CSCO · Q2 2026 Earnings

Bullish

Cisco

Reported February 11, 2026

30-second summary

SENTIMENT: Constructive Q2 revenue grew 10% YoY to a record $15.3B with non-GAAP EPS of $1.04, beating the high end of the prior guide on both lines, and hyperscale AI infrastructure orders stepped up sharply to $2.1B — already matching the entire FY25 total in a single quarter. Management raised the FY26 revenue guide to $61.2–61.7B (from $60.2–61.0B, +$0.85B at the midpoint) and non-GAAP EPS to $4.13–4.17 (from $4.08–4.14, +$0.04 midpoint). The Q3 revenue guide of $15.4–15.6B implies roughly +9–11% YoY growth off the Q3 FY25 base of $14.10B, with the midpoint sitting above the Q2 actual — sequentially up, not down. The one nuance worth flagging: Q3 non-GAAP gross margin is guided to 65.5–66.5%, a step-down of ~100–200bps versus Q2's 67.5% print, with tariffs the cited variable.

Headline numbers

EPS

Q2 FY2026

$1.04

Revenue

Q2 FY2026

$15.30B

+10.0% YoY

Gross margin

Q2 FY2026

65.0%

Operating margin

Q2 FY2026

24.6%

Key financials

Q2 FY2026

Metric	Q2 FY2026	YoY	Q1 FY2026	QoQ
Revenue	$15.30B	+10.0%	$14.90B	+2.7%
EPS	$1.04	—	$1.00	+4.0%
Gross margin	65.0%	—	65.5%	-50bps
Operating margin	24.6%	—	22.6%	+200bps

Guidance

Cisco beat Q2 FY2026 expectations on revenue and operating leverage but lowered full-year FY2026 guidance by ~1–2%, signaling caution on back-half momentum despite strong AI infrastructure traction.

Guidance is issued for both next quarter and the full year. Both may appear below.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
Revenue	Q2 FY2026	$15.0B to $15.2B	$15.3B	+$0.1B above guide	Beat
Non-GAAP EPS	Q2 FY2026	$1.01 to $1.03	$1.04	+$0.01 above guide	Beat
Non-GAAP Gross Margin	Q2 FY2026	67.5% to 68.5%	67.5%	at the low end of guide	Met
Non-GAAP Operating Margin	Q2 FY2026	33.5% to 34.5%	34.6%	+0.1 point above guide	Beat

New guidance

Metric	Period	Guide	YoY
Revenue	Q3 FY2026	$14.65B to $14.85B	+3.9% to +5.3% YoY
Non-GAAP EPS	Q3 FY2026	$0.97 to $0.99	—
Non-GAAP Gross Margin	Q3 FY2026	67.5% to 68.5%	—
Non-GAAP Operating Margin	Q3 FY2026	33% to 34%	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Revenue	FY2026	$60.2B to $61.0B	$59.0B to $60.0B	-$0.6B to -$1.0B at midpoint	Lowered
Non-GAAP EPS	FY2026	$4.08 to $4.14	$4.00 to $4.06	-$0.08 to -$0.06 at midpoint	Lowered

Product revenue

Q2 FY2026

Segment	Q2 FY2026	YoY
Networking	$8.294B	+21.0%
Security	$2.018B	-4.0%
Collaboration	$1.054B	+6.0%
Observability	$0.277B	—
Services	$3.707B	-1.0%

Geographic mix

Q2 FY2026

Segment	Q2 FY2026	YoY
Americas	$8.845B	+8.0%
EMEA	$4.425B	+15.0%
APJC	$2.08B	+8.0%

Management tone

The headline shift is that AI order momentum is now translating into a higher full-year revenue guide. Hyperscale AI infrastructure orders of $2.1B in a single quarter — matching all of FY25 — coincide with management raising the FY26 revenue guide by $0.85B at the midpoint and EPS by $0.04. CEO Chuck Robbins framed Cisco as "uniquely positioned to deliver the trusted infrastructure needed to securely and confidently power the AI-era," and new CFO Mark Patterson said Q2 results "put us on track to deliver our strongest revenue year yet in fiscal 2026." The "strongest year yet" superlative from prior guidance is now being reinforced rather than walked back.

Gross margin is the one place the guide signals incremental pressure. Q3 non-GAAP gross margin is guided to 65.5–66.5%, a step-down of roughly 100–200bps from Q2's 67.5% actual. The press release notes EPS guidance "includes the estimated impact of tariffs based on current trade policy," and the gross-margin compression in the Q3 guide is the cleanest place that tariff exposure is showing up. Operating margin guidance of 33.5–34.5% for Q3 sits just below Q2's 34.6% print, indicating Cisco expects to absorb most of the GM pressure through opex discipline.

Security remains the unresolved soft spot inside an otherwise strong print. Security revenue declined 4% YoY in Q2, deeper than the 3% six-month decline and a second consecutive quarter of contraction. Networking (+21%) and the AI order ramp are doing the heavy lifting on the topline; security has yet to convert the new/refreshed product strength management has flagged into reported revenue growth.

Recurring themes management leaned on this quarter:

AI infrastructure as primary growth driver with record $2B+ annual ordersAgentic AI transitioning from chatbot peaks to sustained high-volume network traffic requiring infrastructure upgradesSecurity embedded into network fabric as competitive differentiation for AI eraMulti-year refresh cycles unlocked by new Silicon One-based products (CAT 9K switches, routers, IoT)Sovereign and neocloud AI opportunities emerging as high-value segment alongside hyperscalersOperating leverage driving EPS growth outpacing revenue growth (14% vs 8%)

Risks management surfaced:

Complex tariff environment (China 30%, Mexico 25%, Canada 35%, retaliatory tariffs) with guidance assumption that 'current tariffs and exemptions remain in place through the end of fiscal 2026'Public sector orders down 6% YoY following strong FY24 compExecution risk on newly accelerated innovation pipeline (20+ launches at Cisco Live)Service provider/cloud customer concentration risk (49% order growth, 4 of 6 top WebScale customers in triple-digit growth)Tariff impacts on copper, steel, aluminum and retaliatory tariffs with 'small impact' acknowledged but potential for escalation

Q&A highlights

Erin Rakers · Wells Fargo

Why does guidance show deceleration from ~7% growth in Q1 FY26 to ~4.5% for remaining quarters? Does this reflect conservatism or a change in demand environment?

Management attributed deceleration to year-over-year comps rather than demand changes. Noted that CAT 9K campus refresh is in year 8 of transition and customers take time to evaluate before deployment, expected to kick in next fiscal year. Prior year comp comparisons more favorable early in fiscal year.

Q1 FY26 guidance ~6.5-7% growthRemaining quarters guidance ~4.5% growthCAT 9K in year 8 of transitionCampus refresh expected to be significant revenue driver in FY27

Samak Chatterjee · JPMorgan

How does networking growth sustain in FY26, particularly considering CAT 9K refresh cycle? Where does Cisco land on its 2-5% medium-term networking growth guidance?

Management highlighted multiple growth drivers: AI modernization across cloud providers, enterprise, and telcos; campus refresh opportunity with tens of billions in pre-CAT 9K install base; routing refresh; data center networking growth (mid-teens orders); and WiFi 7 (triple-digit growth). Expressed confidence in maintaining the 2-5% medium-term guidance range.

Data center networking grew mid-teens orders in enterprise last fiscal yearWiFi 7 grew triple digits year-over-yearCAT 9K in year 8 with tens of billions in pre-CAT 9K install base to targetMaintaining 2-5% medium-term core networking guidance range

Michael Eng · Goldman Sachs

Did $2B+ in AI orders translate to revenue in FY25? How should we think about FY26 revenue contribution? What were orders by networking subsegment (campus, data center, wireless, routing)?

Management confirmed ~$1B in revenue recognized on AI infrastructure orders in FY25, with orders ramping as expected. On web scale business: 4 customers grew triple-digit orders in Q4; 2 customers each placed orders exceeding $1B in FY25. Noted enterprise AI orders were ~$300M+ (noted as roughly 50% of orders on average for SP), with hundreds of millions in pipeline.

$2B+ in AI orders taken in FY25 (>2x original $1B target)~$1B revenue recognized in FY25 from AI orders>$800M AI infrastructure orders in Q4 alone4 customers had triple-digit order growth in Q4

Meena Marshall · Morgan Stanley

How is security business outlook post-Splunk anniversary? What are new CFO priorities?

Management more optimistic on security. New/refreshed products (SASE, XDR, HyperShield, AI Defense, refreshed firewalls) grew orders >20%. Ex-US Federal, security orders grew double-digits in Q4. 80 new HyperShield customers added; 480+ new SSE customers. Over 300 new Splunk logos in Q3-Q4 from cross-selling. New CFO Mark priorities: durable profitable growth, financial discipline, transparency, shareholder value. Opportunities in AI infrastructure, web scale, enterprise AI, NeoClouds, sovereign AI, cybersecurity, and campus refresh.

New/refreshed security products grew orders >20%80 new HyperShield customers in Q4480+ new SSE customers in Q4>300 new Splunk logos in Q3-Q4

Ben Reitzes · Milus Research

Security execution lags expectations; needs significant acceleration to hit 15-17% long-term target. Is that still appropriate, or should security be viewed as high single-digit grower? Also, partnership strategy with AMD alongside NVIDIA?

Management maintained 15-17% security target is appropriate. New/refreshed products (2/3 of organic security) grew >20%; legacy products declining. As new products become larger mix, overall security growth will improve through the year. Expected to exit year at or near the 15-17% target. On partnerships: AMD partnership being pursued closely for sovereign and humane opportunities; Lisa Su on board previously; partnerships designed to deliver integrated solutions.

New/refreshed security products growing >20%New/refreshed products ~2/3 of organic security portfolioLegacy products declining but becoming smaller portion of mixManagement expects to exit FY26 at or near 15-17% security growth target

Answers to last quarter's watch list

Q2 AI infrastructure orders vs. the prior pace — $2.1B in Q2 alone, matching the entire FY25 total in a single quarter. The order trajectory is unambiguously favorable, and unlike prior quarters this strength now flows through to a positive FY revenue revision. Status: Resolved positively

First quarter of growth (or contraction) in the Splunk-impacted security line — Security printed -4% YoY, worse than the -3% six-month figure. The "purely timing" framing has not held; the contraction deepened in Q2. Status: Resolved negatively

Whether the Q2 guide's implied non-AI base growth holds — Cisco disclosed total product orders +18% YoY and networking product orders >20% YoY for Q2; networking revenue +21% is a strong proxy that the base business held up. Status: Resolved positively

Operating cash flow trajectory — Q2 OCF was $1.8B, down 19% YoY from $2.2B and below the Q1 pace of ~$3.2B. The cash flow statement shows a $2.4B income tax payment in the quarter that explains a meaningful portion of the sequential drop, but the YoY decline is still a watch item. Six-month OCF of $5.0B is down vs $5.9B in the prior-year period. Status: Continue monitoring

What to watch into next quarter

Whether Q3 AI infrastructure orders sustain near or above the $2.1B Q2 pace — sustaining $2B+ would put FY26 orders well above the prior implied trajectory; a step-down would signal Q2 was the cycle peak

Whether FY26 revenue guidance gets raised again, held flat, or trimmed — a second consecutive raise would reinforce the "strongest year yet" framing; a hold would still leave the FY26 bar well above where it sat one quarter ago

Security revenue YoY in Q3 — three consecutive quarters of decline would force a harder look at the long-term security growth target; a return to growth (even low-single-digit) would restore the timing narrative

Non-GAAP gross margin print vs. the 65.5–66.5% Q3 guide — whether tariff exposure is being modeled conservatively or whether 65.5–66.5% is roughly the right new run-rate is the single biggest swing factor on FY26 EPS

Operating cash flow recovery vs. the $1.8B Q2 print — Q3 typically benefits from working-capital seasonality; a print materially below year-ago levels again would suggest the working-capital build is structural rather than tax-timing-driven

Sources

Cisco Q2 FY2026 Press Release (Form 8-K Exhibit 99.1), filed February 11, 2026 — https://www.sec.gov/Archives/edgar/data/858877/000085887726000006/exhibit991pressrelease-q2f.htm
Cisco Q1 FY2026 Tapebrief (prior quarter context)
Cisco Q4 FY2025 Tapebrief (multi-quarter trajectory context)

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