2Q26 Financial Results January 28, 2026 DISCLAIMER Non - GAAP Financial Measures This presentation includes certain financial measures that are not presented in accordance with generally accepted accounting principles in the United States ("GAAP"), such as, among other things, Non - GAAP Gross Profit, Non - GAAP EPS, Free Cash Flow, Non - GAAP Gross Margin, Non - GAAP Operating Margin, Net Cash (Debt), Non - GAAP Operating Income (Loss), Non - GAAP Net Income (Loss), Non - GAAP Operating Expense, Gross Debt ...

Financial Data and Key Metrics Changes - The company reported a 7% revenue growth in Q1 FY 2026, totaling $822 million, with product revenue growing by 11% and services revenue growing by 4% year-over-year [19][20] - Systems revenue reached $218 million, up 37% year-over-year, driven by strong demand related to hybrid multi-cloud adoption and AI [20] - GAAP net income for the quarter was $180 million, or $3.10 per share, while non-GAAP net income was $259 million, or $4.45 per share, reflecting a 16% EPS growth from the previous year [22] Business Line Data and Key Metrics Changes - Product revenue accounted for 50% of total revenue, with systems revenue showing significant growth at 37% [19][20] - Software revenue was $192 million, down 8% year-over-year, attributed to a strong comparison from the previous year [20] - Subscription-based software revenue totaled $164 million, up 1% year-over-year, while perpetual licensed software revenue was $27 million, down year-over-year [20] Market Data and Key Metrics Changes - Revenue from the Americas grew 2% year-over-year, representing 53% of total revenue, while EMEA delivered exceptional growth of 24%, accounting for 31% of revenue [21] - APAC region saw a decline of 1%, representing 16% of total revenue [21] - Enterprise customers represented 64% of Q1's product bookings, with government customers at 23% and service providers at 13% [21] Company Strategy and Development Direction - The company is focused on three key areas: investing in security operations, enhancing product security, and supporting the broader security community [5] - The strategy emphasizes hybrid multi-cloud adoption, enterprise AI, and the need for converged platforms, which are seen as significant growth drivers [6][18] - The company aims to lead in hybrid multi-cloud solutions, leveraging its capabilities to provide complete delivery and security for applications [8][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the durability of demand driven by hybrid multi-cloud adoption and AI investments, despite uncertainties from a recent security incident [4][18] - The outlook for FY 2026 has been raised, expecting revenue growth of 5%-6%, up from a prior outlook of 0%-4% [23] - Management highlighted the importance of regulatory drivers and the acceleration of AI as catalysts for future growth [46][47] Other Important Information - The company generated $159 million in cash flow from operations in Q1, with cash and investments totaling approximately $1.22 billion at quarter end [22][23] - Deferred revenue increased to $2.1 billion, up 6% from the previous year [23] - The company repurchased $300 million worth of shares in Q1, with plans to continue share repurchases at least 50% of free cash flow for the year [23] Q&A Session Summary Question: AI adoption trends among enterprise customers - Management noted that the company is early in the AI adoption cycle, with a significant shift from training to production of AI applications, leading to increased demand for infrastructure [30][31] Question: Software and hardware performance outlook - Management acknowledged tough year-over-year comparisons for software but expressed confidence in mid-single-digit growth for the software business moving forward [41][42] Question: Impact of security incident on customer relationships - Management confirmed no evidence of customer breaches due to the security incident and reported minimal disruption in demand, with a successful response to customer needs [63][64]

Market Performance - Major U.S. stock indexes showed mixed results, with the Nasdaq and S&P 500 rising while the Dow experienced a pullback [1][2] - The Nasdaq increased by 215.74 points (0.9%) to close at 23,817.10, and the S&P 500 rose by 28.37 points (0.4%) to a record high of 6,978.60 [1] - The Dow closed down by 408.99 points (0.8%) at 49,003.41, despite recovering from its worst levels during the session [2] Company Earnings - Positive sentiment was bolstered by strong earnings reports from companies like General Motors and UPS [3] - Microsoft shares surged by 2.2%, Apple shares increased by 1.1%, and Meta shares saw slight gains ahead of their earnings announcements [2] - UnitedHealth shares fell sharply by 19.6% after reporting better-than-expected fourth-quarter earnings but disappointing revenue guidance [3] Economic Indicators - The Conference Board reported a significant drop in consumer confidence, with the index falling to 84.5 in January from a revised 94.2 in December, marking the lowest level since May 2014 [4][5] - Economists had anticipated a slight increase in the consumer confidence index to 90.0 [5] Sector Performance - Semiconductor stocks saw a notable increase, with the Philadelphia Semiconductor Index rising by 2.4% to a record closing high [6] - Computer hardware and networking stocks also contributed to the gains in the tech-heavy Nasdaq [6] - Oil service stocks advanced alongside rising crude oil prices, with the Philadelphia Oil Service Index up by 2.0% [6] - Conversely, healthcare, airline, and housing stocks faced significant selling pressure [7] International Markets - Stock markets in the Asia-Pacific region mostly rose, with Japan's Nikkei 225 Index up by 0.9%, Hong Kong's Hang Seng Index up by 1.4%, and South Korea's Kospi surging by 2.7% [8] - Most European stocks also experienced gains, with the U.K.'s FTSE 100 Index climbing by 0.6% and France's CAC 40 Index rising by 0.3%, while Germany's DAX Index dipped by 0.2% [9] Bond Market - U.S. treasuries moved modestly lower, leading to a slight increase in the yield on the benchmark ten-year note, which rose by 1.0 basis points to 4.223% [9]

Core Viewpoint - The analysis suggests it may be an appropriate time to divest from Cisco Systems (CSCO) stock, maintaining a generally negative outlook with a potential price target of $54, reflecting a balanced mix of positive and negative factors regarding operational performance and financial health [2][3]. Company Overview - Cisco Systems has a market capitalization of $305 billion and provides Internet Protocol-based networking solutions, including switching, routing, wireless technology, data centers, collaboration tools, IoT solutions, and analytics software for the communications and IT sectors [6]. Financial Performance - Cisco's revenue has grown at an average annual rate of 3.7% over the past three years, with a recent increase of 8.9% from $53 billion to $58 billion in the last year [9]. - Quarterly revenues rose by 7.5% to $15 billion in the most recent quarter compared to $14 billion a year prior [9]. - The operating income for the last year was $13 billion, representing an operating margin of 22.5%, with a cash flow margin of 23.8%, generating approximately $14 billion in operating cash flow [10]. - Cisco produced nearly $10 billion in net income, indicating a net margin of around 17.9% [10]. Debt and Financial Stability - Cisco's debt stood at $28 billion at the end of the most recent quarter, with a debt-to-equity ratio of 9.2% [11]. - The company has $16 billion in cash (including cash equivalents) out of total assets of $121 billion, resulting in a cash-to-assets ratio of 13.0% [11]. - Financial stability appears very strong, although the company has underperformed compared to the S&P 500 during multiple economic downturns [8][12]. Market Position and Valuation - Cisco's core networking business remains resilient, supported by recurring software and services revenue, but growth has been uneven due to enterprise IT spending uncertainty and increased competition in cloud networking and AI infrastructure [3]. - The stock is considered unattractive due to its elevated valuation relative to its growth profile and peers, with limited upside and asymmetric downside risk if macro conditions weaken or AI-driven networking demand does not accelerate as expected [3][7].

Core Thesis - The investment thesis for Arista Networks (NYSE: ANET) is based on the high demand for the company's expertise in building complex AI networking solutions [1] Company Insights - Arista Networks is positioned to benefit from the increasing need for advanced networking capabilities driven by AI technologies [1] Analyst Background - The author has a background in engineering and a strong interest in technology stocks, which informs the analysis of Arista Networks [1]

Cisco Stock Rises on Upgrade. It's a Big-Cap Bargain, Analyst Says. - Barron'sSkip to Main ContentThis copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com.# Cisco Stock Rises on Upgrade. It's a Big-Cap Bargain, Analyst Says.By [Nate Wolf]ShareResize---ReprintsIn this article[CSCO] ...

Core Insights - Cisco has launched the Cisco 360 Partner Program to enhance collaboration with partners and support customer needs in the evolving AI landscape [1][4] - The program aims to provide clarity and empower partners to achieve predictable profitability while facilitating customer access to the right expertise [2][5] Group 1: Program Features - The Cisco 360 Partner Program is designed for various partner business models, including developers, consultants, and managed services providers, to deliver AI-ready solutions [1][7] - New partner designations help customers identify partners with the right capabilities, including Cisco Portfolio Partners and Cisco Preferred Partners [6] - The program includes the Cisco Partner Incentive (CPI), which streamlines earnings and aligns sales strategies with Cisco's roadmap [5][8] Group 2: Partner Support and Resources - Enhanced resources such as new rebates, Partner Value Indexes, and a Development Fund are available to help partners differentiate their offerings [7][14] - The Cisco AI Assistant has been improved to assist partners in delivering value to customers more effectively [14] - The Distributor Development Fund aims to strengthen alignment and success between Cisco and its distributors, focusing on partner growth [14] Group 3: Market Positioning and Impact - Cisco's AI Readiness Index indicates that being AI-ready provides a competitive advantage, emphasizing the importance of expert partners in delivering essential infrastructure and services [4] - The program is positioned as a bridge to a new partner model that is high-touch, high-value, and outcome-based, aiming for unprecedented profitability in 2026 [14]

Following financial services major RBC Capital's projections that AI revenue for chip companies will increase to $550 billion by 2028, its peer, BNP Paribas, has come out with a note making a case for the data center networking market. Expecting the market to reach a value of about $120 billion by 2028, the firm stated, “The AI party continues [as] data center investment appears durable with lead times supporting improved visibility through '26 across the server, networking, and storage ecosystems. We are ...

Summary of Key Points from the Conference Call Industry Overview - The conference call focused on the **CPO (Co-Packaged Optics)** technology within the **technology sector**, particularly its application in networking and data centers [1] Core Insights - **CPO Penetration Forecast**: Expected to rise starting from the second half of 2027, with a projected penetration rate of **3-5% by 2026** [5] - **NPO (Next-Generation Pluggable Optics)**: Considered a transitional solution, anticipated to be deployed in **2026**, offering lower power consumption and easier production compared to CPO [5] - **Market Dynamics**: CPO switches are currently in small-scale shipment stages, with Broadcom holding a significant market share. Major bottlenecks for mass production include thermal management materials and yield rates in optoelectronic co-packaging [5] Competitive Landscape - **Broadcom vs NVIDIA**: - **NVIDIA** aims for a fully integrated CPO system using advanced technologies like **3D packaging** and **Micro-Ring Modulator (MRM)**, which enhances performance but is technically challenging [2] - **Broadcom** focuses on compatibility with various network architectures, utilizing the more established **Mach-Zehnder Modulator (MZM)** [2] Pricing and Cost Structure - CPO switches are generally **30-40% more expensive** than traditional switches and pluggable optical modules. The cost breakdown indicates that switch chips account for about **one-third** of the total cost, with optical engines at **30%**, and external lasers at **10-15%** [5] - Once mass production is achieved, costs for CPO switches could potentially be **30% lower** than traditional solutions [5] Supply Chain Insights - Major laser providers include **Lumentum**, **Coherent**, and **Broadcom**. Fiber array manufacturers include **Senko Advanced Components** and **US Conec**, while fiber cable manufacturers include **Corning** and **YOFC** [5] - A projected **20% supply gap** for EML (Electro-Absorption Modulated Laser) chips is expected in **2026**, driven by high demand for optical transceivers [6][7] Data Center Trends - In the data center switch segment, **400G switches** are expected to maintain a **50% penetration rate** in **2026**, while **800G switches** are projected to see significant growth, also approaching a **50% penetration rate** [5] - **1.6T switches** are anticipated to be shipped in small batches this year, indicating a slower adoption rate [5] Additional Considerations - The overall demand for **100G and 200G EMLs** is estimated at **500 million units** this year, while production capacity is only **400 million units**, leading to a **20% overall shortage** [7] - The long lead time for optical chip production (approximately **9 months**) suggests that supply constraints may persist for the next **2-3 years** [7]

Core Viewpoint - Arista Networks' shares experienced a significant increase of 10.4% today, attributed to investor interest following a positive mention by BNP Paribas as a top AI stock for 2026, despite no clear catalyst for the surge [1][5][7]. Group 1: Stock Movement - The stock began to rise around 8:30 a.m. ET in pre-market trading and continued to gain momentum, with trading volume exceeding its three-month average by 11:20 a.m. ET [1][3]. - The increase in stock price occurred amidst a broader rise in tech stocks, although this alone does not fully explain the substantial jump in Arista's stock [3]. Group 2: Investor Activity - There was a notable spike in trading volume, suggesting that a large investor may have made a significant purchase of Arista stock [4]. - The company did not release any press statements or SEC filings that could clarify the reason behind the stock's rise, but it did promote an upcoming event on its X account [4]. Group 3: Future Outlook - Arista Networks is positioned for continued growth, particularly due to its involvement in the AI sector and partnerships, such as with Anthropic, which recently raised $10 billion [5][7]. - The potential reasons for today's stock jump may become clearer over time, indicating that some investors are likely positioning themselves for long-term gains [5].