Cisco Shares Slide 9% Despite Strong Earnings Beat and AI Growth

Cisco Systems shares dropped 9% on August 13, 2026, even after the networking giant reported fourth-quarter revenue that beat Wall Street expectations and issued a stronger-than-expected forecast, driven by a surge in artificial intelligence infrastructure orders. According to CNBC and Barron’s reporting, the selloff was triggered by investor concerns over gross margins and a management outlook that Wall Street analysts characterized as conservative.

Fourth-Quarter Revenue and Guidance Figures

For the fiscal fourth quarter, Cisco reported revenue of $17.3 billion, marking an 18% increase year over year that surpassed analyst expectations of $16.8 billion, as outlined by Capwolf. Earnings per share reached $1.22, representing a 23% increase from the prior year, according to Tradingpedia data. For the full 2027 fiscal year, management guided total revenue to a range of $72.2 billion to $73.4 billion, with earnings per share forecast between $5.05 and $5.11, ahead of consensus projections.

Despite those metrics, the stock fell nearly 9% in market trading, holding back the Dow Jones Industrial Average while the Nasdaq climbed, according to Yahoo Finance. Before the decline, the stock had gained more than 60% for the year, leaving many investors ready to take profits.

AI Infrastructure Growth and Margin Pressures

The primary driver behind Cisco’s top-line acceleration is explosive demand for artificial intelligence data center equipment. Hyperscaler customers placed $9.3 billion in infrastructure orders during fiscal year 2026, which is 4.5 times the total from the previous year, according to Tradingpedia. Cisco expects AI-related revenue to climb from roughly $4 billion in the past fiscal year to $7.5 billion in fiscal 2027, as reported by Capwolf.

However, that growth brings a shift in product mix that weighs on profitability. The incremental AI business consists heavily of custom silicon and networking hardware sold to hyperscalers, which carries structurally lower margins than Cisco’s traditional software and services portfolio. Consequently, the company guided first-quarter fiscal 2027 gross margins to a range of 65% to 66%, disappointing investors who anticipated that AI exposure would enhance overall profitability.

We had a record year, we had a record quarter. We’re operating in incredible markets, but it’s also a time that we’re going to start the year being a little bit prudent.

Valuation and Market Reaction

Tradingpedia noted that prior to the pullback, Cisco traded at a forward price-to-earnings multiple of 28.7x with a market capitalization of $488.3 billion, screening above an estimated fair value of $99.88. Even with the correction, technical indicators such as the daily relative strength index at 63 continued to flash a Strong Buy signal, reflecting solid underlying momentum following a 1-year return of 75.97%.