uploads///Cisco Nexus revenue growth

ACI Architecture Could Drive Cisco’s Growth in Fiscal 1Q16

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Nov. 12 2015, Updated 8:07 a.m. ET

ACI products are important for Cisco’s growth

Cisco’s (CSCO) Nexus ACI (Application Centric Infrastructure) is a data center networking architecture designed to deliver business and other applications to end users in a cost-effective way. ACI includes Cisco’s Nexus 9000 switches, a policy model, and an APIC (application policy infrastructure controller).

According to a report from Barron’s, “We think the Application-Centric Infrastructure (ACI) product cycle in the Commercial market likely accelerated Cisco’s order growth to 5%-6% in the first quarter, compared to 4% year-over-year in the fourth quarter. If we are correct about year-over-year product order acceleration to 5%-6% in the fiscal first quarter, then Cisco is likely to guide the fiscal second quarter (ending January) in line with consensus at sales of $12.54 billion, or up 5% year-over-year, and EPS of 56 cents.”

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ACI products showed fast growth last quarter

Nexus 9000 switches have been a success for Cisco. During Cisco’s fiscal 4Q15 earnings conference call, management mentioned that the company added 1,400 new Nexus 9000 customers for a total of 4,100. More importantly, 26 of the 28 largest enterprise customers in the world now use Nexus 9000 switches.

These additional customers are helping Cisco obtain healthy revenue growth for its Nexus 9000 business. Cisco said that the revenue for Nexus 3000, Nexus 9000, and the ACI portfolio of products managed to grow by more than 50% sequentially and 100% on a YoY (year-over-year) basis in fiscal 4Q15 to become a $438 million business. The above graph shows the growth.

Cisco built the ACI initiative based on technology developed by Insieme Networks. To find out more about this, read Cisco Acquired Insieme to Focus on the Important SDN Trend. The term “SDN” signifies the transition from a hardware-centric approach for networking to a virtualized network environment designed to enable flexible, application-driven customization of network infrastructures. By leveraging Insieme’s technology, Cisco successfully partnered with companies like IBM (IBM), Microsoft (MSFT), and SAP (SAP).

If you’re bullish about Cisco’s prospects, you can invest in the PowerShares QQQ Trust, Series 1 ETF (QQQ). QQQ invests about 2.8% of its holdings in Cisco.

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