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Cisco Systems delivered better-than-expected fiscal second-quarter results, but the upbeat headline numbers weren’t enough to calm Wall Street. Shares fell roughly 7% in extended trading after the networking giant issued revenue and earnings guidance that merely matched — rather than exceeded — expectations.

The reaction highlights a growing reality in today’s AI-driven market: solid performance is no longer sufficient. Investors want acceleration.

Strong quarterly performance driven by networking rebound

For its fiscal second quarter, Cisco reported adjusted earnings per share of $1.04, ahead of the $1.02 analysts were expecting. Revenue came in at $15.35 billion, surpassing consensus estimates of $15.12 billion.

That represents approximately 10% year-over-year growth from $14 billion in the same quarter last year. Net income rose sharply to $3.18 billion, or 80 cents per share, compared with $2.43 billion, or 61 cents per share, a year earlier. The adjusted profit figure excludes stock-based compensation and certain other items.

The biggest contributor to the upside was Cisco’s core networking business. Networking revenue climbed 21% year over year to $8.3 billion, significantly above the $7.9 billion analysts had projected. The rebound suggests that enterprise and hyperscale customers are resuming infrastructure spending after a period of inventory digestion and macro uncertainty.

AI momentum builds, but expectations remain high

Investors have been eager to see Cisco establish itself as a central player in the artificial intelligence infrastructure buildout, which has propelled companies tied to GPUs, data center hardware, and cloud computing.

Cisco reported $2.1 billion in AI infrastructure orders from hyperscale customers during the quarter — a notable acceleration that reflects demand for networking equipment capable of handling AI workloads. These deployments typically require high-bandwidth, low-latency networking solutions to connect massive GPU clusters.

During the quarter, Cisco unveiled a new networking switch that integrates an Nvidia processor, strengthening its alignment with the dominant AI chipmaker. The company also announced its participation in a major AI infrastructure project in Saudi Arabia in collaboration with Advanced Micro Devices, signaling expansion into sovereign and international AI initiatives.

However, despite these developments, investors appear to be looking for clearer evidence that AI will materially reshape Cisco’s growth trajectory in the near term.

Guidance meets estimates, but fails to excite

For the current fiscal quarter, Cisco expects adjusted earnings per share between $1.02 and $1.04 and revenue ranging from $15.4 billion to $15.6 billion. Analysts were looking for $1.03 per share on $15.18 billion in revenue.

While the revenue outlook came in slightly above consensus at the midpoint, the earnings guidance did little to suggest meaningful upside acceleration — a key concern for growth-focused investors.

For fiscal 2026, Cisco projects adjusted earnings of $4.13 to $4.17 per share and revenue between $61.2 billion and $61.7 billion, implying roughly 8.5% annual revenue growth. Wall Street had been modeling $4.12 in earnings per share and $60.74 billion in revenue.

In essence, the company delivered solid but not transformative forward guidance — a tone that likely contributed to the post-earnings pullback.

Cloud transition and neocloud ramp-up ahead

CEO Chuck Robbins emphasized that additional growth drivers could emerge in the second half of the fiscal year, particularly from so-called “neocloud” providers — a new generation of cloud companies that differ from established giants like Amazon Web Services and Microsoft Azure.

According to Robbins, revenue from these newer cloud players is expected to begin ramping later this fiscal year and accelerate more meaningfully in fiscal 2027. These customers are increasingly building AI-native infrastructure, which requires advanced networking architecture.

On the sovereign AI front, Robbins noted that Cisco’s current fiscal 2026 guidance does not depend on a significant contribution from large government-backed AI initiatives, implying potential upside if those projects scale faster than anticipated.

Pricing pressures and supply chain dynamics

Like many technology hardware companies, Cisco is navigating rising component costs — particularly in memory — driven by intense demand for Nvidia GPUs and broader AI infrastructure expansion. Elevated memory pricing has impacted equipment manufacturers across the industry.

Cisco has responded by implementing targeted price increases and adjusting terms with channel partners. While there is some possibility that customers may accelerate purchases ahead of price hikes, management does not expect widespread pull-forward demand in its networking segment.

The company’s gross margin profile will remain closely watched as component costs and competitive pricing dynamics evolve.

Investor expectations recalibrate

Cisco’s results underscore a broader theme in the technology sector: earnings beats alone are not enough when valuations and sentiment are heavily tied to AI-driven growth narratives.

The company demonstrated solid operational execution, a strong rebound in networking revenue, and growing traction in AI infrastructure. Yet the market reaction suggests that investors are demanding clearer visibility into sustained double-digit growth and AI-led expansion.

With more than $61 billion in projected annual revenue, improving profitability, and expanding AI partnerships, Cisco remains a central player in global networking infrastructure. However, in a market dominated by rapid AI acceleration, incremental progress may not be sufficient to command premium enthusiasm.

The coming quarters will be critical in determining whether Cisco can convert AI-related orders and neocloud momentum into a durable growth cycle that satisfies increasingly ambitious investor expectations.

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