Cisco Systems, Inc.

(NASDAQ Global Select)
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Somewhat Bullish +45

Why Is Cisco Stock Falling Today Despite Higher Quarterly Revenue and Earnings?

AI infrastructure Analyst downgrade Earnings report AI-generated analysis

πŸ“‰ Cisco shares fell nearly 2% in premarket trading on November 13 despite beating revenue and earnings estimates.

πŸ’° Fiscal Q1 2027 revenue reached a record $18.52 billion, marking a 24% year-over-year increase.

πŸ“ˆ Adjusted earnings per share surged 40% to $1.40, surpassing Wall Street consensus.

πŸ€– Cisco doubled its fiscal 2027 AI infrastructure revenue target to $9 billion reflecting strong demand.

πŸ“‰ Non-GAAP gross margins declined 250 basis points year-over-year to 65.6% due to product mix shifts.

🏭 Product business gross margins fell 350 basis points to 63.7% driven by lower-margin AI hardware sales.

πŸ’Έ Higher memory component costs and a shift toward AI infrastructure are compressing overall profitability.

πŸ“ˆ CFO Mark Patterson expects full-year adjusted gross margin to remain slightly below 65%.

πŸ” Cisco raised its full-year revenue guidance to between $74.8 billion and $75.8 billion for fiscal 2027.

πŸ“‰ Morgan Stanley downgraded CSCO to Equal-Weight with a price target cut from $135 to $120.

⚠️ Analysts warn that customers may accelerate purchases ahead of planned price increases, affecting future revenue comparisons.

πŸ“ˆ CEO Chuck Robbins describes the current environment as the early stages of a multiyear networking super cycle.

πŸ“‰ Stock had gained approximately 35% since the beginning of 2026 prior to this earnings release.

πŸ›οΈ The broader market provided limited support with the Nasdaq Composite declining 0.2% on Friday.

πŸ” Investors are assessing whether Cisco can maintain revenue growth while managing margin pressures.

Bullish Signals
  • Cisco reported fiscal Q1 2027 revenue of $18.52 billion, a record high representing a 24% year-over-year increase.
  • Adjusted earnings per share increased 40% year over year to $1.40, exceeding analyst expectations.
  • The company raised its full-year revenue guidance to between $74.8 billion and $75.8 billion for fiscal 2027.
  • Cisco doubled its fiscal 2027 artificial intelligence infrastructure revenue target to $9 billion.
  • Non-GAAP earnings per share forecast was raised to a range of $5.47 to $5.53 for the full year.
  • CEO Chuck Robbins stated that results indicate Cisco is in the early stages of a multiyear, multibillion-dollar networking super cycle.
Risk Factors
  • Shares declined nearly 2% in premarket trading despite beating earnings estimates due to margin concerns.
  • Non-GAAP gross margins fell 250 basis points year-over-year to 65.6%, with the product business dropping 350 basis points.
  • Profitability is being impacted by a shift toward lower-margin AI networking hardware and higher component costs.
  • Morgan Stanley downgraded the stock to Equal-Weight and reduced the price target from $135 to $120.
  • Analysts warn that customers accelerating purchases ahead of price increases could distort future revenue growth comparisons.
Full Analysis
Cisco Systems (NASDAQ:CSCO) shares declined nearly 2% in US premarket trading on Friday, November 13, despite reporting fiscal first-quarter 2027 revenue of $18.52 billion and adjusted earnings per share of $1.40, both exceeding analyst expectations. The networking equipment giant also raised its full-year financial guidance and doubled its artificial intelligence infrastructure revenue target to $9 billion, signaling strong demand for AI-related products. However, the stock price drop was driven by narrowing profit margins and valuation concerns following a period of significant gains. Non-GAAP gross margins fell 250 basis points year-over-year to 65.6%, with the product business specifically seeing a decline of 350 basis points to 63.7%. Management attributes this reduction to a shift toward lower-margin AI networking hardware and higher component costs. Chief Executive Chuck Robbins characterized the results as evidence that Cisco is in the early stages of a multiyear, multibillion-dollar networking super cycle. Despite the margin compression, the company increased its full-year adjusted gross margin outlook to remain slightly below 65% and raised its non-GAAP earnings per share forecast to between $5.47 and $5.53 for fiscal 2027. Investors are closely monitoring the relationship between revenue growth and profitability as the company navigates a changing product mix. Additionally, a recent downgrade by Morgan Stanley analyst Meta Marshall, who cited that AI business expectations were already priced in, contributed to the negative sentiment surrounding the stock despite the solid financial performance.