Hewlett Packard Enterprise (HPE) and Cisco Systems (CSCO) are now direct competitors in the networking market after HPE acquired Juniper Networks, overlapping across major segments. The recent boom in networking due to AI and high performance computing raises the question of which stock has more upside potential for investors.

HPE’s networking business includes wired/wireless LANs, data center switching, AI-native networking, and more. The acquisition of Juniper Networks deepened its portfolio, leading to increased operating profit. However, the company faces challenges with low-margin traditional server revenue sources, impacting its earnings per share for fiscal year 2025.

Cisco Systems dominates the networking space with a full-stack portfolio supporting various network requirements. Strong demand for AI infrastructure and networking solutions has led to revenue growth. Cisco’s networking product orders are growing, supporting top and bottom-line growth projections for fiscal year 2026.

In terms of price performance and valuation, CSCO shares have outperformed HPE shares year to date. HPE trades at a lower P/S multiple compared to Cisco. While both companies benefit from the demand for advanced networking systems, HPE’s margin compression in server business raises concerns for investors.

HPE currently carries a Zacks Rank #5 (Strong Sell), while CSCO holds a Zacks Rank #3 (Hold), making CSCO the preferred choice. The AI revolution has already created millionaires, and investing in lesser-known AI firms tackling major challenges could lead to substantial profits in the future. Consider exploring these “2nd Wave” AI stocks for potential growth opportunities.

Read more at Nasdaq: HPE vs. CSCO: Which Networking Stock Has an Edge Right Now?