** This is not Financial Advice, so do your own due diligence ** I have been a long time Cisco bull --like forever -- but I was disappointed by CSCO's latest earnings call. I fear, Street is over-modeling FY26 rev growth of >5% Y/Y.. if the past is any indicator, CSCO just cannot sustain over 1% CAGR growth, let alone the 5+% CAGR over a 3 year period. Opinions aside, facts are CSCO 3 yr CAGR is ~1% (70bps to be exact) vs the 5 - 7% CAGR it guided, which btw the company lowered after first offering 7 - 9% CAGR they guided to--even with the backdrop of COVID-led enterprise refresh. Hard to see CSCO's campus opportunity growing here, I'd rather argue we just went through a peak cycle as is evident from the Peak Gross Margins for both CSCO and SPLK. Plus Jayshree Ullal and team at Arista Networks are eating away share in the Fortune-100. $PANW's pjatformization play will likely take a bite out of CSCO's security story, which frankly took too long for CSCO to right! integrating point solutions and stitching them together just doesnt work in security-- CSCO should borrow a page from $FTNT on how to organically grow in security. CSCO has a lot of work ahead of them, SPLK had been on the block for so long, its previous mgmt. significantly under-invested in SPLK and so now CSCO has to step up and drive incremental Opex. Beyond incremental opex, the higher interest rate expense is gonna eat away the EPS.. Streets ~$3.70 FY26 EPS is too high.. would be lucky if they get to $3.50. You know CSCO is in trouble when they got out of their comfort zone of tuck-in acquisitions (typically less than $3B) and bought SPLK for $28B! Remember, Harvard Business School wrote a case study on CSCO's "innovation through acquisition" untill John Chambers disastrous acquisition of Linksys (to expand into consumer market). History is clear the Linksys acquisition was a disaster. Look M&A is hard, Tech M&A is even harder and large tech M&A is next to impossible to be successful. To be fair, CSCO has out executed in the past, its track record in M&A is simply outstanding, one of the reasons why CSCO is still as relevant today as it was during the hight of the "dot com" bubble. CSCO rightfully belonged in the tech leader with the likes of $MSFT, $ORCL. But with the SPLK deal odds are against them -- i suspect this deal was dont by "financial heads" vs the "product leaders". Sure SPLK was big enough to drive a step function improvement in CSCO's software revenue story.. but it also comes with a set of challenges that CSCO is not accustomed to. Odds are against CSCO this time.
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