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Cisco Systems (CSCO +14%) is trading sharply higher to a new all-time high after reporting strong Q3 (Apr) results and issuing much better-than-expected Q4 (Jul) guidance, driven by accelerating AI infrastructure demand and broad-based networking strength. The company also announced an AI-focused restructuring plan that includes nearly 4,000 job cuts as it reallocates resources toward silicon, optics, security, and AI initiatives.

• The Q3 upside was solid and comparable to recent quarters. What really jumped off the page was the huge upside EPS and revenue guidance for Q4 (Jul).
• Networking product orders accelerated more than 50% yr/yr in Q3, fueled by triple-digit growth in service provider routing and compute along with double-digit growth across data center switching, campus switching, wireless, enterprise routing, and industrial IoT products.
• Cisco said enterprise AI infrastructure demand continues to ramp, with Nexus switch orders tied to AI deployments rising nearly 50% sequentially in Q3. Campus networking posted record orders in Q3, growing more than 25% yr/yr.
• AI infrastructure orders from hyperscalers totaled $1.9 bln in Q3 versus $600 mln in the year-ago period. Year-to-date hyperscaler AI infrastructure orders reached $5.3 bln, already exceeding Cisco's prior FY26 target of $5 bln with one quarter still remaining. Cisco now expects approximately $9 bln in hyperscaler AI infrastructure orders in FY26, representing 4.5x growth versus FY25.
• Q3 non-GAAP gross margin declined 260 bps yr/yr to 66%, in line with guidance as elevated memory costs continued to pressure margins. Probably the best takeaway was Cisco saying it believes that gross margins have stabilized and the Q4 guidance at 66% at the mid-point illustrates that.

Briefing.com Analyst Insight:

Cisco delivered one of its strongest quarters in recent memory as AI-related demand accelerated across both hyperscaler and enterprise markets. The biggest takeaway was not just the strong Q3 beat, but the Q4 guidance was truly impressive, fueled by AI infrastructure. Cisco is known for being somewhat cautious on guidance, so to see this big upside guidance for Q4 really illustrates the potential they are seeing. Investors also appear encouraged by the breadth of networking demand, particularly in switching, routing, and Wi-Fi 7 adoption. Margin concerns tied to higher memory pricing also eased considerably after management indicated gross margins have stabilized. We also think investors are pleased to see the restructuring news, which focuses even more on AI.