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Buy Cisco on Strong Guidance, Estimate Revisions and Short-Term Upside
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Key Takeaways
Cisco beat Q4 estimates with strong ARR, RPO and subscription revenue growth.
FY26 revenue outlook is $59 - $60B with EPS guided at $4.00 - $4.06.
Expanded AI, security offerings and NVIDIA partnership drive new enterprise demand.
The global IP-based networking giant, Cisco Systems Inc. (CSCO - Free Report) , reported solid fourth-quarter fiscal 2025 earnings results surpassing the consensus estimates on several counts. CSCO has been integrating AI into its product portfolios across networking, security, collaboration and observability. Strong demand for Cisco’s products in developing AI infrastructure has been a game-changer for the company.
In the last quarter, Cisco reported strong growth in Annual Recurring Revenues (ARR), Remaining Performance Obligations (RPO) and subscription revenues in the reported quarter.
ARR was $31.1 billion, up 5% with product ARR growth of 8%. Total subscription revenues increased 3% year over year to $7.9 billion. Total RPO increased 6% year over year to $43.5 billion. Product RPO grew 8%, and total short-term RPO was $21.7 billion, up 4%. The growing recurring revenue base reflects strong growth prospects, expected to help CSCO stock perform well over the long term.
The Splunk acquisition enhances CSCO’s recurring revenue base. The buyout significantly expands Its portfolio of software-based solutions making it one of the largest software companies in the world. The launch of AI-powered Hypershield, which combines security and networking, strengthened CSCO’s security portfolio.
Solid Guidance
For fiscal 2026, CSCO expects revenues to be $59-$60 billion compared with $56.7 billion reported in fiscal 2025. Non-GAAP earnings are expected between $4 per share and $4.06 per share compared with $3.81 per share reported in fiscal 2025.
Strong Estimate Revisions
For first-quarter fiscal 2026 (ending October 2025), the Zacks Consensus Estimate currently shows revenues of $14.77 billion, suggesting an improvement of 6.7% year over year and earnings per share of $0.98, indicating an increase of 7.7% year over year. The Zacks Consensus Estimate for current-year earnings has improved 1% over the last 60 days.
For fiscal 2026 (ending July 2026), the Zacks Consensus Estimate currently shows revenues of $59.59 billion, suggesting an improvement of 5.2% year over year and earnings per share of $4.02, indicating an increase of 5.5% year over year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 30 days.
Image Source: Zacks Investment Research
Expanding AI-Powered Portfolio
Cisco hasn’t remained a pure-play server provider. The company has taken the strategy of tightly coupling compute, network, and virtualization through hardware-powered vNICs and logic. This provides enterprises dynamic, secure, and high-performance virtual machine networking under the hood of Cisco Server Access Virtualization. This strategy is driving the demand for Cisco’s products in developing AI infrastructure
Cisco’s security business is benefiting from strong demand for both Cisco Secure Access, Hypershield and XDR. In the fourth quarter of fiscal 2025, orders grew mid-single-digit. Splunk and Cisco synergies reported 14% year-over-year growth in new logos for Splunk. Cisco rolled out Splunk on Microsoft Corp.’s (MSFT - Free Report) Azure. Secure Access, XDR, Hypershield and AI Defense added 750 new customers collectively in the fourth quarter.
CSCO’s expanded partnership with NVIDIA Corp. (NVDA - Free Report) , offering solutions that help build AI-ready data center networks, is groundbreaking. Integration of Cisco Nexus switches with NVIDIA’s Spectrum-X architecture is offering low latency, high-speed networking for AI clusters, driving enterprise AI orders. The Cisco Secure AI factory with NVIDIA provides a trusted blueprint for building secure AI-ready data centers for enterprises, sovereign cloud providers and newly emerging Neocloud providers.
Short-Term Price Upside Potential
Year to date, Cisco provided a 13.7% return, exceeding the broad-market index — the S&P 500’s return of 10.2%. The short-term average price target of brokerage firms for the stock represents an increase of 13.5% from the last closing price of $67.32. The brokerage target price is currently in the range of $69-$87. This indicates a maximum upside of 29.2% and no downside. Therefore, the risk-reward ratio is highly favorable for CSCO.
CSCO currently carries a forward P/E of 16.67X for the current financial year, compared with 15.23X of the industry and 19.79X of the S&P 500. CSCO has a return on equity of 27.02% compared with -2.07% of the industry and 17.03% of the S&P 500 Index.
Cisco offers a comprehensive networking solution integrating switching, routing, wireless, and server technology under the umbrella of Cisco Unified Computing System. CSCO’s aggressive AI push and growing security dominance have been major growth drivers. The rapid acceleration in the capacity requirements of the network due to unprecedented levels of network traffic and an ever-evolving threat landscape bodes well for its prospects.
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Buy Cisco on Strong Guidance, Estimate Revisions and Short-Term Upside
Key Takeaways
The global IP-based networking giant, Cisco Systems Inc. (CSCO - Free Report) , reported solid fourth-quarter fiscal 2025 earnings results surpassing the consensus estimates on several counts. CSCO has been integrating AI into its product portfolios across networking, security, collaboration and observability. Strong demand for Cisco’s products in developing AI infrastructure has been a game-changer for the company.
In the last quarter, Cisco reported strong growth in Annual Recurring Revenues (ARR), Remaining Performance Obligations (RPO) and subscription revenues in the reported quarter.
ARR was $31.1 billion, up 5% with product ARR growth of 8%. Total subscription revenues increased 3% year over year to $7.9 billion. Total RPO increased 6% year over year to $43.5 billion. Product RPO grew 8%, and total short-term RPO was $21.7 billion, up 4%. The growing recurring revenue base reflects strong growth prospects, expected to help CSCO stock perform well over the long term.
The Splunk acquisition enhances CSCO’s recurring revenue base. The buyout significantly expands Its portfolio of software-based solutions making it one of the largest software companies in the world. The launch of AI-powered Hypershield, which combines security and networking, strengthened CSCO’s security portfolio.
Solid Guidance
For fiscal 2026, CSCO expects revenues to be $59-$60 billion compared with $56.7 billion reported in fiscal 2025. Non-GAAP earnings are expected between $4 per share and $4.06 per share compared with $3.81 per share reported in fiscal 2025.
Strong Estimate Revisions
For first-quarter fiscal 2026 (ending October 2025), the Zacks Consensus Estimate currently shows revenues of $14.77 billion, suggesting an improvement of 6.7% year over year and earnings per share of $0.98, indicating an increase of 7.7% year over year. The Zacks Consensus Estimate for current-year earnings has improved 1% over the last 60 days.
For fiscal 2026 (ending July 2026), the Zacks Consensus Estimate currently shows revenues of $59.59 billion, suggesting an improvement of 5.2% year over year and earnings per share of $4.02, indicating an increase of 5.5% year over year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 30 days.
Image Source: Zacks Investment Research
Expanding AI-Powered Portfolio
Cisco hasn’t remained a pure-play server provider. The company has taken the strategy of tightly coupling compute, network, and virtualization through hardware-powered vNICs and logic. This provides enterprises dynamic, secure, and high-performance virtual machine networking under the hood of Cisco Server Access Virtualization. This strategy is driving the demand for Cisco’s products in developing AI infrastructure
Cisco’s security business is benefiting from strong demand for both Cisco Secure Access, Hypershield and XDR. In the fourth quarter of fiscal 2025, orders grew mid-single-digit. Splunk and Cisco synergies reported 14% year-over-year growth in new logos for Splunk. Cisco rolled out Splunk on Microsoft Corp.’s (MSFT - Free Report) Azure. Secure Access, XDR, Hypershield and AI Defense added 750 new customers collectively in the fourth quarter.
CSCO’s expanded partnership with NVIDIA Corp. (NVDA - Free Report) , offering solutions that help build AI-ready data center networks, is groundbreaking. Integration of Cisco Nexus switches with NVIDIA’s Spectrum-X architecture is offering low latency, high-speed networking for AI clusters, driving enterprise AI orders. The Cisco Secure AI factory with NVIDIA provides a trusted blueprint for building secure AI-ready data centers for enterprises, sovereign cloud providers and newly emerging Neocloud providers.
Short-Term Price Upside Potential
Year to date, Cisco provided a 13.7% return, exceeding the broad-market index — the S&P 500’s return of 10.2%. The short-term average price target of brokerage firms for the stock represents an increase of 13.5% from the last closing price of $67.32. The brokerage target price is currently in the range of $69-$87. This indicates a maximum upside of 29.2% and no downside. Therefore, the risk-reward ratio is highly favorable for CSCO.
Image Source: Zacks Investment Research
Buy CSCO Shares to Gain in the Near Term
Cisco currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
CSCO currently carries a forward P/E of 16.67X for the current financial year, compared with 15.23X of the industry and 19.79X of the S&P 500. CSCO has a return on equity of 27.02% compared with -2.07% of the industry and 17.03% of the S&P 500 Index.
Cisco offers a comprehensive networking solution integrating switching, routing, wireless, and server technology under the umbrella of Cisco Unified Computing System. CSCO’s aggressive AI push and growing security dominance have been major growth drivers. The rapid acceleration in the capacity requirements of the network due to unprecedented levels of network traffic and an ever-evolving threat landscape bodes well for its prospects.
Image Source: Zacks Investment Research