Cisco's Stock Plummets Despite Strong Earnings Report
By John Nada·Feb 12, 2026·5 min read
Cisco's stock fell 7% despite beating earnings estimates, as lower guidance disappointed investors amid a strong push into AI infrastructure.
Cisco's stock dropped about 7% in extended trading after the company announced its quarterly results, which, while beating earnings and revenue estimates, failed to impress investors with its forecast. The earnings per share came in at $1.04 adjusted, exceeding the expected $1.02, while revenue reached $15.35 billion, surpassing the $15.12 billion forecasted by analysts.
Despite a 10% year-over-year revenue growth from $14 billion, the company’s guidance for the current period only met estimates, leading to investor disappointment. Cisco's net income rose to $3.18 billion from $2.43 billion in the same period last year, but the lower-than-expected earnings guidance for the next quarter dampened market enthusiasm.
Investors have been keenly watching Cisco for its potential role in the artificial intelligence boom. The company reported $2.1 billion in AI infrastructure orders during the quarter, indicating a shift towards this high-growth area. Cisco's core networking revenue surged by 21%, reaching $8.3 billion, exceeding the $7.9 billion analysts anticipated. However, CEO Chuck Robbins noted that expectations for substantial impact in the current fiscal year remain low, suggesting that growth from newer cloud providers, termed neoclouds, won't be significant until later.
The rising costs associated with memory due to high demand for Nvidia graphics processing units are impacting Cisco and prompting the company to adjust pricing strategies. Robbins commented on potential preemptive buying from customers, yet he downplayed its significance in their networking business. For the full fiscal year, Cisco is targeting adjusted earnings per share between $4.13 and $4.17, with revenue expectations of $61.2 billion to $61.7 billion, showcasing an expected growth of 8.5%.
This mixed performance raises questions about the broader implications for the tech sector and investor sentiment towards companies involved in AI and networking technologies. The market's reaction signals a cautious approach as Cisco navigates the transition towards AI-driven solutions while managing cost pressures in its operations. Investors will be closely monitoring how these dynamics unfold in the coming quarters, particularly as demand for AI infrastructure continues to grow in the tech landscape.
Cisco CEO Chuck Robbins appeared at the World Economic Forum in Davos, Switzerland, emphasizing the company's strategic vision and its commitment to innovation. Robbins' comments during the conference underscored the significance of AI and how it ties into Cisco's future growth strategy. He acknowledged that while the company is making strides in AI infrastructure, the immediate impacts of these advancements may not be fully realized in the current fiscal year.
During the earnings call, Robbins indicated that Cisco's core networking revenue experienced a robust increase, highlighting the company's adaptability in a competitive market. The 21% growth in networking revenue to $8.3 billion is particularly noteworthy, as it defies the trend of stagnation seen in some technology sectors. Analysts had anticipated this performance, as evidenced by their expectations of $7.9 billion, but the actual results surpassed even these optimistic predictions.
Cisco's involvement in AI infrastructure is not merely a side venture; it represents a critical component of its overall strategy. The $2.1 billion in AI infrastructure orders from hyperscalers signifies a growing recognition of Cisco as a key player in this transformative sector. Collaborations with industry leaders, such as providing products for an AI infrastructure project in Saudi Arabia alongside Advanced Micro Devices, demonstrate Cisco's commitment to being at the forefront of technological innovation.
However, the challenges associated with rising memory costs cannot be overlooked. The sharp demand for Nvidia GPUs has created an environment where equipment manufacturers, including Cisco, are facing increased prices for essential components. Robbins pointed out that Cisco is proactively adjusting its pricing strategies and contracts with channel partners to mitigate these pressures. This proactive approach could be a double-edged sword, as it may potentially lead to higher costs for customers while also protecting Cisco's margins.
The outlook for the 2026 fiscal year reveals Cisco's expectations for continued growth, with targets set for adjusted earnings per share between $4.13 and $4.17 and revenues ranging from $61.2 billion to $61.7 billion. This projection implies an 8.5% growth, aligning with the insights gathered from market analysts. The LSEG consensus also reflects a positive sentiment, with earnings of $4.12 per share and revenues of $60.74 billion.
As the tech sector grapples with various economic pressures, Cisco's cautious guidance may reflect a broader trend of uncertainty within the industry. Investors are likely to scrutinize Cisco's performance closely, particularly in light of the increasing focus on AI and its implications for future revenues. The demand for AI infrastructure is expected to grow, and Cisco's ability to capitalize on this trend will be pivotal in determining its success in the coming quarters.
The anticipated ramp-up of revenue from neoclouds—cloud providers that are newer and less established compared to giants like Amazon and Microsoft—is an area where Cisco sees potential for future growth. Robbins mentioned that this acceleration is expected to become more pronounced in the second half of the current fiscal year and into the 2027 fiscal year. This insight provides a glimmer of hope for investors looking for indicators of long-term growth within the company.
The market's reaction to Cisco's current earnings report reflects a complex interplay of optimism and caution. While the results themselves were strong, the expectations for future growth remain tempered. Investors are navigating a landscape where the potential for significant advances in AI and networking must be balanced against the realities of rising costs and uncertain economic conditions.