Cisco’s Record Quarter and 40% Switch Boom Mask Cash-Flow Concerns
Published on 05/19/2026 at 01:08 | Redaktion boerse-global.de
The networking giant is riding what management calls the early phase of a new supercycle, with orders for data-center switches surging 40% in the latest quarter. That explosive demand helped lift network-segment revenue by a quarter to $8.8 billion, powering Cisco to a record overall turnover of $15.84 billion in the fiscal third quarter ended April 25. The stock has rewarded investors accordingly, climbing roughly 56% since the start of the year and pushing the shares near a 52-week high, well above their 200-day moving average.
Yet beneath the top-line strength, a less celebrated story is unfolding. Operating cash flow slipped from $4.06 billion to $3.76 billion year-over-year, even as net margin held around 20%. The decline has prompted a handful of analysts to question whether the current valuation is sustainable. The stock now trades at a forward P/E of roughly 27 — historically rich for Cisco — meaning the lofty growth rates in the infrastructure segment must continue to justify the multiple.
Analyst upgrades have been swift and aggressive. Citic Securities raised its price target from $90 to $130, while BNP Paribas Exane set a target of $132 with an outperform rating. New Street Research increased its target to $122 but kept a neutral stance. Wells Fargo joined the bulls with a $130 target and an overweight recommendation, and CICC Research lifted its forecast to $125. The consensus now stands near $114.55, reflecting a moderate buy. Large institutional investors are also piling in: the RiverFront Investment Group nearly doubled its Cisco position.
Should investors sell immediately? Or is it worth buying Cisco?
The product business continues to drive the narrative, with revenue climbing 17% to $12.1 billion, while services posted a slight decline. Remaining performance obligations — a proxy for the order pipeline — rose 4% to $43.5 billion. For the current quarter, Cisco expects revenue between $16.7 billion and $16.9 billion, and the full fiscal 2026 outlook calls for $62.8 billion to $63.0 billion in sales, with non-GAAP earnings per share of $4.27 to $4.29.
Shareholders are being rewarded handsomely even as the company reinvests. Cisco returned $2.9 billion to shareholders during the quarter through dividends and buybacks, and the board proposed a quarterly dividend of $0.42 per share, payable July 22, 2026. The remaining buyback authorization stands at $9.6 billion. At the same time, a restructuring program is underway that will incur pre-tax charges of up to $1 billion, with roughly $450 million hitting the current fiscal year. How the market balances the supercycle euphoria against rising special costs and a tighter cash flow profile will determine whether the stock can hold its historic heights through the second half.
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