CSCO FY2026 Q3 Improving

Cisco Systems, Inc. earnings call

May 13, 2026 · 16:30 ET Chuck RobbinsMark PattersonSammy Badri earningscall_biz

Buzzberg read

Cisco bumps FY26 hyperscaler AI orders to ~$9B, 4.5x FY25

Cisco delivered a record quarter driven by surging AI infrastructure demand from hyperscalers and broad-based enterprise networking refresh. The company raised its FY26 AI orders target to $9B, guided to a strong Q4, and announced a restructuring to focus on high-growth areas. Management emphasized pricing power and supply chain security as key levers to mitigate memory cost inflation and stabilize gross margins. Q3 FY26 revenue was $15.8B (+12%), with product revenue up 17% and product orders up 35% y/y.

Buzzberg read Cisco bumps FY26 hyperscaler AI orders to ~$9B, 4.5x FY25 Cisco delivered a record quarter driven by surging AI infrastructure demand from hyperscalers and broad-based enterprise networking refresh. The company raised its FY26 AI orders target to $9B, guided to a strong Q4, and announced a restructuring to focus on high-growth areas. Management emphasized pricing power and supply chain security as key levers to mitigate memory cost inflation and stabilize gross margins. Q3 FY26 revenue was $15.8B (+12%), with product revenue up 17% and product orders up 35% y/y. Read full analysisCollapse analysis

AI infrastructure orders from hyperscalers reached $1.9B in Q3, bringing YTD to $5.3B; FY26 target raised to ~$9B (up from $5B initial).
Q4 FY26 guidance implies ~14.5% revenue growth, with gross margin stabilizing at ~66% despite memory cost inflation.
The company announced a restructuring plan, expecting up to $1B in pre-tax charges, to reallocate resources toward silicon, optics, security, and AI.

AI Revenue$1.9B-10% QoQ

Revenue$15.841B+3% QoQ

EPS$1.06+2% QoQ

Gross margin63.63%Reported

6 grounded callouts

What matters now

The highest-signal changes from the call.

Cisco bumps FY26 hyperscaler AI orders to ~$9B, 4.5x FY25

Management signals at least $6B hyperscaler AI revenue in FY27

Demand

Non-hyperscaler product orders rose 19%, with price driving half

Show 3 more callouts

Optics

Acacia optics sets record order quarter with >200% FY26 growth

Supply

Cisco aggressively secures supply; commitments up $11.6B YoY

Security

Security portfolio inflecting on strong firewall order growth

Reported period

Actuals

Metric	Reported	Change
AI Revenue	$1.9B	-10% QoQ
Revenue	$15.841B	+3% QoQ
EPS	$1.06	+2% QoQ
Gross margin	63.63%	Reported
Operating margin	25%	Reported
Free cash flow	$3.565B	Reported

Forward-looking

Forward guidance

Metric	Period	Range	Midpoint	Status
EPS	FY2026 Q4	$1.16–$1.18	$1.17	Guided
EPS	FY2026	$4.27–$4.29	$4.28	Raised
Gross margin	FY2026 Q4	65.5%–66.5%	66%	Guided
Operating margin	FY2026 Q4	34%–35%	34.5%	Guided
Revenue	FY2026 Q4	$16.7B–$16.9B	$16.8B	Guided
Revenue	FY2026	$62.8B–$63BAbove consensus	$62.9B	Raised
RevenueAI	FY2027	$6B	$6B	Initiated

AI, capex & demand read

Management read

Tone

Upbeat

Management repeatedly highlights record revenue, record orders, raised AI targets, and guidance toward its 'strongest year ever,' while treating memory costs and the Splunk transition as manageable offsets.

Management AI read

Management says AI demand is broad and durable, not just hyperscaler-driven: hyperscaler AI orders are being raised to ~$9B for FY26 (4.5x FY25), Acacia optics orders hit a record >$1B in Q3, and there is a ~$3B pipeline from neocloud/sovereign/enterprise customers. They position Cisco's own silicon and optics as key competitive advantages and see AI driving a multi-year campus/enterprise network

Capex

Investment and capacity

Rather than conventional capex guidance, Cisco is investing heavily in supply/capacity: inventory and advanced purchase commitments rose $6.7B in just 90 days and are up $11.6B YoY, silicon supply is secured through CY26, and it signed a strategic Nanya memory agreement. Management also announced a restructuring to reallocate resources toward AI, silicon, optics, and security.

all 5 named companies below

Companiesreturns since call

Partners

OPENAI

Partners

Cisco's involvement in OpenAI's cyber program signals a collaborative relationship that could lead to new security product opportunities.

Evidence

“We are also part of OpenAI's Trusted Access for Cyber program.”

Chuck Robbins

ANTHROPIC

Partners

Cisco's testing of Anthropic's security-focused model (Mythos) suggests it will integrate advanced AI-driven threat detection into its offerings, potentially driving demand for security upgrades.

Evidence

“We are also participating in private testing of Anthropic's Cloud Mythos preview model, specifically designed for proactive cybersecurity defense testing.”

Chuck Robbins

NVDA -6.5%

Partners

Cisco secured silicon supply through calendar year 26 and is actively negotiating for CY27, while increasing inventory and advanced purchase commitments by $6.7 billion in 90 days to guarantee components. — This proactive supply chain management is a competitive advantage, allowing Cisco to meet surging demand when competitors face decommits, potentially stealing market share.

Evidence

“In March, we announced a major expansion of our secure AI factory with NVIDIA, giving customers a framework for deploying AI across their entire infrastructure”

Chuck Robbins

Suppliers

NANYA

Suppliers

Cisco's strategic investment and supply agreement with Nanya provides long-term memory supply security, reducing its exposure to market volatility.

Evidence

“You've probably seen the announcement that we made on our strategic investment in Nanya in a three-year supply agreement with them as well.”

Mark Patterson

Supply chain

MU +11.9%

Supply chain

Cisco expects gross margins to stabilize at ~66% in Q4 despite escalating memory costs, driven by tighter pricing terms (15-day notice), which gives them pricing power to pass through cost increases. — Cisco's ability to raise prices and tighten terms suggests memory suppliers have significant pricing power, a signal for the broader supply chain.

Evidence

“And that's really helped us... about four to five points worth of acceleration was just purely based on price not incremental units”

Mark Patterson

External signals

Supply-chain alpha · 5returns since call

Excluding hyperscaler orders, product orders still grew 19% y/y, with management attributing about 4-5 points of that acceleration directly to price increases rather than unit growth.

Mark Patterson

CSCO+8.2%

Evidence

“if we do the math, just on the price increases, actually that we put into place, that actually accounts for about half of that acceleration, about four to five points worth of additional growth”

Cisco's AI infrastructure orders from hyperscalers are now projected to hit ~$9B in FY26, a 4.5x increase from FY25, with at least $6B in revenue recognized in FY27.

Mark Patterson

CSCO+8.2%

Evidence

“it's probably reasonable to expect that we would recognize at least $6 billion of revenue in FY27.”

Cisco secured silicon supply through calendar year 26 and is actively negotiating for CY27, while increasing inventory and advanced purchase commitments by $6.7 billion in 90 days to guarantee components.

Mark Patterson

CSCO+8.2%NVDA-6.5%

Cisco expects gross margins to stabilize at ~66% in Q4 despite escalating memory costs, driven by tighter pricing terms (15-day notice), which gives them pricing power to pass through cost increases.

Mark Patterson

MU+11.9%CSCO+8.2%

Enterprise data center switching orders grew over 40% y/y, with orders tagged for AI deployments up 50% sequentially, showing that AI infrastructure demand is broadening beyond the hyperscalers.

Chuck Robbins

ANET CSCO+8.2%

Methodology & coverage

Management-only analysis. All 5 validated company mentions are shown. Reported actuals and forward guidance are kept separate. Public evidence is limited to eight short attributed quotes. AI-generated analysis can be incomplete or wrong; verify important claims against the original source.