By Trefis Team
Publication Date: 2026-02-19 13:30:00
This photograph taken on January 20, 2026 shows signage bearing the Cisco logo during the World Economic Forum (WEF) annual meeting in Davos. The World Economic Forum takes place in Davos from January 19 to January 23, 2026. (Photo by INA FASSBENDER / AFP via Getty Images)
AFP via Getty Images
The “AI Order Surge” may have obscured a profit warning for the average Cisco (NASDAQ:CSCO) investor. On the evening of February 11, 2026, Cisco Systems appeared to deliver a textbook beat-and-raise quarter, highlighted by a staggering $2.1 billion in AI infrastructure orders. Yet by the next morning, the stock had plunged 12%, wiping out more than $40 billion in market value. This sharp repricing was not driven by a revenue miss or a reduction in full-year guidance — in fact, guidance was raised. Instead, the market looked beyond the impressive AI order book and focused on a single forward-looking metric that reshaped the narrative: a forecasted “gross margin contraction.”
But this margin squeeze is not occurring in isolation — it represents the direct financial fallout of a high-stakes battle against Nvidia (NVDA) for control of the AI data center. The central tension for Cisco is no longer its ability to secure orders; it is the heavy cost required to fend off Nvidia’s expanding ethernet platforms.
The question that erased a tenth of the company’s value overnight is straightforward: is this new wave of growth actually profitable?
The market’s verdict was swift, suggesting…
