To The Moon

$Cisco(CSCO)$’s fiscal fourth-quarter results showed that AI infrastructure is becoming financially meaningful, but the stock’s sell-off demonstrated that investors care about the profitability of that growth as much as its scale.

Cisco reported on August 12 for the quarter ended July 25. Revenue increased 18% to $17.25 billion, while adjusted earnings reached $1.22 per share. Full-year revenue was $63.33 billion, up from $56.65 billion. Cisco’s official fourth-quarter release provides the results and fiscal-2027 guidance.

The bullish thesis is that Cisco is becoming a major supplier of networking systems connecting AI clusters. Fiscal-2026 AI-infrastructure orders from hyperscale customers reached approximately $9.3 billion, including roughly $4 billion in the fourth quarter. Splunk also expands Cisco’s exposure to recurring security and observability software, reducing reliance on periodic router and switch replacements.

Management forecast fiscal-2027 revenue of $72.2–$73.4 billion and adjusted earnings of $5.05–$5.11 per share. That implies substantial growth and confirms that AI demand is not merely experimental.

The bearish issue is mix. AI networking contains a greater hardware component and can carry lower gross margins than software or support revenue. Cisco forecast a 65%–66% non-GAAP gross margin for the first quarter, while investors had expected slightly more. Component costs, aggressive hyperscaler negotiations and rapid product cycles could prevent AI revenue from producing equivalent profit growth. Reuters’ August 12 analysis describes the strong orders and margin concern.

Cisco fell 8.4% on August 13 and closed August 14 near $113.48.

CSCO Daily Chart

Technically, CSCO has suffered a sharp post-earnings breakdown from the $120–$124 area and is now testing short-term support around $111–$112, with a large unfilled gap below spanning roughly $102–$107.

The immediate structure is therefore neutral to bearish: a sustained hold above $111 followed by a reclaim of approximately $115–$117 would suggest that buyers are absorbing the earnings selloff and could support a recovery toward $120, while a decisive close below $111 would increase the probability of a deeper move into the gap zone.

Because downside risk remains open and volatility is likely still elevated, I would avoid buying naked calls here and instead consider a 30–45 DTE $105/$100 bull put credit spread only after CSCO shows stabilization above $111, positioning the short strike near the upper portion of the gap while benefiting from time decay. A clean break below roughly $107 would materially weaken that bullish premium-selling thesis.

The business evidence leans moderately bullish, while the near-term stock outlook is neutral. The view would be invalidated by AI orders slowing abruptly, gross margin falling below guidance, Splunk failing to improve recurring revenue or networking growth becoming dependent on a few hyperscalers. This is personal opinion for education and is not financial advice.

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Disclaimer: This article is for informational and educational purposes only and does not constitute financial, investment, or trading advice. The views expressed are personal opinions based on publicly available information and are subject to change without notice. Investors should conduct their own research and consider their financial situation, risk tolerance, and investment objectives before making any investment decisions. I do not guarantee the accuracy or completeness of the information presented.