Cisco Earnings: Soaring on the Back of Accelerating AI Fundamentals

Key Morningstar Metrics for Cisco

• Fair Value Estimate
  : $90
• Morningstar Rating
  : ★★
• Morningstar Economic Moat Rating
  : Wide
• Morningstar Uncertainty Rating
  : Medium

What We Thought of Cisco’s Earnings

Cisco CSCO Systems’ April-quarter results were above guidance, with strong 12% year-over-year sales growth to $15.8 billion. Cisco raised its fiscal 2026 guidance, led by significantly higher AI revenue ($4 billion, up from $3 billion) and AI orders ($9 billion, up from $5 billion) targets.

Why it matters: Cisco’s artificial intelligence growth is impressive, as it benefits from a large available supply and a strong portfolio between classic networking and optics. We see the firm as well-positioned in hyperscale cloud and AI model builders, as well as in sovereign AI buildouts and neoclouds.

• Networking is a critical enabler of, and bottleneck to, AI model performance. This leads to high spending on AI network infrastructure that supports growth for Cisco and its peers. We expect this trend to continue powerfully over the next five years.
• Campus and enterprise networking is still Cisco’s biggest business and is enjoying above-trend growth in the short term, driven by a strong customer refresh cycle. Still, we see AI’s rapid growth closing the gap with campus, in terms of mix, over the next five years.

The bottom line: We raise our fair value estimate for wide-moat Cisco to $90 from $75, driven by higher forecasts for campus and AI revenue over the next five years. Shares shot up 20% after-hours on raised AI guidance, and we continue to see them as overvalued.

• We model well above Cisco’s AI guidance. As a conservative guide, Cisco’s AI guidance has risen each quarter this year. We model $8 billion in fiscal 2027 (versus management’s $6 billion guide), rising to $19 billion at the end of the decade, implying 79% annualized growth from fiscal 2025.
• We model double-digit growth for campus and enterprise networking in 2026 and 2027, tapering to the mid-single digits by 2030. This is well above the historical growth in the 5% range, and we attribute this to a strong, ongoing refresh cycle that continues through 2027.