01—Abstract
Summary
Summary of the 10-Q filed February 17, 2026. Cited figures are marked; the original filing is the authoritative source.
Cisco Systems, Inc. (CSCO) reported robust financial results for the second quarter and first six months of fiscal year 2026, demonstrating strong top-line growth and improved profitability.
Total revenue saw a significant increase of 10%a year-over-year for the quarter and 9% for the six-month period, primarily driven by a 14% and 12% surge in product revenue, respectively. This growth was predominantly fueled by the Networking segment, especially AI Infrastructure and Campus Networking solutions, which experienced substantial double-digit increases. The company also saw an expansion in operating income as a percentage of revenue, rising by 2.3 and 3.9 percentage points for the quarter and six months, respectively.
This improvement was attributed to revenue growth, enhanced operating leverage, and a reduction in certain expenses such as amortization of purchased intangible assets and restructuring charges. Diluted Earnings Per Share (EPS) also saw a healthy increase of 31%b for the quarter and 18% for the six-month period, reflecting the company's improved financial performance.
02—Key points
Key Highlights
- Total revenue increased by 10% to $15.3 billion for the quarter and 9% to $30.2 billion for the six months ended January 24, 2026.
- Product revenue grew significantly by 14% for the quarter and 12% for the six months, driven by strong demand in the Networking segment, particularly AI Infrastructure and Campus Networking solutions.
- Operating income as a percentage of revenue improved to 24.6% for the quarter and 23.6% for the six months, up from 22.3% and 19.7% respectively, in the prior year periods.
- Diluted EPS rose 31% to $0.80 for the quarter and 18% to $1.51 for the six months, indicating enhanced profitability.
- The company returned substantial capital to shareholders, with $3.2 billion in cash dividends and $3.4 billion in share repurchases during the first six months of fiscal 2026.
- Cash and cash equivalents, along with investments, stood at $15.8 billion as of January 24, 2026, providing ample liquidity.
- The Security product category experienced a 4% revenue decline in the quarter, largely attributed to shifts in Splunk's consumption model from on-premise to cloud subscriptions.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2026, Cisco Systems, Inc. kept $0.21.
- Revenue$15.35B100.0%
- Cost of revenue−$5.38B35.0%
- Gross profit$9.97B65.0%
- Operating costs−$6.19B40.3%
- Operating income$3.78B24.6%
- Interest, other & tax−$606.0M3.9%
- Net income$3.17B20.7%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2026filed February 17, 2026Financial Statements
Q2 FY2026 against Q2 FY2025
| Line item | Q2 FY2026Q2 FY2025 | Change |
|---|---|---|
| Revenue | $15.35B$13.99B | +9.7% |
| Cost of Revenue | $5.38B$4.88B | +10.2% |
| Gross Profit | $9.97B$9.11B | +9.5% |
| R&D Expenses | $2.35B$2.30B | +2.4% |
| Operating Expenses | $6.19B$6.00B | +3.2% |
| Operating Income | $3.78B$3.11B | +21.5% |
| Net Income | $3.17B$2.43B | +30.8% |
| EPS (Basic) | $0.80$0.61 | +31.1% |
| EPS (Diluted) | $0.80$0.61 | +31.1% |
| Shares Outstanding (Basic) | 3.96B3.98B | −0.7% |
| Shares Outstanding (Diluted) | 3.98B4.00B | −0.5% |
05—Questions
Frequently Asked Questions
What was the primary driver of Cisco's revenue growth in the reported periods?
Cisco's revenue growth was primarily driven by a significant increase in product revenue, up 14% for the quarter and 12% for the six months. The Networking segment, particularly its AI Infrastructure and Campus Networking solutions, was the main contributor to this growth, experiencing substantial year-over-year increases.
How did Cisco's profitability evolve during this reporting period?
Cisco demonstrated improved profitability. Operating income as a percentage of revenue increased to 24.6% for the quarter and 23.6% for the six months, up from 22.3% and 19.7% respectively in the prior year periods. This was supported by revenue growth, improved operating leverage, and a decrease in expenses like amortization of purchased intangible assets and restructuring charges.
What is Cisco's strategy regarding capital allocation to shareholders?
Cisco aims to return at least 50% of its free cash flow annually to shareholders through cash dividends and share repurchases. In the first six months of fiscal 2026, the company returned approximately $3.2 billion in dividends and $3.4 billion through its stock repurchase program, demonstrating a commitment to shareholder returns.
What are the key factors affecting Cisco's gross margin?
Product gross margin was positively impacted by productivity improvements and lower amortization of purchased intangible assets. However, it was partially offset by negative impacts from product mix and pricing. For services gross margin, decreases were primarily driven by higher headcount costs and the mix of service offerings.
06—Continue