Cisco’s stock falls from record highs after Q1 beat

Today’s headlines

What’s happening: Shares of Cisco Systems fell in after-hours trading on Wednesday following the release of its results for the first quarter of fiscal 2026.

What happened: The networking equipment provider posted better-than-expected sales and earnings for the latest quarter and raised its full-year guidance.

The stock fell after breaching $80 for the first time earlier this month, reaching a new record high for the first time in 25 years.

How were the results: The San Jose, California-based company reported low double-digit sales growth for the latest quarter.

• Quarterly sales rose 10% year-over-year to $15.35 billion, beating consensus estimates of $15.12 billion.
• Adjusted earnings came in at $1.04 per share, topping Wall Street expectations of $1.02 per share.

Why it matters: Major US tech firms have been making huge investments in AI, which has significantly raised memory chip demand and prices.

The price hikes weighed on Cisco’s margins in the quarter, although the company had begun raising its prices to mitigate the impact. The company reported adjusted gross margins of 67.5% for the latest quarter, below market estimates of 68.14%. CEO Chuck Robbins said that the company was also trying to revise contractual terms with partners and customers.

The company’s product revenues jumped 14%, while services revenue fell by 1% during the quarter. The recent growth in product revenue was driven by a 21% surge in Networking and a 6% gain in Collaboration. Meanwhile, security product revenue fell 4% year-over-year, while Observability came in flat during the quarter.

Cisco recorded $1.8 billion in cash flow from operations in the latest quarter, representing a 19% year-over-year decline.

Management guided to third-quarter revenue of $15.4-$15.6 billion and adjusted earnings of $1.02-$1.04 per share, broadly in-line with expectations.

Cisco raised its fiscal 2026 revenue guidance to $61.20-$61.7 billion, from its previous outlook of $60.20-$61 billion. The company also raised its adjusted earnings forecast to $4.13-$4.17 per share, from the previous range of $4.08-$4.14 per share.

How shares responded: Cisco’s stock fell 7.6% to $79.05 in extended trading hours on Wednesday following the release of quarterly earnings. The stock had jumped around 16% over the past month.

What to watch: Investors will continue monitoring rising demand for AI infrastructure and higher memory prices, which are expected to significantly impact the company’s overall results ahead.

The markets today

The Japanese yen in focus today ahead of some major economic reports

Context: The Japanese yen recorded gains for the fourth consecutive session versus the US dollar this morning, on hopes of Prime Minister Sanae Takaichi’s fiscal policies providing a boost to domestic economic growth.

Details: The yen has jumped almost 3% this week following Prime Minister Sanae Takaichi’s victory in the general elections, which gave her a solid mandate to pursue higher spending and tax cuts. Takaichi reiterated her plans to suspend the 8% sales tax on food.

Markets widely expect her policies to boost economic growth and provide the Bank of Japan more scope to hike interest rates.

Data released this morning showed that Japan’s producer prices climbed 2.3% year-over-year in January, slowing from 2.4% in December. The latest reading signalled the slowest annual growth since May 2024.

Weakness in the US dollar lent further support to the Japanese currency this morning. The US dollar index, which measures the greenback’s performance versus a basket of major peers, edged lower to 96.82.

The USD/JPY pair fell by more than 0.4% to 152.61 this morning, while the Nikkei 225 slipped around 0.1% to 57,605.53.

What to watch: Investors await the release of data on foreign bond investment (0350 UAE Time) and stock investment by foreigners (0350 UAE Time) from Japan on Friday. Bond investments by Japanese abroad surged by ¥713.70 billion during the week ending January 31, while stock investments by foreigners in Japan climbed by ¥494.60 billion during the same week.

Other Markets: European indices closed mixed on Wednesday, with the FTSE 100 and STOXX Europe 600 Index up by 1.14% and 0.10%, respectively, and the DAX 40 and CAC 40 down by 0.53% and 0.18%, respectively.

The news shaping the markets

Ukraine’s military said its forces hit an oil refinery in Volgograd, Russia. The news sent the USD/RUB pair higher in forex trading this morning.

Singapore’s current account surplus rose to S$40.24 billion in the fourth quarter from S$33.95 billion in the year-ago period. The region’s surplus hitting a record high exerted pressure on the USD/SGD forex pair.

Philippines’ net direct investment declined 0.3% year-on-year to $0.9 billion in November. The latest reading still being the strongest level since July 2025 sent the USD/PHP pair lower in forex trading this morning.

Colombia’s consumer confidence index declined to 18.2% in January from 19.1% in the previous month, lending support to the USD/COP forex pair.

Australia’s consumer inflation expectations surged to 5.0% in February from 4.6% in the January. However, the AUD/USD pair rose in forex trading this morning.

What else to watch today

South Africa’s gold production (1330 UAE Time), mining production (1330 UAE Time) and manufacturing production (1500 UAE Time), India’s inflation rate (1430 UAE Time), Turkey’s foreign exchange reserves (1530 UAE Time), Russia’s current account (1700 UAE Time), US initial jobless claims (1730 UAE Time), continuing jobless claims (1730 UAE Time), existing home sales (1900 UAE Time) and EIA natural gas stocks change (1930 UAE Time) as well as Germany’s current account (1745 UAE Time).