Strong Portfolio Aids Cisco's Security Revenues: More Upside Ahead?

Cisco Systems CSCO security business is benefiting from a strong portfolio that comprises Network Security, Identity and Access Management, Secure Access Service Edge (SASE), and Threat Intelligence, Detection, and Response (TIDR) solutions. The acquisition of Splunk has been a game-changer for Cisco’s security business, which accounted for 19.5% of fiscal 2025 revenues that jumped 59% from 2024 to $8.09 billion.

The addition of Splunk has strengthened CSCO’s TIDR offerings. The company has been integrating Cisco Extended Detection and Response (XDR) with Splunk Enterprise Security to create a unified and highly effective solution that helps in preventing, detecting, and responding to sophisticated cyber threats. Cisco has been expanding its SASE architecture, and its cloud-native, AI-powered Hypershield solution is helping the company gain traction in AI-scale data centers.

In the fourth quarter of fiscal 2025, security revenues were $1.95 billion, up 9% year over year, driven by growth in Cisco’s offerings from Splunk and SASE. 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. More importantly, orders grew mid-single-digit, which reflects the growth prospects for CSCO’s security business.

The Zacks Consensus Estimate for the first quarter of fiscal 2026 service revenues is pegged at $2.24 billion, indicating 11% growth over the figure reported in the year-ago quarter.

CSCO Faces Tough Competition in the Security Domain

Cisco is facing stiff competition from Fortinet FTNT and Okta OKTA in the security domain. 

Fortinet benefits from an innovative portfolio backed by more than 500 AI patents and 15 years of development expertise. Fortinet has emerged as a recognized leader across multiple Gartner Magic Quadrants, including SASE Platforms, Enterprise Wired and Wireless LAN Infrastructure, and SD-WAN. The expansion of FortiCloud with new services like FortiIdentity, FortiDrive and FortiConnect demonstrates Fortinet's evolution beyond traditional firewalls into a comprehensive security ecosystem. 

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 Share Price Performance, Valuation & Estimates

Cisco shares have appreciated 18.6% year to date, underperforming the broader Zacks Computer and Technology sector’s return of 24%.

CSCO Stock Lags Sector

The CSCO stock is trading at a premium, with a trailing 12-month price/book of 5.93X compared with the industry’s 5.69X. Cisco has a Value Score of C.

CSCO Stock is Overvalued

The Zacks Consensus Estimate for the first quarter of fiscal 2026 earnings is currently pegged at 98 cents per share, unchanged over the past 30 days, suggesting 7.7% growth from the figure reported in the year-ago quarter.  
 

Cisco Systems, Inc. Price and Consensus

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

The Zacks Consensus Estimate for fiscal 2026 earnings is currently pegged at $4.04 per share, unchanged over the past 30 days, suggesting 6% growth from the figure reported in the year-ago quarter. 

Cisco currently carries a Zacks Rank #2 (Buy). 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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