Cisco shares fell nearly 5% on Tuesday after Piper Sandler lowered its price target to $125 from $132, citing expectations for a lower price-to-earnings multiple as concerns mount that the networking sector's growth cycle is peaking.
The catalyst
Piper analysts framed the cut around valuation compression rather than fundamentals, arguing that the market is starting to price in a deceleration even as Cisco's recent results remain strong. The stock closed at $106.44, still up 57% over the trailing 12 months after hitting a record high in June.
Earnings backdrop
Last month Cisco reported fiscal fourth-quarter revenue of $17.25 billion, beating the $16.8 billion consensus from LSEG. Management guided for nearly 15% revenue growth in fiscal 2027, a projection Piper described as conservative given underlying demand from hyperscalers. Analysts nonetheless greeted the outlook with skepticism, arguing sales growth will revert to single digits once the current AI infrastructure build-out matures.
The hyperscaler bet
Hyperscaler revenue reached about $4 billion in fiscal 2026 and is expected to nearly double to $7.5 billion in fiscal 2027. That trajectory would make the segment a larger share of total revenue, but the market has so far treated the forecast as a reason for caution rather than conviction.
Management's tone
"We're starting a new fiscal year. We're operating in incredible markets," Chief Executive Chuck Robbins told CNBC's Jim Cramer in August. "But it's also a time that we're going to start the year being a little bit prudent." The market appears to be pricing the prudence more than the opportunity.