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Cisco Surges on Strong AI Demand and Upbeat Outlook: ETFs to Win
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Key Takeaways
Cisco jumped 12% on Thursday (at the time of writing) on strong earnings and upbeat outlook.
AI infrastructure orders hit $5.3B YTD, prompting Cisco to raise FY2026 outlook.
Cisco-heavy ETFs like VGT, FTEC and GXPT may benefit from the stock surge.
Cisco (CSCO) shares soared nearly 12% on Thursday (at the time of writing) after the company delivered stronger-than-expected third-quarter results and sharply raised its AI infrastructure forecast. The rally marked Cisco’s biggest potential one-day gain since 2002, per a Fortune article.
Earnings and Revenue Beat Expectations
Cisco reported third-quarter fiscal 2026 non-GAAP earnings of $1.06 per share, beating the Zacks Consensus Estimate by 1.92%. The figure increased 10% year over year.
Revenues of $15.841 billion topped the consensus mark by 1.71% and grew 12% year over year. Annualized recurring revenues were $31.2 billion at the end of the reported quarter, up 2%, underscoring the continued buildout of subscription and maintenance streams.
Strong Guidance Lifts Investor Confidence
For the fourth quarter, Cisco projected adjusted earnings of $1.17 per share on revenue of $16.8 billion, well above analysts’ expectations of $1.07 per share and $15.82 billion in revenues, per Fortune.
AI Orders Surge as Cisco Restructures
Cisco’s hyperscaler AI infrastructure business remained a major engine of demand. AI infrastructure orders taken from hyperscalers were $1.9 billion in the quarter, helping lift the year-to-date total to $5.3 billion. The company also raised its fiscal 2026 AI infrastructure forecast to $9 billion from $5 billion.
Cisco additionally announced plans to cut nearly 4,000 jobs, or just under 5% of its workforce, as part of a restructuring focused on silicon, optics, security, and expanding employee use of AI tools across the company, the same Fortune article noted.
In the third quarter of fiscal 2026, non-GAAP gross margin was 66%, down 260 basis points (bps) year over year. Non-GAAP product gross margin was 64.3%, down 330 bps, partially offset by non-GAAP services gross margin of 71.6%, up 30 bps.
In the third quarter of fiscal 2026, Cisco reported total non-GAAP operating expenses of $5.05 billion, up 4.6% year over year. As a percentage of revenues, operating expenses declined 220 bps year over year.
Cisco still delivered operating leverage, posting a non-GAAP operating margin of 34.2% on non-GAAP operating expenses of $5 billion.
ETFs to Gain
Against this backdrop, Cisco-heavy exchange-traded funds (ETFs) like Global X PureCap MSCI Information Technology ETF (GXPT - Free Report) , Vanguard Information Technology ETF (VGT - Free Report) , Manzil Russell Halal USA Broad Market ETF (MNZL - Free Report) , Fidelity MSCI Information Technology Index ETF (FTEC - Free Report) and iShares Top 20 U.S. Stocks ETF (TOPT - Free Report) . These have more than 10% weight to Cisco.
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Cisco Surges on Strong AI Demand and Upbeat Outlook: ETFs to Win
Key Takeaways
Cisco (CSCO) shares soared nearly 12% on Thursday (at the time of writing) after the company delivered stronger-than-expected third-quarter results and sharply raised its AI infrastructure forecast. The rally marked Cisco’s biggest potential one-day gain since 2002, per a Fortune article.
Earnings and Revenue Beat Expectations
Cisco reported third-quarter fiscal 2026 non-GAAP earnings of $1.06 per share, beating the Zacks Consensus Estimate by 1.92%. The figure increased 10% year over year.
Revenues of $15.841 billion topped the consensus mark by 1.71% and grew 12% year over year. Annualized recurring revenues were $31.2 billion at the end of the reported quarter, up 2%, underscoring the continued buildout of subscription and maintenance streams.
Strong Guidance Lifts Investor Confidence
For the fourth quarter, Cisco projected adjusted earnings of $1.17 per share on revenue of $16.8 billion, well above analysts’ expectations of $1.07 per share and $15.82 billion in revenues, per Fortune.
AI Orders Surge as Cisco Restructures
Cisco’s hyperscaler AI infrastructure business remained a major engine of demand. AI infrastructure orders taken from hyperscalers were $1.9 billion in the quarter, helping lift the year-to-date total to $5.3 billion. The company also raised its fiscal 2026 AI infrastructure forecast to $9 billion from $5 billion.
Cisco additionally announced plans to cut nearly 4,000 jobs, or just under 5% of its workforce, as part of a restructuring focused on silicon, optics, security, and expanding employee use of AI tools across the company, the same Fortune article noted.
Cisco Holds Operating Discipline Amid Cost Pressures
In the third quarter of fiscal 2026, non-GAAP gross margin was 66%, down 260 basis points (bps) year over year. Non-GAAP product gross margin was 64.3%, down 330 bps, partially offset by non-GAAP services gross margin of 71.6%, up 30 bps.
In the third quarter of fiscal 2026, Cisco reported total non-GAAP operating expenses of $5.05 billion, up 4.6% year over year. As a percentage of revenues, operating expenses declined 220 bps year over year.
Cisco still delivered operating leverage, posting a non-GAAP operating margin of 34.2% on non-GAAP operating expenses of $5 billion.
ETFs to Gain
Against this backdrop, Cisco-heavy exchange-traded funds (ETFs) like Global X PureCap MSCI Information Technology ETF (GXPT - Free Report) , Vanguard Information Technology ETF (VGT - Free Report) , Manzil Russell Halal USA Broad Market ETF (MNZL - Free Report) , Fidelity MSCI Information Technology Index ETF (FTEC - Free Report) and iShares Top 20 U.S. Stocks ETF (TOPT - Free Report) . These have more than 10% weight to Cisco.