Cisco reported fiscal Q4 2026 results Wednesday evening that beat on every metric, adjusted EPS of $1.22 versus the $1.17 consensus, revenue of $17.25 billion versus the $16.82 billion estimate, and fiscal 2027 guidance of $72.2 to $73.4 billion versus the $68.69 billion Wall Street estimate.
Hyperscaler AI infrastructure orders hit $9.3 billion for the full fiscal year, about 4.5 times the prior year. The stock fell nearly 6 percent Thursday morning anyway.
The reason is margins. CEO Chuck Robbins guided for lower gross margins in fiscal 2027 as Cisco absorbs the memory shortage costs hitting the entire technology industry, and investors who have watched CSCO trade up 25 percent year-to-date came in expecting more.
The stock pulled back from record highs on worries about whether the AI infrastructure spending boom translates into sustained profitability improvement or simply higher costs.
The AI story is real. Cisco secured $4 billion in hyperscaler AI infrastructure orders in Q4 alone. Acacia, Cisco's optical networking subsidiary, generated more than $1 billion in orders. AI-tagged Nexus switch orders rose more than 85 percent sequentially.
Data-center networking orders climbed more than 35 percent. Hyperscaler AI infrastructure revenue is expected to nearly double in fiscal 2027 to $7.5 billion from $3.8 billion.
The numbers are good. The stock fell anyway. That is the valuation conversation Cisco is now in.