Hi, this is Steve Eisman and welcome to another episode of the Real Eisman Playbook. So, we've been doing a lot of work on AI on this podcast for the last many, many months. We've gotten different perspectives. We've had on Gilura and Dan Ies who are very positive. We've had Gary Marcus on who is negative. We recently had Ed Zitron on who was really negative. But it's also good to talk to people who are not commentators but are in the trenches. And so today we have as a returning guest an old friend of mine, Sam Badger, who is head of investor relations at Cisco. Sam, welcome back.
So for those who don't know you, other than the fact that you are head of investor relations at Cisco, tell people a little bit about your background. When did you join Cisco and what were you before that?
Yes, and thank you for having me back again. Um, maybe I'll do the funny plug first.
Uh, one of my family members recently asked me, they said, "Hey, uh, Sammy, you're involved in this tech finance stuff. Have you heard of the Einstein playbook?" And I said, "Do you mean the Eisman playbook?" They're like, "Yeah, yeah, that." I said, "Yeah, I'm familiar." Right. [laughter] It was kind of funny. So, congrats on the success.
I'm gonna thank you. And I think I may change the name. I think it's a better name.
Okay. It's uh, you know, if it's getting to one of my family members who asked me this question, it means you have reach and distribution. Um so uh I started off uh I graduated from undergrad. I started off in uh consulting at PwC. I did that for about a year and eight, a year and nine months. And then I I started my career really on Wall Street at Credit Suisse um working as a macro researcher. I did that for a very short period of time before going into the equity research department where I started off really at the kind of the lowest part of the totem pole as a junior analyst.
So you were working for another analyst.
Correct. I can even call him out. His his name was uh Coender Garcia. He was the guy who covered Apple, IBM, HP, HPQ.
Really big coverage. Big cap. And it was while the sector was changing.
This was going back to the 2013 plus time period.
So, um I I worked in the trench as a junior analyst for quite a bit of time. And uh I was a research associate and a junior working for a senior analyst and then I did that for a number of years. I think it was about four years and then I got tapped to take over data center infrastructure coverage which included companies that at the time weren't even well known. They were Equinix and Digital Realty and I helped out on an IPO for say uh a company called Switch, Switch Inc.
Which got bought out, didn't it?
It got, it went private and there are already reports that it may potentially go public again but we'll see how that ends up happening.
Um and then I I started off with data centers. I then absorbed networking. So companies like Cisco, Arista, Juniper at the time. It also included companies um sorry in addition to that I started growing my coverage into large cap software. That's when I started bringing in companies like Oracle, Microsoft and some others. And then Credit Suisse was acquired by UBS. And in that window of time, I made the decision to leave Credit Suisse. And um while uh while I was on garden leave and then you know soon after I started at the new bank, around that window of time, the former CFO of Cisco approached me and said, "Hey, would you like to come and take on this head of investor relations role to help explain our story to investors and analysts?" At the time, um it seemed like a really good opportunity to finally make my way into industry. And now I'm here. I've been at Cisco for three years.
Great. So before we dig down into what's going on at Cisco, because you know my audience has all different levels of understanding, if I said to you, oh, you're head of investor relations, Cisco, what does that company do? Let's let's explore that simply first so that we can so then we can really dig deeper for everybody.
It's a really good question. And the majority of our business is stuff that people do not see, right? It's the stuff that allows connectivity like our phones to send a message from one phone to another phone or to connect networks together which was the original foundation of the of the whole company was helping one database in a university connect to another database within the same university. So that that network connectivity in addition to what we do, you know, that would be a switch or a router. In addition to that, we produce Wi-Fi access points. So allowing people to go from their devices like a laptop or a phone and connect to the internet through a Wi-Fi access point. And we mainly sell to major businesses or enterprises. And that is the bulk and the majority of the company. And since then, we've gone to many more things. We we've gone into silicon um you know, at least in the last decade. And here's like an example of our G300 silicon one chip um that we are currently marketing.
Now is that a GPU, CPU, memory chip? What what is this?
This is a network processing unit. An NPU.
Yes. So a a a GPU would be considerably larger than this. Um
A GPU would be larger. Um it depends on the GPU or the accelerator. So it could be something like uh Cerebras which is a another kind of accelerator chip company that would be a much larger uh device.
That would actually also be larger than this considerably because um when Nvidia puts together their products they are essentially a large closed system with many pieces that kind of look like this. Okay, we sell one piece in addition to the switch. Um other companies can also sell all combined systems almost like an entire rack of compute.
So what does this chip do that a GPU does not do?
So this actually allows you to transmit information from point A to point B. This becomes the processing layer of light to transmit set information.
This specific chip is very new. This was announced in February of 2026. Um but the actual silicon program is not new at Cisco. It's been around for about 10 years.
Okay. All right. So let's dig down into what's happened at Cisco. So you joined Cisco what year?
Three years ago. Um yeah so 2023 time frame.
Okay. So the very let's say the very first quarter that you were there roughly what was the revenue growth of Cisco at that time?
Um actually we were completing a year where the revenue growth profile of the company was following a pretty big shipment schedule. So it was actually fairly attractive but you could think of it as almost like normalized single digits mid single digits. And then shortly after I joined the company, we went through a bit of a inventory digestion period where we shipped a lot of gear and our customers need to absorb it. So um we had some you know patchy or rough quarters that followed that and then we guided to the street to grow around mid-single digits around that window.
This most recent quarter your revenue growth was 18%.
In the quarter in that range. Yeah.
When was the last time Cisco had revenue growth normalized that was that level? Would that be during the dotcom boom?
You'd have to go back quite a bit, but um there could be there could have been some quarters which saw a little bit more activity, right?
Not consistent. So normalized, not in this range.
Okay. So let's talk about you got a company, you know, three years is not that long. You whose normalized revenue growth is call it 5%. And now it's high double digits call it 15 to 20%. Why like like what's what's selling? Why is it selling? Like let let's dig down like like that this is not a small company you know. So to go from 5% revenue revenue growth to 18% revenue growth that's pretty dramatic. So why?
Well I'll tell you something dramatic as well. When we guided to 5% topline growth for essentially kind of a multi-year long-term guide, the sell-side analyst reports essentially described this guidance as um here's how we think this growth could be achievable.
It was a very glass half empty type of framing.
Right. So in other words, the people who covered your stock, you said 5% and they said, "Eh, yeah." They're like, "Yeah, we'll see." It was a we'll see kind of reaction. Got it.
Okay. So what's changed today? So our fiscal year 27 guidance is actually 15% revenue growth at the midpoint. So what what changed so dramatically and it's not like our last 12 months was slow growth. Our last 12 months of growth was also uh low double digits growth. So we have an acceleration for the next 12 months versus the prior 12 months. So two big things have changed. Um big thing number one is our hyperscale business with clouds. So you know think of your household hyperscalers. Um our business with them is growing significantly.
Um almost doubling in FY27.
And what percentage of the revenue of the company is that?
It's still it's not a material piece of the company. It's still below, you know, below 20%.
Below 20%. But it's doubling.
It's doubling. Okay. In that in that roughly doubling in FY27.
Okay. So that's one thing.
But by the way, before we explore that, so your hyperscaler business, what are you selling to the hyperscalers? Just so that people understand like why you're that that part of the business is growing so rapidly.
So we sell them um it comes down to really two main products. One of them is a a switch which is designed for hyperscalers that have chips that like that look just like this that are in them that allow them to transmit massive amounts of traffic through their data centers. Okay, so that's kind of the first product we sell. The other main product we sell is something called a coherent pluggable which is essentially like an optical uh derived type product and that's to connect a lot of fiber connections or Ethernet connections to switches. So this is all in the connectivity type spend envelope of a hyperscaler.
Okay. So that part of your business a hyperscaler business is doubling but it's less than 20% of your business. What else is growing a lot?
So this gets us into something called the campus refresh cycle.
So um if we go back over the last almost two decades um we have shipped uh what I would describe as almost like less capable campus switches. So maybe I can zoom on describe what a campus is and help explain the differences.
We're not talking a university actually or are we talking about
A university could be a campus but let me kind of maybe describe define what a campus is. Okay, so everything we sell to a hyperscaler predominantly goes into a actual data center. And if you searched what a data center looks like on the news, that's essentially where the hyperscale type products are going that include chips like this and that that coherent pluggable I referred to. Okay. Right. So that is that is the data center um kind of opportunity and they get the best equipment. They get the best equipment, the highest performance stuff um which which is typically very demanding stuff. Okay. Then there is something called the campus switching uh market and opportunity. A campus switch or a campus could be an office building in downtown Manhattan. It could be a university campus. It could be an airport. But really the simple way to understand it is um a campus is where people like us like end users are are walking, talking, transacting and being productive, right? So that's where the end users are very close to the switches. That is a campus.
Okay. So in the Cisco business um the data center switching opportunity and the hyperscale business that's you know growing it's doing its own thing. Separate to that we have a campus refresh cycle where we're essentially telling customers the old stuff that you used to have we are no longer going to support it because some of these devices have actually been deployed out there for 15 years plus. So so Steve imagine having like a phone like an iPhone that's 15 years old and still using it. There are still Cisco devices that are sitting out there that are in production for enterprises still running today.
Okay. So, we are no longer going to support the patching and and the updates from some of this older gear and uh as customers make these rip and replace decisions, they're submitting new product orders to Cisco for the newer stuff and then we are shipping it accordingly and that's what's driving our 15% overall revenue growth in addition to the hyperscale opportunity. But the hyperscaler part of the story that you would you call that the AI part of the story mostly short answer is yes but we can kind of as we talk you'll kind of find that the campus opportunity does draw in some of the AI dynamics as well and we can get into that.
Okay. So let's broaden the conversation a little bit from your seat. When did this whole AI story really start to cause Cisco to inflect? Like like I mean I'm sure there was not a day maybe there was a day or an hour but there must have been a time frame where you said okay things are really changing here. When was that at the company specifically right? Yeah I'm just talking about Cisco.
So for us you know the the overall sector trend was already moving. So companies like Nvidia were executing, communicating, the hyperscale capex was kind of already being spent. So those trends were already in motion. The point at time it changed for Cisco when we started seeing significant demand for specifically our silicon one-based systems.
