Cisco Systems, Inc. (CSCO) Shares Rise as AI Infrastructure Orders Drive Record Q2 Results

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Shares of Cisco Systems, Inc. ( CSCO ) rose 0.65% to $86.85 in Thursday morning trading after the telecommunications giant reported fiscal 2026 second-quarter results that beat high and low estimates. The company hit a new 52-week high of $88.19 earlier this week. The stock has gained nearly 65% over the past 12 months, driven by rapid 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 visibility solutions. The company designs and sells integrated products and services that power the Internet and corporate networks. Its primary markets include large enterprises, public sector organizations, and hyperscale cloud providers. Cisco has shifted its business model to software-based subscriptions and recurring revenue streams, bolstered by the 2024 acquisition of data analytics company Splunk.

Current Stock Price

$86.85 (Feb 12, 2026)

Market Capitalization

About 340.94 billion

Measurement

Cisco trades at a forward earnings (P/E) ratio of 19.5x for fiscal year 2026. This represents a payout on its five-year historical average of nearly 17x, reflecting the company’s market re-rating as a key AI infrastructure provider.

Q2 and First Half 2026 Financial Results

Cisco reported strong growth for the quarter ended January 24, 2026, marking its first strong quarter in the company’s history.

Quarterly Revenue: It 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, beating the consensus estimate of $1.01.
Annual Recurring Revenue (ARR): Reached $31.4 billion, up 5% year over year, providing significant visibility going forward.
Operating Margin: Non-GAAP operating margin stood at 34.4%, indicating continued operating strength despite higher R&D expenses.
Remaining Operating Obligations (RPO): Total revenue of $42.9 billion, an increase of 7% year-over-year, with 50% expected to be recognized as revenue within the next 12 months.

Profitability Call Themes and AI Momentum

In a conference call held on February 11, executives highlighted the rapid scaling of AI-related network infrastructure.

Hyperscale AI Orders: Orders for AI infrastructure from webscale customers reached $1.3 billion in the most recent quarter. The company reaffirmed its goal of seeing $3 billion in AI revenue for the full fiscal year of 2026.
Splunk Integration: Management reported that cross-selling initiatives are ahead of schedule, and the Security and Visualization segments saw a 26% increase in combined product revenue.
Hardware Update: Network revenue grew 15%, driven by the release of Silicon One P200 chips designed for back-end AI 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 the global business dynamics and changing priorities in IT implementation.

Impacts of Taxes: Management noted that the 2026 guidance includes the limited impact of current US trade policy and tariffs, which compressed gross margins by approximately 120 basis points due to higher segment costs.
Geopolitical Exposure: Intensifying “chip wars” between the US and China threaten Cisco’s supply chain for silicon-based optical devices. Competition from domestic Asian suppliers continues to pressure prices in the APJC area.
Industry Challenges: While the use of AI is strong, the legacy hardware and Security segments have seen a slight decline year over year as customers switch to older software versions.

Cisco Systems (CSCO) SWOT Analysis

Power

AI Infrastructure Leadership: The rapid adoption of Silicon One and optics by hyperscalers provides a major impetus for growth.
Revenue Base: Over $31 billion in ARR reducing sensitivity to hardware cycles.
Dominant Market Share: Maintains a leading position in business switching and campus networking.

Weakness

Legacy Component Drag: The continued decline of traditional collaboration and existing Security platforms.
Gross Margin Pressure: Affected by unfavorable product mix and increased input costs related to tax.
Integration Risk: High complexity in fully integrating Splunk’s legacy data platforms with Cisco’s core network stack.

Opportunities

Enterprise AI Inferencing: A growing pipeline for data center transformation as enterprises move AI models from training to production.
Security Integration: Leveraging Splunk to provide a unified “SOC-of-the-future” platform.
Federal Spending: Increased national security focus is driving global demand for private cloud and secure communications.

Threats

Trade Barriers: New or increased tariffs may erode product boundaries.
Hyperscale Concentration: High reliance on a small number of webscale clients for AI revenue growth.
Deep Downsizing: Widespread economic downturns can lead to delayed campus renewal cycles.