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Cisco Systems CSCO shares are trading at a premium, as suggested by the Value Score of D. In terms of the forward 12-month price/sales, CSCO is trading at a premium of 4.3X, higher than the Zacks Computer Networks industry’s 4.11X.
Cisco shares are trading at a premium compared to its closest industry peers, including Extreme Networks EXTR and NETGEAR NTGR. In terms of the forward 12-month P/S, Extreme Networks shares are trading at 1.75X, while NETGEAR is trading at 1.23X.
In terms of share price movement, Cisco shares have appreciated 13.6% in the past month, underperforming the industry’s and the Zacks Computer & Technology sector’s return of 14.3% and 15.5%, respectively. Cisco shares have underperformed NETGEAR and Extreme Networks in the past month, shares of which have surged 36.2% and 34.5%, respectively, over the same timeframe. Cisco shares suffered from a challenging macroeconomic condition.
However, Cisco’s aggressive AI push and growing security dominance, as reflected by the recently concluded third quarter of fiscal 2025 results, are noteworthy. Security revenues jumped 54% year over year, while Networking increased 8%.
In third-quarter fiscal 2025, total product orders grew 20% year over year or 9% on an organic basis. Networking product orders grew double-digits, driven by web-scale infrastructure, enterprise routing, switching and industrial IoT products. Campus switching orders grew in the high single digits in the reported quarter. WiFi 7 orders increased triple-digit on a sequential basis.
The company has expanded its portfolio by unveiling AI factory architecture developed in collaboration with NVIDIA NVDA. This is expected to drive up Cisco’s AI-driven revenues. Cisco had AI infrastructure orders worth more than $600 million in the third quarter of fiscal 2025, surpassing Cisco’s $1 billion annual target a quarter ahead of schedule.
Cisco’s expanded partnership with NVIDIA, under which the companies plan to offer solutions that help build AI-ready data center networks, is a game changer. Cisco Secure AI Factory with NVIDIA is founded on the NVIDIA Spectrum-X Ethernet networking platform. Security is at the core of the solution and helps enterprises simplify, deploy, manage and secure AI infrastructure at any scale. The launch of 800-gig Nexus switches based on Cisco’s 51.2 terabit Silicon One chip in April is expected to drive orders from AI-based cloud customers.
Cisco’s strategy of infusing AI across Security and Collaboration platforms and developing Agentic capabilities across the portfolio is a key catalyst. It is leveraging Agentic AI to improve customer experience. The launch of Renewals Agent, an Agentic AI-driven solution co-developed with Mistral, and a new Assistant to help customers digitize and de-risk Network Change Management have been noteworthy developments in this regard.
Cisco’s security business is benefiting from strong demand for both Cisco Secure Access, Hypershield and XDR. On a combined basis, these solutions added more than 370 customers in the reported quarter. The acquisition of Snap Attack enhances Splunk’s capability.
For fiscal 2025, CSCO expects revenues to be $56.5-$56.7 billion, up from the previous guidance of $56-$56.5 billion. Non-GAAP earnings are now expected between $3.77 per share and $3.79 per share, better than the previous guidance of $3.68-$3.74 per share.
Cisco Systems, Inc. price-consensus-chart | Cisco Systems, Inc. Quote
The Zacks Consensus Estimate for CSCO’s fiscal 2025 revenues is pegged at $56.57 billion, indicating growth of 5.14% on a year-over-year basis. The consensus mark for CSCO’s 2025 earnings is currently pegged at $3.77 per share, up by a penny over the past 30 days, indicating year-over-year growth of 0.27%.
An expanding and innovative portfolio makes Cisco well-positioned for sustained growth in an evolving tech landscape. AI push is noteworthy, along with a growing footprint in the security space.
The stock is currently trading above the 50-day and the 200-day moving averages, indicating a bullish trend.
However, a challenging macroeconomic condition, as well as stiff competition in the networking and security domain, is expected to hurt Cisco’s prospects in the near term.
CSCO currently carries a Zacks Rank #3 (Hold), suggesting that it may be wise for investors to wait for a better point to start accumulating the stock. 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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