Cisco Stocks Fall 5.29% as AI Networking Mix Squeezes Gross Margins

What happened

Cisco shares fell 5.29% to $96.62 after its fiscal first-quarter results showed revenue up 24% to a record $18.5 billion and non-GAAP earnings per share up 40% to $1.40. Gross margins declined, while Cisco forecast $9 billion in hyperscaler AI infrastructure revenue for fiscal 2027.

Confirmed

Global impact / market context

Faster sales growth is not translating fully into profit per sale: Cisco linked lower gross margins to a greater share of AI networking hardware and higher memory costs. If that mix persists, costs could absorb more revenue even as AI-related demand lifts sales.

Analyst inference

Cisco’s second-quarter outlook combines revenue of $18.0 billion to $18.2 billion with gross margin guidance of 65% to 66%, below the first quarter’s 65.6% only at the lower end. Investors must weigh continued growth against pressure on profit per sale and the expected sequential revenue dip.

Analyst inference

What to watch

1. Compare second-quarter revenue with the $18.0 billion to $18.2 billion forecast; delivery near the lower end would reinforce concern about a sequential slowdown. Analyst inference
2. Check whether gross margin lands within the guided 65% to 66% range, as this indicates how strongly AI hardware mix and memory costs weigh on profit per sale. Analyst inference
3. Track progress toward Cisco’s forecast of $9 billion in hyperscaler AI infrastructure revenue for fiscal 2027, which is expected to more than double fiscal 2026. Confirmed

Evidence

• gurufocus.com