CSCO: AI Networking Cycle Will Drive Multi Year Upside Despite Security Weakness

Analysts have nudged their fair value estimate for Cisco Systems slightly higher to approximately $85 per share, up from about $84.80. They cite a solid multi year networking and AI driven growth cycle, better than expected operating margins, and rising Street price targets, despite ongoing security softness.

Analyst Commentary

Street research on Cisco remains broadly constructive, with multiple recent target raises reflecting higher confidence in the company’s execution through the current networking and AI investment cycle.

Bullish Takeaways

• Bullish analysts have lifted price targets into the mid to high $70s and upper $80s range, arguing that current valuation does not fully reflect a multi year AI and networking driven growth cycle.
• Several notes highlight that revenue is running modestly ahead of consensus, with operating income margins tracking better than expected. This supports the view that Cisco can sustain above average profitability.
• AI related demand is a central pillar of the bullish case, with billions of dollars in backlog and new orders from hyperscalers and enterprise customers viewed as an early stage of a longer cycle.
• Positive commentary around a large scale campus refresh and an improving security trajectory underpins expectations that Cisco can layer incremental growth drivers on top of its core switching and routing franchises.

Bearish Takeaways

• Bearish analysts, or those more cautious, note that security softness has damaged one leg of the original growth thesis. This raises questions about how durable mix and margin gains will be if that segment does not re accelerate.
• Some commentary frames recent target increases as largely catch up to near term beats rather than a step function change in long term earnings power. This implies less upside from current valuation levels.
• Equal weight stances point to execution risk around converting AI and campus refresh pipelines into sustained, high quality revenue growth through fiscal 2026 and beyond, especially if macro conditions or IT budgets tighten.
• There is also concern that, as networking demand normalizes from current strength, Cisco will need faster growth in software, security, and recurring revenues to justify premium multiples versus historical averages.

What's in the News

• Germany and the EU are moving closer to binding restrictions that could ban Huawei and ZTE from 5G and broader telecom networks. This positions Cisco as a key alternative supplier in Europe and could open significant share gain opportunities in carrier infrastructure (Light Reading, Bloomberg).
• The U.S. Commerce Department has proposed banning sales of TP-Link products on national security grounds. This could shift some consumer and SMB networking demand toward competitors including Cisco in WiFi and routing gear (Washington Post).
• Cisco, AMD, and HUMAIN plan a joint venture in Saudi Arabia to build up to 1 GW of AI infrastructure by 2030, with Cisco as an exclusive technology partner supplying networking and data center technology for large scale, AI focused build outs in the region.
• Cisco launched multiple AI centric platforms, including Cisco IQ for AI powered lifecycle management, new Security Cloud Control capabilities for MSPs, and Cisco Unified Edge and N9100 data center switches. These launches underscore a broad push to make its networking, security, and observability stacks foundational to enterprise and sovereign cloud AI deployments.
• New client wins and collaborations, including Asiacell's deployment of Cisco's AI driven Provider Connectivity Assurance platform and expanded Meraki based secure networking with Comcast Business, highlight growing adoption of Cisco's AI ready networking across telecom and enterprise customers.

Valuation Changes

• Fair Value Estimate rose slightly from approximately $84.81 to about $85.24 per share, reflecting a modest uptick in intrinsic value assumptions.
• Discount Rate increased marginally from roughly 8.25 percent to about 8.26 percent, implying a slightly higher required return in the valuation model.
• Revenue Growth remained effectively unchanged at around 5.87 percent, indicating no material revision to long term top line growth expectations.
• Net Profit Margin remained effectively unchanged at roughly 21.41 percent, suggesting stable long term profitability assumptions.
• Future P/E rose slightly from about 28.3x to approximately 28.5x, pointing to a modestly higher multiple applied to forward earnings.