Troubling Similarities at Cisco Systems

Published: 2026-05-15 02:57:20 ET CSCO

Exactly 26 years ago, just before the dot-com bubble burst, Cisco held the crown as the world's most highly valued company, representing 5% of the Nasdaq index on its own.

Kevin Smith

Published on 05/15/2026 at 02:57 am EDT

Much water has flowed under the bridge since then, of course, and shareholders from that era will have had to wait until the end of 2025 to see Cisco's share price return to its former highs.

The equipment manufacturer, which provides the entire technical backbone behind the network infrastructure of major corporations and has gradually repositioned itself in services and software, was - as many recall - the perfect embodiment of the famous dot-com speculative bubble, which some see repeating itself today.

At the time, the internet wave was sweeping the world much like AI is today, and Cisco seemed destined to wire the entire planet and prosper indefinitely. Veterans remember that this translated into annual earnings growth of over 60%, and a market capitalization that, at its peak, reached a multiple of... 200  times earnings.

25 years later, any comparison with analogous situations is, of course, left to the reader's discretion.

Cisco, which published its Q3 results this week, should see its best growth performance in 2026 since 2008 and the subprime crisis. This, once again, allows everyone to draw their own compelling analogies.

Is this a new beginning or a temporary upswing? In any case, it is good news for the group, whose inflation-adjusted revenue has stagnated for ten years, while its operating profit has been eaten away. While EPS are increasing - significantly - it is solely due to sustained share buybacks, which have reduced the number of outstanding shares by a fifth over the decade.

Trading at 15x earnings, with a dividend yield of between 3% and 4%, Cisco's average valuation throughout the past decennial cycle was that of a mature, no-growth group, albeit dominant in its sector. This valuation has recently ignited, exceeding 25x earnings and returning to a meager dividend yield.