Company DCF analysis file
Cisco DCF Analysis
A Cisco DCF must explain why higher FY2026 revenue and operating profit did not increase operating cash. Products and services provide different recognition and delivery patterns, but neither category is a disclosed cash margin. Use the latest completed annual basis rather than inventing a newer quarter.
Revenue, expenses and profit on one annual basis
Historical Cisco consolidated comparison, $ millions: FY2025 ended 2025-07-26 and FY2026 ended 2026-07-25. The latest reported observation uses the same completed annual basis shown in these columns.
| Measure | FY2025 | FY2026 |
|---|---|---|
| Revenue | 56,654 | 63,325 |
| Total cost of sales | 19,864 | 22,465 |
| Research and development | 9,300 | 9,563 |
| Sales and marketing | 10,966 | 11,559 |
| General and administrative | 2,992 | 2,761 |
| Purchased-intangible amortization within operating expenses | 1,028 | 916 |
| Restructuring and other charges | 744 | 693 |
| Operating income | 11,760 | 15,368 |
| Net income | 10,180 | 13,267 |
Source: Annual financial statements. Annual values are reported unless a row is marked derived.
Cost of sales is separate from development, selling and corporate spending. Starting from operating income already deducts those costs. FY2025 net income was $10,180 million on the annual-report basis.
Product and service categories are not cash-flow segments
| Reported revenue, $ millions | FY2025 | FY2026 |
|---|---|---|
| Product | 41,608 | 48,295 |
| Services | 15,046 | 15,030 |
Source: Annual business disclosures and financial notes. Annual values are reported unless a row is marked derived.
A product can include software, and a service contract can be billed before it is recognized. These categories cannot be relabelled simply as hardware and recurring cash. Model delivery and renewal cohorts with their actual billing and service periods before selecting collection assumptions.
Reconcile reported cash before forecasting investor cash
| Measure | FY2025 | FY2026 |
|---|---|---|
| Operating cash | 14,193 | 14,177 |
| Cash property purchases | 905 | 1,410 |
| Cash after property purchases: derived | 13,288 | 12,767 |
Source: Annual cash-flow statement and related notes. Annual values are reported unless a row is marked derived.
Operating cash decreased by $16 million and property purchases increased by $505 million, reducing the cash remainder by $521 million. The 2026 subtraction is 14,177 minus 1,410 = $12,767 million. Earnings growth alone does not establish improved cash conversion; inventory, receivables, taxes and deferred revenue remain separate movements.
Latest released full-year basis
| Observation | Period-specific evidence |
|---|---|
| Reported period basis | FY2026 full-year results, released 2026-08-12, is the latest completed reporting release used here. The latest complete year combines higher revenue and operating profit with almost unchanged operating cash. Product and service accounting categories do not provide separate customer cash margins or an organic-growth measure. |
| Interpretation boundary | The latest reported period is the same completed annual basis shown above; no newer completed quarter is supplied. |
Source: official reporting for the stated period. This is the latest completed annual release at October 25, 2026, already represented in the annual columns; no separate newer quarter is invented. Later reporting must be checked before refreshing the valuation date.
Turn the statements into a DCF operating case
Build product deliveries and service renewals separately, then reconcile shared costs and acquisition accounting. Convert operating profit to investor cash with operating taxes, noncash costs, investment and operating balances. Acquired-intangible amortization and the payment to acquire a business are not the same investment. Stock awards, debt, nonoperating assets and any per-share denominator need the same valuation-date convention.
| Driver | Evidence to carry into the forecast | Downside condition to test |
|---|---|---|
| Product delivery | Customer acceptance, channel inventory and collections | Inventory is funded while product collections slow |
| Service renewal | Contract base, paid renewal value and delivery expense | Renewal demand weakens while support costs remain due |
| Acquisition integration | Comparable acquired scope and recurring investment | Adjusted earnings omit spending needed to sustain acquired revenue |
Compare stable service renewals with slower product deliveries, then test weaker renewals separately. Keep supplier and service commitments visible. A forecast that transfers higher accounting profit straight into cash would miss the historical divergence this annual comparison exposes.
Use the Cisco financial analysis for the broader operating context, the company forecast to state the operating assumptions, and the DCF calculator only after defining the investor cash stream. Keep the statement definitions, reporting dates and your own assumptions visible when comparing valuation cases.
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