Cisco Stock's High Valuation May Be Based on Misplaced Optimism

Cisco Systems (CSCO) stock has been on a tear, returning about 59% over the past twelve months and trading at around $106 per share. However, this price comes with a rich valuation of about 24.6 times non-GAAP earnings per share for fiscal 2026.

This multiple is based on Cisco's own guidance and analysts' forecasts, but it ignores the two years that have already been forecasted. When looking at the first year of fiscal 2027, the price is more reasonable, with a valuation of around 20.6 times earnings.

The growth in AI infrastructure for hyperscalers has been a major driver for Cisco's stock, but much of this business is already ordered and recognized as revenue. Management expects this segment to deliver $7.5 billion in revenue for fiscal 2027, which will be a key contributor to the company's overall growth.