CSCO

In late June, our team of analysts highlighted the growing chances of Cisco's stock price outperformance. We mentioned, in particular, the range of potential price targets from $65 to $73 per share, with the rally expected to accelerate in the summer months, but it all came to less than 6 weeks. Cisco briefly visited $72.55 on August 11 holding above $70 in the following days in anticipation of its quarterly earnings release. After the release that has come out mostly in line with elevated expectations, Cisco has "earned" a bit of a breather, if we may say so.

Cisco did its service; Cisco can go sideways. A kind of flat movement could be expected with partial profit taking along with bullish repositioning at the same time. The initial response led to a 2.5% decline to $68.5 confirming this idea, even though after-hours trading subsequently returned the stock price above $70, recouping all losses. Minor pullbacks and rising waves could alternate over the next few days and later into August. So, we would now look for $62.5 to $65 as a new potential technical support zone, as there is little fundamental reasoning to go down further. Buying all those dips is a more logical scenario. But the market may not hold to these support levels, so that the retracement potential could be much more limited in practice. A gradual move to new and higher targets within the $77.5 to $80 area would be worth keeping in mind.

Moving on to the details of the report, Cisco's EPS (equity per share) added 13.8% YoY, from $0.87 to $0.99, jumping vs last quarter's $0.62. But the latest solid number was fully expected, so that it happened to be only $0.01 better than the average Wall St analyst pool estimate of $0.98. Quarterly revenue came out at $14.67 billion against the consensus number of $14.62 billion, with both figures being more than $1 billion above last year's result for the same season, but missed Cisco's all-time record high of August 2023 at $15.2 billion. The company's forward guidance for investors included Q1 2026 EPS of $0.97 to $0.99, slightly better than nominal consensus of $0.97, on revenue of $14.65 billion to $14.85 billion, also better than average analyst pool forecast of $14.65 billion. There are no big surprises to smash the market minds here. For the financial year of 2026, the company expects EPS of $4.00-$4.06, just the range around the analyst consensus of $4.03. The same rather routine but happy end is projected for its 2026 revenue of $59.00 billion to $60.00 billion, right around the consensus bet for $59.50 billion. Cisco is actually following a kind of historical trend of slightly beating the crowd's hopes, which are traditionally high but doable.

Producing and upgrading AI-related networking equipment for a nearly doubled number of customers (compared to the company's own initial expectations) to move workloads into the cloud environment was cited as the main driver. AI infrastructure orders exceeded $800 million in the quarter, providing the total for the year to exceed $2 billion. Cisco introduced over 20 new products in the segment of AI innovations. The company also entered the Internet of Things industry at the right time. Given all this, but also the fact that Cisco is already up more than 10% in the last 3 months and added more than 50% in the previous 12 months, higher goals for the asset look appropriate, but markets may need to give Cisco some breathing space before resuming the rally.