Cisco Earnings: What More Could You Want? Raising Fair Value Estimate

Key Morningstar Metrics for Cisco Systems

• Fair Value Estimate: $120.00
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: High

What We Thought of Cisco Systems’ Earnings

Cisco Systems CSCO beat its first-quarter guidance and raised its full-year outlook. Sales rose 24% year on year to $18.5 billion, with 340 basis points of annual operating margin expansion to 37.8%. Fiscal 2027 sales guidance of $75.3 billion, at the midpoint, rose by 3% from the previous quarter.

Why it matters: We like Cisco’s strong growth momentum, which is driven by both a growing artificial intelligence pipeline and a strong campus refresh cycle. We’re pleased with the material full-year guidance raise, which surpassed even our bullish expectations.

• Fiscal 2027 AI revenue guidance rose to $9 billion from $7.5 billion, and beat our $8.5 billion model. Cisco’s optics business is driving a significant portion of its AI growth. We like the firm’s full-stack capabilities for AI, from silicon to optics to networking equipment.
• Networking remains a critical bottleneck in AI infrastructure, creating huge demand that benefits Cisco. We see Cisco as well-positioned to keep growing rapidly here. From $9 billion in fiscal 2027, we project more than $20 billion in AI revenue in fiscal 2030, split between optics and networking.

The bottom line: We lift our fair value estimate for wide-moat Cisco to $120 per share from $115 behind higher short-term growth estimates. Shares were flat after hours on Nov. 12 and remain undervalued to us. We believe recent selling pressure with longer-term AI concerns has been overdone on Cisco shares.

• We value Cisco at 19 times our fiscal 2028 earnings estimate. This is the high end of the firm’s historical range, which we believe is warranted for structurally higher growth in both AI and the core campus portfolio.
• We model in line with guidance for 19% growth in fiscal 2027, decelerating to the high single digits by the end of the decade. We expect AI to keep driving more of Cisco’s growth, even as the campus refresh cycle winds down exiting 2028.