We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Buy Cisco as a New Leader of the AI Networking Infrastructure Space
Read MoreHide Full Article
Key Takeaways
Cisco posted record networking revenue growth as AI-driven demand boosted switching and routing orders.
CSCO generated $5.3B in AI infrastructure orders year to date, surpassing its fiscal 2026 target.
CSCO raised fiscal 2026 guidance and is reallocating resources toward AI, security, silicon and optics.
Cisco Systems Inc. (CSCO - Free Report) has been benefiting from strong product orders from hyperscalers, enterprises, service providers, the public sector and cloud customers. The company reported blowout third-quarter fiscal 2026 earnings results.
CSCO generated record-high revenues primarily due to its networking portfolio, powered by Silicon One, AI-native security solutions and operating systems. Increasing AI workloads at the network edge and the emergence of physical AI are benefiting the industrial IoT portfolio. Consequently, the stock price jumped.
Image Source: Zacks Investment Research
CSCO Rides on AI Networking Strength
Networking revenues were $8.82 million, up 25% year over year, highlighting accelerating demand for the company’s switching and routing portfolio. That strength aligned with management’s view that customers are modernizing networks to handle AI-driven traffic growth and campus refresh cycles.
Cisco pointed to record campus networking orders growing more than 25% year over year and data center switching orders up more than 40%, supported by strong uptake in wireless and campus switching.
Solid Demand From AI Hyperscalers
In the last reported quarter, Cisco generated $1.9 billion in AI infrastructure orders, resulting in a total of $5.3 billion in orders year to date. This figure already exceeds management’s fiscal 2026 target. In the last quarter, five of the top hyperscalers each grew orders at triple-digit rates year over year.
CSCO expects total AI infrastructure orders to reach $9 billion in fiscal 2026, an increase of 4.5X from fiscal 2025. Overall product orders grew by a sizable 35% year over year in the third quarter. Of this, data center switching orders grew 40% from the year-ago period, supported by massive AI-powered data center buildout.
Cisco also highlighted a balanced mix between Silicon One-based networking systems and optics, alongside multiple hyperscaler design wins during the quarter. CSCO’s Acacia optics business, which makes the high-speed coherent pluggable optics for AI data centers, generated $1 billion in orders in the last reported quarter.
Moreover, CSCO noted progress in refreshed security products and highlighted that over 1,000 new customers purchased products such as Secure Access, XDR, Hypershield and AI Defense in the third quarter.
AI hyperscaler behemoths like Amazon.com Inc. (AMZN - Free Report) , Microsoft Corp. (MSFT - Free Report) , Meta Platforms Inc. (META - Free Report) and Alphabet Inc. (GOOGL - Free Report) are using CSCO’s AI-enabled networking infrastructure and switching equipment for their data centers.
Targeted Reallocation of Resources
Cisco has decided to retrench 4,000 manpower as part of a sweeping restructuring effort. Management said that this restructuring has been guided to give more emphasis to areas like AI networking infrastructure, network security, silicon and optics.
CSCO identified these four areas as its core business model in which management believes the company can maximize its long-term value. CEO Chuck Robbins said that the company is transforming itself from a legacy networking bigwig to a critical operator of the AI-powered networking infrastructure space.
Strong Guidance
For the fourth quarter of fiscal 2026, CSCO expects revenues of $16.7 billion to $16.9 billion and non-GAAP earnings of $1.16 to $1.18 per share. For fiscal 2026, management raised its outlook to revenues of $62.8 billion to $63.0 billion and non-GAAP earnings of $4.27 to $4.29 per share.
Management also announced that the restructuring plan will cost up to $1 billion of pretax charges, including roughly $450 million in the fourth quarter of fiscal 2026, with the remainder in fiscal 2027.
Impressive Estimate Revisions
For fourth-quarter fiscal 2026 (ending July 2026), the Zacks Consensus Estimate currently shows revenues of $16.84 billion, suggesting an improvement of 14.8% year over year and earnings per share of $1.09, indicating an increase of 10.1% year over year. The Zacks Consensus Estimate for the current year has improved 0.9% in the last seven days.
For 2027 (ending July 2027), the Zacks Consensus Estimate currently shows revenues of $65.77 billion, suggesting an improvement of 5.7% year over year and earnings per share of $4.52, indicating an increase of 8% year over year. The Zacks Consensus Estimate for next year has improved 0.7% in the last seven days.
The astonishing growth potential of the global AI-powered data centers and management’s business visibility offer near-term potential. As a result, the average target price of brokerage firms is expected to witness solid near-term upside.
Image Source: Zacks Investment Research
Zacks' 7 Best Strong Buy Stocks (New Research Report)
Valued at $99, click below to receive our just-released report
predicting the 7 stocks that will soar highest in the coming month.
View the Zacks #1 Rank List
Image: Bigstock
Buy Cisco as a New Leader of the AI Networking Infrastructure Space
Key Takeaways
Cisco Systems Inc. (CSCO - Free Report) has been benefiting from strong product orders from hyperscalers, enterprises, service providers, the public sector and cloud customers. The company reported blowout third-quarter fiscal 2026 earnings results.
CSCO generated record-high revenues primarily due to its networking portfolio, powered by Silicon One, AI-native security solutions and operating systems. Increasing AI workloads at the network edge and the emergence of physical AI are benefiting the industrial IoT portfolio. Consequently, the stock price jumped.
Image Source: Zacks Investment Research
CSCO Rides on AI Networking Strength
Networking revenues were $8.82 million, up 25% year over year, highlighting accelerating demand for the company’s switching and routing portfolio. That strength aligned with management’s view that customers are modernizing networks to handle AI-driven traffic growth and campus refresh cycles.
Cisco pointed to record campus networking orders growing more than 25% year over year and data center switching orders up more than 40%, supported by strong uptake in wireless and campus switching.
Solid Demand From AI Hyperscalers
In the last reported quarter, Cisco generated $1.9 billion in AI infrastructure orders, resulting in a total of $5.3 billion in orders year to date. This figure already exceeds management’s fiscal 2026 target. In the last quarter, five of the top hyperscalers each grew orders at triple-digit rates year over year.
CSCO expects total AI infrastructure orders to reach $9 billion in fiscal 2026, an increase of 4.5X from fiscal 2025. Overall product orders grew by a sizable 35% year over year in the third quarter. Of this, data center switching orders grew 40% from the year-ago period, supported by massive AI-powered data center buildout.
Cisco also highlighted a balanced mix between Silicon One-based networking systems and optics, alongside multiple hyperscaler design wins during the quarter. CSCO’s Acacia optics business, which makes the high-speed coherent pluggable optics for AI data centers, generated $1 billion in orders in the last reported quarter.
Moreover, CSCO noted progress in refreshed security products and highlighted that over 1,000 new customers purchased products such as Secure Access, XDR, Hypershield and AI Defense in the third quarter.
AI hyperscaler behemoths like Amazon.com Inc. (AMZN - Free Report) , Microsoft Corp. (MSFT - Free Report) , Meta Platforms Inc. (META - Free Report) and Alphabet Inc. (GOOGL - Free Report) are using CSCO’s AI-enabled networking infrastructure and switching equipment for their data centers.
Targeted Reallocation of Resources
Cisco has decided to retrench 4,000 manpower as part of a sweeping restructuring effort. Management said that this restructuring has been guided to give more emphasis to areas like AI networking infrastructure, network security, silicon and optics.
CSCO identified these four areas as its core business model in which management believes the company can maximize its long-term value. CEO Chuck Robbins said that the company is transforming itself from a legacy networking bigwig to a critical operator of the AI-powered networking infrastructure space.
Strong Guidance
For the fourth quarter of fiscal 2026, CSCO expects revenues of $16.7 billion to $16.9 billion and non-GAAP earnings of $1.16 to $1.18 per share. For fiscal 2026, management raised its outlook to revenues of $62.8 billion to $63.0 billion and non-GAAP earnings of $4.27 to $4.29 per share.
Management also announced that the restructuring plan will cost up to $1 billion of pretax charges, including roughly $450 million in the fourth quarter of fiscal 2026, with the remainder in fiscal 2027.
Impressive Estimate Revisions
For fourth-quarter fiscal 2026 (ending July 2026), the Zacks Consensus Estimate currently shows revenues of $16.84 billion, suggesting an improvement of 14.8% year over year and earnings per share of $1.09, indicating an increase of 10.1% year over year. The Zacks Consensus Estimate for the current year has improved 0.9% in the last seven days.
For 2027 (ending July 2027), the Zacks Consensus Estimate currently shows revenues of $65.77 billion, suggesting an improvement of 5.7% year over year and earnings per share of $4.52, indicating an increase of 8% year over year. The Zacks Consensus Estimate for next year has improved 0.7% in the last seven days.
Image Source: Zacks Investment Research
Investment Thesis
Cisco Systems currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. CSCO offers an opportunity to invest in a company with substantial unrealized potential in the AI revolution.
The astonishing growth potential of the global AI-powered data centers and management’s business visibility offer near-term potential. As a result, the average target price of brokerage firms is expected to witness solid near-term upside.
Image Source: Zacks Investment Research