Cisco's earnings and revenue both beat expectations, but its outlook is muted; stock price falls 7%

Cisco reported quarterly results that beat expectations on Wednesday, but the stock fell about 7% in after-hours trading as its earnings guidance for the current period merely met market expectations.

The company's performance compared with consensus estimates from LSEG (London Stock Exchange Group) Market:

Adjusted earnings per share: $1.04, expected $1.02;

Revenue: $15.35 billion, expected $15.12 billion.

The announcement shows Cisco's revenue increased about 10% year-over-year, rising from $14 billion in the same period last year to the current level. Net profit grew from $2.43 billion (or $0.61 per share) last year to $3.18 billion (or $0.80 per share). The adjusted data excludes equity incentive costs.

For the current quarter, Cisco expects adjusted earnings per share of $1.02–$1.04 and revenue of $15.4–$15.6 billion. Analyst expectations surveyed by LSEG are for $1.03 per share and revenue of $15.18 billion.

Investors have been hoping for Cisco to play a more central role amid the artificial intelligence boom, a trend that has already driven up shares of chipmakers and other data center technology providers. Cisco's growth has accelerated, with this quarter seeing $2.1 billion in AI infrastructure orders from hyperscale cloud providers.

Cisco's core networking business revenue grew 21% year-over-year to $8.3 billion, with analysts surveyed by StreetAccount expecting $7.9 billion.

This quarter, Cisco announced a partnership with AMD to provide products for an AI infrastructure project in Saudi Arabia. Cisco also launched a network switch powered by Nvidia chips.

Cisco CEO Chuck Robbins stated on an analyst call: “With regard to sovereign cloud, there is actually no need or expectation for it to have a significant impact in fiscal 2026. Therefore, our guidance does not rely on growth from this segment; it is purely incremental.”

Robbins noted that revenue growth from new cloud providers (those established later than mature cloud service companies like Amazon and Microsoft) will kick off in the second half of this fiscal year and become more significant in fiscal 2027.

Due to surging demand for Nvidia graphics processors, memory prices have continued to rise, impacting a range of device manufacturers. Robbins said Cisco has announced price increases and is adjusting contracts with channel partners.

“Do I think customers may make advance purchases in some cases? It's possible,” he said. “But I don’t think this will become a mainstream trend for our networking business.”

For fiscal 2026, Cisco is targeting adjusted earnings per share of $4.13–$4.17 and revenue of $61.2–$61.7 billion, representing approximately 8.5% year-over-year growth. LSEG consensus expectations are for earnings per share of $4.12 and revenue of $60.74 billion.

Editor: Ding Wenwu