Cisco Beats Expectations, But Investors Wanted More

Cisco Systems delivered a solid quarterly performance, surpassing Wall Street's predictions for both profit and sales. Yet, the company's shares fell sharply after hours, dropping roughly 7% as its immediate forecast failed to excite the market.

The networking giant reported adjusted earnings of $1.04 per share on revenue of $15.35 billion for the quarter, beating analyst estimates. Revenue grew 10% year-over-year. However, its guidance for the current period, projecting earnings between $1.02 and $1.04 per share on $15.4 to $15.6 billion in revenue, merely aligned with what analysts had already anticipated.

A key focus for investors is Cisco's position in the artificial intelligence infrastructure race. The company reported $2.1 billion in AI-related orders from large cloud providers last quarter. Its core networking segment saw a strong 21% jump in revenue. Recent moves, like a partnership with AMD on a project in Saudi Arabia and a new switch featuring an Nvidia chip, underscore its push into this area.

On a call with analysts, CEO Chuck Robbins addressed the timeline for significant revenue from newer cloud providers, noting it should begin later this fiscal year and grow more substantially in 2027. He also commented on industry-wide pressures from rising memory costs, linked to soaring demand for AI chips, confirming Cisco has implemented price increases.

For the full 2026 fiscal year, Cisco maintained its outlook, projecting revenue growth of about 8.5%. The message from the market was clear: meeting expectations is no longer enough when the promise of an AI windfall looms on the horizon.

Source: CNBC