Cisco Systems stock faces Morgan Stanley caution before earnings

Cisco Systems stock traded at 87.61 euros on Lang & Schwarz at 13:02 CET on Tuesday, November 10. The networking company enters its fiscal first-quarter reporting week after Morgan Stanley reduced its rating and price target, raising the hurdle for a positive surprise.

In a report published on November 6, Yahoo Finance said Morgan Stanley moved Cisco to Equal-weight from Overweight and lowered its target to 120 US dollars from 135 US dollars. The 11.11 percent reduction reflects a more balanced risk-reward view after Cisco's strong share-price run, rather than a withdrawal of confidence in its longer-term business prospects.

AI growth meets margin pressure

Morgan Stanley continues to see substantial demand for artificial-intelligence infrastructure. The bank expects Cisco's AI revenue to reach 9 billion US dollars in fiscal 2027 and 12 billion US dollars in fiscal 2028, above Cisco's current 7.5 billion US dollar fiscal 2027 target.

The brokerage also expects Cisco's fiscal 2027 revenue to reach about 73.25 billion US dollars, with earnings per share rising 18 percent to 5.14 US dollars. At the same time, it cautions that a higher share of hardware sold to hyperscale cloud customers carries lower gross margins than Cisco's traditional business. That mix could support sales growth while limiting the pace of profit expansion.

Demand timing is another focus. Morgan Stanley flagged the possibility that customers brought orders forward ahead of planned price increases. Such pull-forward effects could strengthen near-term results but make subsequent comparisons more demanding. The bank said its checks remain solid, while the scope for Cisco to exceed already-high expectations has narrowed.

Thursday brings the next test

Cisco is scheduled to release fiscal first-quarter results after the US market close on Thursday, November 12. Management's current guidance calls for revenue of 18.0 billion to 18.2 billion US dollars and adjusted earnings per share of 1.32 to 1.34 US dollars. Morgan Stanley's estimates are higher at 18.3 billion to 18.4 billion US dollars of revenue and adjusted earnings per share of 1.36 to 1.38 US dollars, with an expected gross margin of 66 percent.

The report will show whether strong networking orders are translating into profitable growth. Investors are likely to focus on order momentum, gross-margin performance and whether Cisco maintains its AI infrastructure outlook. The company finished fiscal 2026 with revenue of 63.3 billion US dollars, up 12 percent, while annual AI infrastructure orders reached 9.3 billion US dollars, according to the Yahoo Finance report.

Cisco Systems investors can follow broader moves in the S&P 500 alongside the company's earnings update.

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