Cisco shares drop as margins miss on memory costs

Cisco Systems (CSCO) reported an adjusted gross margin for the quarter that fell short of market expectations on Wednesday, as the networking equipment maker continues to feel the impact of rising global memory prices.

The results weighed on investor sentiment, sending the company’s shares down 7% in premarket trading on Thursday, News.Az reports, citing Reuters.

The surge in artificial intelligence infrastructure investment by major U.S. technology firms, including OpenAI, Alphabet and Microsoft, has significantly tightened global memory chip supply. As chipmakers prioritize higher-margin components for data centers over consumer electronics, memory prices have climbed.

Addressing the issue, Cisco CEO Chuck Robbins told investors that the company has responded to higher memory costs by increasing its own prices and adjusting contract terms with partners and customers.

Despite the margin pressure, Cisco’s stock has gained more than 11% so far this year, following a 30% rise in 2025. Investors have expressed confidence in the company’s ability to benefit from sustained AI-related spending, particularly through its data center networking offerings.

Robbins highlighted strong demand for Cisco’s Silicon One systems and optical products, saying the company now expects AI orders to exceed $5 billion. It also anticipates recognizing more than $3 billion in AI infrastructure revenue from hyperscale customers in fiscal 2026.

Cisco raised its full-year 2026 revenue forecast to a range of $61.2 billion to $61.7 billion, up from its previous outlook of $60.2 billion to $61 billion.

For the quarter ended January 24, the company posted total revenue of $15.35 billion, surpassing analysts’ average estimate of $15.12 billion.

News.Az 

By Nijat Babayev