Cisco just delivered its best quarter in years. Record revenue. Double-digit growth. Earnings beat. AI infrastructure orders piling up. And the stock got punished anyway.
The networking giant reported $15.35 billion in Q2 revenue — up 10% year-over-year and ahead of the $15.12 billion Wall Street expected. Earnings came in at $1.04 per share adjusted, beating the $1.02 consensus. Net income surged to $3.18 billion from $2.43 billion a year ago. By almost any traditional measure, this was a strong quarter.
So why did shares tank 7% after hours?
The answer, as usual in this market, is about what comes next. Cisco’s guidance for the current quarter — $1.02 to $1.04 in adjusted EPS and $15.4 to $15.6 billion in revenue — merely met expectations. In a market that rewards blowout forward guidance and punishes anything less, “meeting expectations” is basically disappointing.
It’s a pattern that’s becoming frustratingly common in 2026: companies deliver strong results, but if the outlook doesn’t scream acceleration, the stock gets hammered. The market isn’t pricing what happened — it’s pricing what it hoped would happen.
The AI angle is the real subplot here. Cisco reported $2.1 billion in AI infrastructure orders from hyperscalers during the quarter, and core networking revenue jumped 21% to $8.3 billion — blowing past the $7.9 billion consensus. CEO Chuck Robbins talked up partnerships with AMD on an AI infrastructure project in Saudi Arabia and a new networking switch built around an Nvidia chip.
But investors wanted more. They wanted Cisco to become the next AI beneficiary story, and instead they got a company that’s growing nicely but cautiously. Robbins noted that revenue from neoclouds — younger cloud providers outside the Amazon-Microsoft-Google triad — should ramp in the second half of this fiscal year, with more impact in fiscal 2027.
There’s also the cost squeeze. Rising memory prices, driven by insatiable demand for Nvidia GPUs, are pressuring equipment makers across the board. Cisco has responded with price hikes and contract adjustments, but the margin impact is real.
For the full fiscal year, Cisco is targeting $4.13 to $4.17 in adjusted EPS and $61.2 to $61.7 billion in revenue — implying 8.5% annual growth. That’s solid. It’s just not the kind of number that makes momentum traders salivate.
The lesson for investors: in a market obsessed with acceleration, steady growth gets no respect. Cisco is doing everything right, but in the current AI-or-bust environment, “right” apparently isn’t enough. For patient investors, that disconnect between execution and stock price might actually be the opportunity.