CSCO · 10-Q · 2026Q2 · Full report

Gross Margin Drivers

CISCO SYSTEMS, INC. · 2026-05-19 · Importance 31 · Surprise 32

Third-quarter gross margin declined 2.0 percentage points to 63.6%, while nine-month gross margin declined 0.8 percentage points to 64.7%. Quarterly product gross margin fell 2.5 percentage points to 61.9%, primarily because higher Networking revenue adversely affected product mix and higher memory costs reduced productivity benefits. Nine-month product gross margin fell 1.0 percentage point to 63.4%, driven by product mix and pricing, partly offset by productivity improvements and lower purchased-intangible amortization. Services gross margin increased 0.5 percentage points quarterly and 0.1 percentage point for nine months because of cost efficiencies.

Key facts

• Total gross margin for the three months ended April 25, 2026 was $10,080 million at 63.6% compared with $9,278 million at 65.6% in the prior year period. source
• Product gross margin amount for the three months ended April 25, 2026 was $7,504 million at 61.9% compared with $6,686 million at 64.4% in the prior year period. source
• Services gross margin amount for the three months ended April 25, 2026 was $2,576 million at 69.2% compared with $2,592 million at 68.7% in the prior year period. source
• Product gross margin decreased by 2.5 percentage points in the third quarter of fiscal 2026, primarily driven by negative impacts from product mix and higher memory costs. source
• Total gross margin decreased 0.8 percentage points for the nine months ended April 25, 2026, primarily due to negative impacts from product mix and to a lesser extent pricing. source
• Product gross margin percentage drivers for the three months ended April 25, 2026 included productivity benefit of 1.2 percentage points and mix of products sold negative 4.4 percentage points. source
• Product gross margin decreased by 2.5 percentage points for the three months ended April 25, 2026 primarily due to negative impacts from product mix and pricing, partially offset by productivity improvements, with productivity adversely impacted by higher memory costs. source
• Total gross margin decreased by 2.0 percentage points in the third quarter of fiscal 2026. source