HSBC Downgrades Cisco Stock Amid Slowing Growth Prospects

Cisco Systems stock dropped by 2% on Friday after HSBC downgraded it from Buy to Hold, citing decelerating revenue growth and a lack of near-term catalysts. The company's Q4 results were strong, with non-GAAP operating profit up 6% above consensus and non-GAAP earnings per share reaching $1.22, a 23.2% year-over-year increase.

HSBC analyst Abhishek Shukla pointed to the deceleration of growth starting in Q2 of fiscal 2027 as the reason for the downgrade. The company's hyperscaler AI subsegment is expected to grow 24.2% in fiscal 2027, but will slow to 12% in fiscal 2028 and just 8% in fiscal 2029.

Cisco's AI business has been a major growth driver, with the company booking $9.3 billion in hyperscaler orders during fiscal 2026. However, HSBC sees EPS growth peaking at 32% in Q1 before easing toward roughly 8% starting in fiscal 2028.