Cisco’s latest quarter exceeded Wall Street’s revenue and adjusted profit expectations, but the market response was negative. Management attributed the strong sales to a surge in demand for AI-driven networking infrastructure, particularly from hyperscale cloud providers and enterprise customers, as well as robust product order momentum across geographies and segments. CEO Charles Robbins highlighted, “We delivered record revenue...with product revenue up 24% year-over-year,” citing broad-based demand and a multi-year networking upgrade cycle as key contributors. However, management also acknowledged that margin headwinds from higher hardware mix and memory costs impacted gross margins, despite overall operating efficiency gains.
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Cisco (CSCO) Q2 CY2026 Highlights:
- Revenue: $17.25 billion vs analyst estimates of $16.83 billion (17.6% year-on-year growth, 2.5% beat)
- Adjusted EPS: $1.22 vs analyst estimates of $1.17 (4.4% beat)
- Revenue Guidance for Q3 CY2026 is $18.1 billion at the midpoint, above analyst estimates of $16.75 billion
- Adjusted EPS guidance for the upcoming financial year 2027 is $5.08 at the midpoint, beating analyst estimates by 5.9%
- Operating Margin: 24.7%, up from 21% in the same quarter last year
- Annual Recurring Revenue: $32.1 billion (3.2% year-on-year growth, beat)
- Billings: $18.43 billion at quarter end, up 19.2% year on year
- Market Capitalization: $439.9 billion
While we enjoy listening to the management’s commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Cisco’s Q2 Earnings Call
- Amit Daryanani (Evercore ISI) asked about durability of growth excluding AI and the sustainability of the networking super cycle. CEO Charles Robbins reiterated confidence in broad drivers including enterprise and telco refreshes, and emphasized, “We believe we are only at the beginning of this super cycle.”
- Ben Reitzes (Melius Research) questioned margin expectations and the apparent conservatism in networking revenue guidance. CFO Mark Patterson described the guidance as prudent, citing tougher year-over-year comparisons and mix shift toward hardware, but stressed the high profitability of incremental AI business.
- Meta Marshall (Morgan Stanley) sought clarity on the 14% security growth and whether it was driven by Splunk or broader portfolio improvements. Patterson explained the quarter included some large on-premise Splunk deals, but underlying trends point to improving growth in both core and new security products.
- Aaron Rakers (Wells Fargo) probed the implied deceleration in revenue growth after Q3 and asked about supply chain readiness. Patterson said guidance reflects tougher comparisons later in the year, and assured that Cisco’s supply chain is well positioned to meet or exceed demand.
- David Vogt (UBS) pressed for insight on AI order timing and the impact of price increases. Patterson explained that large AI orders often extend beyond 12 months, providing backlog, while price increases had a significant impact in Q2 and are expected to continue affecting results in the first half of next year.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be monitoring (1) the pace of AI infrastructure adoption and new design wins across hyperscaler and enterprise customers, (2) the success of Cisco’s security and observability product integration—especially Splunk and new AI-powered offerings, and (3) the company’s ability to maintain operating margin discipline amid hardware-driven revenue growth. Execution on supply chain efficiency and continued customer platform adoption will also be critical signposts for sustainable growth.
Cisco currently trades at $111.43, down from $123.88 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free).
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