Key Takeaways:
Cisco Systems (CSCO) reports fiscal Q4 earnings after the close Aug. 12, with consensus at $1.17 EPS on $16.85 billion revenue, up 18 percent and 15 percent year over year.
"The company looks to build upon its 13.4 percent jump after last quarter's report when they report on Wednesday," Jay Woods, chief market strategist at Freedom Capital Markets, said. "If it can breakout, expect a new leg to accelerate higher over the coming months with upside targets nearing $200."
The networking giant enters the report with momentum after Q3 revenue of $15.84 billion, up 12 percent year over year, and adjusted EPS of $1.06, both beating consensus. Management raised its fiscal 2026 AI infrastructure order forecast to about $9 billion from $5 billion, with AI infrastructure revenue expected at $4 billion. Total product orders jumped 35 percent year over year in Q3, with networking orders up more than 50 percent.
Shares trade around $120, up 60 percent year to date and about 8 percent below the $130.37 all-time high. The stock carries a 30X forward earnings multiple versus the S&P 500's 22X and the Zacks Computer-Networking industry average of 18X. Analysts hold a Moderate Buy consensus with a $123.14 average price target, while BofA Securities raised its target to $150 and Argus to $150.
Cisco's Q4 guidance calls for revenue of $16.7 billion to $16.9 billion and non-GAAP EPS of $1.16 to $1.18, both record levels. The company raised its full-year outlook to $62.8 billion to $63 billion in revenue and $4.27 to $4.29 in adjusted EPS.
UBS projects Q4 revenue and earnings will both beat expectations, with networking revenue possibly surpassing its forecast of $9.6 billion, representing 26 percent year-over-year growth. The bank expects adjusted EPS could reach $1.19, above the market consensus of $1.17. Morningstar projects Cisco's AI revenue could reach $8 billion in fiscal 2027, above management's $6 billion target.
The security segment remains a watch item. Cisco's $28 billion Splunk acquisition continues to weigh on reported revenue as customers shift from upfront licenses to cloud subscriptions. Management has said comparables should normalize by the second quarter of fiscal 2027, with organic security revenue expected to deliver close to double-digit growth by the end of this fiscal year.
Cisco returned $2.9 billion to shareholders in Q3 through dividends and buybacks, with $9.6 billion remaining under its repurchase authorization. The stock yields 1.38 percent, above the S&P 500's 1.01 percent average.
The report will test whether the AI infrastructure narrative can support the stock's valuation after a 60 percent run. Investors will watch management's fiscal 2027 guidance and any update to AI order expectations for signs the growth trajectory extends beyond the current fiscal year.
This article is for informational purposes only and does not constitute investment advice.
