Cisco Shares Slide 9% Despite Record Q4 Revenue and Raised AI Outlook as Margin Fears Dominate

Cisco Systems reported fiscal fourth-quarter 2026 revenue of $17.3 billion, up 18% year over year and above the $16.82 billion analyst consensus, while non-GAAP earnings per share of $1.22 rose 23% year over year and beat the $1.17 estimate. Full-year revenue hit a record $63 billion. CEO Chuck Robbins said all areas of the business have tailwinds and set a target of $7.5 billion in AI infrastructure revenues for fiscal 2027, up from the current pace, citing an AI networking supercycle driven by hyperscaler demand.

The company also claimed market share gains, including a 1,000-switch win at a major U.S. bank. Despite the beat-and-raise quarter, shares fell roughly 9% on Thursday, dragging the Dow Jones Industrial Average down nearly 150 points and costing the index about 68 points on its own. The selloff centered on gross margin compression: hardware-heavy AI infrastructure orders and rising memory chip costs are squeezing profitability, and Morgan Stanley warned that margin pressure could persist into fiscal 2027 as the product mix shifts faster toward hardware.

Networking, Collaboration, and Security segments each posted double-digit year-over-year growth, with EMEA and Americas leading regionally. Robbins called price hikes a last resort. At least five Wall Street firms, including KeyBanc, Truist, UBS, Morgan Stanley, and Rosenblatt, raised their price targets on Cisco following the results.

Piper Sandler described Cisco's guidance as conservative given the current demand environment, suggesting the selloff reflected elevated investor expectations rather than fundamental disappointment.