Abstract

Cisco Systems will report fiscal third-quarter results on May 13, 2026 Post Market; investors are watching revenue growth, gross margin execution, AI order conversion into shipments, and guidance updates for adjusted EPS and operating profitability.

Market Forecast

The current quarter’s consensus, aligned with the company’s last guidance, points to revenue of roughly 15.56 billion US dollars, up 10.50% year over year, with adjusted EPS around 1.04, up 12.76% year over year; EBIT is projected at 5.27 billion US dollars, up 11.34% year over year. Management’s guidance frames an adjusted gross margin of 65.5%–66.5% and operating margin of 33.5%–34.5% for the April-ended quarter; the company did not provide an explicit net profit margin guide. In last quarter’s mix, Products generated 11.64 billion US dollars and Services contributed 3.71 billion US dollars, with company-level strength supported by AI-networking orders and stable maintenance and software attach. The most promising near-term vector remains AI data-center networking, where orders reached 2.10 billion US dollars in the January quarter and accelerated sequentially, setting up a multi-quarter revenue conversion pipeline.

Last Quarter Review

The fiscal second quarter delivered revenue of 15.35 billion US dollars (up 9.71% year over year), a gross profit margin of 64.97%, GAAP net profit attributable to shareholders of 3.18 billion US dollars (quarter on quarter up 11.01%), a net profit margin of 20.69%, and adjusted EPS of 1.04 (up 10.64% year over year). A key highlight was better-than-expected results versus consensus for revenue and adjusted EPS alongside a dividend increase to 0.42 US dollars per share, underscoring cash-flow resilience. By business line, Products delivered 11.64 billion US dollars and Services 3.71 billion US dollars; management flagged accelerating AI-related orders from hyperscale customers, implying continued momentum in data-center networking as those orders translate into recognized revenue.

Current Quarter Outlook

Main revenue engine: Core networking and recurring services

Cisco Systems’ core revenue engine for the April-ended fiscal third quarter centers on enterprise and cloud networking hardware, complemented by software and Services recurring revenue. The company guided revenue to 15.40–15.60 billion US dollars, with adjusted gross margin of 65.5%–66.5% and operating margin of 33.5%–34.5%. These ranges suggest solid pricing and mix, aided by high-margin software and maintenance, as well as disciplined supply-chain and cost controls. The forecasted revenue growth of 10.50% year over year aligns with a backdrop of steady enterprise demand and the beginnings of AI-related order conversion into shipments. While shipment timing can be lumpy, deferred revenue and backlog dynamics should help smooth recognition from large projects. Services, although smaller than Products (3.71 billion US dollars in the January quarter), tends to provide stability through software subscriptions, maintenance contracts, and renewals, supporting the guided gross-margin range. The main watch item inside the core engine is product mix. A higher proportion of software subscriptions and high-end switching tends to lift gross margin toward the top of the guided band, while a heavier mix of hardware shipments for large projects may bias gross margin toward the mid-range. With operating margin guided to the mid-30s, operating leverage from disciplined opex and continued subscription attach will be pivotal to sustain adjusted EPS in the 1.02–1.04 range.

Most promising segment: AI data-center networking and security adjacencies

AI infrastructure networking remains the most promising catalyst this quarter, following 2.10 billion US dollars of AI orders from hyperscale customers in the January quarter, up from 1.30 billion US dollars three months earlier. The sequential inflection in orders is a constructive indicator for multi-quarter revenue flow-through as systems integrators and cloud providers expand AI clusters and backbone networks. The pace at which orders convert to shipments is the single most important swing factor for upside to revenue and gross margin within the guided ranges. Security capabilities tied to protecting AI agents and non-human identities add another growth adjacency. The company recently announced initiatives to help customers test and secure AI agents before deployment, and it plans to acquire Astrix Security to broaden identity defense for automated agents. These moves expand the addressable opportunity around AI deployment, complementing core networking with zero-trust and identity tooling that can lift software mix and support recurring revenue. Given the guidance for adjusted gross margin of 65.5%–66.5%, AI networking content likely carries favorable margin structure when bundled with software control-plane, observability, and security subscriptions. If AI project execution proceeds as planned, the company can maintain gross margin discipline while satisfying strong demand from cloud and large enterprises. The setup points to EPS landing near the upper half of the guided band if mix trends supportive of software attach persist.

Key stock drivers this quarter: AI order conversion, margin execution, and guidance cadence

Three forces are most likely to move the stock around the print and guidance update. First is the rate of AI order conversion into revenue, which investors will read through from product shipments, lead-time commentary, and large-deal milestones. Last quarter’s sequential order acceleration establishes a high bar; the market will look for validation that those wins are scaling into revenue in line with plan. Second is margin execution within the guided bands. Hitting the upper half of the 65.5%–66.5% adjusted gross margin range would signal robust pricing and mix, particularly if high-end switching and software subscriptions are outgrowing lower-margin components. Operating discipline that keeps the operating margin in the 33.5%–34.5% corridor will provide confidence in EPS delivery at approximately 1.04, in line with the 12.76% projected year-over-year growth in adjusted EPS. Third is forward guidance cadence for the fiscal fourth quarter and any qualitative color on the demand pipeline into the second half of the calendar year. The market reaction to the last release—declining despite a top- and bottom-line beat—highlighted that expectations are elevated around AI exposure. Updates on AI-related wins, the timing of hyperscaler deployments, and early traction from the planned Astrix Security acquisition will shape how investors recalibrate revenue and margin trajectories for coming quarters.

Analyst Opinions

Bullish views dominate recent commentary, with a majority of published opinions in the period tilting positive against a smaller number of neutral stances. Evercore ISI reiterated an Outperform rating and recently raised its price target to 110 US dollars, citing strengthening AI-networking momentum and the durability of software and services contributions that help sustain high-60s adjusted gross margins. Earlier, the firm also maintained a Buy stance with a 100 US dollars target, reinforcing conviction that AI-related demand can support double-digit year-over-year growth in the current quarter’s top line and a healthy cadence for earnings. Additional aggregated analyst data indicate an average “overweight” stance with a mean price target around 90.67 US dollars, a setup consistent with expectations for revenue of roughly 15.56 billion US dollars and adjusted EPS near 1.04 this quarter. Neutral perspectives, such as a Hold rating from Erste Group, are present but remain in the minority and typically point to the high bar embedded in the stock following the January-quarter rally and the market’s exacting standards for AI execution. The weight of recent previews, however, emphasizes that the combination of sequential AI order acceleration, a 65.5%–66.5% adjusted gross margin outlook, and a 33.5%–34.5% operating margin framework provides a credible foundation for EPS delivery. The prevailing bullish camp expects that the conversion of AI orders into shipments, supported by recurring revenue from software and services, will keep growth within guidance and potentially bias gross margin toward the upper half of the range if mix trends hold. These analysts also highlight incremental catalysts from expanding AI security offerings—particularly identity defense for non-human agents—and potential cross-selling synergies once recent security initiatives are integrated. With consensus modeling revenue up 10.50% year over year and adjusted EPS up 12.76% year over year, the majority view is that execution risks are manageable and that guidance discipline can underpin continued confidence in the earnings trajectory.