Cisco Systems, Inc.

What they do

Cisco designs and sells a broad range of technologies to power, secure, and draw insights from the Internet, incorporating AI across its product portfolios. It operates globally through three geographic segments: Americas, EMEA, and APJC. Products are grouped into Networking, Security, Collaboration, and Observability, with a range of services over the product lifecycle. Customers include businesses, public institutions, governments, and service providers, including large webscale providers.

Revenue drivers

• Networking — Largest product category, up 25% in Q3 FY2026, driven by data center switching (orders up >40%) and campus networking (orders up >25%).
• Observability — Product revenue up 3% in Q3 FY2026, contributing to growth but smaller than Networking.
• Security — Product revenue flat in Q3 FY2026, but a strategic focus area, leveraging Splunk for a platform approach.
• Services — Revenue decreased 1% in Q3 FY2026, with services gross margin of 69.2%.

Recent performance

In Q3 FY2026 (quarter ended April 25, 2026), Cisco reported record revenue of $15.8 billion, up 12% year-over-year, and diluted EPS of $0.85, up 37%. Product revenue grew 17%, while services revenue declined 1%. Geographic revenue growth: Americas +14%, EMEA +9%, APJC +9%. Gross margin decreased to 63.6% from 65.6%, partly due to product mix and higher memory costs. Total product orders increased 35% year-over-year, with networking orders up over 50%.

Strategy

Cisco's strategy is to securely connect everything, focusing on three customer priorities: building modern infrastructure, protecting against cyber threats, and harnessing AI and data. It aims to integrate AI across its portfolios and leverage telemetry data from Splunk to differentiate security. Management has raised FY2026 AI infrastructure revenue expectations to $4 billion, up from $3 billion, and expects $9 billion in orders for the year. The company is also targeting the campus networking refresh with a next-generation portfolio.

Risks

• Demand Volatility — Operating results are subject to fluctuations in demand, particularly from service providers and internet businesses, due to global economic conditions.
• Competitive Pressure — Price and product competition in communications/networking can change rapidly due to technological innovation and new business models.
• Supply Chain Costs — Product gross margin is negatively impacted by product mix and higher memory costs, which could persist.
• AI Adoption Uncertainty — Success in emerging AI markets is uncertain and depends on market acceptance and adoption of new standards.

Outlook

Management raised Q4 FY2026 revenue guidance to $16.7–$16.9 billion and FY2026 revenue to $62.8–$63.0 billion, with GAAP EPS guidance of $0.80–$0.85 for Q4 and $3.16–$3.21 for the year. They also raised FY2026 AI infrastructure revenue expectations to $4 billion and orders to $9 billion. Guidance includes estimated tariff impacts based on current trade policy.