PDF here. This is the key paragraph:
The Iraq conflict has become the “cause celebre” for jihadists, breeding a deep resentment of US involvement in the Muslim world and cultivating supporters for the global jihadist movement. Should jihadists leaving Iraq perceive themselves, and be perceived, to have failed, we judge fewer fighters will be inspired to carry on the fight.
In other words Iraq has become, in the common phrase, a breeding ground for terrorists. The right is going to latch on to the last part of that paragraph as proof that the NIE says we need to stay the course, but they’ll have to ignore the first part to do so. “Fewer fighters” means “fewer than currently exist” not “fewer than existed pre-Iraq-war”.
Put it this way: let’s say there were ten jihadists before we invaded Iraq, and now there are one hundred. If they perceive themselves to have failed and the number decreases down to fifty, there are still more jihadists as a result of the Iraq war.