Cisco's stock drops 7% on mediocre forecast even as earnings and revenue top estimates

Cisco Systems has reported impressive quarterly results, surpassing earnings and revenue expectations. However, the company's stock experienced a significant decline of approximately 7% in after-hours trading due to guidance for the upcoming quarter merely meeting analysts' forecasts. The company's revenue surged by about 10% from $14 billion a year ago, with net income climbing to $3.18 billion, equating to 80 cents per share, compared to $2.43 billion, or 61 cents per share, in the same quarter last year. This adjusted figure excludes stock-based compensation. For the current quarter, Cisco projects adjusted earnings per share between $1.02 and $1.04, alongside revenue of $15.4 billion to $15.6 billion. Analysts surveyed by LSEG had anticipated earnings of $1.03 per share and revenue of $15.18 billion. Investors are eager for Cisco to capitalize on the booming artificial intelligence sector, which has significantly benefited chipmakers and data center technology providers. The company reported growth in AI infrastructure, with $2.1 billion in orders from hyperscale clients during the quarter. Moreover, Cisco's core networking revenue rose 21% year-over-year to $8.3 billion, exceeding StreetAccount's expectations of $7.9 billion. The company also disclosed plans to support an AI infrastructure initiative in Saudi Arabia in collaboration with Advanced Micro Devices. Additionally, Cisco introduced a new networking switch integrated with an Nvidia chip, further solidifying its position in the tech landscape. Looking ahead to the fiscal year 2026, Cisco aims for adjusted earnings per share between $4.13 and $4.17, and revenue ranging from $61.2 billion to $61.7 billion, indicating an anticipated growth rate of 8.5%. LSEG's consensus forecasts earnings of $4.12 per share and revenue of $60.74 billion. Company executives are set to elaborate on these results during a conference call with analysts at 4:30 p.m. ET.