Cisco Systems’ shares fell more than 2% on Friday after HSBC downgraded the networking equipment maker from “buy” to “hold”, citing concerns that the company’s recent restocking boost is losing steam.
The bank also lowered its price target to $69 per share from $73, implying a modest 0.4% downside from Thursday’s close.
Cisco shares were trading at $67.27, down 2.93% at the time of writing.
Fourth-quarter results match consensus but lag HSBC estimates
For the fourth quarter of fiscal 2025, Cisco reported revenue of $14.67 billion, up 7.6% from the same period a year earlier.
The figure matched both consensus and HSBC’s expectations.
Non-GAAP operating margin rose 1.73 percentage points year-on-year to 34.3%, meeting consensus forecasts but falling short of HSBC’s 35.3% projection.
Non-GAAP earnings per share increased 13.8% to $0.99, also in line with estimates.
The networking segment — a core part of Cisco’s business — showed marked improvement over the year, but the company’s forward guidance raised questions about whether this recovery can continue at the same pace.
Restocking effect fading, says HSBC
In a note to clients, HSBC analyst Stephen Bersey said Cisco’s “restocking party seems over” following quarterly results that, while broadly in line with market expectations, fell short of the bank’s forecasts.
“We expected Cisco’s networking segment to report improved growth vs a low base as its sector emerged from several quarters of destocking,” Bersey wrote.
He noted that networking revenue growth had rebounded sharply — from a 23.5% year-on-year decline in the first quarter of fiscal 2025 to a 12.2% increase in the fourth quarter.
However, Bersey flagged that the company’s fiscal 2026 revenue guidance of 5% year-on-year growth, combined with slowing growth in remaining performance obligations and backlog (up just 4.2% in the fourth quarter), suggests the restocking-driven momentum may be fading sooner than anticipated.
AI strength offset by weakness elsewhere
Cisco has seen rising demand for AI-related infrastructure, with more than $2 billion in orders booked during fiscal 2025.
However, HSBC noted that this strength appears to be offset by softness in other areas of the business.
Bersey also argued that the stock now looks fairly valued.
Cisco shares have climbed over 17% year-to-date and surged 42.8% in the past 12 months, outpacing the broader S&P 500.
Despite this performance, most analysts remain cautious — of the 38 covering the stock, 24 rate it as a “hold”, according to LSEG data.
The downgrade from HSBC comes even as Cisco delivered solid year-on-year revenue growth in its latest results, underscoring investor concerns about the sustainability of its growth drivers.
The share price drop on Thursday suggests some investors are now reassessing the company’s valuation and growth trajectory.
Cisco’s ability to balance AI infrastructure gains with stability in its broader product portfolio will be a key factor for the stock in the months ahead.
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