Cisco Systems shares soared to a record high on Friday, closing at $118.21 after a remarkable 22% weekly gain. The rally was fueled by stronger-than-expected fiscal third-quarter earnings and a sharply increased outlook for artificial intelligence-related revenue. The stock surged 17% on Thursday, marking its biggest single-day advance in over two decades, and added approximately $70 billion to its market capitalization.
Strong Earnings and AI Revenue Boost
Cisco reported third-quarter revenue of $15.8 billion, up 12% year-over-year, with non-GAAP earnings per share of $1.06. The company raised its fiscal 2026 revenue forecast to between $62.8 billion and $63.0 billion. Orders for AI infrastructure from hyperscale cloud providers reached $5.3 billion so far this year, and Cisco now expects $9 billion in AI orders for the full fiscal year, up from an earlier forecast of $5 billion.
CEO Chuck Robbins highlighted "record quarterly revenue" and "very strong, broad-based demand." CFO Mark Patterson noted "double-digit growth on both the top and bottom lines" and a record for non-GAAP operating income.
Job Cuts and Strategic Shift
As part of its strategic pivot toward AI, silicon, optics, and security, Cisco announced plans to cut nearly 4,000 jobs. The restructuring, however, did not dampen investor enthusiasm. "It's about more than just chips," said Ryan Lee of Direxion, pointing to gains tied to growing hyperscaler capital expenditures in data centers and related assets.
Peer Performance and Market Context
While Cisco surged, rivals Arista Networks and Hewlett Packard Enterprise saw their shares decline 3.9% and 3.0%, respectively, on Friday. The mixed performance among AI infrastructure peers suggests that Cisco's gains may be partly company-specific.
Outlook and Risks
Patterson indicated that Cisco could generate at least $6 billion in AI hyperscale sales in fiscal 2027. However, after a 22% weekly jump, the stock has less room for error. Risks include the potential for AI demand to fail to translate into sustainable revenue, heavy spending on hardware squeezing margins, or restructuring distractions. The stock is now more tightly correlated with the capital spending plans of a few large cloud customers.
Management is scheduled to present at J.P. Morgan's Global Technology, Media and Communications Conference in Boston on Monday and Tuesday, with Robbins, Patterson, and investor relations staff expected to attend.
