CISCO REPORTS SECOND QUARTER EARNINGS

, /PRNewswire/ -- News Summary: Double-digit top and bottom-line growth exceeding our guidance, with EPS growing faster than revenueRecord revenue of $15.3 billion, up 10% year over year; GAAP EPS of $0.80, up 31% year over year; and Non-GAAP EPS of $1.04, up 11% year over yearGAAP gross margin of 65.0% and Non-GAAP gross margin of 67.5%; GAAP operating margin of 24.6% and Non-GAAP operating margin of 34.6%, both above the high end of our guidance rangeAccelerating, double-digit growth in product orders across all geographies and robust growth across all customer marketsProduct orders up 18% year over year with networking product orders accelerating to more than 20% year over yearAI Infrastructure orders taken from hyperscalers totaled $2.1 billion, reflecting a significant acceleration in growthMajor multi-year, multi-billion-dollar campus networking refresh cycle underwayDividend increased by 2% to $0.42 per shareQ2 FY 2026 Results:Revenue: $15.3 billionIncrease of 10% year over yearEarnings per Share: GAAP: $0.80; Non-GAAP: $1.04GAAP EPS increased 31% year over yearNon-GAAP EPS increased 11% year over yearQ3 FY 2026 Guidance (1): Revenue: $15.4 billion to $15.6 billionEarnings per Share: GAAP: $0.73 to $0.77; Non-GAAP: $1.02 to $1.04FY 2026 Guidance (1):Revenue: $61.2 billion to $61.7 billionEarnings per Share: GAAP: $3.00 to $3.08; Non-GAAP: $4.13 to $4.17 (1) EPS guidance includes the estimated impact of tariffs based on current trade policy. Cisco (NASDAQ: CSCO) today reported second quarter results for the period ended January 24, 2026. Cisco reported second quarter revenue of $15.3 billion, net income on a generally accepted accounting principles (GAAP) basis of $3.2 billion or $0.80 per share, and non-GAAP net income of $4.1 billion or $1.04 per share. "Cisco's strong second quarter and first half of fiscal 2026 demonstrate both the power of our portfolio and the fundamental role we continue to play in connecting and protecting customers in a rapidly evolving landscape," said Chuck Robbins, chair and CEO of Cisco. "With over 40 years of customer trust, global scale, and a relentless focus on innovation, we believe Cisco is uniquely positioned to deliver the trusted infrastructure needed to securely and confidently power the AI-era." "In Q2, we delivered double-digit growth on both the top and bottom lines which exceeded the high end of our guidance and puts us on track to deliver our strongest revenue year yet in fiscal 2026," said Mark Patterson, CFO of Cisco. "Operating margin was also above the high end of guidance, as we continue to drive profitability by exercising financial discipline. We see strong, broad-based demand for our technology solutions and remain focused on capturing the significant opportunities we see ahead." GAAP Results Q2 FY 2026 Q2 FY 2025 vs. Q2 FY 2025 Revenue $ 15.3 billion $ 14.0 billion 10 % Net Income $ 3.2 billion $ 2.4 billion 31 % Diluted Earnings per Share (EPS) $ 0.80 $ 0.61 31 % Non-GAAP Results Q2 FY 2026 Q2 FY 2025 vs. Q2 FY 2025 Net Income $ 4.1 billion $ 3.8 billion 10 % EPS $ 1.04 $ 0.94 11 % Reconciliations between net income, EPS, and other measures on a GAAP and non-GAAP basis are provided in the tables located in the section entitled "Reconciliations of GAAP to non-GAAP Measures." Cisco Increases Quarterly Dividend Cisco has declared a quarterly dividend of $0.42 per common share, a 1-cent increase or up 2% over the previous quarter's dividend, to be paid on April 22, 2026, to all stockholders of record as of the close of business on April 2, 2026. Future dividends will be subject to Board approval. Financial Summary All comparative percentages are on a year-over-year basis unless otherwise noted. Q2 FY 2026 Highlights Revenue -- Total revenue was $15.3 billion, up 10%, with product revenue up 14% and services revenue down 1%. Revenue by geographic segment was: Americas up 8%, EMEA up 15%, and APJC up 8%. Product revenue performance reflected growth in Networking, up 21%, and Collaboration, up 6%. Security was down 4%. Observability was flat. Gross Margin -- On a GAAP basis, total gross margin, product gross margin, and services gross margin were 65.0%, 63.9%, and 68.4%, respectively, as compared with 65.1%, 63.7%, and 68.9%, respectively, in the second quarter of fiscal 2025. On a non-GAAP basis, total gross margin, product gross margin, and services gross margin were 67.5%, 66.4%, and 70.9%, respectively, as compared with 68.7%, 67.7%, and 71.6%, respectively, in the second quarter of fiscal 2025. Total gross margins by geographic segment were: 65.8% for the Americas, 71.7% for EMEA and 65.8% for APJC. Operating Expenses -- On a GAAP basis, operating expenses were $6.2 billion, up 3% year over year, and were 40.3% of revenue. Non-GAAP operating expenses were $5.0 billion, up 6%, and were 32.9% of revenue. Operating Income -- GAAP operating income was $3.8 billion, up 21%, with GAAP operating margin of 24.6%. Non-GAAP operating income was $5.3 billion, up 9%, with non-GAAP operating margin at 34.6%. Provision for Income Taxes -- The GAAP tax provision rate was 12.9%. The non-GAAP tax provision rate was 19.0%. Net Income and EPS -- On a GAAP basis, net income was $3.2 billion, an increase of 31%, and EPS was $0.80, an increase of 31%. On a non-GAAP basis, net income was $4.1 billion, an increase of 10%, and EPS was $1.04, an increase of 11%. Cash Flow from Operating Activities -- $1.8 billion for the second quarter of fiscal 2026, a decrease of 19%, compared with $2.2 billion for the second quarter of fiscal 2025. Balance Sheet and Other Financial Highlights Cash and Cash Equivalents and Investments -- $15.8 billion at the end of the second quarter of fiscal 2026, compared with $16.1 billion at the end of fiscal 2025. Remaining Performance Obligations (RPO)-- $43.4 billion, up 5% in total. Product RPO was up 8%, of which long-term RPO was $11.8 billion, up 11%. Services RPO was up 2%. Deferred Revenue -- $28.4 billion, up 2% in total, with deferred product revenue up 3% and deferred services revenue up 2%. Capital Allocation -- In the second quarter of fiscal 2026, we returned $3.0 billion to stockholders through share buybacks and dividends. We declared and paid a cash dividend of $0.41 per common share, or $1.6 billion, and repurchased approximately 18 million shares of common stock under our stock repurchase program at an average price of $76.29 per share for an aggregate purchase price of $1.4 billion. The remaining authorized amount for stock repurchases under the program is $10.8 billion with no termination date. Acquisitions In the second quarter of fiscal 2026, we closed the following acquisitions: NeuralFabric Corp., a privately held enterprise AI platform companyEzDubs, Inc., a privately held AI software company Guidance Cisco estimates the following results for the third quarter of fiscal 2026: Q3 FY 2026 Revenue $15.4 billion - $15.6 billion Non-GAAP gross margin 65.5% - 66.5% Non-GAAP operating margin 33.5% - 34.5% Non-GAAP EPS $1.02 - $1.04 Cisco estimates that GAAP EPS will be $0.73 to $0.77 for the third quarter of fiscal 2026. Cisco estimates the following results for fiscal 2026: FY 2026 Revenue $61.2 billion - $61.7 billion Non-GAAP EPS $4.13 - $4.17 Cisco estimates that GAAP EPS will be $3.00 to $3.08 for fiscal 2026. Margin and EPS guidance includes the estimated impact of tariffs based on current trade policy. Our Q3 FY 2026 guidance assumes an effective tax provision rate of approximately 17% for GAAP and approximately 19% for non-GAAP results. Our FY 2026 guidance assumes an effective tax provision rate of approximately 16% for GAAP and approximately 19% for non-GAAP results. A reconciliation between the guidance on a GAAP and non-GAAP basis is provided in the tables entitled "GAAP to non-GAAP Guidance" located in the section entitled "Reconciliations of GAAP to non-GAAP Measures." Editor's Notes: Q2 fiscal year 2026 conference call to discuss Cisco's results along with its guidance will be held on Wednesday, February 11, 2026 at 1:30 p.m. Pacific Time. Conference call number is 1-888-848-6507 (United States) or 1-212-519-0847 (international).Conference call replay will be available from 4:00 p.m. Pacific Time, February 11, 2026 to 10:00 p.m. Pacific Time, February 17, 2026 at 1-800-839-2232 (United States) or 1-203-369-3662 (international). The replay will also be available via webcast on the Cisco Investor Relations website at https://investor.cisco.com. Additional information regarding Cisco's financials, as well as a webcast of the conference call with visuals designed to guide participants through the call, will be available at 1:30 p.m. Pacific Time, February 11, 2026. Text of the conference call's prepared remarks will be available within 24 hours of completion of the call. The webcast will include both the prepared remarks and the question-and-answer session. This information, along with the GAAP to non-GAAP reconciliation information, will be available on the Cisco Investor Relations website at https://investor.cisco.com. CISCO SYSTEMS, INC CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per-share amounts) (Unaudited) Three Months Ended Six Months Ended January 24, 2026 January 25, 2025 January 24, 2026 January 25, 2025 REVENUE: Product $ 11,642 $ 10,234 $ 22,719 $ 20,348 Services 3,707 3,757 7,513 7,484 Total revenue 15,349 13,991 30,232 27,832 COST OF SALES: Product 4,205 3,713 8,139 7,239 Services 1,172 1,167 2,376 2,361 Total cost of sales 5,377 4,880 10,515 9,600 GROSS MARGIN 9,972 9,111 19,717 18,232 OPERATING EXPENSES: Research and development 2,355 2,299 4,755 4,585 Sales and marketing 2,881 2,672 5,752 5,424 General and administrative 688 752 1,421 1,547 Amortization of purchased intangible assets 231 265 462 530 Restructuring and other charges 36 10 183 675 Total operating expenses 6,191 5,998 12,573 12,761 OPERATING INCOME 3,781 3,113 7,144 5,471 Interest income 210 238 432 524 Interest expense (370) (404) (720) (822) Other income (loss), net 25 (60) 181 (19) Interest and other income (loss), net (135) (226) (107) (317) INCOME BEFORE PROVISION FOR INCOME TAXES 3,646 2,887 7,037 5,154 Provision for income taxes 471 459 1,002 15 NET INCOME $ 3,175 $ 2,428 $ 6,035 $ 5,139 Net income per share: Basic $ 0.80 $ 0.61 $ 1.53 $ 1.29 Diluted $ 0.80 $ 0.61 $ 1.51 $ 1.28 Shares used in per-share calculation: Basic 3,955 3,981 3,955 3,986 Diluted 3,984 4,005 3,987 4,008 CISCO SYSTEMS, INC REVENUE BY SEGMENT (In millions, except percentages) January 24, 2026 Three Months Ended Six Months Ended Amount Y/Y % Amount Y/Y % Revenue: Americas $ 8,845 8 % $ 17,834 8 % EMEA 4,425 15 % 8,208 10 % APJC 2,080 8 % 4,191 7 % Total $ 15,349 10 % $ 30,232 9 % Amounts may not sum and percentages may not recalculate due to rounding. CISCO SYSTEMS, INC GROSS MARGIN PERCENTAGE BY SEGMENT (In percentages) January 24, 2026 Three Months Ended Six Months Ended Gross Margin Percentage: Americas 65.8 % 66.3 % EMEA 71.7 % 71.8 % APJC 65.8 % 66.4 % CISCO SYSTEMS, INC REVENUE FOR GROUPS OF SIMILAR PRODUCTS AND SERVICES (In millions, except percentages) January 24, 2026 Three Months Ended Six Months Ended Amount Y/Y % Amount Y/Y % Revenue: Networking $ 8,294 21 % $ 16,061 18 % Security 2,018 (4) % 3,998 (3) % Collaboration 1,054 6 % 2,109 1 % Observability 277 — % 550 3 % Total Product 11,642 14 % 22,719 12 % Services 3,707 (1) % 7,513 — % Total $ 15,349 10 % $ 30,232 9 % Amounts may not sum and percentages may not recalculate due to rounding. CISCO SYSTEMS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In millions) (Unaudited) January 24, 2026 July 26, 2025 ASSETS Current assets: Cash and cash equivalents $ 7,458 $ 8,346 Investments 8,319 7,764 Accounts receivable, net of allowance of $76 at January 24, 2026 and $69 at July 26, 2025 6,606 6,701 Inventories 3,920 3,164 Financing receivables, net 2,944 3,061 Other current assets 5,884 5,950 Total current assets 35,131 34,986 Property and equipment, net 2,351 2,113 Financing receivables, net 3,698 3,466 Goodwill 59,234 59,136 Purchased intangible assets, net 8,307 9,175 Deferred tax assets 7,399 7,356 Other assets 7,251 6,059 TOTAL ASSETS $ 123,371 $ 122,291 LIABILITIES AND EQUITY Current liabilities: Short-term debt $ 8,719 $ 5,232 Accounts payable 2,762 2,528 Income taxes payable 195 1,857 Accrued compensation 3,494 3,611 Deferred revenue 16,199 16,416 Other current liabilities 5,417 5,420 Total current liabilities 36,786 35,064 Long-term debt 21,367 22,861 Income taxes payable 2,124 2,165 Deferred revenue 12,204 12,363 Other long-term liabilities 3,167 2,995 Total liabilities 75,648 75,448 Total equity 47,723 46,843 TOTAL LIABILITIES AND EQUITY $ 123,371 $ 122,291 CISCO SYSTEMS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) (Unaudited) Three Months Ended Six Months Ended January 24, 2026 January 25, 2025 January 24, 2026 January 25, 2025 Cash flows from operating activities: Net income $ 3,175 $ 2,428 $ 6,035 $ 5,139 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization, and other 659 761 1,265 1,550 Share-based compensation expense 934 921 1,989 1,748 Provision for receivables 12 8 9 7 Deferred income taxes (89) (101) (64) (382) (Gains) losses on divestitures, investments and other, net (59) 55 (237) (5) Change in operating assets and liabilities, net of effects of acquisitions and divestitures: Accounts receivable (1,803) (1,258) 54 969 Inventories (527) 212 (761) 441 Financing receivables 192 157 (120) 330 Other assets (50) (237) (642) (427) Accounts payable 344 (90) 236 (359) Income taxes, net (2,375) (1,479) (2,503) (2,285) Accrued compensation 419 461 (120) (293) Deferred revenue 433 416 (290) (555) Other liabilities 557 (13) 183 24 Net cash provided by operating activities 1,822 2,241 5,034 5,902 Cash flows from investing activities: Purchases of investments (2,244) (486) (4,228) (2,261) Proceeds from sales of investments 176 301 1,445 1,791 Proceeds from maturities of investments 1,081 1,539 2,303 2,703 Acquisitions, net of cash and cash equivalents acquired and divestitures (39) (40) (46) (257) Purchases of investments in privately held companies (47) (95) (65) (137) Return of investments in privately held companies 36 17 55 94 Acquisition of property and equipment (283) (210) (606) (427) Other 14 (4) (8) (5) Net cash provided by (used in) investing activities (1,306) 1,022 (1,150) 1,501 Cash flows from financing activities: Issuances of common stock 354 320 354 320 Repurchases of common stock - repurchase program (1,363) (1,240) (3,355) (3,243) Shares repurchased for tax withholdings on vesting of restricted stock units (784) (490) (1,068) (655) Short-term borrowings, original maturities of 90 days or less, net (510) 944 750 1,012 Issuances of debt 2,682 4,674 4,241 10,406 Repayments of debt (204) (6,561) (2,992) (11,382) Dividends paid (1,617) (1,593) (3,234) (3,185) Other 3 1 2 (2) Net cash used in financing activities (1,439) (3,945) (5,302) (6,729) Effect of foreign currency exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents (19) (18) (33) (8) Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents (942) (700) (1,451) 666 Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period 8,401 10,208 8,910 8,842 Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period $ 7,459 $ 9,508 $ 7,459 $ 9,508 Supplemental cash flow information: Cash paid for interest $ 85 $ 224 $ 701 $ 769 Cash paid for income taxes, net $ 2,935 $ 2,039 $ 3,569 $ 2,682 CISCO SYSTEMS, INC. REMAINING PERFORMANCE OBLIGATIONS (In millions, except percentages) January 24, 2026 October 25, 2025 January 25, 2025 Amount Y/Y% Amount Y/Y% Amount Y/Y% Product(1) $ 21,977 8 % $ 21,904 10 % $ 20,321 25 % Services 21,429 2 % 20,969 4 % 20,947 8 % Total $ 43,406 5 % $ 42,873 7 % $ 41,268 16 % (1) As of the end of the second quarter of fiscal 2026, long-term product RPO was $11.8 billion, up 11% year over year. CISCO SYSTEMS, INC. DEFERRED REVENUE (In millions) January 24, 2026 October 25, 2025 January 25, 2025 Deferred revenue: Product $ 13,371 $ 13,252 $ 13,033 Services 15,032 14,717 14,762 Total $ 28,403 $ 27,969 $ 27,795 Reported as: Current $ 16,199 $ 15,801 $ 15,999 Noncurrent 12,204 12,168 11,796 Total $ 28,403 $ 27,969 $ 27,795 CISCO SYSTEMS, INC. DIVIDENDS PAID AND REPURCHASES OF COMMON STOCK (In millions, except per-share amounts) DIVIDENDS STOCK REPURCHASE PROGRAM TOTAL Quarter Ended Per Share Amount Shares Weighted- Average Price per Share Amount Amount Fiscal 2026 January 24, 2026 $ 0.41 $ 1,617 18 $ 76.29 $ 1,351 $ 2,968 October 25, 2025 $ 0.41 $ 1,617 29 $ 68.28 $ 2,001 $ 3,618 Fiscal 2025 July 26, 2025 $ 0.41 $ 1,625 19 $ 64.65 $ 1,252 $ 2,877 April 26, 2025 $ 0.41 $ 1,627 25 $ 59.78 $ 1,504 $ 3,131 January 25, 2025 $ 0.40 $ 1,593 21 $ 58.58 $ 1,236 $ 2,829 October 26, 2024 $ 0.40 $ 1,592 40 $ 49.56 $ 2,003 $ 3,595 CISCO SYSTEMS, INC. RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES GAAP TO NON-GAAP NET INCOME (In millions) Three Months Ended Six Months Ended January 24, 2026 January 25, 2025 January 24, 2026 January 25, 2025 GAAP net income $ 3,175 $ 2,428 $ 6,035 $ 5,139 Adjustments to cost of sales: Share-based compensation expense 151 151 301 282 Amortization of acquisition-related intangible assets 228 335 461 654 Acquisition/divestiture-related costs 6 17 14 36 Total adjustments to GAAP cost of sales 385 503 776 972 Adjustments to operating expenses: Share-based compensation expense 782 765 1,666 1,444 Amortization of acquisition-related intangible assets 231 265 462 530 Acquisition/divestiture-related costs 96 205 199 490 Significant asset impairments and restructurings 36 10 183 675 Total adjustments to GAAP operating expenses 1,145 1,245 2,510 3,139 Adjustments to interest and other income (loss), net: (Gains) and losses on investments (61) 7 (256) (91) Total adjustments to GAAP interest and other income (loss), net (61) 7 (256) (91) Total adjustments to GAAP income before provision for income taxes 1,469 1,755 3,030 4,020 Income tax effect of non-GAAP adjustments (442) (423) (779) (899) Significant tax matters (59) — (132) (829) Total adjustments to GAAP provision for income taxes (501) (423) (911) (1,728) Non-GAAP net income $ 4,143 $ 3,760 $ 8,154 $ 7,431 CISCO SYSTEMS, INC. RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES GAAP TO NON-GAAP EPS Three Months Ended Six Months Ended January 24, 2026 January 25, 2025 January 24, 2026 January 25, 2025 GAAP EPS $ 0.80 $ 0.61 $ 1.51 $ 1.28 Adjustments to GAAP: Share-based compensation expense 0.23 0.23 0.49 0.43 Amortization of acquisition-related intangible assets 0.12 0.15 0.23 0.30 Acquisition/divestiture-related costs 0.03 0.06 0.05 0.13 Significant asset impairments and restructurings 0.01 — 0.05 0.17 (Gains) and losses on investments (0.02) — (0.06) (0.02) Income tax effect of non-GAAP adjustments (0.11) (0.11) (0.20) (0.22) Significant tax matters (0.01) — (0.03) (0.21) Non-GAAP EPS $ 1.04 $ 0.94 $ 2.05 $ 1.85 Amounts may not sum due to rounding. CISCO SYSTEMS, INC. RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES GROSS MARGINS, OPERATING EXPENSES, OPERATING MARGINS, INTEREST AND OTHER INCOME (LOSS), NET, AND NET INCOME (In millions, except percentages) Three Months Ended January 24, 2026 Product Gross Margin Services Gross Margin Total Gross Margin Operating Expenses Y/Y Operating Income Y/Y Interest and other income (loss), net Net Income Y/Y GAAP amount $ 7,437 $ 2,535 $ 9,972 $ 6,191 3 % $ 3,781 21 % $ (135) $ 3,175 31 % % of revenue 63.9 % 68.4 % 65.0 % 40.3 % 24.6 % (0.9) % 20.7 % Adjustments to GAAP amounts: Share-based compensation expense 63 88 151 782 933 — 933 Amortization of acquisition-related intangible assets 228 — 228 231 459 — 459 Acquisition/divestiture-related costs 2 4 6 96 102 — 102 Significant asset impairments and restructurings — — — 36 36 — 36 (Gains) and losses on investments — — — — — (61) (61) Income tax effect/significant tax matters — — — — — — (501) Non-GAAP amount $ 7,730 $ 2,627 $ 10,357 $ 5,046 6 % $ 5,311 9 % $ (196) $ 4,143 10 % % of revenue 66.4 % 70.9 % 67.5 % 32.9 % 34.6 % (1.3) % 27.0 % Three Months Ended January 25, 2025 Product Gross Margin Services Gross Margin Total Gross Margin Operating Expenses Operating Income Interest and other income (loss), net Net Income GAAP amount $ 6,521 $ 2,590 $ 9,111 $ 5,998 $ 3,113 $ (226) $ 2,428 % of revenue 63.7 % 68.9 % 65.1 % 42.9 % 22.3 % (1.6) % 17.4 % Adjustments to GAAP amounts: Share-based compensation expense 65 86 151 765 916 — 916 Amortization of acquisition-related intangible assets 335 — 335 265 600 — 600 Acquisition/divestiture-related costs 3 14 17 205 222 — 222 Significant asset impairments and restructurings — — — 10 10 — 10 (Gains) and losses on investments — — — — — 7 7 Income tax effect/significant tax matters — — — — — — (423) Non-GAAP amount $ 6,924 $ 2,690 $ 9,614 $ 4,753 $ 4,861 $ (219) $ 3,760 % of revenue 67.7 % 71.6 % 68.7 % 34.0 % 34.7 % (1.6) % 26.9 % Amounts may not sum and percentages may not recalculate due to rounding. CISCO SYSTEMS, INC. RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES GROSS MARGINS, OPERATING EXPENSES, OPERATING MARGINS, INTEREST AND OTHER INCOME (LOSS), NET, AND NET INCOME (In millions, except percentages) Six Months Ended January 24, 2026 Product Gross Margin Services Gross Margin Total Gross Margin Operating Expenses Y/Y Operating Income Y/Y Interest and other income (loss), net Net Income Y/Y GAAP amount $ 14,580 $ 5,137 $ 19,717 $ 12,573 (1) % $ 7,144 31 % $ (107) $ 6,035 17 % % of revenue 64.2 % 68.4 % 65.2 % 41.6 % 23.6 % (0.4) % 20.0 % Adjustments to GAAP amounts: Share-based compensation expense 131 170 301 1,666 1,967 — 1,967 Amortization of acquisition-related intangible assets 461 — 461 462 923 — 923 Acquisition/divestiture-related costs 4 10 14 199 213 — 213 Significant asset impairments and restructurings — — — 183 183 — 183 (Gains) and losses on investments — — — — — (256) (256) Income tax effect/significant tax matters — — — — — — (911) Non-GAAP amount $ 15,176 $ 5,317 $ 20,493 $ 10,063 5 % $ 10,430 9 % $ (363) $ 8,154 10 % % of revenue 66.8 % 70.8 % 67.8 % 33.3 % 34.5 % (1.2) % 27.0 % Six Months Ended January 25, 2025 Product Gross Margin Services Gross Margin Total Gross Margin Operating Expenses Operating Income Interest and other income (loss), net Net Income GAAP amount $ 13,109 $ 5,123 $ 18,232 $ 12,761 $ 5,471 $ (317) $ 5,139 % of revenue 64.4 % 68.5 % 65.5 % 45.9 % 19.7 % (1.1) % 18.5 % Adjustments to GAAP amounts: Share-based compensation expense 122 160 282 1,444 1,726 — 1,726 Amortization of acquisition-related intangible assets 654 — 654 530 1,184 — 1,184 Acquisition/divestiture-related costs 8 28 36 490 526 — 526 Significant asset impairments and restructurings — — — 675 675 — 675 (Gains) and losses on investments — — — — — (91) (91) Income tax effect/significant tax matters — — — — — — (1,728) Non-GAAP amount $ 13,893 $ 5,311 $ 19,204 $ 9,622 $ 9,582 $ (408) $ 7,431 % of revenue 68.3 % 71.0 % 69.0 % 34.6 % 34.4 % (1.5) % 26.7 % Amounts may not sum and percentages may not recalculate due to rounding. CISCO SYSTEMS, INC. RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES EFFECTIVE TAX RATE (In percentages) Three Months Ended Six Months Ended January 24, 2026 January 25, 2025 January 24, 2026 January 25, 2025 GAAP effective tax rate 12.9 % 15.9 % 14.2 % 0.3 % Total adjustments to GAAP provision for income taxes 6.1 % 3.1 % 4.8 % 18.7 % Non-GAAP effective tax rate 19.0 % 19.0 % 19.0 % 19.0 % GAAP TO NON-GAAP GUIDANCE Q3 FY 2026 Gross Margin Rate Operating Margin Rate Earnings per Share(1) GAAP 63% - 64% 24% - 25% $0.73 - $0.77 Estimated adjustments for: Share-based compensation expense 1.0 % 6.0 % $0.17 - $0.18 Amortization of acquisition-related intangible assets and acquisition/divestiture-related costs 1.5 % 3.5 % $0.10 - $0.11 Non-GAAP 65.5% - 66.5% 33.5% - 34.5% $1.02 - $1.04 FY 2026 Earnings per Share(1) GAAP $3.00 - $3.08 Estimated adjustments for: Share-based compensation expense $0.70 - $0.72 Amortization of acquisition-related intangible assets and acquisition/divestiture-related costs $0.43 - $0.45 Significant asset impairments and restructurings $0.04 (Gains) and losses on investments ($0.05) Significant tax matters ($0.03) Non-GAAP $4.13 - $4.17 (1) Estimated adjustments to GAAP earnings per share are shown after income tax effects. Margin and EPS guidance includes the estimated impact of tariffs based on current trade policy. Except as noted above, this guidance does not include the effects of any future acquisitions/divestitures, significant asset impairments and restructurings, significant litigation settlements and other contingencies, gains and losses on investments, significant tax matters, or other items, which may or may not be significant. Forward Looking Statements, Non-GAAP Information and Additional Information This release may be deemed to contain forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among other things, statements regarding future events (such as our belief in our unique position to deliver the trusted infrastructure needed to securely and confidently power the AI-era, continuing to drive profitability by exercising financial discipline, and the strong, broad-based demand for our technology solutions as we remain focused on capturing the significant opportunities ahead) and the future financial performance of Cisco (including the guidance for Q3 FY 2026 and full year FY 2026) that involve risks and uncertainties, such as the actual impact of tariffs on our guidance for Q3 FY 2026 and full year FY 2026. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results due to a variety of factors, including: business and economic conditions and growth trends in the networking industry, our customer markets and various geographic regions; global economic conditions and uncertainties in the geopolitical environment; our development and use of artificial intelligence; overall information technology spending; the growth and evolution of the Internet and levels of capital spending on Internet-based systems; variations in customer demand for products and services, including sales to the service provider market, cloud, enterprise and other customer markets; the return on our investments in certain key priority areas, and in certain geographical locations, as well as maintaining leadership in Networking and services; the timing of orders and manufacturing and customer lead times; supply constraints; changes in customer order patterns or customer mix; insufficient, excess or obsolete inventory; variability of component costs; variations in sales channels, product costs or mix of products sold; our ability to successfully acquire businesses and technologies and to successfully integrate and operate these acquired businesses and technologies; our ability to achieve expected benefits of our partnerships; increased competition in our product and services markets, including the data center market; dependence on the introduction and market acceptance of new product offerings and standards; rapid technological and market change; manufacturing and sourcing risks; product defects and returns; litigation involving patents, other intellectual property, antitrust, stockholder and other matters, and governmental investigations; our ability to achieve the benefits of restructurings and possible changes in the size and timing of related charges; cyber attacks, data breaches or other incidents; vulnerabilities and critical security defects; our ability to protect personal data; evolving regulatory uncertainty; terrorism; natural catastrophic events (including as a result of global climate change); any pandemic or epidemic; our ability to achieve the benefits anticipated from our investments in sales, engineering, service, marketing and manufacturing activities; our ability to recruit and retain key personnel; our ability to manage financial risk, and to manage expenses during economic downturns; risks related to the global nature of our operations, including our operations in emerging markets; currency fluctuations and other international factors; changes in provision for income taxes, including changes in tax laws and regulations or adverse outcomes resulting from examinations of our income tax returns; potential volatility in operating results; and other factors listed in Cisco's most recent reports on Forms 10-Q and 10-K filed on November 18, 2025 and September 3, 2025, respectively. The financial information contained in this release should be read in conjunction with the consolidated financial statements and notes thereto included in Cisco's most recent reports on Forms 10-Q and 10-K as each may be amended from time to time. Cisco's results of operations for the three and six months ended January 24, 2026 are not necessarily indicative of Cisco's operating results for any future periods. Any projections in this release are based on limited information currently available to Cisco, which is subject to change. Although any such projections and the factors influencing them will likely change, Cisco will not necessarily update the information, since Cisco will only provide guidance at certain points during the year. Such information speaks only as of the date of this release. This release includes non-GAAP net income, non-GAAP gross margins, non-GAAP operating expenses, non-GAAP operating income and margin, non-GAAP effective tax rates, non-GAAP interest and other income (loss), net, and non-GAAP net income per share data for the periods presented. It also includes future estimated ranges for gross margin, operating margin, tax provision rate and EPS on a non-GAAP basis. These non-GAAP measures are not in accordance with, or an alternative for, measures prepared in accordance with generally accepted accounting principles (GAAP) and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Cisco believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with Cisco's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Cisco's results of operations in conjunction with the corresponding GAAP measures. Cisco believes that the presentation of non-GAAP measures when shown in conjunction with the corresponding GAAP measures, provides useful information to investors and management regarding financial and business trends relating to its financial condition and its historical and projected results of operations. For its internal budgeting process, Cisco's management uses financial statements that do not include, when applicable, share-based compensation expense, amortization of acquisition-related intangible assets, acquisition/divestiture-related costs, significant asset impairments and restructurings, significant litigation settlements and other contingencies, gains and losses on investments, the income tax effects of the foregoing and significant tax matters. Cisco's management also uses the foregoing non-GAAP measures, in addition to the corresponding GAAP measures, in reviewing the financial results of Cisco. In prior periods, Cisco has excluded other items that it no longer excludes for purposes of its non-GAAP financial measures. From time to time in the future there may be other items that Cisco may exclude for purposes of its internal budgeting process and in reviewing its financial results. For additional information on the items excluded by Cisco from one or more of its non-GAAP financial measures, refer to the Form 8-K regarding this release furnished today to the Securities and Exchange Commission. About Cisco Cisco (NASDAQ: CSCO) is the worldwide technology leader that is revolutionizing the way organizations connect and protect in the AI era. For more than 40 years, Cisco has securely connected the world. With its industry leading AI-powered solutions and services, Cisco enables its customers, partners and communities to unlock innovation, enhance productivity and strengthen digital resilience. With purpose at its core, Cisco remains committed to creating a more connected and inclusive future for all. Discover more on The Newsroom and follow us on X at @Cisco. Copyright © 2026 Cisco and/or its affiliates. All rights reserved. Cisco and the Cisco logo are trademarks or registered trademarks of Cisco and/or its affiliates in the U.S. and other countries. To view a list of Cisco trademarks, go to: www.cisco.com/go/trademarks. Third-party trademarks mentioned in this document are the property of their respective owners. The use of the word partner does not imply a partnership relationship between Cisco and any other company. This document is Cisco Public Information. RSS Feed for Cisco: https://newsroom.cisco.com/rss-feeds View original content to download multimedia:https://www.prnewswire.com/news-releases/cisco-reports-second-quarter-earnings-302685643.html SOURCE Cisco Systems, Inc.