Cisco Systems, Inc.

(NASDAQ Global Select)
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Slightly Bullish +25

Cisco Systems stock faces Morgan Stanley caution before earnings

AI infrastructure Analyst downgrade AI-generated analysis

πŸ“‰ Morgan Stanley downgraded Cisco Systems from Overweight to Equal-weight and cut its price target from $135 to $120 ahead of earnings.

πŸ€– Analysts expect Cisco's AI revenue to reach $9 billion in fiscal 2027, surpassing the company's current guidance of $7.5 billion.

⚠️ The brokerage warns that a higher sales mix with hyperscale cloud customers will likely limit gross margin expansion compared to traditional business segments.

πŸ“… Cisco is scheduled to report fiscal first-quarter results after market close on Thursday, November 12.

πŸ“Š Management guidance calls for revenue between $18.0 billion and $18.2 billion with adjusted EPS of $1.32 to $1.34.

πŸ”„ Morgan Stanley estimates higher revenue of $18.3-$18.4 billion and EPS of $1.36-$1.38 for the upcoming quarter.

⏳ The bank flags a risk that customers may have pulled forward orders ahead of price increases, potentially distorting near-term results.

πŸ“ˆ Cisco finished fiscal 2026 with revenue of $63.3 billion and annual AI infrastructure orders totaling $9.3 billion.

Bullish Signals
  • Morgan Stanley expects Cisco's AI revenue to reach $9 billion in fiscal 2027, which is significantly above the company's current target of $7.5 billion.
  • The brokerage forecasts total fiscal 2027 revenue of approximately $73.25 billion with earnings per share rising 18% to $5.14.
  • Cisco finished fiscal 2026 with revenue growth of 12% to $63.3 billion, demonstrating resilient top-line performance.
  • The company reported annual AI infrastructure orders reaching $9.3 billion, indicating strong demand for its networking solutions.
Risk Factors
  • Morgan Stanley downgraded Cisco from Overweight to Equal-weight and cut its price target from $135 to $120 due to a more balanced risk-reward view.
  • A higher share of hardware sold to hyperscale cloud customers carries lower gross margins, which could limit the pace of profit expansion despite sales growth.
  • There is a risk that customers brought orders forward ahead of planned price increases, which could strengthen near-term results but make subsequent comparisons more demanding.
  • The scope for Cisco to exceed already-high expectations has narrowed as checks remain solid but margins face pressure.
Full Analysis
Cisco Systems is set to report its fiscal first-quarter results after the US market close on Thursday, November 12. Prior to the earnings release, Morgan Stanley downgraded Cisco from an Overweight to an Equal-weight rating and lowered its price target from $135 to $120. The bank maintains a positive long-term outlook for AI infrastructure demand but expresses caution regarding near-term profitability pressures. Morgan Stanley anticipates that a shift in sales mix toward hyperscale cloud customers will exert downward pressure on gross margins, as these hardware deals typically carry lower margins than Cisco's traditional business model. Additionally, the analyst firm notes potential 'pull-forward' effects where customers may have accelerated orders ahead of planned price increases, which could inflate near-term revenue but complicate future sequential comparisons. Despite the rating cut, Morgan Stanley expects Cisco's AI revenue to reach $9 billion in fiscal 2027 and $12 billion in fiscal 2028, exceeding the company's current guidance. The brokerage forecasts total fiscal 2027 revenue of approximately $73.25 billion with earnings per share rising 18% to $5.14. Investors will closely monitor whether Cisco can meet management's guidance for revenue between $18.0 and $18.2 billion while maintaining gross margins around 66%. Management currently projects adjusted earnings per share of $1.32 to $1.34 for the quarter, whereas Morgan Stanley estimates slightly higher figures of $1.36 to $1.38. The upcoming report will be critical in determining if strong networking orders are successfully translating into profitable growth and validating the company's AI infrastructure outlook against the backdrop of margin headwinds.