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Cisco Stock Falls 7% After Morgan Stanley Downgrade
Why did Cisco stock fall 7%?
Cisco (CSCO) stock fell 7% to $96.13 on Thursday, Nov. 5, after a Morgan Stanley downgrade to Equal-Weight over worries that lower-profit AI hardware sales will squeeze margins.
Key numbers
| Fiscal 2027 revenue guidance | $72.2–73.4Bvs $68.7B Street estimate |
|---|---|
| AI infrastructure orders, fiscal 2026 | $9.3B$4B in Q4 alone |
| Stock after downgrade (Nov 5) | $96.13-7% |
| Gross margin, Q4 (non-GAAP) | 66.3%vs 68.4% a year earlier |
| Q1 revenue expected today | $18.11B+21.7% YoY |
What happened
Cisco (CSCO) stock fell 7% to $96.13 on Thursday, Nov. 5, after a Morgan Stanley downgrade to Equal-Weight over worries that lower-profit AI hardware sales will squeeze margins. That drop came a week before Cisco reports quarterly results, due after the close today. In August, Cisco beat estimates and gave its own forecast (guidance) of $72.2–73.4 billion in sales for fiscal 2027, well above the $68.7 billion analysts expected. Shares still slipped after hours as investors worried about thinner profit margins. AI-related orders reached $9.3 billion for the year.
Why it matters
Cisco makes the networking equipment that moves data inside AI data centers, so its results show whether AI spending is still growing. The worry is profit margin, the share of each sale the company keeps as profit. Selling more low-profit hardware to big cloud customers can shrink it, even as sales rise. Cisco's gross margin was 66.3% last quarter, down from 68.4% a year earlier.
Who this affects
- MarketbearishMedium impact
- Networking stock holders saw sharp drops; negative short term.
- CompanymixedMedium impact
- Cisco shareholders face margin worries despite strong AI orders.
- CompetitorsbearishMedium impact
- Arista and Ciena fell 10% and 15% that day.
- IndustrymixedMedium impact
- AI networking demand strong, but profit mix shifting.
Cisco vs Arista Networks, Ciena
How we got here
Cisco beats Q4 estimates and guides fiscal 2027 revenue to $72.2–73.4B; shares slip after hours.
Cisco announces it will report Q1 fiscal 2027 results on November 12.
Morgan Stanley cuts Cisco to Equal-Weight, target $120 from $135; stock falls 7%.
Cisco shares trade near $101.96, up 3.9%, ahead of earnings.
Cisco reports Q1 fiscal 2027 results after the market close.
What to watch
- Whether Q1 revenue lands in Cisco's $18.0–18.2B range versus $18.11B expected.2026-11-12
- Gross margin versus Cisco's 65%–66% forecast, with lower-margin cloud hardware in focus.2026-11-12
- Progress toward the roughly $7.5B of AI infrastructure revenue expected in fiscal 2027.2026-11-12
Educational content only. Not investment advice.
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