Cisco Systems, Inc. (CSCO) | Investment Case

1. Company Snapshot

1.a. Company Description

Cisco Systems, Inc.designs, manufactures, and sells Internet Protocol based networking and other products related to the communications and information technology industry in the Americas, Europe, the Middle East, Africa, the Asia Pacific, Japan, and China.It provides infrastructure platforms, including networking technologies of switching, routing, wireless, and data center products that are designed to work together to deliver networking capabilities, and transport and/or store data.

The company also offers collaboration products comprising unified communications, Cisco TelePresence, and conferencing, as well as the Internet of Things and analytics software.In addition, it provides security products, such as network security, cloud and email security, identity and access management, advanced threat protection, and unified threat management products.Further, the company offers a range of service and support options for its customers, including technical support and advanced services.

It serves businesses of various sizes, public institutions, governments, and service providers.The company sells its products and services directly, as well as through systems integrators, service providers, other resellers, and distributors.Cisco Systems, Inc.

has strategic alliances with other companies.Cisco Systems, Inc.was incorporated in 1984 and is headquartered in San Jose, California.

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1.b. Last Insights on CSCO

Breaking News: Cisco Systems Inc reported Q2 earnings that beat estimates with 10% EPS growth and 9.7% revenue rise. The company saw strong AI orders and provided an upbeat fiscal 2026 outlook. However investors seem unimpressed due to conservative guidance for the current quarter and a decline in adjusted gross margins to 67.5%. Management reported record revenue but rising memory and AI hardware costs are a concern. Some analysts think the high valuation multiples are detached from Cisco's fundamentals. A mixed Q3 guidance was also provided.

1.c. Company Highlights

Last Price	75
Change Percentage	-12.32%
Open	79.58
Previous Close	85.54
Market Cap ( Millions)	296332
Volume	68015496
Year High	88.19
Year Low	52.11
M A 50	77.91
M A 200	70.42

FCF Yield	4.34%
Dividend Yield	2.19%
ROE	23.64%
Debt / Equity	63.04%
Net Debt / EBIDTA	158.29%
Price To Book	6.22
Price Earnings Ratio	26.78
Price To FCF	23.07
Price To sales	5.02
EV / EBITDA	22.31

2. Cisco's Strong Q2 FY2026 Earnings Driven by AI Infrastructure and Campus Networking

Cisco reported a robust Q2 FY2026 with revenue reaching $15.3 billion, a 10% year-over-year increase, driven by a 14% rise in product revenue to $11.6 billion. The growth was largely attributed to AI infrastructure and campus networking solutions. Non-GAAP EPS grew 11% to $1.04, surpassing estimates of $1.02. The company returned $3 billion in capital to shareholders and announced a dividend increase to $0.42 per quarter. Total product orders grew 18% year-over-year, with significant growth seen across various segments.

Publication Date: Feb -12

                                    📋 Highlights
                                    AI Infrastructure Growth::
                                                AI infrastructure orders from hyperscalers totaled $2.1B, with Cisco projecting over $5B in AI orders and $3B in AI revenue for FY2026.
Revenue Expansion::
                                                Q2 FY2026 revenue reached $15.3B (+10% YoY), driven by 14% product revenue growth ($11.6B) from AI infrastructure and campus solutions.
Capital Returns::
                                                Returned $3B to shareholders and raised dividend to $0.42/quarter, alongside non-GAAP EPS growth of 11% to $1.04.
Security Portfolio Momentum::
                                                1,000 new customers for security products (100% sequential increase), with 4,000 total customers since launch and double-digit growth expected by Q4.
Campus & Data Center Strength::
                                                Enterprise campus orders grew 8% YoY, data center switching saw 21.1% growth in Q3, and AI-driven memory demand boosted advanced purchase commitments to $1.8B (+73% YoY).

                                

Segment Performance

Enterprise product orders were up 8%, public sector up 11%, and service provider and cloud customers up 65%. AI infrastructure orders from hyperscalers totaled $2.1 billion, with Cisco expecting to take AI orders in excess of $5 billion and recognize over $3 billion in AI infrastructure revenue from hyperscalers in FY2026. The company's guidance for Q3 revenue is $15.4-15.6 billion and non-GAAP EPS of $1.02-1.04, maintaining its FY2026 guidance of $61.2-61.7 billion in revenue and non-GAAP EPS of $4.13-4.17.

Gross Margin and EPS Growth

Gross margin is expected to trough in Q3 but improve as the company moves forward, driven by cost controls, memory price increases, and a focus on profitability. EPS growth is expected to outpace revenue growth, with a focus on growing EPS faster than revenue. The company's EBIT margin outperformance in the quarter was driven by financial prudence in expenditures and a focus on profitability, with EPS and top-line growth both double digits. The EBIT margin was 34.6%, the highest in 4 quarters.

Valuation and Outlook

With a P/E Ratio of 30.54 and an ROE of 23.64%, the market is pricing in a certain level of growth for Cisco. The company's strong commercial momentum on the cloud and AI front is expected to continue, with a growing opportunity with enterprise sovereign and neoclouds in AI and a beginning of a campus refresh, a multiyear, multibillion-dollar opportunity. Analysts estimate next year's revenue growth at 5.2%, which may be conservative given Cisco's current trajectory. The Dividend Yield is 1.92%, indicating a relatively stable return for shareholders.

3. NewsRoom

Stock Market Today, Feb. 12: AI Fears Slam Markets as Nasdaq Drops 2%

Feb -12

Source:

Market Today: Tech Sells Off on AI Jitters; M&A, FDA Moves and Policy Shifts

Feb -12

Source: gurufocus.com

Cisco Systems: The Market Is Impatient For Growth

Feb -12

Source: seekingalpha.com

Memory Prices Hit Cisco, Apple Faces Siri Snags | Bloomberg Tech 2/12/2026

Feb -12

Source: youtube.com

Why Cisco's stock is falling hard — and taking the tech sector with it

Feb -12

Source: marketwatch.com

Cisco stock has worst day since 2022 as memory prices pressure margins

Feb -12

Source: cnbc.com

Networking Giant Drops on Earnings: Time to Load Up on Cisco?

Feb -12

Source: zacks.com

Investors are dumping Cisco stock as it's in a bad position — ‘it's not'

Feb -12

Source: invezz.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (5.40%)

6. Segments

Computer Networks

Expected Growth: 5.4%

Cisco Systems’ growth is driven by increasing demand for network infrastructure, IoT devices, and cybersecurity solutions, as well as the adoption of cloud computing and artificial intelligence technologies.

7. Detailed Products

Routers

Cisco routers are designed to connect multiple networks together and route traffic between them, enabling communication between devices on different networks.

Switches

Cisco switches are used to connect devices within a network, allowing them to communicate with each other and share resources.

Firewalls

Cisco firewalls provide network security by controlling incoming and outgoing network traffic based on predetermined security rules.

Wireless Access Points

Cisco wireless access points provide wireless connectivity to devices, allowing them to connect to a network without the use of cables.

Unified Communications

Cisco unified communications solutions integrate voice, video, and data communications, enabling real-time collaboration and communication.

Network Security

Cisco network security solutions provide threat defense, vulnerability management, and incident response, protecting networks from cyber threats.

Data Center Products

Cisco data center products provide a scalable and flexible infrastructure for data center environments, enabling virtualization and cloud computing.

Collaboration Tools

Cisco collaboration tools provide real-time communication and collaboration capabilities, enabling teams to work together more effectively.

IoT Products

Cisco IoT products provide connectivity, security, and analytics for IoT devices, enabling IoT applications and services.

8. Cisco Systems, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Cisco Systems, Inc. has a low threat of substitutes due to its strong brand recognition and high-quality products, making it difficult for substitutes to enter the market.

Bargaining Power Of Customers

Cisco Systems, Inc. has a medium bargaining power of customers due to the presence of large enterprises and governments as customers, which can negotiate prices and terms.

Bargaining Power Of Suppliers

Cisco Systems, Inc. has a low bargaining power of suppliers due to its large scale of operations and diversified supply chain, reducing dependence on individual suppliers.

Threat Of New Entrants

Cisco Systems, Inc. has a low threat of new entrants due to the high barriers to entry in the networking equipment market, including significant capital requirements and technological expertise.

Intensity Of Rivalry

Cisco Systems, Inc. operates in a highly competitive market with intense rivalry among established players, including Hewlett Packard Enterprise, Juniper Networks, and Huawei Technologies.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	15.91%
Debt Cost	6.18%
Equity Weight	84.09%
Equity Cost	8.23%
WACC	7.91%
Leverage	18.92%

11. Quality Control: Cisco Systems, Inc. passed 6 out of 9 key points

Strong Liquidity

Low Deb

Strong Interest Coverage

Healthy Cash Flow

Operating Efficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Cisco

A-Score: 6.2/10

Value: 2.3

Growth: 4.0

Quality: 7.6

Yield: 5.0

Momentum: 9.0

Volatility: 9.3

1-Year Total Return ->

IBM

A-Score: 5.7/10

Value: 1.8

Growth: 3.0

Quality: 6.0

Yield: 6.0

Momentum: 9.0

Volatility: 8.3

1-Year Total Return ->

NetApp

A-Score: 5.5/10

Value: 3.4

Growth: 5.7

Quality: 7.4

Yield: 5.0

Momentum: 4.5

Volatility: 7.0

1-Year Total Return ->

QUALCOMM

A-Score: 5.5/10

Value: 2.5

Growth: 5.9

Quality: 7.4

Yield: 4.0

Momentum: 7.0

Volatility: 6.0

1-Year Total Return ->

Motorola Solutions

A-Score: 5.0/10

Value: 2.0

Growth: 6.3

Quality: 6.8

Yield: 2.0

Momentum: 3.0

Volatility: 9.7

1-Year Total Return ->

HPE

A-Score: 4.6/10

Value: 4.4

Growth: 3.7

Quality: 3.2

Yield: 5.0

Momentum: 6.0

Volatility: 5.3

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

5.98%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

7.91%

Cisco Systems, Inc. - US17275R1023

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on CSCO

1.c. Company Highlights

Higher Yield

Less Volatile

Better Quality

Earnings Beats

Revenues Beats

Strong Momentum

2. Cisco's Strong Q2 FY2026 Earnings Driven by AI Infrastructure and Campus Networking

Segment Performance

Gross Margin and EPS Growth

Valuation and Outlook

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (5.40%)

6. Segments

Computer Networks

Expected Growth: 5.4%

7. Detailed Products

Routers

Switches

Firewalls

Wireless Access Points

Unified Communications

Network Security

Data Center Products

Collaboration Tools

IoT Products

8. Cisco Systems, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Cisco Systems, Inc. passed 6 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

75.0$

Current Price

75$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA