Cisco's Q2 Earnings Beat Estimates, Revenues Rise Y/Y, Shares Fall

Cisco Systems CSCO reported second-quarter fiscal 2026 non-GAAP earnings of $1.04 per share, beating the Zacks Consensus Estimate by 1.96%. The figure increased 10.6% year over year. 

Revenues of $15.35 billion surpassed the Zacks Consensus Estimate by 1.49%. The top line increased 9.7% year over year. Total Annual Recurring Revenues (ARR) were $31 billion, up 3% with product ARR growth of 6%. Total subscription revenues were $7.83 billion and represented 51% of Cisco’s total revenues. Total software revenue increased 36.9% year over year to $5.6 billion. 

Cisco shares were down 7.47% at the time of writing this article.

CSCO’s Q2 Top-Line Details

Revenues from Networking in the second quarter of fiscal 2026 were $8.29 billion, up 21% on a year-over-year basis. Security revenues were $2.01 billion, down 4% year over year. Collaboration revenues were $1.05 billion, up 6% year over year. Observability revenues were $277 million, which was in line year over year. 

Cisco Systems, Inc. Price, Consensus and EPS Surprise

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

Total Product revenues in the second quarter of fiscal 2026 were $11.64 billion, comprising 75.8% of Cisco’s total revenues. On a year-over-year basis, product revenues increased 13.8%. Service Revenues were $3.70 billion, comprising 24.2% of Cisco’s total revenues and down 1.3% on a year-over-year basis. 

Region-wise, the Americas’ revenues increased 8% year over year to $8.84 billion. EMEA (Europe, Middle East, and Africa) revenues climbed 15% year over year to $4.42 billion. APJC (Asia Pacific Japan China) revenues climbed 8% year over year to $2.08 billion. 

In the second quarter of fiscal 2026, AI Infrastructure orders from webscale customers exceeded $2.1 billion.

CSCO’s Q2 Operating Details

Second-quarter fiscal 2026 non-GAAP gross margin was 67.5%, which contracted 120 basis points (bps) year over year. On a non-GAAP basis, the product gross margin decreased 90 bps on a year-over-year basis to 50.4%. Service gross margin decreased 210 bps to 17.1%. 

In the second quarter of fiscal 2026, Cisco reported total non-GAAP operating expenses of $5.04 billion, up 6.2% year over year. As a percentage of revenues, operating expenses declined 110 bps year over year. 

Consequently, CSCO reported a non-GAAP operating income of $5.31 billion, up 9.3% year over year. Operating margin contracted 10 bps year over year to 34.6%.

CSCO’s Balance Sheet Details

As of Jan. 24, 2026, cash and cash equivalents and investments totaled $15.8 billion, which increased from $15.7 billion as of Oct. 25, 2026. 

Total debt was $30 billion as of Jan. 24, 2026, compared with $28.1 billion as of Oct. 25, 2025. 

The remaining performance obligations (RPO) at the end of the second quarter of fiscal 2026 were $43.4 billion, up 5% year over year. Product RPO increased 8% year over year, of which long-term RPO was $11.8 billion, up 11% year over year. Services RPO was up 2% year over year. 

In the second quarter of fiscal 2026, CSCO returned $3 billion to stockholders through share buybacks and dividends.

CSCO Offers Positive Guidance

For the third quarter of fiscal 2026, Cisco expects non-GAAP earnings between $1.02 and $1.04 per share. Revenues are expected to be in the range of $15.4 billion-$15.6 billion. Non-GAAP gross margins are expected to be between 65.5% and 66.5%. 

Non-GAAP operating margin is anticipated to be between 33.5% and 34.5%. For fiscal 2026, Cisco expects non-GAAP earnings between $4.13 and $4.17 per share. 

The company expects revenues between $61.2 billion and $61.7 billion.

Zacks Rank & Stocks to Consider

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

Some better-ranked stocks in the broader Zacks Computer and Technology sector include Analog Devices ADI, Applied Optoelectronics AAOI, and MKS MKSI. While MKSI sports a Zacks Rank #1 (Strong Buy), Analog Devices and Applied Optoelectronics carry a Zacks Rank of 2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here. 

Analog Devices’ shares have gained 61% in the past 12-month period. Analog Devices is scheduled to release first-quarter 2026 results on Feb. 18, 2026. 

Applied Optoelectronics shares have returned 93.4% in the past 12-month period. Applied Optoelectronics is set to report fourth-quarter 2025 results on Feb. 26. 

MKS shares have surged 149.5% in the past 12-month period. MKS is set to report its fourth-quarter 2025 results on Feb. 17, 2026.

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