To The Moon

We have seen another day of rebounce from the AI, so is this a dead-cat bounce or real turn? Can Cisco earnings change the way narratives played out?

$Cisco(CSCO)$ is scheduled to report its fiscal Q2 2026 earnings on Wednesday, February 11, 2026, before the market opens.

After years of being viewed as a "legacy" networking giant, Cisco has rebranded itself as a pivotal AI infrastructure play. Investors are increasingly bullish, with the stock recently trading near $85 and some analysts, like Evercore ISI, pushing price targets as high as $175.

The Numbers to Beat (Consensus Estimates)

Revenue: ~$15.11 billion (up ~8.1% year-over-year).

Non-GAAP EPS: ~$1.02 (up ~8.5% year-over-year).

Guidance (Q2 Range): Revenue of $15.0B – $15.2B; EPS of $1.01 – $1.03.

Cisco’s fiscal Q1 2026 report, released in November 2025, was a "statement" quarter that solidified its transition from a legacy hardware vendor to an AI infrastructure power player. The company posted a "beat and raise" that sent the stock up over 3% on the day of the announcement.

Q1 2026 Financial Summary

• Revenue: $14.9 billion (Up 8% YoY), beating the high end of its own guidance.

• Non-GAAP EPS: $1.00 (Up 10% YoY), exceeding consensus estimates of $0.98.

• Product Orders: Up 13% YoY, marking the fifth consecutive quarter of double-digit growth.

• AI Momentum: Cisco booked $1.3 billion in AI infrastructure orders from hyperscalers (Meta, Google, etc.) in this single quarter alone.

Segment Performance

• Networking: The star performer, up 15% YoY to $7.8 billion, driven by AI fabric demand and a campus refresh.

• Security: Technically down 2%, but management clarified this was due to a revenue timing shift at Splunk, which is moving from "up-front" on-premise deals to "ratable" cloud subscriptions.

• Margins: Non-GAAP gross margin stayed strong at 68.1%, proving that Cisco can maintain profitability even while shifting its product mix toward high-volume AI hardware.

The Lesson Learnt from Guidance

The biggest takeaway from the Q1 report wasn't just the "beat," but the aggressive raising of the full-year floor. Cisco increased its FY2026 revenue guidance to $60.2B – $61.0B and EPS to $4.08 – $4.14.

1. The "AI Lag" is Over

For the past two years, investors worried Cisco was losing the AI race to Nvidia and Broadcom. The Q1 guidance proved that as AI clusters move from "training" to "inferencing" and "agentic AI," the demand for Cisco’s Silicon One chips and pluggable optics scales exponentially. The lesson? Networking is the bottleneck of AI, and Cisco has the cure.

2. The Shift to Recurring Revenue is De-risking the Stock

With 54% of revenue now coming from subscriptions and a $42.9 billion RPO (backlog), Cisco is no longer just a cyclical hardware company. The guidance lesson here is that Cisco’s earnings are becoming more predictable and "software-like," which justifies a higher P/E multiple than the stock has seen in the last decade.

3. Resilience Against Macro Headwinds

Cisco explicitly baked potential tariff impacts and supply chain costs into its raised guidance. The fact that they still raised their outlook despite these headwinds signaled to the market that demand is so "inelastic" that Cisco can absorb or pass on these costs without hurting its bottom line.

Key Metrics to Watch

1. AI Infrastructure Orders

This is the "make or break" metric for Cisco’s current valuation.

• The Goal: Cisco previously guided for $3 billion in AI infrastructure revenue from hyperscalers (like Meta and Microsoft) for FY2026.

• What to look for: Last quarter, AI orders hit $1.3 billion. Watch for whether they maintain this pace. Any upward revision to the $3B annual target could trigger a major rally.

2. Silicon One Adoption

Cisco’s Silicon One chips are direct competitors to specialized networking silicon from Broadcom.

• Milestone: Management expects to ship their 1 millionth Silicon One chip this quarter. Commentary on the "G200" and "P200" series will signal how well Cisco is capturing the transition from traditional networking to AI-ready fabrics.

3. Software & Recurring Revenue (Splunk Integration)

Since acquiring Splunk, Cisco has shifted focus toward high-margin subscriptions.

• Metric: Watch Remaining Performance Obligations (RPO). It stood at $42.9 billion last quarter. Growth here indicates long-term stability and success in moving customers away from "one-off" hardware sales toward a software-centric model.

4. Networking Refresh Cycle

The "Campus Networking" segment (enterprise Wi-Fi, switching) is seeing a post-pandemic refresh.

• Growth: Analysts expect networking revenue to grow ~13% ($7.74B). If this lags, it suggests enterprise spending is tightening despite the AI hype.

Cisco (CSCO) Price Target

Based on 18 analysts from Tiger Brokers app offering 12 month price targets for Cisco Systems in the last 3 months. The average price target is $86.18 with a high forecast of $100.00 and a low forecast of $68.21. The average price target represents a -0.69% change from the last price of $86.78.

Short-Term Trading Opportunities

The "Bull" Case (Potential Upside)

• The Setup: Unusual call option activity (nearly 90k contracts recently) suggests traders are betting on a "beat and raise."

• The Trigger: If Cisco beats the $1.02 EPS estimate and raises its full-year revenue guidance (currently $60.2B – $61B), the stock could easily test the $90–$95 range.

• Strategy: Look for a "breakout" play if the stock clears its recent resistance near $86 on high volume immediately following the pre-market report.

The "Bear" Case (Potential Downside)

• The Setup: Cisco is currently trading at a stretched valuation relative to its historical average (Forward P/S around 5.4x).

• The Trigger: Supply chain tightening in memory and optics was mentioned last quarter. If management warns that higher component costs are eating into the 68% gross margin, or if AI orders "plateau" at $1.3B, the stock may see a "sell the news" reaction.

• Strategy: A failure to hold the $82 support level post-earnings could lead to a retracement toward $78.

Analyst Sentiment Summary

Technical Analysis - Exponential Moving Average (EMA)

We have seen how Cisco have benefitted from last Friday (06 Feb) and Monday (09 Feb) bounce back from the software selling off, and Cisco is currently trading significantly away from the 26-EMA and also RSI momentum is pretty positive strong.

So would Cisco earnings results shed some light on whether the recent AI rebounce is just a dead-cat bounce or a real turn? So what investors would be interested to look at its the outlook guidance and demand for 2026, because Cisco is complementing infrastructure build for AI data centre, and on the software side, the tractions for its networking and security are growing.

Cisco have prove that AI infrastructure demand is "inelastic" in Q1 2026, would we see even more confirmation for this in the upcoming Q2 2026?

Summary

Cisco Systems (CSCO) is set to report its fiscal Q2 2026 results on Wednesday, February 11, 2026, after the market closes. Following a transformative Q1, the market is eager to see if Cisco can sustain its momentum as a primary AI infrastructure provider.

Expectations & Financial Targets

Wall Street expects a "beat and raise" performance. Consensus estimates include:

• Revenue: ~$15.12 billion (8.1% YoY growth).

• Non-GAAP EPS: ~$1.02 (8.5% YoY growth).

• Guidance: Investors will look for a tightening or raising of the FY2026 revenue target ($60.2B – $61.0B).

3 Key Metrics to Watch

1. AI Infrastructure Orders: After booking $1.3 billion in AI orders last quarter, the focus is on whether Cisco is on track to hit its $3 billion annual target for hyperscalers.

2. Silicon One Progress: Cisco is expected to ship its 1 millionth Silicon One chip this quarter. Success here signals market share gains against rivals like Broadcom and Arista.

3. Backlog & RPO: Remaining Performance Obligations (RPO) stood at $42.9 billion last quarter. Sustained growth here confirms the successful shift to a software-subscription model via Splunk.

Short-Term Trading Outlook

• Implied Volatility: Options markets are pricing in a ~6% move in either direction—wider than Cisco's historical average.

• Bull Case: A revenue beat paired with an AI order surge could push the stock toward the $90–$95 range, as it recently hit new 52-week highs near $85.

• Bear Case: Technical indicators suggest the stock is approaching "overbought" territory. Any mention of supply chain constraints in memory or optics, or a stagnation in AI order growth, could trigger a "sell the news" retracement toward $80.

Lesson from Q1 Guidance

The primary lesson from the previous quarter was that networking is no longer a "legacy" drag. Cisco proved that AI infrastructure demand is "inelastic" — meaning customers are willing to pay a premium for Cisco’s integrated security and networking stack, allowing the company to raise guidance even amidst macroeconomic uncertainty.

Appreciate if you could share your thoughts in the comment section whether you think Cisco would raise its guidance as there is demand for customer to pay premium for its networking solution.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire @MillionaireTiger appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.