Cisco Systems Inc. (NASDAQ:CSCO) shares rose in premarket trading Thursday after the networking equipment maker reported stronger-than-expected third-quarter results, raised its fiscal 2026 guidance and highlighted accelerating demand for artificial intelligence infrastructure.
Strong Quarterly Results Beat Expectations
Revenue for the quarter increased to $15.84 billion, topping analyst estimates of $15.56 billion. Adjusted earnings came in at $1.06 per share, ahead of Wall Street expectations of $1.03 per share.
Annual recurring revenue rose 2% year over year to $31.2 billion, while product ARR increased 4%. Adjusted gross margin declined 260 basis points from a year earlier to 66%, primarily due to shifts in product mix and higher memory costs.
Cisco ended the quarter with $16.6 billion in cash, cash equivalents and investments.
Customer Growth And Subscription Expansion
The company said it added more than 1,000 new customers during the quarter across products including Secure Access, XDR, HyperShield and AI Defense, bringing the total customer base for those offerings to about 5,000 since launch.
Subscription revenue totaled $7.8 billion, accounting for 49% of total quarterly revenue.
AI Infrastructure And Networking Demand Accelerate
Product revenue climbed 17% year over year to $12.1 billion, driven by demand for AI infrastructure, campus networking, data center switching and wireless products.
Total product orders surged 35% from a year earlier. Excluding hyperscaler customers, product orders still increased 19%, supported by enterprise and public sector spending.
Orders from service provider and cloud customers jumped 105% year over year, with five major hyperscalers posting triple-digit growth. Enterprise orders rose 18%, while public sector orders increased 27%, with double-digit gains across all geographic regions.
Networking product orders rose more than 50%, led by triple-digit growth in service provider routing and compute, alongside double-digit growth in data center switching, campus switching, wireless, enterprise routing and industrial IoT.
AI infrastructure orders from hyperscalers reached $1.9 billion during the quarter, up from $600 million a year earlier. Year-to-date AI infrastructure orders totaled $5.3 billion, already surpassing Cisco’s prior fiscal 2026 target of $5 billion with one quarter remaining.
Restructuring Plan Targets AI And Cybersecurity Growth
Cisco also announced a restructuring plan aimed at redirecting investments toward silicon optics, AI and cybersecurity. The company expects to incur up to $1 billion in pre-tax restructuring charges and plans to cut nearly 4,000 jobs.
The company said rising demand from hyperscale cloud customers and AI-related infrastructure is driving the need to shift resources toward faster-growing business areas.
Outlook Raised On Strong AI Momentum
For the fiscal fourth quarter, Cisco forecast revenue of $16.7 billion to $16.9 billion, above analyst estimates of $15.82 billion. The company projected adjusted earnings of $1.16 to $1.18 per share, compared with expectations of $1.07 per share.
Cisco also raised its fiscal 2026 revenue guidance to a range of $62.8 billion to $63 billion, up from prior guidance of $61.2 billion to $61.7 billion. Analysts were expecting revenue of $61.6 billion.
The company lifted its full-year adjusted earnings outlook to $4.27 to $4.29 per share from a previous range of $4.13 to $4.17. Analysts were projecting full-year earnings of $4.16 per share.
Cisco said it now expects total AI-related orders to reach $9 billion in fiscal 2026, up from prior guidance of $5 billion, and anticipates recognizing about $4 billion in related AI infrastructure revenue during the year.
Acacia Optics Business Delivers Record Quarter
Its Acacia optics business posted a record quarter with more than $1 billion in orders, and management expects the segment to grow more than 200% year over year in fiscal 2026.
Stock Performance
CSCO Price Action: Cisco Systems shares were up 16.77% at $118.95 during premarket trading on Thursday. The stock is trading at a new 52-week high, according to Benzinga Pro data.
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