RESOLVING THE LEDGER
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See the full story · 1 sourcesCisco shares dropped 9% on Thursday, as the networking equipment vendor's better-than-expected earnings report and strong guidance failed to impress Wall Street.
The company said revenue in the current quarter will be between $18 billion and $18.2 billion, topping the $16.8 billion average estimate, according to LSEG. Revenue in the fiscal fourth quarter increased 18% to $17. 3 billion, while analysts were looking for $16.8 billion.
Analysts at Piper Sandler wrote, in a note after the report, that Cisco showed good numbers for the quarter, but their guidance "looks conservative given the current demand environment." Some investors "may start to nitpick that we're seeing peak growth," wrote the analysts, who recommend holding the stock.
Heading into earnings, Cisco shares were up more than 60% for the year, as the company finally started to show that it was benefitting from the artificial intelligence boom. Even though the forecast for this year is solid, with Cisco projecting revenue growth of about 15%, analysts see sales growth dipping next fiscal year back into the single digits.
Still, Cisco CEO Chuck Robbins focused on the across-the-board beat.
"We had a record year, we had a record quarter," Robbins told CNBC's Jim Cramer on Thursday. After issuing guidance that was better than analysts expected, they said, "Why are you being so conservative," Robbins added.
"We're starting a new fiscal year. We're operating in incredible markets," Robbins said. "But it's also a time that we're going to start the year being a little bit prudent."
Analysts at KeyBanc Capital Markets remain bullish on the stock, with the equivalent of a buy rating. In a note after the report, they wrote that Cisco will likely see market share gains with the hyperscalers increasing their capital expenditures and with so-called neoclouds and others ramping their spending.
Hyperscalers, or the internet giants driving much of the AI spend, placed $4 billion of infrastructure orders in the quarter, bringing the total for the fiscal year to $9.3 billion, Cisco said. That group accounted for about $4 billion of revenue in the past fiscal year, with Cisco expecting that number to almost double in fiscal 2027 to $7.5 billion.
The stock was trading at around $113 as of mid-day Thursday. Its record closing high was $130 in June.
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