Cisco Earnings: AI Orders and Profitability Look Strong Despite Second-Half Choppiness

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What We Thought of Cisco Systems’ Earnings

Cisco Systems’ CSCO January-quarter results beat guidance, and management raised its full-year outlook. Sales of $15.3 billion rose 10% year over year, and fiscal 2026 growth guidance rose to 8%, from 7%. Management also raised its fiscal 2026 AI order outlook to $5 billion, up from more than $4 billion.

Why it matters: AI infrastructure demand and an ongoing campus network refresh cycle are driving robust growth for Cisco. Shares dropped 7% after hours, over implied fiscal-second-half margin compression and softer AI orders. We don’t view either as a significant worry for long-term investors.

• Gross margin is guided down 150 basis points sequentially in the April quarter—not a surprise, given rising memory input prices. The midpoint of 66% is a strong level. We don’t see much more compression, given Cisco’s ability to pass on price increases with a loyal…