Core Insights - CrowdStrike and Cisco Systems are prominent players in the cybersecurity sector, with CrowdStrike focusing on endpoint protection and AI-native cloud security through its Falcon platform, while Cisco is enhancing its offerings in Threat Intelligence, Detection, and Response [1][2] Industry Overview - The cybersecurity market is expected to grow at a CAGR of 12.28% from 2026 to 2030, driven by increasing complex attacks such as credential theft and social engineering [2] CrowdStrike Analysis - CrowdStrike's Falcon platform is recognized as the first multi-tenant, cloud-native security solution, securing various environments and endpoints [4] - The platform offers 29 cloud modules under a subscription model, with subscription sales increasing from 72% in fiscal 2017 to 95% in fiscal 2025 [5] - In Q3 fiscal 2026, Annual Recurring Revenues (ARR) from Falcon Flex customers reached $1.35 billion, growing over 200% year-over-year, indicating strong customer value perception [6] - However, CrowdStrike's revenue growth has decelerated from over 35% year-over-year in fiscal 2024 to an expected 21-22% in fiscal 2026, with projected revenues between $4.797 billion and $4.807 billion [7] Cisco Systems Analysis - Cisco Systems is expanding its security business with new products like Secure Access and AI Defense, achieving good customer adoption with nearly 3,000 customers purchasing new solutions in Q1 fiscal 2026 [8][10] - The acquisition of Splunk has contributed to strong growth in ARR and performance obligations, with significant deals enhancing Cisco's security portfolio [9] - Cisco's new products, such as Cisco Unified Edge and Cisco Data Fabric, are designed to support AI-related needs, further strengthening its market position [11][12] Earnings Estimates Comparison - CrowdStrike's fiscal 2026 earnings estimate is $3.71 per share, reflecting a year-over-year decline of 5.6% [13] - In contrast, Cisco's fiscal 2026 earnings estimate is $4.10 per share, indicating a year-over-year increase of 7.61% [14] Price Performance and Valuation - Over the past six months, Cisco shares have risen by 11.2%, while CrowdStrike shares have decreased by 5.8% [16] - Cisco is trading at a forward sales multiple of 4.81X, significantly lower than CrowdStrike's 19.75X, making Cisco more attractive for value-seeking investors [17] Conclusion - Cisco Systems has a competitive edge over CrowdStrike due to its strong security portfolio and reasonable valuation, making it an appealing option for investors looking for growth in the cybersecurity sector [20][21]

Core Insights - Cisco Systems' Security revenues decreased by 2% year over year to $1.98 billion in Q1 FY26, impacted by a shift to cloud subscriptions and lower revenues from older products [1][10] - New and refreshed products, which make up about one-third of Cisco's security portfolio, are expected to drive top-line growth, with mid-teens growth in demand for next-gen firewalls [2] - Splunk's annualized recurring revenues and product remaining performance obligations grew in double digits, enhancing Cisco's threat detection capabilities through integration with Cisco Extended Detection and Response (XDR) [3][10] Financial Performance - The Zacks Consensus Estimate for Q2 FY26 service revenues is $2.16 billion, indicating a 2.6% growth compared to the same quarter last year [4] - The Zacks Consensus Estimate for Q2 FY26 earnings is $1.02 per share, suggesting an 8.5% growth from the previous year [15] - The Zacks Consensus Estimate for FY26 earnings is $4.10 per share, indicating a 7.6% growth from FY25 [16] Competitive Landscape - Cisco faces significant competition in the security domain from Fortinet and Okta [5] - Fortinet is rapidly advancing its AI-powered security operations, with over 20 AI-driven solutions and a focus on secure AI usage [6] - Okta's offerings include AI-powered capabilities that are expected to drive a CAGR of 16% in revenues from FY23 to FY26, with projected revenues of $2.906 billion to $2.908 billion for FY26 [7] Stock Performance and Valuation - Cisco shares have appreciated by 30.8% over the past year, outperforming the broader Zacks Computer and Technology sector's return of 24.2% [8] - Cisco's stock is trading at a premium, with a trailing 12-month price/book ratio of 6.49X compared to the industry average of 6.13X [12] - Cisco currently holds a Zacks Rank 3 (Hold) [16]

Financial Data and Key Metrics Changes - Cisco reported revenue of $56.7 billion for fiscal year 2025, representing a 5% year-over-year increase [18] - Non-GAAP EPS was $3.81, up 2% year-over-year, with non-GAAP gross margins at 68.7% [18] - Non-GAAP operating income reached $19.5 billion, a 6% increase year-over-year, while non-GAAP net income was flat at $15.2 billion [18] - For Q1 of fiscal year 2026, revenue was $14.9 billion, an 8% increase year-over-year, with non-GAAP EPS at $1, up 10% year-over-year [19] Business Line Data and Key Metrics Changes - The growth in Q1 was driven by a 15% year-over-year increase in networking revenue, with SP routing being the largest contributor [26] - Product orders grew by 13% year-over-year across all geographies and customer markets [19] Market Data and Key Metrics Changes - Strong demand for AI infrastructure from hyperscalers and telcos was noted, as they scale data centers and increase network capacity to handle AI traffic [26] - Enterprise customers are modernizing their networks for AI, indicating a broad market trend towards upgrading infrastructure [26] Company Strategy and Development Direction - Cisco is focusing on capitalizing on AI opportunities, integrating Splunk to enhance digital resilience and unify customer data for AI model building [28][29] - The company aims to grow organically and inorganically, continue dividend growth, buy back shares, and return excess cash to shareholders [20] - Cisco is positioned to play a critical role in the AI transition, with a focus on AI infrastructure, security, data management, AI-native products, and customer services [21][22][23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, highlighting the strong performance in fiscal year 2025 and the record start to fiscal year 2026 [18][24] - The company anticipates significant growth opportunities driven by leadership in AI and secure networking [19][24] Other Important Information - Cisco returned 94% of free cash flow to shareholders in fiscal year 2025, with an annualized dividend per share of $1.64 and nearly $6 billion in share repurchases [20] - The board recommended stockholders vote against a proposal regarding the assessment of inclusion programs, which was not approved with approximately 99% of shares voting against it [16] Q&A Session Summary Question: Key trends driving recent strong growth - Cisco noted strong Q1 performance with 8% revenue growth driven by networking strength and demand for AI infrastructure from hyperscalers and telcos [26] Question: Cisco's strategy for capitalizing on AI opportunities - Cisco highlighted broad AI opportunities, emphasizing the need for customers to upgrade networks and embed security deeply into their infrastructure [28] Question: How Cisco's purpose influences business strategy - Cisco's purpose guides its operations, focusing on community resilience, responsible innovation, and energy sustainability, which are seen as beneficial for long-term shareholder value [30][31]

Financial Data and Key Metrics Changes - Cisco reported revenue of $56.7 billion for fiscal year 2025, representing a 5% year-over-year increase [18] - Non-GAAP EPS was $3.81, up 2% year-over-year, with non-GAAP gross margins at 68.7% [18] - Non-GAAP operating income reached $19.5 billion, up 6% year-over-year, while non-GAAP net income was $15.2 billion, flat year-over-year [18] - For Q1 of fiscal year 2026, revenue was $14.9 billion, an 8% increase year-over-year, with non-GAAP EPS at $1, up 10% year-over-year [19] Business Line Data and Key Metrics Changes - The growth in revenue was driven by strong demand for AI infrastructure and campus networking solutions, with product orders growing 13% year-over-year [19] - Networking revenue specifically grew by 15% year-over-year in Q1, with SP routing being the largest contributor [26] Market Data and Key Metrics Changes - Cisco experienced robust demand across all geographies and customer markets, indicating a broad-based growth [19] - The company noted strong demand from hyperscalers and telcos, which are increasing their network capacity to handle AI traffic [26] Company Strategy and Development Direction - Cisco is focusing on capitalizing on the AI opportunity, integrating AI into its product offerings, and enhancing security within its network infrastructure [28] - The company aims to grow organically and inorganically, continue dividend growth, buy back shares, and return excess cash to shareholders [20] - Cisco's strategy includes building AI-ready data centers, modernizing workplaces, and ensuring digital resilience for customers [23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, highlighting the strong performance in fiscal 2025 and the positive outlook for fiscal 2026 [18][24] - The integration of Splunk is seen as crucial for enhancing digital resilience and enabling customers to unify their data for AI model building [29] Other Important Information - Cisco returned 94% of its free cash flow to shareholders in fiscal year 2025, with an annualized dividend per share of $1.64 and nearly $6 billion in share repurchases [20] - The company plans to publish its purpose report in mid-January 2026, detailing its commitment to community resilience, responsible innovation, and sustainability [31] Q&A Session Summary Question: Can you discuss the key trends you are seeing with your customers and what is driving this performance? - Cisco noted strong Q1 performance driven by networking strength and demand for AI infrastructure, with customers modernizing their networks for AI [26] Question: Can you discuss Cisco's overall strategy for capitalizing on the AI opportunity and how the integration of Splunk is enhancing your position? - Cisco sees broad AI opportunities and emphasizes the need for customers to upgrade their networks and embed security deeply, with Splunk integration enhancing digital resilience [28] Question: How does Cisco's stated purpose influence your business strategy and create long-term value? - Cisco's purpose guides its operations, focusing on community resilience, responsible innovation, and sustainability, which are believed to drive durable growth for shareholders [30]

Financial Data and Key Metrics Changes - Cisco reported revenue of $56.7 billion for FY 2025, representing a 5% year-over-year increase [17] - Non-GAAP EPS was $3.81, up 2% year-over-year, with non-GAAP gross margins at 68.7% [17] - Non-GAAP operating income reached $19.5 billion, up 6% year-over-year, while non-GAAP net income was $15.2 billion, flat year-over-year [17] - For Q1 FY 2026, revenue was $14.9 billion, an 8% increase year-over-year, with non-GAAP EPS at $1, up 10% year-over-year [18] Business Line Data and Key Metrics Changes - Software and subscriptions now account for more than half of Cisco's revenue, indicating a shift towards recurring revenue models [17] - Networking revenue grew by 15% year-over-year in Q1 FY 2026, driven by strong demand for AI infrastructure [25] Market Data and Key Metrics Changes - Product orders grew 13% year-over-year across all geographies and customer markets in Q1 FY 2026 [18] - Strong demand from hyperscalers and telcos for AI infrastructure and increased network capacity was noted [25] Company Strategy and Development Direction - Cisco is focusing on capitalizing on the AI transition, with a strategy that includes enhancing AI infrastructure, security, and data management [20][21] - The integration of Splunk is seen as crucial for building a comprehensive data fabric that allows customers to unify their data and build AI models [28] - The company aims to return more than 50% of free cash flow to shareholders, having returned 94% in FY 2025 [19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the opportunities in the AI era, highlighting the need for modern infrastructure to support AI workloads [22] - The company anticipates strong growth driven by its leadership in AI and secure networking, positioning itself for what is expected to be its strongest year yet [18][23] Other Important Information - Cisco's annual meeting included discussions on corporate governance, executive compensation, and stockholder proposals, with significant support for most proposals [15] - The company plans to publish its purpose report in mid-January 2026, detailing its commitment to community resilience, responsible innovation, and sustainability [30] Q&A Session Summary Question: Key trends driving recent company performance - Cisco noted strong Q1 performance with 8% revenue growth, driven by networking strength and demand for AI infrastructure from hyperscalers and telcos [25] Question: Cisco's strategy for capitalizing on AI opportunities - The company highlighted broad AI opportunities, emphasizing the need for customers to upgrade networks and embed security deeply into their infrastructure [27] Question: Influence of Cisco's purpose on business strategy - Cisco's purpose guides its operations, focusing on community resilience, responsible innovation, and sustainability, which are seen as beneficial for long-term shareholder value [29]

Core Insights - The cybersecurity landscape is rapidly evolving, with Fortinet (FTNT) and Cisco Systems (CSCO) as key competitors in the network security market, which is projected to grow from $24.95 billion in 2025 to $42.93 billion by 2030, at a CAGR of 11.47% [1][8] Fortinet (FTNT) Overview - Fortinet's investment thesis is based on its strong execution and focused strategy in the high-growth security market, reporting Q2 revenues of $1.63 billion, a 14% year-over-year increase, and billings of $1.78 billion, up 15% [3][4] - The company boasts industry-leading non-GAAP operating margins of 33% in Q2, reflecting operational efficiency, and has raised its full-year 2025 billings guidance to $7.325-$7.475 billion [4] - Fortinet's competitive edge comes from its FortiAI innovations, with over 500 AI patents, and its recognition in multiple Gartner Magic Quadrants, indicating its leadership in various security segments [5] - The company is successfully transitioning to recurring revenue models, with Unified SASE ARR growing 22% and Security Operations ARR expanding 35% year-over-year [5] - Fortinet's proprietary ASIC-driven architecture and recent product launches position it well to capitalize on the convergence of networking and security [6] Cisco Systems (CSCO) Overview - Cisco reported fiscal Q4 revenues of $14.67 billion, a 7.6% increase year-over-year, with product orders growing 7% across all regions [7][10] - The integration of Splunk enhances Cisco's observability capabilities but complicates its security innovation efforts, leading to operational challenges [10][11] - Cisco's fiscal Q1 2026 revenue guidance of $14.65-$14.85 billion suggests modest growth, with management acknowledging headwinds from tariffs and challenges in converting AI investments into revenue [10] - Despite introducing innovations, Cisco struggles to maintain relevance in pure security, with security revenue growth coming from a smaller base and including Splunk contributions [11] Valuation and Performance Comparison - Fortinet trades at a forward P/S ratio of 8.09X, significantly higher than Cisco's 4.49X, justified by Fortinet's superior growth profile and execution consistency [12][15] - Fortinet's revenues are projected to grow 13.29% to $6.75 billion in 2025, while Cisco's fiscal 2026 revenue growth is estimated at 5.19% to $59.59 billion [15] - Year-to-date, Fortinet shares have declined 20%, while Cisco's shares have gained 14.6%, indicating differing market perceptions of their respective strategies [15] Conclusion - Fortinet is positioned as a superior investment opportunity due to its focused security strategy, consistent double-digit revenue growth, and leadership in critical technologies [19] - Cisco's execution challenges and legacy portfolio complexity limit its near-term growth potential, making Fortinet's premium valuation justified [19]

Summary of Cisco's Earnings Call Company Overview - **Company**: Cisco Systems, Inc. - **Key Executives**: - Jitu Patel, President and Chief Product Officer - Mark Patterson, EVP and Chief Financial Officer Core Industry Insights - **Industry**: Networking and Cybersecurity - **Trends**: - Increased demand for AI infrastructure and services - Shift towards integrated platforms rather than standalone products - Growing importance of security integrated within networking solutions Key Points and Arguments 1. Integration and Innovation - Cisco has shifted from operating as a collection of business units to a more integrated platform approach, enhancing innovation and product synergy [7][8] - The focus is on creating a cohesive technology stack that combines networking and security, which is expected to provide a competitive advantage [12][19] 2. AI and Network Traffic - The rise of agentic AI will lead to significant changes in network traffic patterns, requiring infrastructure that can handle increased and sustained traffic [10][42] - Cisco is positioned to address these needs with its smart switch technology that integrates security and network processing [12][30] 3. Financial Discipline and Growth - Cisco reported strong earnings growth, with earnings expected to outpace revenue growth in the upcoming quarters [55][56] - The company is focusing on productivity and resource allocation to capitalize on AI and infrastructure opportunities [14][17] 4. Strategic Partnerships - Cisco has established a strategic partnership with NVIDIA, integrating their technologies to enhance AI capabilities and market positioning [36][38] - This partnership allows Cisco to be part of NVIDIA's reference architecture, which is crucial for enterprise AI deployments [38][39] 5. Infrastructure Constraints - Cisco anticipates three major constraints in the future: infrastructure limitations, trust deficits in AI systems, and data gaps [28][30] - The company is actively working to address these constraints through its product offerings and strategic initiatives [30] 6. Zero Trust Security Model - Cisco is implementing a universal Zero Trust Network Access (ZTNA) framework to enhance security across all devices and applications, including AI agents [50][51] - This approach aims to mitigate risks associated with over-provisioning permissions and ensure secure access for both human and machine identities [49][50] 7. Market Positioning and Future Outlook - Cisco is well-positioned to benefit from the ongoing digital transformation and the need for modernized data centers and workplaces [22][23] - The company is focusing on re-architecting its offerings to ensure they are AI-ready and resilient against future challenges [23][44] 8. Cultural Shift - A significant cultural change within Cisco emphasizes building innovative products rather than relying solely on acquisitions, fostering a more agile and responsive organization [64][65] - This shift has led to increased employee engagement and a renewed sense of purpose within the company [65] Additional Important Insights - Cisco's acquisition of Splunk enhances its ability to correlate network and security data, improving incident response times [23] - The company is adapting to global supply chain challenges and tariffs, leveraging its scale to mitigate impacts [58][59] This summary encapsulates the key insights and strategic directions discussed during Cisco's earnings call, highlighting the company's focus on innovation, integration, and addressing future challenges in the networking and cybersecurity landscape.

Financial Data and Key Metrics Changes - The company reported total revenue of $14.7 billion for Q4, an increase of 8% year over year [22] - Non-GAAP net income was $4 billion, up 12%, with non-GAAP earnings per share at $0.99, reflecting a 14% increase [22][23] - For the full fiscal year, total revenue reached $56.7 billion, up 5%, with non-GAAP earnings per share at $3.81, a 2% increase [29][31] Business Line Data and Key Metrics Changes - Total product revenue was $10.9 billion, up 10%, while services revenue remained flat at $3.8 billion [23][24] - Networking revenue grew by 12%, driven by double-digit growth in internet infrastructure and enterprise routing [24] - Security revenue increased by 9%, primarily due to growth from Splunk and SASE offerings [24] - Collaboration revenue rose by 2%, supported by solid growth in devices [24] Market Data and Key Metrics Changes - Product orders in Q4 grew by 7% year over year, with the Americas up 5%, EMEA up 10%, and APJC up 7% [26] - Service provider and cloud orders surged by 49%, while enterprise orders increased by 5% and public sector orders declined by 6% [26][9] - AI infrastructure orders from web scale customers exceeded $800 million in Q4, totaling over $2 billion for the fiscal year [8][12] Company Strategy and Development Direction - The company is focusing on AI infrastructure, with a strong emphasis on networking and security solutions to support the AI era [7][12] - Cisco aims to leverage its refreshed product portfolio, including Silicon One and AI-native security solutions, to meet increasing network demands [7][12] - The company is positioned to capitalize on the growing demand for AI solutions, particularly in the enterprise and web scale markets [12][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing demand for AI infrastructure and the company's ability to deliver critical solutions [7][12] - The company anticipates a strong fiscal year 2026, driven by continued growth in AI-related orders and a robust pipeline [7][34] - Management acknowledged the complexities of the current operating environment but remains optimistic about future growth opportunities [32][34] Other Important Information - The company returned $2.9 billion to shareholders in Q4, totaling $12.4 billion for the fiscal year, representing 94% of free cash flow [7][30] - The non-GAAP gross margin for Q4 was 68.4%, up 50 basis points year over year, indicating strong profitability [26][27] Q&A Session Summary Question: Regarding guidance and AI opportunity - Management clarified that the anticipated deceleration in growth is related to year-over-year comparisons and not a change in demand [38][39] Question: Outlook for security business growth - Management expressed optimism about security growth, citing strong order growth for new products and double-digit growth outside the U.S. federal sector [44][46] Question: Concerns about order pull forwards - Management stated that there is no significant evidence of order pull forwards affecting the business, based on customer feedback and order metrics [57][60] Question: Sustainability of networking growth - Management indicated confidence in maintaining growth rates, driven by AI demand and upcoming campus upgrades [68][70] Question: AI orders translating into revenue - Management confirmed that approximately $1 billion in revenue was recognized from AI infrastructure orders during FY 2025 [76]

Group 1: Cisco's AI Infrastructure Growth - Cisco Systems is experiencing significant growth in AI infrastructure, with third-quarter fiscal 2025 AI infrastructure orders exceeding $600 million, driven by strong demand from webscale clients [1] - Year-to-date orders have surpassed Cisco's initial target of $1 billion, attributed to the strength of its secure networking portfolio and trusted partner base [1] Group 2: Security Challenges and Solutions - The rise of AI has introduced new security challenges, prompting Cisco to launch AI Defense, a platform that provides visibility into AI use, verifies model integrity, and enforces security measures [2] - Cisco's latest Duo Identity and Access Management aims to help security teams combat identity-related attacks exacerbated by AI automation [2] Group 3: Strategic Partnerships - Cisco has partnered with NVIDIA to create Secure AI Factories, a solution designed to protect AI systems at all levels [3] - A collaboration with ServiceNow has been established to integrate AI Defense into their platform for centralized AI risk management and compliance [3] Group 4: Competitive Landscape - Hewlett-Packard Enterprise (HPE) and Arista Networks (ANET) are emerging competitors to Cisco in the AI networking space [4] - HPE reported second-quarter fiscal 2025 revenues of $7.6 billion, with $1 billion from AI server sales, indicating strong growth in AI-driven edge and cloud infrastructure [5] - Arista Networks achieved $2 billion in revenues in the first quarter of 2025, driven by demand from hyperscalers, and is targeting $750 million in campus networking revenues by year-end [6] Group 5: Financial Performance and Valuation - Cisco's shares have increased by 11.6% year-to-date, slightly outperforming the Zacks Computer – Networking industry's return of 11.3% [7] - Cisco's forward 12-month price-to-sales ratio stands at 4.45, higher than the industry's 4.24, indicating a potentially overvalued position [10] - The Zacks Consensus Estimate for Cisco's fiscal 2025 revenues is $56.59 billion, reflecting a year-over-year growth of 5.18%, with earnings estimated at $3.79 per share, suggesting a 1.61% increase from fiscal 2024 [12]