Cisco Stock Tumbles Amid Shift to Hyperscaler-Driven Growth

Cisco Systems (CSCO) shares have been on a downward trend lately, trading near $109, about 16% below its 52-week high. The decline is part of a broader market correction, but Cisco's stock has historically shown resilience in times of economic stress.

In its latest fiscal year, Cisco reported record revenue of $63.3 billion and guided revenue above $72 billion for the next fiscal year, exceeding Wall Street expectations. However, the company experienced a decline in non-GAAP gross margin by 210 basis points year over year due to increased orders from hyperscalers, which come with minimal operating expense.

The shift towards hyperscaler AI infrastructure is driving Cisco's growth, accounting for approximately $2.9 billion of the $6.7 billion increase in revenue over the trailing twelve months. The core business is still growing around 10%, but at a slower rate than the hyperscaler-driven segment.