Stock Market Today, Aug. 13: Cisco Falls on Margin Concerns Despite Record Revenue and AI Demand
Cisco Systems (NASDAQ:CSCO), a global networking hardware and security provider, closed at $113.47, down 8.40%. The stock fell after better-than-expected fiscal fourth-quarter results and guidance, but investors are focusing on margin pressure, even as the stock is still up nearly 50% this year.
Trading volume reached 61.1 million shares, coming in about 137% above its three-month average of 25.7 million shares.
How the markets moved today
The S&P 500 (SNPINDEX:^GSPC) rose 0.65% to 7,799, and the Nasdaq Composite (NASDAQINDEX:^IXIC) gained 0.81% to 26,803. In networking equipment and enterprise communications technology, Arista Networks (NYSE:ANET) fell 3.27% to $203.62, while Hewlett Packard Enterprise (NYSE:HPE) rose 1.75% to $59.82 as investors weighed Cisco Systems' earnings reaction and broader spending trends.
What this means for investors
Investors approached Cisco’s fiscal fourth-quarter earnings with high expectations for the company. Cisco stock was up 60% year-to-date entering today’s trading. While the company delivered record top and bottom-line results, total (non-GAAP) gross margin for the quarter dropped to 66.3% from last year's 68.4%. This decline was partly attributed to the increased cost of components used in AI hardware, such as memory.
AI-related demand remains strong, however. Some analysts also noted the decline in gross margin, but suggested that operating margins would expand in fiscal 2027. This expansion could result in profits growing faster than revenue.
That may make today’s plunge a good opportunity to at least begin a position in Cisco stock.
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Howard Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Arista Networks, Cisco Systems, and Hewlett Packard Enterprise. The Motley Fool has a disclosure policy.
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