Cisco Systems (CSCO) Morgan Stanley Technology, Media & Telecom Conference 2026 summary

Demand trends and growth

• Achieved 18% product order growth in fiscal Q2, with double-digit growth across all geographies and verticals, even excluding hyperscale orders which alone contributed $2.1 billion in new AI infrastructure orders in 90 days.

• Campus data center refresh and AI infrastructure are identified as multi-billion dollar, multi-year opportunities, with rapid adoption of new platforms in wireless, routing, and switching.

Gross margin and profitability management

• Gross margin faced pressure from rising memory prices and a shift toward hardware; mitigation includes price increases, tighter terms with partners, and leveraging financial strength for supply security.

• Hardware growth exceeded 20% in Q2, while software, especially security, was softer; focus remains on maintaining operating margin between 33.5% and 34.5%.

• EPS growth is targeted to outpace top-line growth for FY 2026.

Software, recurring revenue, and security

• Software and subscriptions remain over 50% of business, with $43 billion in remaining performance obligations supporting predictable growth.

• Security revenue faces headwinds from the transition to cloud-based Splunk, but new security offerings like Hypershield and XDR are gaining traction, with 1,000 new customers in Q2.