Cisco Systems (CSCO) AI Stock Analysis

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Cisco Systems

(NASDAQ:CSCO)

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Outperform 74 (OpenAI - 5.2)

Rating:74Outperform

Price Target:

$97.00

▲(24.77% Upside)

Action:ReiteratedDate:02/12/26

The score is driven primarily by strong underlying financial quality (durable margins and robust free cash flow) and an upbeat earnings call with confident FY26 guidance and AI/networking momentum. Technicals are supportive but overbought, while valuation (high P/E with only modest yield) meaningfully tempers the overall rating.

Positive Factors

Free cash flow generation

Cisco's FCF closely tracks net income (94–97%), indicating durable cash conversion. This supports sustained capital returns, reinvestment in networking/AI supply commitments, and balance-sheet flexibility for multi-year initiatives even if revenue growth slows.

High gross and net margins

Sustained ~65% gross margins and healthy net margins reflect structural pricing power in networking and software. Durable margin levels give Cisco the ability to fund R&D, absorb component cost swings, and maintain profitability through product transitions and recurring revenue mix shifts.

AI infrastructure momentum & silicon capability

Material AI orders, Silicon One scale, and new high-throughput chips embed Cisco in structural AI infrastructure demand. These capabilities, plus ecosystem partnerships, position the company to capture multi-year hardware plus recurring software/service revenue tied to AI deployments.

Negative Factors

Rising leverage

Leverage rising to ~0.63 from prior ~0.2–0.27 materially reduces balance-sheet flexibility. Higher debt increases fixed obligations and raises vulnerability to profit or cash-flow shocks, limiting room for opportunistic M&A or large capex if demand softens.

Modest, uneven revenue growth

Revenue growth is low and uneven, with only modest TTM recovery. Structural reliance on refresh cycles and hyperscaler deals means top-line expansion may remain constrained, pressuring long-term operating leverage and making returns more dependent on margin and buybacks.

Concentrated, lumpy hyperscaler demand

Heavy concentration of AI orders with a few hyperscalers increases timing and visibility risk. Revenue recognition and capacity commitments can shift across quarters, producing structural volatility in product revenue and complicating multi-quarter planning despite strong pipeline.

Cisco Systems (CSCO) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$308.80B

Dividend Yield2.09%

Average Volume (3M)23.97M

Price to Earnings (P/E)27.5

Beta (1Y)0.92

Revenue Growth8.91%

EPS Growth14.53%

CountryUS

Employees90,400

SectorTechnology

Sector Strength88

IndustryCommunication Equipment

Share Statistics

EPS (TTM)1.04

Shares Outstanding3,949,893,000

10 Day Avg. Volume29,380,936

30 Day Avg. Volume23,974,892

Financial Highlights & Ratios

PEG Ratio68.41

Price to Book (P/B)5.83

Price to Sales (P/S)4.82

P/FCF Ratio20.55

Enterprise Value/Market Cap1.07

Enterprise Value/Revenue5.61

Enterprise Value/Gross Profit8.66

Enterprise Value/Ebitda19.49

Forecast

1Y Price Target

$91.82

Price Target Upside18.11% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering13

EPS Forecast (FY)N/A

Revenue Forecast (FY)N/A

Cisco Systems Business Overview & Revenue Model

Company DescriptionCisco Systems, Inc. designs, manufactures, and sells Internet Protocol based networking and other products related to the communications and information technology industry in the Americas, Europe, the Middle East, Africa, the Asia Pacific, Japan, and China. The company also offers switching portfolio encompasses campus switching as well as data center switching; enterprise routing portfolio interconnects public and private wireline and mobile networks, delivering highly secure, and reliable connectivity to campus, data center and branch networks; and wireless products include indoor and outdoor wireless coverage designed for seamless roaming use of voice, video, and data applications. In addition, it provides security, which comprising network security, identity and access management, secure access service edge, and threat intelligence, detection, and response offerings; collaboration products, such as Webex Suite, collaboration devices, contact center, and communication platform as a service; end-to-end collaboration solutions that can be delivered from the cloud, on-premise or within hybrid cloud environments allowing customers to transition their collaboration solutions from on-premise to the cloud; and observability offers network assurance, monitoring and analytics and observability suite. Further, the company offers a range of service and support options for its customers, including technical support and advanced services and advisory services. It serves businesses of various sizes, public institutions, governments, and service providers. The company sells its products and services directly, as well as through systems integrators, service providers, other resellers, and distributors. Cisco Systems, Inc. has strategic alliances with other companies. Cisco Systems, Inc. was incorporated in 1984 and is headquartered in San Jose, California.

How the Company Makes MoneyCisco generates revenue primarily through the sale of its networking hardware and software solutions, which include routers, switches, and security products. The company's revenue model is diversified across several key segments: Infrastructure Platforms, where it earns from its hardware and software products; Applications, which includes collaboration and cloud-based services; Security, focusing on cybersecurity solutions; and Services, encompassing technical support and consulting. Cisco also benefits from subscription-based services that provide recurring revenue streams. Additionally, strategic partnerships with other technology firms and cloud service providers enhance its market reach and contribute to its earnings.

Cisco Systems Key Performance Indicators (KPIs)

Any

Revenue by Geography

Revenue by Geography
Breaks down revenue across different regions, revealing where the company is strongest and where it may face risk or growth potential due to local economic conditions or market share shifts.

Chart InsightsCisco's revenue in the Americas and EMEA regions is showing a strong recovery, with consistent growth in 2025, driven by robust demand for AI infrastructure and networking solutions. The APJC region is also rebounding, albeit at a slower pace. The latest earnings call highlights a record-breaking Q1 with an 8% increase in overall revenue, underscoring the company's strategic focus on AI and networking. However, challenges in the security and collaboration segments, along with DRAM pricing pressures, could pose risks to sustained growth.

Data provided by:

The Fly

Cisco Systems Earnings Call Summary

Earnings Call Date:Feb 11, 2026

(Q2-2026)

% Change Since: |

Next Earnings Date:May 20, 2026

Earnings Call Sentiment Positive

The call conveyed strong overall momentum: record revenue, double-digit product and EPS growth, robust order activity across networking and AI infrastructure, meaningful progress with Silicon One and optics, expanding recurring revenue and solid capital returns. These positives are tempered by near-term margin pressure driven by memory price inflation and product mix, the Splunk transition and a one-time tax cash impact that reduced operating cash flow. Hyperscaler demand is substantial but lumpy and concentrated, creating some timing and visibility risk. Management communicated clear mitigation actions (price increases, contract adjustments, advanced purchase commitments) and reiterated confidence in FY26 targets.

Q2-2026 Updates

Positive Updates

Record Revenue and EPS Growth

Total revenue of $15.3 billion, up 10% year-over-year; non-GAAP net income of $4.1 billion, up 10%; non-GAAP EPS of $1.04, up 11%, both exceeding the high end of guidance.

Product Revenue and Networking Strength

Total product revenue of $11.6 billion, up 14% YoY; Networking product growth of 21% driven by AI infrastructure, campus refresh, data center and campus switching, wireless, routing and servers; networking product orders >20% and sixth consecutive quarter of double-digit networking growth.

Robust Order Trends and Broad-Based Demand

Product orders up 18% YoY (excluding hyperscalers up 10%); geographic product order growth with Americas +23%, EMEA +11%, APJC +15%; customer market orders: service provider & cloud +65%, public sector +11%, enterprise +8%; telco & cable orders nearly +20%.

AI Infrastructure Momentum and Silicon One Milestones

Hyperscaler AI infrastructure orders of $2.1 billion in Q2 (vs. $1.3B last quarter and equal to FY25 total); shipped 1 millionth Silicon One chip; introduced 102.4Tbps G300 chip and new 102.4Tbps systems; company now expects AI orders in excess of $5 billion and to recognize >$3 billion in hyperscaler AI infrastructure revenue in FY26.

Security and New Product Traction

New and refreshed security products (roughly one-third of portfolio) added >1,000 new customers in Q2 (>100% QoQ growth) and ~4,000 net new customers since launch; Secure Access booked >2.5 million users in Q2; three consecutive quarters of double-digit firewall unit growth.

Recurring Revenue and Subscription Mix

Total RPO $43.4 billion, up 5%; product long-term RPO $11.8 billion, up 11%; total ARR $31 billion, up 3% (product ARR +6%); subscription revenue $7.8 billion representing 51% of total revenue; total software revenue $5.7 billion, up 2%.

Capital Return and Dividend Increase

Returned $3.0 billion to shareholders in the quarter ($1.6B dividends, $1.4B buybacks), YTD $6.6B returned; announced quarterly dividend increase of $0.01 to $0.42 and $10.8 billion remaining under repurchase authorization.

Operational Execution and Profitability

Non-GAAP operating margin 34.6% (above the high end of guidance); demonstrated operating leverage with EPS growing faster than revenue; advanced purchase commitments increased ~$1.8 billion in 90 days (up ~73% YoY), helping secure supply.

Customer Adoption of AI and Internal Productivity Gains

Splunk reached 500 new logos in H1 and is on track for 1,000 in FY26; majority of product developers using AI coding assistants; >90% of customer support cases touched by AI/automation, resolving a greater proportion of complex cases within 1 day and driving highest ever customer satisfaction scores.

Strategic Partnerships and New Ventures

Announced joint venture plans with AMD and HUMAIN to deliver up to 1 gigawatt of AI infrastructure by 2030 (Phase 1: 100MW in Saudi Arabia) and strengthened ecosystem engagements (e.g., increased NVIDIA engagements +70% sequentially).

Negative Updates

Gross Margin Pressure from Mix and Memory Costs

Total non-GAAP gross margin 67.5%, down 120 basis points YoY; product gross margin 66.4%, down 130 basis points, primarily due to unfavorable mix and higher memory costs; Q3 gross margin guide implies further near-term pressure (65.5%–66.5%).

Security Revenue and Splunk Transition Drag

Security revenue down 4% YoY driven by declines in prior-generation products and Splunk's transition from on-prem perpetual to cloud subscriptions, which creates a near-term revenue drag and expected continued pressure in H2 FY26.

Services and Cash Flow Headwinds

Services revenue declined 1% YoY; operating cash flow of $1.8 billion was down 19% YoY, primarily due to a $2.3 billion final transition tax payment from the 2017 TCJA and increased investments to support AI demand.

Supply-Chain and Component Price Volatility

Significant increases in memory prices across the market are creating margin headwinds; Cisco announced price increases and contract term changes but expects some short-term disruption while adjustments and supply commitments are implemented.

Concentration and Lumpy Hyperscaler Demand

AI infrastructure orders and revenue are concentrated among a small number of hyperscalers and are inherently lumpy; management noted that the >$5B AI order expectation is based on current pipeline but remains uneven and could be conservative.

Near-Term Margin Guidance and Seasonality Uncertainty

Q3 guidance implies gross margin compression and operating margin guidance slightly below Q2 level range; management highlighted nonlinearity and seasonal uncertainty tied to hyperscaler ordering patterns.

Recognition Timing for Some AI Revenue

While orders are accelerating, management noted some AI revenue recognition timing shifts (visibility into FY27) as large customers plan and convert orders over time, suggesting some revenue could shift beyond FY26.

Company Guidance

Cisco guided Q3 revenue of $15.4–$15.6 billion, non‑GAAP gross margin of 65.5%–66.5%, non‑GAAP operating margin of 33.5%–34.5%, non‑GAAP EPS of $1.02–$1.04 and an approximate non‑GAAP tax rate of 19%; for fiscal 2026 it expects revenue of $61.2–$61.7 billion and non‑GAAP EPS of $4.13–$4.17, assuming current tariffs and exemptions remain in place through FY26. The company also reiterated capital return and AI targets, raising the quarterly dividend $0.01 to $0.42, committing to return at least 50% of free cash flow, and forecasting AI orders in excess of $5 billion with more than $3 billion of AI infrastructure revenue from hyperscalers in FY26.

Cisco Systems Financial Statement Overview

Summary

High-quality profitability and cash generation support the score (strong gross margins ~65%, solid net margins, and free cash flow closely tracking net income). Offsets include modest/uneven revenue growth and a notable increase in leverage versus prior years (debt-to-equity rising to ~0.63), which reduces flexibility if growth or margins weaken.

Income Statement

Positive

CSCO shows strong, resilient profitability with high gross margins (~65%) and solid net margins (roughly 18–23%) across the period. Revenue has returned to modest growth in TTM (Trailing-Twelve-Months) (~2.4%) after a down year in 2024, but the growth profile remains low and somewhat uneven. Operating profitability has softened versus the 2022–2023 peak (lower operating and EBITDA margins in recent periods), which is the main offset to otherwise high-quality earnings.

Balance Sheet

Positive

The company maintains a sizable equity base and healthy returns on equity (~22% in TTM (Trailing-Twelve-Months)), indicating strong underlying profitability. However, leverage has increased materially versus 2022–2023: debt-to-equity has moved from ~0.19–0.27 to ~0.63 in the most recent annual and TTM (Trailing-Twelve-Months) periods, reducing balance-sheet flexibility. Overall asset levels are stable, but the higher debt load is the key risk factor.

Cash Flow

Very Positive

Cash generation remains a major strength: free cash flow consistently tracks net income closely (about 94–97% of net income), supporting earnings quality. While operating cash flow is below net income in recent periods (lower coverage in TTM (Trailing-Twelve-Months) vs prior years), free cash flow remains robust and has re-accelerated sharply in TTM (Trailing-Twelve-Months) (strong positive growth after a decline in 2024). The main watch item is the drop in operating cash flow versus the 2023 peak, even as free cash flow stays strong.

Breakdown	TTM	Jul 2025	Jul 2024	Jul 2023	Jul 2022	Jul 2021
Income Statement
Total Revenue	59.05B	56.65B	53.80B	57.00B	51.56B	49.82B
Gross Profit	38.27B	36.79B	34.83B	35.75B	32.25B	31.89B
EBITDA	17.00B	15.38B	15.75B	17.47B	16.79B	15.56B
Net Income	11.08B	10.18B	10.32B	12.61B	11.81B	10.59B
Balance Sheet
Total Assets	123.37B	122.29B	124.41B	101.85B	94.00B	97.50B
Cash, Cash Equivalents and Short-Term Investments	15.78B	16.11B	17.85B	26.15B	19.27B	24.52B
Total Debt	30.09B	28.09B	30.97B	8.39B	10.56B	11.53B
Total Liabilities	75.65B	75.45B	78.96B	57.50B	54.23B	56.22B
Stockholders Equity	47.72B	46.84B	45.46B	44.35B	39.77B	41.27B
Cash Flow
Free Cash Flow	12.85B	13.29B	10.21B	19.04B	12.75B	14.76B
Operating Cash Flow	13.32B	14.19B	10.88B	19.89B	13.23B	15.45B
Investing Cash Flow	-918.00M	1.73B	-20.48B	-5.11B	1.55B	-5.29B
Financing Cash Flow	-14.39B	-15.81B	6.84B	-11.63B	-15.96B	-12.10B

Cisco Systems Technical Analysis

Technical Analysis Sentiment

Neutral

Last Price77.74

Price Trends

50DMA

77.74

Positive

100DMA

75.15

Positive

200DMA

70.51

Positive

Market Momentum

MACD

0.31

Positive

RSI

47.00

Neutral

STOCH

34.41

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CSCO, the sentiment is Neutral. The current price of 77.74 is below the 20-day moving average (MA) of 80.22, above the 50-day MA of 77.74, and above the 200-day MA of 70.51, indicating a neutral trend. The MACD of 0.31 indicates Positive momentum. The RSI at 47.00 is Neutral, neither overbought nor oversold. The STOCH value of 34.41 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for CSCO.

Cisco Systems Risk Analysis

Cisco Systems disclosed 38 risk factors in its most recent earnings report. Cisco Systems reported the most risks in the "Finance & Corporate" category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Cisco Systems Peers Comparison

Overall Rating

UnderperformOutperform

Sector (61)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ANET	82 Outperform	$175.34B	49.84	31.40%	―	27.75%	25.42%
FFIV	79 Outperform	$15.69B	23.11	20.84%	―	9.66%	23.87%
CSCO	74 Outperform	$308.80B	27.50	24.34%	2.09%	8.91%	14.53%
FTNT	72 Outperform	$60.00B	33.66	135.72%	―	14.78%	22.52%
PANW	72 Outperform	$124.32B	83.55	16.26%	―	15.30%	-60.71%
HPE	67 Neutral	$28.64B	―	0.23%	2.17%	14.17%	-102.25%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%

* Technology Sector Average

Performance Comparison

CSCO

Cisco Systems

77.74

14.99

23.90%

FFIV

F5, Inc.

269.52

-23.46

-8.01%

FTNT

Fortinet

75.60

-32.46

-30.04%

PANW

Palo Alto Networks

144.14

-43.87

-23.33%

ANET

Arista Networks

127.43

34.55

37.20%

HPE

Hewlett Packard Enterprise

20.00

0.24

1.21%

Cisco Systems Corporate Events

Business Operations and StrategyExecutive/Board ChangesShareholder Meetings

Cisco Stockholders Approve 2005 Plan Amendments

Neutral

Dec 17, 2025

At its Annual Meeting on December 16, 2025, Cisco Systems‘ stockholders approved amendments to the 2005 Stock Incentive Plan, increasing the number of shares authorized for issuance by 57,490,000. This plan remains a key part of Cisco’s employee incentives and aligns with its long-term strategic goals. Key agenda items at the meeting also included electing nine board members, approving executive compensation, and ratifying auditors. While most proposals passed with majority support, a stockholder proposal to evaluate the financial value of Cisco’s inclusion programs faced opposition.

The most recent analyst rating on (CSCO) stock is a Buy with a $91.00 price target. To see the full list of analyst forecasts on Cisco Systems stock, see the CSCO Stock Forecast page.

Glossary

BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Feb 12, 2026