Cisco Stock Plunges Amid Margin Pressure Despite Record Revenue

Cisco Systems (CSCO) stock took a hit on August 13th despite delivering record revenue and AI demand. The global networking hardware and security provider closed at $113.47, down 8.40% from its previous close. Trading volume reached 61.1 million shares, more than double the three-month average of 25.7 million shares.

The decline in stock price came despite Cisco's better-than-expected fiscal fourth-quarter results and guidance. However, investors are focusing on margin pressure, with the company's total (non-GAAP) gross margin dropping to 66.3% from last year's 68.4%. The decrease was partly attributed to increased costs for components used in AI hardware, such as memory.

Analysts noted that while the decline in gross margin is a concern, operating margins are expected to expand in fiscal 2027, potentially leading to profits growing faster than revenue. This could make today's plunge a good opportunity to consider investing in Cisco stock.