Why Is Cisco Stock Falling Today Despite Higher Quarterly Revenue and Earnings?

Cisco Systems (NASDAQ:CSCO) shares declined nearly 2% in US premarket trading on Friday, November 13, as investors assessed narrowing profit margins and valuation considerations following the networking equipment company’s fiscal first-quarter results.

Cisco reported revenue and adjusted earnings above analysts’ expectations for the quarter ended in fiscal 2027, while also raising its full-year financial guidance and increasing its artificial intelligence infrastructure revenue target.

However, the results revealed a decline in gross profit margins, reflecting changes in the company’s product mix and higher component costs. The share price movement also followed a period of gains ahead of the earnings announcement.

What Did Cisco Report in Its First-Quarter Results?

Cisco reported fiscal first-quarter 2027 revenue of $18.52 billion, representing a 24% increase from the corresponding period a year earlier.

The growth rate was the company’s highest in more than 15 years, while revenue reached a quarterly record.

Non-GAAP earnings per share increased 40% year over year to $1.40.

Both revenue and adjusted earnings exceeded Wall Street consensus estimates, reflecting increased demand for Cisco’s networking products and infrastructure.

Chief Executive Chuck Robbins described the results as evidence that Cisco was in “the early stages of a multiyear, multibillion-dollar networking super cycle.”

The company attributed part of its revenue growth to demand for networking infrastructure supporting artificial intelligence workloads and data centre development.

Despite the increases in revenue and earnings, investors also examined the company’s profitability measures and the potential effect of its product mix on future margins.

Why Are Cisco’s Profit Margins Attracting Investor Attention?

Cisco reported a non-GAAP gross margin of 65.6% for the quarter, compared with 68.1% a year earlier, representing a decline of 250 basis points.

The reduction was more pronounced in the company’s product business, where gross margin fell 350 basis points to 63.7%.

The company identified an increased proportion of lower-margin artificial intelligence networking hardware and higher memory component costs as factors affecting profitability.

The shift in product mix means that revenue growth from AI infrastructure equipment is accompanied by different margin characteristics from those of some of Cisco’s other products and services.

Chief Financial Officer Mark Patterson indicated that Cisco expects its full-year adjusted gross margin to remain slightly below 65%, reflecting continued demand for hardware products.

The margin outlook has consequently become an important consideration for investors assessing the relationship between revenue growth and profitability.

Has Cisco Raised Its Financial Guidance for Fiscal 2027?

Cisco increased its revenue guidance for fiscal 2027 to between $74.8 billion and $75.8 billion.

The company also raised its full-year non-GAAP earnings per share forecast to a range of $5.47 to $5.53.

Both revised forecasts were above the company’s previous expectations.

Cisco additionally doubled its fiscal 2027 revenue target for artificial intelligence infrastructure to $9 billion.

The updated target reflects the company’s expectations for demand from customers investing in AI computing and networking capacity.

The increased guidance indicates that Cisco anticipates continued revenue growth during the fiscal year, although its gross margin projections suggest that product costs and sales mix will remain relevant to overall profitability.

What Did Morgan Stanley Say About Cisco’s Valuation?

Cisco’s share price movement also followed a research update issued by Morgan Stanley on November 5.

Analyst Meta Marshall downgraded the stock to Equal-Weight from Overweight and reduced the firm’s price target to $120 from $135.

The analyst indicated that expectations surrounding Cisco’s artificial intelligence business had already been substantially reflected in its share price.

Marshall also identified a potential risk that customers could accelerate purchases ahead of Cisco’s planned price increases, bringing forward demand that might otherwise have occurred in later periods.

Such purchasing patterns could affect comparisons of revenue growth between quarters if customer orders subsequently moderate.

The research update preceded Cisco’s earnings announcement but remained relevant to investor assessments of the company’s valuation and future growth expectations.

Did Cisco’s Earlier Share Price Gains Influence the Reaction?

Cisco shares had gained approximately 35% since the beginning of 2026 before the quarterly results were released.

The stock had also advanced in the days leading up to the announcement, reflecting expectations for the company’s financial performance and artificial intelligence infrastructure business.

The subsequent premarket decline occurred despite revenue and earnings exceeding consensus forecasts.

The broader US equity market provided limited support on Friday, with the Nasdaq Composite declining approximately 0.2%, while the S&P 500 and Dow Jones Industrial Average were little changed.

Cisco’s share price movement therefore coincided with both company-specific developments and a relatively subdued market environment.

What Are Investors Watching Next for Cisco?

Investors are expected to monitor Cisco’s ability to maintain revenue growth while managing the effect of higher component costs and changes in its product mix.

The company’s full-year gross margin outlook, revised earnings guidance and $9 billion AI infrastructure revenue target will provide benchmarks for evaluating its performance during the remaining quarters of fiscal 2027.

Attention will also remain on whether demand for networking equipment continues at the levels anticipated by management and how planned price increases affect customer purchasing patterns.

Cisco’s latest results showed increases in revenue and adjusted earnings, while the premarket share price decline reflected investor attention to profitability, valuation and the timing of future demand.

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