Key Highlights

  • Cisco expects Q3 FY2026 Revenue of US$15.4bn–US$15.6bn, supported by AI infrastructure Demand.
  • AI infrastructure orders reached US$2.1bn in Q2, with ~US$3bn expected for FY2026.
  • Splunk integration and subscription growth remain central to Cisco’s evolving Revenue model.

Cisco Systems, Inc. (Nasdaq: CSCO), the long-standing leader in enterprise networking and one of the largest enterprise technology companies in the world, is preparing to deliver its third-quarter fiscal 2026 results in May with several powerful narratives in motion. Strong AI infrastructure order momentum, the ongoing integration of Splunk and a refreshed campus and data centre product cycle have together produced a more dynamic Cisco story than at any point in recent years.

Heading into the print, management has guided to Revenue of US$15.4 billion to US$15.6 billion for the third quarter and non-GAAP Earnings-per-share/">Earnings Per Share of US$1.02 to US$1.04, framing the period as another step in the company's effort to translate strong order activity into reported Revenue and Earnings.

Company background

Headquartered in San Jose, California, and listed on the Nasdaq under the ticker CSCO, Cisco designs, manufactures and sells networking, security, observability, collaboration and related infrastructure products and services. Its customer base spans hyperscale cloud providers, large enterprises, public-sector organisations, service providers and small to medium businesses globally.

The company's Revenue is organised around several product categories. Networking remains the largest, encompassing switching, routing, wireless, optics and the Silicon One family of merchant networking silicon. Security, fast-growing in importance, includes a wide range of products and services. Collaboration includes Webex and related communication tools. Observability, anchored by the Splunk platform, has emerged as a strategic priority following Cisco's Acquisition of Splunk. Cisco also generates significant recurring Revenue from software, subscriptions and services.

Cisco's fiscal year ends in late July. The company is in the third quarter of its fiscal year 2026, which closes at the end of April 2026, with results scheduled for release in mid-May.

Latest developments

Cisco's most recently reported quarter was the second quarter of fiscal 2026, ended in January 2026 and reported in February. The company highlighted double-digit product order growth across all regions, led by US$2.1 billion in AI infrastructure orders during the quarter. Demand was supported by Silicon One networking systems including the G300, energy-efficient N9000/N8000 platforms and new 1.6T/800G optical transceivers used in modern AI fabric architectures.

Management has indicated that AI infrastructure Revenue could reach approximately US$3 billion for the full fiscal year 2026, a meaningful contribution that has refined how investors think about Cisco's exposure to the AI buildout cycle. Splunk continued to win new customers in Q2, reaching 500 new logos for the first half of fiscal 2026 and remaining on track to add 1,000 new logos for the full year.

Looking forward, Cisco's third-quarter fiscal 2026 guidance includes Revenue of US$15.4 billion to US$15.6 billion, non-GAAP gross Margin of 65.5 to 66.5 per cent, non-GAAP operating Margin of 33.5 to 34.5 per cent and non-GAAP Earnings-per-share/">Earnings Per Share of US$1.02 to US$1.04. Some analyst forecasts of GAAP-equivalent Earnings-per-share/">Earnings Per Share have referenced numbers in the high-US$0.80s range, with the difference reflecting accounting treatment, Amortisation of acquired intangibles and other reconciling items.

The third-quarter print is expected to provide additional context on the conversion of the strong order book into Revenue, the trajectory of AI infrastructure Revenue, the Splunk integration progress and the broader networking refresh cycle.

Recent financial performance

Recent Cisco results have demonstrated a mix of operational improvement and strategic transition. After several quarters of digesting the Splunk Acquisition and an industry-wide period of inventory normalisation, the company has returned to constructive top-line trends supported by AI-related infrastructure Demand and recovering enterprise spending.

Recurring Revenue remains a structural feature of the Business. Software subscriptions, services and Splunk-related Revenue continue to grow as a share of the overall mix, supporting both the visibility and the resilience of Cisco's Revenue base. Management commentary has highlighted ongoing progress in converting customers to subscription-based consumption models and in growing annualised recurring Revenue.

Margins have continued to be influenced by mix, memory cost dynamics in the broader hardware market, the integration of Splunk and ongoing strategic investments. Cisco has historically maintained a strong Cash Flow profile, with a long-running pattern of dividends, share repurchases and disciplined Capital allocation.

The Q2 fiscal 2026 commentary highlighted some Margin pressure from memory costs and Splunk's cloud transition, but Leverage/">Operating Leverage from underlying growth has helped to support overall profitability.

Annualised recurring Revenue (ARR) and remaining performance obligations (RPO) have continued to be highlighted by management as forward-looking indicators of Revenue durability. Cisco has also continued to emphasise the strategic role of its software portfolio, including operating system, networking software, observability and security products, in supporting customer outcomes and improving the long-term Economics of its hardware-anchored relationships.

Free Cash Flow generation remains a long-running strength of the Franchise. Combined with a sizeable cash balance and modest Leverage, this has supported Cisco's ability to maintain a consistent Dividend, continue share Buybacks and absorb the financial impact of the Splunk transaction while still funding meaningful R&Amp;D and acquisitions.

Share-market context

Cisco shares trade on the Nasdaq and have historically been viewed as a relatively defensive way to gain exposure to enterprise IT spending. Share-price action has been driven by quarterly results, AI-related disclosures, Splunk integration progress, and broader sentiment around enterprise technology Investment cycles.

Investor focus has shifted increasingly toward the AI infrastructure narrative. Cisco's positioning as a critical supplier of networking and optical infrastructure for AI data centres has provided a renewed growth lens for the company. At the same time, the durability of Splunk's contribution and the trajectory of the broader observability and security businesses continue to influence sentiment.

Macro factors — including interest rates, foreign exchange and broader corporate IT budgets — continue to play a role in short-term price action. Cisco's well-established Dividend policy and consistent Capital returns remain a meaningful part of the Investment narrative for many shareholders.

Industry backdrop

The enterprise networking and infrastructure market in 2026 is being shaped by several significant forces. AI-driven data centre buildouts have created strong Demand for high-throughput networking, optical interconnects and advanced silicon, while Cybersecurity threats have continued to elevate enterprise spending on integrated security platforms.

Within networking, the rise of AI fabric architectures — supporting high-bandwidth, low-latency communication between accelerators in large clusters — has created opportunities for both established networking vendors and merchant silicon providers. Cisco's Silicon One initiative places the company in a position to compete across both customer-grade and merchant networking opportunities.

Observability and security have become critical to enterprise IT operations. The convergence of these two domains, alongside the growing scale of telemetry data generated by modern infrastructure, has been a strategic rationale for Cisco's Splunk Acquisition. Splunk's strong position in security and observability Data Analytics complements Cisco's existing portfolio.

Competition is significant. Other large networking and security players, hyperscaler-driven custom silicon initiatives, specialty observability and security vendors, and an evolving cloud-native stack create a dynamic environment in which incumbency must be matched with continued innovation.

Strategy and growth drivers

Cisco's strategy can be framed around several themes: capturing AI-driven networking Demand, growing security and observability, scaling the Splunk Franchise, and continuing to shift the Business toward subscription-based recurring Revenue.

On AI networking, Cisco has highlighted the role of Silicon One, its high-end switching platforms, optical interconnects and integrated systems in supporting both hyperscale and enterprise AI buildouts. The US$2.1 billion of AI infrastructure orders in Q2 fiscal 2026 illustrated the scale of opportunity.

Splunk integration is a multi-quarter initiative that involves aligning go-to-market motions, integrating product roadmaps, transitioning to cloud-based consumption models and managing legacy enterprise contracts. Continued growth in new logos, increased Splunk attach rates among Cisco's broader customer base, and successful migration of customers to cloud-based consumption are all key markers of progress.

Subscription growth remains a structural priority. Continued conversion of customers to subscription-based offerings supports recurring Revenue, deferred Revenue and longer-term visibility into financial performance.

Capital allocation continues to balance Investment in R&Amp;D, ongoing acquisitions, dividends and share repurchases. The company has historically maintained a strong Dividend policy, with consistent quarterly distributions to shareholders.

Risks and challenges

Cisco faces a meaningful set of risks. Competitive intensity is significant: in networking, large vendors and merchant silicon-based platforms compete directly; in security and observability, specialty players and cloud-native challengers create ongoing pressure; in collaboration, hyperscaler-led platforms have reshaped the industry.

Macro risk includes the impact of corporate IT spending cycles, currency movements and broader economic conditions. AI capex is currently a tailwind, but it remains exposed to changes in hyperscaler Investment patterns and enterprise adoption cadence. Memory and component cost dynamics can affect gross Margin trends, particularly in product categories with significant memory content.

Splunk integration risk includes the possibility of slower-than-expected synergy realisation, customer migration challenges or competitive responses from specialty observability vendors. Continued Investment will be required to maintain Splunk's Leadership in security analytics and observability.

Cybersecurity risk is significant for Cisco both as a vendor and as a target. Maintaining the integrity of its product portfolio against sophisticated threats is a continuous priority. Regulatory developments — including those related to data privacy, Supply chain and cross-border data flows — also Factor into the operating environment.

Other relevant risks include foreign currency Volatility, Supply chain pressures, intellectual property disputes and litigation typical of large technology companies.

Customer concentration in any single segment of Demand is a further consideration. While Cisco's customer base is broad, a meaningful share of incremental AI infrastructure orders is associated with a relatively small number of large customers. Significant changes in any of those customers' build plans or technology preferences could affect quarterly Revenue cadence even when underlying long-term Demand remains intact. The company's transition toward more software-centric and subscription-based commercial models, while strategically valuable, can also introduce variability in how reported Revenue compares with prior periods that were more hardware-weighted.

Analyst and investor focus

Investors and analysts will focus on the upcoming Q3 fiscal 2026 print and several key metrics. Top of the list is the conversion of strong AI infrastructure orders into reported Revenue, alongside any updated guidance for full-year AI infrastructure Revenue beyond the previously communicated US$3 billion framework.

Splunk-related metrics — new logo additions, customer expansions, cloud transition progress and contributions to overall Revenue and margins — will be carefully tracked. Networking refresh dynamics across enterprise and service-provider customers will provide additional context.

Margin trajectory, particularly given the pressures from memory costs and Splunk's cloud shift, will be a meaningful indicator. Capital allocation activity, including Dividend and buyback execution, will continue to be a focus for income-oriented investors. Commentary on the broader macro environment, IT spending and AI capex trends will help shape the medium-term narrative.

Outlook

Looking out 12 to 24 months, Cisco's performance will be influenced by several factors. The trajectory of AI-related networking Demand will likely remain a central driver, with sustained hyperscaler and enterprise Investment supporting continued order growth. The pace of Splunk's integration and growth will play a meaningful role in shaping Margin and Revenue trends. Continued progress on subscription-based consumption will support recurring Revenue and improve visibility.

Macro conditions, IT spending patterns and the broader competitive environment will continue to influence outcomes. Currency moves and policy developments — including those affecting cross-border technology Supply chains — will provide an overlay on operating performance.

Capital allocation will remain a critical part of the Investment story. Sustained dividends, share repurchases and selective Investment in growth areas will continue to be central pillars of the framework that has long defined the way Cisco engages with shareholders.

Conclusion

Cisco enters the rest of fiscal 2026 with substantial AI-related order momentum, an active Splunk integration story and an evolving product portfolio across networking, security and observability. The company's scale, customer relationships and recurring Revenue provide a meaningful foundation, while AI-driven Demand creates a renewed growth lens for the long-running enterprise technology incumbent. Issues investors are likely to monitor include the conversion of AI infrastructure orders into Revenue, the trajectory of Splunk's contribution, Margin progression, Capital returns and the broader macro and competitive environment for enterprise technology spending.