CSCO Stock Tumbles Amid Gross Margin Miss — Why Does The Street See An Upside?

• Citi also increased the price target on Cisco to $90 from $85 and kept a Buy rating on the shares. 
• Cisco reported second-quarter adjusted total gross margin of 67.5%, compared to 68.7% from the same period last year. 
• Cisco also said that its AI Infrastructure orders from hyperscalers was at $2.1 billion.

Shares of Cisco Systems, Inc. (CSCO) declined over 12% on Thursday, the most since May 2022, after the company’s gross margins came in below Wall Street’s expectations in its latest earnings report.

Cisco reported second-quarter adjusted total gross margin of 67.5%, compared to 68.7% from the same period last year.

However, UBS and Citi raised price targets on the technology company following its earnings release, according to TheFly. Meanwhile, retail sentiment on Stocktwits around CSCO shares remained in the ‘extremely bullish’ territory over the past 24 hours.

Analyst Rationale

UBS raised its price target on Cisco to $95 from $90 and kept a ‘Buy’ rating on the shares, citing the acceleration of Cisco's artificial intelligence order momentum during the quarter. The analyst said this boosted the company’s FY26 revenue visibility and FY27 growth potential.

Meanwhile, Citi also increased the price target on Cisco to $90 from $85 and kept a Buy rating on the shares. The analyst said that the company's weaker gross margins from higher memory costs were offset by its networking momentum in the quarter, and cited multiple expansions of AI stocks for the target boost.

Q2 Earnings

In its second-quarter (Q2) earnings update, Cisco clocked quarterly revenue of $15.35 billion, ahead of street estimates of $15.12 billion, as per data from Fiscal AI. The company reported adjusted earnings per share of $1.04, marginally higher than the $1.02 expectations.

The company said that the squeezed gross margins were a result of rising memory chip costs. However, the company said that it has already raised prices to beat the higher costs and is also revising terms with customers.

Cisco also said that its AI Infrastructure orders from hyperscalers were at $2.1 billion. The company said it expects annual revenue of $61.2-$61.7 billion for 2026, and forecast adjusted profit to be between $4.13 and $4.17.

How Did Stocktwits Users React?

Message volume around CSCO shares remained in the ‘extremely high’ territory, jumping 757% in 24 hours, according to data from Stocktwits on Thursday morning.

One bullish user said the pullback was ‘nice,’ encouraging users to keep buying shares after noting that it was a margin issue and not demand.

Shares of CSCO have risen more than 20% in the past year.

For updates and corrections, email newsroom[at]stocktwits[dot]com.

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