Cisco Shares Fall Despite Earnings Beat and Strong AI-Driven Forecast

Cisco shares fell in extended trading Wednesday even after the networking equipment maker reported better-than-expected fourth-quarter results and issued revenue guidance that significantly exceeded Wall Street estimates, as investors appeared to focus on the expectations already embedded in the stock's sharp recent rally.

Cisco reported adjusted earnings per share of $1.22, above the $1.17 expected by analysts surveyed by LSEG. Revenue reached $17.25 billion, compared with the $16.82 billion consensus estimate.

The results came after a strong run for Cisco shares. The stock had gained more than 60% during the quarter and about 8% in August as investors increasingly bet that the company would become a major beneficiary of the surge in artificial intelligence infrastructure spending.

Cisco's latest results provide evidence for that thesis. The company said hyperscalers, the large technology companies operating massive cloud and data-center networks, placed $4 billion in infrastructure orders during the quarter. That brought total hyperscaler orders for the fiscal year to $9.3 billion.

The company expects the business to expand substantially. Cisco said hyperscalers generated about $4 billion of revenue during the recently completed fiscal year and forecast that figure will nearly double to $7.5 billion in fiscal 2027.

The forecast points to a growing role for Cisco in the infrastructure buildout required to support increasingly sophisticated AI systems. AI workloads require large volumes of high-speed networking equipment to connect processors, storage, and other components across data centers, creating an expanding market for companies that can supply the underlying infrastructure.

Cisco also delivered an unusually strong outlook for the coming quarter.

The company expects fiscal first-quarter revenue of between $18 billion and $18.2 billion, well above the $16.8 billion average analyst estimate compiled by LSEG. Its earnings forecast for the period also exceeded expectations, while the company provided strong guidance for the full fiscal year.

Revenue in the latest quarter increased 18% from $14.7 billion a year earlier. Net income rose 51% to $3.9 billion, or 97 cents a share, from $2.6 billion, or 64 cents a share, in the same period last year.

The combination of accelerating revenue, stronger profitability and rapidly expanding orders from hyperscalers suggests Cisco is beginning to capture a larger portion of the capital spending associated with the AI boom.

Cisco's opportunity is different from that of semiconductor companies such as Nvidia. Rather than supplying the processors that power AI models, Cisco provides networking equipment that allows those processors and other data-center systems to communicate at increasingly high speeds.

As AI clusters become larger and more geographically distributed, high-performance networking has become a critical part of data-center construction. The scale of hyperscaler orders reported by Cisco indicates that demand is extending beyond GPUs and other computing components into the networking layer.

The market reaction nevertheless suggests investors may have been expecting an even stronger performance after the stock's substantial gains.

Cisco entered the earnings report with its shares already up more than 60% for the quarter. That rally had priced in a meaningful improvement in the company's AI prospects, raising the bar for the results needed to push the stock higher.

The decline in extended trading therefore does not necessarily contradict the underlying strength of the report. Instead, it highlights how rapidly expectations have risen around Cisco's AI opportunity.

The company's forecast that hyperscaler revenue could reach $7.5 billion in fiscal 2027 will now become an important benchmark for investors. Delivering that growth would represent a significant expansion from the approximately $4 billion generated in fiscal 2026 and provide further evidence that Cisco has established a meaningful position in the AI infrastructure cycle.

Currently, Cisco's numbers show a company benefiting from two trends at once: stronger demand across its traditional networking business and a rapidly expanding pipeline of orders from the world's largest technology companies building AI infrastructure.

The challenge for the stock is no longer simply demonstrating that Cisco can participate in the AI boom. With the shares already having risen sharply, investors appear focused on how much of that growth has already been priced in.