Cisco Stock Plunges 9% Despite Beating Earnings Expectations

Cisco Systems reported its fiscal fourth quarter results on August 13, and despite beating revenue expectations by 18%, the stock plummeted 9% to $112.81.

The company saw strong growth in bookings from its AI networking business, with $9.3 billion of hyperscaler orders above the $9 billion goal, and projected revenue recognition of approximately $7.5 billion for fiscal year 2027.

However, investors punished Cisco for margin compression, with adjusted gross margin decreasing to 66.3% from 68.4%, a notable decrease. The company's guidance for fiscal year 2027 was also lower than expected, ranging from $72.2 billion to $73.4 billion, representing an estimated 15% growth.

Cisco's networking revenue grew by 28%, driven by upgrades to its AI Data Centers and enterprise campus networking, but the company faces a challenge in maintaining margins due to hardware sales having lower margins than software as a service.