Cisco Systems (NASDAQ:CSCO) reported record fiscal third-quarter revenue and raised its expectations for artificial intelligence infrastructure orders, as executives said demand accelerated across hyperscale, enterprise and public-sector customers.
Chair and CEO Chuck Robbins said Cisco delivered “a great quarter,” with revenue and earnings per share growing by double digits and exceeding the high end of the company’s guidance ranges. Revenue rose 12% year over year to a record $15.8 billion, while product revenue increased 17%. Non-GAAP earnings per share rose 10% to $1.06.
AI Infrastructure Orders Drive Growth
Cisco’s AI infrastructure business was a central focus of the call. Robbins said AI infrastructure orders from hyperscalers totaled $1.9 billion in the quarter, up from $600 million in the prior-year period. Year-to-date orders from hyperscalers reached $5.3 billion, already above Cisco’s prior fiscal 2026 expectation of $5 billion.
Given the stronger demand, Robbins said Cisco now expects to take approximately $9 billion in AI infrastructure orders from hyperscalers in fiscal 2026, or 4.5 times the fiscal 2025 total. The company expects to recognize about $4 billion in AI infrastructure revenue from hyperscalers in fiscal 2026.
Robbins also highlighted Cisco’s Acacia optics business, which recorded more than $1 billion in orders in the quarter and is on track to grow more than 200% year over year in fiscal 2026. He said Cisco has shipped more than 750,000 400-gig and more than 40,000 800-gig coherent pluggable optics to date.
In the quarter, Cisco recorded five new design wins with hyperscalers, including two in optics and three in systems. Robbins said two of the system wins were the first for Cisco’s Silicon One P200-powered system for scale-across use cases, while another involved a Silicon One G200-powered system for a scale-out use case.
Networking Demand Remains Broad-Based
Cisco reported networking product orders growth of more than 50% in the quarter, marking the seventh consecutive quarter of double-digit growth for the portfolio. Robbins cited triple-digit growth in service provider routing and compute, along with double-digit growth in data center switching, campus switching, wireless, enterprise routing and industrial IoT products.
Enterprise product orders increased 18%, while public-sector orders rose 27%. Orders from service provider and cloud customers grew 105%, including triple-digit growth from five of the top hyperscalers. Telco orders increased 9%.
Within campus networking, Robbins said Cisco posted record orders, up more than 25% year over year. Wireless orders reached an all-time high, growing more than 40%, with Wi-Fi 7 accounting for half of the wireless mix in the quarter.
Robbins said recent Cisco research involving about 3,500 technology leaders found that 93% of respondents are accelerating network modernization plans, with traffic across campus and branch networks expected to triple over the next three years because of AI.
Security Portfolio Shows Mixed Trends
In security, Robbins said Cisco’s core security portfolio, excluding Splunk, posted double-digit order growth across new and refreshed products. Firewalls saw strong double-digit order growth, and more than 1,000 new customers purchased products including Secure Access, XDR, Hypershield and AI Defense during the quarter.
However, Cisco said declines in prior-generation products continued to offset growth in newer products, though to a lesser extent than in the first half of the year. For Splunk, Robbins said the expected shift toward cloud subscriptions and away from on-premise deals continued to create a near-term drag on revenue growth.
Robbins said Cisco remains on track to exceed its fiscal 2026 target of 1,000 new customer logos for Splunk.
Margins, Cash Flow and Capital Returns
CFO Mark Patterson said total non-GAAP gross margin was 66%, down 260 basis points from a year earlier. Non-GAAP product gross margin declined 330 basis points to 64.3%, primarily due to product mix and higher memory costs, partially offset by productivity improvements. Non-GAAP services gross margin rose 30 basis points to 71.6%.
Patterson said Cisco’s non-GAAP operating margin was 34.2%, reflecting “strong execution and operational efficiency.” The company ended the quarter with $16.6 billion in cash, cash equivalents and investments. Operating cash flow was $3.8 billion, down 7%, which Patterson attributed to investments to meet growing demand, especially in AI infrastructure.
Cisco returned $2.9 billion to shareholders during the quarter, including $1.7 billion in dividends and $1.3 billion in share repurchases. Year-to-date capital returns totaled more than $9 billion, with $9.6 billion remaining under the company’s share repurchase authorization.
Cisco Issues Q4 and Fiscal 2026 Outlook
For fiscal fourth quarter, Cisco guided for revenue of $16.7 billion to $16.9 billion, non-GAAP gross margin of 65.5% to 66.5%, non-GAAP operating margin of 34% to 35% and non-GAAP earnings per share of $1.16 to $1.18. The company assumed a non-GAAP effective tax rate of approximately 19%.
For fiscal 2026, Cisco expects revenue of $62.8 billion to $63 billion and non-GAAP earnings per share of $4.27 to $4.29. Patterson said the guidance assumes current tariffs and exemptions remain in place through the end of the fiscal year.
Cisco also announced a restructuring plan intended to realign resources toward silicon, optics, security and AI. Patterson said the company expects to recognize up to $1 billion in pre-tax charges, with $450 million expected in the fourth quarter of fiscal 2026 and the remainder during fiscal 2027. He said the restructuring was not primarily driven by cost savings, but by the need to move resources toward faster-growing opportunities.
During the question-and-answer session, Patterson said Cisco is not seeing meaningful order pull-forward, though he acknowledged that some modest pull-ahead was reasonable to assume. He said price increases accounted for about 4 to 5 percentage points of the acceleration in non-webscale product order growth.
Robbins said Cisco’s Silicon One technology gives the company greater supply-chain control and is a key reason for its hyperscaler wins. Patterson said Cisco has secured silicon supply through calendar 2026 and is pursuing initiatives to reduce memory usage across its portfolio.
Robbins closed the call by saying Cisco’s technology is increasingly relevant as AI infrastructure expands, particularly across hyperscalers, enterprise networking and security.
About Cisco Systems (NASDAQ:CSCO)
Cisco Systems, Inc is a global technology company that designs, manufactures and sells networking hardware, software and telecommunications equipment. Its core business focuses on enabling enterprise and service-provider networks through products such as routers, switches, network security appliances and wireless systems. Over time Cisco has broadened its portfolio to emphasize software-defined networking, cybersecurity, cloud infrastructure and edge computing solutions that help organizations build and manage modern IT environments.
In addition to hardware, Cisco offers a growing range of software platforms and subscription services for network management, security, analytics and collaboration.
