Cisco Systems: A Tech Leader with Bullish Guidance on AI Infrastructure Momentum

Cisco Systems projects FY2026 revenue between $59 bln and $60 bln and non-GAAP EPS of $4.00 to $4.06, driven by three growth engines: AI infrastructure momentum, software and services transformation, and an enterprise networking refresh cycle. The company secured over $2 bln in AI-related orders in FY2025, and its subscription revenue accounts for 54% of total revenue. Cisco's core offerings include routers, switches, cybersecurity solutions, and collaboration platforms like Webex.

Title: Cisco Systems' FY2026 Revenue Projections: Driven by AI Momentum and Transformation

Cisco Systems (CSCO) has projected its fiscal year 2026 (FY2026) revenue to range between $59 billion and $60 billion, with non-GAAP earnings per share (EPS) expected to fall between $4.00 and $4.06. This significant growth is attributed to three key drivers: the momentum in AI infrastructure, a transformation in software and services, and a refresh cycle in enterprise networking. The company's AI-related orders in FY2025 reached over $2 billion, and its subscription revenue now accounts for 54% of total revenue.

In the fourth quarter of fiscal 2025, Cisco's security business saw mid-single-digit order growth, driven by strong demand for products like Cisco Secure Access, Hypershield, and XDR. Security revenues reached $1.95 billion, up 9% year-over-year [1]. This growth is further bolstered by Cisco's collaboration with NVIDIA, integrating Nexus switches with Spectrum-X architecture and advancing Secure AI Factory solutions [2].

Cisco's diversified portfolio, strong hyperscaler relationships, and expanding presence with emerging cloud clients provide a solid foundation for sustained growth. The company's integration of Splunk and its strategic shift towards higher-margin software and subscription offerings have contributed to a 54% annual recurring revenue (ARR) share of total revenue [2]. This move reduces reliance on cyclical hardware sales and aligns with the industry's shift towards as-a-service models.

However, Cisco faces stiff competition in the AI infrastructure and enterprise security spaces. Broadcom (AVGO) and Okta (OKTA) are notable competitors. Broadcom's security offerings, part of its Infrastructure Software solution, accounted for 44% of its revenues in the second quarter of fiscal 2025. Okta's AI-powered capabilities have seen strong demand for its new products, including Identity Governance, Privileged Access, and Identity Threat Protection [1].

Despite the competition, Cisco's stock has appreciated 16.7% year-to-date, outperforming the broader Zacks Computer and Technology sector's return of 12.9% [1]. The company's forward 12-month price-to-sales ratio is 4.59X, slightly higher than the industry average of 4.31X. Cisco's stock currently carries a Zacks Rank #3 (Hold), indicating a neutral outlook [1].

In conclusion, Cisco Systems is poised for continued growth in FY2026, driven by its AI infrastructure momentum, software and services transformation, and enterprise networking refresh cycle. However, investors should be mindful of the intense competition in these markets.

# References:
[1] https://www.theglobeandmail.com/investing/markets/stocks/OKTA/pressreleases/34522072/ciscos-security-portfolio-gains-traction-a-sign-of-more-upside/
[2] https://www.theglobeandmail.com/investing/markets/stocks/CSCO/pressreleases/34398813/cisco-rides-ai-boom-with-2b-orders-can-it-sustain-the-growth-curve/