Networking equipment maker Cisco Systems (CSCO) unveiled quarterly gross margin that was short of analysts’ estimates, sending its shares down by more than 7% in extended hours trading.
A key member of the Dow 30, Cisco is known for its extensive portfolio of networking hardware and services—ranging from switches and routers to wireless access points and controllers—that help enterprises build and manage complex digital infrastructure.
| Cisco Systems (CSCO) | Price: $79.30 (-7.3%) | Market cap: $312bn |
The $312 billion company is also viewed as a central player in helping businesses prepare their systems for artificial intelligence workloads, a trend that has boosted demand for Cisco’s core technologies.
Memory chip pricing
However, a surge in spending on AI data centres has strained the global supply of memory chips, driving up their prices. That shortage has weighed on Cisco, whose products rely heavily on those components.
Adjusted gross margin for Cisco’s second quarter stood at 67.5%, missing expectations of 68.14%, according to LSEG data cited by Reuters.
Although CEO Chuck Robbins told investors in a post-earnings call that Cisco has already lifted its prices and revising customer contracts, the company anticipates ongoing strong demand for its systems and optics, with AI orders now projected to be more than $5 billion in its current fiscal year.
Q2 2026 numbers
For the quarter, Cisco earned $1.04 per share on revenue of $15.35 billion, ahead of estimates pitched at $1.02 EPS on $15.11 billion revenue.
Looking ahead, Cisco forecast EPS of $1.02 to $1.04 on revenue of $15.4 billion to $15.6 billion for the current quarter. For fiscal 2026, the company now expects EPS $4.13 to $4.17 on between $61.2 billion and $61.7 billion revenue.
Cisco peer Arista Networks (ANET) and semiconductor player Applied Materials (AMAT) are due to report results after the close of US markets on Thursday.
To us, Cisco is a crucial components supplier to an AI and data centre supercycle that could run for years to come.
Its very respectable and, largely, dependable margins and returns of capital and equity track records have scope to improve, implying Nasdaq-beating total returns over three and five years can continue.
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