Quantum Computing Stocks: Cisco Targets Quantum Networking - by Reinhardt Krause of Investors

jlagan74
Oct 29
5 min read

When investors think of big tech companies making moves in quantum technology, names like Google (GOOGL), IBM (IBM) and Microsoft (MSFT) come to mind, not Cisco Systems (CSCO). But the internet pioneer aims to replicate its success in quantum networking, which would be a boost to Cisco stock.

Most tech giants are focused on quantum computing, which works on a subatomic level and uses exotic technologies. Further, quantum computing aims to solve problems that are too complex for today's classical, electronics-based supercomputers. Cisco aims to be a leader in quantum networking — developing infrastructure to connect distributed quantum processors.

Vijoy Pandey, Cisco's general manager and senior VP of Cisco's technology incubation unit called Outshift, talked about Cisco's strategy in an IBD interview.

"To us, quantum is at the point of moving from physics to systems, and that's where we shine," he said. "We are the only player in the networking space that understands networking systems at scale."

Systems Approach

Cisco has developed a quantum software compiler to split quantum problems across multiple networked computers. Cisco's roadmap includes building quantum data centers where quantum processors from multiple companies will collaborate via a tech-agnostic network fabric called QFabric.

"We are a systems company," Pandey said. "If you think about Cisco and the way we built up the classical internet — we do silicon, we do hardware based on that silicon, we do protocols, we do the applications — we build that entire stack. We're doing the same thing on quantum networking. We're going to build the silicon and build the hardware around it."

Traditional computers use electronic circuits to store information as digital zeros and ones. Instead, quantum machines rely on processors known as "qubits." When atom-based qubits link with other qubits, it's a physics process called entanglement.

Cisco has created a photonics-based integrated circuit called the Quantum Network Entanglement Chip. The entanglement chip generates and distributes "entangled" photons over existing telecom fiber networks at room temperature. It was developed with the University of California at Santa Barbara.

In addition, Cisco has opened a Quantum Lab in Santa Monica, Calif., to advance quantum technologies. And it has invested in two quantum startups: Qunnect and Aliro.

Sound Strategy For Cisco Stock

Doug Finke, chief content officer of research firm Global Quantum Intelligence, said Cisco has a sound strategy.

"The Cisco quantum networking efforts make a lot of sense," he said. "First because Cisco possesses a lot of general knowledge and understanding of computer networking that they may be able to leverage and second because the networking of multiple quantum processors within a data center or between data centers will become critical in the future."

Finke added: "The quantum hardware providers will need to scale up their systems to the hundreds of thousands or even millions of qubits. Some of the quantum hardware providers will soon reach a limit on the maximum number of qubits they can fit within a single processor, and networking multiple systems together will allow continued qubit expansion to support more complex computing programs."

A recent JPMorgan report was upbeat on Cisco's strategy.

"By focusing on networking rather than qubit development, Cisco aims to replicate its classical internet role in the quantum era, although the entanglement chip remains in the prototype stages," said JPMorgan analyst Samik Chatterjee.

As in quantum computing, competition is rife in quantum networking.

Quantum Networking Competition

China has established a lead in one form of quantum networking. It's called Quantum Key Distribution (QKD).

In Japan, Toshiba and NEC are pursuing quantum networking work. Startups include Quantum xChange, QuantumCTek, ID Quantique and Qunnect. Among public companies, there's IonQ (IONQ), which has been on an acquisition spree.

Pandey says Cisco is well-positioned.

"The way we think about this entire space, especially on the networking side, is that there's a lot of work that was done in key distribution in the past, just exchanging security keys over large distances, whether through satellite or ground-based quantum communication. We think that the world is way larger than just key exchanges. We're looking at the space holistically. QKD is a very, very small sliver in that set. We actually believe that that sliver is less and less important moving forward."

Thus far, Cisco hasn't been making quantum acquisitions. But that could change.

"We believe in a full portfolio strategy," Pandey said. "There will be a lot of things that we will develop internally and organically because this is a net-new space and the next frontier for networking. So we want to have a lot of IP (intellectual property) in this space."

He added: "Of course, we will also partner. One reason for partnering is we want an ecosystem to build around the things that we are producing. And in the future, as we start scaling out the business, sure there will be tuck-in or other kinds of acquisitions as well."

Agnostic Quantum Networking

A big part of Cisco's quantum strategy is developing technology so that quantum machines can work with classical supercomputers and conventional fiber-optic networks. And Cisco aims to be neutral as technologies and companies compete.

Pandey noted that Cisco tries to work with all types of quantum qubit technologies — superconducting, ion-trapped, annealing, photonic and others – which he thinks will coexist.

"The supercomputing of the future is going to be this mixed bag of quantum processors, classical accelerators and CPUs, and our network and our software are going to enable (collaborative) workloads," he said.

Pandey added: "We are a scale-out company, so we want to bring in the network — a secure quantum network — that connects all of these computing technologies together. The North Star vision for us is to connect all of these disparate computing technologies and build out a scale-out quantum data center."

Cisco Stock's Shift To Software

In addition, Cisco has shifted away from its core business of selling network switches and routers. With acquisitions, Cisco aims to increase revenue from software and services.

Cisco in 2024 closed the acquisition of software company Splunk for $25 billion in cash. With roots in data analytics software, Splunk has expanded into cybersecurity.

Further, Cisco stock has gained 19% in 2025.

Meanwhile, Cisco stock holds a Composite Rating of 91 out of a best-possible 99, according to IBD Stock Checkup.

Cisco stock holds an Accumulation/Distribution Rating of C-. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. (A+ signifies heavy institutional buying; E means heavy selling. Think of a C grade as neutral.)