Cisco Systems, Inc. (CSCO): A Bull Case Theory

We came across a bullish thesis on Cisco Systems, Inc. (CSCO) on Substack by Kroker Equity Research. In this article, we will summarize the bulls’ thesis on CSCO. Cisco Systems, Inc. (CSCO)'s share was trading at $63.92 as of May 19^th. CSCO’s trailing and forward P/E were 26.09 and 16 respectively according to Yahoo Finance.

Cisco represents a high-potential yet complex long-term investment opportunity as it transforms from a legacy networking giant into a full-stack software and infrastructure platform for the AI and cloud era. At the core of the bullish thesis is Cisco’s pivot toward high-margin, recurring software revenue, highlighted by strong growth in Annualized Recurring Revenue (ARR) and Remaining Performance Obligations (RPO). Its early success in AI infrastructure—surpassing FY25 order targets a full quarter ahead—underscores its role as an enabler of the AI boom, with strength in high-performance networking, enterprise security, and observability.

The $28B Splunk acquisition is central to this transformation, integrating deep observability and security tools into Cisco’s ecosystem and driving cross-sell and bundling opportunities across its massive enterprise base. Meanwhile, Cisco's strong balance sheet, shareholder returns, and reasonable valuation provide downside protection. However, execution risk remains high. Successfully integrating Splunk while navigating fierce competition in AI, security, and cloud software requires flawless operational discipline. Cisco also faces legacy drag from maturing networking businesses, macro sensitivity, and pressure on margins as it competes in crowded, price-sensitive markets.

Despite these risks, Cisco raised its FY25 guidance following a strong Q3 and continues investing in growth areas such as cybersecurity, hybrid cloud networking, and Industrial IoT—where its rugged infrastructure could quietly become a differentiator. If Cisco can scale AI and software fast enough to offset legacy headwinds, the company could unlock significant shareholder value. With execution as the key variable, Cisco offers a compelling yet volatile setup—potentially undervalued if its transformation continues to deliver.

Cisco Systems, Inc. (CSCO) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 84 hedge fund portfolios held CSCO at the end of the fourth quarter which was 60 in the previous quarter. While we acknowledge the risk and potential of CSCO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CSCO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.