Cisco Systems Inc. reported mixed results, with its stock falling 8.8% after the company revealed a shrink in gross margin due to heavy investment in AI hardware. Despite this, Cisco saw record orders for its AI hardware, driving revenue growth. The company's net income rose to $3.08 billion, with revenue climbing to $12.1 billion from $11.9 billion.
Looking ahead, Cisco forecasts AI sales to make up about 10% of its projected total revenue of $72.2 billion to $73.4 billion in fiscal 2027. The company generated about $4 billion in AI revenue in fiscal 2026. However, investors have expressed concern over the company's AI sales forecast, which was lower than expected.
Meanwhile, OpenAI is making strides in AI with the release of its GPT-5.6 models, aimed at reducing agent costs. The company is pushing the boundaries of AI capabilities, tackling longer tasks with fewer tokens. Other companies, such as US Foods Holding Corp., are also leveraging AI to improve productivity and strengthen their supply chains.
Beyond the tech giants, there are opportunities for AI investment in the mid-cap segment, according to Lori Keith, Portfolio Manager and Senior Analyst at Parnassus Investments. The AI revolution is creating significant investment potential beyond the usual suspects, with AI driving transformations in business communications and integrated platforms.
Key Takeaways
• Cisco Systems Inc.'s stock fell 8.8% despite reporting a net income of $3.08 billion and revenue growth to $12.1 billion.• The company's gross margin shrunk due to heavy investment in AI hardware, but saw record orders for its AI products.
• Cisco forecasts AI sales to make up 10% of its projected total revenue of $72.2 billion to $73.4 billion in fiscal 2027.
• OpenAI released GPT-5.6 models to reduce AI agent costs and improve capabilities.
• US Foods Holding Corp. leverages AI to improve seller productivity and strengthen its supply chain.
• Demand for AI-native chief information security officers and chief security officers rose 256% in the first seven months of 2026.
• 53% of organizations struggle to translate business context into AI systems and workflows.
• 80% of organizations expect AI spending to increase over the next two years.
• AI is driving transformations in business communications, with integrated platforms and bundled solutions gaining traction.
• There are opportunities for AI investment in the mid-cap segment, beyond the tech giants.
Cisco Stock Falls as AI Hardware Squeezes Margins
Cisco Systems Inc. stock fell 8.8% after the company reported fiscal first-quarter earnings that topped expectations but saw its gross margin shrink due to heavy investment in AI hardware. The company's net income rose to $3.08 billion, or 73 cents a share, from $2.84 billion, or 68 cents, in the year-earlier period. Revenue climbed to $12.1 billion from $11.9 billion. Cisco's gross margin fell to 61.4% from 62.1% in the year-earlier period. The company sees record orders for its AI hardware, which helped drive revenue growth.
Cisco Stock Tumbles as AI Hardware Squeezes Margins
Cisco Systems Inc. stock tumbled roughly 8.8% in Thursday's regular session. The company's fiscal fourth-quarter results showed revenue surging 18% to $17.3 billion, while adjusted earnings climbed 23% to $1.22 per share. Cisco's AI demand was the headline act: hyperscaler AI-infrastructure orders hit $4 billion in the quarter and $9.3 billion for the full year.
Cisco's AI Sales Forecast Sparks Investor Concern
Cisco Systems' fourth-quarter earnings report has left investors disappointed, primarily due to a projected $7.5 billion in sales tied to the AI data center boom. This figure is notably lower than the $9.3 billion in orders for AI-related gear amassed over the past year.
Cisco's AI Outlook Disappoints Investors Seeking Bigger Payoff
Cisco's AI Outlook Disappoints Investors Seeking Bigger Payoff. AI sales will make up about 10% of Cisco's projected total revenue of $72.2 billion to $73.4 billion in fiscal 2027. Cisco Chief Executive Officer Chuck Robbins said during the call that the company generated about $4 billion in AI revenue in fiscal 2026.
AI Opportunities Beyond Mega-Caps
The current wave of AI innovation is not solely benefiting the tech behemoths. Lori Keith, Portfolio Manager and Senior Analyst at Parnassus Investments, joined Bloomberg Tech to discuss how investors can find opportunities in the mid-cap segment of the market.
AI Investment
The current focus on a handful of colossal technology firms for artificial intelligence investments overlooks a broader field of opportunity. Lori Keith, Portfolio Manager and Senior Analyst at Parnassus Investments, argues that the AI revolution is creating significant investment potential beyond the usual suspects.
RNG
AI is driving a transformation in business communications, with integrated platforms and bundled solutions gaining traction. Early adoption of AI products shows measurable ROI and significant growth potential.
Academic Integrity
Academic integrity and artificial intelligence (AI) ethics should be incorporated as core teaching content. Nearly half of surveyed students did not understand rules and ethics regarding AI use.
Organizations Struggle with AI
53% of organizations struggle to translate business context into AI systems and workflows. 80% of organizations expect AI spending to increase over the next two years.
GPT-5.6 Slashes Agent Costs
OpenAI is pushing the envelope on AI agent economics with the release of its GPT-5.6 models. GPT-5.6 aims to tackle longer tasks with fewer tokens.
Goodwin Joins Big Law
Goodwin Procter wants to shift a million hours worth of its lawyers' time each year to higher value work through its use of AI.
Demand for AI-Native Security Chiefs Jumps
Demand for AI-native chief information security officers and chief security officers rose 256% in the first seven months of 2026.
US Foods Highlights AI Investments
US Foods Holding Corp. reported Q2 net sales growth of 4.5% year over year to $10.5 billion. The company leverages AI to improve seller productivity and strengthen its supply chain.
FrontierFinance
We introduce FrontierFinance, a fully open benchmark of 220 expert-crafted queries and 11,543 source-attributed rubrics spanning six crucial use cases across the full investor workflow.
Sources
- Cisco Stock Tumbles 8.8% as AI Hardware Squeezes Margins
- Cisco Stock Tumbles 8.8% as AI Hardware Squeezes Margins
- Cisco's AI Sales Forecast Sparks Investor Concern
- Cisco's AI Outlook Disappoints Investors Seeking Bigger Payoff
- AI Opportunities Beyond Mega-Caps: Insights from Parnassus Investments
- AI Investment: Beyond Mega-Caps to Mid-Cap Opportunities
- RNG: AI-powered communications and disciplined operations drive growth, margin expansion, and innovation
- Academic integrity, AI ethics should be in schools: report
- 53% of Organizations Struggle to Translate Business Context Into AI Despite Rising AI Investment
- GPT-5.6 Slashes Agent Costs
- Goodwin Joins Big Law’s AI Arms Race With Venture Funding Tool
- Demand for AI-native security chiefs jumps 256%, Christian & Timbers research finds
- US Foods highlights AI investments as Q2 sales grow 4.5%
- FrontierFinance: A Challenging Benchmark for Measuring Frontier Intelligence of Finance Agents
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