ETFs in Focus as Cisco Slides Post Q2 Earnings Beat Amid Poor Outlook

Shares of Cisco Systems CSCO slipped 7% in extended trading yesterday (as cited in CNBC), despite the company beating analysts’ expectations on both the top and bottom lines in the second quarter of fiscal 2026. This pullback was most likely triggered by the network leader’s fiscal 2026 revenue guidance, which fell short of Wall Street’s projection of $62.1 billion (as cited in Yahoo Finance).

For investors, this share price slump may offer an opportune moment to invest in CSCO shares, considering the company’s solid long-term growth potential, particularly in connection with the artificial intelligence (AI)-led technology boom and networking solutions. Within its Campus networking portfolio, CSCO is witnessing strong demand for its next-generation switching, routing and wireless products, which continue to ramp faster than prior product launches. 

The company is also benefiting from robust AI-driven demand from hyperscalers, with management expecting to recognize more than $3 billion in AI infrastructure revenues from this segment in fiscal 2026.

Direct investment in CSCO stock carries company-specific risks, including intense competitive pressure in the AI infrastructure space from rivals like Nvidia NVDA. If Cisco’s Ethernet-based solutions fail to gain sufficient traction against proprietary alternatives like InfiniBand, the company could see a sharp erosion in data center market share. These plausible hurdles could trigger sudden and sharp declines in CSCO’s share price.

For investors looking to capitalize on this recent dip without being fully exposed to the unique single-stock volatility and company-specific challenges that could severely affect CSCO’s share price at any point of time, a more prudent strategy could be to invest in Exchange-Traded Funds (ETFs) with significant exposure to this network solutions provider. 

The basket approach will allow investors to capture the potential upside of CSCO and other industry leaders while mitigating company-specific risks arising from sector-specific challenges or geopolitical factors.

But before diving straight into these ETFs, let us check CSCO’s overall performance in the fiscal second quarter in terms of other metrics.

A Brief Analysis of CSCO’s Q2 Results

Cisco’s earnings beat the Zacks Consensus Estimate by 2%. Revenues topped the mark by 1.5%. On a year-over-year basis, the company registered a double-digit increase in revenues and high single-digit growth in earnings. 

Its total product orders grew 18% year over year, with networking product orders accelerating to more than 20% year over year. This also marked  the sixth consecutive quarter of double-digit growth in networking product orders, driven by service provider routing, data center switching, campus switching, wireless, servers and industrial IoT products.

Cisco reported $2.1 billion in AI infrastructure orders from hyperscalers in the fiscal second quarter, signaling a marked acceleration in growth.

Following the acquisition of Splunk, CSCO witnessed continued acceleration in cloud subscriptions and a decline in on-premise deals in the last reported quarter. Splunk added new customers in the fiscal second quarter, bringing total new logos to 500 for the first half of fiscal 2026, and remains on track to reach 1,000 new logos by the end of the fiscal year.

Alongside its fiscal second-quarter results, Cisco announced a one-cent increase in its dividend, in line with its commitment to return at least 50% of annual free cash flow to shareholders.

Cisco expects to generate revenues in the range of $15.4-$15.6 billion in the fiscal third quarter. The consensus estimate, pegged at $15.18 billion, comes below the company guidance. 

For fiscal 2026, the company expects revenues to be in the range of $61.2-$61.7 billion. The consensus estimate, pegged at $60.64 billion, lies below the company guidance. 

Beyond the current fiscal year, Cisco aims to deliver up to 1 gigawatt of AI infrastructure by 2030 in collaboration with Advanced Micro Devices AMD and HUMAIN, a Saudi AI firm. As part of the joint venture, the partners plan to build 100 megawatts in Saudi Arabia as Phase 1 of the project.

CSCO-Heavy ETFs to Watch

iShares U.S. Telecommunications ETF IYZ

This fund, with net assets worth $778.7 million, offers exposure to U.S. companies that provide telephone and internet products, services, and technologies. Of these, Cisco carries the first spot, holding 20.71% of the fund.

This fund charges 38 basis points (bps) as fees. Its volume is good at an average of 1.15 million shares a day. 

First Trust NASDAQ Cybersecurity ETF CIBR

This fund, with net assets worth $10.30 billion, offers exposure to 32 companies engaged in the cybersecurity segment of the technology and industrials sectors. It includes companies primarily involved in the building, implementation, and management of security protocols applied to private and public networks, computers, and mobile devices in order to provide protection of the integrity of data and network operations. Of these, Cisco carries the first spot, holding 9.51% of the fund.

This fund charges 58 bps as fees.  Its volume is at an average of 1.32 million shares a day.  

Amplify Cybersecurity ETF HACK

This fund, with net assets worth $1.96 billion, offers exposure to 23 companies actively involved in providing cybersecurity solutions that include hardware, software and services. Of these, Cisco carries the first spot, holding 7.27% of the fund.

This fund charges 60 bps as fees.  It traded at a volume of 0.13 million shares in the last trading session.   

First Trust Dow Jones Internet ETF FDN

This fund, with net assets worth $5.81 billion, offers exposure to 41 U.S. companies from the Internet industry. Of these, Cisco carries the fourth spot, holding 7.90% of the fund.

This fund charges 49 bps as fees.  Its volume is at an average of 438,028 shares a day.  

Pacer Data and Digital Revolution ETF TRFK

This fund, with net assets worth $458.5 million, offers exposure to 87 large cap companies driving transmission, manipulation, storage and use of data. Of these, Cisco carries the fourth spot, holding 7.34% of the fund.

This fund charges 49 bps as fees. It traded at a volume of 0.21 million shares in the last trading session.   

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

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