New York, February 12, 2026, 11:20 (EST) — Regular session
- Cisco’s stock dropped roughly 11% in morning trading following its quarterly results and outlook.
- Company raised its revenue outlook for fiscal 2026 but expects gross margin to drop next quarter
- Investors are zeroing in on rising memory costs and questioning if AI-driven orders will actually boost profits
Cisco Systems, Inc. shares fell roughly 11% to $76.21 in late-morning trading Thursday as investors reacted to the networking giant’s latest quarterly results and updated outlook.
This is crucial since Cisco runs the infrastructure in data centers and corporate networks. Investors have been eager to back anything connected to AI development, yet they swiftly turn away from hardware companies when profits seem uncertain.
Margins are under the spotlight at the moment. Gross margin — the remainder after covering the direct costs of producing and shipping gear — tends to reveal cost inflation early, often shifting guidance more quickly than changes in demand.
Cisco reported a 10% revenue increase to $15.3 billion for its fiscal second quarter ending Jan. 24, posting non-GAAP earnings of $1.04 per share and a non-GAAP gross margin of 67.5%. The company projects third-quarter revenue between $15.4 billion and $15.6 billion, with a non-GAAP gross margin ranging from 65.5% to 66.5%. It also raised its fiscal 2026 revenue forecast to $61.2 billion–$61.7 billion, noting that EPS guidance factors in tariffs based on current trade policies. CEO Chuck Robbins described the quarter as “strong,” while CFO Mark Patterson highlighted an operating margin “above the high end of guidance.” Cisco increased its quarterly dividend to $0.42 and repurchased approximately 18 million shares during the quarter. 1
Reuters reported that the margin squeeze stems from a global surge in memory prices, driven by the scramble to build AI infrastructure that’s tightening supply. Robbins noted Cisco has bumped up prices and is tweaking contract terms. He expects AI orders to top $5 billion, with over $3 billion in AI infrastructure revenue from hyperscalers in fiscal 2026. “Compressed margins definitely took some shine off the report,” said Jake Behan, head of capital markets at Direxion. 2
At Cisco Live in Amsterdam this week, Cisco pushed its AI networking agenda hard. On Feb. 10, it unveiled the Silicon One G300 switching chip along with new systems designed to scale AI data centers. Product chief Jeetu Patel emphasized that Cisco is providing the infrastructure customers need “to move fast” on AI, with shipments slated for this year. Cisco Live Amsterdam runs Feb. 9-13. 3
The slide spilled over into other hardware stocks during morning trading, with Arista Networks falling roughly 4.6%, Dell Technologies dropping around 7.7%, and Hewlett Packard Enterprise declining about 6.5%.
The risk is clear: if memory prices remain elevated longer than anticipated or customers resist paying more, margins could shrink faster than revenue expands. For a stock riding the AI wave, that’s a tough spot.
Investors are closely monitoring whether Cisco’s pricing moves hold firm, how soon cost pressures emerge in the March-quarter results, and if AI-related orders translate smoothly into revenue instead of lingering in backlog.
Next up: more insights from Cisco Live in Amsterdam, running through Friday. Management and customers are sharing updates, while traders focus on any news about costs, pricing, and hyperscaler demand.
