There’s a version of Cisco (CSCO) that Wall Street wrote off years ago — a legacy networking giant stuck in the slow lane while flashier AI names grabbed all the attention. That story is getting harder to tell lately.
The 41-year-old multinational technology conglomerate headquartered in California just reported record quarterly revenue of $15.8 billion, up 12% year over year, beating the high end of its own guidance. Non-GAAP earnings per share (EPS) came in at $1.06, ahead of expectations.
CEO Chuck Robbins didn’t bury the lead.
“Cisco delivered record quarterly revenue in Q3, and we saw very strong, broad-based demand for our products,” he said in the company’s third-quarter earnings statement, “demonstrating the relevance of our technology for connecting and securing AI.”
Morgan Stanley was already watching. The firm had been overweight on Cisco for a while, betting on a combination of hyperscaler relationships, an enterprise product cycle, and a networking spend backdrop that was quietly strengthening.
The last time Cisco grew at this pace? More than 15 years ago.
Morgan Stanley raised Cisco’s stock price target to $120 from $91
After this third quarter 2026 (Q32026), Morgan Stanley raised its price target to $120 from $91, in a note shared with me at TheStreet. The single most important number in Cisco’s quarter wasn’t revenue or EPS. It was the AI orders figure, and it moved dramatically.
Coming into Q3, Cisco had guided for roughly $5 billion in AI infrastructure orders for fiscal year 2026 (FY26). After the quarter, that target was raised to $9 billion, according to Cisco’s Q32026 statement. Year-to-date AI orders already stood at $5.3 billion through Q3.
My review of the data shows how fast this has moved:
- FY25 AI orders: $2 billion
- FY26 AI orders guidance (original): $5 billion
- FY26 AI orders guidance (revised): $9 billion
- FY27 AI revenue commitment: At least 50% YoY growth, targeting approximately $6 billion
Source: Morgan Stanley note
According to the Morgan Stanley note, all five major hyperscalers grew triple digits in AI-related orders. That means the strength is broad, not concentrated in one or two relationships. The firm added five new design wins in Q3 alone — two in optics and three in systems — according to the note.
Morgan Stanley flagged one thing worth watching: AI orders totaled $1.9 billion in Q3, down from $2.1 billion in Q2 and $1.8 billion in Q1. The quarterly figure can be lumpy. The company says Q4 needs to be a “meaningful pickup” to hit the $9 billion full-year target, and management expressed confidence that the pipeline supports it, the note indicated.
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Cisco enterprise demand is more than just a hardware refresh
The hyperscaler story gets most of the headlines, but Cisco’s enterprise business is telling its own compelling story.
Enterprise product orders grew 18% YoY in Q3. Data center switching orders were up more than 40% YoY. Campus networking orders grew more than 25% YoY, with wireless up more than 40%, according to both Morgan Stanley and Cisco.
Related: Cisco CEO predicts AI will force multi-billion dollar infrastructure reset
Importantly, Morgan Stanley pushed back on the idea that this is simply a product upgrade cycle. According to the note, enterprise customers are increasingly investing in AI preparedness, not just refreshing old equipment. The firm described enterprise customers as being in the “first inning” of AI modernization. That framing matters for how long the cycle can last.
One area still lagging is security revenue. It was flat YoY in Q3, as growth in newer products was offset by weakness in legacy offerings and an ongoing Splunk-cloud transition, according to the note. That’s a business Morgan Stanley sees as a future AI-driven catalyst, but it hasn’t arrived yet.
The gross margin question Cisco still needs to answer
Not everything in the quarter was clean. Product gross margins stepped down to 64.3% in Q3 from 67.6% in Q2. Management attributed the decline primarily to product mix (more hardware, less software) and memory pricing headwinds.
Morgan Stanley said gross margins have “stabilized” at around 66% on a non-GAAP basis, and Cisco is taking steps to reduce operating expenses, including an announced restructuring, to maintain operating margins. Non-GAAP operating margin held at 34.2% in Q3.
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Morgan Stanley flagged this as something to watch heading into FY27, particularly if the hardware-heavy mix persists. The firm is also monitoring for demand pull-forward.
Management acknowledged “probably” some modest pull-forward into Q3, but cited pricing contribution, a healthy Q4 pipeline, and limited cross-quarter shifting as reasons to believe it was minor, according to the note.
Why Morgan Stanley raised Cisco’s price target to $120
Morgan Stanley’s revised $120 price target reflects roughly 25 times calendar year 2027 (CY27) EPS of approximately $4.70, up from a prior multiple of 20 to 21 times, according to the note. The multiple expansion is deliberate.
The firm argued that Cisco’s growth rate now exceeds the long-term 4% to 6% model the company laid out at its 2024 Analyst Day, and that the AI upgrade cycle has more durability than previously assumed.
The firm’s scenario range:
- Bear case: $64, based on 16 times CY27 EPS of approximately $4, assuming enterprise demand softens and AI contribution fades
- Base case: $120, based on 25 times CY27 EPS of approximately $4.70
- Bull case: $140, based on 28 times CY27 EPS of approximately $5, if Cisco captures outsized AI infrastructure share
Source: Morgan Stanley note
For FY26, Morgan Stanley forecasts revenue of $62.9 billion and non-GAAP EPS of $4.27, in line with Cisco’s own guidance of $62.8 billion to $63.0 billion and EPS of $4.27 to $4.29, according to both the note and Cisco’s statement.
CSCO shares were trading up 51.60% year to date and 92.84% over the past year, according to Yahoo Finance data as of the May 14, 2026, closing bell. The S&P 500 returned 9.58% and 27.30% over those same periods.
For a stock that spent years being overlooked, the current setup of record revenue, quadrupling AI orders, and a price target that just jumped 32% suggests the market is finally paying attention.
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