CSCO

The business quality is real. FY2025 gross margin was 64.9%, net margin 18.0%, and ROE 21.7%. Cisco is asset-light and cash-rich: operating cash flow jumped 30.5% to $14.2B against just $905M of capex (~$13.3B free cash flow), and management returned roughly $12.4B to shareholders — $6.0B of buybacks plus $6.44B of dividends — with about $14.2B of buyback authorization still remaining per the 10-K. On cash generation alone this is a genuine compounder.

But the growth is lower-quality than the headline. Revenue rose 5.3% to $56.7B, yet the MD&A is explicit that this leaned on a full year of Splunk versus ~4 months in FY2024: total software revenue was $22.3B (+21%) and the standout segment moves — Security +59%, Observability +26% — were Splunk-driven, while core Networking product revenue actually declined 3%. Underneath, net income fell 1.4% to $10.2B (below the FY2023 peak of $12.6B on higher revenue), operating margin compressed 1.8 points to 20.8% (amortization of purchased intangibles, higher share-based comp, and a Q4 supplier legal charge per MD&A), and diluted EPS was essentially flat at $2.55.