Cisco stock pops as Q3 earnings defy memory headwinds

Cisco Systems (CSCO) shares are extending gains in after-hours trading after the company posted a “beat and raise” signaling a robust recovery in enterprise networking and a massive acceleration in the AI infrastructure build-out.

For its fiscal Q3, the Nasdaq-listed firm reported record revenue of $15.8 billion, a 12% year-over-year increase that comfortably cleared the analyst consensus of $15.3 billion.

Adjusted earnings per share (EPS) came in at $1.06, beating the $1.03 estimate and marking a 10% pop from the year-ago period.

Including the after-hours rally, Cisco stock is up nearly 60% versus its recent low.

Cisco Q3 earnings defy memory costs and supply headwinds

Heading into the Q3 print, a key concern for CSCO shares was the memory headwind – specifically the rising costs and supply tightness in HBM and DDR5 modules – which threatened to squeeze hardware margins.

However, the quarterly release effectively defied these fears.

Despite inflationary pressures in the component market, Cisco maintained a strong adjusted gross margin of 66%.

This resilience was driven by an increase in networking revenue to $8.8 billion, where high-margin data center switches dominated the mix (orders up more than 40%).

Cisco successfully offset input costs with a shift toward high-value, AI-ready silicon – particularly the Silicon One architecture – proving its pricing power remains intact even as the supply chain for memory remains constrained.

Why else are CSCO shares gaining momentum after Q3 print

Cisco shares are ripping higher also because management raised its full-year revenue guidance to $63 billion, signaling that the momentum in campus networking refreshes is not a one-off event.

Beyond top-line growth, the company underscored its commitment to shareholder value by declaring a $0.42 quarterly dividend and executing $1.3 billion in share repurchases during the quarter.

Moreover, CSCO ended Q3 with $43.5 billion in remaining performance obligations (RPO).

This growing backlog of deferred revenue provides a high degree of visibility into 2027, reassuring investors that the current growth trajectory is sustainable and not just a result of clearing out old order books.

How to play Cisco Systems after its third-quarter release

All in all, the most significant takeaway from the quarterly print is Cisco’s strengthening position within the global AI infrastructure narrative.

The company dramatically increased its 2026 artificial intelligence order guidance from $5 billion to $9 billion, a move that places it in the same competitive lane with pure-play hardware accelerators.

With $5.3 billion in AI orders already booked year-to-date, Cisco is proving that its Ethernet-based fabrics and custom silicon are becoming the preferred “plumbing” for massive GPU clusters.

By integrating security and observability directly into the AI stack, CSCO stock is no longer just a legacy hardware provider; it’s an essential architect of the gen-AI era, providing the connectivity and reliability required for the next generation of data centers.

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