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FY2026 Q2
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Cisco Systems, Inc. earnings call
Buzzberg read
Cisco raises FY26 hyperscaler AI orders to >$5B
Cisco reported a blowout quarter with double-digit revenue and EPS growth, driven by a surge in AI infrastructure demand from hyperscalers and a strong campus refresh cycle. However, management guided for margin compression in the coming quarters due to the memory price spike, though they believe they can manage it better than peers. Total revenue grew 10% YoY to $15.3 billion, with product orders up 18% YoY.
Buzzberg read Cisco raises FY26 hyperscaler AI orders to >$5B Cisco reported a blowout quarter with double-digit revenue and EPS growth, driven by a surge in AI infrastructure demand from hyperscalers and a strong campus refresh cycle. However, management guided for margin compression in the coming quarters due to the memory price spike, though they believe they can manage it better than peers. Total revenue grew 10% YoY to $15.3 billion, with product orders up 18% YoY. Read full analysisCollapse analysis
Cisco reported a blowout quarter with double-digit revenue and EPS growth, driven by a surge in AI infrastructure demand from hyperscalers and a strong campus refresh cycle. However, management guided for margin compression in the coming quarters due to the memory price spike, though they believe they can manage it better than peers. Total revenue grew 10% YoY to $15.3 billion, with product orders up 18% YoY.
- AI infrastructure orders from hyperscalers hit $2.1 billion in Q2, nearly equal to the total for all of FY25.
- Company raised its FY26 AI order target to 'in excess of $5 billion' and expects $3 billion in revenue from hyperscalers.
- Gross margins are facing headwinds from rising memory costs, leading to price increases and supply chain investments.
AI Revenue$2.1BReported
Revenue$15.349B+3% QoQ
EPS$1.04+4% QoQ
Gross margin64.97%Reported
6 grounded callouts
What matters now
The highest-signal changes from the call.
Demand
Total product orders up 18% with broad-based demand
Margins
Memory inflation prompts Cisco to raise prices
Show 3 more callouts
Demand
Campus refresh is multi-year, multi-billion opportunity
Cloud
Splunk cloud shift will drag revenue growth into 2H26
Security
Organic security portfolio to exit FY26 near double-digit revenue growth
Reported period
Actuals
| Metric | Reported | Change |
|---|---|---|
| AI Revenue | $2.1B | Reported |
| Revenue | $15.349B | +3% QoQ |
| EPS | $1.04 | +4% QoQ |
| Gross margin | 64.97% | Reported |
| Operating margin | 24.63% | Reported |
| Free cash flow | $2.145B | -26% QoQ |
Forward-looking
Forward guidance
| Metric | Period | Range | Midpoint | Status |
|---|---|---|---|---|
| EPS | FY2026 | $4.13–$4.17 | $4.15 | Maintained |
| EPS | FY2026 Q3 | $1.02–$1.04 | $1.03 | Guided |
| Gross margin | FY2026 Q3 | 65.5%–66.5% | 66% | Guided |
| Operating margin | FY2026 Q3 | 33.5%–34.5% | 34% | Guided |
| Revenue | FY2026 | $61.2B–$61.7B | $61.45B | Maintained |
AI, capex & demand read
Management read
Upbeat
Management highlighted record revenue, raised AI order expectations, and described the campus refresh as a 'multi-year, multi-billion dollar' opportunity while expressing confidence in managing memory cost inflation.
Management AI read
Management described AI as the central growth catalyst, with hyperscaler AI orders accelerating sharply and fiscal-year expectations raised again. New Silicon One and optics launches are broadening Cisco's AI infrastructure position, while enterprise, sovereign, and neocloud AI demand is still early-stage upside.
Investment and capacity
Management is leaning into AI infrastructure build-out, including a JV targeting up to 1GW of AI infrastructure by 2030 and sharply higher advanced purchase commitments to secure supply, particularly memory. Operating cash flow was temporarily pressured by a final transition tax payment and continued investments to meet AI-related demand.
all 6 named companies below
Companiesreturns since call
Partners
Partners
Chuck Robbins
Cisco explicitly stated that its $5 billion AI order target and new product launches, such as the G300 and P200, are not included in the current forecast, implying a significant potential for upward revisions. — This indicates that the core AI growth catalysts are yet to be fully reflected in guidance, leaving room for positive surprises.
Evidence
“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.”
Partners
Chuck Robbins
Cisco is partnering with AMD to build out massive AI infrastructure capacity, indicating a deep, strategic relationship that could drive demand for AMD's AI compute in the neocloud market.
Evidence
“we announced plans to form a joint venture with AMD and Humane to deliver up to one gigawatt of AI infrastructure by 2030.”
Supply chain
Supply chain
Chuck Robbins
Acacia's coherent pluggable optics are seeing massive demand from all major hyperscalers, pointing to a significant growth phase for the business.
Evidence
“Acacia reported its strongest quarter to date with triple digit growth in bookings. all major hyperscalers are deploying its market-leading coherent pluggable optics for data center interconnect”
Supply chain
Mark Patterson
The surge in memory prices is a major headwind, but Cisco's advanced purchase commitments have jumped by $1.8 billion in 90 days to secure supply, a move that may pressure near-term cash flow but protect long-term margins. — This aggressive strategy to lock in memory supply suggests Cisco expects continued shortages, potentially exacerbating pricing pressure for rivals with less leverage.
Evidence
“If you look at it, it's evidenced by our advanced purchase commitments that just in the last 90 days are up $1.8 billion. If you look at it on a year-over-year basis, they're up about 73%. A big chunk of that is around memory.”
Supply chain
Chuck Robbins
Cisco's new campus networking products, crucial for the refresh cycle, have less memory content than general compute, making them less susceptible to price hikes and potentially more attractive to customers amid the current shortage. — This could make Cisco's campus switching portfolio more competitively priced relative to full-system compute rivals, accelerating share gains in the refresh market.
Evidence
“I would say that on the core networking side, the memory content is not quite as high as, you know, what you'd see in compute platforms. And so the price increases are more nominal than they are in sort of the compute systems”
External signals
Supply-chain alpha · 4returns since call
Cisco explicitly stated that its $5 billion AI order target and new product launches, such as the G300 and P200, are not included in the current forecast, implying a significant potential for upward revisions.
Evidence
“So on the AI infrastructure side, the $5 billion that we now have raised our estimates to during fiscal 2026 does not include any of the recently announced P200 products nor G300, also neither of the optics solutions that we announced this…”
The surge in memory prices is a major headwind, but Cisco's advanced purchase commitments have jumped by $1.8 billion in 90 days to secure supply, a move that may pressure near-term cash flow but protect long-term margins.
Cisco's AI systems sales are supply-constrained, with one major customer asking for 'as much as they can get'.
Evidence
“I think we're selling as much as we can build at this point. We see demand across a couple of major customers that are literally asking for as much as they can get.”
Cisco's new campus networking products, crucial for the refresh cycle, have less memory content than general compute, making them less susceptible to price hikes and potentially more attractive to customers amid the current shortage.
Methodology & coverage
Management-only analysis. All 6 validated company mentions are shown. Reported actuals and forward guidance are kept separate. Public evidence is limited to eight short attributed quotes. AI-generated analysis can be incomplete or wrong; verify important claims against the original source.