Cisco Slides 5% as Analysts Question Whether AI-Fueled Growth Is Peaking

Cisco closed Tuesday at $106.44 after Piper Sandler reduced its valuation expectations for the networking equipment company. The analysts pointed to the potential for lower price-to-earnings multiples as industry growth begins to moderate. The pullback follows a strong run that took Cisco shares to a record high in June.

The company’s recent financial performance has remained solid. Cisco reported fourth-quarter revenue of $17.25 billion last month, exceeding the $16.8 billion expected by analysts surveyed by LSEG. Revenue has benefited from increased investment in networking infrastructure as technology companies expand their AI capabilities.

Cisco also issued strong guidance for fiscal 2027, projecting revenue growth of nearly 15%. However, the outlook received a muted response from investors, with some analysts expecting growth to return to single-digit levels after the current expansion. Piper Sandler described Cisco’s projection as conservative given the strength of market demand.

CEO Chuck Robbins has acknowledged the favorable environment while maintaining a cautious approach to forecasting. He said Cisco is operating in markets with significant tailwinds but that the company intends to remain prudent at the beginning of its new fiscal year. That caution comes as investors assess how long the current wave of AI-related infrastructure spending can continue.

Hyperscale customers have become an increasingly important source of growth. They generated approximately $4 billion in revenue for Cisco during fiscal 2026, and the company expects that figure to rise to $7.5 billion in fiscal 2027. The projected increase highlights Cisco’s growing exposure to large-scale data center and AI infrastructure investment.

At the same time, that exposure raises expectations for future performance. Cisco shares remain up 57% over the past 12 months even after Tuesday’s decline, meaning investors have already priced in substantial growth from the AI boom. Concerns that networking demand could eventually normalize may therefore put greater pressure on the company to consistently exceed forecasts.

Cisco’s outlook now reflects a broader question facing companies benefiting from the AI infrastructure cycle: whether rapid spending can translate into durable long-term growth. Strong hyperscaler demand provides Cisco with significant momentum heading into fiscal 2027, but sustaining its share-price gains may increasingly depend on proving that the current expansion extends beyond a near-term surge in AI investment.