Cisco's Q1 Earnings Beat Estimates, Revenues Rise Y/Y, Shares Rise

Cisco Systems CSCO reported first-quarter fiscal 2026 non-GAAP earnings of $1 per share, beating the Zacks Consensus Estimate by 2.04%. The figure increased 9.9% year over year.

Revenues of $14.88 billion surpassed the Zacks Consensus Estimate by 0.71%. The top line increased 7.5% year over year. Total Annual Recurring Revenues (ARR) were $31.4 billion, up 5% with product ARR growth of 7%. Total subscription revenues were $8 billion and represented 54% of Cisco’s total revenues. Total software revenue was up 3% year over year to $5.7 billion.

Cisco shares were up 5.73% at the time of writing this article. In the trailing 12-month period, CSCO shares have appreciated 24.9%, underperforming the Zacks Computer & Technology sector’s return of 26.9%.

CSCO’s Q1 Top-Line Details

Revenues from Networking in the first quarter of fiscal 2026 were $7.77 billion, up 15% on a year-over-year basis. Security revenues were $1.98 billion, down 2% year over year. Collaboration revenues were $1.06 billion, down 3% year over year. Observability revenues were $274 million, up 6% year over year.

Total Product revenues in the first quarter of fiscal 2026 were $11.08 billion, comprising 74.4% of Cisco’s total revenues. On a year-over-year basis, product revenues increased 9.5%. Service Revenues were $3.81 billion, comprising 25.6% of Cisco’s total revenues and up 2.1% on a year-over-year basis.
 

Cisco Systems, Inc. Price, Consensus and EPS Surprise

Cisco Systems, Inc. price-consensus-eps-surprise-chart | Cisco Systems, Inc. Quote

Region-wise, the Americas’ revenues increased 9% year over year to $8.99 billion. EMEA (Europe, Middle East and Africa) revenues climbed 5% year over year to $3.78 billion. APJC (Asia Pacific Japan China) revenues climbed 5% year over year to $2.11 billion. 

In the first quarter of fiscal 2026, AI Infrastructure orders from webscale customers exceeded $1.3 billion.

CSCO’s Q1 Operating Details

First-quarter fiscal 2026 non-GAAP gross margin was 68.1%, which expanded 120 basis points (bps) year over year. On a non-GAAP basis, the product gross margin decreased 30 bps on a year-over-year basis to 50%. Service gross margin decreased 90 bps to 18.1%.

In the first quarter of fiscal 2026, Cisco reported total non-GAAP operating expenses of $5.02 billion, up 3% year over year. As a percentage of revenues, operating expenses declined 150 bps year over year.

Consequently, CSCO reported a non-GAAP operating income of $5.12 billion, up 8.4% year over year. Operating margin expanded 30 bps year over year to 34.4%.

CSCO’s Balance Sheet Details

As of Oct. 25, 2025, cash and cash equivalents and investments totaled $15.7 billion, which decreased from $16.1 billion as of July 26.

Total debt was $28.1 billion as of Oct. 25, 2025, compared with $28.1 billion as of July 26.

The remaining performance obligations (RPO) at the end of the first quarter of fiscal 2026 were $42.9 billion, up 7%. Product RPO was up 10%, and services RPO was up 4%.

In the first quarter of fiscal 2026, CSCO returned $3.6 billion to stockholders through share buybacks ($2 billion) and dividends ($1.6 billion).

CSCO Offers Positive Guidance

For the second quarter of fiscal 2026, Cisco expects non-GAAP earnings between $1.01 per share and $1.03 per share. Revenues are expected to be in the range of $15 billion-$15.2 billion. 

Non-GAAP gross margins are expected to be between 67.5% and 68.5%. Non-GAAP operating margin is anticipated to be between 33.5% and 34.5%. 

For fiscal 2026, Cisco expects non-GAAP earnings between $4.08 per share and $4.14 per share. The company expects revenues between $60.2 billion and $61 billion.  

Zacks Rank & Stocks to Consider

Cisco currently has a Zacks Rank #3 (Hold).

Amphenol APH, Digital Turbine APPS and Advanced Energy Industries AEIS are some better-ranked stocks in the broader sector. Each of the three stocks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Amphenol, Digital Turbine and ASML Holding is currently pegged at 26.83%, 42.42% and 20.87%, respectively. Shares of Amphenol, Digital Turbine and Advanced Energy Industries have appreciated 98.8%, 270.4% and 33.41%, respectively.

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This article originally published on Zacks Investment Research (zacks.com).

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