Cisco’s ARR Growth Slows to 2% While Stock Trades at 7.8x PS
ANET•Cisco Systems stock has risen 87% over the past year while AI-related orders jumped 35% y/y, yet its Annual Recurring Revenue grew only 2% in the latest quarter vs. 3% prior. Subscriptions now represent 49% of revenue, and the stock trades at a 7.8x price-to-sales multiple, above its 10-year high.
1. ARR Growth Deceleration
Cisco reported that its Annual Recurring Revenue increased by just 2% year-over-year in the latest quarter, down from a 3% gain in the prior period. Product-specific ARR decelerated to 4% growth from 6% in the previous quarter, signaling potential weakness in its subscription expansion.
2. Subscription Transition Under Pressure
Subscription services now account for 49% of Cisco’s total revenue, reflecting the company's strategic shift from hardware to software. Despite a 35% year-over-year surge in product orders driven by AI infrastructure demand, the slower ARR growth casts doubt on the durability of recurring revenue.
3. Valuation at Decade High
Cisco’s price-to-sales ratio stands at 7.8, surpassing its 10-year high of 5.2 and implying elevated market expectations. If recurring revenue momentum falters, the stock multiple risks contracting, especially when the AI-driven hardware cycle inevitably cools.
