Market Roundup: Cisco (CSCO) and Cerebras Sink on Margin Worries While S&P 500 Reaches New Peak

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Table of Contents

Cisco shares slid 6-7% following earnings as declining gross margins overshadowed record $17.3 billion in quarterly revenue
Cerebras plunged 15-17% post-results even as revenue surged 70% compared to the prior year
The S&P 500 climbed to a new intraday peak following inflation data that came in lighter than forecasts
Crude oil declined more than 2% following an unprecedented weekly U.S. inventory increase of 17.4 million barrels
Billionaire Bill Ackman revealed Pershing Square re-established a Netflix stake as part of sweeping portfolio changes

Cisco Shares Decline Despite Hitting Revenue Milestone

Cisco delivered record-breaking quarterly sales of $17.3 billion, marking an 18% increase from the same period last year. The surge was powered by robust demand for networking infrastructure tied to artificial intelligence data center buildouts.

Management also unveiled a fiscal 2027 revenue projection ranging from $72.2 billion to $73.4 billion, surpassing analyst consensus estimates.

However, shares tumbled approximately 6-7% in trading. The culprit was a gross margin compression to 66.3%, down from 68.4% in the year-ago quarter, coupled with cautious margin guidance from executives.

The company’s expanding AI hardware business is boosting topline results but simultaneously squeezing profitability metrics.

Cerebras Slides as Market Focuses on Profitability Metrics

Cerebras Systems reported second-quarter GAAP revenue of $180.1 million, representing approximately 70% year-over-year growth. Core revenue reached $209.9 million, prompting the company to lift its full-year core revenue outlook to a range of $880 million to $890 million.

Despite the impressive growth figures, shares plummeted 15-17% following the earnings release. Core gross margin registered at 41%, while the company’s approximately $25 billion order backlog remained unchanged quarter-over-quarter.

The market response to both Cisco and Cerebras delivers a clear message. Investors evaluating AI-related companies are no longer satisfied with revenue expansion alone. Margin performance and bottom-line profitability have emerged as critical evaluation criteria.

S&P 500 Climbs to New Peak Following Inflation Report

Equity markets advanced on Thursday. The S&P 500 touched a new intraday all-time high following July’s Producer Price Index release, which came in lighter than Wall Street anticipated.

Producer prices registered no change on a monthly basis, contrasting with the forecasted 0.2% increase. Year-over-year PPI inflation decelerated to 4.7% from the prior month’s reading of 5.5%.

The softer-than-expected inflation figures reduced speculation that the Federal Reserve might implement additional interest rate hikes. Technology giants including Nvidia, Microsoft, and Apple all posted gains following the release.

Crude Prices Sink Over 2% Following Stockpile Jump

Oil prices experienced significant declines Thursday. Brent crude fell approximately 2.2% to trade near $87 per barrel, while West Texas Intermediate dropped to roughly $81.

The selloff was triggered by an unexpected buildup in U.S. crude stockpiles totaling 17.4 million barrels. This marked the most substantial weekly accumulation recorded since January 2023.

OPEC simultaneously lowered its projection for worldwide oil demand growth in 2026. Sustained declines in crude prices could contribute to reducing inflationary pressures throughout the broader economy.

Bill Ackman Re-Enters Netflix Position After $400 Million Loss in 2022

Hedge fund manager Bill Ackman has executed a comprehensive restructuring of his Pershing Square holdings and re-established a position in Netflix. He revealed six fresh positions encompassing Netflix, Visa, Mastercard, Alcon, Intercontinental Exchange, and S&P Global.

Ackman initially purchased Netflix shares in early 2022 but exited the position mere months afterward, recording a loss exceeding $400 million following a weak subscriber growth report that hammered the stock.

His renewed investment suggests confidence in the streaming giant’s transformation. Netflix has since launched an advertising-supported tier and expanded into live sports programming, fundamentally altering its revenue model.

The portfolio reshuffling represents one of the most extensive adjustments Pershing Square has undertaken in recent years.