Cisco Systems Inc CSCO

Cisco Earnings: Positive Guidance and Splunk’s Inclusion Align With Our Long-Term Thesis

We maintained our $50 fair value estimate for shares of wide-moat Cisco Systems after its fiscal third-quarter results aligned with our expectations, and we integrated the acquisition of Splunk into our model. Cisco continues to see weak networking demand, stemming from overordering at customers in 2022 and 2023. Splunk (closed in March) added some inorganic revenue, and management raised its full-year guide to include the acquisition. Shares rose about 5% after-hours, which we believe is due to a raised fiscal year guide and positive commentary around networking demand returning. We’d already forecast a recovery in fiscal 2025 and view the guidance raise as entirely inorganic. We reiterate our belief that the Splunk deal is value-neutral. We continue to see shares as fairly valued.