Here’s What Comes Next

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Cisco’s call is over; there wasn’t a ton of movement during it.

As we noted earlier, most of the movement came during Cisco discussing lessening gross margins from memory costs.

It appears the company is now another victim of increasing component costs.

Cisco is now seeing all-time highs (beyond its 2000 peak!) thanks to AI demand.

On the other end, it’s also the victim of AI demand. Rabid AI demand is increasing the cost of components like memory and cutting into its margins.

Overall, these were fine earnings, but Cisco is more of a victim of its own recent success than any other factor.

Well, here’s the quote from Cisco on their call that seems to be accelerating losses.

In short, the company is another loser from the booming price of memory:

“Total non-GAAP gross margin came in at 67.5% down 120 basis points year-over-year. Non-GAAP product gross margin was 66.4%, down 130 basis points, primarily driven by negative impacts from mix and higher memory costs, partially offset by productivity improvements. Non-GAAP services gross margin was 70.9%, down 70 basis points. We continue our focus on enhancing profitability and driving financial discipline with non-GAAP operating margin at 34.6%, above the high end of our guidance range. Our non-GAAP tax rate was 19% for the quarter.”

Memory stocks are doing wonderful, but they’re certainly causing a lot of pain across other companies.

We’ll keep updating and Cisco’s earnings call is up next, but if you’re enjoying this live blog, there are more ways to keep updated from 24/7 Wall St:

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Another area you might be interested in is top AI stocks as the trend continues accelerating in 2026. Once again, we’ve got you covered with our new Top 10 AI Stocks report. It’s free and will introduce some companies seeing absolutely massive growth this earnings season.

Cisco’s Q2 beat came with a catch: operating cash flow plunged 19% year-over-year to $1.8 billion, a sharp reversal from the strong revenue and earnings growth. This wasn’t flagged in headline numbers but signals potential working capital strain or timing issues that could pressure future margins.

The Security segment declined 4% to $2.0 billion, contrasting sharply with Networking’s 21% surge. As competitors like Palo Alto and CrowdStrike gain share, this weakness raises questions about Cisco’s ability to defend its security franchise—a critical component of its AI-era positioning.

While full-year guidance was raised to $61.2-61.7 billion revenue, management noted tariff impacts are embedded in the outlook. This hedges expectations—if tariffs ease, Cisco beats; if they worsen, guidance could need cuts.

Looking at figures that were the most ‘lukewarm’ from Cisco.

• Full-year EPS guidance of $4.13 to $4.17 only slightly tops Wall Street expectations ($4.13) at the midpoint.
• Next quarter’s EPS guide of $1.02 to $1.04 is exactly inline with expectations.

Cisco referenced some areas of excitement such as product orders up 18% year-over-year and AI infrastructure orders totalling $2.1 billion, but those are likely being overshadowed by the areas we highlighted above.

CSCO | Cisco Q2’26 Earnings Highlights:

• Adj. EPS: $1.04 (Est. $1.02) [✅]; UP +11% YoY
• Revenue: $15.3B; UP +10% YoY
• Adj. Gross Margin: 67.5% (Est. 66.0%) [✅]; UP +20 bps YoY
• Net Income: $3.2B; UP +31% YoY
• Operating Income: $3.8B; UP +21% YoY
• Operating Margin: 24.6%; UP +230 bps YoY
• Free Cash Flow: $1.8B; DOWN -19% YoY
• Effective Tax Rate: 12.9% (vs. 15.9% YoY)
• Dividend: $0.42 per share; UP +2% from previous quarter

Q3’26 Outlook:

• Revenue: $15.4B to $15.6B (Est. $15.5B) [✅]
  • Guidance reflects strong demand across all customer markets and geographies.
  • Expectations of continued growth driven by AI infrastructure orders and networking refresh cycles.

Q2 Segment Performance:

• Americas Revenue: $8.845B; UP +8% YoY
• EMEA Revenue: $4.425B; UP +15% YoY
• APJC Revenue: $2.080B; UP +8% YoY
• Product Revenue: $11.642B; UP +14% YoY
• Services Revenue: $3.707B; DOWN -1% YoY

Other Key Q2 Metrics:

• Adj. Operating Income: $5.3B; UP +9% YoY
• Adj. Operating Expenses: $5.0B; UP +6% YoY
• R&D Expenses: $2.355B; UP +2% YoY
• Cash and Cash Equivalents: $15.8B
• Remaining Performance Obligations: $43.4B; UP +5% YoY
• Deferred Revenue: $28.4B; UP +2% YoY
• Capital Returned to Shareholders: $3.0B through buybacks and dividends

CEO Commentary:

• Chuck Robbins: “Cisco’s strong second quarter and first half of fiscal 2026 demonstrate both the power of our portfolio and the fundamental role we continue to play in connecting and protecting customers in a rapidly evolving landscape.”

CFO Commentary:

• Mark Patterson: “In Q2, we delivered double-digit growth on both the top and bottom lines which exceeded the high end of our guidance and puts us on track to deliver our strongest revenue year yet in fiscal 2026.”

AppLovin is getting punished after hours now. Earnings look generally good but the market has been punishing ad companies (and software companies in general) harshly across this earnings season.

Guidance next quarter is $15.5 billion at the midpoint, which is above consensus.

Gross margins might be a little lower than expectations.

Full-year guidance is now $61.2 billion to $61.7 billion while EPS was raised to $4.13 to $4.17.

Shares are now plunging, down 3.8%. 

Cisco shares are chopping up and down and are now up slightly at .5%.

We’ll continue analyzing their earnings, but no major reaction right after they posted.

Here’s what they reported:

• EPS: $1.04
• Revenue: $15.3 billion

Here’s what Wall Street expected:

• EPS: $1.02
• Revenue: $15.1 to $15.4 billion

It’s another earnings beat for Cisco, but shares are initially down 2%.

While Cisco could drop its earnings immediately after four, we do expect them closer to 4:05 p.m. ET. So, if you see any movement right after earnings, that might be noise. Once earnings are released, we will provide updates that will push automatically to this live blog.

While you wait, make sure to check out a couple of essential resources.

If you’re looking for a daily news source that not only tells you the biggest news but the profit plays on it, make sure to check out 24/7 Wall St.’s Daily Profit newsletter.

Another area you might be interested in is top AI stocks as the trend continues accelerating in 2026. Once again, we’ve got you covered with our new Top 10 AI Stocks report. It’s free and will introduce some companies seeing absolutely massive growth this earnings season.

We’re only 20 minutes away from Cisco’s Fiscal Q2 earnings and prediction markets are placing 91% odds on Cisco beating Wall Street’s EPS target.

Cisco has a long track record of beating earnings, so optimism is warranted. Still, shares will most likely react the most in terms of whether Cisco updates full year guidance or gives updates AI spending figures that could lead to Wall Street revising targets north in Fiscal 2027.