Cisco's flexible supply chain drives gross margin expansion, facing competition but strong overall.

Cisco Systems (CSCO) benefits from a flexible supply chain driving gross margin expansion. In Q3 fiscal 2025, product gross margin expanded 70 bps year over year to 67.6%. Non-GAAP gross margin expanded 30 bps year over year, hitting the high end of guidance.

Hewlett-Packard Enterprise (HPE) emerges as a strong Cisco competitor post-acquiring Juniper Networks. HPE offers AI-driven networking solutions but lags in gross margins at 29% compared to Cisco’s 65%. Arista Networks (ANET) leads in cloud and AI-driven networking with gross margins around 64%.

Cisco’s stock performance shows 18% YTD growth. It’s trading at a forward 12-month P/S ratio of 4.6, higher than the industry’s 4.39X. The Zacks Consensus Estimate for fiscal 2025 is $3.79 per share and $4 per share for fiscal 2026.

Cisco expects Q4 fiscal 2025 non-GAAP gross margin between 67.5% and 68.5%. Non-GAAP operating margin is expected to be between 33.5% and 34.5%. The company faces competition from HPE and ANET but remains a strong player in the networking landscape.

Read more at Nasdaq: Cisco’s Margins Riding on Supply Chain: Will the Expansion Continue?