Cisco’s Record Q3: Networking Demand Surges, AI Momentum Fuels Upgraded Guidance
Double-Digit Growth and Record Revenues Define Q3
It’s not every day a tech giant breaks its own records, but that’s exactly what Cisco (NASDAQ: CSCO) did in its third quarter, reporting a stunning 12% year-over-year jump in revenue to $15.8 billion. Net income on a GAAP basis soared 35% to $3.4 billion, while earnings per share climbed to $0.85, a 37% increase from the same quarter last year. Non-GAAP measures reinforced the momentum, with EPS at $1.06, up 10% year over year.
Networking and AI Infrastructure Orders Hit All-Time Highs
Behind this surge, the backbone was an extraordinary spike in networking product orders—up more than 50% year over year. Driven in part by accelerating demand from hyperscaler clients for AI infrastructure, Cisco revealed $5.3 billion in AI-related orders year to date and raised its full-year expectations to $9 billion, nearly doubling its previous outlook. Campus networking saw its own renaissance, with orders up more than 25%, as organizations ramped up multi-year refresh cycles on next-generation platforms. Data center switching was another standout, posting over 40% annual growth in orders.
| Category | Q3 FY 2026 | Q3 FY 2025 | Year-over-Year Change |
|---|---|---|---|
| Revenue | $15.8B | $14.1B | +12% |
| GAAP Net Income | $3.4B | $2.5B | +35% |
| GAAP EPS | $0.85 | $0.62 | +37% |
| Non-GAAP EPS | $1.06 | $0.96 | +10% |
| Networking Orders | +50%+ | ||
| AI Infrastructure Orders (YTD) | $5.3B (raised FY outlook to $9B) | ||
Strong Margins Point to Healthy Execution
Operational discipline was evident in margins and expense management. Gross margin came in at 63.6% (GAAP) and 66.0% (non-GAAP), while operating income margins expanded to 25.0% and 34.2%, respectively. These strong numbers were achieved despite ongoing investments in AI, security, and silicon initiatives. Cash flows from operations remained robust at $3.8 billion, though slightly below last year’s levels due to increased investments and working capital shifts.
Raised Guidance Reflects Confidence in Demand and Execution
Cisco isn’t slowing down. For Q4, the company forecasts revenue between $16.7 billion and $16.9 billion, and non-GAAP EPS between $1.16 and $1.18. Full year FY26 guidance now sits at $62.8–$63.0 billion in revenue and non-GAAP EPS of $4.27–$4.29—a clear sign management sees structural shifts driving sustainable growth. Notably, margin projections remain healthy, with non-GAAP gross margins expected in the 65.5–66.5% range, even as the company ramps investments in next-generation products and platforms.
| Guidance Metric | Q4 FY 2026 | Full-Year FY 2026 |
|---|---|---|
| Revenue | $16.7–$16.9B | $62.8–$63.0B |
| Non-GAAP Gross Margin | 65.5–66.5% | – |
| Non-GAAP EPS | $1.16–$1.18 | $4.27–$4.29 |
Capital Return Is Steady: Buybacks and Dividend Growth Continue
Shareholders haven’t been left behind: Cisco returned $2.9 billion to investors through a combination of $1.7 billion in dividends and $1.3 billion in share buybacks during the quarter. The quarterly dividend was raised to $0.42 per share, reflecting ongoing confidence in the company’s cash flow and outlook.
Key Takeaway: Signs Point to Prolonged Demand Cycle and Strong AI Leverage
If there’s a single narrative here, it’s that demand for foundational networking and AI infrastructure is not only robust but accelerating. With raised guidance, record orders, and continued operational efficiency, Cisco appears positioned to lean further into industry tailwinds. Investors might want to watch upcoming Q4 results for continued evidence that this momentum can translate into lasting growth beyond the current cycle—particularly as the company undertakes a major campus networking refresh and builds on its hyperscaler AI wins.
What to Watch Next
Cisco will hold its Q3 earnings call today at 1:30 p.m. Pacific Time—which should provide further color around its AI-driven strategy and guidance upgrades. For those tracking tech sector signals: Is this renewed demand a sign of a broader industry upcycle, or unique to Cisco’s positioning? Either way, heightened expectations for AI infrastructure are likely to remain a central theme in the quarters to come.
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