Cisco Gives Tepid Margin Forecast, Marring Upbeat Outlook

Cisco’s profitability forecast for Q2 2026 fell short of expectations, with adjusted gross margins projected at 65.5%–66.5%, below the 68.2% analyst consensus, citing rising memory-chip costs as a key drag. The weak margin outlook overshadowed a positive sales forecast driven by AI-related revenue growth, highlighting cost pressures despite demand strength in emerging tech sectors. Shares declined in late trading as investors reacted to the profit warning, prioritizing margin concerns over revenue optimism in Cisco’s hardware and networking business. Analysts noted memory-chip price surges as a broader industry challenge, squeezing profit margins for hardware manufacturers reliant on semiconductor components amid supply chain volatility. The forecast underscores tensions between AI-driven growth and escalating production costs, testing Cisco’s ability to balance innovation investments with near-term financial performance.