Key Points
IBM has higher revenue growth right now, and is helping enterprises build autonomous AI agents.
Cisco is experiencing substantial sales growth from its AI infrastructure products.
Not every tech stock is a volatile, growth-fueled investment that is likely to exhibit dramatic price swings. Cisco(NASDAQ: CSCO) and IBM(NYSE: IBM) are long-standing dividend payers that offer high yields and long-term growth prospects.
Both stocks have betas under 1, which means they are less volatile than the S&P500. That makes them particularly worth considering for retirement portfolios. Less drama and solid cash flow are great strengths, but if you can only add one of them to your holdings now, here's what you should consider before making your choice.
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Both companies are riding AI tailwinds
Demand for artificial intelligence (AI) has been a key catalyst for both companies. IBM's watsonx platform helps enterprises build autonomous AI agents, and its hybrid cloud platform enables cost-effective, secure AI deployment for enterprises.
This setup helped IBM deliver 12% year-over-year revenue growth in Q4, with infrastructure and software sales up by 21% and 14% year over year, respectively. Revenue growth accelerated in Q4 compared to full-year 2025, reflecting the ongoing demand surge for AI infrastructure.
Cisco is also riding the AI tailwinds, and its share price has finally climbed back above its dot-com bubble highs. The company's revenue increased by 10% year over year in its fiscal 2026 Q2 (which ended Jan. 24), with AI infrastructure orders representing 13.7% of total revenue.
Cisco focuses more on hardware, and its Silicon One platform quickly cultivates unified routing and switching, which makes it easier to move data across thousands of AI processors. This technology helps data centers scale and directly translates into real-world AI uses by enabling high-speed, low-latency connectivity, making Cisco's technology a foundational piece of AI infrastructure.
Cisco offers more compelling growth than IBM
Financially, both companies appear fairly similar on the surface. Cisco's five-year compound annual revenue growth rate of 5.1% slightly edges IBM's 4.7% rate over the same stretch, while IBM reported slightly higher revenue growth than Cisco in the most recent quarter. At their current share prices, IBM has the higher dividend yield as well, but both companies have hiked their payouts annually by low-single-digit percentages for several years.
From a dividend perspective, it's good to treat these stocks as income picks that should not be expected to exhibit high payout growth over many years. However, looking at the individual businesses, Cisco's AI segment has shown rapid growth that makes it more compelling than IBM.
Cisco's AI infrastructure revenue has grown like a weed and has quickly turned into a large part of total revenue. In its fiscal 2025 Q4, its AI infrastructure sales clocked in at more than $800 million. That segment's sales rose by 62.5% sequentially to $1.3 billion in fiscal 2026 Q1, and by another 61.5% sequentially to $2.1 billion in its fiscal Q2.
IBM's AI infrastructure segment has not had that type of run-up. While Big Blue posted 41.7% sequential growth for AI infrastructure in Q4, it followed a sequential drop of 12.2% in Q3. That sales decline does not ruin the investment thesis for IBM, as revenue was up year over year in both quarters. However, it demonstrates that Cisco is gaining AI market share at a faster rate, making it a more attractive tech stock buy right now.
Should you buy stock in Cisco Systems right now?
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Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Cisco Systems and International Business Machines. The Motley Fool has a disclosure policy.
