Cisco Systems, Inc Q2 2026 Earnings Call Transcript

Cisco Systems, Inc (NASDAQ: CSCO) Q2 2026 Earnings Call dated Feb. 11, 2026

Presentation

Operator

Sa. Welcome to Cisco’s second quarter fiscal year 2026 financial results conference call. At the request of Cisco, today’s conference is being recorded. If you have any objections, you may disconnect now. I would like to introduce Sami Baudry, Head of Industrial Relations. Sir, you may begin.

Sami Badri — Head of Investor Relations & Strategic Finance

Good afternoon everyone. This is Sami Baudry, Cisco’s Head of Investor Relations. I’m joined by Chuck Robbins, our Chair and CEO, and and Mark Patterson, our cfo. Cisco’s earnings press release and supplemental information including GAAP to non GAAP reconciliations are available on our investor relations website. Following this call, we will also make the recorded webcast and slides available on the website. Throughout today’s call, we’ll be referencing both GAAP and non GAAP financial results. We will discuss product results in terms of revenue and geographic and customer results in terms of product orders. Unless stated otherwise, all comparisons will be made on a year over year basis.

Please note that our discussion today will include forward looking statements including our guidance for the third quarter and fiscal year 2026. These statements are subject to risks and uncertainties detailed in our SEC filings, particularly Our most recent 10k and 10q reports which identify important risk factors that could cause actual results to differ materially from those contained in our forward looking statements with respect to guidance. Please also see the slides and press release that accompany this call for further details. Cisco will not comment on its financial guidance during the quarter unless it is done through an explicit public disclosure.

Now I’ll turn it over to Chuck.

Chuck Robbins — Chair and Chief Executive Office

Thanks Sami and thank you all for joining us today. Q2 was a very strong quarter with revenue and earnings per share both growing double digits and coming in above the high end of our guidance ranges, we delivered record revenue in Q2, putting Cisco on track to deliver our strongest year yet. As indicated in our guidance, for the full year in Q2, total revenue growth accelerated to 10% year over year with product revenue up 14% driven by robust demand for AI infrastructure and campus networking solutions. Our strong top line performance combined with operating efficiencies and solid execution by our teams contributed to non GAAP eps growth of 11% which continued to grow faster than revenue.

This strong performance allowed us to return 3 billion in capital to shareholders in the quarter, bringing the total value returned. Year to date to 6.6 billion. Today we also announced an increase to Cisco’s dividend, demonstrating our commitment to returning value to shareholders through consistent capital returns. Our innovation engine is firing on all cylinders and our commitment to customers has never been stronger. Last week Cisco hosted its AI Summit gathering AI visionaries and geopolitical experts to explore the economic, societal and business impacts of AI. While it was clear that expectations for adoption and execution are high, one major challenge still exists. Legacy infrastructure was not designed for the performance, speed and security needs of AI. Our strong first half of FY26 demonstrates both the power of our portfolio and the fundamental role we play in this once in a generation transition.

With our industry leading networking Portfolio powered by SiliconOne AI, native security solutions and operating systems, Cisco is well positioned to provide the critical infrastructure needed for the AI era. I’d also like to address the recent significant increases in memory prices across the market. Leveraging our industry leading supply chain team, we are proactively implementing three key strategies. First, we have already announced price increases and will continue to monitor market trends and make additional adjustments as necessary. Second, we are revising contractual terms with channel partners and customers to address evolving component prices. Third, Cisco’s operating scale and industry leading position help us negotiate favorable terms and secure supply to fulfill current and future demand.

Overall, we feel confident in our ability to manage this industry wide dynamic better than our peers. Now let me comment on the strong demand we saw in Q2. Overall, total product orders grew 18% year over year even on top of double digit growth in Q2 fiscal year 25. Excluding hyperscalers, product orders were up 10% year over year demonstrating the broad based demand we see for our technology. Globally, enterprise product orders were up 8% year over year in Q2 with strength across our entire networking portfolio. Public sector orders were up 11% year over year with double digit growth across all geographies.

Product orders from service provider and cloud customers accelerated in Q2 growing 65% driven by triple digit order growth across hyperscalers. We also saw continued growth from telco and cable customers in Q2 with orders up almost 20% on a combined basis. Now some color on demand From a product perspective, growth in networking product orders continued to accelerate reaching more than 20% in Q2 and marking the sixth consecutive quarter of double digit growth driven by service provider routing, data center switching, campus switching, wireless servers and industrial IoT products. Within our campus networking portfolio, we are seeing strong demand for our next generation switching, routing and wireless products which continue to ramp faster than prior product launches.

We are delivering AI native capabilities across these products including weaving security into the fabric of the network and modernizing the operational stack of campus networks. These new capabilities combined with an installed base representing tens of billions of dollars across early catalyst generations nearing end of support, underpin the multi year multibillion dollar Refresh Opportunity for Cisco we continue to see strong demand for our industrial IoT portfolio which has now grown double digits for seven consecutive quarters. This demand is driven by onshoring of manufacturing to the United States, the increase of AI workloads at the network edge and the emergence of physical AI.

AI infrastructure orders taken from hyperscalers totaled 2.1 billion in Q2 compared to 1.3 billion just last quarter and equal to the total orders taken in all of fiscal year 25 marking another significant acceleration in growth across our silicon systems and optics. We shipped our 1 millionth SiliconOne chip in Q2 and plan to deploy our SiliconOne architecture across our high performance networking systems by fiscal year 29. Just this week at Cisco Live Amsterdam we introduced our 102.4-terabit per second G300 chip positioning Cisco in an exclusive group of silicon providers delivering over 100 terabits per second switching speeds.

In addition, we launched four new systems powered by G300. The Cisco 8000 and Nexus 9K 102. Four terabit systems offer flexible air cooled options for traditional data center architectures as well as liquid cooled option designed for the latest ground up facilities. SiliconOne’s programmability puts Cisco silicon in a class of its own capable of adapting to a wide range of use cases and network infrastructure designs. We also announced two new pluggable optics, a 1.6 terabit per second OSFP and an 800 gig LPO both built with Cisco silicon photonics technology delivering greater efficiency and reliability in high performance AI infrastructure.

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 and scale across use cases. We see growth in both 400 gig and 800 gig coherent optics and transponder shipments with 800 gig pluggables ramping significantly given the strong demand for our SiliconOne systems and optics. We now expect to take AI orders in excess of 5 billion and to recognize over 3 billion in AI infrastructure revenue from hyperscalers in FY26. Beyond hyperscalers we have a separate AI opportunity across Neo, Cloud, Sovereign and Enterprise customers.

We took 350 million in AI orders from these customers in Q2 and have a growing pipeline in excess of 2.5 billion for our high performance AI infrastructure portfolio. We continue to develop our strategic partnerships to capture this opportunity in Q2. We announced plans to form a joint venture with AMD and Humane to deliver up to 1 gigawatt of AI infrastructure by 2030. This joint venture expects to begin operations this calendar year with a plan to build out 100 megawatts in Saudi Arabia as phase one of the project. We are seeing strong interest from European customers in our Sovereign Critical Infrastructure portfolio, designed to operate in air gapped on PREM environments, giving organizations control over sensitive data and critical infrastructure.

As AI adoption accelerates, concerns over privacy, data governance and regulatory compliance are top of mind for our customers, making sovereign solutions an essential foundation for building digital trust. Now shifting to security in Q2, we continue to see order growth across our new and refreshed products which represent roughly one third of our security portfolio and include Secure Access, xdr, hypershield, AI Defense and Refreshed Firewalls. Excluding the refreshed firewalls, over 1,000 new customers purchased these products in Q2, representing more than 100% growth quarter over quarter and bringing the total of net new customers since launch to roughly 4,000.

We have also seen three consecutive quarters of double digit growth in the number of firewalls ordered for Secure Access. Specifically, we booked over 2.5 million users in Q2 and more than 50% of added customers were new logos. As the adoption of AI tools grow and and agentic AI increases at the network edge, we expect to see continued momentum in our SASE business including Secure Access and SD wan. As mentioned in prior quarters, growth in our new and refreshed portfolio continues to be offset by a decline in our prior generation portfolio. Turning to Splunk, we saw a similar trend in Q2 as seen in Q1 with continued acceleration to cloud subscriptions and fewer on premise deals.

While this shift is creating a drag on revenue growth which we expect to Continue in the second half of fiscal year 26, cloud subscriptions enable greater adoption, expansion and faster delivery of innovation to customers, so overall we are pleased with this transition. Splunk also continued to win new customers in Q2, reaching 500 new logos for the first half of fiscal year 26 and is on track to add 1,000 new logos for the year. We are accelerating our innovation across our offerings both for and with AI. Cisco Live Amsterdam this week we unveiled major AI Defense and SASE advancements to help secure organizations as AI agents enter the workforce.

AI Defense can now scan models and repositories for vulnerabilities and provide an AI bill of materials for centralized governance. In Cisco SASE we launched a new semantic inspection engine that that can evaluate the intent of agentic interactions and block sophisticated context dependent threats. We’re also making agentic Ops, the operating model for AI driven IT to enable autonomous troubleshooting, continuous optimization and trusted validation. We are deploying AI agents to work hand in hand with human administrators within our product dashboards, AI Assistants and AI Canvas. We continue to make AI advancements internally with expanded use cases in Q2 across nearly every organization.

Today, the majority of our product developers are using AI coding assistance and working alongside agents which help us innovate faster across our portfolio. Currently over 90% of customer experience support cases are touched by AI and automation, enabling us to resolve a greater proportion of complex cases within one day and contributing to our highest ever customer satisfaction scores. Additional use cases across sales, security and trust, supply chain and corporate functions are also providing significant cost savings and efficiency gains. To summarize, we see strong demand for our solutions across all customer markets and geographies, solidifying Cisco’s role in providing the critical infrastructure needed for this once in a generation transition.

The value of our innovation is exemplified by SiliconOne, which positions Cisco for the broadest range of AI deployments, even the most technologically challenging. And with over 40 years of customer trust and global scale, Cisco is committed to leading in the AI era to drive breakthrough innovation, manage complexity and risk, and deliver faster business outcomes to customers globally. Now I’ll turn it over to Mark for more detail on the quarter and our outlook.

Mark Patterson — Executive Vice President and Chief Financial Officer

Thanks Chuck. We delivered another strong quarter with record revenue in Q2 and both operating margin and earnings per share coming in above the high end of our guidance. For the quarter. Total revenue was 15.3 billion, up 10% year over year. Non GAAP net income was 4.1 billion, up 10% and non GAAP earnings per share was $1.04 up 11% demonstrating continuing operating leverage with non GAAP earnings per share growing faster than revenue. Looking at our Q2 revenue in more detail, total product revenue was 11.6 billion, up 14% and services revenue was 3.7 billion down 1% year over year.

Networking was again the standout with growth of 21% driven by AI infrastructure and campus refresh. We saw double digit growth in campus switching, data center switching, wireless service provider routing, enterprise routing and Compute security was down 4% reflecting similar dynamics discussed last quarter with declines in prior generation products and the transition in our splunk business from an on prem deal to cloud subscriptions, partially offset by growth in new and refreshed products. Collaboration posted solid growth of 6% led by double digit growth in devices as well as growth in CPaaS, WebEx and cloud contact Center. Looking at our recurring metrics, Total RPO was 43.4 billion, up 5%.

Product RPO grew 8% of which the long term portion was $11.8 billion, up 11%. Total ARR ended the quarter at 31 billion, an increase of 3% with product ARR growth of 6%. The subscription revenue Total subscription revenue was 7.8 billion and represented 51% of Cisco’s total revenue. Total software revenue was 5.7 billion, up 2%. Q2 product orders were up 18% year over year. Product orders were up double digits across all geographic segments with The Americas up 23%, EMEA up 11% and APJC up 15%. Product orders were also up across all customer markets with service provider and cloud up 65%, public sector up 11% and enterprise up 8%.

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. Shifting to the balance sheet, we ended Q2 with total cash cash equivalents and investments of 15.8 billion.

Operating cash flow was 1.8 billion, down 19% due to the final transition tax payment of $2.3 billion from the 2017 tax cuts and Jobs act and continued investments to meet growing overall demand as well as specifically for AI infrastructure. From a capital allocation perspective, we returned $3 billion to our shareholders during the quarter, comprised of $1.6 billion for our quarterly cash dividend and $1.4 billion of share repurchases with $10.8 billion remaining under our share repurchase program. Given the confidence we have in our business and the strength of our ongoing cash flows, today we announced that we are raising our dividend by a penny to 42 cents per quarter.

This dividend increase demonstrates our commitment to returning a minimum of 50% of free cash flow annually to our shareholders. To summarize, we had another quarter with top and bottom line performance exceeding our expectations, driven by strong order growth and robust margins, all demonstrating the power of our innovation engine to drive strong top line growth as well as operating leverage to fuel profitability. We remain focused on making strategic investments in innovation to capitalize on the significant growth opportunities that we see ahead. This will continue to be underpinned by our commitment to disciplined spend management and this powerful combination that continues to fuel strong cash flow and our ability to return significant value to our shareholders.

Turning to Guidance Please note our Q3 and Fiscal Year 2026 guide assumes current tariffs and exemptions remain in place through the end of fiscal 2026. These assumptions remain unchanged from prior guidance. Looking ahead, you can expect us to continue our focus on durable growth with financial discipline driving operating leverage and continued capital returns. For fiscal Q3, our guidance is as follows. We expect revenue to be in the range of 15.4 billion to 15.6 billion. We anticipate non GAAP gross margin to be in the range of 65.5% to 66.5%. Non GAAP operating margin is expected to be in the range of 33.5% to 34.5%.

Non GAAP earnings per share is expected to range from $1.02 to $1.04. We are assuming a non GAAP effective tax rate of approximately 19%. Cisco is positioned for its strongest year ever, as indicated in our guidance for fiscal year 2026, which is as follows. We expect revenue to be in the range of 61.2 billion to 61.7 billion. Non GAAP earnings per share is expected to range from $4.13 to $4.17. Sammy, let’s now move into the Q and A.

Question & Answers

Sami Badri — Head of Investor Relations & Strategic Finance

Thank you Mark. Before we start the Q and A portion of the call, I’d like to remind analysts to ask one question and a single follow up question at the same time. Operator, can we move to the first analyst in the queue?

Operator

Thank you. Amit Dhariani with Evercore isi. Your line is open.

Amit Daryanani

Thanks. Good afternoon. I guess my two questions, maybe the first one. You folks obviously have very solid momentum on the AI side with a 5 billion AI target for fiscal 26. Can you just help us think about. The mix between Silicon one versus Optics in the book and then really as you think about some of the newer products like the G300 and the P200 on the silicon one side, do you see these opening up incremental markets or workloads for Cisco? Or is it more about deepening your existing relationship? I’d love to just kind of understand that side and then maybe on the follow up. Mark, you just touched on the gross margin decline in April. I assume it’s all memory related. We’d love to just understand what’s happening There. And if you feel like that’s a trough on the gross margin and memory issues or not.

Thank you.

Chuck Robbins — Chair and Chief Executive Office

Hey Amit, thank you very much for the question. 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. No. Or G300. Also, neither of the optics solutions that we announced this week at Cisco Live, EMEA we talked about this past quarter, the mix was 60% systems, 40% optics and I think that’s been reasonably consistent over the last few quarters. Your final question about whether these open up new markets. I think these will allow us to continue to sell next generation solutions across our existing customer base and I think it’ll continue to help us gain traction with the NEO clouds, the sovereign clouds, et cetera, help us get, you know, the scale across technologies out and continue to sell these solutions to existing customers as well as new customers.

But just to reiterate, P203 and G300 are not in the 5 billion expected for fiscal 26 mark.

Mark Patterson — Executive Vice President and Chief Financial Officer

Yeah, thanks Emmett. And I’ll take the gross margin question. So really, as you look at the Q3 guide, there’s two primary things at work. One is mix and the other is memory prices, as you mentioned. First off, I just want to acknowledge, you know, the significant growth in hardware that we’re seeing across, you know, our existing and new platforms that have been introduced and the fact that they’re accelerating much faster than previous launches. Secondly, you know, in terms of memory, you know, we’re going to control what we can control. And Chuck talked a little bit about the fact that we’ve already announced price increases.

We, we’re going to stay very close to that and adjust as needed going forward. Secondly, there’s some T’s and C’s with partners and customers that we’re going to adjust to really bolster our position there. Thirdly, it’s really leaning into our financial strength and our world class supply chain. 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. And then lastly, I think, you know, in terms of focusing on what we can control, we’re focused on financial discipline and profitability and we’re focused on growing EPS faster than revenue.

You saw that in Q1, you saw it in Q2, and it’s also in our full year FY26 guide. And if you. We don’t guide Q4, but if you go sort of back into the implied guide for Q4, you see it there as well.

Sami Badri — Head of Investor Relations & Strategic Finance

Thank you, Amit. Michelle, we can move to the next analyst.

Operator

Thank you. Tal Leiani with Bank of America Securities. Your line is open.

Tal Liani

Hi. I have two questions. The first one is, when I look at product revenue growth, the entire outperformance came from networking, which grew 21.1%. Can you drill down and tell us you spoke about orders in the prepared remarks. Can you speak about revenue growth? How did the various segments of networking grew and where did the outperformance came from? The second one is I can back out your 4Q guidance and when I look at the sequential growth from Q3 to Q4, it’s only 1.4%. So normally it’s 5%, 6%. This is a seasonally strong quarter. So why is it so low? Is it just conservatism or is there growth concentration in the next two quarters? Thanks.

Mark Patterson — Executive Vice President and Chief Financial Officer

Yes. So. Thanks, Tal. You know, really across networking, we’re seeing strength, frankly across the entire portfolio from the campus to the data center to the manufacturing floor in terms of our IoT offerings as well. So you’re seeing very strong growth. Again, we talked about data center switching being six out of the last eight quarters. Double digit growth. It was double digit growth this quarter. You’re seeing strengthening again in the campus and in a move to these new platforms that’s faster than previous launches. And I think you’re second part of the question was really just around seasonality, Is that right?

Chuck Robbins — Chair and Chief Executive Office

Yes. Sequential season.

Mark Patterson — Executive Vice President and Chief Financial Officer

Yes, sequential. So if you look at it, you know, the Q2 product revenue typically is kind of down mid single digits, quarter over quarter and we were up 5%. And as you look at Q3, really the typical seasonality is kind of, you know, low single digits. And that’s right where we are, despite the fact that we had a huge Q2 in terms of year over year growth, 14% and also seasonally a very strong quarter in Q2 as well. So we feel pretty good about the Q3.

Chuck Robbins — Chair and Chief Executive Office

Yeah. One other comment, Tal, I’d make on that is that I think with the, with the nonlinear nature of the hyperscaler business, it, it creates a little bit of uncertainty relative to our historical numbers that you’re so used to seeing.

Sami Badri — Head of Investor Relations & Strategic Finance

Thank you, Tal. Michelle, we can move to the next analyst.

Operator

Thank you. Ben Reitzos with Milius Research. Your line is open.

Ben Reitzes

Hey, thanks. I want to ask the Gross margin in a different way. You know, backing into the EPS guidance, it seems like, you know, EPS a little higher than where the street is. In the fourth quarter, maybe, maybe a couple pennies. And that would imply that the gross. Margin is expected to trough and get better. Or is that just due to operating margin? And then I was wondering, you know. If you could address that. I think the first question talked about. The trough, but if I look at. The guidance that way, something’s getting a little better on the operating margin line. Is that from cost cutting or gross margin in the fourth quarter? And then I have a follow up. Thanks.

Mark Patterson — Executive Vice President and Chief Financial Officer

Yeah, thanks, Ben. So, on gross margin, certainly, you know, a lot of what we talked about relative to what we can control and some of the memory price increases that we’ve seen, some of that is just timing. So we think that that will improve as we move, we move forward. And then certainly we’re not, we’re not here to talk about FY27, but as you get into FY27, we think that, you know, software growth will improve as well and that’ll certainly help us.

Chuck Robbins — Chair and Chief Executive Office

Get a second question, I think. Ben.

Sami Badri — Head of Investor Relations & Strategic Finance

Okay, Ben, we can catch up with you afterward. Thank you for the questions, Michelle. We can move to the next analyst.

Operator

Thank you. Erin Rakers with Wells Fargo, your line is open.

Aaron Rakers

Yeah, thanks for taking the question. I guess I want to go more into the architecture stuff. Chuck. You know, as we think about the AI networking opportunity and attraction that you’ve been seeing, I’m curious of your updated thoughts on how you view Scale up as an opportunity for Cisco. What have you been doing? When does that start to maybe materialize, if you see that as a large opportunity? And as my second question, I’m curious, given the traction you’re seeing in the NEO clouds and the Sovereign opportunities, just maybe an update of the relationship, the engagement you’ve had with Nvidia and how much that started to become maybe a driver outside of the hyperscalers.

Thank you.

Chuck Robbins — Chair and Chief Executive Office

Yeah, thanks, Aaron. So we haven’t made any announcements on Scale Up. I think in the past I’ve said we, we do plan to participate in it and we expect in the future to have products and revenue from Scale up, but we haven’t announced anything. So I would say stay tuned on that front. On the Enterprise Sovereign and NEO cloud space, the first thing I would say is that the Sovereign side, there’s really no real need nor expectation for meaningful impact in FY26. And so we don’t need that to actually accelerate. For the guide that We’ve, that we’ve provided that’s purely upside down.

And then the NEO clouds I’d say are generally the same. We expect the ramp to begin in second half, but really be FY27 as it relates to Nvidia. I think we had a, we had a quarter where we really began to see the acceleration of the engagements. We tracked 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 and so we see those engagements continue to increase. We had obviously Jensen was recently with us at our AI summit and talked about the power of their GPU and compute with our networking and security, which was emblematic of the relationship and why we’re doing it.

So we’re starting to see some early, early success there and I think it’ll only ramp from here.

Sami Badri — Head of Investor Relations & Strategic Finance

Thank you, Erin. Michelle, we can move to the next analyst.

Operator

Thank you. Meena Marshall with Morgan Stanley. Your line is open.

Meta Marshall

Great, thanks. Maybe building on that last question, just kind of the, you know, coming out of that AI summit, clearly talking to a lot of customers, you know, just where are you seeing or how evolved is that enterprise appetite for investment or when do you think that that kind of enterprise AI story take. And then maybe just a second question just in terms of the price increases, any demonstrable kind of change to demand or forward ordering that you saw as a result of that? Thanks.

Chuck Robbins — Chair and Chief Executive Office

I’ll take it first. You take a second. Okay. So on the AI front, I think first of all on the AI summit, I think if you looked at the lineup of representation that we had there, I think it speaks to the, the partnerships that we built and the role that the entire ecosystem thinks that we’re going to play across that ecosystem. So we were really excited about that and got a lot of positive feedback. On the enterprise side, what we’re seeing is early use cases around things like quant fraud detection, video analytics. We’re seeing it across financials, manufacturing, pharmaceuticals.

I also see examples in retail where you have, they’re leveraging agents on mobile devices in retail to help their staff do a better job engaging with their customers. And I think you can see the way this is playing out. We’re seeing a combination of both investment in cloud based architectures as well as on prem. I think if you look at our data center switching business, which is enterprise focused, we’ve had double digit order growth six out of the last eight quarters and we still had positive growth in the other two. So we Continue to see meaningful investment in private data centers to support these applications.

Mark Patterson — Executive Vice President and Chief Financial Officer

Yeah, on the second part of your question, you know, around pull forwards, we really didn’t see anything in the quarter that would point us to evidence that there were any significant pull forwards there at all. We looked at the typical things in terms of linearity in the quarter. We had, we frankly had good double digit growth as we moved through the entire quarter. We looked at, you know, whether we had any pipeline pull forwards from future quarters. Didn’t really see that. Looked at software activations, as you’d expect, channel checks and whatnot. And we actually saw the pipeline begin to build really in the out quarters rather than being pulled forward.

So feel good about that. And in terms of the price increase and whether or not it sort of lands with customers, you know, I would say as you talk to customers, I think they understand it. They understand this is industry wide. And 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. And I think there’s no concern that we’ve seen there yet whatsoever.

Chuck Robbins — Chair and Chief Executive Office

I would just add to that. Mark, Mark and I had lunch with one of our absolute biggest customers yesterday here on our campus and we had a very detailed discussion about the different dynamics that are happening in this space and the pricing pressure. And they completely understood and are going to work with us to actually make sure that the entire partnership actually continues to work for both of us. So I think customers, it’s an industry wide issue. Customers get it and while they may not like it, they understand that it’s a dynamic that we’re all dealing with.

Mark Patterson — Executive Vice President and Chief Financial Officer

I think frankly also a lot of them understand that, you know, we’ll probably be able to manage this a lot better than some of our peers too. So we’ll get through this together.

Sami Badri — Head of Investor Relations & Strategic Finance

Thank you, Mita. Michelle, we can move to the next analyst.

Operator

Thank you. Our next caller is David Boat with ubs. Your line is open, sir.

David Bowie

Great. Thanks guys for taking the question. I have a two parter around the order numbers. So one, I appreciate the strength that you guys reported in AI orders, but it certainly sounds like the over 5 billion of order numbers sounds a bit conservative given the momentum that you’re seeing in sort of the capex programs that have been announced over the last couple of weeks. So maybe if you could talk to why that number is only moving up to in excess of 5 billion. I think you said in the past it would double the prior year. And then along those lines, I Think you also mentioned that you’re only going to recognize over 3 billion in AI related revenue this year and I think previously you had said about 3 billion.

So does that suggest that the timing from a revenue recognition perspective shifts into fiscal 27 and gives you more visibility from an infrastructure revenue perspective next year on top of the growth that you’re seeing here in 26?

Chuck Robbins — Chair and Chief Executive Office

Thanks, Mark. I’ll take the orders and you take the revenue one, I think. Thanks, David, for the questions on the AI orders and the 5 billion. I think the thing to really remember about these customers is they’re nonlinear. So if, and you just have to. It’s quite lumpy. There’s only, there’s less than a handful of these major customers that are placing these orders. So you know, we’re giving you that number based on the pipeline we see clearly our teams will be working to make that number as big as they possibly can. But that’s what we see today and we just wanted to, to give you as close to a real number as we could see today.

I didn’t mention earlier, but I would also call out that during that, during Q2, we actually won three new use cases across these major players. So we won one optics and two on the system side. And so we continue to see new opportunity and hopefully that’ll result in us giving you a better number at some point. David.

Mark Patterson — Executive Vice President and Chief Financial Officer

Yeah, and David, just on the revenue question, you know these, these customers plan well in advance, which has its advantages to it. You’re seeing orders converting to revenue. I think that you’re seeing a, a continued ramp as we move through the year. And, and you’re spot on in terms of giving us better visibility on some of the revenue wreck that we would, we would look at into 27. That will, that’ll continue to follow on.

Sami Badri — Head of Investor Relations & Strategic Finance

Thank you, David. Michelle, we can move to the next analyst.

Operator

Thank you. Sam McChatterjee with JP Morgan. Your line is open, sir.

Samik Chatterjee

Hi, thanks for taking my questions. Maybe one on AI optics and one on non AI. For the AI part, Chuck, you talked about the new products you’re launching in optics or the pluggable optics that you’ve launched recently. Particularly a big focus this year is CPO and sort of support for that in the infrastructure. So any thoughts or insights in terms of how Cisco plans around sort of addressing the CPO functionality? Particularly, are you seeing customers look at that as part of your roadmap? Are they looking for Cisco to have that as part of their roadmap in optics? And then for my non AI part, just Trying to get a sense of what you’re seeing on the order front for campus in the sense that we see your networking orders did act straight, but when we strip out AI from it, what are the trends you’re seeing on that order front for X AI in networking and whether the end of life of CAC 4K and 6K, just to put that in context in terms of how much of a tailwind that is to your campus orders.

Chuck Robbins — Chair and Chief Executive Office

Thank you. Thanks. I would say on the cpo, we absolutely believe it’s going to happen. We don’t believe it’s actually imminent right now. If you recall, we actually demonstrated this technology I think two years ago or more. And so we have the technology to build it and we will as customers want it. But today they want choice and I think in many cases customers want the differentiation between optics and silicon. So they have choice and they don’t get locked in. It reduces their multi vendor choice. But you know, we did announce the 800 gig LPO which is gives customers huge power savings, greater efficiency for AI scale out and we’ll continue to innovate as well on that front.

I’d say on the campus basically on the enterprise networking side. Let me just give you some color and then Mark, you may want to expand on the order rates. But the first thing I’d say is that when you look at the enterprise switching, enterprise routing, the wireless and the industrial IoT platforms, all four of them, the transition is ramping faster in all four of those areas than the prior transitions that we’ve seen historically at Cisco. So they’re all ramping faster. That being said, we’re in the top of the first inning, so this thing is just getting started.

So there’s a lot of Runway. We talked about the network products being up double digits now for six consecutive quarters. Data center switching was up double digits six of the last eight quarters. All these things are ramping faster. I think Wi Fi 7 was up 80% sequentially. I think our campus switching business was up close to double digits on orders.

Mark Patterson — Executive Vice President and Chief Financial Officer

That’s right. So we’re seeing a fair amount of momentum and a lot of energy around customers that want to actually move on these upgrades. Yeah. And I would just maybe just add to that, Chuck. I mean to reiterate, if you look at that 18% bookings growth, excluding web scale, we were still at double digits, 10% year over year growth. So really, really strong quarter from an order standpoint. And when you look at the three geographies that we look at, all three grew in the double digits. All three accelerated their growth from Q1 just 90 days ago. So really strong quarter overall.

Sami Badri — Head of Investor Relations & Strategic Finance

Thank you, Sameik. Michelle, we can move to the next analyst.

Operator

Thank you. Our next caller is Carl Ackerman with BMP Paribus. Your line is open, sir.

Karl Ackerman

Yes, I have two as well, please. First, the roughly. Excuse me. I understand that security was weaker as splunk transition from professional licenses to SaaS. However, could you speak to the order rates and new product demand traction of your security portfolio that could augur well for recovery in your security offerings for the balance of 26. And just as my follow up please, Doug, I noticed you indicated that your 5 billion of AI orders does not include your G300 or the 100 terabyte switch portfolio. But more broadly, can you talk about the order rates you are seeing for your 51 terabyte and 100 terabyte data center switch portfolio? Because demand seems to be accelerating there.

Thank you.

Chuck Robbins — Chair and Chief Executive Office

Yeah, thanks Carl. So on the security. Update, here’s what I would say. There’s really three key points. Number one, we talked about the splunk transition that has a short term revenue headwind with the accounting treatment of on prem versus cloud. The second thing is that we, you know, on the new products, and these are products that largely didn’t exist three years ago. This is everything from secure access to XDR to AI defense to hypershield. We had 1,000 new customers of those products during the past quarter and it was up 100% sequentially. So we’re seeing the ramp now where customers are adopting these new products, which is a really good sign.

And there’s 4,000 customers who have bought one of those products since we built them. And these are again, these did not exist. So that’s positive. On the refresh firewalls, we had our third consecutive quarter of double digit unit growth and we just launched our new high end refresh firewalls in the last 120 days. So we expect that to continue. And where that would lead us is as we exit Q4 this year, the organic Cisco security portfolio will be growing. Revenue close to double digits as we exit. So the teams are a little, they’re a little behind where we, not the teams, but this portfolio is a little behind where we thought we’d be exiting the year.

But it’s still performing relatively well. It’s just masked right now with this splunk situation on the county treatment on the 5 billion and the 51.2 product. 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. And we’re, you know, we’re seeing huge acceleration in the 800 gig optics. We’re seeing huge acceleration obviously in the Acacia portfolio. So I think the, the demand is there and we just need to continue to build capacity.

Mark Patterson — Executive Vice President and Chief Financial Officer

Yeah, I think. And just to add to that, it’s not only the demand, but also continuing to make inroads with each of these hyperscalers across the portfolio. But also additional design wins that we saw this quarter as well.

Sami Badri — Head of Investor Relations & Strategic Finance

Thank you, Carl. Michelle, we can move to the next analyst.

Operator

Thank you. Michael Ng with Goldman Sachs. Your line is open, sir.

Michael Ng

Hey, good afternoon. Thank you for the question. I have two as well. First, I was wondering if you could just talk a little bit about the EBIT margin outperformance in the quarter. Was that driven by cost savings? Is that a mixed benefit as you do more with hyperscale customers? And then second, I wanted to just revisit the comments around the April quarter gross margins. And I know you talked a little bit about that just being timing. Is the implication that you’ll just take more pricing over the coming quarters to kind of recover a lot of that commodity cost inflation, or is that a timing comment around just the mix of AI revenue perhaps? Just would love your general thoughts on that.

Thank you.

Mark Patterson — Executive Vice President and Chief Financial Officer

Yeah, so, thanks, Michael. So I’ll take the first one just on the op inc. Percentage, as you pointed out, 34.6% for us is actually the highest in four quarters. So even though you saw a little bit of margin decline on a quarter over quarter basis and, and certainly year over year, we’re just continuing to execute very well. And you’re seeing us be, you know, very financially prudent in our expenditures and just really determined to drive profitability. And you saw that in the fact that EPS and Top Line both grew double digits, but the EPS line actually exceeded the top line.

And then in terms of the, the timing, you know, I think the measures that we talked about in terms of price increases and then some of the T’s and C’s that we’re going to be modifying with our partners and customers, those just take a little bit of time, you know, to run through. So you’ll start to see that over time.

Sami Badri — Head of Investor Relations & Strategic Finance

Thank you, Michael. Michelle, we can move to the next analyst.

Operator

Thank you. Our next caller is Pierre Ferregu with New Street. Your line is open, sir.

Sami Badri — Head of Investor Relations & Strategic Finance

You might be on mute.

Pierre Ferragu

Hey, apologies, I was on mute. Yes. So Chuck, can you give Us a sense of how your commercial momentum is evolving on the cloud, like on the AI France. So you mentioned a couple of use cases you won with large customers on hyperscale. So I guess it’s really like a kind of use case game. So what can you tell us about a typical use case where you make a difference, where really you beat your big competition? So what’s your, how do you win there? And then as you’re expanding into the new cloud opportunities, the broader markets, what do the dynamics look there? Is that a similar, like use case focused kind of competitive game? And are you like second, second source for your clients or do you see actually clients who go for, like Cisco as a primary, primary source for networking for AI?

Chuck Robbins — Chair and Chief Executive Office

Oh, thanks, Pierre. So on the, on the first one, I would say, how do we win? First of all, our optics portfolio is really just well received and is, I’d say, number one in the world. I mean, we have, we have the best optics portfolio that our customers want and we just need, we need to increase capacity to actually continue to deal with more and more demand there. I’d say on the, on the system side and the silicon side, we’ve talked a lot over the years about their desire to have silicon diversity. So that’s a starting point for why they’re interested in us being successful.

But then our systems, when we build these, I think there’s two big differentiators for us. There’s programmability of the silicon and then there’s just the power efficiency that we’re building into it and those generally. And I think the way we do business and the commercial relationship that we have, the team, the partnership that we have with them, I think they just, they appreciate that and I think it, it contributes to their desire for us to be able to do more with them. The second was Neocloud, right?

Mark Patterson — Executive Vice President and Chief Financial Officer

Enterprise.

Chuck Robbins — Chair and Chief Executive Office

Oh, enterprise, yeah. On the enterprise side, there’s opportunity across AI factory with Nvidia, so with GPUs. But what we really focus on and what we’re most interested in is networking and security in addition to strategically where we need to position the GPUs. But by and large, we are the network standard, particularly when we’re partnering with Nvidia in the enterprise right now. So that’s what we see happening. And again, we think bundling our security solutions like AI defense and those sorts of technologies in these AI factory solutions is a good opportunity for us as we go forward.

Sami Badri — Head of Investor Relations & Strategic Finance

Thank you, Pierre. Michelle, can we move to the last question in the queue?

Operator

Thank you. James Fish with Piper Sandler, your line is open, sir.

James Fish

Hey guys, thanks for squeezing me in. Just on, on the campus side, going back to a couple of questions here and trying to bridge it all together. You guys have talked about the refresh opportunity historically as more your fiscal 27, but now you’re starting to say it’s ongoing. I get it, Chuck. You know, first inning of a Braves game for you, right? But what’s, what’s changed? And then why wouldn’t they start. Why wouldn’t customers, especially in the enterprise, start pulling in their orders here, given the pricing increases that they know are coming? These are smart buyers and it kind of reminds a lot of enterprise out there of the supply chain issues a few years ago where we did start to see a pull in of orders.

Chuck Robbins — Chair and Chief Executive Office

Yeah. Okay, thanks, Jim. So, first of all, I think, you. Know, we are seeing a ramp in. An acceleration and I wasn’t sure if this is what you asked, but I’ll make a couple of comments. Just to be clear. Many of these customers learned from COVID and they recognize that in these major times of transition, they don’t want to ever be stuck with technology that’s not modern. And as they look at the architectures that are required for agentic AI, the security architecture, the network architecture, the latency requirements, all of that is leading them to look at making sure that their infrastructure is modernized. So that combined with the fact that there’s been a lot of learnings over the last couple of years about equipment that’s past last day of support and the cybersecurity risks that are associated with that, I think those are well documented.

And that’s another thing that’s leading them to do. So. I would say that on the core networking side, the memory content is not quite as high as what you’d see in compute platforms. And so the price increases are more nominal than they are in sort of the compute systems that you see some of our competitors talking about and the things that are a larger percentage of their portfolio. So do I think customers will try to buy ahead? In some cases? Perhaps. But I don’t think it’s going to be a big trend in the networking side of our business.

And UCS for us is just, it’s not as big a percentage as it represents for some of our peers.

Sami Badri — Head of Investor Relations & Strategic Finance

All right, thank you, Jim. I want to hand it over to Chuck for some closing remarks following the Q and A.

Chuck Robbins — Chair and Chief Executive Office

First, I want to thank all of you for being with us today and also want to thank our team. I’m very proud of what they’ve done and the hard work that they put in. And the results today are like, you know, they’re coming together after multiple years of effort to get here. And we want to continue to deliver this innovation to our customers and our teams are dedicated to do so. We’re proud of the performance, especially in the core. I think it’s important to really think about two big areas of momentum opportunity for us. And we’re very early in all of these.

First of all, with the hyperscalers and the AI buildouts, the Silicon One architecture, the new innovation that we announced this week, the new use cases that we won during the quarter, we obviously see a growing opportunity with Enterprise Sovereign and the neoclouds and AI. And then this, this beginning of this campus refresh, as I said, feels like the top of the first inning. It’s a multi year, multi billion dollar opportunity for us. So I have a high degree of confidence that we’re going to deliver our strongest fiscal year yet. And again, I want to thank our teams and I want to thank all of you for joining us.

And Sami, I’ll hand it back to you.

Sami Badri — Head of Investor Relations & Strategic Finance

Thank you, Chuck. Cisco’s next quarterly call, which will outline our third quarter fiscal year 2026 results, will be on Wednesday, May 13, 2026 at 1:30pm Pacific Time, 4:30pm Eastern Time. This concludes today’s call. If you have any further questions, please feel free to contact the Cisco Investor Relations Department. We thank you very much for joining the call today.

Operator

Thank you for participating on today’s conference call. If you would like to listen to the call in its entirety, you may call 1-800-839. For participants dialing from outside the US please dial 203-369-3662. This concludes today’s call. You may disconnect at.