Shares of the networking equipment manufacturer based in San Jose, California, surged over 16% during after-hours trading.
CEO Chuck Robbins mentioned in a statement on Cisco’s website, “The companies that will thrive in the AI era will be those demonstrating focus, urgency, and the discipline to continuously direct investments towards the areas where demand and long-term value creation are the highest.”
Cisco announced it is making strategic investments in silicon, optics, security, and the integration of AI for employees across the organization, while also reducing roles in certain segments.
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This fiscal year, Cisco has secured $5.3 billion in AI infrastructure orders from hyperscalers, increasing its total annual order expectation to $9 billion from the previous $5 billion.
“While a slight reduction in headcount may draw attention, the movement in post-market trading is primarily due to hyperscaler capex filtering down. This shift confirms that this capex goes beyond just chips,” stated Ryan Lee, senior vice president of product and strategy at Direxion.
Cisco is gaining as businesses increase their spending not only on AI processors but also on the high-speed networks essential for connecting large data-center systems. Orders for its networking products climbed over 50% in the third quarter compared to the previous year, while data-center switching orders increased by over 40%.
The company’s shares have appreciated by 32% this year.
During a post-earnings conference call, Cisco’s finance chief, Mark Patterson, noted that it is “reasonable” to anticipate at least $6 billion in revenue from the AI hyperscale segment by fiscal 2027.
The company reported revenue of $15.84 billion for the third quarter that concluded on April 25, surpassing analysts’ average forecast of $15.56 billion, according to data from LSEG.
It now forecasts fiscal 2026 revenue to be between $62.8 billion and $63 billion, up from an earlier estimate of $61.2 billion to $61.7 billion.
Cisco will cut its workforce by fewer than 4,000 jobs in the fourth quarter, which accounts for less than 5% of its total workforce. As of July 26, the company had approximately 86,200 employees.
The restructuring efforts are anticipated to cost Cisco up to $1 billion, with around $450 million to be recognized in the fourth quarter and the remaining amount to be accounted for in fiscal 2027.
