Cisco Systems (CSCO) saw its stock climb 4.79% to close at $96.57 on Friday, as investors positioned for the networking giant's fiscal third-quarter earnings report due after the market close on May 13. The rally reflects heightened expectations around AI-driven demand for Cisco's hardware and software offerings, with Wall Street closely watching for updates on hyperscaler orders.
Earnings Expectations and Guidance
Analysts, based on a survey by AlphaStreet, project adjusted earnings of $1.04 per share on revenue of $15.56 billion. This revenue figure sits near the upper end of Cisco's own guidance range of $15.4 billion to $15.6 billion. The company's earnings call is scheduled for 1:30 p.m. Pacific on Wednesday, May 13.
AI Orders and Hyperscaler Demand
UBS maintains a Buy rating on Cisco with a $95 price target, forecasting $1 billion in AI hyperscaler orders for the quarter. If achieved, this would bring year-to-date AI orders to $4.4 billion, inching closer to Cisco's annual target of exceeding $5 billion. In the second quarter, Cisco reported $2.1 billion in AI infrastructure orders from hyperscalers, contributing to an 18% jump in product orders and 10% revenue growth to $15.3 billion. CEO Chuck Robbins has emphasized Cisco's role as a provider of "trusted infrastructure" for the AI era.
Margin Pressures and Risks
Despite the positive order outlook, UBS warns that higher component costs—particularly for memory, optics, and other parts—could cap gross margins at around 66%. Cisco has implemented price increases over the past three to six months, but profit margins may still face headwinds if input costs rise faster than anticipated.
Competitive Landscape
Arista Networks, a key rival in data-center networking, reported a 35.1% revenue increase in the first quarter and guided for approximately $2.8 billion in second-quarter revenue. However, CFO Chantelle Breithaupt described the macro and supply-chain environment as "dynamic," highlighting that strong AI networking demand does not eliminate execution risks. This peer performance provides a mixed but relevant read-through for Cisco's upcoming results.
Post-Earnings Events and Security Focus
Following the earnings release, Cisco's CEO Chuck Robbins and CFO Mark Patterson are scheduled to present at J.P. Morgan's technology, media, and communications conference on May 18-19. Security chief Peter Bailey will represent the company at a Bank of America technology forum on June 4. Additionally, Cisco recently announced plans to acquire Astrix Security, a firm specializing in protecting non-human identities such as API keys and tokens. Bailey noted that "AI agents are a new attack surface," underscoring the strategic importance of this acquisition.
Stock Volatility and Market Context
Bloomberg options data indicates an expected 5.8% move in Cisco's stock following the earnings report. In the previous quarter, shares fell 9.8% despite beating expectations. After Friday's rally, there is limited cushion if results merely meet forecasts, making the upcoming report a pivotal moment for the stock.
