Cisco Systems Inc. reported fiscal second‑quarter 2026 results, delivering record revenue of $15.3 billion, up 10% year‑over‑year, and adjusted earnings per share of $1.04, beating consensus of $1.02. The quarter ended January 24, 2026.
Product revenue grew 14% to $11.6 billion, driven by a 21% increase in networking sales, while services revenue fell 1% to $3.7 billion. The decline in services was offset by strong demand for networking and AI‑enabled infrastructure, with AI infrastructure orders from hyperscalers totaling $2.1 billion, matching the total for fiscal 2025.
Gross margin contracted to 67.5%, a 120‑basis‑point decline from the prior year, largely due to higher memory costs and a lower‑margin AI systems mix. Management indicated the compression is largely temporary, citing price adjustments and mix improvements expected in the next quarter.
Cisco raised its fiscal 2026 revenue guidance to $61.2‑$61.7 billion and adjusted EPS to $4.13‑$4.17, up from the previous $60.2‑$61.0 billion and $4.08‑$4.14 range. The upgrade reflects confidence in sustained AI demand and a rebound in networking orders, and signals that the company expects to maintain profitability despite short‑term margin pressure.
Segment‑level detail shows security revenue declined 4%, collaboration revenue grew 6%, and observability revenue remained flat. The mix shift toward higher‑margin networking and AI products helped offset the decline in lower‑margin security and collaboration segments.
Management emphasized that the $2.1 billion AI infrastructure order book represents a 65% year‑over‑year increase and that the company expects AI orders to exceed $5 billion for fiscal 2026. The company also highlighted a 20% acceleration in campus‑refresh orders, underscoring its focus on high‑margin AI‑enabled networking.
Despite the earnings beat, investors focused on margin compression and a forecasted decline in GAAP profits for the next quarter, which tempered the market’s reaction. The company remains committed to returning 125% of free cash flow to shareholders through buybacks and dividends, with the quarterly dividend increased to $0.42 per share.
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