AI "scaling up" in F2027E, alongside positive inflections in core Networking business

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AI "scaling up" in F2027E, alongside positive inflections in core Networking business

Truist Securities

Equity Research Report May 18, 2026

TMT: Data Centers, Communications Cisco Systems, Inc. (CSCO)

Infrastructure & Technology

AI "scaling up" in F2027E, alongside positive inflections in core

Matthew Niknam Networking business

212-326-6151

Matthew.Niknam@truist.com

We reiterate our Buy rating on Cisco shares, with our new estimates implying top and

Mo Chen bottom-line growth in FY27E exceed its longer-term ranges laid out at its last Analyst Day.

212-590-0901 More specifically, we forecast +8% growth in FY27E (off +11% growth this FY), given ramping

Mo.Chen@truist.com AI-related sales (to $6bn, from $4bn this FY) and ongoing strength in its core Networking

business (Campus refresh, "upgrading for AI" related spend). At the same time, we're

encouraged by commentary around gross margin stabilization, while we continue to forecast

OI margin expansion in upcoming years. Net net, our new estimates call for +11% EPS

Stock Rating BUY growth next year, and a 10% EPS CAGR between FY26-FY29E.

Unchanged

Price Target $125.00 We are raising our estimates and price target, following F3Q26 results which included

↑ accelerating order growth (+35% yoy vs. +18% last quarter, and well ahead of our +12%

from estimate), with strength both in AI-related demand from hyperscalers, as well as the broader

$94.00 business (as we detail below). This, alongside an improved (operating income) margin

outlook drives the 4-8% increase in our forward non-GAAP EPS estimates, to $4.29/$4.77/

$5.23 for FY26E-FY28E (with our FY27E/FY28E estimates +1% vs. consensus). As a result

of this and increased target multiples, our 12-month price target moves to $125 (vs. $94 TR to Target 7.2%

prior).