Cisco Systems: A Giant Facing Challenges in Networking Revenue

With a market cap of $235.8 billion, San Jose, California’s Cisco Systems, Inc. (CSCO) stands tall as a leading player in Internet Protocol (IP) networking and communication solutions. Their product lineup includes network security, data center solutions, collaboration tools, and advanced observability, catering to a wide range of global customers.

Why Cisco Is Considered a “Mega-Cap” Stock

Stocks that are valued over $200 billion are classified as “mega-cap,” and Cisco fits this category seamlessly. Cisco is well-known for its innovative offerings in routing, switching, and cybersecurity. These solutions enable businesses to create secure and efficient digital infrastructures.

Stock Performance vs. Market Trends

Currently, CSCO shares are trading 1.1% below their 52-week high of $59.87, which was achieved on November 27. Over the last three months, the company’s stock has risen by 17.2%, outpacing the Dow Jones Industrials Average’s ($DOWI) 8.7% return during the same period.

However, looking at the year-to-date results, CSCO’s stock has increased by 17.3%, which is slightly behind DOWI’s 19.2% gains. Over the past 52 weeks, CSCO has gained 22.2%, while DOWI has seen a stronger growth of 26.8%.

Despite these challenges, CSCO has remained above its 50-day and 200-day moving averages since August, suggesting a positive outlook.

Recent Results and Market Response

Over the past year, Cisco has faced obstacles, including a decline in networking revenues and economic uncertainty causing cautious capital expenditures. The rise of smaller networking firms has intensified competition.

On November 13, Cisco reported better-than-expected Q1 2025 adjusted EPS of $0.91 and revenue of $13.8 billion. However, its shares fell by 2.1% the next day due to concerns about a 23% year-over-year drop in networking revenues. There’s also been weak demand from telecommunications and cable services providers, along with excess inventory, leading to a dip in investor confidence. Additionally, a 2.6% decrease in gross margin and a 9% increase in operating expenses to $4.9 billion raised red flags about profitability, resulting in a 12.1% decline in operating income.

Comparing Performance with Rivals

When compared to its competitor, Arista Networks, Inc. (ANET), Cisco has fallen behind. Arista gained 88.3% over the past 52 weeks and maintained a 73.2% increase year-to-date.

Despite this underperformance, analysts are cautiously optimistic about CSCO’s future. The stock holds a consensus rating of “Moderate Buy” from 21 analysts covering it and is currently priced below its mean price target of $62.63.

On the date of publication, Sohini Mondal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.