Cisco's Security Portfolio Gains Traction: A Sign of More Upside?

Cisco Systems’ CSCO security business is benefiting from strong demand for Cisco Secure Access, Hypershield and XDR. In the fourth quarter of fiscal 2025, orders grew mid-single-digit. Splunk and Cisco synergies reported 14% year-over-year growth in new logos for Splunk.  Secure Access, XDR, Hypershield and AI Defense added 750 new customers collectively in the reported quarter.

Security revenues were $1.95 billion, up 9% year over year, driven by growth in Cisco’s offerings from Splunk and SASE. In terms of order growth, Cisco saw mid-single-digit growth in the fiscal fourth quarter. Excluding sluggish U.S. federal order growth, rest of the world security order growth increased double digits in the fiscal fourth quarter. 

Cisco’s collaboration with NVIDIA NVDA, under which the company integrates Nexus switches with Spectrum-X architecture and advances Secure AI Factory solutions, strengthens Cisco’s leadership in the long run. The company believes that by fusing security deep into the network, agentic AI can only be secured, and Cisco is well-positioned to deliver this capability.

Apart from growing security traction, Cisco’s diversified portfolio, strong hyperscaler relationships and expanding presence with emerging cloud clients provide a solid foundation for sustained growth. Cisco expects first-quarter fiscal 2026 revenues between $14.65 billion and $14.85 billion. The Zacks Consensus Estimate for first-quarter fiscal 2026 is pegged at $14.77 billion, indicating 6.7% growth from the figure reported in the year-ago quarter.

CSCO Suffers from Intensifying Competition

Cisco is facing stiff competition from Broadcom AVGO and Okta OKTA in the enterprise security space. 

Broadcom’s security offerings are a part of its broader Infrastructure Software solution that accounted for 44% of revenues in the second quarter of fiscal 2025. In March, Broadcom introduced updates to VMware vDefend, improving security planning, lifecycle management, and scalability for VCF with new tools like the Security Segmentation Assessment and Report, optimized micro-segmentation, and advanced Network Detection and Response, all aimed at improving threat prevention and operational efficiency. In April, Broadcom introduced Incident Prediction, which extends the security feature of Adaptive Protection, a unique capability of Symantec Endpoint Security Complete (SES-C).

Okta’s offerings include Okta AI, a suite of AI-powered capabilities embedded across several products, which empowers organizations to harness AI to build better experiences and protect against cyberattacks. The company benefits from strong demand for its new products, including Identity Governance, Privileged Access, Device Access, Fine Grained Authorization, Identity Security Posture Management, and Identity Threat Protection with Okta AI.

CSCO’s Share Price Performance, Valuation & Estimates

Cisco shares have appreciated 16.7% year to date, outperforming the broader Zacks Computer and Technology sector’s return of 12.9%.

CSCO Stock’s Performance

Cisco stock is overvalued, with a forward 12-month price/sales of 4.59X compared with the Zacks Computer Networking industry’s 4.31X. CSCO currently has a Value Score of D.

CSCO Valuation

Cisco expects first-quarter fiscal 2026 earnings between 97 cents and 99 cents per share. The Zacks Consensus Estimate for first-quarter fiscal 2026 earnings is pegged at 98 cents per share, unchanged over the past 30 days, suggesting 7.7% year-over-year growth.
 

Cisco Systems, Inc. Price and Consensus

Cisco Systems, Inc. price-consensus-chart | Cisco Systems, Inc. Quote

Cisco currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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