Cisco Stock Falls 5% on Piper Sandler Cut Citing Growth Peak
Piper Sandler lowered Cisco's price target to $125, citing peaked industry growth despite the networker's record June highs and strong AI-driven revenue.
Key points
- Piper Sandler cut Cisco's price target to $125 from $132, citing concerns that industry growth is peaking.
- Cisco reported Q4 revenue of $17.25 billion, beating the $16.8 billion analyst estimate, though the stock fell 5% on the news.
- Cisco projects hyperscaler revenue to nearly double to $7.5 billion in fiscal 2027, up from $4 billion in the prior year.
Cisco shares declined by approximately 5% on Tuesday following a downward revision in the firm's price target by Piper Sandler. The brokerage reduced its valuation from $132 to $125, a move that reflected diminished expectations for the company's future earnings multiple.
The analyst firm argued that the networking sector is reaching a growth ceiling, which limits the premium investors are willing to pay for Cisco's performance. This assessment contrasts with the stock's recent momentum, where shares gained 56% over the last 12 months driven by the artificial intelligence infrastructure boom.
Quarterly results exceeded market estimates
During its most recent earnings report, Cisco delivered a fourth-quarter performance that surpassed analyst forecasts. The company recorded revenue of $17.25 billion, which outperformed the $16.8 billion consensus estimate tracked by LSEG.
Despite the top-line beat, the market reaction was muted. Investors appeared skeptical of the sustainability of the growth rate, leading to a lackluster reception of the financial results even as the figures themselves remained strong.
Guidance suggests prudent fiscal outlook
In August, Cisco provided guidance for fiscal year 2027 that projected nearly 15% revenue growth. However, analysts at Piper Sandler characterized this outlook as conservative, suggesting that actual sales growth could revert to single digits despite high demand in the market.
Cisco executives told CNBC that the company is adopting a prudent approach as it begins a new fiscal year. This strategy aims to balance aggressive expansion in lucrative markets with careful management of operational expectations.
Hyperscaler revenue set to double
A significant driver of Cisco's recent performance is its business with hyperscale cloud providers. In fiscal year 2026, these customers accounted for approximately $4 billion in revenue.
The company expects this segment to nearly double in fiscal year 2027, reaching an estimated $7.5 billion. This expansion highlights the critical role that large-scale AI infrastructure builds play in Cisco's current and future revenue streams.
