Cisco Systems, Inc. (סיסקו)

Cisco designs and sells networking hardware and software: switches, routers, wireless networks, its own networking chips (the Silicon One family) and optical components. Alongside the network it sells security products, collaboration systems (Webex) and observability systems, mostly from the 2024 acquisition of Splunk for about $27 billion. On top of all of these sits a layer of technical support and professional services. Headquarters are in San Jose, California; the company was founded in 1984 and has about 82,400 employees.

Fiscal 2026 revenue was $63.3 billion. Products were 76% of revenue and services 24%. The Networking category alone was $34.7 billion, more than half of revenue. Customers are enterprises, governments, service providers and, over the last two years, cloud giants (hyperscalers) building data centers for artificial intelligence.

Cisco has no controlling shareholder. Chuck Robbins is Chair and CEO, and Mark Patterson is CFO. In May 2026 a new Chief Accounting Officer was appointed from within the company, and two directors left the board during the year.

The year: growth that accelerated quarter by quarter

Revenue grew 8%, 8%, 10%, 12% and 18% over the last five quarters. For the full year, product revenue rose 16% and services were flat. 95% of the increase in product revenue came from the Networking category, mainly, per the filing, from AI infrastructure systems. Per the filing, hyperscalers were about 6% of revenue for the year, versus less than 2% the year before.

What needs normalizing: net income rose 30% to $13.3 billion and EPS 31% to $3.33. Pre-tax income included $1.4 billion of revaluation gains on investments in private companies, $0.87 billion of them in Q4 alone. Removing the revaluation before tax, at the reported tax rate (17.1%), EPS is about $3.04. The prior year included a $355 million charge from a supplier dispute and a one-time $720 million tax benefit. Removing both, fiscal 2025 EPS is about $2.42, and normalized growth is about 26%. Restructuring charges were not removed: this is the third consecutive plan.

A note on the previous page: the August 2025 earnings release showed fiscal 2025 EPS of $2.61. The annual report, published afterwards, included the supplier charge and updated the figure to $2.55. This review relies on the annual report.

The multi-year context

In fiscal 2021–2026 revenue grew 4.9% a year on average and EPS 5.9% a year. Fiscal 2023 was the peak of the previous cycle, after the release of orders that built up during the component shortage, and in fiscal 2024 revenue fell 5.6%. Stock-based compensation has nearly doubled since 2022, to $3.8 billion (6% of revenue), mainly following the Splunk acquisition.

On July 25, 2026 Cisco held $15.9 billion of cash and investments, against financial debt of $29.5 billion: $23.0 billion of bonds and $6.7 billion of commercial paper ($3.5 billion a year earlier). Net debt is $13.6 billion, about 0.8 times EBITDA. The current ratio was 0.93. Goodwill of $59.5 billion is larger than equity ($50.3 billion), mainly because of the Splunk acquisition.

Earnings versus cash: net income rose 30%, but operating cash flow was $14.2 billion, exactly as in the prior year, and free cash flow fell 4%. The company attributes part of the gap to the final transition-tax payment under the U.S. tax reform ($2.3 billion). A similar payment, of about $1.8 billion per the fiscal 2025 annual report, was also made in the prior year. Excluding both payments, operating cash flow rose about 3%. Working capital absorbed $5.2 billion: inventory $2.5 billion, customer financing $1.8 billion and receivables $0.8 billion.

Three material balance-sheet changes:

• Inventory and purchase commitments: inventory rose from $3.2 to $5.7 billion, and purchase commitments with contract manufacturers and suppliers from $7.6 to $17.2 billion. Per the filing, a "significant portion" of the commitments is non-cancelable, some components are qualified to a specific customer design with limited alternative use, and hyperscaler orders may be canceled or rescheduled with limited notice. In fiscal 2025 a long-term supply arrangement from the previous shortage ended with the forfeiture of about $450 million of prepayments and a $355 million charge.
• Customer financing: $8.3 billion, up 28%. $1.75 billion of the increase occurred in Q4. The filing attributes it to "higher customer demand for financing" and does not identify the borrowers. The share of loans rated 5 or higher on the internal risk scale (1 to 10) was unchanged: 37.6%, versus 37.7% a year earlier.
• Investments in private companies: carrying value rose from $1.9 to $4.0 billion, mainly from revaluation. The revaluation was recorded in earnings, but not in cash flow.

Capital return: $12.7 billion was returned to shareholders in the year: $6.6 billion of dividends and $6.1 billion of buybacks, about 99% of free cash flow. In addition, $1.9 billion was paid for tax withholding on employee shares. The diluted share count fell only 0.3%. In Q4 shares were repurchased at an average price of $111.53, versus an average of $56.53 in fiscal 2025. The quarterly dividend is $0.42. Stated policy: return at least 50% of free cash flow.

Cisco reports three geographic segments and measures them on gross margin only. It also publishes product revenue in four categories.

Americas: product revenue rose 17%, led per the filing by the service provider and cloud market, "largely driven by revenue from our AI Infrastructure solutions". In the same year the segment's gross margin fell 3.1 points. The filing attributes this to product mix. In the company-wide product margin bridge, mix subtracted 3.6 points, and higher memory costs offset part of the productivity improvement.

Recurring revenue: subscription revenue (term licenses, software as a service and support contracts) rose 1% to $32.0 billion. Its share fell from 55.6% to 50.5% of revenue, because hardware grew faster. The observability suite declined over the year, and Security grew 2% for the full year and 14% in Q4.

The differentiation the company presents is a broad installed base of enterprise network equipment, together with a portfolio that links networking, security and observability. In Q3 the company reported growth of more than 25% in campus networking orders and more than 40% in data center switching. In Q4 product orders rose 35%, and 25% excluding hyperscalers, with double-digit growth in every geography and customer market. In AI infrastructure the company relies on networking chips it designs (Silicon One) and on optical components.

Where the filings show pressure: per the filing, some large customers, including hyperscalers, have the resources to design their own networking equipment, chips and software, or to buy directly from contract manufacturers. The company also cites competition in the data center market. Security and observability revenue, built mainly through acquisitions, grew 2% to 4% for the year.

This review does not include market-share or competitor data from primary sources.

Risks that emerge from the filings

• Hyperscaler concentration: per the filing, their purchases are large, sporadic and depend on the capital spending of a small number of customers, who may delay, reduce or cancel.
• Purchase commitments and inventory: $17.2 billion of commitments and $5.7 billion of inventory. Per the filing, a decline in demand could require material charges.
• Memory and components: according to company management, rising memory costs will continue to affect it. Some memory commitments are for fixed quantities at variable prices.
• Customer self-design: large customers can develop equipment and chips themselves or buy directly from manufacturers.
• Customer financing: $8.3 billion, up 28%, with no disclosure of who the borrowers added in Q4 are.
• Tariffs: per the filing, the extent of exposure is uncertain but could be significant.
• Legal proceedings: import-tax claims in Brazil for 2004–2007 totaling $1.44 billion including interest and penalties, which the company disputes; and a patent claim by Ramot, Tel Aviv University's technology transfer company, on optical components.

Items to monitor in the Q1 fiscal 2027 report (Nov 11, 2026)