Key Points
Cisco beat on both sales and earnings last night, and forecasts more sales growth ahead.
Investors don't care -- because Cisco's profits are about to fall.
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Cisco Systems (NASDAQ: CSCO) stock tumbled 9.7% through 10:10 a.m. ET Thursday despite beating on both top and bottom lines in its fiscal Q2 2026 earnings report last night.
Analysts expected Cisco to earn $1.02 per share on $15.1 billion in sales, but Cisco actually earned $1.04 per share (adjusted for one-time items) on sales of $15.3 billion.
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Cisco Q2 earnings
Sales set a new quarterly revenue for at the networking equipment maker, rising 10% year over year. Adjusted earnings rose 11%, and earnings as calculated according to generally accepted accounting principles (GAAP) surged 31%. (GAAP profits still weren't as good as the non-GAAP number, however -- only $0.80 per share.)
Best of all, Cisco said it's enjoying "accelerating, double-digit growth in product orders across all geographies and robust growth across all customer markets," with product orders up 18% year over year, foreshadowing even stronger sales growth ahead.
Is Cisco stock a buy?
In that regard, Cisco gave new guidance for continued sales growth to about $15.5 billion in Q3, and forecast full-year sales of about $61.5 billion. Unfortunately for Cisco, that's where the good news ends.
Sales may be growing, but profits growth seems to have stopped. Q3 GAAP profits are forecast at about $0.75 per share (plus or minus $0.02), a sequential decline. Full-year GAAP earnings should range from $3 to $3.08 per share, implying profits won't resume growing in Q4, either. Cisco blamed rising costs for computer memory for depressing its profits.)
With Cisco stock still stuck at about $77 a share, the stock trading for more than 25 times earnings -- and earnings flat-to-down -- Cisco stock still looks like a sell.
Should you buy stock in Cisco Systems right now?
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Cisco Systems. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
