First a message from our friends at Crypto 101 (sponsor)
Dear Investor,
27 of crypto's most successful insiders are breaking their silence in an emergency summit.The architects of Solana and THORChain. The co-creator of Tether. Fund managers who've generated billions.
They're gathering to answer one question: What happens next?
We're still in Uptober. Bitcoin's recently hit new highs. Q4 historically produces crypto's biggest gains. But after the recent shakeout, the opportunity is different now.
These experts are sharing where they're putting their own money, which coins could explode, and what the flash crash actually means for the mega bull run ahead.
Normally $799. Free access for a limited time if you go here now:
Bryce Paul
Crypto 101
BONUS ARTICLE
The one stock active traders should have on the top of their screen next week: Cisco (CSCO)
Cisco just delivered one of the cleanest “tell me what the market cares about right now” reactions you’ll see all year: results beat, guidance raised, stock still got hit hard—because the tape is laser-focused on margins, component costs, and AI infrastructure pricing power.
That combination makes CSCO unusually important for active traders this week: it’s a liquid mega-name that can trend, gap, and set the tone for adjacent groups (networking, data-center hardware, enterprise tech, even memory and optics). And after the latest earnings, it’s sitting right at the intersection of three high-energy forces:
AI infrastructure demand is accelerating
Memory/component costs are squeezing gross margins
The market is repricing “AI winners” by pricing power—not hype
Below is a deep dive on why CSCO matters right now, what the data says, what could go right/wrong, and how an active trader can frame trades for Monday and the weeks ahead—without pretending anything is guaranteed.
Cisco (CSCO): The “AI Plumbing” Bellwether Traders Can’t Ignore
There are weeks where a stock moves and it’s just noise—an overreaction, a squeeze, a rotation. Then there are weeks where a stock moves and it becomes a signal.
Cisco’s earnings reaction was a signal week.
Because Cisco didn’t miss. In fact, Cisco delivered the type of quarter that usually produces a nice, orderly rally in a mega-cap: revenue grew, EPS beat, and the company guided higher. Yet the stock dropped sharply anyway because one line item spooked the market: gross margin—and more specifically, margin pressure from memory costs tied to AI infrastructure demand.
That’s not just a Cisco story. It’s a story about what the market is starting to fear in the AI cycle:
It’s not that AI demand is fake.
It’s that the supply chain is shifting costs around in ways that could squeeze the “middle layer” providers.
And the market wants to know who can pass costs through—and who can’t.
Cisco is now the tradable proxy for that question.
If you’re an active trader, you don’t need Cisco to be “cheap” or “expensive” to make money. You need it to be important. And right now, Cisco is important.
Why Cisco matters now
Cisco sits in a unique spot in the AI ecosystem. It’s not an AI model company. It’s not a GPU leader. It’s not a hyperscaler. Cisco is something far more quietly powerful:
Cisco is the infrastructure that connects the infrastructure.
When hyperscalers build AI clusters, they don’t just buy compute. They buy the networking fabric, high-speed optics, switching, and the systems that keep data moving between GPUs, CPUs, memory, and storage with minimal latency.
That’s why the most important data point from Cisco’s latest quarter wasn’t EPS.
It was this: AI infrastructure orders from hyperscalers totaled $2.1 billion in the quarter.
That’s not a “small side project.” That’s a serious demand signal.
And Cisco has also indicated it expects to recognize over $3.0 billion in AI infrastructure revenue from hyperscalers in FY2026, with a broader expectation of AI orders exceeding $5.0 billion in FY2026.
So why did the stock sell off?
Because while AI demand is exploding, component costs are also exploding—and Cisco guided margins lower in the near term.
That is the tug-of-war active traders should care about.
The quarter, in hard numbers
Cisco’s Q2 results (period ended January 24, 2026) were objectively strong:
Revenue: about $15.3–$15.35 billion
GAAP net income: $3.2 billion (about $0.80 EPS)
Non-GAAP EPS: $1.04
And Cisco guided to:
Q3 revenue: $15.4–$15.6 billion
FY2026 revenue: $61.2–$61.7 billion
Those are not the numbers of a company collapsing.
But the stock traded like a company with a new problem.
That problem was margin.
The margin issue: why the market cared more than the beat
Cisco posted an adjusted gross margin around 67.5% for the quarter (below what analysts expected), and guided Q3 gross margins to 65.5%–66.5%.
That’s the entire reason Cisco became a headline mover: the market wasn’t prepared for that level of margin compression.
The narrative behind it matters:
AI infrastructure demand has tightened memory supply chains.
Memory and components got more expensive.
Cisco’s margin is getting squeezed—at least temporarily.
Cisco’s CEO noted the company is raising prices and renegotiating contract terms to manage cost pressures.
That creates a clean trading question:
Is this a one-quarter margin valley that reverses as pricing catches up—
or the start of a longer “hardware squeeze” where Cisco eats more cost than investors want?
Active traders should approach this question as a scenario tree, not a prediction.
The stock reaction: what price and volume told us
Let’s translate the earnings reaction into tape language.
From recent price history:
Cisco closed near $86–$88 earlier in the week, with an intraday high around $88.19 on Feb 10.
After earnings, the stock dropped hard, with a close around $75.00 on Feb 12 on very heavy volume (~67.9M shares).
It then rebounded into Feb 13, closing about $76.85 (volume ~42.8M).
That’s a classic “shock-and-stabilize” setup:
A violent repricing day (gap down, heavy volume)
A stabilization day (attempt to reclaim some ground)
When you see this in a mega-cap, it’s rarely random retail noise. It’s institutional repositioning.
The most important question for Monday isn’t “will it go up?”
It’s “did the stock establish a tradable base in the mid-70s—or is this just dead-cat drift before the next leg lower?”
How to read the earnings gap like an active trader
Earnings gaps create a simple battlefield:
The gap zone is where trapped holders and opportunistic buyers fight it out.
The first 2–5 sessions after the gap often define the trade for the next 2–6 weeks.
Here’s how to frame Cisco’s gap:
If CSCO holds the post-earnings lows
That implies buyers accept the “margin valley” narrative. This is the “bad news priced in” scenario.
What you typically see:
Lower volatility day-over-day
Higher lows on the hourly chart
Price holding above VWAP during pullbacks
If CSCO loses the post-earnings lows
That implies the market thinks the margin issue is not temporary, or broader tape pressure is dragging it.
What you typically see:
Failure rallies (pop, fade, repeat)
Lower highs
Increasing sell volume on down days
This is why Cisco is such a strong trader stock right now: the levels are clear, liquidity is high, and the narrative is catalytic.
Options market: volatility, positioning, and what it suggests
Cisco is also interesting because the options market lit up around earnings.
Options volume spiked meaningfully (data providers show volume multiples of normal).
One dataset showed a put/call open interest ratio around 0.82, with notable open interest clustered by strike.
Another data source highlights how Cisco historically experiences a meaningful post-earnings implied volatility drop (“IV crush”), averaging a sizeable decline after earnings.
Active trader implications:
Post-earnings IV crush means long premium buyers who didn’t get direction right often lose quickly.
Defined-risk structures can make more sense than naked calls/puts if you expect choppy consolidation.
Watch where open interest clusters: it can act like “magnet” levels in the near term—especially if market makers are actively hedging.
This isn’t about believing options “predict” price. It’s about recognizing that dealer hedging can influence intraday behavior, particularly right after a major gap.
Analysts and targets: what “the Street” is implying
After the selloff, a key point is that many analysts remain constructive on Cisco.
Barron’s referenced a $100 price target from Melius Research while acknowledging near-term margin pressure.
Aggregate target trackers show consensus targets in the mid-to-high $90s, implying upside from mid-$70s prices (methodologies differ by service).
For traders, analyst targets aren’t “truth,” but they do help with psychology:
If Cisco is in the mid-$70s and the sell side still talks $90–$100, you often get bargain-hunting bids—especially if the broader market stabilizes.
The trade risk is that analysts can be slow to adjust if margins stay compressed longer than expected.
The real bull case for Cisco: AI demand is not theoretical anymore
The best argument for being bullish Cisco in the short-to-mid term is simple:
AI infrastructure spending is real, and Cisco is directly capturing it.
Hyperscaler AI infrastructure orders hitting $2.1B in one quarter is a concrete number that ties Cisco’s growth to the AI capex cycle.
Cisco’s raised full-year revenue outlook also matters because it tells you demand isn’t falling off a cliff.
If the market begins to believe margin pressure is temporary and pricing power will catch up, Cisco becomes a “relief rally” candidate with room to retrace part of the gap.
In that scenario, Cisco doesn’t have to become a hypergrowth stock. It just needs to regain the market’s confidence that margins normalize.
The real bear case: Cisco is the “squeezed middle” of AI hardware
The best bear case is also simple:
Cisco is positioned in a place where it can be squeezed.
Hyperscalers have enormous bargaining power.
Component suppliers (memory, optics inputs) can push costs higher.
Cisco is caught between them—at least in the near term.
That’s exactly what the market was saying when it punished the stock despite the revenue beat.
If costs stay high and Cisco cannot fully pass them through, margins could remain under pressure for longer. And if margins remain under pressure, multiple compression becomes a bigger risk than revenue growth is a reward.
This is the “great demand, weaker economics” trap.
Traders should take it seriously—especially if the stock fails to reclaim key gap levels.
Why Cisco is a “market stock” right now (not just a Cisco stock)
Cisco’s move also matters because it can influence other groups:
Networking peers: If Cisco can’t protect margins, what does it mean for others in networking hardware?
AI supply chain: If memory scarcity is pressuring Cisco, that reinforces the “memory is a bottleneck” theme.
Enterprise tech sentiment: Cisco is a big, widely held enterprise bellwether.
That’s why this isn’t a niche trade. It’s a tape signal.
A realistic action plan for active traders (suggestive, not definitive)
Here are four frameworks that match what the chart and fundamentals are offering—without pretending there’s only one correct answer.
Framework 1: The “gap-base long” (best when the broader market is steady)
Thesis: The earnings gap was an overreaction; the stock is building a base.
What you want to see Monday/Tuesday:
Higher lows vs. the post-earnings low
Ability to hold VWAP on pullbacks
Decreasing volatility as price stabilizes
How active traders commonly manage risk:
Smaller sizing until a clear higher-high forms
Stop/invalidation defined below the post-earnings low region
Framework 2: The “failed bounce short” (best if the market weakens)
Thesis: The stock cannot reclaim the gap zone and sellers remain in control.
What you want to see:
Rally attempts that stall quickly
Increasing sell volume on down moves
Lower highs forming on the 1H/4H chart
Risk control:
Define a hard invalidation level above the failed-bounce zone
Avoid shorting into support without confirmation (mega-caps can snap back violently)
Framework 3: “Options-defined risk into consolidation”
Thesis: You expect chop, not a clean trend.
How traders express it:
Spreads instead of outright calls/puts
Structures that reduce volatility risk, especially after earnings IV crush
Framework 4: Pair the theme (Cisco vs. a beneficiary of the squeeze)
Thesis: If memory costs are the issue, you can pair-trade the value chain:
Long a bottleneck beneficiary (memory suppliers/theme baskets)
Long/short Cisco based on whether it shows pricing power recovery
This is a more advanced approach, but it fits the actual narrative Cisco introduced this week: the AI boom is tightening supply chains, and someone pays the bill.
The single most important thing to watch next week
If you only track one thing, track this:
Does Cisco convince the market that margin pressure is temporary and fixable?
Management is already talking about pricing actions and renegotiating terms.
If upcoming commentary and the stock’s price action confirm that margins stabilize in Q4 as some analysts expect, Cisco can transition from “punished on margins” to “rewarded for AI demand.”
If not, the stock can stay trapped in a grind while the market finds cleaner AI expressions.
That’s the trade.
Why this matters for Monday
Monday isn’t about guessing a direction. It’s about recognizing that Cisco has become:
a high-liquidity, high-attention battleground
with a clear catalyst
and clearly defined levels from the earnings gap
That is exactly what active traders want: a stock where the tape is honest about what it’s doing.
Cisco isn’t just “a dividend tech stock” anymore. It’s the market’s scoreboard for whether AI infrastructure demand translates into profits across the stack—or whether costs and pricing power turn it into a margin war.
And when the market is asking that question, you should have the stock on your screen.
Editorial Disclaimer
This commentary is for informational and educational purposes only and does not constitute investment advice. All market strategies involve risk, and past performance is not indicative of future results. Readers should conduct their own analysis or consult a licensed financial professional before making investment decisions.