Cisco Systems Posts Double-Digit Growth From Hyperscale AI

Cisco Systems offers investors a direct avenue to participate in mission-critical artificial intelligence infrastructure without taking on the extreme valuation multiples common among semiconductor pure-plays. The company’s platforms have established entrenched moats across Fortune 500 enterprises and Tier-1 cloud providers.

Furthermore, its ongoing business model evolution from transactional box-selling to software subscriptions and recurring maintenance yields highly predictable revenue and defensive cash generation. With over $6.0 billion in quarterly software sales, low leverage, and a disciplined capital return policy that directs virtually all free cash flow back into dividends and buybacks, the company offers an attractive balance of secular tech growth and downside resilience.

The stock trades at 20.9 times the company’s forward earnings forecast. That’s a moderate discount to the broader technology sector and enterprise software peers despite guiding to 15% revenue growth and double-digit adjusted EPS growth over the coming year. For long-term investors, this valuation represents a fair, defensive entry multiple for an enterprise networking platform.

CISCO SYSTEMS INC. (Nasdaq symbol CSCO; www.cisco.com) is a global technology leader that designs, manufactures, and sells Internet Protocol-based networking infrastructure, cybersecurity software, and cloud-collaboration solutions to enterprise, service provider, and hyperscale data center clients.

For all of fiscal 2026, Cisco received orders related to AI worth $9.3 billion. Those orders generated revenue of $4 billion in the year. The company expects AI-related revenue will rise to $7.5 billion in fiscal 2027.

In its fiscal 2026 fourth quarter, ended July 25, 2026, Cisco’s revenue rose 17.6%, to $17.25 billion from $14.67 billion a year earlier. That beat the consensus forecast of $16.82 billion.
Sales of new equipment (78% of total revenue) rose 23.6%, while revenue from software and services (22%) gained 0.2%.

Overall earnings in the quarter, excluding unusual items, gained 23.2%, to $1.22 a share (or a total of $4.87 billion) from $0.99 a share (or $3.95 billion). That also topped the $1.17 consensus estimate.
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Cisco’s reasonable p/e and solid yield add appeal

This maker of computer networking equipment, including routers and switches, continues to benefit from strong demand from the builders of new datacentres to run artificial intelligence (AI) programs.

As a result, Cisco’s shares have nearly doubled in the past five years. If Cisco now accounts for more than, say, 10% of your portfolio, you can consider selling as much as half of your shares to maintain optimal portfolio diversification and for cash to invest in other stocks.

Meantime, we still like Cisco’s outlook. The company will probably earn $5.14 a share for the fiscal year ending July 31, 2027, and the stock trades an attractive 20.9 times that estimate.

The company last raised your quarterly dividend with the April 2026 payment. Investors now receive $0.42 a share, up 2.4% from $0.41. The new annual rate of $1.68 yields 1.6%. Including this latest increase, the company has raised its dividend by an average 2.6% annually over the last 5 years. Its TSI Dividend Sustainability Rating is Above Average.

Recommendation in Dividend Advisor: Cisco Systems Inc. is a buy.

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Jim Bates

Jim is an associate editor at TSI Network. He is the lead reporter and analyst for The Successful Investor and Wall Street Stock Forecaster and a member of the Investment Planning Committee. Jim has held the Chartered Financial Analyst designation since 1992 and spent more than a decade at the Financial Post DataGroup before joining TSI Network. He has a Bachelor of Commerce degree from the University of Toronto.

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