At today's price, Cisco's stock is pricing in about 16.4% annual free-cash-flow growth for the next ten years. Over the past five years, the company's actual FCF shrank at -2.6% a year, while revenue grew just 3.3% a year — both far below what the price now requires.
At its current price, CSCO implies ~16.4% annual FCF growth for the next 10 years, discounted at 10%.
Cisco's actual 5-year FCF growth was -2.6% a year — it shrank, not grew.
Required growth vs. historical growth
Required growth from the reverse DCF below. Historical CAGRs from 10-K FY2021–FY2025 income and cash flow statements. FCF actually declined over the period, so its bar is shown as a stub rather than a proportional fill.
Sensitivity: what if the discount rate moves?
| WACC | Required growth |
|---|---|
| 8% | 11.6% |
| 10% (base case) | 16.4% |
| 12% | 20.6% |
Even at the lowest discount rate tested (8%), the required growth rate (11.6%) is still more than three times Cisco's 5-year revenue CAGR (3.3%).
What would move this number
- Using the 3-year average FCF ($14.18B) instead of trailing-twelve-month FCF ($11.79B) lowers the required growth rate from 16.4% to 13.9%. TTM FCF came in below the 3-year average due to recent memory-chip price spikes compressing margins and higher inventory/capex — judged not one-time, so used as the base without normalization.
- Swapping the comparison benchmark to revenue CAGR (+3.3%) instead of FCF CAGR (-2.6%) paints a less dire picture, but the market's ask is still roughly five times that pace.
- Using Cisco's own latest guidance (FY2026 $62.8-63.0B vs. FY2025's actual $56.65B) implies near-term growth of about +11% — much closer to the market's ask, reflecting the recent AI-order surge. Whether that pace can be sustained for a full decade is a separate question this model can't answer.
Show your work
Inputs, sources, model assumptions, and the calculation
- Share price$109.59 — stockanalysis.com, Aug 20, 2026, 4:00PM EDT close
- Diluted shares outstanding3.940B — stockanalysis.com, Aug 20, 2026
- Market cap$431.8B — price × diluted shares (calculated)
- Total debt$31.303B — 10-Q FY2026 Q3 balance sheet (Apr 25, 2026): $11.93B short-term + $19.37B long-term
- Cash + investments$16.64B — 10-Q FY2026 Q3 balance sheet ($7.08B cash + $9.56B investments)
- Net debt$14.66B — calculated
- Trailing-twelve-month FCF$11.79B — 10-K FY2025 cash flow statement, p.58, plus 10-Q FY2026 Q3 cash flow, p.6 (9-month substitution)
- 3-year average FCF (FY2023-2025)$14.18B
- Discount rate (WACC)10% base case (8%/12% tested)
- Terminal growth rate2.5% — long-run GDP-level assumption
Normalization check: TTM FCF ($11.79B) is 16.9% below the three-year average ($14.18B) — within the ±40% threshold, so used as-is without adjustment.
Model: free cash flow is assumed to grow at a constant annual rate g for 10 years, then at a 2.5% terminal rate thereafter, solved by bisection for the value of g that equates present value to today's enterprise value (market cap $431.8B + net debt $14.66B = $446.4B).
Historical CAGR check: 5-yr FCF CAGR = (2025 FCF ÷ 2021 FCF)^(1/4) − 1 = ($13.3B ÷ $14.8B)^(1/4) − 1 = -2.6%. 5-yr revenue CAGR = ($56.7B ÷ $49.8B)^(1/4) − 1 = +3.3%.
The fine print
- This isn't a fair-value price target — it only shows what the current price already assumes.
- Change the discount rate, the FCF base, the projection window, or the terminal growth rate, and the answer moves — see the sensitivity table above.
- Whether 16.4% growth is realistic depends on whether the AI-infrastructure order boom becomes a durable, decade-long growth driver rather than a multi-quarter cycle — not on this math alone.
- Any investment decision, and its outcome, is your own responsibility.
Frequently asked questions
What growth rate does CSCO's stock price assume?
At today's price, Cisco's stock is pricing in about 16.4% annual free-cash-flow growth for the next ten years, at a 10% discount rate.
How does that compare to Cisco's actual growth?
Cisco's actual FCF shrank at -2.6% a year over the past five years (FY2021-FY2025), and revenue grew just 3.3% a year — both dramatically below the 16.4% the current price requires.
What share price was used for this analysis?
This analysis used $109.59, as of the Aug 20, 2026 close.