Cisco stock fell 9% on Thursday despite beating quarterly earnings and revenue estimates, as investors grew concerned about the company’s margin outlook and questioned whether the AI infrastructure boom had already priced into shares. The networking giant reported fourth-quarter revenue of $17.3 billion, up 18% year-over-year and ahead of the $16.8 billion analyst estimate, along with adjusted earnings of $1.22 per share versus the expected $1.17.
The stock decline reflected a familiar pattern in the 2026 earnings season: even a strong beat can disappoint if guidance disappoints or if the market has already factored in positive expectations. Cisco’s stock had surged more than 60% this year on optimism about artificial intelligence infrastructure demand, leaving little room for upside surprise.
Analysts at Piper Sandler noted in a report after the announcement that while Cisco showed solid quarterly numbers, the company’s guidance “looks conservative given the current demand environment.” Investors worried that management was being overly cautious, raising questions about whether peak growth had already arrived. Jake Behan, head of capital markets at Direxion, told Reuters that “Cisco delivered strong results, but the company entered earnings with a lot of optimism already priced into the shares. The market appears to be treating this as confirmation of the AI infrastructure story rather than a new catalyst.”
Cisco did provide strong forward guidance, forecasting fiscal 2027 revenue between $72.2 billion and $73.4 billion, above the average analyst estimate of $68.69 billion. The company also signaled robust AI demand, reporting $9.3 billion in AI infrastructure orders from hyperscalers in fiscal 2026, roughly 4.5 times the prior year total. In the fourth quarter alone, hyperscalers placed $4 billion of infrastructure orders.
However, margin concerns weighed on the stock. For the first quarter of fiscal 2027, Cisco guided to an adjusted gross margin of 65% to 66%, slightly below market estimates of 66.10%. Joe Tigay, portfolio manager of the Rational Equity Armor Fund, noted that “even as revenue and earnings increase, margins are tight as Cisco deals with a more hardware-intensive product mix and elevated component costs.”
Cisco CEO Chuck Robbins defended the company’s cautious stance during a Thursday morning interview on CNBC, saying the company had issued guidance better than analysts expected. “Why are you being so conservative,” he said analysts asked. “We’re starting a new fiscal year. We’re operating in incredible markets. But it’s also a time that we’re going to start the year being a little bit prudent.”
The sell-off underscores a broader trend in tech earnings this season, where companies that beat estimates face stock declines if their forward guidance misses expectations or appears too conservative relative to market sentiment. SanDisk stock fell despite beating Q4 earnings, and Circle stock dropped after a Q2 earnings beat, both cases where guidance or other factors overshadowed the headline beat.
Despite the sharp decline, analysts at KeyBanc Capital Markets remained bullish on Cisco’s prospects, with a buy-equivalent rating. They wrote that the company will likely see market share gains as hyperscalers increase capital expenditures for AI infrastructure. Cisco expects hyperscaler revenue to nearly double to $7.5 billion in fiscal 2027, up from approximately $4 billion in fiscal 2026.
Sources
- CNBC — Cisco shares slide 9% despite earnings beat and guidance; CEO Chuck Robbins interview on Q4 results and forward guidance.
- Reuters — Cisco forecast fiscal 2027 revenue above estimates; analyst commentary from Jake Behan on market expectations and margin concerns from Joe Tigay.
- Cisco Investor Relations — Q4 FY2026 earnings report with revenue, EPS, AI orders, and FY2027 guidance.
- MarketBeat — Cisco Q4 2026 earnings data: EPS beat of $1.22 vs. $1.17 expected, revenue beat of $17.25 billion vs. $16.82 billion expected.
