Key Stats for Cisco Stock
- Current Price: $121.43
- Target Price (Mid): ~$126
- Potential Total Return: ~4%
- Annualized IRR: ~1% / year
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What Happened?
Cisco Systems (CSCO) reports fiscal fourth-quarter results after the close on Wednesday, August 12, and most of the market is watching one line. The stock is up roughly 46% in 2026 on a single story: hyperscaler AI infrastructure orders that management now expects to reach around $9 billion for the fiscal year. That number will lead the headlines again. But the segment that tells you whether this quarter is clean or cracked is quieter, and almost nobody is talking about it.
Security revenue was flat at roughly $2 billion in the fiscal third quarter, the slowest-growing part of the portfolio at a moment when networking orders rose 35%. On the May call, CEO Chuck Robbins said the organic security business should “exit this fiscal year approaching double-digit revenue growth.” Q4 is that exit quarter.
The Splunk Drag Is Supposed to Be Fading Right About Now
Cisco paid roughly $28 billion for Splunk in March 2024, and Splunk customers have been shifting from upfront licensed deals to ratable cloud subscriptions, which pulls revenue out of the current period. At the same time, declines in prior-generation security products keep offsetting growth in the newer lineup. CFO Mark Patterson has called the Splunk move from on-premise to cloud a near-term drag on revenue growth, and Robbins has said the legacy decline, while still a drag, is easing.
Timing is what makes August 12 the right checkpoint. At the Bank of America Global Technology Conference on June 4, Cisco’s Ahmed Sami Badri gave an unusually specific map of when the pressure lifts: “By the time we get to fiscal 2Q ’27, these mix compares become a lot more normalized,” adding that the Cisco Security core was “already starting to see some improvements.” That frames Q4 as the setup print, the last quarter before the comps are supposed to turn. Robbins himself described the path as “slow, steady improvement” quarter after quarter, not a single snap higher, so the read investors want is direction and slope, not a clean double-digit number yet.
Security orders excluding Splunk grew double digits in Q3, with strong double-digit firewall order growth, and products like Secure Access, XDR, Hypershield, and AI Defense added more than 1,000 new customers in the quarter, per the company’s Q3 prepared remarks. Reported revenue does not show any of that yet, which is why a Q4 uptick in the segment number would convert the story from guidance into evidence.
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Why the Security Line Tests the Whole Company
The market treats Cisco as an AI hardware trade and security as a separate, sleepier business. Management is trying to collapse that split. On the same June panel, Cisco Security’s Peter Bailey argued that securing AI is a “right now conversation” with customers, because chief information security officers face board-level pressure to make AI deployments safe. As he put it, with money pouring into AI infrastructure, “if we can’t secure these use cases, it’s going to impact the ROI on those investments.” The same buildout driving the order book is supposed to pull security along with it, showing up first in agentic security products, Hypershield attach, and the Splunk data platform. A reacceleration validates the one-platform story. Another flat quarter says the AI tailwind is not reaching the software stack.
Underneath sits a cost problem the print will expose. Non-GAAP gross margin fell 260 basis points year over year to 66% in Q3, driven mainly by higher memory costs and mix. Cisco guided fiscal fourth-quarter gross margin to 65.5% to 66.5%, so pressure is already expected. The open question is whether memory costs are stabilizing, because that line governs how much of the AI revenue surge actually reaches earnings.
On valuation, Cisco trades rich against its own peer group. Its NTM EV/EBITDA sits near 19 times, and its forward P/E near 26 times runs ahead of Nokia at roughly 23 times and Ericsson closer to 17 times. Only Arista Networks, near 32 times NTM EV/EBITDA, carries a clearly higher multiple, and Arista is a faster-growing pure AI-networking play. The premium is defensible only if security reaccelerates and margins hold, the two levers that justify Cisco trading like a platform rather than a mature hardware vendor.
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TIKR Advanced Model Analysis
- Current Price: $121.43
- Target Price (Mid): ~$126
- Potential Total Return: ~4%
- Annualized IRR: ~1% / year
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TIKR’s mid-case model puts Cisco’s target near $126 by July 2030, worth roughly 4% total return, or about 1% annualized, from the current $121.43. That flat base case is why a single quarter carries this much weight.
- Revenue drivers: the AI hyperscaler ramp, where management sees at least $6 billion of recognized revenue in fiscal 2027, and the early-stage campus networking refresh.
- Margin driver: gross margin recovery as memory costs normalize and higher-margin software mix builds.
- Primary risk: memory costs stay elevated and security stays flat, leaving the stock leaning on cyclical hardware.
- Upside: security reaccelerates toward Robbins’ exit-rate target, memory pressure eases, and the multiple holds as Cisco earns its platform re-rating.
- Downside: another flat security quarter and continued margin compression turn a priced-for-execution stock into a disappointment, with only a 4% base return for cushion.
Conclusion
Watch the security segment revenue line first when Cisco reports after the close on August 12. Robbins guided the organic business to exit the year approaching double-digit growth, so a segment number that clears the flat, near-$2 billion mark and shows a clear sequential slope reads as the transition finally turning. Another flat print says the drag has outlasted its own timeline. The AI order number will set the tone, but the security line tells whether the next twelve months belong to a platform or just a networking cycle. Consensus calls for around $16.83 billion in revenue and around $1.17 in non-GAAP EPS, and with the base case this flat, the burden is on the quarter to prove the rest.
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Should You Invest in Cisco?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
