Cisco Systems opens coverage at Buy following fourth-quarter and full-year fiscal 2026 results, released after the close on August 12.

The quarter cleared the high end of every range management had set three months earlier. Revenue of $17.25 billion rose 18% against guidance of $16.7 billion to $16.9 billion and a $16.82 billion consensus. Non-GAAP earnings of $1.22 per share rose 23% against a $1.16 to $1.18 guide. Non-GAAP operating margin reached 35.9%, up 160 basis points year-over-year. For the full year, revenue of $63.3 billion grew 12% and non-GAAP earnings of $4.33 grew 14%, both above the ranges set in May.

The outlook mattered more than the quarter. Cisco guided fiscal 2027 revenue to $72.2 billion to $73.4 billion against a $68.69 billion consensus, and earnings to $5.05 to $5.11 against $4.80. That is roughly a $4 billion revenue raise delivered in a single release, implying 15% revenue growth and 17% earnings growth at the midpoints, from a company that spent a decade guiding to a 4% to 6% long-term model. Stripping out the $7.5 billion of guided hyperscaler AI revenue still leaves the core business growing near 10%.

The shares fell anyway, closing August 12 at $123.88 and trading near $115 the following morning. The objection was gross margin. Management guided the first quarter to 65% to 66%, below the 66.3% just delivered, and flagged further erosion as hardware becomes a larger share of the mix. That objection is accurate but misweighted. Cisco is trading gross margin for operating profit by selling hyperscaler hardware that requires almost no incremental operating expense, and the fourth quarter proved the arithmetic: gross margin down 210 basis points, operating expense down 370 basis points as a share of revenue, operating margin up 160. Fiscal 2027 operating margin is guided to a thirty-year high.

The rating stops at Buy rather than Strong Buy because of price. At $115 the stock trades on 22.6 times guided fiscal 2027 earnings, against a decade spent nearer fifteen. Free cash flow fell 3.9% to $12.77 billion in a year when non-GAAP earnings per share rose 14%, with inventories up 80% to $5.69 billion consuming much of the difference. The incremental growth also rests on four or five hyperscaler customers whose ordering is non-linear by nature.

Probability-weighted fair value is $130, roughly 13% above the post-release price, with a cut-loss at $106 and targets at $132 and $150.

Scenario detail, the scorecard and the full technical work appear in the complete Cisco Systems (CSCO) report on our Reports page.