Why Cisco's stock is falling hard - and taking the tech sector with it

By Emily Bary and William Gavin

Arista's stock is dropping ahead of earnings, after Cisco's report sparked renewed fears about the impact of high memory prices

Cisco's commentary on the impact of memory prices is weighing on tech stocks Thursday.

Another day, another victim of soaring memory prices.

Now it's Cisco Systems (CSCO), which disclosed Wednesday afternoon that higher memory prices proved a drag on gross margins in the latest quarter. Cisco's product offerings include networking hardware.

"In terms of memory, we're going to control what we can control," CEO Chuck Robbins said on the earnings call.

He noted that Cisco had various plans to mitigate the spike in prices. The company has raised some of its own prices, and it is "revising contractual terms with channel partners and customers to address evolving component prices."

"Overall, we feel confident in our ability to manage this industrywide dynamic better than our peers," he said.

See also: Micron's stock climbs on this fresh sign of booming memory prices

But investors still seem spooked, sending Cisco shares down 12% on Thursday and toward their worst one-day decline since a 13.7% fall on May 19, 2022.

Mizuho trading-desk analyst Jordan Klein noted that the company could see two or three quarters of gross-margin pain, and that its weak forecast on the metric suggests "real risk" for Hewlett Packard Enterprise (HPE) and Dell (DELL). Same for Arista Networks (ANET), whose shares are down more than 4% in afternoon trading. The Cisco rival reports earnings after Thursday's closing bell.

Dell and HPE shares fell 9% and 7%, respectively. The S&P 500 Information Technology Sector XX:SP500.45 declined 2.7%.

BofA on Thursday lowered its price target for Dell to $150 from $163, with analysts led by Wamsi Mohan predicting that the company will be less impacted by declining demand than computer and printer maker HP (HPQ) .

Don't miss: Cisco's stock falls as investors pan a seemingly upbeat earnings report

For HP, the analysts said revenue could fall on a year-over-year basis in fiscal 2026 as a result of higher prices. BofA cut its price target on that stock to $18 from $20, implying 3% downside from current levels.

The analysts found that in order for Dell to maintain positive operating margins in its consumer and commercial computer divisions, the company would need to raise prices and either reduce operational spending by between 15% and 20% or make its computers less advanced. The same goes for HP's respective segments, although the company would only need to slash operational expenditures by as much as 10%, BofA said.

-Emily Bary -William Gavin

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02-12-26 1648ET