Cisco's Q1 2026 Financials: Networking Powers Growth Amid Mixed Results

Networking giant Cisco Systems, Inc. recently released its first-quarter financial results for fiscal year 2026, giving us a fresh look into its performance. Let's dive into the numbers from its latest 10-Q filing to understand what's driving the business.

Cisco reported a solid start to its fiscal year, with total revenue climbing 8% year-over-year to $14.9 billion. Net income also saw a 5% increase, reaching $2.9 billion, or $0.72 per diluted share. This performance was largely fueled by strong product sales, which grew 10% to $11.1 billion, while services revenue posted a modest 2% gain.

The following flow diagram visualizes Cisco's income statement for the quarter, showing how revenue from its various segments is translated into profit after accounting for costs and expenses.

Networking Leads the Charge

Digging into the product categories reveals a clear driver of growth. The Networking division, which is Cisco's largest, saw an impressive 15% revenue increase to $7.8 billion. This segment includes the company's core switching, routing, and wireless products.

However, other areas faced headwinds:

• Security revenue dipped 2% to $2.0 billion.
• Collaboration revenue declined 3% to $1.1 billion.
• Observability showed 6% growth, reaching $274 million.

This performance highlights Cisco's continued strength in its core market, even as it navigates challenges in other segments. Geographically, the Americas region led the way with a 9% revenue increase, while both the EMEA (Europe, Middle East, and Africa) and APJC (Asia Pacific, Japan, and China) regions grew by 5%.

A Closer Look at Profitability

While overall revenue grew, Cisco’s total gross margin percentage saw a slight dip from 65.9% to 65.5%. The product gross margin specifically decreased from 65.1% to 64.5%. According to the filing, this was primarily due to a shift in the "mix of products sold," which offset gains from productivity improvements.

A key factor boosting the bottom line was a significant reduction in one-time expenses. "Restructuring and other charges" fell to just $147 million this quarter, compared to a substantial $665 million in the same period last year. This sharp decrease was a major contributor to the 42% surge in operating income, which climbed to $3.4 billion.

Capital Returns and Future Outlook

Cisco continued its strong commitment to shareholder returns, spending $2.0 billion on stock repurchases and paying out $1.6 billion in dividends during the quarter. The total capital returned to shareholders ($3.6 billion) slightly outpaced the company's net cash provided by operating activities ($3.2 billion).

Overall, Cisco's first-quarter results paint a picture of a company leveraging its foundational strength in networking to drive top-line growth. While navigating a mixed performance in its security and collaboration segments and a slight margin compression from its product mix, the company's profitability received a significant lift from lower restructuring costs. As the company moves forward, its ability to manage the volatile demand from service providers and cloud customers, a risk highlighted in the filing, will be crucial to sustaining this momentum.