Cisco Systems’ Stock (CSCO) Eyeing Up Highs Ahead of Earnings

Cisco Systems stock (NASDAQ:CSCO) is currently trading at just over $72 per share in the pre-market, after a 6.3% gain in the last month. The stock's performance comes ahead of its earnings report scheduled today, adding to market anticipation. The technology giant's recent strategic moves and financial results paint a complex picture, with analysts weighing the potential for further gains against potential risks.

Analysts project that Cisco Systems will report an earnings per share (EPS) of $0.98 for the upcoming earnings report, which marks an increase from $0.91 in the same period last year. Additionally, the average revenue estimate is set at $14.78 billion, reflecting a sales growth of approximately 6.76% year-over-year.

Cisco has been actively pursuing growth through strategic initiatives, particularly in the realms of artificial intelligence (AI) and cybersecurity. On November 3rd, the company launched a new suite of AI-driven solutions, including the Cisco Unified Edge platform, an expanded AI-ready network architecture, and an upgraded Security Cloud Control.

These innovations are designed to enhance cybersecurity and enable real-time decision-making across various industries. The market responded positively to this announcement, with CSCO shares seeing a bump following the news.

Further bolstering its AI capabilities, Cisco expanded its collaboration with NVIDIA in late February. The partnership aims to develop AI-ready data center networks through the Cisco Secure AI Factory, built on NVIDIA's Spectrum-X Ethernet networking platform. This collaboration is projected to significantly boost Cisco's AI-driven revenues, with AI infrastructure orders already surpassing $700 million in the first half of fiscal 2025 and on track to exceed $1 billion for the full fiscal year.

Cisco's strong performance in the fourth quarter of fiscal 2025 has also fueled optimism. The company reported revenue of $14.7 billion, an 8% year-over-year increase, and adjusted earnings per share of $0.99, exceeding analyst expectations. This growth was driven by robust demand for networking and security products, coupled with a surge in AI infrastructure orders, which exceeded $2 billion for the fiscal year, more than doubling the initial projection.

The completion of the $28 billion acquisition of Splunk in March 2024 has further strengthened Cisco's position in the cybersecurity market. The integration of Splunk has significantly contributed to Cisco's security revenues, which doubled year-over-year to $2.02 billion in the first quarter of fiscal 2025. This strategic move has enhanced Cisco's capabilities in data management, analytics, and threat detection, positioning it for future growth.

While Cisco's strategic moves appear promising, it's possible that the market may be overestimating the immediate impact of AI on its bottom line. The actual realization of significant revenue from AI-driven solutions could take longer than anticipated, and the costs associated with developing and deploying these technologies could weigh on profitability in the short term.

Furthermore, the cybersecurity market is becoming increasingly crowded, with numerous players vying for market share. Cisco's ability to maintain its competitive edge in this landscape is not guaranteed, and the benefits from the Splunk acquisition may be offset by increased competition and pricing pressures.

Markets will be closely watching for updates on AI revenue, security performance, and the overall impact of strategic initiatives. The $72 level has so far proved to offer up some resistance, although a positive print could set CSCO on path to retest highs. The implied move is ~5% on the week, with earnings set to inject fresh volatility.