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By Juby Babu<\/p>\n
Feb 11 (Reuters) – Cisco Systems (CSCO) posted quarterly adjusted gross margin below market estimates on Wednesday, as the networking equipment provider grapples with the \u200cfallout of a global memory price increase, sending its shares down 7% in \u200cpremarket trading on Thursday.<\/p>\n
The rapid build-out of artificial intelligence infrastructure by U.S. tech firms such as OpenAI, Alphabet and Microsoft has \u200babsorbed much of the world’s memory chip supply, which has lifted prices as manufacturers prioritize components for higher-margin data centers over consumer devices.<\/p>\n
Cisco provides the essential high-speed networking infrastructure, with switches and routers powered by multiple kinds of memory chips, that underpins data centers running AI \u200capplications.<\/p>\n
“Strong demand and accelerating revenue were \u2060clear positives for Cisco this quarter, but compressed margins definitely took some shine off the report,” said Jake Behan, head of capital markets \u2060at Direxion. “The rate at which Cisco can monetize any order backlog and turn that into real revenue will be a key focus for the second half of the year.”<\/p>\n
The networking equipment \u200bmaker \u200bposted adjusted gross margin of 67.5% for the \u200bsecond quarter, below the analysts’ average \u200cestimate of 68.14%, according to data compiled by LSEG.<\/p>\n
In response to recent memory price increases, Cisco has already raised its own prices and is also revising contractual terms with partners and customers, CEO Chuck Robbins said on a call with investors. Shares of the company have risen over 11% so far this year after a 30% jump in 2025, as \u200cWall Street bets big on its potential to \u200bbenefit from robust spending on AI with its data \u200bcenter networking products.<\/p>\n
“Given the strong demand \u200bfor our Silicon One systems and optics, we now expect to \u200ctake AI orders in excess of $5 billion \u200band to recognize over $3 \u200bbillion in AI infrastructure revenue from hyperscalers in fiscal year 2026,” Robbins added.<\/p>\n
Cisco now expects 2026 revenue between $61.2 billion and $61.7 billion, compared with its prior forecast of $60.2 \u200bbillion to $61 billion.<\/p>\n\n
The company reported \u200ctotal revenue of $15.35 billion for the quarter ended January 24, beating the \u200banalysts’ average estimate of $15.12 billion.<\/p>\n
(Reporting by Juby Babu in Mexico City and Arsheeya \u200bBajwa in Bengaluru; Editing by Alan Barona)<\/p>\n<\/p><\/div>\n