Key Points
Cisco combines real AI infrastructure exposure with the steady dividend profile many retirees prioritize.
Rising AI orders plus recurring software revenue make Cisco a compelling retirement-friendly tech stock.
Retirees who want exposure to artificial intelligence (AI) often run into a basic conflict. The companies most closely associated with the theme tend to be volatile and expensive, and they pay little to no dividends. The goal of a retirement portfolio is roughly the opposite: stable cash flow, moderate drawdowns, and enough growth to keep up with inflation.
The good news is that one of the largest beneficiaries of AI infrastructure spending fits the retiree profile remarkably well -- Cisco Systems (NASDAQ: CSCO).
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The AI story that hides inside a dividend stock
For most of the last decade, Cisco was treated as a slow-growth networking incumbent. That framing is now outdated. The company has become a major arms dealer for the AI data center build-out, and the order book has accelerated quickly. In April 2026, Cisco disclosed that it booked roughly $2.1 billion of AI infrastructure orders from hyperscalers in a single quarter, matching its entire fiscal 2025 AI order total, and management raised its fiscal 2026 AI order target to more than $5 billion.
The products driving this are Cisco's Silicon One networking silicon, 1.6T and 800G optics for AI clusters, and a growing portfolio of AI-specific switching and security products. For a retiree, the relevance is that these revenue streams are increasingly bookings based, often from a small number of very large customers that plan capital expenditure (capex) multiple years ahead. That tends to make revenue more predictable than the consumer- or training-driven pieces of the AI complex.
The dividend and balance sheet are doing what retirees need
Cisco pays a meaningful and growing dividend, generates substantial free cash flow, and runs a regular share-repurchase program. The fiscal 2026 revenue guidance was raised to roughly $61.2 billion to $61.7 billion, with management citing double-digit order growth across geographies and the integration of Splunk. The roughly two-year-old Splunk acquisition matters here because it brought a recurring software revenue stream into a historically hardware-heavy company, which tends to support a higher valuation multiple and steadier earnings.
For a retirement-oriented investor, the combination matters more than any single quarterly headline. A reliable, growing dividend, a buyback that reduces share count over time, and an enterprise customer base that pays predictably is exactly the financial profile most retirees actually want.
There is a fair question about why hyperscalers, which build much of their own infrastructure, would buy as much as they do from Cisco. The honest answer is that switching at the scale of AI clusters is hard, optics and silicon design cycles are long, and Cisco's incumbency gives it both reference architectures and supply commitments that very few competitors can match at the volumes required. Cisco also recently launched a Universal Quantum Switch and completed acquisitions such as Galileo AI to strengthen AI operations capabilities, both of which extend the platform story.
Why this fits a retirement portfolio better than Nvidia
Nvidia is the clearest pure-play winner of the AI training era, but its volatility, valuation multiple, and modest dividend make it a poor fit for income-oriented portfolios. Cisco offers a different bargain -- a substantial dividend, predictable free cash flow, and real, accelerating AI revenue growth. The trade-off is upside. Cisco will almost certainly not deliver the kind of returns a top chipmaker has achieved in recent years. It is also far less likely to lose half its value in a sentiment-driven correction.
For retirees who want genuine AI exposure without giving up the financial profile they rely on, Cisco Systems is the rare name that bridges both. It pays a real dividend, it is buying back stock, and the AI order book is accelerating, all at a valuation that is still reasonable. Investors who insist on the most exciting AI story should look elsewhere, but those who want AI growth inside a portfolio built for income and stability are arguably better served here.
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Micah Zimmerman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Cisco Systems and Nvidia. The Motley Fool has a disclosure policy.