Cisco Posts Record Q1 Revenue Up 24% and Raises AI Forecast to $9 Billion But Stock Falls 5% on Margin Pressure

Cisco Systems reported record first-quarter revenue of $18.52 billion for the period ended October 24, 2026, a 24.4% increase from $14.88 billion a year earlier, the company's fastest revenue growth in more than 15 years. Adjusted earnings per share rose roughly 40% year over year to $1.40, and adjusted operating margin reached a record near 38%, beating consensus estimates across the board.

Despite the strong results, Cisco shares fell between 4% and 5% on Friday, dragging the Dow Jones Industrial Average down nearly 150 points. The selloff centered on two concerns: product order growth that came in below investor expectations, and gross margin compression tied to a heavier mix of AI hyperscaler hardware sales and elevated memory costs. Those dynamics are expected to persist over the next several quarters as AI-driven infrastructure revenue grows as a share of the total.

Cisco raised its fiscal year 2027 hyperscaler AI revenue target to $9 billion and guided for full-year revenue growth of approximately 19% and adjusted EPS growth of approximately 27%. Second-quarter guidance implies revenue growth of about 18%, pointing to some moderation from the first quarter's pace. Citi, which holds a Buy rating with a $139 price target, flagged that growth may have peaked, while BofA and JPMorgan each maintained Buy ratings with $150 price targets. Wells Fargo, Rosenblatt, Piper Sandler, and Truist all cut their price targets, citing order growth concerns, valuation, or market compression, while KeyBanc reiterated its Overweight rating.

CEO Chuck Robbins told CNBC that every employee inside the company now has a personal AI agent, describing productivity gains that allow Cisco to generate more revenue with a smaller workforce. On the question of AI data center construction facing political headwinds, Robbins said the buildout will continue because it is "too important to our country." He also said Cisco would continue trusting Nvidia chips following Jensen Huang's departure, responding "absolutely" when asked directly.