VALUATION HIGHLIGHTS

1. Products constitute 69% of the Trefis price estimate for Cisco's stock.
2. Network Services constitute 24% of the Trefis price estimate for Cisco's stock.

WHAT HAS CHANGED?

1. Latest Earnings

Cisco saw its revenue for Q2 FY'24 decline by almost 6% year-over-year to $12.8 billion, with adjusted earnings coming in at $0.87 per share. The company also revised its annual revenue guidance lower to between $51.5-52.5 billion from an earlier estimate of $53.8-55.0 billion. The move comes as a mixed economy is causing big customers in industries including telecom and cable to cut back their spending on networking equipment.

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.

SOURCES OF VALUE

Infrastructure Platforms

Over the past few years, Cisco has had a nearly 60% market share in the Switches market (although the figure has declined in recent years). Similarly, Cisco's share in the router market has also been comfortably over 50% in recent years. Cisco's share in the enterprise WLAN market is also around 50%. The company's dominance in these market spaces is expected to continue in the coming years, with competitors commanding a significantly lower share in these markets.

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.