Lesson 7 of 7
The number you can defend
One table, one line per adjustment, each with its filing and the claim it makes. Cisco fiscal 2026 normalised operating income comes to 15,504 million.
By Javier Sanz
Founder of ValueScreener. Built Ninety Nine, a securities services provider, and sold it to a tier-one global bank; ran operations and internationalization at Alpaca, the brokerage API.
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In one minute
- The output of a normalisation is a table, not a number: one line per adjustment, each with its amount, its source and its claim.
- On Cisco fiscal 2026 the table contains one adjustment, and normalised operating income comes to 15,504 million dollars against 15,368 million reported.
- The lines you decided not to adjust belong in the table too, because a reader has to see what you considered and rejected.
Six lessons of argument produce one page. The page is the deliverable, and the single figure at the bottom of it is the least useful thing on it.
Cisco fiscal 2026 operating income, normalised
- Operating income as reported$15,368m
- Remove this year's restructuring charge+$693m
- Add the ten-year average restructuring charge−$557m
- Normalised operating income= $15,504m
The table
| Line | Amount | Source | The claim being made |
|---|---|---|---|
| Operating income as reported, FY2026 | 15,368 | Consolidated statements of operations, accession 0000858877-26-000132 | None. This is the starting point. |
| Restructuring charge, this year | +693 | Restructuring and other charges line, same filing | This year's amount does not describe an average year. |
| Restructuring charge, ten-year average | -557 | The same line across ten annual reports, fiscal 2017 to 2026 | The charge recurs, so a figure drawn from the record replaces it. |
| Share-based compensation | no adjustment | Consolidated statements of cash flows, same filing | It is already an expense under ASC 718 and removing it would count the benefit twice. |
| Operating lease liabilities | no adjustment to earnings | Consolidated balance sheet, same filing | The lease cost is already inside operating income. Adding the liability to debt without changing this figure would double count. |
| Acquisition perimeter | no adjustment to FY2026 | Business combinations note, same filing | Fiscal 2026 contains a full year of the acquired business, so no part-year effect remains in this figure. |
| Normalised operating income, FY2026 | 15,504 |
Why the rejected lines are on it
Three of the seven rows adjust nothing. They are the most useful rows on the page, because they tell a reader what was considered.
Without them, somebody reviewing the work cannot tell the difference between an analyst who decided share-based compensation belongs in the cost base and an analyst who forgot it existed. Those two produce the same number and are not the same piece of work.
What the figure is worth
Normalised operating income of 15,504 million dollars on revenue of 63,325 million is a margin of 24.48 percent. The ten-year average of reported margins is 25.18 percent, so the normalised figure sits slightly below the decade and slightly above the last five years, which average 24.23 percent.
That coherence is a check, not a validation. It says the adjustment did not move the answer outside the range the record supports, which is the most a single-year normalisation can claim.
The three sentences to write underneath
Which window the averages cover, and why that window. Which structural change in the period the window straddles, and how the figure treats it. And what would change the answer most, which here is the restructuring average: using the fiscal 2022 to 2026 average of 741 million instead of 557 million gives 15,320 million, slightly below the reported figure rather than slightly above.
Check yourself
What is the output of a normalisation?
- A single earnings figure
- A table with one line per adjustment, each carrying its amount, its source and the claim it makes
- A valuation
Show the answer
Answer: B.
The figure at the bottom is only usable if each line above it can be accepted or rejected separately by somebody else.Why do the lines that adjust nothing belong in the table?
- To make it longer
- Because they distinguish a decision not to adjust from a failure to consider the item
- Because the standards require it
Show the answer
Answer: B.
An analyst who considered share-based compensation and left it alone produces the same number as one who forgot it. Only the table separates them.Using the fiscal 2022 to 2026 restructuring average of 741 million instead of the ten-year 557 million does what?
- Doubles the normalised figure
- Gives 15,320 million rather than 15,504 million, a difference of 184 million
- Makes no difference
Show the answer
Answer: B.
The window is the largest single choice in this table, and it moves the answer by about 1.2 percent of the figure.Sources
- Cisco Systems, Inc., annual reports on Form 10-K for fiscal years 2017 through 2026, filed with the SEC; the fiscal 2026 report filed 2026-09-02, accession 0000858877-26-000132.
- ASC 718, Compensation, Stock Compensation.
- ASC 842, Leases.
- ASC 805, Business Combinations.
What this leaves out
- The ten-year average of 557 million dollars is a choice of window made by this course. It is stated in the table so it can be replaced, and the callout shows what replacing it does.
- One year of normalised operating income is not a valuation and not a forecast. It is a description of what the filed record supports for an average year of the business as now constituted.
- The table adjusts operating income only. Interest, tax and the capital structure are separate problems handled in the valuation courses.
- Cisco appears here as a source of filed figures. Nothing in this course is a view on Cisco or on any security.