$46.7 Billion Already ContractedNarrow moat

Cisco Systems (CSCO) — moat facet

Cisco begins each year with about $46.7 billion already contracted, split evenly between software and support.

Cisco starts every year with most of a year's revenue already under contract. Remaining performance obligations, revenue contracted but not yet recognised, were $46,734 million at the end of fiscal 2026, up 7%1. That is about three quarters of a year's revenue2.

Remaining performance obligations ($M)21,723Short-term FY2522,776Short-term FY2621,810Long-term FY2523,958Long-term FY26Cisco Form 10-K FY2026
The long end grew twice as fast.

The backlog is split almost exactly in half. Products accounted for $23,436 million and services $23,298 million3. The product half is mostly software and subscriptions sold on multi-year terms; the services half is support contracts on installed equipment.

The long end grew faster than the short end. Obligations due within a year were $22,776 million, up about 4.8%, while those due later were $23,958 million, up about 9.8%45. Customers are signing longer contracts, which is what a vendor with switching costs should expect.

Through the year the backlog grew more slowly than revenue: $42.9 billion after the first quarter, up 7%; $43.4 billion after the second, up 5%; $43.5 billion after the third, up 4%678. Hardware revenue ran ahead of it.

The balance sheet shows the other side. Deferred revenue, invoiced but not yet earned, was $29,781 million at the end of fiscal 2026, $16,988 million of it current9. The rest of the backlog is contracted but not yet billed.

The product half is the software half. Product performance obligations were $23,436 million10, mostly subscriptions to software and security sold on multi-year terms, the same products whose subscription revenue grew from $14,078 million in fiscal 2024 to $18,314 million in fiscal 202611.

The backlog is the evidence that customers commit years ahead. If its growth falls behind revenue growth for another year, more of Cisco's income will depend on orders it has not yet won.

Moat trajectory: Holding steady

RPO +7%; long-term obligations +9.8%.

The number that tests this moat
Reported
Remaining performance obligations, year end
$46.7bn, +7% (end FY2026)

Committed future revenue; growth well behind revenue growth would mean more income depends on new orders.

Source: Cisco Form 10-K, FY2026 ↗
⚠ Threats to the moat
⚠ THREAT 01
A Backlog Growing Slower Than Revenue
Cisco's contracted backlog grew 7% while revenue grew 12%, so more of the company now rests on orders it has yet to take.
References
  1. ReportedRemaining performance obligations, revenue contracted but not yet recognised, were $46,734 million at the end of fiscal 2026, up 7%.
    Cisco Systems Form 10-K for fiscal 2026 (year ended 25 July 2026) - financial statements and notes: balance sheet, cash flow, commitments, customers and acquisitions. — FY2026 · publ. 2 September 2026 · source ↗
  2. Moat Explorer calcThat is about three quarters of a year's revenue.
    Moat Explorer calculation from Cisco's reported revenue, margins and financial statements ($ millions unless stated). Revenue growth FY2026 63,325 / 56,654 - 1 = 11.8%; increase 63,325 - 56,654 = 6,671. Networking share 34,668 / 63,325 = 54.7%; of product revenue 34,668 / 48,295 = 71.8%; networking increase 34,668 - 28,304 = 6,364, 6,364 / 6,671 = 95.4% of the revenue increase. Networking against FY2023 34,668 / 34,570 - 1 = 0.3%; FY2024 29,229 / 34,570 - 1 = -15.4% (a fall of 5,341); FY2025 28,304 / 29,229 - 1 = -3.2% (a fall of 925); FY2023 34,570 - 29,265 = +5,305. Other lines FY2026 changes: security 8,232 - 8,094 = +138 (+1.7%); collaboration 4,300 - 4,154 = +146 (+3.5%); observability 1,095 - 1,055 = +40 (+3.8%); services 15,030 - 15,046 = -16 (-0.1%). Product revenue 48,295 / 41,608 - 1 = 16.1%. Shares of FY2026 revenue: services 15,030 / 63,325 = 23.7%; security 8,232 / 63,325 = 13.0%; collaboration 4,300 / 63,325 = 6.8%; observability 1,095 / 63,325 = 1.7%. Observability shares: 581 / 51,557 = 1.1% (FY2022); 661 / 56,998 = 1.2%; 837 / 53,803 = 1.6%; 1,055 / 56,654 = 1.9%. Observability growth 661 / 581 - 1 = 13.8%; 837 / 661 - 1 = 26.6%; 1,055 / 837 - 1 = 26.0%; 1,095 / 1,055 - 1 = 3.8%; 1,095 / 581 = 1.88 times. Services growth 13,856 / 13,539 - 1 = 2.3% (FY2023); 14,550 / 13,856 - 1 = 5.0%; 15,046 / 14,550 - 1 = 3.4%; FY2016 to FY2026 15,030 / 11,993 - 1 = 25.3%. Services gross profit 10,346 / 40,860 = 25.3% of gross margin. Subscription services 13,663 / 15,030 = 90.9% of services. Non-subscription product 48,295 - 18,314 = 29,981; non-subscription services 15,030 - 13,663 = 1,367. Subscription share 31,977 / 63,325 = 50.5% (FY2026); 31,526 / 56,654 = 55.6% (FY2025); 27,380 / 53,803 = 50.9% (FY2024); subscription growth 31,977 / 31,526 - 1 = 1.4%. Security: 3,382 / 1,969 - 1 = 71.8% (FY2016 to FY2021, older basis); 8,094 / 3,859 = 2.1 times (FY2023 to FY2025); 8,232 / 3,699 = 2.2 times (FY2022 to FY2026). Collaboration 4,300 / 4,823 - 1 = -10.8% against FY2020. Segments: Americas revenue 37,799 / 33,656 - 1 = 12.3%; Americas gross margin 68.2% - 65.1% = 3.1 points (310 basis points); EMEA 16,613 / 14,824 - 1 = 12.1%; APJC 8,914 / 8,174 - 1 = 9.1%. United States revenue 34.4 / 63.3 = 54.3%; outside the United States 63.3 - 34.4 = 28.9 bn; United States growth 34.4 / 30.4 - 1 = 13.2%. AI and orders: Q3 FY2026 hyperscaler orders 5.3 - 1.3 - 2.1 = 1.9 bn; Acacia about 1,000 / 9,791 networking = 10.2%; FY2027 revenue guidance midpoint (72.2 + 73.4) / 2 = 72.8 bn, 72.8 / 63.325 - 1 = 15.0%; AI revenue target 7.5 / 72.8 = 10.3%; price increases 4.5 points / 15 = about a third; Q1 FY2027 gross margin guidance midpoint (65 + 66) / 2 = 65.5%; Q1 FY2027 operating margin guidance midpoint (35.5 + 36.5) / 2 = 36.0%. Security plus observability Q4 FY2026 2,226 + 275 = 2,501. Backlog: remaining performance obligations 46,734 / 63,325 = 73.8% of revenue; short-term 22,776 / 21,723 - 1 = 4.8%; long-term 23,958 / 21,810 - 1 = 9.8%. Purchase commitments 17,165 / 7,599 - 1 = 125.9%; 17,165 / 63,325 = 27.1% of revenue. Inventory 5,694 / 3,164 - 1 = 80.0%. Competitors named in the FY2026 10-K: 18 (Amazon Web Services, Arista, Broadcom, Ciena, CrowdStrike, Datadog, Dell, Dynatrace, Fortinet, Hewlett Packard Enterprise, Huawei, Microsoft, Nokia, Nvidia, Palo Alto Networks, RingCentral, Zoom, Zscaler). Balance sheet, cash flow and market data: Net income 13,267 / 10,180 - 1 = 30.3%; free cash flow 12,767 / 13,288 - 1 = -3.9%; capital spending 1,410 / 905 - 1 = 55.8%; capital spending 1,410 / 63,325 = 2.2% of revenue; free cash flow margin 12,767 / 63,325 = 20.2%; returned 12,659 / 12,767 = 99.2% of free cash flow. Dividends / free cash flow: 6,384 / 10,210 = 62.5% (FY2024); 6,437 / 13,288 = 48.4% (FY2025); 6,553 / 12,767 = 51.3% (FY2026). Dividends per share 1.66 / 0.72 = 2.3 times (FY2014 to FY2026). Buybacks: 117 - 76 = 41 million fewer shares than FY2024; average price 80.26 / 49.45 - 1 = 62.3%; FY2018-FY2026 17,661 + 20,577 + 2,619 + 2,902 + 7,734 + 4,271 + 5,764 + 5,995 + 6,106 = 73,629. Diluted shares 3,987 / 5,146 - 1 = -22.5%. Net income 13,267 / 8,981 - 1 = 47.7%; diluted EPS 3.33 / 1.75 - 1 = 90.3% (FY2015 to FY2026). Net debt 29,533 - 15,918 (cash and investments, about 15.9 bn) = 13,615, about 13.6 bn. Net interest 1,365 - 1,006 = +359 (FY2024); 1,001 - 1,593 = -592 (FY2025); 866 - 1,470 = -604 (FY2026). Goodwill 59,477 / 129,637 = 45.9% of total assets; Splunk goodwill 19,301 / 27,090 = 71.2% of consideration. Employees 82,400 / 90,400 - 1 = -8.8%; R&D 9,563 - 9,300 = +263; sales and marketing 11,559 - 10,966 = +593; R&D 9,563 / 63,325 = 15.1% of revenue; restructuring 693 / 63,325 = 1.1% of revenue. FY2025 net income as released about 10,500 - 10,180 as filed = about 320 (about 0.3 bn); EPS 2.61 - 2.55 = 0.06. Free cash flow yield 12,767 / 421,740 = 3.0%. Price against the 52-week high 106.97 / 130.37 - 1 = -17.9%. P/E 421,740 / 13,267 = 31.8; P/S 421,740 / 63,325 = 6.66. Further: revenue FY2023 to FY2026 63,325 / 56,998 - 1 = 11.1%; HPE and Juniper Ethernet 1.15 / 5.43 = 21.2% of Cisco Ethernet; non-GAAP EPS 4.33 / 3.81 - 1 = 13.6%; FY2026 order forecast 9 / 5 - 1 = 80%; FY2025 AI orders 2.0 / 56.654 = 3.5% of revenue; FY2026 9.3 / 63.325 = 14.7%; product subscription 18,314 / 17,783 - 1 = 3.0%; FY2018 buyback 17,661 / 80.26 = 220 million shares; 76 / 3,946 = 1.9% of shares; revenue FY2024 to FY2026 63,325 / 53,803 - 1 = 17.7%; Arista 2.30 - 2.24 = 0.06 bn; R&D 9,300 / 7,983 - 1 = 16.5% and revenue 56,654 / 53,803 - 1 = 5.3% (FY2025); R&D 9,563 / 9,300 - 1 = 2.8% (FY2026); Q1 FY2027 guidance midpoint 18.1 / 14.883 - 1 = 21.6%; FY2028 consensus P/E 106.97 / 5.62 = 19.0; cash 15.9 / 6.553 = 2.4 years of dividends; services obligations 23,298 / 46,734 = 49.9% and 23,298 / 15,030 = 1.55 years; short-term debt 10,161 / 29,533 = 34.4%; authorisation 8.1 / 6.1 = 1.3 years; product-services margin spread 68.8 - 63.2 = 5.6 points; FY2024 returns (6,384 + 5,764) / 10,210 = 119%; diluted shares 4,254 / 4,881 - 1 = -12.8% (FY2018 to FY2020); buybacks FY2018 and FY2019 17,661 + 20,577 = 38,238; AI revenue 7.5 / 3.8 = 1.97 times; FY2027 GAAP EPS guidance midpoint (4.00 + 4.06) / 2 = 4.03, 4.03 / 3.33 - 1 = 21.0%; G&A 2,761 / 2,992 - 1 = -7.7%; Q4 security 2,226 / 8,232 = 27.0% of the year - revenue-line totals, growth and orders. — FY2015-FY2027 · publ. September 2026 · source ↗
    Method: Arithmetic on figures reported in Cisco's Forms 10-K, quarterly results releases, the Q4 FY2026 call and market data; operands shown in the source line.
  3. ReportedProducts accounted for $23,436 million and services $23,298 million.
    Cisco Systems Form 10-K for fiscal 2026 (year ended 25 July 2026) - Item 7 MD&A: revenue by product category and segment, and gross margins. — FY2026 · publ. 2 September 2026 · source ↗
  4. ReportedObligations due within a year were $22,776 million, up about 4.8%, while those due later were $23,958 million, up about 9.8%.
    Cisco Systems Form 10-K for fiscal 2026 (year ended 25 July 2026) - Item 1 business: products, strategy, employees and sales. — FY2026 · publ. 2 September 2026 · source ↗
  5. Moat Explorer calcObligations due within a year were $22,776 million, up about 4.8%, while those due later were $23,958 million, up about 9.8%.
    Moat Explorer calculation from Cisco's reported revenue, margins and financial statements ($ millions unless stated). Revenue growth FY2026 63,325 / 56,654 - 1 = 11.8%; increase 63,325 - 56,654 = 6,671. Networking share 34,668 / 63,325 = 54.7%; of product revenue 34,668 / 48,295 = 71.8%; networking increase 34,668 - 28,304 = 6,364, 6,364 / 6,671 = 95.4% of the revenue increase. Networking against FY2023 34,668 / 34,570 - 1 = 0.3%; FY2024 29,229 / 34,570 - 1 = -15.4% (a fall of 5,341); FY2025 28,304 / 29,229 - 1 = -3.2% (a fall of 925); FY2023 34,570 - 29,265 = +5,305. Other lines FY2026 changes: security 8,232 - 8,094 = +138 (+1.7%); collaboration 4,300 - 4,154 = +146 (+3.5%); observability 1,095 - 1,055 = +40 (+3.8%); services 15,030 - 15,046 = -16 (-0.1%). Product revenue 48,295 / 41,608 - 1 = 16.1%. Shares of FY2026 revenue: services 15,030 / 63,325 = 23.7%; security 8,232 / 63,325 = 13.0%; collaboration 4,300 / 63,325 = 6.8%; observability 1,095 / 63,325 = 1.7%. Observability shares: 581 / 51,557 = 1.1% (FY2022); 661 / 56,998 = 1.2%; 837 / 53,803 = 1.6%; 1,055 / 56,654 = 1.9%. Observability growth 661 / 581 - 1 = 13.8%; 837 / 661 - 1 = 26.6%; 1,055 / 837 - 1 = 26.0%; 1,095 / 1,055 - 1 = 3.8%; 1,095 / 581 = 1.88 times. Services growth 13,856 / 13,539 - 1 = 2.3% (FY2023); 14,550 / 13,856 - 1 = 5.0%; 15,046 / 14,550 - 1 = 3.4%; FY2016 to FY2026 15,030 / 11,993 - 1 = 25.3%. Services gross profit 10,346 / 40,860 = 25.3% of gross margin. Subscription services 13,663 / 15,030 = 90.9% of services. Non-subscription product 48,295 - 18,314 = 29,981; non-subscription services 15,030 - 13,663 = 1,367. Subscription share 31,977 / 63,325 = 50.5% (FY2026); 31,526 / 56,654 = 55.6% (FY2025); 27,380 / 53,803 = 50.9% (FY2024); subscription growth 31,977 / 31,526 - 1 = 1.4%. Security: 3,382 / 1,969 - 1 = 71.8% (FY2016 to FY2021, older basis); 8,094 / 3,859 = 2.1 times (FY2023 to FY2025); 8,232 / 3,699 = 2.2 times (FY2022 to FY2026). Collaboration 4,300 / 4,823 - 1 = -10.8% against FY2020. Segments: Americas revenue 37,799 / 33,656 - 1 = 12.3%; Americas gross margin 68.2% - 65.1% = 3.1 points (310 basis points); EMEA 16,613 / 14,824 - 1 = 12.1%; APJC 8,914 / 8,174 - 1 = 9.1%. United States revenue 34.4 / 63.3 = 54.3%; outside the United States 63.3 - 34.4 = 28.9 bn; United States growth 34.4 / 30.4 - 1 = 13.2%. AI and orders: Q3 FY2026 hyperscaler orders 5.3 - 1.3 - 2.1 = 1.9 bn; Acacia about 1,000 / 9,791 networking = 10.2%; FY2027 revenue guidance midpoint (72.2 + 73.4) / 2 = 72.8 bn, 72.8 / 63.325 - 1 = 15.0%; AI revenue target 7.5 / 72.8 = 10.3%; price increases 4.5 points / 15 = about a third; Q1 FY2027 gross margin guidance midpoint (65 + 66) / 2 = 65.5%; Q1 FY2027 operating margin guidance midpoint (35.5 + 36.5) / 2 = 36.0%. Security plus observability Q4 FY2026 2,226 + 275 = 2,501. Backlog: remaining performance obligations 46,734 / 63,325 = 73.8% of revenue; short-term 22,776 / 21,723 - 1 = 4.8%; long-term 23,958 / 21,810 - 1 = 9.8%. Purchase commitments 17,165 / 7,599 - 1 = 125.9%; 17,165 / 63,325 = 27.1% of revenue. Inventory 5,694 / 3,164 - 1 = 80.0%. Competitors named in the FY2026 10-K: 18 (Amazon Web Services, Arista, Broadcom, Ciena, CrowdStrike, Datadog, Dell, Dynatrace, Fortinet, Hewlett Packard Enterprise, Huawei, Microsoft, Nokia, Nvidia, Palo Alto Networks, RingCentral, Zoom, Zscaler). Balance sheet, cash flow and market data: Net income 13,267 / 10,180 - 1 = 30.3%; free cash flow 12,767 / 13,288 - 1 = -3.9%; capital spending 1,410 / 905 - 1 = 55.8%; capital spending 1,410 / 63,325 = 2.2% of revenue; free cash flow margin 12,767 / 63,325 = 20.2%; returned 12,659 / 12,767 = 99.2% of free cash flow. Dividends / free cash flow: 6,384 / 10,210 = 62.5% (FY2024); 6,437 / 13,288 = 48.4% (FY2025); 6,553 / 12,767 = 51.3% (FY2026). Dividends per share 1.66 / 0.72 = 2.3 times (FY2014 to FY2026). Buybacks: 117 - 76 = 41 million fewer shares than FY2024; average price 80.26 / 49.45 - 1 = 62.3%; FY2018-FY2026 17,661 + 20,577 + 2,619 + 2,902 + 7,734 + 4,271 + 5,764 + 5,995 + 6,106 = 73,629. Diluted shares 3,987 / 5,146 - 1 = -22.5%. Net income 13,267 / 8,981 - 1 = 47.7%; diluted EPS 3.33 / 1.75 - 1 = 90.3% (FY2015 to FY2026). Net debt 29,533 - 15,918 (cash and investments, about 15.9 bn) = 13,615, about 13.6 bn. Net interest 1,365 - 1,006 = +359 (FY2024); 1,001 - 1,593 = -592 (FY2025); 866 - 1,470 = -604 (FY2026). Goodwill 59,477 / 129,637 = 45.9% of total assets; Splunk goodwill 19,301 / 27,090 = 71.2% of consideration. Employees 82,400 / 90,400 - 1 = -8.8%; R&D 9,563 - 9,300 = +263; sales and marketing 11,559 - 10,966 = +593; R&D 9,563 / 63,325 = 15.1% of revenue; restructuring 693 / 63,325 = 1.1% of revenue. FY2025 net income as released about 10,500 - 10,180 as filed = about 320 (about 0.3 bn); EPS 2.61 - 2.55 = 0.06. Free cash flow yield 12,767 / 421,740 = 3.0%. Price against the 52-week high 106.97 / 130.37 - 1 = -17.9%. P/E 421,740 / 13,267 = 31.8; P/S 421,740 / 63,325 = 6.66. Further: revenue FY2023 to FY2026 63,325 / 56,998 - 1 = 11.1%; HPE and Juniper Ethernet 1.15 / 5.43 = 21.2% of Cisco Ethernet; non-GAAP EPS 4.33 / 3.81 - 1 = 13.6%; FY2026 order forecast 9 / 5 - 1 = 80%; FY2025 AI orders 2.0 / 56.654 = 3.5% of revenue; FY2026 9.3 / 63.325 = 14.7%; product subscription 18,314 / 17,783 - 1 = 3.0%; FY2018 buyback 17,661 / 80.26 = 220 million shares; 76 / 3,946 = 1.9% of shares; revenue FY2024 to FY2026 63,325 / 53,803 - 1 = 17.7%; Arista 2.30 - 2.24 = 0.06 bn; R&D 9,300 / 7,983 - 1 = 16.5% and revenue 56,654 / 53,803 - 1 = 5.3% (FY2025); R&D 9,563 / 9,300 - 1 = 2.8% (FY2026); Q1 FY2027 guidance midpoint 18.1 / 14.883 - 1 = 21.6%; FY2028 consensus P/E 106.97 / 5.62 = 19.0; cash 15.9 / 6.553 = 2.4 years of dividends; services obligations 23,298 / 46,734 = 49.9% and 23,298 / 15,030 = 1.55 years; short-term debt 10,161 / 29,533 = 34.4%; authorisation 8.1 / 6.1 = 1.3 years; product-services margin spread 68.8 - 63.2 = 5.6 points; FY2024 returns (6,384 + 5,764) / 10,210 = 119%; diluted shares 4,254 / 4,881 - 1 = -12.8% (FY2018 to FY2020); buybacks FY2018 and FY2019 17,661 + 20,577 = 38,238; AI revenue 7.5 / 3.8 = 1.97 times; FY2027 GAAP EPS guidance midpoint (4.00 + 4.06) / 2 = 4.03, 4.03 / 3.33 - 1 = 21.0%; G&A 2,761 / 2,992 - 1 = -7.7%; Q4 security 2,226 / 8,232 = 27.0% of the year - revenue-line totals, growth and orders. — FY2015-FY2027 · publ. September 2026 · source ↗
    Method: Arithmetic on figures reported in Cisco's Forms 10-K, quarterly results releases, the Q4 FY2026 call and market data; operands shown in the source line.
  6. ReportedThrough the year the backlog grew more slowly than revenue: $42.9 billion after the first quarter, up 7%; $43.4 billion after the second, up 5%; $43.5 billion after the third, up 4%.
    Cisco first-quarter fiscal 2026 results release, Form 8-K exhibit 99.1. — Q1 FY2026 · publ. 12 November 2025 · source ↗
  7. ReportedThrough the year the backlog grew more slowly than revenue: $42.9 billion after the first quarter, up 7%; $43.4 billion after the second, up 5%; $43.5 billion after the third, up 4%.
    Cisco second-quarter fiscal 2026 results release, Form 8-K exhibit 99.1. — Q2 FY2026 · publ. 11 February 2026 · source ↗
  8. ReportedThrough the year the backlog grew more slowly than revenue: $42.9 billion after the first quarter, up 7%; $43.4 billion after the second, up 5%; $43.5 billion after the third, up 4%.
    Cisco third-quarter fiscal 2026 results release, Form 8-K exhibit 99.1. — Q3 FY2026 · publ. 13 May 2026 · source ↗
  9. ReportedDeferred revenue, invoiced but not yet earned, was $29,781 million at the end of fiscal 2026, $16,988 million of it current.
    Cisco fourth-quarter and fiscal 2026 results release, Form 8-K exhibit 99.1 - quarterly revenue by line and segment, margins, AI infrastructure orders and fiscal 2027 guidance - fourth-quarter and full-year results by line, segment and margin. — Q4 FY2026 · publ. 12 August 2026 · source ↗
  10. ReportedProduct performance obligations were $23,436 million, mostly subscriptions to software and security sold on multi-year terms, the same products whose subscription revenue grew from $14,078 million in fiscal 2024 to $18,314 million in fiscal 2026.
    Cisco Systems Form 10-K for fiscal 2026 (year ended 25 July 2026) - Item 7 MD&A: revenue by product category and segment, and gross margins. — FY2026 · publ. 2 September 2026 · source ↗
  11. ReportedProduct performance obligations were $23,436 million, mostly subscriptions to software and security sold on multi-year terms, the same products whose subscription revenue grew from $14,078 million in fiscal 2024 to $18,314 million in fiscal 2026.
    Cisco Systems Form 10-K for fiscal 2026 (year ended 25 July 2026) - Item 7 MD&A: revenue by product category and segment, and gross margins. — FY2026 · publ. 2 September 2026 · source ↗
Sources
Generated September 25, 2026