Cisco Systems (CSCO), a main supplier of networking, safety and collaboration options, is scheduled to report its fiscal fourth-quarter 2025 earnings on Wednesday after the market shut. Analysts estimate earnings per share (EPS) of 98 cents on income of roughly $14.63 billion, reflecting 7.3% year-over-year income progress and about 16% year-on-year free money movement progress to only beneath $4.1 billion. The firm’s efficiency has been influenced by developments in synthetic intelligence (AI) infrastructure, cybersecurity demand and enterprise digital transformation. Cisco’s year-to-date whole return is almost greater than 23%, outperforming QQQ by ~11% as of Friday. However, macroeconomic uncertainties, together with potential tariffs and aggressive pressures, introduce dangers. Bull case: The bullish outlook for Cisco facilities on its positioning in high-growth areas akin to AI infrastructure and software-centric companies, that are anticipated to drive sustained income enlargement and margin enchancment. On the May 14 earnings name, the corporate highlighted that that they had acquired over $1 billion in AI infrastructure orders yr so far, exceeding their fiscal yr goal early. (Cisco’s fiscal yr runs from Aug. 1 to July 31). Cisco has “three pillars” in their AI alternative: AI coaching infrastructure for webscale AI inference/enterprise clouds AI community connectivity. Additionally, Cisco introduced a partnership with Nvidia to create a unified structure and safe AI options. Cisco’s valuation stays comparatively engaging, buying and selling at 18.9x FY estimates and 17.8x ahead adjusted earnings estimates. This a number of is extra in conserving with a cyclical/hardware-based enterprise, whereas Cisco’s been shifting in direction of recurring income streams, with software program subscriptions now comprising over 50% of whole income. Not solely do expertise companies are usually extra constant than {hardware} gross sales, however the price of offering them is significantly decrease. Product income is estimated to be ~48% of the entire, whereas related prices are ~75% of the entire for the trailing 12 months. Put in a different way, companies are extra constant AND have a greater margin. The firm’s FY free money movement estimate of $13.4 billion represents a free money movement yield of about 4.7%, Bear case: Cisco’s conventional networking {hardware} faces commoditization dangers, and whereas AI orders are promising, the better than $1 billion in AI orders the corporate highlighted in May represented between 2%-3% of the corporate’s whole FY-to-date revenues of greater than $40 billion. One may argue that the inventory’s important year-to-date outperformance displays important optimism, and the aforementioned value of income from the product/{hardware} aspect may result in margin compression in the occasion of stock overstocking. Analysts are additionally forecasting $4.03 in adjusted EPS for FY2026, solely 6.3% yearly. That’s not solely lower than many AI expertise corporations, however truly properly under the speed of earnings progress exhibited by the S & P 500 usually, though these two are carefully associated, admittedly because of the outsize results of expertise behemoths like Nvidia. Earnings associated implied move (options): The options market is implying a move of roughly 5%, which is in line with the historic common. One approach to play a modestly bullish view in Cisco is by buying a longer-dated December 72.5 calls financed in half with the sale of a nearer-dated strangle, such because the September 67.5/80. This would keep a longer-term bullish perspective whereas searching for to capitalize on the “vol crush” that incessantly follows earnings in the nearer-dated September options. DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and don’t replicate the opinions of CNBC, NBC UNIVERSAL, their mum or dad firm or associates, and should have been beforehand disseminated by them on tv, radio, web or one other medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click right here for the complete disclaimer.