Markets
Cisco Fell 6.2% a Day After Its Best Growth in 15 Years
Cisco shares fell 6.24% to $95.64 on November 13, 2026, a day after record quarterly revenue, as investors focused on a 2.5-point fall in gross margin.
On Thursday evening Cisco looked like the winner of the AI week. Its fiscal first-quarter revenue rose 24% to a record $18.52 billion, adjusted earnings per share rose 40% to $1.40, and it raised its full-year revenue forecast to $74.8 billion to $75.8 billion. The shares added about 3% after hours. By Friday's close they had fallen 6.24% to $95.64.
The reason was on the profit line, not the sales line. Cisco's adjusted gross margin, the share of revenue left after the direct cost of making its products, fell to 65.6% from 68.1% a year earlier. On products alone, it fell 3.5 percentage points to 63.7%. Two forces are behind it: a heavier mix of AI networking equipment sold to large cloud companies, which is priced more tightly than the enterprise gear Cisco has sold for decades, and higher costs for memory chips. Chief financial officer Mark Patterson said the full-year adjusted gross margin should stay just below 65% while hardware volumes stay high.
That is the trade-off investors were weighing. Cisco now expects about $9 billion of AI infrastructure revenue from hyperscalers this fiscal year, roughly double last year. Every extra dollar of that business brings in fewer cents of gross profit than the company's average. Morgan Stanley analyst Meta Marshall had made this argument on November 5, when she cut the stock to Equal-Weight and lowered her target to $120 from $135, saying the AI re-rating was largely priced in and that some demand had been pulled forward ahead of Cisco's price increases. The stock fell 7% that day.
Positioning made the fall steeper. Cisco had gained about 35% this year before the report and had rallied in the days before it, which raised the bar a beat had to clear. Friday's session was also a poor one for anything tied to data-centre hardware: Dell fell 7.18%, CoreWeave 6.13% and the technology sector 2.01%, as the market reconsidered the AI trade after Nvidia's leadership change.
There is a pattern here that shows up across this earnings season. Companies whose growth comes from selling equipment into the AI build-out are reporting record revenue and, at the same time, lower margins, because their biggest customers have the bargaining power to demand it. Applied Materials, which also beat estimates on Thursday, fell 2.74% on Friday. A beat on revenue no longer guarantees a higher share price if each sale earns less.
Cisco's next numbers come in February. Until then, the useful measure is the gap between revenue growth and gross profit growth: if margins settle just under 65%, as management guided, the expanding AI business should still add to profits in dollars, even as it shrinks them in percentage terms.