Cisco's Record Quarter Meets a 66.3% Gross Margin, Stock Down 6%
Cisco reported a record quarter and the stock is down more than 6% in premarket trading. After Wednesday's close (August 12), the company posted revenue of $17.25 billion, up 18% year over year, and adjusted earnings of $1.22 a share, against consensus of $16.82 billion and $1.17. Total product orders rose 35%, AI infrastructure orders reached $9.3 billion, and management guided fiscal 2027 revenue to $72.2–$73.4 billion versus a $68.69 billion consensus. The stock traded above $132 after hours before reversing.
One line changed the whole picture: adjusted gross margin slipped to 66.3%, down from a year earlier. The mechanism is straightforward — the switching and optical hardware Cisco sells into AI data centers carries thinner margins than its traditional enterprise networking gear, so the faster revenue grows, the more the mix dilutes. The same question jumped to neighboring names: Coherent, which beat with $1.19 in earnings and $2.05 billion in revenue against $1.14 and $1.99 billion, fell 5% premarket — even though Super Micro's report had lifted the entire chip supply chain during Wednesday's session.
Two data points landed together at 8:30 a.m. ET (3:30 p.m. in Istanbul). The July producer price index was unchanged month over month against a forecast of 0.2%, and the annual rate fell to 4.7% from 5.5% — but the entire decline came from energy, with final demand goods prices down 0.7%, energy down 3.1% and gasoline down 5.7%. Core PPI excluding food, energy and trade services rose 0.4% on the month and held at 4.7% year over year, so the headline cooled and the core did not. Initial jobless claims rose to 209,000 against a 202,000 forecast, with the prior week revised up to 200,000; the four-week average held at 199,000 and continuing claims fell to 1.777 million.