Record Revenue at $15.3B: Cisco Raises AI Orders Target Past $5B (CSCO Q2 2026 Earnings Call)

Revenue Hits Record $15.3B as Product Orders Surge 18%

Cisco's Q2 FY26 total revenue grew 10% year-over-year to a record $15.3 billion, with product revenue up 14% to $11.6 billion. Non-GAAP EPS rose 11% to $1.04, growing faster than revenue and demonstrating continued operating leverage. Networking was the standout at 21% growth, powered by double-digit gains in campus switching, data center switching, wireless, service provider routing, and compute. Product orders accelerated to 18% growth, with enterprise up 8%, public sector up 11%, and service provider and cloud customers surging 65% on triple-digit hyperscaler order growth. Excluding hyperscalers, product orders still grew a robust 10%. The company returned $3 billion to shareholders in the quarter and announced a dividend increase to $0.42 per quarter.

AI Infrastructure Orders Raised Past $5B with G300 Chip Upside Ahead

Hyperscaler AI infrastructure orders totaled $2.1 billion in Q2 alone, up from $1.3 billion last quarter and equal to all of fiscal 2025 combined. Management raised the full-year AI order target to over $5 billion with expected revenue recognition exceeding $3 billion. CEO Chuck Robbins emphasized these targets do not include any contribution from the newly announced 102.4 terabit per second G300 chip or P200, meaning announced innovations represent pure upside. Acacia reported its strongest quarter ever with triple-digit booking growth, and Cisco shipped its 1 millionth Silicon One chip. Beyond hyperscalers, the company took $350 million in AI orders from neocloud, sovereign, and enterprise customers in Q2, with a growing pipeline exceeding $2.5 billion.

Campus Refresh Enters "Top of the First Inning" with Faster-Than-Historical Ramps

All four enterprise networking product families, switching, routing, wireless, and industrial IoT, are transitioning to next-generation platforms faster than any prior Cisco product cycle. Campus switching orders grew close to double digits, Wi-Fi 7 surged 80% sequentially, and industrial IoT maintained double-digit growth for the seventh consecutive quarter. Robbins framed the opportunity as "multiyear, multibillion-dollar" driven by tens of billions of dollars in installed base across early Catalyst generations nearing end of support. He noted that customers are accelerating upgrades due to Agentic AI requirements, latency demands, and cybersecurity risks associated with unsupported equipment. On security, new-generation products (Secure Access, XDR, Hypershield, AI Defense) added 1,000 new customers in Q2, up 100% sequentially, though legacy portfolio declines and Splunk's cloud transition continue to mask the growth.

Memory Costs Hit Near-Term Margins, But Management Sees a Trough

Q3 guidance calls for revenue of $15.4 billion to $15.6 billion but non-GAAP gross margin of 65.5% to 66.5%, down from 67.5% in Q2, reflecting memory price increases and AI infrastructure mix shift. CFO Mark Patterson outlined three countermeasures: announced price increases with ongoing monitoring, revised contractual terms with channel partners and customers, and leveraging Cisco's scale to secure supply. Advanced purchase commitments rose $1.8 billion in just 90 days, up 73% year-over-year. Full-year FY26 guidance was raised to revenue of $61.2 billion to $61.7 billion and non-GAAP EPS of $4.13 to $4.17, positioning Cisco for its strongest fiscal year ever. Patterson indicated the margin pressure is timing-related and should improve as pricing actions flow through.