Cisco Drops 7% on Gross Margin Fears: Five Firms Raise Cisco Price Target Anyway

3 days ago 10

David Moadel

Thu, August 13, 2026 astatine 9:31 AM CDT 5 min read

Quick Read

CSCO tumbled 7% connected gross borderline compression to 66.3%, overshadowing a beardown Q4 EPS bushed and 18% gross growth.
Rosenblatt raised its people to $165 and Wells Fargo to $150, portion ANET slipped conscionable 0.7%, flagging a Cisco-specific borderline repricing.
Cisco's $9.3 cardinal successful FY2026 AI infrastructure orders and $7.5 cardinal projected for FY2027 anchor the bull lawsuit contempt near-term borderline compression.
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Shares of Cisco Systems (NASDAQ:CSCO) are down 7% to $115 Thursday greeting aft the company's fiscal Q4 2026 results delivered a bushed and raise. The absorption has flipped astir wholly to gross borderline compression tied to AI hardware mix, and the determination partially unwinds a 63% twelvemonth to day (YTD) tally heading into the print.

Cisco banal closed astatine $123.88 Wednesday. Non-GAAP EPS came successful astatine $1.22 against $1.17 consensus, portion gross reached $17.3 cardinal (up 18% twelvemonth implicit year).

Meanwhile, Cisco's AI infrastructure orders totaled $4 cardinal successful the 4th and $9.3 cardinal for fiscal 2026.

Margin Compression Steals the Show

Cisco's non-GAAP full gross borderline fell to 66.3% from 68.4% a twelvemonth earlier, and merchandise non-GAAP gross borderline dropped to 64.8% from 67.5%. Management guided Q1 FY2027 gross borderline to 65% to 66%, signaling continued compression arsenic lower-margin AI hardware scales into the mix.

Inventories climbed to $5.69 cardinal from $3.16 billion, portion afloat twelvemonth operating currency travel was level astatine $14.2 billion. Services gross was the softer line, level YoY astatine $3.79 cardinal versus $3.81 cardinal consensus.

Guidance inactive came successful supra the Street's statement call. Cisco projected Q1 FY2027 gross of $18 cardinal to $18.2 cardinal versus $16.83 cardinal consensus, and adjusted EPS of $1.32 to $1.34.

Full-year FY2027 guidance calls for $72.2 cardinal to $73.4 cardinal successful gross and $5.05 to $5.11 successful adjusted EPS, including $7.5 cardinal of AI infrastructure revenue.

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Cisco Systems CFO Mark Patterson declared, "In (the 4th quarter), we delivered grounds revenue, non-GAAP operating income and EPS, each exceeding the precocious extremity of our guidance ranges and demonstrating beardown fiscal subject and operating leverage." He besides noted that Cisco delivered its "highest productivity metrics successful 30 years" successful fiscal 2026.

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