Group 1 - Wall Street's tech sector experienced a significant decline, erasing over $500 billion in market value across 10 major companies, with both software and legacy hardware firms affected [1] - The iShares Expanded Tech-Software Sector ETF (NYSE:IGV) fell more than 3% on Thursday, marking a year-to-date decline of over 20% [2] - Cisco's earnings report was a key catalyst for the broader tech slump, as the company saw an 11% drop in stock price despite reporting earnings of $1.04 per share, exceeding the $1.02 consensus, and revenue of $15.35 billion, above estimates of $15.11 billion [2] Group 2 - Cisco's gross margin guidance for the fiscal third quarter was 65.5%-66.5%, which fell short of the 68% consensus, attributed to a heavier hardware mix and rising commodity costs [3] - Cisco's networking revenue grew 21% year over year, with orders accelerating above 20%, indicating strong demand despite margin pressures [3] - Lenovo, a major player in the tech industry, acknowledged the risk of declining PC shipments due to worsening memory shortages, with the CEO stating the company aims to maintain profitability amid these challenges [4]

Cisco System (CSCO) is dropping today despite posting record revenue for its fiscal Q2 and beating earnings estimates. Investors have been put off by the company’s in-line guidance and a slight decline in non-GAAP gross margin, triggering a selloff that pushed it below its 50-day moving average (MA) on Feb. 12. More News from Barchart While that technical setup signals continued downward momentum ahead, Ray Wang, founder and chairman of Constellation Research, recommends buying the dip in Cisco shares ...

Group 1 - Wall Street experienced volatility, with technology and software stocks declining after Cisco Systems Inc. provided a cautious margin outlook, raising concerns about profit durability in the AI sector [1] - Cisco's shares fell over 11%, marking their worst single-day drop since May 2022, despite exceeding earnings and revenue expectations [1] - The iShares Tech-Expanded Software Sector ETF, seen as a measure of AI-disruption risk, decreased by 3.7%, returning to lows from the previous week [2] Group 2 - Major US indices saw declines, with the Nasdaq 100 down 1.7%, S&P 500 and Dow Jones Industrial Average each losing 1.2%, and the Russell 2000 falling 2.4% [3] - Volatility increased, as indicated by a 16% jump in the VIX, leading investors to shift towards defensive sectors like utilities and consumer staples [3] - Commodities faced declines, with gold dropping 2.7% to below $5,000 per ounce and silver plunging over 8% to $77 [3] Group 3 - Crude oil prices retreated sharply, with WTI down 3% due to rising expectations of a potential U.S.–Iran deal that could reduce geopolitical risk premiums [4] - In the cryptocurrency market, Bitcoin fell 2% to $65,000, marking a trend towards a fourth consecutive session of losses [4]

Core Viewpoint - Cisco Systems has successfully transformed from a hardware-centric company to a diversified software and services powerhouse, reflecting a significant evolution in its business model and market positioning [1][2][3]. Group 1: Company Evolution - Cisco has shifted focus towards recurring revenue models, with over 50% of its revenue now driven by subscriptions, particularly in observability and cybersecurity following the acquisition of Splunk for $28 billion in 2024 [3][4]. - The company has capitalized on the AI infrastructure boom, enhancing its Ethernet switching and AI-optimized networking solutions, which are gaining traction among hyperscalers [4]. - Cisco's annual recurring revenue (ARR) has shown steady growth, supported by its strategic pivots and investments in AI networking [4][13]. Group 2: Financial Performance - In the fiscal second quarter, Cisco reported revenue of $15.35 billion, a nearly 10% increase year-over-year, surpassing consensus estimates of $15.12 billion [9]. - Earnings per share reached $1.04, up 11% from the previous year, exceeding forecasts by $0.02 [9]. - The company highlighted $2.1 billion in AI infrastructure orders for the quarter, raising full-year expectations to over $5 billion, indicating strong demand from hyperscalers [9][10]. Group 3: Market Position and Outlook - Despite a dip in shares following earnings, Cisco's diversified exposure across networking, security, and observability provides stability amid tech sector volatility [7][10]. - The company projects Q3 FY2026 revenue between $15.4 billion and $15.6 billion, reflecting a 5-7% year-over-year growth, with adjusted earnings expected between $1.02 and $1.04 [10]. - Cisco's recent dividend increase of 2% to $0.42 per share reinforces its commitment to shareholder returns and reflects its underlying financial health [13][14].

Core Viewpoint - Investors are selling off shares of Cisco (NASDAQ: CSCO) despite the company reporting record revenue and exceeding earnings estimates for its fiscal Q2, primarily due to management's cautious outlook [1] Financial Performance - Cisco reported record revenue for fiscal Q2, surpassing earnings estimates, which typically would boost investor confidence [1] Management Outlook - The sentiment among investors is dampened by management's cautious outlook, which has led to concerns about future performance despite the strong current results [1]

Networking giant Cisco Systems is the latest tech firm to see its stock drop after revealing it's grappling with the impacts of a global memory shortage. ...

Core Insights - The article discusses the expertise of Vladimir Dimitrov, CFA, who has a background in strategy consulting focused on brand and intangible asset valuation, particularly in technology, telecom, and banking sectors [1] Group 1: Professional Background - Vladimir Dimitrov has worked with some of the largest global brands in various sectors, indicating a strong industry presence and experience [1] - He graduated from the London School of Economics, which adds credibility to his analytical skills and knowledge base [1] Group 2: Investment Focus - The focus is on identifying reasonably priced businesses that possess sustainable long-term competitive advantages, suggesting a value-oriented investment strategy [1]

Company Performance - Cisco (CSCO) reported solid earnings and guidance but saw its stock decline due to concerns over rising memory costs, which analysts believe are manageable given Cisco's strength in AI-related areas [5] - AppLovin (APP) also experienced a stock drop despite beating revenue and earnings estimates, guiding for Q1 revenue between $1.745 billion and $1.775 billion, exceeding the $1.7 billion estimate [5] - Rollins (ROL) was the largest decliner in the S&P 500 after missing both revenue and adjusted earnings estimates, attributing the shortfall to erratic weather patterns affecting seasonal work [6] Economic Indicators - Existing home sales fell by 8.4% in January to a seasonally adjusted annual rate of 3.91 million, below the consensus estimate of 4.2 million and down from 4.27 million in December [7] - The decline in home sales is being compared to lows seen during the Great Recession, with some analysts suggesting that the drop may be temporary and could reverse if mortgage rates decrease in the coming quarters [8] Market Trends - The S&P 500 has not shown significant gains this year, but there is a rotation away from last year's leading sectors, benefiting less trendy areas of the market [9] - The S&P 500 Machinery Index has increased by over 20% year to date, with companies like Cummins (CMI), Nordson (NDSN), PACCAR (PCAR), Caterpillar (CAT), and Parker-Hannifin (PH) receiving strong ratings [10]

Core Insights - Cisco Systems, Inc. is experiencing positive impacts from AI, as evidenced by its recent fiscal Q2 results [1] Financial Performance - The company has reported significant benefits from AI integration in its operations, contributing to its financial performance [1] Investor Sentiment - Despite the positive financial results, investor sentiment appears to be turning negative towards the company [1]

Market Overview - Wall Street experienced declines, particularly in technology stocks, with a notable rotation into cyclical sectors like industrials, which are performing strongly [1] - Key holdings in the portfolio, including Dupont, Dover, Honeywell, Linde, GE Vernova, and Eaton, have shown extraordinary year-to-date performance, while the S&P 500 has only slightly increased [1] Portfolio Management - The decision to trim positions in Eaton and Procter & Gamble was made to maintain portfolio discipline as these stocks benefited from the market rotation [1] - A prior decision to reduce Cisco holdings before its earnings report was validated as shares fell over 10% following the announcement [1] Cisco's Performance - Cisco reported a strong quarter with networking order growth exceeding 20%, marking six consecutive quarters of double-digit growth, driven by AI hardware demand [1] - Despite the positive growth, a dip in gross margins due to rising memory prices caused concern among investors [1] - Management's actions to leverage pricing power and robust order growth led to an increase in full-year earnings guidance, indicating a commitment to long-term performance [1] Impact on Related Companies - Apple shares fell over 3% in response to Cisco's warning about memory prices, with PC makers Dell Technologies and HP Inc. experiencing even larger declines of 9% and 6%, respectively [1] - Memory prices are a critical factor for these companies, raising concerns about future margins [1] Apple Developments - Apple is facing challenges with the rollout of the Siri upgrade, which is now expected to be staggered throughout the year instead of a full launch in March [1] - Despite the delay, strong iPhone sales are ongoing, suggesting that the slower Siri rollout may not significantly impact Apple's overall performance [1] - The partnership with Google's Gemini AI models has created optimism regarding the potential value of the Siri upgrade [1]