Cisco AI Orders Doubled, Performance Guidance Exceeds Expectations

Global networking equipment leader Cisco disclosed its Q3 financial report for the fiscal year 2026, with solid performance that exceeded expectations, and both quarterly and full-year financial guidance were significantly revised upwards. The surge in demand for AI data centers has led to a substantial increase in the order expectations for hyper-scale cloud service providers, and the company has announced a reorganization and layoffs focused on AI, causing the stock price to soar after hours, with a gain that approached 20%.

The financial report data shows that Cisco's revenue for the third quarter of the fiscal year 2026 grew by 12% year-on-year to $15.8 billion, and adjusted earnings per share grew by 10% year-on-year to $1.06, both of which were slightly higher than the market's consensus expectations.

Looking at the performance by business segment, hardware and networking product revenue reached $12.12 billion, becoming the core pillar of the performance that exceeded expectations. Service revenue slightly missed expectations, reflecting that the company's software and subscription-based transformation still needs continuous validation.

Financial guidance emerges as the biggest highlight of this report

According to data compiled by Bloomberg, the company officially gave its performance outlook for the fourth quarter ending in July on Wednesday, expecting revenue to be in the range of $16.7 billion to $16.9 billion, with adjusted earnings per share between $1.16 and $1.18. The revenue guidance is nearly 6% higher than analysts' expectations. The adjusted EPS guidance range is over 8% higher than market expectations.

The full-year revenue guidance for the fiscal year 2026 has been revised upwards to between $62.8 billion and $63 billion, with an increase of more than 2%, and the profit guidance has been revised upwards in tandem, with revenue expansion not sacrificing profit quality.

AI infrastructure demand has become the core engine of the company's growth

Cisco has raised its annual order expectations for hyper-scale cloud service providers by 80% to $9 billion, with a current order volume of $5.3 billion, surpassing the previous annual target. High-speed switches, routers, and other network devices, as key components in the construction of AI clusters, have seen a continuous increase in cloud vendors' capital expenditure, driving Cisco to deeply enter the investment cycle of AI data centers.

Focusing on AI, Cisco officially launches strategic reorganization

The company plans to lay off nearly 4,000 people, less than 5% of its total workforce, with an expected pre-tax expenditure of up to $1 billion. Management stated that the reorganization aims to divest inefficient businesses, optimize cost structures, and concentrate resources on high-growth tracks such as AI networks and cloud infrastructure.

In terms of profitability, the company's gross margin for this quarter is 66%, and the quarterly guidance maintains the same level, slightly lower than market expectations. Large cloud customers have strong bargaining power, and changes in the structure of project-type orders may exert short-term structural pressure on the overall gross margin, and whether the AI business can achieve both volume and profit growth in the future remains to be observed.

Additionally, the company's remaining performance obligations amount to $43.46 billion, slightly exceeding market expectations, with an ample scale of signed but unconfirmed revenue, providing a solid order support for the performance growth in subsequent quarters.

On the market front, Cisco rose by 2.6% on Wednesday's regular trading day, and the stock price further soared significantly after the release of the financial report and the announcement of reorganization. Investors are no longer limited to the traditional networking equipment cycle logic and have started to include Cisco in the core benefit chain of AI infrastructure. Cost optimization combined with upwardly revised performance guidance has increased expectations for profit elasticity, and the pace of gross margin recovery remains a key variable in subsequent capital games.