Cisco Earnings: We Like Core Networking Strength

Key Morningstar Metrics for Cisco Systems

• Fair Value Estimate: $56.00
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium

What We Thought of Cisco Systems’ Earnings

Cisco Systems’ CSCO April-quarter results beat management guidance. Sales rose 11.0% year over year and 1.0% sequentially to $14.1 billion, while non-GAAP operating margin was 34.5%. July-quarter guidance includes sequential sales growth to a midpoint of $14.6 billion and tariff-driven margin compression.

Why it matters: Cisco’s good growth and profitability continue to show strong demand for its networking portfolio. We particularly like high order growth for campus offerings, which are the firm’s largest driver. Artificial intelligence order growth is also promising but remains a small piece of the total.

• Management didn’t see material revenue pull-in during the quarter—an investor concern with a looming end to the 90-day pause on many US import tariffs. We see this as a positive indicator on current healthy demand, but we would still expect weaker orders if tariffs remain in effect in the long term.
• This was the last quarter with inorganic growth from the 2024 Splunk acquisition, which effectively doubled Cisco’s security portfolio. We remain positive on the acquisition, given competitive concerns about Cisco’s legacy security offerings.

The bottom line: We raised our fair value estimate for wide-moat Cisco to $56 per share from $54, after raising our medium-term growth forecast for campus networking revenue to reflect a better upcoming refresh cycle. Shares look moderately overvalued to us.

• We still think the financial impact of Cisco’s AI portfolio is being overestimated in the market. We expect well over $1 billion in AI revenue in fiscal 2026, compared with a $59 billion top line. AI is gently elevating Cisco’s networking growth, but we remain focused on enterprise customers.
• We remain constructive on Cisco’s total networking portfolio, which is extensive, highly profitable, and deeply entrenched in customers. In our view, the combination of networking and security sets Cisco up well for long-term growth and customer retention, informing our wide moat rating.