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Cisco’s Q4 Orders Just Changed The AI Conversation
Posted On Aug 13, 2026 by Grayson Cavern
Cisco Systems (NASDAQ: CSCO)closed FY26 with a record $17.3 billion in Q4 revenue, up 18% year over year, while non-GAAP EPS climbed 23% to $1.22. Those are backward-looking numbers, so the better read on where Cisco is headed comes from what customers are committing to now and whether those commitments can keep the company’s growth rate elevated over the coming quarters.
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The company’s product orders jumped 35% in Q4, with networking product orders up 40%. Even excluding hyperscalers, product orders still grew 25%, while Enterprise orders rose 21%.
In fact, according to the earnings release, the company isn’t relying on a handful of hyperscalers to carry the entire AI story; enterprise customers are spending more, service providers are spending more, and the networking business itself is seeing sustained order growth.
AI is sitting underneath much of that spending, as customers build the infrastructure needed to connect increasingly large and distributed workloads, and Cisco is positioned across that stack rather than in just one corner of it.
The hyperscaler numbers show just how quickly that piece of the business is developing, and that’s where we need to look next.
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That growth is coming through Cisco’s networking portfolio, particularly its Silicon One systems and Acacia optics, which together represented roughly 60% and 40% of FY26 hyperscaler AI orders, respectively. The company also secured three new hyperscaler design wins in Q4, including another Silicon One P200 system for scale-across workloads.
I also like what is happening outside the hyperscaler bucket. Cisco took more than $400 million of AI infrastructure orders from neocloud, sovereign and enterprise customers in Q4, bringing FY26’s total to more than $1 billion. Enterprise Nexus switch orders tagged for AI deployments also rose more than 85% sequentially.
So Cisco isn’t betting the entire AI opportunity on one customer type or one deployment model; the same networking demand is beginning to spread from giant cloud providers into enterprises and newer AI infrastructure operators. That gives the company a much broader runway than simply supplying hyperscalers with another wave of hardware.
But Cisco Is Paying For The AI Boom In Gross Margin
Cisco Systems’ AI opportunity is getting bigger, but the mix of business coming with it is putting some pressure on profitability, with non-GAAP product gross margin falling 270 basis points year over year to 64.8% as a higher hardware mix and memory costs weighed on the quarter.
That trade-off is worth watching because Cisco is moving deeper into hardware-heavy AI infrastructure at the same time its networking business is accelerating, meaning more revenue does not automatically translate into the same level of gross profit. The good news is that the company isn’t letting that pressure flow straight through to the bottom line: non-GAAP operating margin rose to 35.9%, while EPS climbed 23%.
That leaves Cisco with a fairly simple balancing act: keep the AI-driven hardware growth coming without allowing the lower-margin mix to eat away at the operating leverage that made this quarter so strong.
Cisco’s Chart Hasn’t Broken The Bull Case
Cisco Systems closed the regular session at $123.88, up 2.86%, before slipping in after-hours trading, but the broader setup still leaves room for the bulls. Shares had pushed above the $116.20 20-day and $118.01 50-day moving averages, leaving the recent June high around $130 as the obvious hurdle. A move through that area would give the earnings reaction more credibility, especially after the stock spent much of the summer consolidating beneath it.
The other thing I’d watch is whether the $118 area can hold if the initial earnings excitement fades, because that zone now sits around the 50-day moving average and could become the line between a healthy consolidation and a failed breakout. With Cisco’s order growth running ahead of reported revenue, I wouldn’t be surprised to see buyers take another shot at $130 if the stock can stay above that support.
The Business Is Moving In A Direction I Like
I’m not ready to call Cisco Systems an AI rocket ship, but the business is moving in a direction I like: orders are accelerating, hyperscaler AI infrastructure is scaling quickly, and management is guiding to another year of revenue and EPS growth. FY27 revenue is expected to reach $72.2 billion–$73.4 billion, while non-GAAP EPS is guided to $5.05-$5.11, giving investors a fairly clear benchmark for whether this AI-driven acceleration is actually making its way into the financials.
But like I said, there is still the gross-margin issue to watch, particularly with product margins already feeling the weight of the heavier hardware mix and memory costs. But CSCO finished FY26 with $15.9 billion in cash, $5.4 billion of quarterly operating cash flow and $12.7 billion returned to shareholders, so this isn’t a business that needs the AI boom to survive.
If the company can keep converting those orders into revenue while protecting its operating leverage, $130 may end up looking less like a ceiling and more like the next stop.
Today’s editorial pick for you
Alphabet Stock Options May be Gunning for a Near-Term Pop
Posted On Aug 14, 2026 by Joshua Enomoto
Alphabet (NASDAQ: GOOG)isn’t exactly carrying a whole lot of weight for the broader technology space. On a year-to-date basis, the ticker has gained a little over 9%, which is quite modest for its standards. Moreover, GOOG stock is down 2.37% in the trailing month ending Aug. 12. There doesn’t seem to be much excitement for the name, which from a contrarian’s perspective makes the idea intriguing.
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No, I don’t think it’s a wise idea just to randomly acquire securities merely because they’re on a downtrend. Of course, Warren Buffett has taught us that we should look to be greedy when others are fearful but there’s the thing: we have to be strategic in our contrarianism. Here, I believe GOOG stock presents a fundamentally sound argument.
Look, Alphabet isn’t exactly trouble-free. Plus, in the age of artificial intelligence, other players have arguably made bigger strides. Combine corporate concerns with the overall economy and you have reason to be cautious with Alphabet stock. Nevertheless, the underlying company is the undisputed stalwart in search and commands a litany of attractive and viable brands.
So, whenever GOOG stock encounters a period of prolonged weakness, my estimation is that this negative circumstance won’t last long. Google is probably a permanently relevant brand and I’m going to (reasonably) assume that institutional players will bid up any discounted opportunities.
Specifically, I anticipate a conspicuous swing in Alphabet stock over the next three weeks. If so, the 350/355 bull call spread expiring Sep. 4 may be a tempting idea. To be sure, it’s risky because of the near-term expiration date. However, at a net debit of $210 — with the opportunity to make a maximum profit of $290 should GOOG rise through the $355 strike at expiration — the overall cost isn’t too onerous.
That said, there are huge probabilistic risks with the above call spread that should be acknowledged.
Black-Scholes Doesn’t Have Great Things to Say About GOOG Stock
At time of writing, Alphabet stock trades at $342.37. Given the full profitability target of $355, you’re looking at about a 3.7% move higher over the next three weeks. It’s quite aggressive as the implied volatility (IV) for the Sep. 4 options chain is only 28.28%. Historically, the IV would usually land at this time around 43%.
Right now, the options market is signaling unusually low forward mobility for GOOG stock. When applying the Black-Scholes formula, the anticipated probability of the ticker reaching $355 at expiration is only 29.67%. That’s super low and much of it stems from the historically low IV.
Making matters worse, the probability of the 350/355 call spread breaking even at expiration is only 34.7%. No matter how you cut it, this trade — under the presupposed framework of Black-Scholes — is doomed to suffer a negative expected value (EV) over the theoretical long run.
Still, we shouldn’t just give up on the trade idea before we’ve fully assessed the risk. Because the equities market has not been proven to be determinative, no one can tell you what Alphabet stock is precisely worth in the future. By logical deduction, when experts do assign probabilistic estimates, those numbers are based on presuppositions.
What is a presupposition? If you ever get cornered by a street evangelist who tells you that there’s only one way to ultimate truth, that’s a presupposition. By necessity, no one knows what will happen in the great beyond. So, as convincing as religious experts may be, they’re reasoning under uncertainty.
And that’s what Black-Scholes — just another reasoning mechanism under uncertainty. In this case, the framework offers an implied probability of GOOG stock reaching the $355 target at expiration through a presupposed random walk.
In other words, under random conditions and given the initial volatility expectations, we’d expect Alphabet stock to hit $355 on Sep. 4 around 30 times out of 100. It will break even around 35 times out of 100, which are obviously not great odds.
The thing is, you don’t have to accept these numbers as gospel truth.
Order Flow Imbalance Potentially Signals Upside for Alphabet Stock
Primarily, the reason why you shouldn’t take Black-Scholes-derived probabilistic estimates at face value is the random walk itself. As other experts have demonstrated, the market is reflexive. It doesn’t operate in a vacuum but responds to various catalysts and influencing agents.
Subsequently, I believe that order flow imbalances represent a major influencing factor. For example, if GOOG stock suffers a prolonged downward trend, that is likely to trigger buy-the-dip sentiments from institutional players. And that’s why I anticipate a near-term pop in the coming weeks.
Specifically, in the last 10 weeks, Alphabet stock has only managed to print three up weeks, leading to a downward slope. Under this 3-7-D quantitative sequence, the ticker tends to rise above the random baseline for the next three to four weeks, followed by a period of underperformance relative to the baseline. That’s why I’m interested in near-expiry call options.
Under 3-7-D conditions, which has only flashed 11 times on a rolling basis since January 2019, Alphabet stock has hit the equivalent of the $355 strike price a total of six times at the end of week 3 (Sep. 4). Of course, the extremely small sample size forces us to view these observed stats with a massive grain of salt. Nevertheless, on the surface, the success ratio is 54.5%.
What’s interesting is that, largely as a consequence of the small sample size, the probability of hitting breakeven under my model is also 54.5%. Basically, when the aforementioned signal flashes in the charts, we tend to see an exuberant move higher.
Now, I’m going to keep a relatively conservative view on GOOG stock, ignoring the really high payout trades because of the low IV. For me, the $355 strike represents a balanced perspective.
Expected Value Calculations Are the Cherries on Top
If you assumed that Black-Scholes is telling the ultimate truth, the EV calculations would be wildly bad. For the 350/355 bull spread, you would be expected to win $86.04 (29.67% x $290) and lose $147.69 (70.33% x $210). That’s an outrageous net loss of $61.65, assuming you bet on this exact trade multiple times over the long run.
However, the calculus shifts dramatically under my nonrandom inductive model. Under this framework, you would be expected to win $158.05 and lose $95.55. That comes out to an expected net gain of $62.50, which is basically the inverse of the Black-Scholes model.
Because our approaches are producing completely different expectations, you’ll want to sit down and research GOOG stock. Still, if you do give credence to inductive reasoning, there may be a compelling opportunity here.
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