Cisco Shares Tumble 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 estimate, capping a record $63 billion full fiscal year. Non-GAAP earnings per share came in at $1.22, up 23% year-over-year and ahead of the $1.17 consensus. Despite the beat and a raise, shares slid roughly 9% on Thursday, dragging the Dow Jones Industrial Average down nearly 150 points and costing the index approximately 68 points tied specifically to rising memory chip costs that compressed gross margins.

Networking, Collaboration, and Security segments all posted double-digit year-over-year growth, with EMEA and Americas leading regional gains. The central concern for investors was margin compression driven by a hardware-heavy mix as AI infrastructure orders accelerate, a dynamic Morgan Stanley flagged as likely to persist into fiscal 2027. CEO Chuck Robbins, describing an AI 'supercycle,' set a target of $7.5 billion in AI infrastructure revenues for fiscal 2027 and said price hikes remain 'a last resort.' Robbins also said Cisco is winning customers from rivals, citing a 1,000-switch deal at a major U.S. bank, and argued that on-premise AI infrastructure will drive the next enterprise AI wave.

Five or more Wall Street firms, including KeyBanc, Truist, UBS, Morgan Stanley, and Rosenblatt, raised their price targets on the results, and Piper Sandler described Cisco's guidance as 'conservative given the current demand environment.' Evercore ISI reiterated its rating on AI revenue outlook. The stock's decline stood in contrast to gains in Dell and HP, which both rose premarket, underscoring how investors are differentiating within hardware on margin exposure.