Cisco Drops to $116.40 as 210 Basis Points of Margin Erase a Record $17.3B Quarter

Cisco Systems traded down 5.72% to $116.80 in Thursday's pre-market session and extended losses through the open, falling roughly 7% to 8% during regular trading after opening near $116.40. That follows a Wednesday close of $123.88, up 2.86%, and a session in which the stock had been testing the $124.62 trendline that has capped it for weeks.

The after-hours sequence was orderly and then accelerated. Shares fell 4.6% to $118.18 in the first minutes following the 4:05 p.m. Eastern release, then extended to the mid-$116 range as the earnings call progressed and management detailed first-quarter margin guidance.

The round trip erases roughly three weeks of gains. Cisco closed Monday's regular session at $122.57 and Tuesday at $120.43, having advanced 61.6% year to date and 75.97% over twelve months — a run that more than quadrupled the S&P 500's roughly 13% advance over the same period. Market capitalization stood at $488.3 billion at Wednesday's close and falls to roughly $459 billion at $116.40.

The setup into the print was demanding by any measure. The options market priced an 8.21% move, above the 7.75% average absolute move Cisco has delivered across its last four quarterly reports, where reactions ranged from 0.80% to 13.41%. Prediction market traders assigned a 96.1% probability of an earnings beat. Analysts had issued 18 upward EPS revisions with zero downgrades over the trailing three months, and an identical 18-to-zero pattern on revenue.

The stock entered the report 7.6% below its 52-week high of $130.37, having defended $119.65 support and pressed against $124.62 resistance with relative strength at 63. A breakout above $124.62 was expected to open $129.75.

Recent history offered a warning. The May 13 third-quarter report produced a 2.6% gain on the day and a further 13.4% the following session. The February 11 second-quarter report also delivered a beat, and the stock fell 13.1%. Cisco has beaten both top and bottom lines in every quarterly report over the past two years, and the reaction has been unpredictable in both direction and magnitude.

Record Everything: $17.3 Billion Revenue, $1.22 EPS, $63.3 Billion Year

The quarter itself was the strongest in the company's modern history and exceeded the high end of every guidance range management had set.

Fourth-quarter revenue for the period ended July 25 reached $17.3 billion, up 18% year over year, against consensus of $16.82 billion to $16.84 billion and a guidance range of $16.7 billion to $16.9 billion. Product revenue rose 24% to $13.5 billion while services revenue of $3.8 billion was flat.

Non-GAAP earnings came in at $1.22 per share, up 23% from $0.99, against a $1.17 consensus and a $1.16 to $1.18 guidance range. GAAP net income jumped 51% to $3.9 billion, or $0.97 per share.

Geographic performance was broad. Americas revenue rose 18%, EMEA 19% and APJC 14% — three regions all delivering double-digit growth in the same quarter, which has not happened in years.

The full-year figures are the ones management chose to lead with. Fiscal 2026 revenue reached a record $63.3 billion, up 12%, against a guidance range of $62.8 billion to $63.0 billion. GAAP net income rose 30% to $13.3 billion. Non-GAAP earnings per share came in at $4.33, up 14%, against guidance of $4.27 to $4.29. Chief Executive Chuck Robbins characterized fiscal 2026 as delivering the highest revenue, operating margin and earnings per employee in thirty years.

GAAP operating margin reached 24.7% and non-GAAP operating margin 35.9%, the latter against a guidance range of 34% to 35%. GAAP operating expenses were $6.8 billion, up 10% year over year, representing 39.4% of revenue — meaning opex grew at roughly half the pace of revenue, which is the operating leverage the margin structure is supposed to deliver.

Software revenue reached $6.2 billion in the quarter, up 11%. Annual recurring revenue stood at $32.1 billion, up 3%.

Every headline number cleared. The stock fell 7%.

Guidance Was Raised Across Every Line and the Stock Still Fell

The forward outlook was the strongest element of the release and, in normal circumstances, would have driven a substantial re-rating.

First-quarter fiscal 2027 revenue is guided to $18.0 billion to $18.2 billion against a $16.8 billion analyst estimate — a beat of roughly $1.3 billion at the midpoint, or 8%. Non-GAAP earnings per share are guided to $1.32 to $1.34 against a $1.16 consensus, a 15% beat.

Full-year fiscal 2027 revenue is guided to $72.2 billion to $73.4 billion against a $68.69 billion estimate, and non-GAAP EPS to $5.05 to $5.11 against $4.80. The revenue midpoint implies approximately 15% growth against a long-term model that calls for 4% to 6%.

Hyperscaler AI infrastructure revenue is projected to reach $7.5 billion in fiscal 2027, nearly doubling from approximately $3.8 billion to $4 billion in fiscal 2026 and up from $1 billion in fiscal 2025.

Management was pressed directly on the credibility of that trajectory during the call. Asked what drives the implied double-digit ex-AI growth against a 4% to 6% long-term model, Robbins attributed it to a networking super cycle enabled by integrating systems, silicon, optics, security and observability into a single stack — with drivers spanning hyperscaler AI buildouts, telecommunications operators preparing for scale-across traffic estimated at fourteen times traditional data center interconnect volumes, and enterprises modernizing networks for AI and quantum readiness.

The pre-earnings bar had been set at whether management would lift the AI order target beyond $9 billion and guide fiscal 2027 revenue growth into the low teens against the Street's 9.5% assumption. Both were cleared. AI orders came in at $9.3 billion for the year and the fiscal 2027 midpoint implies 15%.

That is a company clearing every bar the market set for it, in both directions, on the same evening. The market's response was to sell 7%, which tells you the bar was not the guidance. It was the margin line, and it was not part of the published expectations.

The 210 Basis Points That Broke It: 66.3% Gross Margin Against 68.4%

Non-GAAP total gross margin came in at 66.3% for the fourth quarter against 68.4% in the year-ago period — a 210 basis point decline. Against a StreetAccount consensus of 66.0% and a guidance range of 65.5% to 66.5%, the reported figure was a modest beat.

The problem is the forward number. First-quarter fiscal 2027 gross margin guidance calls for 65% to 66%, below the 66.4% consensus and below the 66.3% just delivered. That means management is guiding to sequential compression of roughly 80 basis points at the midpoint after a 210 basis point year-over-year decline.

On a GAAP basis the picture is superficially better and structurally the same. Total gross margin was 64.1% against 63.2% a year earlier, product gross margin 62.6% against 61.5%, and services gross margin 69.4% against 68.3%. Those GAAP improvements reflect amortization and charge timing rather than underlying unit economics.

Geographic gross margins show the mix effect clearly: 64.5% for the Americas, 70.1% for EMEA and 67.3% for APJC. The region growing orders fastest — Americas at 44% order growth — carries the lowest margin, because that is where the hyperscaler business sits.

The mechanism is straightforward and management has not disputed it. AI infrastructure revenue is hardware-heavy, sold at scale to a small number of sophisticated buyers with enormous negotiating leverage, and increasingly exposed to rising memory and component costs. Every incremental dollar of hyperscaler revenue dilutes the blended margin.

Pre-earnings analysis had flagged exactly this. One published view held that a higher mix of networking hardware combined with rising memory costs could keep gross margins near 66%, flat sequentially. Another expected margin pressure from higher component and memory costs to keep gross margins near 66%. Both were roughly correct on the level and both underestimated the guide.

The market's read is that Cisco has traded a 68% gross margin software-and-services business for a 65% gross margin hardware business, and that the revenue growth being celebrated is the visible symptom of that trade.

Product Gross Margin at 64.8% Is the Real Number

Total gross margin obscures the underlying deterioration because services revenue at $3.8 billion carries a 71.6% non-GAAP margin and dilutes the signal.

Product non-GAAP gross margin came in at 64.8% against 67.5% in the year-ago quarter — a 270 basis point decline, materially worse than the 210 basis point blended figure. Product revenue grew 24% while product gross margin fell 270 basis points, which means gross profit dollars from product grew roughly 19% rather than 24%.

Services non-GAAP gross margin actually improved to 71.6% from 70.8%, but services revenue was flat at $3.8 billion. The high-margin, stable-revenue portion of the business is not growing. The low-margin, fast-growing portion is where all the volume sits.

That composition is the structural question the market is now pricing. Annual recurring revenue at $32.1 billion grew just 3%. Software revenue at $6.2 billion grew 11%. Product revenue grew 24%. The mix is shifting decisively toward hardware, and hardware in this cycle means Ethernet switching sold into hyperscaler data centers at negotiated prices.

Full-year operating cash flow was flat at $14.2 billion even as GAAP net income rose 30% to $13.3 billion. That divergence — a 30% earnings increase producing zero cash flow growth — is the working capital cost of a hardware-heavy quarter, and it is the second-order confirmation of the margin story.

The counterargument management has offered is scale. More volume amortizes fixed manufacturing and engineering costs across more units, and component pricing improves with commitment size. That argument works over multiple years and does not help a stock priced at 28.7 times forward earnings in the next two quarters.

The comparison across this reporting week makes the point. Cerebras missed revenue by 7% while beating its own margin guidance by 260 basis points and fell 14%. Cisco beat revenue by 3%, beat EPS by 4%, raised full-year guidance by $3.9 billion, and fell 7% on a margin guide 100 basis points light. The market is pricing margin structure and treating revenue growth as already discounted.

$4 Billion of Hyperscaler AI Orders in One Quarter and $9.3 Billion for the Year

The AI numbers are the reason the stock rose 61.6% into this print and the reason analysts have stayed bullish through the decline.

Cisco took $4 billion in AI infrastructure orders from hyperscalers during the fourth quarter alone, bringing the fiscal 2026 total to $9.3 billion. That is 4.5 times the prior year. The trajectory through the year ran from $1.3 billion in the first quarter to $4 billion in the fourth — a threefold increase in quarterly run rate across twelve months.

The guidance history is the more remarkable detail. Cisco entered fiscal 2026 expecting roughly $5 billion in AI infrastructure orders for the full year. By the third quarter, orders had reached $5.3 billion year to date and management raised the full-year target to $9 billion. The final figure of $9.3 billion exceeded a target that had itself already been revised up 80% mid-year.

AI infrastructure revenue recognized during fiscal 2026 reached approximately $3.8 billion to $4 billion, up from $1 billion in fiscal 2025, against an initial target of $3 billion that was raised to $4 billion during the year. Fiscal 2027 guidance calls for $7.5 billion.

Beyond hyperscalers, Cisco secured $1.3 billion in AI orders from neocloud, sovereign and enterprise customers during fiscal 2026, representing approximately 150% year-over-year growth. That figure matters more than its size suggests, because it is the first evidence that the AI networking opportunity extends past a handful of cloud buyers into a broader customer base with better pricing power.

Hyperscaler orders grew at a triple-digit rate in the fourth quarter. Service provider and cloud orders surged 95%.

The strategic framing management offered positions Cisco's Ethernet stack against alternative interconnect approaches, with the buildout pulling power infrastructure alongside it — from engine orders for gigawatt-scale campuses to financing structures assembling around third-party capital for AI compute.

The $7.5 billion fiscal 2027 AI revenue target represents roughly 10.3% of guided revenue at the midpoint. That is the segment carrying the growth narrative and simultaneously the segment compressing the margin.

Orders Up 35% and Up 25% Without Hyperscalers

The single most underappreciated figure in the release is the order growth excluding AI.

Total product orders rose 35% year over year in the fourth quarter. Excluding hyperscalers, they rose 25%. That gap is only ten percentage points, which means the non-AI business — campus switching, enterprise networking, service provider routing, security — is growing at 25% in its own right.

The breakdown by customer market: enterprise orders rose 21%, public sector orders increased 30%, and service provider and cloud orders surged 95%. By geography: Americas up 44%, EMEA up 25%, APJC up 19%. Double-digit growth across every geography and every customer market simultaneously.

Networking product orders grew 40% year over year, marking the eighth consecutive quarter of double-digit growth. Eight straight quarters is not a spike; it is a cycle.

This is the data that supports management's super cycle framing and the fiscal 2027 guide implying double-digit ex-AI growth against a 4% to 6% long-term model. Three demand cycles are running concurrently: hyperscaler AI buildout, a multi-year global campus networking refresh, and telecommunications operators preparing infrastructure for scale-across traffic that management estimates at fourteen times traditional data center interconnect volumes.

The campus refresh in particular is the higher-margin business. Enterprises modernizing networks for AI workloads buy switching and wireless at standard enterprise pricing rather than hyperscaler pricing, and they attach services and software. If that cycle sustains at 21% order growth, the mix argument reverses over time.

The caveat is the order-to-revenue conversion. Remaining performance obligations stood at $46.7 billion, up 7%, with product RPO up 9% and services RPO up 6%. Orders growing 35% against RPO growing 7% means the vast majority of these orders convert to revenue within the current fiscal year rather than building durable multi-year backlog. That is favourable for near-term reported growth and offers less protection if demand rolls over.

Networking Up 28% While Observability Managed 6%

The product category detail shows a business with one engine running very hot and three running cold.

Networking revenue rose 28% year over year, driven by AI infrastructure and campus networking, with the underlying strength spread across campus switching, data center switching, wireless and service provider routing. That category encompasses the core switching, routing, wireless and server portfolio and is where essentially all incremental growth originates.

Security revenue grew 14% to $2.2 billion. That is a genuine improvement — the category had been declining as recently as the third quarter, where nine-month security revenue fell 2% or $136 million on weakness in threat intelligence, detection and response offerings and prior-generation products, partially offset by SASE growth.

Collaboration grew 12% to $1.2 billion, also a reversal from a 1% third-quarter decline driven by Webex Suite weakness offset by collaboration devices, cloud contact center and CPaaS.

Observability grew 6% to $275 million, the weakest category and the smallest by a wide margin.

The pre-earnings concern had been that security and observability remained flat and represented the relative weakness in the portfolio. Both improved in the fourth quarter, with security at 14% the more meaningful surprise. If that inflection sustains, it changes the margin math materially, because security and observability carry software-like margins that offset hardware dilution.

The problem is scale. Security at $2.2 billion, collaboration at $1.2 billion and observability at $275 million sum to roughly $3.7 billion against product revenue of $13.5 billion. Networking is doing the work, and networking is where the margin pressure lives.

Software revenue at $6.2 billion grew 11% and annual recurring revenue at $32.1 billion grew 3%. A 3% ARR growth rate at a company guiding 15% total revenue growth confirms that the recurring, high-margin base is not participating in the acceleration.

Inventories at $5.69 Billion From $3.16 Billion

The balance sheet line that has drawn the least commentary and deserves the most is inventory.

Inventories climbed to $5.69 billion from $3.16 billion — an 80% increase year over year against revenue growth of 18% for the quarter and 12% for the full year. Inventory is growing at roughly four times the pace of the business.

There are two readings and they lead to opposite conclusions.

The constructive interpretation is that Cisco is building ahead of a demand cycle it has visibility into. With product orders up 35%, networking orders up 40% for an eighth consecutive quarter, and first-quarter revenue guided to $18.0 billion to $18.2 billion against $17.3 billion just delivered, the company needs component and finished-goods inventory in place to ship. Securing memory and optical components ahead of rising prices is rational when guidance calls for 15% growth. This is inventory as a forward indicator.

The cautious interpretation is that inventory building at 80% while gross margins compress 210 basis points describes a company absorbing higher input costs into stock that will be sold at negotiated hyperscaler prices. Under that reading, today's inventory is tomorrow's margin pressure already locked in, which is precisely what the 65% to 66% first-quarter guidance implies.

The cash flow data supports the second reading at least partially. Full-year operating cash flow was flat at $14.2 billion while GAAP net income rose 30% to $13.3 billion. Fourth-quarter operating cash flow climbed 27% to $5.4 billion, which is strong, but the full-year stagnation against a 30% earnings increase points to working capital absorption of roughly $3 billion.

For a company with $15.9 billion in cash, cash equivalents and investments, none of this is a liquidity concern. It is a margin-timing concern, and it argues that the 65% to 66% first-quarter guidance is already visible in the warehouse rather than being a conservative placeholder.

Cash Flow, Capital Return and a $46.7 Billion Backlog

The capital return and balance sheet position remain the anchor for the equity story regardless of what happens to gross margin.

Cisco ended the quarter with $15.9 billion in cash, cash equivalents and investments. Fourth-quarter operating cash flow rose 27% to $5.4 billion, while full-year operating cash flow was flat at $14.2 billion.

The company returned $3.2 billion to shareholders in the fourth quarter — $1.7 billion in dividends and $1.5 billion in share repurchases — bringing fiscal 2026 capital return to $12.7 billion. That is 89% of full-year operating cash flow returned to holders. Remaining repurchase authorization stands at $8.1 billion.

A quarterly dividend of $0.42 per common share was declared, payable October 21 to holders of record as of October 2. At $116.40 that annualizes to a 1.44% yield, which is thin by Cisco's historical standards and reflects how far the multiple has expanded.

Remaining performance obligations totaled $46.7 billion, up 7% year over year, with product RPO up 9% and services RPO up 6%. Against fiscal 2027 revenue guidance of $72.2 billion to $73.4 billion, the backlog covers roughly 64% of the guided year, which is normal coverage for this business and provides genuine visibility.

The structural read is a company generating $14 billion of annual operating cash flow, holding $15.9 billion in liquid assets, returning nearly all free cash to shareholders, and carrying $46.7 billion of contracted future revenue. That is not a business with existential risk. It is a business whose valuation has expanded to reflect a growth rate it has never sustained.

The relevant question is whether the current capital return pace is compatible with a hardware-heavy growth cycle that consumes working capital. Inventory absorbed roughly $2.5 billion this year while $12.7 billion went out the door to shareholders and cash flow was flat. If fiscal 2027 delivers 15% revenue growth with a similar working capital profile, either the buyback slows or the cash balance draws down.

Valuation: 28.7x Forward Earnings After a 61.6% Year

At $116.40 and a market capitalization near $459 billion, Cisco trades at approximately 28.7 times forward earnings and 29.4 times trailing. Against fiscal 2027 non-GAAP EPS guidance of $5.05 to $5.11, the multiple at the midpoint is 22.9 times.

The stock has advanced 61.6% year to date and 75.97% over twelve months, against a roughly 13% advance in the S&P 500. The 52-week range runs $65.75 to $130.37, meaning the stock has more than doubled off its low.

For a company whose long-term revenue model calls for 4% to 6% growth, 28.7 times forward earnings is a multiple that requires the super cycle framing to be correct. If fiscal 2027 delivers 15% growth and fiscal 2028 reverts toward the long-term model, the current price discounts a two-year acceleration as if it were permanent.

Valuation screens have been emphatic. One intrinsic value framework puts fair value between $67.67 and $69.43 against a $123.88 close, implying the stock is 78% to 83% overvalued, while assigning a composite fundamental score of 75 to 76 out of 100 — strong business, expensive price. A separate fair value estimate of $99.88 implies 19.4% downside from Wednesday's close.

Insider behaviour supports caution rather than conviction. There has been no insider buying over the past three months against $7.2 million in insider selling.

The counterweight is that Cisco's earnings base has genuinely re-rated. Fiscal 2026 non-GAAP EPS of $4.33 growing to guided $5.05 to $5.11 in fiscal 2027 is 17% growth at the midpoint, following 14% growth in fiscal 2026. A company compounding earnings at mid-to-high teens with $46.7 billion of backlog and $14 billion of operating cash flow is not obviously mispriced at 23 times forward guided earnings.

The margin question determines which frame applies. At 66% gross margin and 36% operating margin, the fiscal 2027 EPS guide holds. At 65% and falling, it does not.

Analysts Stayed Bullish: $136 Average, $139 From the Most Recent Raise

Sell-side positioning has not broken, and that distinguishes this decline from a genuine thesis failure.

Wall Street carried a Moderate Buy consensus into the print with an average price target of $136.23. The most recent published raise lifted a Buy-rated target to $139 from $112 — a 24% increase — while flagging that a higher mix of networking hardware combined with rising memory costs could keep gross margins near 66%, flat sequentially. Another firm saw potential upside to networking revenue estimates against the same margin caveat.

Both of those views anticipated the margin issue and remained constructive anyway, which is why analysts stayed largely bullish after the print, citing AI networking momentum, building enterprise AI adoption and a multi-year campus upgrade cycle.

The revision pattern into the quarter was unanimous. Over the trailing three months, analysts issued 18 upward EPS revisions with zero downgrades, and an identical 18-to-zero split on revenue estimates. That is a full sweep in one direction, which in practice means estimates had been marked up to the point where a beat was fully priced.

At $116.40, the $136.23 average target implies 17% upside and the $139 high implies 19%. Those figures will be revised upward mechanically for revenue and downward for margin, and the net effect on price targets is likely modest given that fiscal 2027 EPS guidance of $5.05 to $5.11 sits well above the $4.80 consensus those targets were built on.

The tension in the analyst community is between the earnings model and the valuation model. The former argues for higher targets on a $5.08 midpoint against $4.80 previously. The latter, expressed through intrinsic value frameworks putting fair value between $67.67 and $99.88, argues the entire move since January was multiple expansion rather than earnings revision.

Both can be true. Cisco earned the fundamental improvement. The stock priced it in advance and then some.

Technical Structure: $124.62 Trendline, $119.65 Support, $130.37 High

The chart levels were well defined before the print and remain the operative map.

The stock had been consolidating between $119.65 support and $124.62 trendline resistance for several weeks, with relative strength at 63 and a breakout above $124.62 expected to open $129.75 and then the 52-week high at $130.37. Wednesday's 2.86% advance to $123.88 was an attempt at that breakout that never completed.

The gap lower has taken the stock through both boundaries of that range in a single session. At $116.40 it sits 2.7% below the $119.65 support that had held for weeks, which converts that level into first resistance on any recovery attempt.

Immediate support beneath spot is the $115 area, then $112.57 marking prior consolidation, and $110 as the round number. Below that, the more significant structural level is $105, where the stock based before the May earnings gap.

Resistance runs $119.65 first, then $122.57 at Monday's close, $123.88 at Wednesday's close and the gap fill, and $124.62 at the trendline that has now rejected three attempts.

The gap between $116.40 and $123.88 is the technical feature that will define the next several weeks. Earnings gaps of this size in large-cap technology typically either fill within four to six weeks or mark a durable regime change. Cisco's own history offers both outcomes: the February 11 report produced a 13.1% decline on a beat that took months to recover, while the May 13 report produced a 16.4% two-day advance.

Relative strength will now read deeply oversold on the daily timeframe, but oversold readings in a stock that has advanced 61.6% year to date and remains 28.7 times forward earnings provide limited mean-reversion edge.

The clean decision levels: reclaiming $119.65 neutralizes the break and puts the $123.88 gap fill in play. Losing $115 opens $112.57 and then $110.

Verdict: The Best Quarter in Thirty Years Priced as a Margin Warning

Cisco at $116.40 has fallen roughly 7% from a $123.88 close after delivering record fourth-quarter revenue of $17.3 billion, up 18%, non-GAAP EPS of $1.22, up 23%, record fiscal 2026 revenue of $63.3 billion, up 12%, and what management described as the highest revenue, operating margin and earnings per employee in three decades.

It then raised guidance across every line. First-quarter revenue of $18.0 billion to $18.2 billion against a $16.8 billion estimate. First-quarter EPS of $1.32 to $1.34 against $1.16. Full-year fiscal 2027 revenue of $72.2 billion to $73.4 billion against $68.69 billion, implying 15% growth against a 4% to 6% long-term model. EPS of $5.05 to $5.11 against $4.80. Hyperscaler AI revenue of $7.5 billion against roughly $3.8 billion delivered.

The demand data underneath is not a single-customer story. Product orders rose 35% and 25% excluding hyperscalers. Networking orders rose 40% for an eighth consecutive quarter of double-digit growth. Enterprise orders rose 21%, public sector 30%, service provider and cloud 95%. Americas up 44%, EMEA 25%, APJC 19%. Security returned to 14% growth after declining nine months earlier, and collaboration to 12%.

One line broke it. Non-GAAP gross margin at 66.3% against 68.4% a year ago is a 210 basis point decline, and product gross margin at 64.8% against 67.5% is 270 basis points. First-quarter guidance of 65% to 66% sits below the 66.4% consensus and below what was just reported, meaning management is guiding to further compression. Inventories at $5.69 billion from $3.16 billion suggest that compression is already purchased. Full-year operating cash flow was flat at $14.2 billion while GAAP net income rose 30%.

The pattern across this reporting week is consistent and it is the real signal. Revenue growth is treated as fully discounted; margin structure is repriced immediately and violently. Cerebras missed revenue and beat margins and fell 14%. Cisco beat revenue, beat EPS, raised guidance by nearly $4 billion, and fell 7% on a 100 basis point margin guide.

At 28.7 times forward earnings and 22.9 times guided fiscal 2027 EPS, after a 61.6% year-to-date advance and a 75.97% twelve-month return, Cisco is priced for the super cycle to be durable. Intrinsic value frameworks put fair value between $67.67 and $99.88. Insiders sold $7.2 million over three months and bought nothing.

The business is executing. The stock was not cheap. Both statements remain true after today.

Base case is a range between $115 and $123.88 as the gap is worked through, with the $46.7 billion backlog and $8.1 billion repurchase authorization providing support. Bull case requires reclaiming $119.65 and filling the gap toward $124.62, with the $136 consensus target intact on raised fiscal 2027 numbers. Bear case breaks $115 and targets $112.57 and then $110, with the intrinsic-value gap suggesting further downside if the margin trajectory continues. The level that matters is $119.65, and the next test is whether first-quarter gross margin lands at 66% or 65%.

That's TradingNEWS