Morgan Stanley downgrades Cisco before scheduled Q1 FY27 results

Morgan Stanley moves Cisco to Equal-Weight

Morgan Stanley downgraded Cisco Systems from Overweight to Equal-Weight on November 5 as Meta Marshall said the risk-reward was balanced ahead of the networking company’s scheduled first-quarter fiscal 2027 results. The downgrade came before Cisco was due to release its results on November 12; the reporting had not occurred as of the review’s November 6 knowledge snapshot.

Cisco shares were reported down 2.9% in premarket trading following the downgrade.

Price target and margin concerns

Marshall lowered her price target on Cisco to $120 from $135. She said Cisco could continue to appreciate through earnings growth, but strong expectations and gross-margin headwinds from the AI business left less room for upside. Her reduced target was an analyst view, not company guidance.

Marshall also said she saw a lower probability that Cisco would exceed full expectations, particularly in light of results reported elsewhere in the networking and cybersecurity sectors. She remained constructive on Cisco’s fundamentals, citing improving demand and its AI opportunity, while assessing the shares’ risk-reward as balanced.

Expectations for the November 12 report

Wall Street expected Cisco to report first-quarter fiscal 2027 earnings per share of $1.32, up 32% from the prior-year quarter. The estimate was attributed to Wall Street and remained an expectation rather than a reported result. The supplied coverage did not provide revenue consensus, company guidance or management remarks for the upcoming release.

Cisco was also expected to address a business in which the analyst saw AI-related gross-margin pressure. The reviewed reports did not quantify that pressure, so its effect on the forthcoming financial results could not be established from the available evidence.

Valuation follows strong share performance

Cisco shares had risen 43% over the preceding 12 months, compared with a 14% increase in the S&P 500, according to the coverage of Marshall’s rationale. She said Cisco traded at about 19 times forward earnings, in line with the S&P 500, and argued that much of the AI-driven rerating and market-cap expansion was already reflected in the shares.

The broader analyst consensus cited in the coverage was Moderate Buy, based on 11 Buy ratings and eight Hold ratings. Its average price target was $137.50, which represented 42.3% implied upside at the time of the cited market price. Those figures represented the wider analyst group’s views and did not change Morgan Stanley’s more cautious Equal-Weight position.

What remains unconfirmed

Cisco’s scheduled November 12 release is the next verifiable milestone. Whether the company exceeds the cited earnings expectation, what management says about AI-related gross margins and how the shares respond remain unresolved; the downgrade and previews should not be treated as evidence that those outcomes have occurred.