Cisco Systems delivered record fiscal first-quarter results after Thursday's close, with adjusted earnings of $1.40 per share soaring 40% year over year and revenue surging 24% to an all-time quarterly high of $18.52 billion, according to Zacks Investment Research.

Networking revenue jumped 43% to $11.13 billion on AI infrastructure demand, and adjusted operating margin hit a record 37.8%. Yet Investor's Business Daily reports that several investment banks lowered price targets on Friday and Cisco stock fell in early trading, despite the beat.

The reversal is what makes this development surprising: Zacks notes it was Cisco's strongest revenue and adjusted earnings growth in more than 15 years, with shares up roughly 30% year to date before the print.

Instead of a clean win, Investor's Business Daily reports the banks cutting targets pointed to concerns over peaking growth and deceleration, and Morgan Stanley downgraded Cisco over AI impacting gross margins.

A record AI-driven quarter is now being read by some on the Street as evidence the growth curve bends down from here.

According to Zacks, Cisco raised its fiscal 2027 revenue guidance to $74.8-$75.8 billion from $72.2-$73.4 billion, ahead of Wall Street's $73.34 billion consensus, and lifted adjusted EPS guidance to $5.47-$5.53 from $5.05-$5.11 versus a $5.17 forecast.

The company also raised its FY27 hyperscaler AI infrastructure revenue outlook to $9 billion, more than double FY26 levels, and guided Q2 revenue to $18-$18.2 billion with adjusted EPS of $1.34-$1.36. Cisco maintained its $0.42 quarterly dividend and returned $3.7 billion to shareholders in Q1.

The standoff sets up a test of whether AI infrastructure demand can keep outrunning valuation and margin concerns.

Zacks argues the case for the bulls, citing a reasonable 19X forward earnings multiple, a generous dividend and a Zacks Rank #2 (Buy), while the price-target cuts and Morgan Stanley's gross-margin downgrade capture the bear case on AI economics for enterprise networking suppliers.