Cisco Earnings Rise on AI Demand
Cisco earnings showed record Q3 growth and raised Q4 guidance on AI-driven networking orders, refocusing investors on margins and the near-term outlook.
KEY TAKEAWAYS
- Cisco reported Q3 revenue of $15.8 billion, up 12% year over year.
- Non-GAAP EPS was $1.06 and GAAP EPS was $0.85, with expanded gross margins.
- Company guided Q4 revenue to $16.7B-$16.9B, citing rising AI-driven networking orders.
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Cisco Systems Inc. reported Q3 results on May 13, 2026, showing record revenue and stronger-than-expected margins driven by broad-based demand for AI infrastructure. The company raised its Q4 guidance, shifting investor focus to product mix and profitability.
Quarter Results and Guidance
For the quarter ended April 25, 2026, Cisco reported revenue of $15.8 billion, up 12% year over year. GAAP net income rose 35% to $3.4 billion, with GAAP earnings per share increasing 37% to $0.85. On a non-GAAP basis, net income grew 10% to $4.2 billion, and non-GAAP EPS rose 10% to $1.06. Management described the results as double-digit growth on both top and bottom lines, exceeding the high end of its guidance.
Profitability improved as gross margins expanded. GAAP gross margin reached 63.6%, while non-GAAP gross margin was 66.0%. GAAP operating income climbed 24% to $4.0 billion, yielding a 25.0% operating margin. Non-GAAP operating income rose 11% to $5.4 billion, with a 34.2% margin. The GAAP tax provision rate was 16.5%, and the non-GAAP tax rate was 19.0%.
The company set fourth-quarter targets for revenue between $16.7 billion and $16.9 billion, non-GAAP gross margin of 65.5% to 66.5%, and non-GAAP EPS of $1.16 to $1.18. GAAP EPS guidance ranged from $0.80 to $0.85. The guidance incorporates the estimated impact of tariffs under current trade policy and came in above prevailing third-party consensus estimates.
AI Demand and Product Mix
Product revenue led growth, rising 17% year over year, while services revenue declined 1%. Networking was the standout segment, up 25%, followed by observability, which increased 3%. Collaboration revenue slipped 1%, and security remained flat.
Geographically, the Americas grew 14%, with Europe, the Middle East, and Africa (EMEA) and Asia Pacific, Japan, and China (APJC) each rising 9%.
Management attributed the acceleration to strong demand for AI infrastructure products, emphasizing Cisco’s role in connecting and securing AI. The CEO said the company is “well-positioned as the critical infrastructure for the AI era.”
The company also raised its annual revenue forecast, linking the increase to rising orders for AI-powered networking equipment. Shares rose about 11% to an all-time high following the release, reflecting investor optimism about Cisco’s AI exposure. Analysts and investors are now focused on how AI-driven orders, a heavier product mix, and operational efficiencies may reshape Cisco’s growth trajectory and margin profile.
