Cisco Posts Record Revenue as AI Orders Surge

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• CSCO

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The networking-equipment provider Cisco Systems (CSCO) reported record revenue and sharply higher product orders in its fiscal third quarter, driven by surging demand for artificial-intelligence infrastructure [1][2]. Sales rose 12% from a year earlier to $15.8 billion, accelerating from 10% growth in the prior quarter and marking the fastest pace in two years [1][2][3][4].

The results underscored a turn in Cisco’s core business, where total product orders jumped 35% year-over-year, more than doubling the 18% growth recorded in the second quarter [1][2][3]. Excluding hyperscale customers, orders still climbed 19%, up from 18% in the prior quarter, as enterprises accelerated network upgrades [1][2][3]. AI infrastructure orders from hyperscalers reached $5.3 billion year-to-date, prompting the company to lift its full-year order target to $9 billion from $5 billion and its revenue forecast to $4 billion from $3 billion [1][2].

Revenue growth was broad-based, with networking sales up 25% year-over-year, accelerating from 21% in the second quarter [5][6][7]. Campus networking orders grew more than 25%, outpacing prior product launches, while data center switching orders rose over 40% [1][2][3]. By region, the Americas led with 14% growth, nearly doubling the 8% pace of the prior quarter, while EMEA decelerated to 9% from 15% [8][9][10].

Earnings reflected the revenue strength but also margin pressure. GAAP earnings per share rose 37% to $0.85, extending a streak of accelerating growth, while non-GAAP EPS grew 10% to $1.06, in line with the prior quarter [1][2][3][4]. Gross margins, however, continued to compress, with GAAP gross margin falling to 63.6% from 65.0% in the second quarter and non-GAAP gross margin declining to 66.0% from 67.5% [1][5][2][3]. Operating margins told a mixed story: GAAP operating margin expanded to 25.0%, while non-GAAP operating margin slipped to 34.2% [1][11][12][13].

The company raised its outlook, projecting fourth-quarter revenue of $16.7 billion to $16.9 billion, up from prior guidance of $15.4 billion to $15.6 billion [1][14][2]. Full-year revenue guidance was lifted to $62.8 billion to $63.0 billion from $61.2 billion to $61.7 billion, while non-GAAP EPS guidance rose to $4.27 to $4.29 from $4.13 to $4.17 [1][14][2]. Cisco also disclosed a restructuring plan with estimated pre-tax charges of up to $1 billion, including $450 million expected in the current quarter [15].

Cash flow from operations declined 7% to $3.8 billion, extending a trend of year-over-year declines, while remaining performance obligations grew 4% to $43.5 billion, a slower pace than in prior quarters [11][12][13][16]. Shareholder returns totaled $2.9 billion, down from $3.0 billion in the prior quarter, as the company increased its dividend by 1 cent to $0.42 a share [14][17][16].

Citations

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