Cisco Systems, Inc. (NASDAQ:CSCO) delivered strong fiscal fourth-quarter growth, but the mix deserves attention. Product revenue reached $13.459 billion, up from $10.886 billion a year earlier. Services revenue was $3.793 billion, barely above $3.787 billion. The service business supported profitability without contributing much to the sales acceleration.
Those August 12 results cover the quarter ended July 25. The categories should not be confused with recurring versus nonrecurring revenue: Cisco also sells subscriptions within products. Even so, the difference helps investors locate the part of the income statement carrying the current growth rate.
CSCO ranks fifth on our list of 10 Best Cybersecurity Stocks to Buy According to Analysts. See which four stocks ranked ahead.
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Cisco placed fifth in our October 7 cybersecurity list. Find the four names with greater analyst target upside in that screen, including businesses with different exposure to network spending.
A stable service base still earned more
Services costs fell to $1.160 billion from $1.199 billion. Calculated gross margin therefore improved to 69.4% from 68.3%, producing $45 million more gross profit on just $6 million of incremental sales. Efficiency within an established customer base can support earnings even when its revenue is stable.
The limitation is scale. Product revenue supplied almost the entire $2.579 billion increase in consolidated quarterly sales. If equipment demand cools, investors should not assume the service line will automatically sustain the same company-wide growth rate.
A 10% decline in quarterly product sales would remove $1.35 billion of revenue. Services would need to grow 35.5% from their current base just to offset it, assuming the rest of the mix were unchanged. That sensitivity puts the cushion in perspective: stable services can support earnings, but their size limits how much product volatility they can absorb.
The earnings forecast carries the next test
At the October 8 closing price of $114.89, Cisco cost 22.6 times the $5.08 midpoint of management’s fiscal 2027 adjusted EPS guidance. That measure uses the company’s forecast and excludes costs included in GAAP earnings; it is not a trailing multiple or a guaranteed result.
On the $4.03 midpoint of GAAP guidance, the same price equals 28.5 times earnings. The lower adjusted multiple therefore comes with a meaningful cost reconciliation. Management’s demand indicators offer support: total product orders grew 35%, or 25% excluding hyperscalers. That breadth argues against attributing the entire acceleration to a handful of AI customers, although orders still need to become recognized sales.
Security spending offers another source of opportunity, although Cisco’s broad portfolio behaves differently from a more concentrated security platform. Our Cisco–Palo Alto Networks analysis separates the two companies’ AI-security tests and examines Ken Fisher’s disclosed additions.
Insider Monkey counted 101 Cisco hedge-fund holders in Q2 2026 versus 97 in Q1. Fisher Asset Management increased its shares roughly 94%. These positions predate the fiscal fourth-quarter announcement. Cisco’s improving service margin is a useful earnings cushion. Sustaining the wider growth case still requires healthy product demand and successful conversion of that demand into per-share profit.
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.
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