Ricardo Pillai
3 min read
In This Article:
We came across a bullish thesis on Cisco Systems, Inc. on Kroker Equity Research’s Substack. In this article, we will summarize the bulls’ thesis on CSCO. Cisco Systems, Inc.'s share was trading at $67.38 as of June 23rd. CSCO’s trailing and forward P/E ratios were 27.50 and 16.84, respectively, according to Yahoo Finance.
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Cisco Systems (CSCO) is undergoing a strategic transformation from a legacy hardware-centric firm to a modern software-driven, AI-enabled platform company. Its pivot is centered around high-margin, recurring-revenue streams in observability, cybersecurity, and AI infrastructure, accelerated by its $28 billion acquisition of Splunk. Splunk positions Cisco as a key player in full-stack observability and security, expanding its relevance in hybrid-cloud environments.
AI momentum is also strong, with FY25 infrastructure orders surpassing $1 billion ahead of schedule, validating Cisco’s role in powering the data center backbone for AI workloads through its Nexus switches, Silicon One chips, and partnerships with NVIDIA. Though Cisco still derives significant revenue from mature markets like routing and switching, these segments serve as a stable cash engine, funding its pivot. The company maintains a robust capital return profile, supported by strong free cash flow, with a 3% dividend yield and a newly authorized $15 billion buyback program. While Cisco is financially strong, the investment case is not without risk.
Execution around Splunk integration, navigating macro headwinds, and staying competitive against cloud-native and hyperscaler threats will be crucial. Valuation-wise, Cisco trades around 15.6× forward earnings, above historical averages but still discounted compared to high-growth tech peers. A DCF implies fair value in the low $50s, modestly below current levels, suggesting shares are fully valued unless growth meaningfully surprises.
Still, with its shift toward software, strategic alignment with AI and security megatrends, and shareholder-friendly policies, Cisco offers an attractive long-term profile for investors seeking durable, cash-rich tech exposure with upside optionality if execution stays on track.
Previously, we covered a bullish thesis on Cisco Systems, Inc. by Kroker Equity Research in May 2025, which highlighted its AI-led transformation, growing software revenues, and the Splunk acquisition. The stock appreciated by approximately 5.4% since. The thesis still stands as execution remains on track. Kroker Equity Research shares an identical view but emphasizes stronger AI traction and integration risks.
