cloud providers simultaneously increased investments in traditional optical infrastructure beyond AI applications. This dual-source demand elevated Cisco’s optical segment performance significantly above previous analyst projections. Bank of America now anticipates the worldwide 800G ZR/ZR+ optics segment will experience nearly tenfold expansion during 2026. This market segment is expected to constitute 35.5% of total optical networking revenue in 2026, a dramatic leap from merely 4.6% in 2025. The comprehensive ZR/ZR+ market is forecasted to expand 35% year-over-year throughout 2026, followed by an additional 26% growth in 2027. BofA emphasizes this expansion rate substantially exceeds the broader optical networking industry’s growth trajectory. Cisco presently commands over 50% of the 800G market segment, based on BofA’s analysis. The investment bank attributes this commanding position to Cisco’s prior expertise in successfully scaling 400G product deployments. Ciena captures approximately 30% of the 800G optical segment. BofA analysts project Ciena will expand market share leveraging its advanced 3nm DSP technology, which delivers superior power efficiency compared to competing solutions. Both networking equipment manufacturers are strategically positioned to capitalize on the industry transition from 400G to 800G pluggable optical modules. Bank of America notes that regardless of potential market share fluctuations between competitors, the substantial overall market expansion should generate robust revenue growth for both enterprises. BofA has revised its financial projections upward for both organizations. The firm increased Cisco’s fiscal 2027 revenue estimates by approximately $700 million, accompanied by elevated earnings forecasts. For Ciena, Bank of America raised fiscal 2028 revenue projections by nearly $747 million while boosting profitability estimates. The bank anticipates sustained demand from both AI infrastructure builders and conventional cloud service providers will support this growth trajectory. Liani emphasized that Cisco’s latest quarterly performance and management guidance regarding persistent strong Acacia demand reinforce the bank’s optimistic outlook on the optical networking demand landscape. The enhanced price targets reflect updated valuation methodologies. Cisco’s new target applies a 29x 2027 EV/FCF multiple, increased from 25x previously. Ciena’s target utilizes a 69x CY27 P/E ratio, elevated from 62x. These target increases arrive as both companies position themselves to compete in what BofA characterizes as a rapidly accelerating optical equipment cycle directly tied to artificial intelligence infrastructure deployment.