Is CSCO a good stock to buy? We came across a bullish thesis on Cisco Systems, Inc. on Compounding Your Wealth’s Substack by Sergey. In this article, we will summarize the bulls’ thesis on CSCO. Cisco Systems, Inc.’s share was trading at $87.71 as of April 20th. CSCO’s trailing and forward P/E were 31.55 and 18.98 respectively according to Yahoo Finance.
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Cisco Systems, Inc. designs, develops, and sells technologies that help to power, secure, and draw insights from the internet in the Americas and internationally. CSCO delivered a strong Q2 FY2026 performance, with revenue of $15.3B, up 10% YoY, and EPS of $1.04, up 11%, reflecting improving operating leverage despite ongoing business mix shifts.
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Growth was led by product revenue, which rose 14% to $11.6B, driven primarily by networking strength at +21%, while services slightly declined and security revenue fell 4% due to legacy product compression and the ongoing transition of Splunk into a cloud-centric model. Even with a 120 bps decline in gross margin to 67.5% from mix and memory cost pressures, Cisco maintained a robust 34.6% operating margin, underscoring disciplined cost control and scale advantages.
The investment narrative is increasingly centered on Cisco’s transformation toward an AI- and platform-led infrastructure leader. Its integrated approach across networking, security, and observability creates structural advantages versus pure-play competitors, leveraging a massive installed base to accelerate cross-sell.
Security is showing early stabilization and repositioning, with next-generation offerings such as Secure Access, XDR, and AI Defense adding over 1,000 customers in the quarter, bringing the base to ~4,000, while firewall demand has posted three consecutive quarters of double-digit growth. SASE adoption also continues to scale, adding 2.5M users, with more than half of new customers being net-new, indicating improving product-market traction.
AI is emerging as a key incremental growth driver, with Cisco reporting $2.1B in AI infrastructure orders in Q2 and guiding toward $5B+ in FY2026 orders and $3B+ in revenue. Expanding enterprise traction, including $350M in new AI orders and a $2.5B+ pipeline beyond hyperscalers, supports a broadening demand profile. However, near-term headwinds persist from margin pressure tied to memory costs, hardware-heavy mix, and execution risk around the Splunk integration, while hyperscaler-driven demand volatility and revenue recognition timing may introduce lumpiness.
FY2026 guidance of $61.2–$61.7B in revenue and $4.13–$4.17 EPS reflects steady but accelerating transformation, as Cisco shifts toward higher-quality software, AI infrastructure, and integrated security platforms, positioning the company for sustained mid-term re-rating as mix improves and AI demand scales.
Previously, we covered a bullish thesis on Cisco Systems, Inc. (CSCO) by Kroker Equity Research in May 2025, which highlighted its transformation toward high-margin software, AI infrastructure growth, and Splunk-driven platform integration. CSCO’s stock price has appreciated by approximately 37.21% since our coverage. “Sergey” shares a similar bullish view but emphasizes strong Q2 FY2026 execution and accelerating AI order momentum.
Cisco Systems, Inc. is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 77 hedge fund portfolios held CSCO at the end of the fourth quarter which was 74 in the previous quarter. While we acknowledge the risk and potential of CSCO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CSCO and that has 10,000% upside potential, check out our report about this cheapest AI stock.
Disclosure: None.
