New York, February 12, 2026, 10:29 EST — Regular session
- Cisco Systems dropped roughly 9.7% after the company pointed to margin pressure from pricier memory.
- The networking gear maker lifted its full-year revenue forecast, though it cautioned that gross margin is set to fall again next quarter.
- This week, traders have an eye on backlog conversion, cost pass-through, and any fresh headlines coming out of Cisco Live.
Cisco Systems (CSCO.O) dropped roughly 9.7% to $77.27 on Thursday, deepening a steep post-earnings selloff. Investors focused on margin pressure, even though revenue came in ahead of expectations.
This is a significant development: Cisco’s role as a bellwether for the guts of AI infrastructure—switches, routers, optics inside data centers—means that when its margins come under pressure, it casts doubt on who ultimately shoulders the growing costs of building AI at scale.
Cisco blamed rising global memory costs for dragging its adjusted gross margin—what’s left after direct expenses—below analyst targets. Demand wasn’t the issue. But for a stock trading as if it were a clear-cut AI infrastructure success, that margin miss stings.
Cisco turned in an adjusted gross margin of 67.5% for the quarter ended Jan. 24, missing the LSEG consensus of 68.14%. The company is contending with pricier memory chips, a side effect of the scramble among tech players to expand AI infrastructure. CEO Chuck Robbins told investors that Cisco has already bumped up prices and is updating contract terms. “Compressed margins definitely took some shine off the report,” noted Jake Behan, head of capital markets at Direxion. 1
Cisco posted revenue of $15.3 billion, with non-GAAP earnings landing at $1.04 a share. Looking ahead, the company sees third-quarter revenue coming in between $15.4 billion and $15.6 billion, and it’s guiding non-GAAP gross margins to a range of 65.5% to 66.5%. That margin outlook suggests more pressure is likely, even as Cisco bumped its fiscal 2026 revenue target to $61.2 billion-$61.7 billion. The board signed off on a one-cent increase to the dividend, now at $0.42 per share. 2
The selloff signals “beat-and-raise” alone didn’t cut it. Investors are weighing how quickly Cisco can convert AI orders into actual revenue—and whether the company’s price increases can keep up with rising component costs, all without holding up shipments.
It also sharpens the focus on performance in the data-center networking space, a field where Cisco goes up against Arista Networks and Juniper Networks, all vying for major cloud clients.
The risk is straightforward. Should memory prices remain high—or climb further—Cisco could find itself forced to pick between shoring up margins and holding onto volumes. A hiccup in contract talks or a sudden pullback from hyperscalers would hit quarterly profits fast.
Plenty lands on Cisco’s plate this week. Its Cisco Live event runs in Amsterdam through Feb. 13, and investors are tuned in for updates on AI order flow, pricing strategy, and what’s happening with supply-chain expenses—the key issues steering the shares lately. 3
