Cisco Systems, Inc. (NASDAQ:CSCO) is seeking to expand Splunk’s role in enterprise AI. That matters because it could give the networking giant another avenue to monetize the AI infrastructure buildout beyond hardware sales.
At the 2026 Splunk conference in Denver this week (Sept. 14-17), Cisco introduced the Cisco AI POD for Splunk. This solution brings Splunk AI capabilities to customers running Splunk Enterprise in on-premises, private-cloud, and air-gapped environments. The configuration combines Cisco infrastructure and Nvidia accelerated computing. It allows customers to self-host selected AI models.
As enterprises deploy more AI workloads, they need to monitor, secure, and manage those workloads. Now Cisco is positioning itself to capture more of AI spending by combining its infrastructure with Splunk’s data, observability, and security capabilities.
AI Infrastructure Is Becoming a Larger Cisco Business
Cisco Systems, Inc.’s latest results offer another glimpse into how AI infrastructure demand is becoming financially significant for the company.
Cisco took in $9.3 billion of AI infrastructure orders from hyperscalers in fiscal 2026. That included $4 billion in the fourth quarter alone. The company generated around $4 billion in AI infrastructure revenue during the year. It expects that figure to nearly double to $7.5 billion in fiscal 2027.
The opportunity for Splunk is to extend Cisco’s participation in AI from infrastructure into software and security.
In addition to the launch of the Cisco AI POD for Splunk configuration, Cisco has also entered into a multi-year agreement with AWS to co-develop Splunk-centered security products for AI-driven threats. That arrangement adds another route for Splunk to benefit as AI workloads become more complex.
However, the thesis has a stress point. At this point, Cisco’s infrastructure business is leading the growth in AI-related revenue. But infrastructure can be exposed to competitive pricing and component cost inflation, crimping margins.
That raises the question about whether and how quickly Cisco can convert its growing AI infrastructure business into higher-value, recurring software and security growth. The modest 6% growth in observability revenue in Q4 indicates that this transformation is not yet fully reflected across the portfolio.
Hedge Funds Increase Exposure to CSCO as Short Sellers Retreat
Insider Monkey’s hedge fund database shows that hedge fund positioning has moved in a supportive direction. It should be noted that the positioning occurred before the latest Splunk announcement.
The number of hedge funds holding Cisco Systems, Inc. increased to 101 in Q2 from 97 in Q1 and 77 in Q4. Fisher Asset Management, the top hedge fund holder, increased its stake 94% to more than 33.4 million shares. That followed increases of 443% in Q1 and 867% in Q4. Arrowstreet Capital raised its stake 10% to 19.3 million shares, and D.E. Shaw increased its stake 605% to 4.1 million shares.
As of August 31, 55.5 million Cisco shares were shorted, with 3.6 days to cover. That represented 1.41% of the public float and showed a 5.77% decline in short interest from the prior reading.
The Splunk expansion gives Cisco another channel to pursue additional AI spending. Ultimately, execution will determine how much of the additional AI spending opportunity reaches Cisco’s bottom line.
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