Cisco Systems Has Multi-Year Growth Path But Faces Margin Concerns, Morgan Stanley Says

12:02 PM EST, 11/05/2026 (MT Newswires) -- Cisco Systems (CSCO) has a multi-year path to double-digit growth, largely driven by its cloud business, supporting a higher valuation multiple than its historical average, but potential demand pull-forward ahead of pricing increases and lower margins in its hyperscaler AI business remain concerns, Morgan Stanley said Thursday in a note. Morgan Stanley believes the improving demand environment and emerging AI opportunity reinforce its original overweight thesis on Cisco, but sees merit in trimming exposure following the stock's significant outperformance, according to the note. The stock could continue to gain on earnings growth, but high expectations and gross margin headwinds from its AI business leave less room for further upside. Morgan Stanley expects fiscal Q1 revenue of $18.3 billion to $18.4 billion and adjusted EPS of $1.36 to $1.38, alongside 18% to 20% growth in product orders excluding hyperscalers and hyperscaler AI orders worth $3 billion to $3.5 billion. It expects Cisco to raise its fiscal 2027 revenue and adjusted EPS guidance to $73.25 billion and $5.14, respectively. Morgan Stanley downgraded Cisco Systems to equal weight from overweight and cut its price target to $120 from $135. Shares of Cisco were down 6% in Thursday afternoon trading. Price: 97.36, Change: -6.25, Percent Change: -6.03