Cisco Set a Record and Fell 9% on What Memory Costs Are Doing to Margins
Cisco booked $4 billion of hyperscaler AI orders in a single quarter and the stock fell about 9%, which is the same story the rest of the group told this week from the other side.
Cisco booked $4 billion of hyperscaler AI orders in a single quarter and the stock fell about 9%, which is the same story the rest of the group told this week from the other side.
Revenue was a record near $17.3 billion, up 18% year over year. EPS came in at $1.22. The AI order number is the one worth sitting with: $4 billion in the quarter, part of $9.3 billion for the full year, roughly 4.5 times fiscal 2025.
Why the demand number did not win
Because the cost of the memory going into the boxes is rising faster than the price of the boxes. Record revenue and record orders establish that Cisco is selling the thing the market wants sold. Margin compression establishes that selling more of it does not yet convert proportionally to profit.
Nearly half the year's AI orders arriving in the fourth quarter is a genuine acceleration, and the market largely declined to pay for it. That tells you which variable investors are currently underwriting.
The week's pattern
Applied Materials beat and fell on flat margin guidance. Cisco set a record and fell on margin compression. Memory names rose on pricing power.
Those are not three stories. They are one, viewed from the systems side and the component side: whoever owns memory pricing right now is capturing the economics, and whoever buys memory is absorbing them.