Key Takeaways:
Cisco Systems Inc. (NASDAQ:CSCO) surged over 17% after boosting its fiscal 2026 AI infrastructure order forecast by 80% to $9 billion, prompting a series of price target upgrades from Wall Street analysts.
"The firm cited Cisco’s revenue and AI orders, which beat expectations, while gross margin came in line with forecasts despite rising component and memory costs," UBS said in a note explaining its higher price target.
The networking giant reported fiscal third-quarter revenue of $15.84 billion and adjusted earnings of $1.06 per share, beating consensus estimates. The performance was driven by a sharp acceleration in AI-related orders, which have reached $5.3 billion in the fiscal year to date. Multiple analysts raised their price targets following the report.
The sharply higher forecast, which lifted Cisco’s market capitalization to $459 billion, extends the company's revenue visibility and shifts the market's focus to converting its growing AI backlog into profit.
While the AI order boom from hyperscale customers grabbed headlines, Cisco also showed renewed strength in its core business. Total product orders rose 35% year-over-year, but importantly, they still climbed 19% even when excluding the large AI deals.
CEO Chuck Robbins pointed to a "multiyear, multibillion-dollar campus refresh opportunity," as enterprises accelerate network modernization plans to handle an expected 3x increase in traffic from AI applications. Orders for Nexus switches tagged for AI deployments rose almost 50% sequentially.
The growth comes at a cost, as the shift in revenue mix toward hardware-heavy AI systems pressured profitability. Cisco’s non-GAAP product gross margin fell 330 basis points to 64.3%. Management attributed the decline to higher costs for components like optics and memory, which are essential for AI infrastructure.
To focus investment on growth areas like AI, Cisco also announced a restructuring plan that includes reducing its workforce by nearly 4,000 jobs, or less than 5% of its total.
The guidance increase shows management expects AI demand to accelerate into 2026. Investors will watch upcoming quarters for evidence that Cisco can convert its substantial backlog into revenue without further margin erosion.
This article is for informational purposes only and does not constitute investment advice.
