Shares of Cisco Systems tumbled 4.1% to $87.51 on November 5 after Morgan Stanley downgraded the stock to Equal-weight from Overweight and slashed its price target from $135 to $120, warning that the easy gains from Cisco's recent rally may already be priced in. Morgan Stanley Says Cisco's AI Rally Has Run Its Course — But Has the Growth Story Really Peaked?

Shares of Cisco Systems sank as much as 4.1% to $87.51 on November 5 after Morgan Stanley analyst Meta Marshall downgraded the stock from Overweight to Equal-weight, slashing the price target from $135 to $120. The move comes just one week before Cisco's fiscal first-quarter earnings report, scheduled for November 12 , raising the stakes for a company that has been one of the year's standout performers in enterprise tech.

  • A 43% Rally Left Little Room for Error

Cisco's stock has risen 43% over the last 12 months, compared with a 14% gain for the S&P 500.

That surge pushed the shares to roughly 19 times expected future earnings — on par with the broader market — erasing the valuation discount that originally attracted Morgan Stanley in April 2024. The firm said a meaningful portion of the AI-driven price increase and growth in market value is now reflected in the shares. In short, the easy money has been made.

  • Customers May Have Ordered Early, Inflating Recent Results

Marshall flagged the "degree of pullforward ahead of pricing increases" as a concern — meaning customers likely rushed to buy networking gear before Cisco raised prices, borrowing demand from future quarters. The broker also cited a lower-margin hyperscaler hardware mix as a risk, with upcoming fiscal Q1 results set to test AI growth, pricing power, and margin resilience. If the November 12 report shows softening orders, the current valuation gets harder to defend.

  • AI Is a Double-Edged Sword for Profit Margins

Morgan Stanley said Cisco can continue to grow through earnings gains, but strong expectations and gross margin headwinds from AI business leave less room for upside. Selling big hardware systems to cloud giants like Amazon and Microsoft generates revenue but at thinner profit margins than Cisco's traditional enterprise networking sales. The firm still expects several years of double-digit growth, led largely by cloud customers , but investors will pocket less profit per dollar of revenue.

  • Wall Street Still Broadly Backs the Stock — For Now

Analyst sentiment remains positive overall, with a "Moderate Buy" consensus and an average price target of $127.87.

Cisco's last reported quarter beat estimates, with earnings per share of $1.22 and revenue of $17.25 billion — up 17.6% year over year. But insiders have sold roughly $6 million in shares over the past three months , a signal worth watching alongside the downgrade. Cisco must prove next week that its AI-fueled growth can sustain both top-line momentum and healthy margins.