Cisco Earnings: Expanding AI Pipeline and Broad-Based Networking Strength

Key Morningstar Metrics for Cisco Systems

• Fair Value Estimate: $67.00
• Morningstar Rating: ★★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium

What We Thought of Cisco Systems’ Earnings

Cisco Systems’ CSCO October-quarter results reached the top ends of guidance, with sales rising 8% year over year to $14.9 billion. January guidance calls for sequential growth, which is above FactSet consensus expectations. Cisco raised its fiscal 2026 sales guidance by $1 billion, or about 2%.

Why it matters: We’re impressed with Cisco’s broad-based growth. Artificial intelligence is a rising growth driver, but we also see strong results across campus and enterprise customers. We expect a significant growth year for networking, spurred by a campus refresh cycle and a rising AI pipeline.

• Campus and enterprise networking is Cisco’s bread and butter. Many customers are up for networking equipment refreshes five years after covid, which should spur higher growth in the mid- or high-single digits for this business over the next two years.
• We like Cisco’s rising AI momentum. The firm guided to $3 billion in AI revenue in fiscal 2026, and more than $4 billion in AI orders, both implying immense growth. In addition, it announced a wholly incremental pipeline of enterprise and government AI orders in the future.

The bottom line: We raise our fair value estimate for wide-moat Cisco to $67 per share from $61, behind a higher networking forecast across both campus and AI products. Shares rose 7% after hours on strong guidance. Valuation is challenging for us, despite an attractive networking and AI growth outlook.

• We model mid- to high-single-digit growth for networking sales, above the top end of Cisco’s guidance range of 5%. We see AI driving significant growth, with low-single-digit growth for the rest of networking.
• Profitability remains highly positive for Cisco, with a non-GAAP gross margin of 68% and an operating margin 34%. We expect these levels to be steady into the medium term, though we foresee some modest gross margin pressure from a higher mix of cloud and AI customers.