Cisco Systems Breaks Out of Forgotten Tech Status, Poised for Further Growth

Cisco Systems has broken out to the upside and is expected to continue its upward trajectory. The company, which was once considered a potential $1 trillion company, has been overlooked for too long. Its recent growth has highlighted its potential as a leader in the technology industry.

Cisco Systems (CSCO) has been making headlines with its impressive stock performance, breaking out to the upside and signaling a potential upward trajectory. The company, once considered a potential $1 trillion entity, has been overlooked for too long but is now gaining recognition as a leader in the technology industry. Its recent growth highlights its potential to continue thriving in the evolving tech landscape.

Cisco's stock has delivered a remarkable 52.78% return over the past year [3], driven by its strategic shift towards a subscription-based business model and a growing focus on artificial intelligence (AI). The company's overall financial health score is rated "GOOD" by InvestingPro, reflecting its strong market position [3]. Cisco's core business remains rooted in networking solutions, but it has expanded its portfolio to include AI-driven technologies and custom silicon development, positioning it to capitalize on the growing demand for AI infrastructure and advanced networking capabilities.

Cisco's recent financial performance has been solid, with the company outperforming expectations in both revenue and earnings. In its most recent quarter, Cisco experienced growth in its networking segment, contributing significantly to the strong performance [3]. The company's aggressive AI push and growing security dominance have been major growth drivers, with Cisco securing AI infrastructure orders worth more than $1 billion to date in fiscal 2025, a quarter ahead of schedule [2]. This momentum is expected to continue, bolstered by an expanding portfolio and collaboration with NVIDIA (NVDA).

Cisco's stock is currently trading above the 50-day and 200-day moving averages, indicating a bullish trend [2]. The company's security business is benefiting from strong demand for Cisco Secure Access, Hypershield, and XDR, with orders growing double-digit in the third quarter of fiscal 2025 [2]. Cisco's partnership with NVIDIA and ServiceNow (NOW) to offer AI-ready data center networks and holistic AI risk management and governance is also noteworthy.

For fiscal 2025, Cisco expects revenues to be $56.5-$56.7 billion, up from the previous guidance of $56-$56.5 billion. Non-GAAP earnings are now expected between $3.77 per share and $3.79 per share, better than the previous guidance of $3.68-$3.74 per share [2]. The Zacks Consensus Estimate for Cisco's fiscal 2025 revenues is pegged at $56.59 billion, indicating year-over-year growth of 5.18% [2]. The consensus mark for Cisco's fiscal 2025 earnings is currently pegged at $3.79 per share, unchanged over the past 30 days, indicating year-over-year growth of 1.61% [2].

However, Cisco shares are trading at a premium, as suggested by the Value Score of D [2]. In terms of the forward 12-month price/sales, Cisco is trading at a premium of 4.65X, higher than the Zacks Computer Networks industry’s 4.54 [2]. Despite the stretched valuation, investors who currently hold the stock should continue to do so, as the company's expanding portfolio and AI push position it well for sustained growth in an evolving tech landscape. Nevertheless, a challenging macroeconomic condition due to uncertainty over tariffs and stiff competition in the networking and security domain is expected to hurt Cisco’s prospects in the near term.

References:
[1] https://www.benzinga.com/quote/CSCO
[2] https://www.nasdaq.com/articles/cisco-shares-trade-near-52-week-high-whats-next-csco-investors
[3] https://ca.investing.com/news/-4090757