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Financial data on TradingView ↗Reported statements, ratios and ownership, alongside this research.
Cisco designs and sells networking equipment (switches, routers, wireless, optics and its own networking chips), security, observability and collaboration software, and support services. Its customers are enterprises, governments, telecom carriers and, increasingly, hyperscale cloud providers building AI data centers. [S2][S1]
In fiscal 2026 (year to July 25, 2026), product sales were 76% of $63.3 billion revenue, led by networking at 55%, security 13%, collaboration 7% and observability 2%; technical support and professional services contributed 24%. About 48% of revenue is subscription-based. [S1][S3]
Explore the research to see how business evidence informs assumptions and valuation.
Start with the business evidence, then follow the assumptions through to scenarios and valuation.
Financial data on TradingView ↗Reported statements, ratios and ownership, alongside this research.
Valuation and assumptionsCisco's demand is the strongest in years, but networking revenue only just regained its FY2023 level, and part of today's growth is AI backlog and memory-driven price increases that may not repeat.
Cisco sells networking hardware, security and observability software, and support services, mostly through partners to enterprises and governments and directly to hyperscalers. About 48% of revenue is subscription-based. Deferred revenue funds its operating assets, so returns on tangible capital are very high; goodwill from Splunk lowers returns on total capital to about 20%.
Holding a 29% operating margin after stock compensation, the $105.32 price requires about 10% annual revenue growth from FY2028 to FY2036, or a discount rate near 6.9% while 10-year Treasuries yield close to 5%.
A valuation model that works backward from a share price to find combinations of growth, margins, and other assumptions consistent with that price.
In this report: Solving for the growth, margin or discount rate that justifies $105.32 shows the price needs about 10% annual growth for nine years after FY2027, versus Cisco's roughly 4% history.
The weighted average required return of a company's debt and equity providers, used to discount cash flows to the firm.
In this report: Much of the gap between this valuation and the market price is the discount rate: 8.9% here versus about 6.9% implied by the price.
Good business, expensive stock. Probability-weighted value is about $69 and the bull case about $95, both below the price. With no change in multiple, fundamentals return roughly 7% a year, below a 9.2% cost of equity.
Core growth after FY2027: whether non-AI demand stays near 10% once price increases lap, or returns to low single digits. It has the widest plausible range and compounds into terminal value.
The value of product purchase commitments customers placed in a period, reported by Cisco as year-over-year growth rates. Orders are recognized as revenue later, when products ship or services are delivered, so they lead revenue.
In this report: Cisco discloses orders by customer market, and orders excluding hyperscalers are the earliest public signal of whether enterprise demand persists after the refresh.
Operating margin: hardware mix and memory costs push gross margin down; operating margin holds only while revenue outgrows fixed costs.
The sensitivity of operating profit to changes in revenue when some operating costs are fixed.
In this report: Cisco's operating margin rose in FY2026 despite lower gross margin because revenue grew 18% in Q4 while operating expenses grew 5%. The same leverage works in reverse in a flat year.
Hyperscalers and enterprises digest purchases, memory prices fall and price increases reverse, inventory is written down, and margins reset lower as fixed costs meet lower volume.
FY2027 meets guidance, AI revenue grows again in FY2028, enterprise growth slows as the refresh matures, and growth fades toward 3% with margins near 29%.
AI traffic drives multi-year growth across enterprise, telco and hyperscale; Cisco silicon wins data center share and security accelerates, lifting margins to about 31.5%.
Product orders excluding hyperscalers from Q3 FY2027: above 10% for four quarters would support durable growth; negative for two quarters would support the cyclical reading.
The value of product purchase commitments customers placed in a period, reported by Cisco as year-over-year growth rates. Orders are recognized as revenue later, when products ship or services are delivered, so they lead revenue.
In this report: Cisco discloses orders by customer market, and orders excluding hyperscalers are the earliest public signal of whether enterprise demand persists after the refresh.
Non-GAAP gross margin: holding at or above 66% while AI revenue grows would ease the margin concern; below 64% for two quarters would weaken it.
FY2028 guidance in August 2027 is the main test of whether FY2027 was a peak.
Total ARR growth, 3% in Q4 FY2026: above 7% would show the software layer compounding.
Not read: the FY2026 10-K MD&A and notes on debt maturities, purchase commitments, segment detail and customer concentration; the FY2026 proxy (executive pay design, insider ownership, related-party transactions); credit ratings. Stock-based compensation before FY2025 and gross margin for FY2022-FY2024 are from secondary or unverified sources. Peer ROIC, balance sheets and valuation multiples were not verified, so no peer-relative valuation conclusion is drawn. No verified total addressable market figure. The explanation for the restatement of FY2025 GAAP EPS from $2.61 to $2.55 was not located. The management-described 'Mythos effect' on security-driven refresh is unquantified and assigned no value. Publication dates for S6, S11 and S12 are approximated to the event date. Schema note: because the stance is avoid, 'strengthen' triggers denote evidence strengthening the business case for owning Cisco, which would argue against this stance.
These model scenarios depend on their inputs. Review the assumptions and supporting evidence alongside the implied values.
earnings multiple v2 · as of 2026-10-18
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