Earnings beat across the board, and guidance was raised—yet the stock fell 6.2% the next day. What is the market really worried about in Cisco’s earnings report?
Cisco ($CSCO ) reported its fiscal Q1 2027 results after market close on Thursday: revenue of $18.52 billion, up 24% year over year and a quarterly record; and adjusted earnings per share of $1.40, up 40% year over year. Both topped expectations. Management also raised its full-year guidance: fiscal 2027 revenue of $74.8 billion to $75.8 billion and adjusted EPS of $5.47 to $5.53. Its revenue guidance for AI infrastructure sales to hyperscalers rose from $7.5 billion to $9 billion, and the CEO said the industry is in the early stages of a “networking supercycle.”
But the market wasn’t buying it at Friday’s open: the stock closed at $95.64, down 6.24%, wiping out about $27 billion in market value in a day. It’s now down roughly 27% from its 52-week high of $130 in June.
Why can’t the stock gain traction? The earnings report actually had two sore spots: first, next-quarter guidance came in below the latest quarter’s results. Q2 revenue is forecast at $18 billion to $18.2 billion, with EPS of $1.34 to $1.36—both below Q1’s $18.52 billion and $1.40. Second, memory costs are squeezing hardware margins, with product gross margin narrowing to 63.7%. Add in the broader sell-off in AI hardware stocks on Friday—AMD fell 8.8% that day—and it’s hard to separate how much of Cisco’s 6% drop was company-specific and how much was sector sentiment.
Our take: This earnings report is like a mirror. Demand for AI infrastructure is real—you can’t fake 43% year-over-year growth in networking revenue to $11.1 billion. But the market is now looking beyond “how much did you sell?” to “how much did you earn, and can you do even better next quarter?” When guidance softens and margins weaken, even a strong quarter gets marked down. Cisco is still up about 24% year to date, so this pullback looks more like a correction to high expectations than a rejection of AI demand. Keep an eye on two things next: whether Q2 margins hold steady, and how quickly the $9 billion in hyperscaler orders converts into revenue. Those will matter more for where the stock goes than the headline numbers on earnings day.
Cisco ($CSCO ) reported its fiscal Q1 2027 results after market close on Thursday: revenue of $18.52 billion, up 24% year over year and a quarterly record; and adjusted earnings per share of $1.40, up 40% year over year. Both topped expectations. Management also raised its full-year guidance: fiscal 2027 revenue of $74.8 billion to $75.8 billion and adjusted EPS of $5.47 to $5.53. Its revenue guidance for AI infrastructure sales to hyperscalers rose from $7.5 billion to $9 billion, and the CEO said the industry is in the early stages of a “networking supercycle.”
But the market wasn’t buying it at Friday’s open: the stock closed at $95.64, down 6.24%, wiping out about $27 billion in market value in a day. It’s now down roughly 27% from its 52-week high of $130 in June.
Why can’t the stock gain traction? The earnings report actually had two sore spots: first, next-quarter guidance came in below the latest quarter’s results. Q2 revenue is forecast at $18 billion to $18.2 billion, with EPS of $1.34 to $1.36—both below Q1’s $18.52 billion and $1.40. Second, memory costs are squeezing hardware margins, with product gross margin narrowing to 63.7%. Add in the broader sell-off in AI hardware stocks on Friday—AMD fell 8.8% that day—and it’s hard to separate how much of Cisco’s 6% drop was company-specific and how much was sector sentiment.
Our take: This earnings report is like a mirror. Demand for AI infrastructure is real—you can’t fake 43% year-over-year growth in networking revenue to $11.1 billion. But the market is now looking beyond “how much did you sell?” to “how much did you earn, and can you do even better next quarter?” When guidance softens and margins weaken, even a strong quarter gets marked down. Cisco is still up about 24% year to date, so this pullback looks more like a correction to high expectations than a rejection of AI demand. Keep an eye on two things next: whether Q2 margins hold steady, and how quickly the $9 billion in hyperscaler orders converts into revenue. Those will matter more for where the stock goes than the headline numbers on earnings day.
