Cisco Systems Inc (CSCO) Q2 2026 Earnings Call Highlights: Record Revenue and AI Infrastructure ...
GuruFocus News
Wed, February 11, 2026 at 9:02 PM PST 4 min read
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- Total Revenue: $15.3 billion, up 10% year over year.
- Product Revenue: $11.6 billion, up 14% year over year.
- Services Revenue: $3.7 billion, down 1% year over year.
- Non-GAAP Net Income: $4.1 billion, up 10% year over year.
- Non-GAAP Earnings Per Share (EPS): $1.04, up 11% year over year.
- Operating Cash Flow: $1.8 billion, down 19% due to a final transition tax payment and investments in AI infrastructure.
- Capital Returned to Shareholders: $3 billion, including $1.6 billion in dividends and $1.4 billion in share repurchases.
- Dividend Increase: Raised by 1 penny to $0.42 per quarter.
- Total Product Orders Growth: 18% year over year.
- Non-GAAP Gross Margin: 67.5%, down 120 basis points year over year.
- Non-GAAP Operating Margin: 34.6%, above guidance range.
- Networking Revenue Growth: 21%, driven by AI infrastructure and campus refresh.
- Security Revenue: Down 4%, due to declines in prior generation products and transition to cloud subscriptions.
- Collaboration Revenue Growth: 6%, led by devices and cloud services.
- Total Software Revenue: $5.7 billion, up 2% year over year.
- Total Subscription Revenue: $7.8 billion, representing 51% of total revenue.
- Total RPO (Remaining Performance Obligations): $43.4 billion, up 5% year over year.
- Product RPO Growth: 8%, with long-term portion up 11%.
- Total ARR (Annual Recurring Revenue): $31 billion, up 3% year over year.
Release Date: February 11, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points- Cisco Systems Inc ( NASDAQ:CSCO) reported a strong Q2 with double-digit growth in both revenue and earnings per share, exceeding the high end of guidance ranges.
- The company achieved record revenue in Q2, driven by a 14% increase in product revenue, particularly from AI infrastructure and campus networking solutions.
- Cisco Systems Inc ( NASDAQ:CSCO) returned $3 billion in capital to shareholders in Q2, with a total of $6.6 billion returned year-to-date, and announced an increase in its dividend.
- The company saw a significant increase in AI infrastructure orders, with expectations to take AI orders in excess of $5 billion and recognize over $3 billion in AI infrastructure revenue from hyperscalers in FY26.
- Cisco Systems Inc ( NASDAQ:CSCO) reported strong demand across its networking portfolio, with double-digit growth in data center switching, campus switching, wireless, servers, and industrial IoT products.
Negative Points- Cisco Systems Inc ( NASDAQ:CSCO) faced challenges with legacy infrastructure not designed for AI's performance, speed, and security needs.
- The company experienced a decline in security revenue by 4%, impacted by the transition of its Splunk business from on-premise deals to cloud subscriptions.
- Non-GAAP gross margin decreased by 120 basis points year over year, primarily due to negative impacts from product mix and higher memory costs.
- Operating cash flow was down 19% due to a final transition tax payment and continued investments to meet growing demand, particularly for AI infrastructure.
- Cisco Systems Inc ( NASDAQ:CSCO) noted that the nonlinear nature of the hyperscale business creates uncertainty relative to historical numbers, impacting revenue predictability.
Q & A HighlightsQ: Can you discuss the mix between Silicon and Optics in your AI infrastructure and whether new products like the G300 and P-200 open up new markets for Cisco? A: Chuck Robbins, CEO: The $5 billion AI target for fiscal '26 does not include the recently announced P-200 or G300 products. The mix has been about 60% systems and 40% optics. These new products will help deepen existing relationships and gain traction with new customers, but they are not included in the current fiscal '26 target.
Q: Why is the sequential growth from Q3 to Q4 only 1.4% when it is usually 5-6%? Is this due to conservatism or growth concentration? A: Mark Patterson, CFO: The Q2 product revenue was up 5% quarter over quarter, which is atypical. For Q3, the typical seasonality is low single-digits, aligning with our guidance. The hyperscale business's nonlinear nature adds some uncertainty to historical numbers.
Q: How do you view the scale-up opportunity for Cisco in AI networking, and what is the status of your relationship with Nvidia? A: Chuck Robbins, CEO: We plan to participate in scale-up opportunities in the future but have not announced anything yet. Our engagements with Nvidia have increased by 70% sequentially, and we are seeing early success in this partnership, which is expected to ramp up.
Q: Can you provide insights into the demand for your 51 terabit and 100 terabit data center switch portfolio? A: Chuck Robbins, CEO: We are selling as much as we can build, with significant demand from major customers. The 800 gig optics and Acacia portfolio are also seeing huge acceleration. We continue to build capacity to meet this demand.
Q: How is the enterprise appetite for AI investment evolving, and have you seen any changes in demand due to price increases? A: Chuck Robbins, CEO: Enterprise AI use cases are emerging in areas like fraud detection and video analytics. We have not seen significant pull-forwards in demand due to price increases, and customers understand the industry-wide nature of these changes.
For the complete transcript of the earnings call, please refer to the full earnings call transcript. |
