Cisco's AI Infrastructure Push: Will the Stock Rebound?

Cisco's Q4 earnings report revealed a record revenue of $17.3B and EPS of $1.22, yet the stock fell 9.5% to $112.13 due to concerns over gross margin guidance.

The company's AI infrastructure opportunity is substantial, with orders reaching $4B in Q4 alone and a FY2026 total of $9.3B, representing a 4.5x increase from the previous year. Management guided $7.5B in AI revenue for FY2027, roughly 10% of total revenue.

Cisco is deliberately trading gross margin percentage for absolute dollars, with guidance implying further erosion. However, CFO Mark Patterson framed operating margin (~35% for FY2027) as the more meaningful metric, as lower operating expense intensity offsets gross margin headwinds.