Key Takeaways
- BofA increased Cisco’s target price from $114 to $135 and Ciena’s from $550 to $660
- Both companies maintain “Buy” ratings from the investment bank
- Cisco’s Acacia division secured more than $1 billion in optical bookings during Q3, with AI optics soaring to $950 million
- The 800G optical market is forecast to expand almost 10x throughout 2026, with Cisco commanding over 50% market share
- ZR/ZR+ optics segment expected to surge 35% in 2026 and another 26% in 2027, per BofA projections
Bank of America Securities has elevated its price objectives for Cisco Systems and Ciena Corporation, highlighting robust momentum in optical networking equipment driven by artificial intelligence infrastructure investments.
BofA analyst Tal Liani increased Cisco’s target from $114 to $135 while raising Ciena’s objective from $550 to $660. The firm maintained “Buy” recommendations for both networking equipment providers.
Artificial Intelligence Accelerates Optical Equipment Orders
Cisco disclosed that its Acacia division recorded over $1 billion in optical system orders during the company’s fiscal third quarter of 2026. Within this total, AI-specific optical demand surged nearly fourfold to approximately $950 million.
Hyperscale cloud providers additionally boosted growth through investments in traditional optical infrastructure. This dual-source demand propelled Cisco’s optical performance significantly beyond earlier forecasts.
BofA now anticipates the worldwide 800G ZR/ZR+ optical market will expand approximately tenfold during 2026. This segment is expected to account for 35.5% of the entire optical networking sector in 2026, a dramatic jump from merely 4.6% in 2025.
The complete ZR/ZR+ market is forecasted to advance 35% year-over-year throughout 2026, followed by an additional 26% expansion in 2027. BofA emphasized this growth trajectory substantially exceeds the broader optical networking industry’s expansion rate.
Market Positioning of Cisco and Ciena
Cisco currently commands over 50% of the 800G optical market, according to BofA’s analysis. The investment bank attributes this dominant position to Cisco’s prior experience successfully scaling 400G technology deployments.
Ciena captures approximately 30% of the 800G market segment. Analysts project Ciena will gain additional market share due to its advanced 3nm DSP technology, which delivers superior power efficiency compared to competing solutions.
Both enterprises are positioned favorably for the industry’s transition from 400G to 800G pluggable optical modules. BofA notes that regardless of competitive share shifts between vendors, the substantial market expansion should generate strong revenue growth for both companies.
BofA revised its financial models upward for both firms. For Cisco, the bank elevated fiscal 2027 revenue forecasts by approximately $700 million, accompanied by increased earnings projections.
For Ciena, BofA raised fiscal 2028 revenue estimates by nearly $747 million while increasing profit expectations. The firm anticipates sustained demand from both AI workloads and conventional cloud customers will support continued growth.
Liani noted that Cisco’s latest quarterly performance and management guidance regarding persistent Acacia demand strength reinforce the bank’s optimistic outlook on the optical networking demand landscape.
The updated price targets reflect revised valuation frameworks. Cisco’s new target applies a 29x 2027 EV/FCF multiple, elevated from 25x previously. Ciena’s objective utilizes a 69x CY27 P/E ratio, increased from 62x.
These upgrades arrive as both companies position themselves to capitalize on what BofA characterizes as a rapidly accelerating optical networking cycle directly linked to artificial intelligence infrastructure expansion.
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