Buy Cisco Stock Ahead of Q3 Earnings? Here's What to Know

Cisco Systems CSCO is set to release its third-quarter fiscal 2026 results on May 13.The company anticipates third-quarter fiscal 2026 revenues between $15.4 billion and $15.6 billion. Non-GAAP earnings are expected between $1.02 per share and $1.04 per share. The Zacks Consensus Estimate for revenues is pegged at $15.58 billion, indicating growth of 10.1% from the year-ago quarter’s reported figure. The consensus mark for earnings has been steady at $1.04 per share over the past 30 days, suggesting year-over-year growth of 8.3%.Consensus Estimate Trend Image Source: Zacks Investment Research CSCO’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average being 2.89%.  Cisco Systems, Inc. Price and EPS Surprise Cisco Systems, Inc. price-eps-surprise | Cisco Systems, Inc. QuoteLet’s see how things are shaping up prior to this announcement.Key Factors to Note for CSCO’s Q3 EarningsRobust demand for AI infrastructure and campus networking solutions is expected to have driven CSCO’s top-line growth in the to-be-reported quarter. The company’s networking portfolio, powered by Silicon One, AI-native security solutions and operating systems, is expanding CSCO’s AI footprint. Networking product orders grew 20% in the second quarter of fiscal 2026, which marked the sixth consecutive quarter of double-digit growth driven by hyperscale infrastructure, enterprise routing, campus switching, wireless, industrial IoT and servers. The trend is expected to have continued in the to-be-reported quarter.Increasing AI workloads at the network edge and the emergence of physical AI are benefiting the industrial IoT portfolio. Product orders in the second quarter of fiscal 2026 grew more than 18% year over year, with product orders from service providers and cloud customers surging 65%. Campus networking is benefiting from strong demand for next-gen solutions, including smart switches, secure routers and wireless products. Rapid acceleration in the capacity requirements of the network due to unprecedented levels of network traffic and an ever-evolving threat landscape bodes well for Cisco’s prospects. The aforesaid trends are expected to have continued in the to-be-reported quarter.However, Cisco is suffering from stiff competition from Arista Networks ANET, Dell Technologies DELL, and Hewlett Packard Enterprise HPE across AI networking and enterprise security domains. Hewlett Packard Enterprise benefits from the Juniper Networks acquisition that has elevated HPE’s competitive stance by expanding its networking domain in AI, cloud and hybrid solutions. The versatility of Arista Networks’ unified software stack across various use cases, including WAN routing, campus and data center infrastructure, is setting ANET apart from its competitors, including CSCO. Dell Technologies benefits from strong demand for AI servers as well as robust enterprise demand for AI-optimized servers.CSCO Shares Outperform SectorCisco shares have appreciated 25.4% year to date (YTD), outperforming the Zacks Computer & Technology sector’s return of 16.8%. CSCO shares have underperformed Dell Technologies and Hewlett-Packard Enterprise YTD, while outperforming Arista Networks. Shares of Dell Technologies, Arista Networks and Hewlett-Packard have appreciated 106.9%, 8.2% and 30.6%, respectively.CSCO Stock’s Price Performance Image Source: Zacks Investment Research However, the Value Score of F suggests a stretched valuation for Cisco at this moment.In terms of the forward 12-month price/sales, CSCO is trading at 5.98X, higher than the Zacks Computer Networking industry’s 5.73X, Dell Technologies’ 1.18X and Hewlett Packard Enterprise’s 1X but lower than Arista Networks’ 14.43X.CSCO’s Valuation Image Source: Zacks Investment Research Cisco Rides on Strong Portfolio & AI DemandCisco expects more than $3 billion in AI infrastructure revenues from hyperscalers in fiscal 2026. The company plans to deploy the Silicon One architecture across high-performance networking systems by fiscal year 2029. An expanding portfolio with the introduction of a 102.4 terabit per second G300 chip and two new pluggable optics, a 1.6 terabit per second OSFP and an 800-gig LPO (both built with Cisco silicon photonics technology), is driving CSCO’s footprint in high-performance AI infrastructure. Cisco sees a growing pipeline of more than $2.5 billion in orders for its high-performance networking products across sovereign, Neocloud and enterprise customers ($350 million worth of orders in the second quarter of fiscal 2026). The joint venture with AMD and HUMAIN plans to deliver up to 1 gigawatt of AI infrastructure by 2030. Sovereign solutions are gaining traction as rapid AI adoption is accelerating concerns related to privacy, data governance and regulatory compliance.ConclusionCisco’s near-term results are expected to benefit from an expanding portfolio and an accelerating AI push. These factors justify a premium valuation. Cisco currently carries a Zacks Rank #2 (Buy), which implies that investors should start accumulating the stock ahead of third-quarter fiscal 2026 earnings. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Beyond Nvidia: AI's Second Wave Is HereThe AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. AI’s second wave is moving from infrastructure to implementation and these companies are at the forefront of this transition, positioned to become what Amazon and Google were to the internet era.See Stocks Now >>This article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks