VALUATION HIGHLIGHTS

1. Products constitute 73% of the Trefis price estimate for Cisco's stock.
2. Network Services constitute 27% of the Trefis price estimate for Cisco's stock.

WHAT HAS CHANGED?

1. Latest Earnings - Q2'26

Cisco Systems reported solid Q2 FY2026 results, with revenue rising 10% year over year to $15.3 billion, supported by enterprise networking upgrades and AI-related infrastructure demand. GAAP EPS came in at $0.80 while non-GAAP EPS was $1.04, both ahead of expectations, and gross margins remained healthy at roughly 65% GAAP and 67.5% non-GAAP.

Note: Cisco's FY'25 ended on July 26, 2025. Q2'26 refers to the quarter that ended on January 24, 2026.

2. Outlook

For the full fiscal year, Cisco now expects revenue of about $61.2 billion to $61.7 billion, above prior guidance ranges, and non-GAAP earnings per share of approximately $4.13 to $4.17, modestly ahead of consensus forecasts. Management also provided Q3 FY2026 EPS guidance of roughly $1.02 to $1.04, suggesting continued profitability near recent run-rate levels.

BUSINESS SUMMARY

Cisco designs and sells networking and communications technology and services. It creates networking equipment such as switches and routers used primarily by businesses and Internet service providers to route data such as emails, videos, files, and other digital communication. For example, an email that you send to a distant friend travels through various switches and routers made by companies like Cisco, Juniper, Huawei, and Alcatel-Lucent along the path to its destination.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of Cisco's value that present opportunities for upside or downside to the current Trefis price estimate:

Networking Segment

• Enterprise Networking Product Revenue: Recovery in campus and data center switching demand, along with AI cluster buildouts, could drive faster than expected top-line growth. If order momentum sustains, revenue growth could exceed current assumptions, creating upside to valuation. Conversely, slower enterprise spending or competitive pricing pressure could limit gains.


• Product Gross Profit Margin: Cisco's margin profile benefits from a growing software mix and cost discipline. If gross margins remain near recent highs and operating leverage improves, margins could expand beyond expectations. However, renewed component cost inflation or higher AI-related investments could cap margin expansion.

SOURCES OF VALUE

Infrastructure Platforms

Over the past decade, Cisco Systems has remained the clear leader in core networking infrastructure markets, although its market share has moderated from the peak levels seen several years ago. In Ethernet switching, Cisco currently holds roughly 30% to 35% of the global market, down from levels that exceeded 50% historically. In routing, the company maintains an estimated mid-30% to around 40% share globally, still the largest position in the industry, but below the 50% plus levels it once commanded. Similarly, in enterprise wireless LAN, Cisco remains the market leader with approximately 25% to 30% share worldwide.

Network Services

In addition to networking hardware, Cisco provides maintenance and support services to its customers to help them fix problems that occur with networking equipment. Cisco's network service revenues and profits are dependent on the installed base of Cisco switch and router equipment.

Shift Toward Recurring Revenue

Management continues to emphasize subscription-based software, security analytics, and platform integration, which supports revenue stability and margin resilience over the long term.