Cisco Shares Drop 12% on Memory Price Surge Eroding Margins

Cisco (CSCO-US) fell 12% on Thursday, its largest single-day decline since 2022. The plunge followed strong AI chip demand driven by NVIDIA (NVDA-US), which tightened data center memory supply and drove prices sharply higher, squeezing margins for network equipment makers including Cisco. The memory shortage expanded beyond smartphones to impact Apple (AAPL-US), Dell (DELL-US), and chipmakers like Qualcomm (QCOM-US). Cisco's pre-earnings report on February 4 and its subsequent weaker-than-expected guidance contributed to the tumble. In the earnings call, CEO Chuck Robbins said memory price increases are a shared industry challenge, and CFO Mark Patterson noted the company will adjust pricing, renegotiate contracts, and focus on controllable costs. For the quarter ended February 4, Cisco forecast adjusted gross margins of 65.5%–66.5%, below analysts' average of 68.2%, citing product mix changes and rising memory costs.