Cisco Systems and Applied Materials each delivered record-setting quarters this week. Both companies crushed Wall Street estimates on revenue and earnings. And both stocks are trading lower. For self-directed investors trying to make sense of the reaction, the setup is worth understanding — because the gap between results and stock price often creates opportunity.
Cisco: A Networking Supercycle Hiding in Plain Sight
Cisco (CSCO) reported fiscal fourth-quarter 2026 results on August 12, posting revenue of $17.25 billion — up 18% year over year and above the $16.83 billion consensus. Non-GAAP earnings per share came in at $1.22, topping the $1.17 estimate. For the full fiscal year 2026, revenue reached $63.30 billion, up 12%, marking the highest revenue, operating margin, and earnings per employee in the company's 30-year history as a public company.
The standout data point wasn't the earnings beat — it was the AI order momentum. Cisco booked $4.00 billion in hyperscaler AI infrastructure orders in Q4 alone, bringing the fiscal year 2026 total to $9.30 billion, a roughly 4.5x increase from fiscal year 2025. Networking product orders surged 40% year over year in Q4, the eighth consecutive quarter of double-digit growth in that category. The company's fiscal year 2027 revenue guidance came in at $72.20 billion to $73.40 billion — well above what analysts had modeled.
Yet as of August 14, CSCO is trading at $111.69, down -1.57% on the day. The stock sits near the middle of its 52-week range of $65.75 to $130.37, and it carries a P/E ratio of 33.53 on trailing 12-month EPS of $4.09.
Why the muted reaction? Analysts pointed to gross margin compression. Cisco's non-GAAP gross margin slipped 2.1 percentage points to 66.3% as the revenue mix shifted toward hardware-heavy AI infrastructure. Services revenue was flat year over year, and management flagged only low single-digit services growth expected in fiscal year 2027. For a company trading at a growth multiple, flat services and margin pressure gave investors reason to pause.
Still, the analyst community isn't walking away. Of 14 analysts covering the stock, 78.6% carry a bullish rating. The average price target sits at $131.86, implying 18.1%upside from current levels, with the highest target reaching $165.00.
HSBC downgraded Cisco to Hold on August 14 with a $120.00 target, while UBS and Truist Securities each maintained Buy ratings with targets of $138.00 and $140.00, respectively.
Applied Materials: Record Quarter, Sold on the News
Applied Materials (AMAT) reported fiscal third-quarter 2026 results on August 13. The semiconductor equipment company posted revenue of $9.12 billion, up 25% year over year and the highest sequential revenue growth in the company's history. Non-GAAP EPS came in at $3.50, up 41% year over year and above the $3.40 consensus. The Semiconductor Systems segment generated $7.04 billion in revenue, up 27% year over year, with DRAM — including high-bandwidth memory used in AI chips — accounting for 26% of semiconductor revenue, up from 22% a year ago.
CEO Gary Dickerson described AI adoption as driving "unprecedented demand" for the company's materials engineering solutions, and management raised its calendar year 2026 semiconductor equipment growth outlook to more than 30%, up from a prior forecast of more than 20%.
Fourth-quarter guidance was particularly striking. Applied Materials is projecting $10.25 billion in Q4 revenue — a midpoint 51% above Q4 fiscal year 2025 — and non-GAAP EPS of $4.02, up 85% year over year. Analysts had been modeling $9.54 billion in Q4 revenue and EPS of $3.71.
Despite all of that, AMAT is trading at $506.13 on August 14, down -5.32%. The stock's 52-week range runs from $154.47 to $739.67, meaning it remains well below its peak. Investors appeared focused on near-term margin guidance and the pace of sequential improvement, selling the news after a strong run into earnings. The company carries a market cap of $401.80B and a P/E of 43.64 — a premium multiple that leaves little room for disappointment even when results impress.
Of 22 analysts covering Applied Materials, a commanding 95.5% rate the stock as bullish. The average price target of $665.77 implies 31.5% upside from current levels, with the highest target at $900.00. Post-earnings, TD Cowen reiterated its Buy rating with a $700.00 target, while RBC Capital raised its target to $600.00 from $520.00.
What Investors Should Watch
The post-earnings sell-offs in CSCO and AMAT reflect a pattern that has appeared repeatedly in this earnings cycle: record results, raised guidance, and stocks that still move sideways or lower as investors focus on what they're not getting — faster margin expansion, higher services contributions, or cleaner near-term visibility.
That disconnect can be noise, or it can be signal. For AMAT, AI-driven chip manufacturing capex is still accelerating, and management's guidance for fiscal Q4 significantly exceeds what the Street expected. For Cisco, the AI networking supercycle story is intact, even if gross margins are absorbing the hardware mix shift. Both companies are executing well in a capital-intensive AI infrastructure buildout that appears durable through the end of the decade.
Investors looking for exposure to the infrastructure layer powering AI — one step removed from chip hype — have two companies worth a closer look this weekend.
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