Can you detail the networking revenue growth by segment? Why is the implied Q4 sequential growth significantly lower than typical seasonality?

Mark highlighted broad strength across the entire networking portfolio (Campus, data center, IoT). Chuck attributed the lower implied Q4 sequential growth to the nonlinear and lumpy nature of the hyperscaler business, which creates uncertainty compared to historical seasonality patterns. “I think with the nonlinear nature of the hyperscaler business, it creates a little bit of uncertainty relative to our historical numbers that you're so used to seeing.”

What are Cisco's plans and timeline for participating in the scale-up opportunity? Can you update on the NVIDIA relationship and its impact on neocloud/sovereign opportunities?

Chuck stated no announcements on scale-up yet but plans to participate in the future. He noted that sovereign AI impact is not expected to be meaningful in FY26 (purely upside), and neocloud ramp will begin in H2 FY26 but primarily materialize in FY27. Engagements with NVIDIA increased 70% sequentially, showing early success and expected ramp-up. “We track the number of engagements we have in the field with NVIDIA. And while it was not a massive number leading up, we increased it by 70% from -- sequentially.”

How evolved is enterprise appetite for AI investment, and when will the enterprise AI story take off? Have price increases led to any demonstrable changes in demand or forward ordering?

Chuck observed early enterprise AI use cases in quant, fraud detection, and video analytics across various industries, with investments in both cloud and on-prem architectures. Mark stated no significant pull-forwards due to price increases, with the pipeline building in out-quarters. Customers understand the industry-wide nature of memory price increases and are not delaying strategic investments. “I haven't talked to any customers that are really willing to delay or defer any sort of strategic investments that they're making in technology.”

CSCO

Cisco (CSCO) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jan 2026 (Q2 FY26)· Information Technology· Feb 11, 2026

Source: earnings call transcript

Executive summary

Cisco Q2 FY26 — AI Infrastructure and Campus Networking Drive Double-Digit Growth

Cisco delivered a strong Q2 FY26, with double-digit revenue and EPS growth driven by robust demand for AI infrastructure and Campus networking solutions. The company raised its full-year AI orders and revenue expectations, signaling continued momentum in this critical area. Despite gross margin pressures from memory costs and a revenue drag from the Splunk cloud transition, Cisco demonstrated operating leverage and increased its dividend, reinforcing its commitment to shareholder returns and strategic investments in innovation.

Highlights

Total revenue grew 10% YoY to $15.3 billion, exceeding the high end of guidance ranges.
Product revenue increased 14% YoY, driven by robust demand for AI infrastructure and Campus networking solutions.
Non-GAAP EPS grew 11% YoY to $1.04, demonstrating operating leverage by growing faster than revenue.
Total product orders grew 18% YoY, with AI infrastructure orders from hyperscalers totaling $2.1 billion in Q2 FY26.
Dividend increased by $0.01 to $0.42 per quarter, reaffirming commitment to returning a minimum of 50% of free cash flow annually.

Concerns

Non-GAAP gross margin declined 120 basis points YoY to 67.5%, primarily due to negative impacts from mix and higher memory costs.
Security revenue was down 4% YoY, reflecting declines in prior-generation products and the transition of Splunk from on-prem deals to cloud subscriptions.
Operating cash flow was down 19% YoY to $1.8 billion, impacted by a $2.3 billion transition tax payment and continued investments in AI infrastructure.

Guidance & targets

Category	Target	Timeline	Confidence
Q3 FY26 Revenue	$15.4 billion to $15.6 billion high materiality	Q3 · FY26	High
Q3 FY26 Non-GAAP Gross Margin	65.5% to 66.5% medium materiality	Q3 · FY26	High
Q3 FY26 Non-GAAP Operating Margin	33.5% to 34.5% medium materiality	Q3 · FY26	High
Q3 FY26 Non-GAAP Earnings Per Share	$1.02 to $1.04 high materiality	Q3 · FY26	High
Q3 FY26 Non-GAAP Effective Tax Rate	approximately 19% low materiality	Q3 · FY26	High
FY26 Revenue	$61.2 billion to $61.7 billion high materiality	FY26	High
FY26 Non-GAAP Earnings Per Share	$4.13 to $4.17 high materiality	FY26	High
FY26 AI Orders	in excess of $5 billion high materiality	FY26	High
FY26 AI Infrastructure Revenue from Hyperscalers	over $3 billion high materiality	FY26	High
Quarterly Dividend	$0.42 per quarter high materiality	Ongoing	High
Annual Free Cash Flow Return to Shareholders	minimum of 50% high materiality	Annually	High
Sovereign AI Impact	not meaningful low materiality	FY26	Medium
Neocloud AI Ramp	begin in the second half, but really be FY '27 low materiality	H2 FY26 and FY27	Medium
Organic Cisco Security Portfolio Revenue Growth	close to double digits medium materiality	Q4 · FY26	Medium

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Networking (Product Revenue) Driven by AI infrastructure and campus refresh. Saw double-digit growth across multiple sub-segments. Campus switching: Double-digit growthData center switching: Double-digit growthWireless: Double-digit growthService provider routing: Double-digit growthEnterprise routing: Double-digit growthCompute: Double-digit growth	$11.6B	21%	—	—
Security Reflects similar dynamics as last quarter with declines in prior generation products and the transition in Splunk business from on-prem to cloud subscriptions, partially offset by growth in new and refreshed products.	—	-4%	—	—
Collaboration Posted solid growth, led by devices. Devices: Double-digit growthCPaaS: GrowthWebex: GrowthCloud Contact Center: Growth	—	6%	—	—
Americas (Product Orders) Product orders were up double digits across all geographic segments.	—	23%	—	—
EMEA (Product Orders) Product orders were up double digits across all geographic segments.	—	11%	—	—
APJC (Product Orders) Product orders were up double digits across all geographic segments.	—	15%	—	—
Service Provider and Cloud (Product Orders) Accelerated in Q2, driven by triple-digit order growth across hyperscalers.	—	65%	—	—
Public Sector (Product Orders) Double-digit growth across all geographies.	—	11%	—	—
Enterprise (Product Orders) Strength across the entire networking portfolio.	—	8%	—	—
Telco and Cable (Product Orders) Combined growth in Q2.	—	almost 20%	—	—

CSCO operating KPIs by quarter

CSCO operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Jan 2025 Q2 FY25	Apr 2025 Q3 FY25	Jul 2025 Q4 FY25	Oct 2025 Q1 FY26	This call Jan 2026 Q2 FY26	Apr 2026 Q3 FY26	Jul 2026 Q4 FY26	Change vs prior quarter
Annual recurring revenue (ARR)	$30.1B Total ARR ended the quarter at $30.1 billion, an increase of 22% with product ARR growth of 41%. Source: earnings call transcript	$30.6B Total ARR ended the quarter at $30.6 billion, an increase of 5% with product ARR growth of 8%. Source: earnings call transcript	$31.1B Total ARR ended the quarter at $31.1 billion, an increase of 5% with product ARR growth of 8%. Source: earnings call transcript	$31.4B Total ARR ended the quarter at $31.4 billion, an increase of 5%, with product ARR growth of 7%. Source: earnings call transcript	$31B Total ARR ended the quarter at $31 billion, an increase of 3% with product ARR growth of 6%. Source: earnings call transcript	$31.2B Total ARR ended the quarter at $31.2 billion, an increase of 2%, with product ARR growth of 4%. Source: earnings call transcript	$32.1B Total ARR ended the quarter at $32.1 billion, an increase of 3%, with product ARR growth of 5%. Source: earnings call transcript	+2.9%
Remaining performance obligation (RPO)	$41.3B And total RPO was $41.3 billion, up 16%, product RPO grew 25%, and total short-term RPO was up 17% to $21 billion. Source: earnings call transcript	$41.7B Total RPO was $41.7 billion, up 7%. Source: earnings call transcript	$43.5B Total RPO was $43.5 billion, up 6% and Product RPO grew 8%, and total short-term RPO was $21.7 billion, up 4%. Source: earnings call transcript	$42.9B Total RPO was $42.9 billion, up 7%. Source: earnings call transcript	$43.4B Total RPO was $43.4 billion, up 5%. Source: earnings call transcript	$43.5B Total RPO was $43.5 billion, up 4%. Source: earnings call transcript	$46.7B Total RPO was $46.7 billion, up 7%, with product RPO up 9%. Source: earnings call transcript	+7.4%
Remaining performance obligation (RPO) Short-term	$21B And total RPO was $41.3 billion, up 16%, product RPO grew 25%, and total short-term RPO was up 17% to $21 billion. Source: earnings call transcript	$21.1B And total short-term RPO and was $21.1 billion, up 5%. Source: earnings call transcript	$21.7B Total RPO was $43.5 billion, up 6% and Product RPO grew 8%, and total short-term RPO was $21.7 billion, up 4%. Source: earnings call transcript	—	—	—	—	+2.8%
Remaining performance obligation (RPO) Product Long-term	—	—	—	$11.8B Product RPO grew 10%, of which the long-term portion was $11.8 billion, up 13%. Source: earnings call transcript	$11.8B Product RPO grew 8%, of which the long-term portion was $11.8 billion, up 11%. Source: earnings call transcript	—	—	0%

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

Total RPO $43.4B End of Q2 FY26

+5% YoY

Product RPO Grew 8% End of Q2 FY26

YoY

Long-term Product RPO $11.8B End of Q2 FY26

+11% YoY

Total ARR $31B End of Q2 FY26

+3% YoY

Product ARR Grew 6% End of Q2 FY26

YoY

Total Product Orders Up 18% Q2 FY26

YoY

Even on top of double-digit growth in Q2 FY25.

Product Orders (excluding hyperscalers) Up 10% Q2 FY26

YoY

Demonstrating broad-based demand.

AI Infrastructure Orders from Hyperscalers $2.1B Q2 FY26

vs $1.3B last quarter; equal to total FY25 orders

Marking another significant acceleration in growth.

Product announcements

Product	Type	Timeline
G300 Chip	launch	This week at Cisco Live Amsterdam
G300 Powered Systems (Cisco 8000 and Nexus 9000)	launch	This week at Cisco Live Amsterdam
Pluggable Optics (1.6T OSFP and 800G LPO)	launch	This week at Cisco Live Amsterdam
AI Defense Advancements	update	This week at Cisco Live Amsterdam
SASE Advancements (Semantic Inspection Engine)	update	This week at Cisco Live Amsterdam
AgenticOps	launch	Ongoing

Deals & partnerships

AMD and HUMAIN JV by 2030

Plans to form a joint venture to deliver up to 1 gigawatt of AI infrastructure by 2030, with Phase 1 building out 100 megawatts in Saudi Arabia.

Capital programs

Joint Venture with AMD and HUMAIN for AI Infrastructure announced Up to 1 gigawatt of AI infrastructure

Benefit:1 gigawatt of AI infrastructure

This joint venture expects to begin operations this calendar year with a plan to build out 100 megawatts in Saudi Arabia as Phase 1 of the project.

Risks & headwinds

Significant increases in memory prices across the market Ongoing

Contributed to non-GAAP product gross margin decline of 130 bps YoY.

Mitigation:Implementing price increases, revising contractual terms with channel partners and customers, leveraging operating scale and supply chain to negotiate favorable terms and secure supply.

Revenue drag from Splunk's transition to cloud subscriptions Expected to continue in the second half of fiscal year '26.

Creating a drag on revenue growth.

Mitigation:Focusing on greater adoption, expansion, and faster delivery of innovation through cloud subscriptions, which is seen as a positive long-term transition.

Decline in prior generation security products Ongoing

Offsetting growth in new and refreshed products, contributing to Security revenue being down 4% YoY.

Mitigation:Focusing on new and refreshed products (Secure Access, XDR, Hypershield, AI Defense) which are seeing strong customer adoption and sequential growth.

Lower operating cash flow due to tax payment and investments Q2 FY26

Operating cash flow down 19% YoY to $1.8 billion.

Mitigation:Primarily due to the final transition tax payment of $2.3 billion from the 2017 Tax Cuts and Jobs Act and continued strategic investments to meet growing overall demand, especially for AI infrastructure.

Q&A highlights

What is the mix between Silicon One and Optics in the AI orders, and will new products like G300/P200 open new markets? Also, is the Q3 gross margin decline primarily memory-related and expected to trough?

Chuck clarified that the $5 billion FY26 AI target does not include G300/P200, and the Q2 mix was 60% systems, 40% optics. New products will deepen existing relationships and gain traction with neoclouds/sovereign. Mark confirmed Q3 gross margin decline is due to mix and memory prices, with mitigation strategies (price increases, T&Cs, supply chain) expected to improve timing.

“P200 and G300 are not in the $5 billion expected for fiscal '26.”

asked by Amit Daryanani · answered by Charles Robbins

3 min read 6 chapters

Detailed narrative

AI Infrastructure Momentum

Cisco is experiencing significant acceleration in AI infrastructure demand, particularly from hyperscalers, with Q2 FY26 orders reaching $2.1 billion, surpassing the total for all of FY25. The company has raised its FY26 AI orders forecast to over $5 billion and revenue to over $3 billion, driven by its Silicon One architecture, new G300 chip, and advanced pluggable optics.

This growth is supported by new design wins, including 3 new use cases in Q2 (1 Optics, 2 systems), and increasing capacity for 800-gig optics, positioning Cisco for the broadest range of AI deployments.

Campus Networking Refresh Cycle

The company is seeing strong demand for its next-generation Campus networking products, including switching, routing, and wireless, with these transitions ramping faster than previous product launches. This multi-year, multi-billion-dollar refresh opportunity is underpinned by an installed base of older catalyst generations nearing end-of-support and the need for AI-native security and modernized operational stacks.

Enterprise data center switching has shown double-digit order growth in 6 of the last 8 quarters, indicating meaningful investment in private data centers to support new applications.

Security Portfolio Evolution

Cisco's security segment is undergoing a transition, with new and refreshed products like Secure Access, XDR, Hypershield, and AI Defense gaining traction, evidenced by over 1,000 new customers in Q2 FY26 (100% sequential growth) and ~4,000 total since launch. Refreshed firewalls have also seen three consecutive quarters of double-digit unit growth.

However, this growth is currently offset by declines in prior-generation products and the revenue drag from Splunk's shift to cloud subscriptions. The organic security portfolio is expected to approach double-digit revenue growth by the end of Q4 FY26.

Memory Price Headwinds and Mitigation

Cisco is facing industry-wide increases in memory prices, which contributed to a 130 basis point YoY decline in non-GAAP product gross margin. To mitigate this, the company has implemented price increases, is revising contractual terms with partners and customers, and is leveraging its operating scale and supply chain to negotiate favorable terms and secure supply.

Management believes these actions, combined with financial discipline, will help manage the impact, and customers generally understand the industry-wide nature of these price adjustments.

Splunk Cloud Transition

The integration of Splunk continues to see a shift towards cloud subscriptions and fewer on-premise deals, creating a short-term revenue drag due to accounting treatment. Despite this, the company views the transition positively, as cloud subscriptions enable greater adoption, expansion, and faster innovation delivery.

Splunk added 500 new logos in the first half of FY26 and is on track to add 1,000 new logos for the full fiscal year, indicating continued customer acquisition and strategic alignment.

Strategic Partnerships and JV

Cisco is actively developing strategic partnerships to capture AI opportunities beyond hyperscalers, including neocloud, sovereign, and enterprise customers. A joint venture with AMD and HUMAIN is planned to deliver up to 1 gigawatt of AI infrastructure by 2030, starting with 100 megawatts in Saudi Arabia in calendar year 2024.

The company also noted a 70% sequential increase in engagements with NVIDIA, indicating early success in leveraging their combined strengths in AI infrastructure.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.