Cisco Guides Q3 Margin to 65.5%–66.5%, Shares Slide 7% Despite 18% Order Growth
Cisco projected fiscal Q3 non-GAAP gross margin of 65.5%–66.5%, missing the 67% analyst consensus, and warned of flat-to-declining full-year EPS due to rising memory costs. Shares plunged 7% despite 18% year-over-year product order growth driven by AI infrastructure investments.
1. Margin Guidance and Cost Outlook
Cisco forecast non-GAAP gross margin of 65.5%–66.5% for the March quarter, below the 67% consensus, and flagged flat-to-declining earnings per share for the full year. Management attributed the compressed margin outlook to elevated memory component costs and supply-chain pressures.
2. Sharp Share Decline
Following the guidance, shares fell 7%, representing the largest intraday drop since the prior quarter’s results. The sell-off weighed on broader networking peers, reflecting investor concern over profitability headwinds.
3. AI-Driven Order Growth
Despite margin challenges, Cisco reported 18% year-over-year growth in product orders, led by AI infrastructure spending. The strong demand in its data center and AI router segments underscores sustained enterprise investment in generative AI platforms.