Buy, Sell, Or Hold Cisco Stock?

Core Insights - Cisco Systems Inc has seen a stock increase of 6% year-to-date, outperforming the S&P 500 index's 3% growth, while competitor Alphabet experienced a 3% decline [2] - Cisco's Q2 earnings for the period ending January 25 showed revenue of $14 billion, a 9% year-over-year increase, driven by AI infrastructure orders exceeding $350 million, despite a net income decline of 8% to $2.43 billion [2][4] - The company raised its full-year revenue outlook to $56 billion to $56.5 billion and adjusted EPS forecast to between $3.68 and $3.74, reflecting positive growth expectations [3] Financial Performance - Cisco's fiscal first half showed mixed results, with security revenue doubling year-over-year while networking revenue dropped by 14%, indicating a shift towards service-based solutions [4] - The acquisition of Splunk for $27 billion has positively impacted Cisco's revenue, preventing a 1% year-over-year decline without it, and enhancing adjusted EPS ahead of expectations [4] - Gross margins improved, with total gross margin at 65.1%, product gross margin at 63.7%, and services gross margin at 68.9%, benefiting from lower costs and a favorable product mix [5] Stock Performance and Valuation - Cisco's stock has shown volatility over the past four years, with a 46% gain in 2021, a 22% decline in 2022, a 9% increase in 2023, and a 22% gain in 2024 [6] - The revised valuation for Cisco is $65 per share, based on an expected EPS of $3.70 and a P/E multiple of 17.6x for fiscal 2025, aligning closely with the current market price [7]