Cisco Systems, Inc. (CSCO) shares rose 0.65% to $86.85 in Thursday morning trading after the networking giant reported second-quarter fiscal 2026 results that exceeded top and bottom-line estimates. The company reached a new 52-week high of $88.19 earlier this week. The stock has gained approximately 65% over the past 12 months, driven by accelerated demand for artificial intelligence (AI) infrastructure and the integration of its Splunk acquisition.
Company Description
Cisco Systems, Inc. is a global technology leader providing networking, security, collaboration, and observability solutions. The company designs and sells integrated products and services that power the internet and corporate networks. Its primary end markets include large enterprises, public sector organizations, and hyperscale cloud providers. Cisco has shifted its business model toward software-based subscriptions and recurring revenue streams, bolstered by the 2024 acquisition of data analytics firm Splunk.
Current Stock Price
$86.85 (Feb 12, 2026)
Market Capitalization
Approximately $340.94 billion
Valuation
Cisco trades at a forward price-to-earnings (P/E) ratio of 19.5x for fiscal 2026. This represents a premium to its five-year historical average of approximately 17x, reflecting market re-rating of the company as a key AI infrastructure provider.
Q2 and First-Half Fiscal 2026 Financial Results
Cisco reported robust growth for the quarter ended January 24, 2026, marking its strongest first half in company history.
- Quarterly Revenue: Rose to $15.1 billion, at the high end of guidance, compared to $14.9 billion in the previous quarter.
- Non-GAAP EPS: Reported at $1.02, exceeding the consensus estimate of $1.01.
- Annualized Recurring Revenue (ARR): Reached $31.4 billion, up 5% year-over-year, providing significant forward visibility.
- Operating Margins: Non-GAAP operating margin stood at 34.4%, reflecting continued operating leverage despite higher R&D spend.
- Remaining Performance Obligations (RPO): Totaled $42.9 billion, an increase of 7% year-over-year, with 50% expected to be recognized as revenue within the next 12 months.
Earnings Call Themes and AI Momentum
In the conference call held February 11, management highlighted the rapid scaling of AI-related networking hardware.
- Hyperscale AI Orders: AI infrastructure orders from webscale customers totaled $1.3 billion in the most recent quarter. The company reaffirmed its target to recognize $3 billion in AI revenue for the full fiscal year 2026.
- Splunk Integration: Management reported that cross-selling initiatives are ahead of schedule, with the Security and Observability segments seeing a 26% increase in combined product revenue.
- Hardware Refresh: Networking revenue grew 15%, driven by the rollout of the Silicon One P200 chips designed for AI backend fabrics.
- Capital Allocation: Cisco returned $3.6 billion to shareholders this quarter through $1.6 billion in dividends and $2.0 billion in share repurchases.
Macro Pressures and Geopolitical Risk
Cisco remains exposed to global trade dynamics and shifting IT spending priorities.
- Tariff Impacts: Management noted that 2026 guidance includes the estimated impact of current U.S. trade policy and tariffs, which have pressured gross margins by approximately 120 basis points due to higher component costs.
- Geopolitical Exposure: Intensifying “chip wars” between the U.S. and China pose a risk to Cisco’s supply chain for high-performance optics and silicon. Competition from domestic Asian providers continues to pressure pricing in the APJC region.
- Sector Challenges: While AI spending is robust, legacy Collaboration and Security hardware segments saw slight year-over-year declines as customers transition to cloud-native software versions.
Cisco Systems (CSCO) SWOT Analysis
Strengths
- AI Infrastructure Leadership: Rapid adoption of Silicon One and optics by hyperscalers provides a massive growth catalyst.
- Recurring Revenue Base: Over $31 billion in ARR reduces sensitivity to hardware cycles.
- Dominant Market Share: Maintains a leading position in enterprise switching and campus networking.
Weaknesses
- Legacy Segment Drag: Continued declines in traditional Collaboration and on-premise Security hardware.
- Gross Margin Pressure: Impacted by unfavorable product mix and rising tariff-related input costs.
- Integration Risk: High complexity in fully merging Splunk’s legacy data platforms with Cisco’s core networking stack.
Opportunities
- Enterprise AI Inferencing: Growing pipeline for data center switching as enterprises move AI models from training to production.
- Security Consolidation: Leveraging Splunk to offer an integrated “SOC-of-the-future” platform.
- Federal Spending: Increased national security focus globally driving demand for sovereign cloud and secure networking.
Threats
- Trade Barriers: New or expanded tariffs could further erode product margins.
- Hyperscale Concentration: High reliance on a small number of webscale customers for AI revenue growth.
- Macro Slowdown: A broader economic contraction could lead to deferred enterprise campus refresh cycles.