Cisco (CSCO) Q3 2026 Earnings Report

Cisco shares experienced a significant surge of 17% in after-hours trading on Wednesday, following the release of its financial results and forward-looking guidance that comfortably surpassed Wall Street’s expectations. This robust performance underscores a renewed investor confidence in the networking giant’s strategic direction and its ability to capitalize on emerging market trends.

The company also indicated a workforce reduction this quarter, affecting fewer than 4,000 employees, which translates to less than 5% of its total global headcount. This recalibration of resources appears to be a strategic move to streamline operations and reinvest in high-growth areas, particularly in light of the burgeoning AI landscape.

Here’s a breakdown of Cisco’s performance against LSEG consensus estimates:

• Adjusted Earnings Per Share: $1.06, exceeding the expected $1.04.
• Revenue: $15.84 billion, surpassing the consensus forecast of $15.56 billion.

The company reported a 12% year-over-year increase in revenue for the quarter ending April 25, reaching $15.84 billion, up from $14.15 billion in the prior year. Net income saw a substantial rise to $3.37 billion, or 85 cents per share, compared to $2.49 billion, or 62 cents per share, in the same period last year. This indicates a significant improvement in profitability and operational efficiency.

Looking ahead to the fiscal fourth quarter, Cisco projects adjusted earnings per share to be in the range of $1.16 to $1.18, with revenue anticipated between $16.7 billion and $16.9 billion. These projections are notably higher than the consensus estimates from analysts polled by LSEG, who were expecting $1.07 in adjusted earnings per share on $15.82 billion in revenue. This optimistic outlook suggests management’s confidence in continued market momentum and the effectiveness of their strategic initiatives.

A key driver behind this positive sentiment is Cisco’s burgeoning artificial intelligence infrastructure business. The company announced it has secured $5.3 billion in AI infrastructure and hyperscaler orders year-to-date, a significant increase from its previous expectations. Cisco has revised its projected AI-related orders for the fiscal year upwards to $9 billion, a substantial jump from the earlier $5 billion forecast. Furthermore, the company anticipates generating $4 billion in revenue from this segment within the fiscal year, an upward revision from its prior projection of $3 billion. This highlights Cisco’s aggressive push into the AI market and its success in securing foundational infrastructure deals.

While Cisco has been perceived as playing catch-up in the AI infrastructure race compared to some of its data center peers, the market narrative has shifted dramatically. Investor sentiment has turned bullish, propelling the stock to a record high late last year, ultimately surpassing its dot-com peak. The upward trajectory has continued into this year, with Cisco’s shares appreciating by 33%, significantly outperforming the Nasdaq’s 14% advance. If the stock maintains its post-market gains through Thursday’s trading session, it would represent the most substantial single-day rally since 2002, underscoring the market’s strong conviction.

In a communication to employees, CEO Chuck Robbins outlined the strategic rationale behind recent organizational adjustments, including workforce changes. These measures are intended to sharpen the company’s focus and optimize its investment strategy in areas with the highest demand and long-term value creation potential. Robbins emphasized that “The companies that will win in the AI era will be those with focus, urgency, and the discipline to continuously shift investment toward the areas where demand and long-term value creation are strongest.” He expressed confidence in Cisco’s position to be a leader in this transformative era, necessitating “hard decisions—about where we invest, how we’re organized, and how our cost structure reflects the opportunity in front of us.”

The financial implications of these workforce adjustments were detailed in a regulatory filing. Cisco estimates that severance and related costs will incur pre-tax charges of approximately $1 billion. The company expects to recognize about $450 million of these charges in the fiscal fourth quarter. This proactive financial management aims to align the cost structure with future growth opportunities.

Cisco has been actively innovating its product portfolio to address the demands of the AI era. During the third quarter, the company unveiled new switches and routers powered by its next-generation processors, designed to enhance the performance and scalability of AI data centers. Additionally, Cisco introduced a comprehensive leaderboard for evaluating generative AI models, focusing on their resilience against sophisticated cybersecurity threats. These advancements underscore Cisco’s commitment to providing end-to-end solutions for the evolving technological landscape.

Delving deeper into segment performance, Cisco’s networking revenue saw a robust increase of 25%, reaching $8.82 billion. This significantly exceeded the consensus estimate of $8.47 billion among analysts polled by StreetAccount. Security revenue, however, remained relatively flat at approximately $2 billion, aligning closely with StreetAccount’s consensus of $1.99 billion. This mixed performance across segments highlights the strong demand for its core networking infrastructure, while the security business continues to navigate market dynamics.

Company executives are scheduled to discuss these results and provide further insights during a conference call with analysts, commencing at 4:30 p.m. ET.