Cisco Systems, Inc.

(NASDAQ Global Select)
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Somewhat Bullish +35

Analyst Sells Cisco (CSCO) and Trims Meta (META) Amid Rising Yields

AI infrastructure Analyst downgrade Chip design win AI-generated analysis

πŸ“‰ Analyst Steve Weiss sold Cisco Systems after the stock failed to bounce following its last quarterly report.

πŸ“ˆ Cisco secured three new hyperscale design wins in fiscal 2026 with AI orders growing 4.5 times year-over-year.

πŸš€ Management forecasts 15% revenue growth and 17% EPS growth for fiscal 2027 at the midpoint.

πŸ“‰ Non-GAAP gross margins contracted to 66.3% in Q4 as lower-margin AI hardware increased the sales mix.

βš–οΈ Cisco trades at a forward P/E of 20.74x, which is 10.82% below the sector median valuation.

πŸ† The company designs its own chips and optics to ship complete systems for hyperscale clients.

πŸ“‰ Gross margins are under pressure as Nvidia becomes the top data center Ethernet switching vendor by revenue.

πŸ“ˆ Cisco shares have appreciated approximately 47% so far this year despite mixed analyst sentiment.

πŸ’° The forward PEG ratio stands at 2.11, which is significantly higher than the sector median of 1.25.

Bullish Signals
  • Cisco Systems landed three new hyperscale design wins in fiscal 2026, driving a 4.5x increase in AI orders.
  • Management expects meaningful growth in AI orders for fiscal 2027, projecting 15% revenue and 17% EPS growth.
  • The stock has rallied approximately 47% year-to-date, reflecting strong investor interest despite mixed analyst views.
  • Cisco trades at a forward P/E of 20.74x, which is 10.82% below the sector median valuation.
Risk Factors
  • Non-GAAP gross margins dropped to 66.3% in Q4 from 68.4% a year earlier due to lower-margin AI hardware.
  • The forward PEG ratio of 2.11 is 69.55% above the sector median, suggesting high valuation relative to growth.
  • Nvidia has surpassed Cisco as the top data center Ethernet switching vendor by revenue in Q1 2026.
Full Analysis
Short Hills Capital managing partner Steve Weiss sold his Cisco Systems (NASDAQ:CSCO) position and trimmed Meta Platforms, citing rising Treasury yields as the primary driver for his cautious stance. Weiss noted that the 10-year yield hovered near 5.26% during a recent CNBC appearance, viewing it as having limited support below 5% and a clear path toward 6%. Consequently, he exited Cisco because the anticipated bounce after its last quarterly report failed to materialize, adhering to his strategy of exiting positions he is not confident in. Despite Weiss's exit, other investors remain bullish on the networking giant. Lorne Steinberg Wealth Management maintains a positive outlook citing steady growth, while billionaire Ken Fisher added to his Cisco holdings earlier this year. The company has successfully secured three new hyperscale design wins in fiscal 2026 and expects AI-related orders to grow significantly in fiscal 2027. Management projects 15% revenue growth and 17% EPS growth for the upcoming fiscal year, driven by its strategy of designing proprietary chips and optics. Financial metrics reveal a mixed valuation picture for Cisco as it navigates competition from Nvidia in the data center space. Gross margins declined to 66.3% in the fourth quarter due to the inclusion of lower-margin AI hardware in the sales mix. While the stock has rallied approximately 47% year-to-date, trading at a forward P/E of 20.74x which is below the sector median, valuation multiples like EV/Forward Sales and PEG ratios remain elevated relative to peers and historical averages.