Cisco Systems reported a solid 10% increase in revenue for its fiscal 2026 second quarter, beating expectations with adjusted earnings per share up 11%. However, shares dropped 7% in after-hours trading due to concerns about the impact of higher memory prices on gross margins and ongoing weakness in the Security segment. Cisco also announced a new product, the Silicon One G300. Despite these challenges, Cisco’s total product orders increased 18% year over year, driven by strong demand for its Networking products and AI infrastructure orders from hyperscale customers. The company expects AI orders from hyperscalers to exceed $5 billion this fiscal year. Cisco also saw growth in its campus networking portfolio. However, revenue in the Security division fell 4% year over year, missing analysts’ forecasts for the fourth quarter in a row. Additionally, the Collaboration and Observability units saw mixed results, with Collaboration beating estimates and Observability missing expectations. Cisco repurchased 18 million shares during the quarter and raised its quarterly dividend. The company raised its revenue outlook for fiscal 2026 and expects revenue of $61.2 billion to $61.7 billion. Cisco’s guidance for the third quarter includes revenue of $15.4 billion to $15.6 billion and non-GAAP EPS of $1.02 to $1.04. While the revenue outlook is positive, concerns about higher memory prices impacting margins may be affecting the market’s reaction to the news.

Read more at CNBC: Cisco shares slide after earnings fail to wow the Street. Here’s our plan for the stock