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After Cisco reported its November results, we updated our fair value and raised our quality score to 4.3. We raised our rating to Buy and increased our expectations for how much money the company makes on its investments. We added the contribution of higher-performance networking equipment to our sales projections and started tracking how much profit comes from its more efficient operations. We also added the risk of lower profit margins on hardware sales to what we watch.
Cisco reported its strongest quarterly growth in over 15 years, with revenue reaching $18.5 billion. This was well ahead of the $18.1 billion analysts expected. The company is seeing broad demand for its networking gear, but the standout was its outlook for AI. Management now expects to sell $9 billion in equipment to the large cloud providers that build AI data centers next year, which is more than double what it sold this year.
This result suggests that Cisco is successfully moving past a period where customers were sitting on too much old inventory. By raising its full-year profit and sales targets, the company is signaling that the upgrade cycle for AI-ready hardware is finally arriving. For long-term owners, the most important detail is that these gains came alongside record profit margins, showing that Cisco can grow its volume without having to sacrifice its pricing power.
See the full quarter, and how our tracked metrics did
Source: 8-K filing
Cisco is scheduled to release its quarterly results after the bell today. Analysts are looking for revenue of about 18.1 billion dollars and earnings of 1.33 dollars per share. Beyond the numbers, the focus will be on how well the company is selling its AI-specific networking gear and whether its software subscription revenue continues to grow. These recurring sales are a key part of the plan to make the business more predictable and less dependent on one-off hardware sales.
Cisco is expanding its security software to include "red teaming" for AI, a process where the system simulates attacks to find weaknesses before hackers do. As part of this, Cisco is integrating Anthropic's Claude Mythos model to help identify risks in how a company's AI agents behave.
This launch is a practical step in Cisco's plan to move beyond selling hardware boxes and into high-margin software. By weaving these tools into Splunk and Cisco IQ, the company is trying to make its software bundle essential for any business running complex AI tasks. For long-term owners, this is a sign that Cisco is successfully using its existing footprint in data centers to sell new, modern security services.
Source: PRNewsWire
Morgan Stanley analysts lowered their rating on the networking giant from Overweight to Equal Weight, which is their way of saying the stock is now fairly valued rather than a top pick. This change comes as the stock dropped about 7 percent on Thursday.
While the average analyst price target across all firms sits much higher at $131, this downgrade suggests a shift in confidence regarding how much room the stock has to grow from here. For a company trying to prove it can move beyond selling hardware boxes into high-margin software, a rating cut from a major firm like Morgan Stanley is a signal that the near-term path for the stock price may be getting tougher.
Source: Morgan Stanley
Cisco has beaten analyst targets for eight straight quarters. This pattern shows management sets a conservative bar they can reliably clear, even as the business shifts toward software.
| Expectation | |
|---|---|
| EPS | $1.24 |
| Revenue | $18.12B |
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