Cisco Earnings Summary - Q2 2026
Overview
Cisco Systems Inc. reported its earnings for the second quarter of 2026, revealing a mixed performance that led to a significant drop in stock price by approximately 7% at the Wall Street open. Despite beating revenue expectations, the market reacted negatively primarily due to disappointing gross margins.
Earnings Highlights
- Revenue: Increased to USD 17.3 billion, surpassing expectations of USD 16.8 billion, marking a 15% year-on-year growth.
- EPS: Reported at USD 1.22 (non-GAAP), exceeding expectations of USD 1.17, and reflecting a year-on-year increase of about 100%.
- Gross Margin: Declined from 68.4% to 66.3% in the latest quarter, raising concerns among investors.
Business Segment Performance
- Networking: Total orders rose by 40%, with a 25% increase when excluding orders from hyperscale companies, totaling USD 9.3 billion.
- AI Revenue: Projected to reach USD 7.5 billion for the next fiscal year, up from USD 4 billion.
- Security Segment: Grew by 14% year-on-year, generating USD 2.22 billion.
Future Guidance
Management's projections for the upcoming fiscal year indicate a revenue target of USD 72.8 billion, approximately 6% higher than previous estimates. The projected EPS for the next quarter is expected to be as high as USD 1.33, suggesting a year-on-year increase of nearly 30%.
However, the outlook for margins is concerning, with expectations of a 60 basis point decline to below 66% in the next quarter.
Conclusion
Cisco's earnings report highlights strong demand and growth, particularly in the networking segment, driven by ongoing investments in AI and infrastructure. However, the company faces challenges in cost optimization and margin management, which could hinder profitability moving forward. The market remains cautiously optimistic, with potential for growth in AI infrastructure and security services, but the valuation may be limited compared to other companies in the AI sector.