Cisco Q3 Earnings to be Unveiled After Market Today, AI Orders Emerge as Key Focus

Cisco will release its financial report for the third quarter of FY2026, covering the fiscal period ending on April 25th, in the early morning of May 14th Beijing time. Management had already given guidance during the Q2 conference call in February: Q3 revenue range is between 15.4 billion and 15.6 billion USD, with non-GAAP EPS between 1.02 and 1.04 USD, both higher than the market consensus of 15.2 billion USD and 0.95 USD.

The most closely watched metric by the market is AI infrastructure orders. AI orders for Q2 alone reached 2.1 billion USD, prompting the company to revise its annual AI order forecast upwards to over 5 billion USD, with about 3 billion USD expected to be recognized as revenue from hyperscale cloud providers within the current fiscal year. As of Q2, cumulative AI orders year-to-date have already reached 4.4 billion USD, which is 88% of the annual target.

Silicon One is the core hardware support for Cisco's AI narrative. During Q2, the company completed the shipment of its one millionth Silicon One chip and released the G300 architecture, pushing the switching bandwidth to 102.4 Tbps, directly targeting the AI backend network needs of hyperscale data centers and emerging cloud providers.

Splunk integration has entered its second year, with 500 new customers added in the first half of the fiscal year, aiming for a total of 1000. However, the cloud subscription model transition brings short-term revenue drag, and this structural friction remains a potential stress point for analysts.

Gross margin is another sensitive variable. Although Q2 financials exceeded expectations—with 15.3 billion USD in revenue, a 10% year-over-year increase, and EPS of 1.04 USD higher than the expected 1.02 USD—the management provided Q3 non-GAAP gross margin guidance of 65.5% to 66.5%, and rising costs due to price increases in memory chips have caused market concern, with the stock price falling between 7% and 12% after the Q2 report. The options market currently prices an implied volatility of approximately 8.7% after Q3 earnings, higher than the historical average of 5.7%.

For the full year, Cisco maintains its FY2026 revenue guidance of 61.2 billion to 61.7 billion USD, with non-GAAP EPS between 4.13 and 4.17 USD. The stock price has risen by more than 25% since the beginning of the year. Investors will need to focus on three key points tonight: whether AI orders can maintain a quarterly sequential growth of over 2 billion USD, whether the annual guidance will be revised upward, and the management's latest comments on the gross margin trend.