Cisco Raised AI Orders to $9B — So Why Is the Stock Stuck Below $124.62 Resistance?

TradingKey - Cisco Systems (CSCO) will announce their fiscal Q4 2026 results tonight (August 12 after market close). The company's fundamental setup looks strong. Cisco increased their expected full-year AI hyperscaler order range from $5 billion to $9 billion. Cisco also saw record revenue in Q3 at $15.8B, an increase of 12% YoY and stated they are benefiting from three simultaneous spending cycles. The stock currently trades around the $120.44 level and has been repeatedly rejected from the $124.62 level. There is a descending trendline at resistance and $119.65 support zone. Tonight's results should determine whether Cisco breaks the $124.62 trendline or whether the stock retreats to the $119.65 support zone. For longer term stock holders, the real concern is whether the $9 billion order goal was hit and whether the fiscal 2027 guidance is indicative of sustained AI networking and campus refresh or if the momentum is simply cyclical.

The AI Narrative: $9B Orders Suggest Real Demand, Not Hype

Cisco came into fiscal 2026 anticipating $5 billion of AI orders from hyperscalers and increased this goal to $9 billion by the end of Q3 with bookings of $5.3 billion. The distinction between booked orders and recognized revenue bookings is crucial. Booked orders indicate demand, and recogizied revenue bookings are recorded when the equipment ships. The $9 billion order target builds the horizontal demand pipeline entering fiscal 2027.

Cisco can pursue opportunities in networking for AI accelerators. Clusters that are used for both training and inference contain thousands of GPUs, each of which requires high inter-node communication, communication to memory/storage, and communication to remote data centers. Cisco provides switching, routing, and optical solutions as well as processors to connect the required networking infrastructure. Cisco will not be in competition with NVIDIA GPUs in this case, as they will benefit from the required networking spend around non-NVIDIA GPUs and other custom accelerators.

Supporting Evidence: Data-Center and Campus Orders Accelerating

The AI trend is confirmed by the accelerating orders across the portfolio. Increases of 40% and 50% for data-center switching orders and overall networking products orders, respectively, were reported for Q3 by Cisco. This cements a shift in the industry towards the use of Ethernet for AI Networking.

Even beyond the huge hyperscalers, Campus Networking is undergoing a major upgrade cycle. According to Cisco, orders for campus networking infrastructure increased by more than 25% year-on-year in Q3. Doubly, organizations holding off on buying additional hardware post pandemic, and the shift to more advanced Wi-Fi, AI, and Security architectures, has left many organizations with outdated hardware infrastructure. 

This is creating an ideal scenario of massive hyperscaler spending on data center AI infrastructure and enterprise spending on upgrading campus networks.

Q4 Expectations: Revenue Record, Margin Maintenance

Cisco has announced projected revenue for fiscal Q4 in the range of $16.7 to $16.9 billion. With revenue record year after record year, achieving this goal would be another remarkable record. For this quarter, Cisco has targeted an adjusted EPS in the range of $1.16 to $1.18, an adjusted gross margin in the range of 65.5% to 66.5% and an adjusted operating margin of 34% to 35%. For the full fiscal year, Cisco has targeted revenue in the range of $62.8 billion to $63.0 billion, with an adjusted EPS in the range of $4.27 to $4.29.

Tonight's earnings will need to answer whether Cisco closed fiscal 2026 above these targets, but even more importantly, what indicators management has for fiscal 2027. Fiscal 2027 revenue, margin and AI order indicators will likely be some of the most important parts of this particular earnings call. If management communicates that AI and campus networking cycle indicators are strong, some investors may view Cisco as an AI cyclical beneficiary. However, if hyperscale customer orders are completed upon initial buildout and customer orders normalize, some of the current order growth may be more difficult to sustain.

The Weaknesses: Security Flat, Observability Slow

Not all of Cisco's portfolios perform equally well. Q3 Observability revenue increased by only 3% and Security revenue was stagnant compared to the same period prior. Th...

Cisco is using the funding from security and observability acquisitions like NeuralFabric and EzDubs strategically, but investors still need to see substantial revenue growth. Security stagnation, with AI networking growing, means Cisco risks having AI networking dominance be their primary business instead of the broader target of managing an infrastructure-and-security platform.

Profitability and Cash Generation Remain Exceptional

Cisco has consistently shown strength in profitability. Adjusted gross margin for fiscal Q3 was 66.0%, and adjusted operating margin was 34.2% for Q3. Cisco generated $3.8 billion of operating cash flow in Q3 and ended April with $16.6 billion of cash. Cisco also returned $2.9 billion to shareholders in Q3 ($1.7 billion in dividends and $1.3 billion in buybacks), in addition to authorizing $9.6 billion for more buybacks. The quarterly dividend is $0.42 per share.

As a result of the combination of AI-driven growth and significant capital returns, Cisco is in an advantageous position compared to most high-growth AI infrastructure companies that are cash eaters. Cisco also has $43.5 billion in remaining performance obligations (up 4% YoY) and has substantial revenue visibility heading into fiscal 2027.

Cisco Technical Setup: Descending Trendline Caps Upside at $124.62

On the 4-hour chart, Cisco is at an important chart level. Cisco is currently trading around $120.44 after many rejections at $124.62 resistance and the falling trendline from the June high. The stock currently resides above major moving averages ($117.30 50-EMA, $114.54 100-EMA), but a breakout at $124 is not strong enough to be convincing.

CSCO Price Chart - Source: Tradingview

The first level to check is around the $119.65 support which has acted as a pivot before. Should this area hold, another run for $124.62 should be possible. A clean 4-hour close above $124.62 and the descending trendline would take out a lot of the prior sellers and worthy of a run to the last important peak at $129.75. The latest rejection has taken a lot of the steam out of this move. The RSI was high and overbought, but is now sitting just below 50 and under the signal line suggesting buyers lost momentum.

What to Watch in Tonight's Q4 Earnings (After Market Close, Aug 12)

Key stats: (1) Was revenue in the $16.7-16.9B range? (2) What was the adjusted EPS range? (3) How did FY2026 AI orders fare? (4) Did margins fall in the range of 65.5-66.5%? (5) What is the expected revenue for FY2027? (6) Did security and observability demonstrate more pace? (7) Did management comment in any detail about the expected AI and campus spending patterns for FY2027?

If Cisco beats their numbers and preserves margins of 66%, and there is a good outlook for continued AI/campus spending, the stock could trade above $124.62 and up to $129.75. It could trade below $119.65 if it disappointed, and trend lower to $117.30.

Bottom Line (Aug 12, Earnings Tonight)

The strength of Cisco's fundamentals has been improving for some time. AI orders jumped from $5B to $9B. Q3 revenue increased by 12%. AI, campus networking, and security spending were all mentioned as being active. The orders also grew by 35%, 50%, and 40% respectively, in the unit of their respective categories. Margins are at a strong 66%. Security growth has been slow at best with no improvements in Splunk. 

CSCO is in a trading range trading below $124.62, with$119.65 offering support. RSI at 56 signals a loss in momentum. Whether Cisco breaks their trading range (bullish $124.62 → $129.75) or drops to support (cautious $119.65 → $117.30) will be dictated by the outcome of the earnings.

For day traders: track the post-earnings gap. A beat on EPS, combined with a strong FY2027 guide, has a chance to drive this name above $124.62. If expectations guide misses or is uninspiring, we could get a run at $119.65. For investors: After the bell, we will find out if Cisco has commenced a genuine multi-year AI Infrastructure cycle, or if this is just a documented temporary network cyclical opportunity. This is just me thinking out loud.