Cisco (CSCO) Leans on Splunk to Broaden Its Share of Enterprise AI Spending. It Faces a Big Test

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. (NASDAQ:CSCO)'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.