Cisco's stock plummeted 8.45% during intraday trading on Thursday, as investor concerns over the company's profitability overshadowed its better-than-expected quarterly earnings and revenue.

The networking equipment giant reported quarterly adjusted gross margin of 67.5%, which fell short of analyst estimates of 68.14%. The margin pressure was attributed to soaring memory costs linked to booming AI data-center demand, which are weighing on the company's profitability despite strong demand for its products.

Cisco's Chief Financial Officer Mark Patterson identified rising memory costs as the primary reason for the squeezed margins. While the company reported robust AI infrastructure orders totaling $2.1 billion and raised its full-year revenue guidance, investors focused on the margin miss and the company's expectation that margin pressure would continue in the near term.