Cisco Reports Strong Q2 Earnings
What happened
Cisco reported second-quarter earnings that exceeded guidance, featuring double-digit growth in both revenue and profit. The company highlighted that its earnings per share grew at a faster rate than revenue. The strong results are expected to be received favorably by investors and will be used as a benchmark for competitors.
Why it matters
- Despite the strong earnings report, Cisco's stock fell as its guidance for the next quarter only met expectations and it warned of declining gross margins. The company projects third-quarter gross margins to fall to a range of 65.5% to 66.5%, down from 67.5% in the second quarter, citing product mix and rising memory costs. - The company's Networking division was a standout performer, with revenue surging 21% year-over-year to $8.3 billion, driven by AI infrastructure and campus networking refreshes. However, this growth was contrasted by a 4% decline in the Security segment and a 1% drop in Services revenue. - A key driver of growth was a significant increase in AI-related business, with Cisco reporting $2.1 billion in AI infrastructure orders from hyperscale customers during the quarter. The company raised its forecast for full-year AI infrastructure orders to exceed $5 billion. - Total product orders grew 18% year-over-year, showing accelerated demand across all geographic regions and customer markets. Revenue grew 8% in the Americas, 15% in EMEA, and 8% in the APJC region. - For its full fiscal year 2026, Cisco raised its forecast and now expects revenue to be in the range of $61.2 billion to $61.7 billion with non-GAAP earnings per share between $4.13 and $4.17. - During the quarter, the company returned $3.0 billion to its stockholders through a combination of share buybacks and dividends.
Key numbers
- The company projects third-quarter gross margins to fall to a range of 65.5% to 66.5%, down from 67.5% in the second quarter, citing product mix and rising memory costs.
- The company's Networking division was a standout performer, with revenue surging 21% year-over-year to $8.3 billion, driven by AI infrastructure and campus networking refreshes.
- However, this growth was contrasted by a 4% decline in the Security segment and a 1% drop in Services revenue.
- A key driver of growth was a significant increase in AI-related business, with Cisco reporting $2.1 billion in AI infrastructure orders from hyperscale customers during the quarter.
What happens next
- Despite the strong earnings report, Cisco's stock fell as its guidance for the next quarter only met expectations and it warned of declining gross margins.
- For its full fiscal year 2026, Cisco raised its forecast and now expects revenue to be in the range of $61.2 billion to $61.7 billion with non-GAAP earnings per share between $4.13 and $4.17.
- The strong results are expected to be received favorably by investors and will be used as a benchmark for competitors.
Quick answers
What happened in Cisco Reports Strong Q2 Earnings?
Cisco reported second-quarter earnings that exceeded guidance, featuring double-digit growth in both revenue and profit. The company highlighted that its earnings per share grew at a faster rate than revenue. The strong results are expected to be received favorably by investors and will be used as a benchmark for competitors.
Why does Cisco Reports Strong Q2 Earnings matter?
Despite the strong earnings report, Cisco's stock fell as its guidance for the next quarter only met expectations and it warned of declining gross margins. The company projects third-quarter gross margins to fall to a range of 65.5% to 66.5%, down from 67.5% in the second quarter, citing product mix and rising memory costs. The company's Networking division was a standout performer, with revenue surging 21% year-over-year to $8.3 billion, driven by AI infrastructure and campus networking refreshes. However, this growth was contrasted by a 4% decline in the Security segment and a 1% drop in Services revenue. A key driver of growth was a significant increase in AI-related business, with Cisco reporting $2.1 billion in AI infrastructure orders from hyperscale customers during the quarter. The company raised its forecast for full-year AI infrastructure orders to exceed $5 billion. Total product orders grew 18% year-over-year, showing accelerated demand across all geographic regions and customer markets. Revenue grew 8% in the Americas, 15% in EMEA, and 8% in the APJC region. For its full fiscal year 2026, Cisco raised its forecast and now expects revenue to be in the range of $61.2 billion to $61.7 billion with non-GAAP earnings per share between $4.13 and $4.17. During the quarter, the company returned $3.0 billion to its stockholders through a combination of share buybacks and dividends.
