Key Takeaways
- Reports Q3 revenue of $15.8 billion, a 12% year-over-year increase.
- Beats analyst consensus for revenue which stood at $15.3 billion.
- Shares extend gains in after-hours trading on strong AI infrastructure outlook.
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Cisco Q3 revenue beats by $500M on AI demand
Cisco Systems reported fiscal third-quarter revenue of $15.8 billion, beating analyst estimates by $500 million as demand for its AI-powering network hardware accelerated.
"Increased capex spending from hyperscalers as they build out their AI infrastructure is a good sign for Cisco," UBS analyst David Vogt wrote in a May 4 research note.
Shares of the San Jose-based tech firm rose in after-hours trading, adding to a 60% gain over the past year. The strong results may ease investor concerns over high memory costs that have pressured gross margins across the hardware sector.
The "beat and raise" quarter signals a robust recovery in enterprise networking. Demand for advanced networking capability has been a tailwind for Cisco, which competes with companies like Arista Networks and Juniper Networks in the AI infrastructure space. The company's networking segment revenue was expected to climb 19% to $8.44 billion for the quarter.
The strong top-line performance comes despite industry-wide headwinds from surging memory costs. In the prior quarter, Cisco's gross margins of 67.5% missed Wall Street estimates, and analysts had projected margins to contract further to 66.2% in the just-reported quarter. In conjunction with the results, Cisco also announced plans to reduce its workforce by fewer than 4,000 employees to refocus on priority areas like AI.
The results position Cisco as a key beneficiary of the massive AI infrastructure build-out by cloud providers like Meta Platforms. Investors will now look to the company's full earnings call for updated guidance on gross margins and future orders.
This article is for informational purposes only and does not constitute investment advice.
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