What's good for Cisco is good for Broadcom. 3 reasons both stocks are soaring

Cisco investors aren't the only victors from the network company's blowout earnings on Wednesday night: Broadcom shareholders also picked up a win. Shares of Cisco surged 15% on Thursday to a new record high, after posting results and guidance that topped Wall Street's expectations. More importantly, the report highlighted the rising demand for networking solutions tied to the AI data center buildout. Cisco said it has received $5.3 billion in artificial intelligence infrastructure and hyperscaler orders so far this year, and raised its expected orders for the fiscal year to $9 billion, up from $5 billion. Those positive vibes extended to Broadcom , which jumped more than 5% and also hit a new high. Broadcom is known for designing custom AI chips for hyperscalers such as Alphabet and Meta . But it also has a robust networking business that should benefit from this wave of AI spending. In fact, Wells Fargo analysts raised Broadcom's price target to $545 a share from $430 Thursday, saying the company's AI networking momentum is "underappreciated and a source of upside." "It feels like there's a bit of a networking super cycle that we're entering right now," Cisco CEO Chuck Robbins told Jim Cramer Thursday morning on CNBC, adding that years before the AI boom, many doubted the future value of networking solutions and hardware. But today, networking equipment is critical to directing traffic in data centers . After examining Cisco's latest earnings and listening to its investor call, here are the key read-throughs to Broadcom, which reports earnings on June 3. 1. Big cloud companies are buying more of Cisco's networking gear. Robbins said hyperscaler AI infrastructure orders hit $1.9 billion for the quarter, up from $600 million a year ago, citing strong growth in both Cisco's Silicon One systems and market-leading Acacia optics. Cisco's Silicon One offering delivers routing and switching capabilities for AI and networking needs. Cisco received a total of $5.3 billion in hyperscaler orders this year, surpassing prior estimates of $5 billion for fiscal year 2026 with a full quarter remaining. This year-over-year order growth bodes well for what we should see reported from Broadcom in a few weeks. The demand driving Cisco's guidance will also work in Broadcom's favor, as better-than-expected customer demand is likely to be spread across all key AI infrastructure companies. 2. Those same hyperscalers are preparing for inference and agentic applications. Inference is what occurs when AI models respond to questions. Agentic AI applications can run autonomously and perform tasks for their users unaided. In both scenarios, "the network is incredibly important," Robbins said on the call, adding that the quick transfer of information requires minimal delays. This is a good sign for Broadcom, which reported networking revenue growth of more than 60% last quarter, accounting for one-third of its fiscal first-quarter AI revenue. Broadcom predicts its AI networking business will reach 40% of total AI revenues in the quarter it reports in June. Broadcom said on its March earnings call that sales of its Tomahawk 6 switch, which launched last June, were rising. The Ethernet switching device is the first of its kind with a record speed of 102 terabits per second. "This lead will extend in 2027 with our next-generation Tomahawk 7 featuring double the performance," said CEO Hock Tan. 3. Companies need to modernize their operations for AI. Cisco cited research that 93% of 3,500 global technology enterprise leaders confirmed they are accelerating network modernization plans on their campuses. This is largely based on the expectation that AI will cause traffic across these networks to triple over the next three years. "These findings support our belief that we are still at the start of a multi-year, multi-billion dollar campus refresh opportunity," Robbins said. Broadcom also sells networking gear for enterprises , which is set to benefit from this refresh. Bottom line We remain bullish on Broadcom after a historic run this year. "Broadcom's been one of the great winners of all time," said Jim Cramer during April's Monthly Meeting . The stock has consistently hit new records this year, prompting us to trim what had become an oversized position in the portfolio last month. With the stock now up over 85% in the last year and more than 25% year to date, the Club has a 2-hold-equivalent rating on the stock, meaning we'd wait for a significant pullback before upgrading the stock again. (Jim Cramer's Charitable Trust is long AVGO. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. 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