Shares of Cisco fell in premarket trading on Thursday.
Cisco reported record results on Wednesday, citing an artificial-intelligence "supercycle," but Wall Street is pointing to squeezed gross margins.
The technology conglomerate posted revenue for the fiscal fourth quarter of $17.3 billion, up 18% year-on-year and higher than analysts' estimates of $16.8 billion, according to Fact Set. Cisco $(CSCO)$ said demand skyrocketed amid an AI "supercycle," with hyperscalers now accelerating the process to construct data centers.
The San Jose, Calif.-based company said it sees revenue to reach between $72.2 billion to $73.4 billion in 2027, surpassing Wall Street expectations of $69.1 billion.
Shares of Cisco fell 6% in premarket trading following Wednesday#s gain of almost 3%, with its stock up about 60% overall since the start of the year.
For analysts at Goldman Sachs, led by Michael Ng, investors could be concerned about gross margins. The company reported a gross margin of 66.3% for the three-month period, down from 68.4% for the same quarter of 2025. Also, gross margin guidance for next year of between 65% and 66% was lower than consensus estimates of 66.4%.
"Management expects to ship a significant amount of hardware due to the networking supercycle and Cisco's strong competitive position due to its supply chain," the analysts said. "The increased concentration should pressure gross margins, although [earnings before interest and tax] margins should face less pressure as hyperscaler deals have low gross margins but require marginal incremental [operating expenditure]."
Goldman maintained its 12-month price target of $125. Analysts at Evercore ISI, who are bullish on Cisco, also maintained their price target of $150.
They wrote in a note on Wednesday that they see the company benefitting from companies moving back to physical servers as opposed to using the public cloud and as they become willing again to pay more for specialized software.
Analysts at Citigroup kept their price target for Cisco unchanged at $139 as they noted the same order growth rate of 35% year-on-year reported this quarter as last quarter. They also noted that networking sales growth is expected to slow in 2027.
-Nora Redmond