Cisco Systems Guidance Understates New Growth Initiatives, Says Bullish Analyst

Earlier this month, Cisco Systems Inc (NASDAQ:CSCO) launched a $1 billion investment fund to support the development of secure AI solutions.

The company's Investor Day focused on the large target addressable market (TAM) but management provided conservative growth targets for fiscal 2026 and 2027, according to BofA Securities.

The Cisco Systems Analyst: Tal Liani maintained a Buy rating and price target of $60 on the stock.

The Cisco Systems Thesis: The guidance of 5% year-on-year revenue growth in fiscal 2026 and 2027 "suggests little improvement" from management’s projections for core revenue growth ex-Splunk for fiscal 2025, Liani said in a note.

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The guidance does not fully reflect the new growth initiatives, "such as AI networking and other drivers," the analyst says.

"Management guided networking revenue to grow 3.5% YoY in FY26 and FY27, driven by normalization of campus demand and better opportunity for data center share capture with AI infrastructure buildout," Liani wrote. The company expects AI-related orders to surpass $1 billion by fiscal 2025 and believes revenue conversion will commence in the first half of the year and ramp in the second half, he added.

"Yet in our view, management’s long-term guidance does not fully reflect the larger $3bn potential pipeline of AI networking demand, and we believe these growth estimates are conservative as a result," Liani stated.

CSCO Price Action: Shares of Cisco Systems had declined by 0.84% to $45.46 at the time of publication on Monday.

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