Cisco Earnings: Growth Guidance for Fiscal 2025 Is Positive

Key Morningstar Metrics for Cisco Systems

• Fair Value Estimate: $50.00
• Morningstar Rating: 3 stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium

What We Thought of Cisco Systems’ Earnings

We maintain our $50 per share fair value estimate of Cisco Systems CSCO, as our long-term thesis is intact after the firm reported its fiscal fourth-quarter results. Cisco’s fiscal 2025 guidance was a little light compared with our model, but we continue to see a return to growth.

In the long term, we see Cisco as a low-to-mid-single-digit revenue growth story, with ongoing strength in its core campus and enterprise networking markets. We don’t expect the firm to be a major winner from AI investment, but see a modest position growing over time. We like the integration with Splunk, which should bolster Cisco’s ecosystem of joined networking, security, and observability. Fiscal fourth-quarter results and fiscal first-quarter guidance were largely in line with our expectations. Shares are up 6% after-hours on growth guidance for fiscal 2025, and we see the stock as fairly valued.

July-quarter sales beat the top end of guidance and rose 7% sequentially to $13.6 billion. Cisco is facing harsh year-over-year comparisons after a period of customer overordering in calendar 2023, particularly for its networking equipment. We expect the October quarter to be the last quarter of year-over-year revenue declines against these prior quarters of overordering. Cisco’s software rose nicely in the quarter organically, and high reported growth included an inorganic contribution from Splunk. We expect the inclusion of Splunk to drive better organic growth for Cisco’s security sales over the medium term.

October-quarter guidance was in line with our expectations. A midpoint of $13.75 billion in sales implies 1% sequential growth. Fiscal 2025 sales guidance of $55.6 billion at the midpoint implies 3% growth, even including a harsh comparison against the first fiscal quarter of 2024 that included customer overordering. We believe Cisco’s fiscal 2025 will see a return to more typical customer ordering, and we see 3% growth as durable for the firm in the long run.