CSCO · Forward model · Observability · Bull case
What has to happen in Observability
Model as of
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Observability
Basis quarter$275M
Final quarter$406M
Implied CAGR+8%
Final revenue mix2%
The smallest disclosed line: $275M in the basis quarter, $1,095M and +4% for FY2026, +6% in Q4. ThousandEyes, AppDynamics and now Galileo Technologies. Subscale against Datadog and Dynatrace, and it matters to this model as an option rather than as a driver. No ARR and no customer count are published.
Last four quarters
2026 Q1
$274M
Reported
2026 Q2
$277M
Reported
2026 Q3
$269M
Reported
2026 Q4
$275M
Reported
ThousandEyes internet and network intelligenceAppDynamics application performance monitoringGalileo Technologies (acquired FY2026 Q4)
Sequential growth
+0.8%/qtr
decaying toward +1.5%
0.75% a quarter, about 3% a year, matching a line that has been flat around $270M for six quarters.
Observability
Latest: $406M (2031Q4E)
| Period | Value |
|---|---|
| 2024Q1 | $190M |
| 2024Q2 | $188M |
| 2024Q3 | $211M |
| 2024Q4 | $248M |
| 2025Q1 | $258M |
| 2025Q2 | $277M |
| 2025Q3 | $261M |
| 2025Q4 | $259M |
| 2026Q1 | $274M |
| 2026Q2 | $277M |
| 2026Q3 | $269M |
| 2026Q4 | $275M |
| 2027Q1E | $279M |
| 2027Q2E | $284M |
| 2027Q3E | $288M |
| 2027Q4E | $293M |
| 2028Q1E | $299M |
| 2028Q2E | $304M |
| 2028Q3E | $310M |
| 2028Q4E | $316M |
| 2029Q1E | $322M |
| 2029Q2E | $329M |
| 2029Q3E | $336M |
| 2029Q4E | $343M |
| 2030Q1E | $350M |
| 2030Q2E | $357M |
| 2030Q3E | $365M |
| 2030Q4E | $373M |
| 2031Q1E | $381M |
| 2031Q2E | $389M |
| 2031Q3E | $398M |
| 2031Q4E | $406M |
Assumptions & reasoning
- At 1.6% of revenue this line cannot move the valuation: even doubling its terminal growth changes fair value by cents. It is carried because Cisco reports it, not because it drives the answer.
- Margin 15% rising to 22% is assumed: a subscale software line still absorbing acquisitions, reaching software scale economics without a step-change in size. Nothing in the filings discloses this line's profitability.
- Every vertical margin here is assumed. Cisco discloses gross margin by geography (Americas 64.5%, EMEA 70.1%, APJC 67.3% in the basis quarter) and product-versus-services gross margin, and never operating profit, capex or headcount by product category.
- The two July quarters are derived, not printed: FY2024 Q4 and FY2025 Q4 are the fiscal-year column of the 10-K less the nine-month column of that year's Q3 10-Q, and both reconcile to the quarterly totals Cisco printed later, so they carry estimated: true.
- Capex intensity is the consolidated rate applied to every line: FY2026 property and equipment $1,410M on $63,325M of revenue is 2.2%, and Cisco publishes no capex by product category to split it with.