AI infrastructure spending boosts Cisco’s earnings and revenue, but its stock declines after-hours

Cisco Systems Inc. reported solid earnings and revenue for the fourth quarter, outpacing analyst estimates. The company's stock, however, declined in late trading following a drop in gross margins. Cisco's earnings per share, excluding certain costs, came in at $1.22, slightly above the expected $1.17 per share. Revenue for the period totaled $17.25 billion, representing an 18% increase from the previous year and beating the forecast of $16.82 billion.

Net income grew by 51% to $3.9 billion. The artificial intelligence boom has been a catalyst for Cisco's growth, particularly in its networking segment, which comprises equipment used in AI data centers. The segment's revenue reached $9.79 billion, a 28% increase from last year and surpassing the Street's forecast of $9.66 billion.

Hyperscalers, or large data center operators, contributed $4 billion in AI infrastructure spending during the quarter, with the total spending on such equipment reaching $9.3 billion for the fiscal year. Cisco CEO Chuck Robbins attributed the strong performance to the company's portfolio and competitive edge in secure networking, emphasizing its ability to support customers in deploying AI across various environments.

Despite the positive results, Cisco's stock fell by more than 4% in after-hours trading, likely due to the decline in gross margins, which dropped to 66.3% from 68.4% in the same period a year earlier. This decrease can likely be attributed to rising costs for components like memory chips used in Cisco's networking hardware.