Key takeaways
View moreWhile Cisco demonstrates strong profitability and promising growth opportunities in AI and security, its current valuation metrics (EV/Sales of 4.32x vs. industry average 2.56x) suggest moderate overvaluation. The company's liquidity concerns, increasing debt levels, and various operational risks (tariffs, competition, integration challenges) are not adequately reflected in the current stock price of $66.06, especially considering the modest revenue growth rate.
- Cisco's net profit margin of 17.61% significantly exceeds the industry average of -54.72%, indicating strong profitability.
- The current ratio of 0.91 is below 1 and lower than the industry average of 2.30, signaling potential liquidity concerns.
- Long-term debt is increasing, which could raise concerns about long-term solvency if not managed carefully.
- AI infrastructure orders from web-scale customers exceeded $600 million in Q3 FY25, surpassing the initial FY25 target, highlighting AI as a significant growth driver.
- Cisco's stock price has increased from $56.59 on 2025-04-10 to $66.06 on 2025-06-06, showing a positive trend.
- Cisco's Enterprise Value to Sales ratio is higher than the industry average, suggesting the company may be overvalued relative to its sales.
- The company faces risks related to fluctuations in operating results due to demand volatility, supply chain issues, and competitive pressures, as noted in SEC filings.
- Cisco has outperformed the Technology Select Sector SPDR Fund (XLK) over the past year, with returns of 48.41% versus 11.04%.
- Management expects revenue between $14.5 billion and $14.7 billion for Q4 FY25, with non-GAAP EPS between $0.96 and $0.98.
Evaluation summary
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Company Overview:
- Cisco Systems, Inc. (CSCO) designs, manufactures, and sells Internet Protocol-based networking products and services. Its offerings span secure, agile networks, internet for the future, collaboration tools, end-to-end security, and optimized application experiences.
- The company operates through three geographical segments: the Americas, EMEA, and APJC.
- For comparative analysis, the Technology Select Sector SPDR Fund (XLK) is used as a benchmark, and Motorola Solutions, Inc. (MSI) and Arista Networks, Inc. (ANET) are considered industry peers.
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Financial Performance:
- Cisco's revenue has shown a slight upward trend over the recent quarters, increasing from $13.642 billion in 2024-07-31 to $14.149 billion in 2025-04-30.
- Net income has fluctuated, with a high of $2.711 billion in 2024-10-31 and a low of $2.162 billion in 2024-07-31. The most recent quarter shows a net income of $2.491 billion.
- The gross profit margin has remained relatively stable, ranging from 62.40% to 64.74%. As of 2025-04-30, the gross profit margin is 63.85%, significantly higher than the industry average of 28.26%.
- The net profit margin is also strong, ranging from 15.85% to 19.59%. The most recent quarter shows a net profit margin of 17.61%, substantially higher than the industry average of -54.72%.
- Return on Assets (ROA) has ranged from 8.07% to 9.12%, Return on Equity (ROE) from 20.02% to 22.98%, and Return on Invested Capital (ROIC) from 14.33% to 17.54%. These figures indicate strong profitability compared to industry averages, with ROA at -9.50%, ROE at -86.97%, and ROIC at -39.05%.
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Operational Efficiency:
- Total current assets have decreased from $36.862 billion in 2024-07-31 to $31.316 billion in 2025-04-30, while total current liabilities have remained relatively stable, fluctuating around $40 billion.
- Working capital is negative, ranging from -$3.179 billion to -$5.338 billion, indicating potential short-term liquidity challenges.
- Net operating cash flow has fluctuated, with a low of $2.241 billion in 2025-01-31 and a high of $4.057 billion in 2025-04-30.
- Free cash flow to equity has also varied, ranging from $2.031 billion to $3.796 billion. The free cash flow margin has ranged from 0.15 to 0.27, which is higher than the industry average of -0.37.
- Capital expenditure has been relatively stable, ranging from $198 million to $261 million per quarter. Depreciation, depletion, and amortization have also been consistent, ranging from $626 million to $823 million.
- Cisco has returned significant value to shareholders through dividends and share repurchases. In 2025-04-30, cash dividends paid amounted to $1.627 billion, and the change in capital stock was -$1.760 billion, indicating share repurchases.
- The current ratio is consistently below 1, ranging from 0.87 to 0.91, which is lower than the industry average of 2.30, signaling potential liquidity concerns. The quick ratio is also below 1, ranging from 0.79 to 0.83, compared to the industry average of 1.64.
- The debt-to-equity ratio has fluctuated, ranging from 66.93 to 73.51, which is lower than the industry average of 113.63.
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Growth Opportunities:
- Cisco's management has emphasized AI as a significant growth driver, with AI-related orders exceeding expectations, as highlighted in the 2025Q3 earnings call.
- The company is focused on strategic partnerships, particularly with NVIDIA, to enhance its AI capabilities.
- Cisco is also investing in security solutions, embedding security deep into its networking products to differentiate itself from competitors.
- Geographic expansion plans include investments in Saudi Arabia and collaboration with G42 to support AI workloads.
- The acquisition of Splunk is expected to expand Cisco's portfolio and capabilities in security and observability.
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Recent Developments and Market Sentiment:
- The 2025Q3 earnings report highlighted strong performance, with revenue, margins, and EPS exceeding guidance.
- AI infrastructure orders from web-scale customers surpassed the initial FY25 target, indicating strong demand for Cisco's AI solutions.
- Security orders grew in high double digits, driven by Splunk's security and observability platforms.
- Analysts are focused on the impact of tariffs, cloud capital expenditure, and sovereign AI deployments on Cisco's performance.
- The market sentiment appears positive, driven by Cisco's strong Q3 performance and its strategic focus on AI and security.
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Risks and Threats:
- Cisco faces risks related to fluctuations in operating results due to demand volatility, supply chain issues, and competitive pressures, as noted in SEC filings.
- The company is exposed to macroeconomic and geopolitical risks that could negatively impact customer demand.
- Cybersecurity threats and vulnerabilities in products/services could disrupt operations and damage reputation.
- Ongoing patent infringement litigation and the ability to develop new products to meet evolving customer needs pose legal and operational risks.
- Tariffs pose a risk to Cisco's financial performance, as highlighted in the earnings call.
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Valuation Analysis:
- The Enterprise Value to EBITDA ratio has ranged from 13.27 to 17.75, while the Enterprise Value to Sales ratio has ranged from 3.83 to 4.86.
- Compared to the industry average, Cisco's Enterprise Value to Sales ratio is higher, suggesting the company may be overvalued relative to its sales.
- Potential catalysts include continued growth in AI and security markets, successful integration of Splunk, and favorable resolution of legal matters.
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Price Performance:
- Cisco's stock price has shown an upward trend in recent months, increasing from $56.59 on 2025-04-10 to $66.06 on 2025-06-06.
- Year-to-date, CSCO has outperformed the Technology Select Sector SPDR Fund (XLK), with returns of 13.29% versus 2.94%.
- Over the past year, CSCO has significantly outperformed XLK, with returns of 48.41% versus 11.04%. However, over longer periods (2 and 3 years), CSCO has underperformed XLK.
- Compared to its peers, CSCO has shown strong recent performance but lags in longer-term returns.
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Future Outlook:
- Management expects revenue between $14.5 billion and $14.7 billion for Q4 FY25, with non-GAAP EPS between $0.96 and $0.98.
- The full-year FY25 revenue guidance is $56.5 billion to $56.7 billion, with non-GAAP EPS between $3.77 and $3.79.
- Analysts expect Cisco to continue to benefit from the growth in AI and security markets, but also face challenges related to tariffs and macroeconomic uncertainty.
- Recent developments, such as the strong Q3 performance and strategic partnerships, are expected to positively influence the company's future performance.
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Summary:
- Cisco is a profitable company with strong gross and net profit margins, significantly above industry averages.
- The company faces potential liquidity concerns due to a current ratio below 1 and negative working capital.
- Growth opportunities exist in AI and security markets, driven by strategic partnerships and product innovation.
- Risks include macroeconomic uncertainty, supply chain issues, and ongoing legal matters.
- Cisco's valuation metrics suggest it may be overvalued relative to its sales compared to industry averages.
- The company's recent price performance has been strong, outperforming benchmarks and peers in the short term.
- Cisco's financial health is generally stable, but liquidity and debt management require close monitoring.
- Critical factors for future performance include successful integration of Splunk, continued growth in AI and security markets, and effective management of risks.
- Areas requiring further monitoring include the current ratio, long-term debt levels, and the impact of tariffs.
- Overall, Cisco presents a mixed investment profile. Its strong profitability and growth potential are balanced against liquidity concerns and valuation risks. The company's position relative to industry trends and recent developments suggests it is well-positioned to benefit from the growth in AI and security markets, but investors should carefully consider the identified risks and monitor key financial metrics.
Price history
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Fundamentals
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Insights
- Cisco's profitability is strong, with net profit margins significantly above the industry average, but revenue growth is modest.
- The company faces potential liquidity concerns due to a current ratio below 1, which is also lower than the industry average.
- Increasing long-term debt and decreasing cash reserves require careful monitoring to ensure long-term solvency and financial flexibility.
- The acquisition of Splunk has significantly increased intangible assets, and its impact on overall asset performance needs to be evaluated.
- Management needs to focus on controlling operating expenses and improving cash flow generation to sustain growth and shareholder returns.
Analysis
- Revenue
- Revenue is showing a slightly increasing trend, indicating potential growth in the company's top line.
- The company's revenue growth could be linked to new product launches or market expansion, as mentioned in the earnings call.
- The Enterprise Value To Sales ratio is higher than the industry average, suggesting the company may be overvalued relative to its sales.
- Profitability
- The Net Profit Margin is showing an increasing trend, suggesting profitability is improving.
- The Net Profit Margin is significantly higher than the industry average, indicating the company is more profitable than its peers.
- The increasing trend in Gross Profit Margin indicates the company is managing its cost of goods sold effectively.
- Liquidity
- The Current Ratio is below 1, signaling potential liquidity concerns.
- The Current Ratio is lower than the industry average, indicating the company may have less liquidity than its peers.
- Cash and short-term investments have been decreasing, which could impact the company's ability to fund operations or make acquisitions.
- Solvency
- Long-term debt is increasing, which could raise concerns about long-term solvency if not managed carefully.
- The Total Debt to Total Equity Ratio is lower than the industry average, indicating the company has less financial leverage than its peers.
- The increasing debt and relatively stable equity indicate a shift in the capital structure towards more leverage.
- Operational Efficiency
- Inventories are decreasing, which may indicate efficient inventory management or potential supply chain issues.
- The increasing trend in Selling, General & Administrative Expenses suggests the company may need to focus on controlling operating expenses.
- The company is showing signs of revenue growth, but it needs to manage its operating expenses to improve profitability.
- Cash Flow Analysis - Net income and operating cash flow have not been consistently aligned, indicating potential earnings quality issues. - Persistent negative free cash flow (FCF) could raise concerns about long-term sustainability. - Declining FCF margin indicates potential challenges in profitability.
- Risk Factors
- The low current ratio is a potential red flag.
- The increasing long-term debt needs to be monitored to ensure the company's solvency is maintained.
- The presence of non-recurring items could distort the company's sustainable earnings.
- Future Outlook
- Monitor the current ratio closely to ensure it remains above critical levels.
- Evaluate the impact of the Splunk acquisition on intangible assets and overall asset performance.
- Keep track of long-term debt levels and related interest expenses.
- Profitability
Financial statements
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Public filings
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- Cisco is navigating industry shifts towards software, cloud, and as-a-service models, which is driving both growth opportunities and competitive pressures
- The company has been active in M&A, including the transformative $27 billion acquisition of Splunk, to expand its portfolio and capabilities in key priority areas like security and observability
- Cisco faces operational risks from supply chain challenges, pricing competition, and the need to continually innovate to meet evolving customer demands
- Legal and regulatory matters, particularly around intellectual property and international operations, represent ongoing risks that could impact the company's financial performance and reputation
- Cisco's management is focused on driving profitability through productivity improvements, cost optimization, and strategic investments in high-growth areas, while navigating a challenging macroeconomic environment
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Core Business and Operations:
- Cisco is a leading provider of networking, security, collaboration, and observability technologies, with a diversified customer base spanning enterprises, public sector, and service providers
- The company is navigating industry shifts towards software, cloud, and as-a-service models, driving both growth opportunities and competitive pressures
- Cisco has been active in M&A, including the transformative $27 billion acquisition of Splunk, to expand its portfolio and capabilities in key priority areas like security and observability
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Industry and Market Trends:
- Networking and communications industry characterized by rapid technological change, evolving industry standards, and migration to solutions offering relative advantages
- Increasing demand for technology delivered as a service, software-defined networking, and cloud-based offerings
- Regulatory changes, economic conditions, and geopolitical tensions can impact industry dynamics and customer demand
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Recent Events:
- Completed acquisition of Splunk Inc., a cybersecurity and observability company, for $27 billion in March 2024
- Announced restructuring plans in fiscal 2025 to drive efficiencies and invest in key growth areas
- Expanded product portfolio and capabilities through various smaller acquisitions
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Risk Factors:
- Fluctuations in operating results and revenue due to various factors like demand volatility, supply chain issues, and competitive pressures
- Exposure to macroeconomic and geopolitical risks that could negatively impact customer demand
- Cybersecurity threats and vulnerabilities in products/services that could disrupt operations and damage reputation
- Intellectual property litigation and ability to develop new products to meet evolving customer needs
- Risks associated with acquisitions and integrating new businesses
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Legal Matters:
- Ongoing patent infringement litigation with Centripetal Networks, Ramot, and Egenera
- Investigation by Brazilian authorities related to alleged tax evasion by Cisco's Brazilian subsidiary
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Management's Discussion and Analysis:
- Revenue declined 6% year-over-year in fiscal 2024, with product revenue down 9% and services revenue up 5%
- Gross margins improved due to favorable product mix, productivity gains, and Splunk contribution, partially offset by pricing pressure
- Operating expenses increased due to Splunk integration, restructuring charges, and higher amortization of intangibles
- Strong cash flow generation and balance sheet, with $43.9 billion in cash and investments at the end of fiscal 2024
Earnings calls
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Earnings Report 2025Q3 (2025-05-14)
Key takeaways
- AI is a significant growth driver: Cisco's AI-related orders are exceeding expectations, indicating a strong position in this emerging market.
- Web-scale customers are key: The company's success with web-scale customers is driven by its Silicon One technology and its ability to deliver high-quality systems.
- Security is increasingly important: Cisco is embedding security deep into its networking products, which is becoming a key differentiator for customers.
- Tariffs pose a risk: The company's guidance incorporates the impact of existing tariffs, but future changes in tariff policies could affect its financial performance.
- Strategic partnerships are crucial: Cisco's partnerships with NVIDIA and other companies are essential for its success in the AI market.
Focus of management’s prepared remarks
- Strong Q3 Performance: Cisco delivered a strong quarter with revenue, margins, and EPS exceeding guidance. The company also saw solid growth in ARR, RPO, and subscription revenue.
- AI Infrastructure Orders: Cisco received over $600 million in AI infrastructure orders from web-scale customers in Q3, surpassing the initial FY25 target of $1 billion.
- Capital Returns: Cisco returned $3.1 billion to shareholders in Q3 through share repurchases and dividends, totaling $9.6 billion year-to-date.
- Product Order Growth: Total product orders grew 20% year-over-year, or 9% organically excluding Splunk, driven by demand across various customer markets.
- Customer Market Performance: Enterprise product orders were up 22%, public sector orders were up 8%, and service provider/cloud orders were up 32%.
- Networking Product Orders: Networking product orders grew double-digits, driven by web-scale infrastructure, enterprise routing, switching, and industrial IoT products.
- AI Partnership with NVIDIA: Cisco announced a cross-portfolio unified architecture with NVIDIA, integrating Cisco Silicon One into the NVIDIA Spectrum-X Ethernet networking reference architecture.
- Investments in AI: Cisco announced a new investment program in Saudi Arabia and joined the AI infrastructure partnership to support AI workloads.
- Security Order Growth: Security orders grew in high double digits, including a large multiyear deal with a major financial services company for Splunk's security and observability platforms.
- Innovation Pipeline: Cisco introduced innovations in AI-powered security solutions, including Cisco XDR and a partnership with ServiceNow, as well as advancements in quantum networking.
- Organizational Announcements: Scott Herren will retire at the end of FY25, with Mark Patterson succeeding him as CFO. Jeetu Patel was promoted to President and Chief Product Officer. Kevin Weil of OpenAI was appointed to Cisco's Board of Directors.
- Q4 and Full Year Guidance: Cisco provided revenue and EPS guidance for Q4 and full-year FY25, incorporating assumptions about tariffs.
Focus of the analyst Q&A
- Customer Buying Behavior:
- Impact of tariff uncertainty on customer purchasing decisions.
- Potential for pull-forward of demand due to tariff concerns.
- Public Sector Performance:
- Trends and challenges in the public sector, particularly in the U.S. federal market.
- Cloud Capital Expenditure:
- Sustainability of cloud capital expenditure growth and its impact on Cisco's performance.
- Potential slowdown in cloud CapEx and its implications for Cisco.
- Sovereign AI Deployments:
- Details and timing of sovereign AI deployment opportunities.
- Potential size and impact of these opportunities on Cisco's order book.
- Data Center Switching:
- Update on the data center switching market and the impact of new silicon.
- Middle East Investments:
- How Cisco plans to participate in Middle East AI initiatives.
- Timing and magnitude of opportunities in the Middle East.
- Enterprise Campus:
- Customer feedback and momentum in the enterprise campus vertical.
- Opportunity for recovery in the enterprise campus market.
- Networking Order Strength:
- Factors driving networking order growth, including the contribution of WiFi 7.
- Organic Revenue Growth:
- Organic revenue growth rates for the company and its segments, excluding Splunk.
- Web Scale Growth:
- Drivers of sustained success in the web-scale market.
- Pace of transition from InfiniBand to Ethernet.
- AI Order Growth:
- Growth rates for AI orders and revenues moving forward.
- Margin Outlook:
- Factors affecting operating margin in the upcoming quarter.
- Campus Refresh Cycle:
- Historical perspective on campus refresh cycles and their impact.
- Tariff Impact:
- Impact of tariffs after the July 9 pause.
- AI Substitution:
- Whether AI is substitutionary of existing non-AI networking real estate.
- AI Orders for Enterprise:
- Quantification of AI orders for enterprise customers, incremental to cloud orders.
- Co-packaged Optics:
- Timeline for Silicon One to offer co-packaged optics solutions.
- AI Pipeline:
- Update on the AI pipeline.
- White Box Usage:
- Trends in white box usage among hyperscaler customers.
Summary
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Financial Performance
Cisco reported a strong Q3 FY25, exceeding the high end of its guidance for revenue, margins, and EPS. Total revenue was $14.1 billion, up 11% year-over-year. Non-GAAP EPS was $0.96. The company returned $3.1 billion to shareholders through share repurchases and dividends, bringing the year-to-date total to $9.6 billion.
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Revenue Drivers
Product revenue was a key driver, up 15% year-over-year, while services revenue increased by 3%. Networking revenue grew by 8%, led by switching and enterprise routing. Security revenue surged by 54%, primarily due to Splunk and SASE offerings. Collaboration was up 4%, and observability increased by 24%. AI infrastructure orders from web-scale customers exceeded $600 million in Q3, surpassing the initial FY25 target. Enterprise product orders were up 22%, and service provider/cloud orders increased by 32%.
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Profit Margins and Cost Management
Non-GAAP gross margin was 68.6%, up 30 basis points year-over-year, exceeding guidance. Product gross margin was 67.6%, up 70 basis points, driven by productivity improvements and Splunk. Non-GAAP operating margin was 34.5%, also above guidance. The non-GAAP tax rate was 17.5%. The company emphasized disciplined spend management to fuel cash flow generation and shareholder returns.
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Guidance and Outlook
For Q4 FY25, Cisco expects revenue between $14.5 billion and $14.7 billion, non-GAAP gross margin between 67.5% and 68.5%, non-GAAP operating margin between 33.5% and 34.5%, and non-GAAP EPS between $0.96 and $0.98. The full-year FY25 revenue guidance is $56.5 billion to $56.7 billion, with non-GAAP EPS between $3.77 and $3.79. The guidance incorporates the impact of existing tariffs, with ongoing uncertainty regarding future tariff policies.
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Strategic Initiatives
Cisco is focused on AI, with significant orders for AI training infrastructure and expanding partnerships with NVIDIA. The company announced a unified architecture with NVIDIA and a secure AI factory. Investments in Saudi Arabia and collaboration with G42 highlight Cisco's position in AI networking solutions. The company is also innovating in security, with new products like Secure Access, XDR, and Hypershield. Organizational changes include Mark Patterson becoming CFO and Jeetu Patel becoming President and Chief Product Officer.
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Management Commentary
Management expressed confidence in Cisco's long-term success, driven by product innovation, strong execution, and strategic investments. CEO Chuck Robbins highlighted the demand for Cisco's technology across customer markets and the accelerating innovation pipeline. CFO Scott Herren emphasized the company's focus on profitability and financial discipline. Robbins noted the importance of the AI transition and customers' commitment to technology spending.
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Industry and Market Conditions
Cisco sees strong demand for its technologies despite an uncertain macroeconomic environment. The company is well-positioned to benefit from the AI revolution, with opportunities in AI training infrastructure, AI inference and enterprise clouds, and AI network connectivity. The company expects a sovereign AI cloud opportunity to ramp up in the near term.
Comparative analysis
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Benchmarks (as of 2025-06-06)
Technology Select Sector SPDR Fund (XLK)
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Performance Comparison:
- Cisco Systems, Inc. (CSCO) has shown mixed performance compared to the Technology Select Sector SPDR Fund (XLK). Over the past year, CSCO has significantly outperformed XLK, with returns of 48.41% versus 11.04%. However, over longer periods (2 and 3 years), CSCO has underperformed XLK. For the 2-year period, CSCO returned 41.28% compared to XLK's 45.75%, and for the 3-year period, CSCO returned 63.94% compared to XLK's 79.29%. Year-to-date, CSCO has outperformed XLK, with returns of 13.29% and 2.94% respectively.
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Risk and Return Analysis:
- The annualized returns show that CSCO has a higher return over the past year (48.41%) compared to XLK (11.04%). However, over 2 and 3 years, CSCO's annualized returns (18.86% and 17.91%, respectively) are lower than XLK's (20.73% and 21.48%, respectively).
- Analyzing annualized volatility, CSCO generally exhibited higher volatility in earlier periods but has become relatively more stable recently. For example, in Q2 2022, CSCO's volatility ranged from 45.52% to 51.39%, while XLK's ranged from 37.06% to 40.71%. By Q2 2025, CSCO's volatility was 20.88% and XLK's was 25.11%.
- The maximum drawdown for CSCO was -36.68% on 2022-10-12, while for XLK it was -33.56% on the same date. This suggests that CSCO experienced slightly larger peak-to-trough declines during periods of market stress.
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Risk-Adjusted Performance:
- The Sharpe Ratio analysis indicates that XLK generally offers better risk-adjusted returns compared to CSCO. While CSCO's Sharpe Ratio has improved over time, it has generally remained lower than XLK's, especially in recent periods.
- The Beta analysis shows that CSCO has a beta consistently below 1, indicating lower sensitivity to market movements compared to XLK, which has a beta consistently above 1. This suggests that CSCO is less volatile than the broader technology sector represented by XLK.
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Overall Assessment:
- CSCO has demonstrated strong recent performance, outperforming XLK over the past year and year-to-date. However, its longer-term performance (2 and 3 years) lags behind XLK. CSCO's lower beta suggests it is less sensitive to market fluctuations, which may appeal to investors seeking stability. However, XLK has generally provided better risk-adjusted returns, as indicated by its higher Sharpe Ratio. Investors should consider their investment horizon and risk tolerance when choosing between CSCO and XLK. If the investment goal is long term with moderate risk, XLK may be more suitable. If the investment goal is short term with higher risk tolerance, CSCO may be more appropriate.
Peers Price History(as of 2025-06-06)
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Performance Comparison:
- Cisco Systems, Inc. (CSCO) has shown mixed performance compared to its peers, Motorola Solutions, Inc. (MSI) and Arista Networks, Inc. (ANET). Year-to-date, CSCO has outperformed both MSI and ANET, with a return of 13.29% compared to MSI's -8.76% and ANET's -13.01%. Over a 1-year period, CSCO also outperformed, posting a 48.41% return against MSI's 12.9% and ANET's 30.72%. However, over longer periods (2 and 3 years), CSCO has underperformed, with returns of 41.28% and 63.94%, respectively, compared to MSI's 53.67% and 102.16%, and ANET's 139.36% and 295.29%. This suggests that while CSCO has had a strong recent performance, it has lagged behind its peers over the longer term.
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Risk and Return Analysis:
- The annualized returns show a similar pattern. CSCO's 1-year annualized return of 48.41% is higher than MSI's 12.9% and ANET's 30.72%. However, its 2-year and 3-year annualized returns of 18.86% and 17.91%, respectively, are lower than MSI's 23.96% and 26.44%, and significantly lower than ANET's 54.71% and 58.11%.
- In terms of annualized volatility, Arista Networks, Inc. (ANET) generally exhibits the highest levels, often exceeding 50%, while Cisco Systems, Inc. (CSCO) and Motorola Solutions, Inc. (MSI) typically show lower volatility, ranging from approximately 10% to 45% and 10% to 40%, respectively. This indicates that ANET is the most volatile of the three.
- The maximum drawdown for CSCO is -36.68% (on 2022-10-12), which is more severe than MSI's -27.23% (on 2022-06-16) but less than ANET's -50.42% (on 2025-04-04). This suggests that CSCO carries a moderate level of risk in terms of potential peak-to-trough decline compared to its peers.
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Risk-Adjusted Performance:
- Motorola Solutions, Inc. (MSI) consistently exhibits higher Sharpe Ratios compared to Cisco Systems, Inc. (CSCO) throughout the entire period, indicating better risk-adjusted returns. Arista Networks, Inc. (ANET) generally has higher Sharpe Ratios than CSCO but lower than MSI. As of Q2 2025, the Sharpe Ratios are 1.81 for CSCO, 0.7 for MSI, and 0.79 for ANET.
- The beta values for CSCO and MSI have generally remained below 1, indicating lower volatility compared to the market. ANET consistently has beta values above 1, suggesting higher volatility relative to the market. As of Q2 2025, the beta values are 0.83 for CSCO, 0.54 for MSI, and 1.68 for ANET.
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Overall Assessment:
- Cisco Systems, Inc. (CSCO) has demonstrated strong recent performance, outperforming its peers in the short term. However, its longer-term performance lags behind Motorola Solutions, Inc. (MSI) and Arista Networks, Inc. (ANET). CSCO exhibits moderate volatility and drawdown compared to its peers. Its risk-adjusted returns, as indicated by the Sharpe Ratio, are generally lower than those of MSI and ANET. The beta value suggests that CSCO is less sensitive to market movements than ANET but more sensitive than MSI.
- A significant trend is the recent decline in Sharpe Ratios for all three companies, indicating a decrease in risk-adjusted performance. ANET's high volatility and drawdown, combined with its high beta, suggest it is a higher-risk investment compared to CSCO and MSI. MSI consistently shows better risk-adjusted returns and lower volatility, making it a potentially more stable investment option.
Peers Fundamentals(as of 2025-04-30)
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Market Position and Size:
- Cisco Systems, Inc. (CSCO) holds a dominant market position due to its significantly larger market capitalization of $252,303.15 million compared to Motorola Solutions, Inc. (MSI) at $70,593.78 million and Arista Networks, Inc. (ANET) at $120,153.87 million.
- CSCO's substantial market cap is supported by its higher revenue ($55,623 million) compared to MSI ($10,956 million) and ANET ($7,436.57 million). Similarly, CSCO's EBITDA ($15,100 million) and Net Income ($9,792 million) are considerably larger than those of its peers.
- CSCO's relative size and market position within the peer group is dominant due to its significantly larger size, as reflected in its market capitalization, revenue, and earnings. This suggests a more established and diversified business compared to its peers.
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Profitability and Efficiency:
- CSCO's Gross Profit Margin of 63.56% is slightly less than ANET's 64.09% but significantly greater than MSI's 50.16% and the industry average of 28.26%.
- CSCO's EBITDA Margin of 27.15% is less than MSI's 28.82% and ANET's 43.08%, but substantially greater than the industry average of -25.39%.
- CSCO's Net Profit Margin of 17.6% is less than MSI's 18.67% and ANET's 40.72%, but significantly greater than the industry average of -54.72%.
- Despite having the largest market cap and revenue, CSCO's profitability margins are not the highest among its peers, indicating potential inefficiencies or different business strategies. However, CSCO's profitability is strong compared to the industry average.
- CSCO is less efficient in generating returns compared to its peers, as indicated by its lower ROA, ROE, ROTC, and ROIC. However, its returns are still positive and above the industry average.
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Financial Health and Stability:
- CSCO's Current Ratio of 0.91 is less than MSI (1.18), ANET (3.93), and the industry average (2.3), indicating potential liquidity concerns.
- CSCO's Quick Ratio of 0.83 is less than MSI (1.02), ANET (3.31), and the industry average (1.64), further suggesting liquidity challenges.
- CSCO's Total Debt to Total Equity Ratio of 66.93 is less than MSI (397.62) but greater than ANET (0.0). It is also less than the industry average (113.63).
- CSCO's Debt / EBITDA ratio of 1.94 is slightly greater than MSI (1.9) but significantly greater than ANET (0.0). It is also less than the industry average (18.77).
- CSCO's liquidity ratios are below industry averages and peer levels, suggesting potential short-term financial risk. However, its debt levels are manageable compared to MSI and the industry average.
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Valuation and Market Perception:
- CSCO's Enterprise Value To Sales ratio of 4.32 is greater than the industry average (2.56) but less than MSI (7.17) and ANET (12.23).
- CSCO's Enterprise Value To EBITDA ratio of 15.83 is less than MSI (24.69), ANET (28.4), and the industry average (47.56).
- CSCO's Price To Earnings ratio of 25.99 is less than MSI (35.28), ANET (40.47), and the industry average (67.61).
- CSCO's Price to Book Ratio of 5.54 is less than MSI (43.01), ANET (11.88), and the industry average (9.53).
- CSCO's Price To Sales Ratio of 4.56 is less than MSI (6.55) and ANET (16.46) but greater than the industry average (2.27).
- CSCO appears undervalued compared to its peers and the industry average based on several valuation metrics, particularly EV/EBITDA and P/E ratios.
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Cash Flow and Capital Management:
- CSCO's Net Operating Cash Flow of $13,689 million is significantly greater than MSI ($2,519 million) and ANET ($3,836.13 million).
- CSCO's Total Capital Expenditure of $886 million is significantly greater than MSI ($248 million) and ANET ($51.04 million).
- CSCO's Free Cash Flow of $12,803 million is significantly greater than MSI ($2,271 million) and ANET ($3,785.09 million).
- CSCO generates significantly more cash flow than its peers, reflecting its larger scale and established market position.
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Growth and Future Prospects:
- CSCO shows inferior growth in Sales/Revenue, EBITDA, Net Income, Basic Earnings per Share, Free Cash Flow, and EBIT Margin compared to its peers.
- Growth rates have been generally decreasing over the 5-year period for most metrics, indicating a potential slowdown in CSCO's growth.
- CSCO's most recent year-over-year growth rates are generally lower than its 5-year CAGRs, indicating a deceleration trend.
- The lack of revenue growth coupled with declining profit margins is a potential red flag.
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Potential for Investment:
- From an investment perspective, CSCO presents a mixed picture. Its large size and strong cash flow generation provide stability, but its slower growth rates and lower returns on investment may limit its upside potential.
- While its valuation metrics suggest it may be undervalued, investors should carefully consider its growth prospects and efficiency compared to its peers before making an investment decision.
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Key Risks and Considerations:
- CSCO's slower growth rates compared to peers pose a risk to its market share and competitive position.
- Its lower liquidity ratios compared to peers and industry averages raise concerns about its short-term financial flexibility.
- The potential for declining profit margins and returns on investment could negatively impact its future earnings and shareholder value.
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Overall Assessment:
- CSCO exhibits strong financial health due to its large size, substantial cash flow generation, and solid gross profit margin. However, its growth rates are lagging behind peers, and its liquidity ratios raise some concerns.
- While its returns on investment are positive, they are not as high as its competitors. Overall, CSCO is financially stable but needs to improve its growth and efficiency to maintain its competitive edge.
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