Cisco Earnings: We See Healthy Demand in Fiscal 2025, but Shares Reflect Aggressive AI Expectations

We keep our $50 per share fair value estimate for wide-moat Cisco Systems, as we leave our long-term forecasts intact after October-quarter results. We believe Cisco is solidly back in a normal demand environment after two years of choppy results that stemmed from overordering and subsequent inventory digestion at customers. We still like the acquisition and integration of Splunk, but view this as a minority driver relative to the larger networking business. We also like Cisco’s emerging growth from artificial intelligence networking infrastructure, but we don’t expect this to be a massive driver, nor do we expect Cisco to hold a strong market share in AI networks. Shares look overvalued to us after rising more than 25% since Cisco’s last earnings release in August. We believe current levels overestimate the firm’s long-term growth opportunity, likely due to some overexuberance around the firm’s AI exposure.