Key Highlights

  • Cisco Systems shares are trading down about 9% today despite reporting fiscal fourth-quarter results that topped Wall Street estimates on both Earnings and revenue.
  • Adjusted EPS of $1.22 beat the $1.17 estimate, while Revenue of $17.3 billion beat the $16.8 billion estimate.
  • The selloff appears driven by a flat services revenue miss and contracting gross margins.
  • Management described recent hardware price hikes as a last resort amid rising memory costs.

Why Is Cisco Systems Stock Falling Today?

Cisco Systems (NASDAQ:CSCO) shares are down about 9% today despite reporting fiscal fourth-quarter results that topped Wall Street estimates on both lines, with adjusted EPS of $1.22 beating the $1.17 estimate and revenue of $17.3 billion beating the $16.8 billion estimate. AI infrastructure orders reached $9.3 billion for fiscal 2026, and the company also issued fiscal 2027 guidance of $72.2 billion to $73.4 billion in revenue, above consensus. Cisco Systems is a global leader in the communication equipment industry, designing, manufacturing, and selling IP-based networking hardware, software, and services, with a core portfolio spanning switching, enterprise routing, wireless solutions, network security, and collaboration tools including Webex.

What's Driving the Selloff Despite the Beat

The selloff appears to be driven by a flat services revenue miss and contracting gross margins, which came in at 66.3% versus 68.4% a year ago, tied to a faster hardware mix and rising memory costs. Management described recent hardware price hikes as a last resort, and some investors also appear concerned about elevated expectations after the stock's roughly 60% year-to-date rally heading into the print. Despite today's decline, numerous analysts including Morgan Stanley, Wells Fargo, UBS, KeyBanc, and BNP Paribas raised price targets following the report, citing durable AI networking Demand and a multi-year networking supercycle.

Strong Underlying Growth Metrics

Total product orders grew 35% year-over-year in the fourth quarter, with hyperscaler orders up triple digits, enterprise orders up 21%, and service provider and cloud orders up 95%. Networking product orders grew 40% in the quarter, marking an eighth consecutive quarter of double-digit growth, while security orders, including Splunk, grew double digits and collaboration had its best quarterly performance in seven years. The company also returned $12.7 billion to shareholders in fiscal 2026 through dividends and buybacks, representing 99% of free cash flow, and increased its Dividend for the 15th consecutive year.

Conclusion

Cisco Systems shares are falling today even after the company delivered a fiscal fourth-quarter beat and issued above-consensus fiscal 2027 guidance, as investors appear to be focused on Margin compression and a services revenue miss rather than the strong order growth and AI infrastructure demand underlying the results. With several analysts raising price targets despite the pullback, the market's reaction suggests valuation concerns following the stock's steep year-to-date rally may be playing a larger role than the underlying fundamentals.