Cisco Systems is trimming its payroll. The networking giant disclosed plans to cut fewer than 4,000 positions this quarter. That amounts to less than 5 percent of its workforce. The move came alongside blockbuster third-quarter results that sent shares soaring more than 14 percent in extended trading.
Revenue climbed 12 percent to $15.84 billion. Adjusted earnings per share hit $1.06. Both figures topped Wall Street forecasts. Yet the headline numbers masked a sharper story. Cisco is redirecting resources toward artificial intelligence infrastructure even as it shrinks parts of its organization.
Chuck Robbins, the chief executive, laid out the rationale in a company memo. “The companies that will win in the AI era will be those with focus, urgency, and the discipline to continuously shift investment toward the areas where demand and long-term value creation are strongest,” he wrote. “This means making hard decisions — about where we invest, how we’re organized, and how our cost structure reflects the opportunity in front of us.” (Cisco Blog)
The reductions begin today. Notifications started on May 14 and will roll out globally in line with local regulations. Affected employees will receive pro-rated fiscal 2026 bonuses. Cisco promises placement services that have helped 75 percent of prior participants land new roles internally or externally. One year of access to Cisco U courses and certifications in AI, security and networking comes too. Still. The human impact lands heavy on those receiving the news.
This isn’t Cisco’s first round of belt-tightening. Similar actions in 2024 trimmed thousands as the company adjusted to slower growth after the pandemic surge. What feels different now is the backdrop. Demand for AI-related gear is exploding. Hyperscalers placed $5.3 billion in AI infrastructure orders with Cisco so far this fiscal year. The company lifted its full-year order target to $9 billion from an earlier $5 billion projection. (Reuters)
Networking product orders jumped more than 50 percent in the quarter. Data-center switching orders rose over 40 percent. Revenue from networking products reached $8.82 billion, well ahead of expectations. Security revenue held steady near $2 billion. The figures signal that capital spending on AI is spilling downstream from chips into the high-speed networks needed to connect vast data-center clusters.
Analysts took notice. Ryan Lee, senior vice president of product and strategy at Direxion, called the stock reaction a validation. “Though much will likely be made about a slight decrease in headcount, the post-market move we are seeing is truly the result of hyperscaler capex spilling downstream. This move validates that this capex is about more than just chips.” The shares have gained 33 percent so far this year. That performance outpaces the Nasdaq.
Cisco now projects fiscal 2026 revenue between $62.8 billion and $63 billion. The prior range sat at $61.2 billion to $61.7 billion. For the current quarter, the company expects revenue of $16.7 billion to $16.9 billion and adjusted earnings per share of $1.16 to $1.18. Both outlooks beat consensus estimates. Finance chief Mark Patterson told investors it is “reasonable” to expect at least $6 billion in AI hyperscale revenue in fiscal 2027. (CNBC)
The restructuring carries a price. Cisco anticipates pre-tax charges of roughly $1 billion. About $450 million hits in the fourth quarter, with the rest in fiscal 2027. Those costs cover severance and related expenses. Executives insist the savings will fund fresh bets in silicon, optics, security and broader employee adoption of AI tools inside the company.
But questions linger. How many of the departing workers specialized in legacy hardware or slower-growth segments? Cisco did not break down the cuts by division. Observers point to a pattern across technology. Profitability rises. Headcount falls. Microsoft, Google and others have made comparable moves while pouring capital into AI. Cisco joins that list.
Robbins struck an optimistic tone despite the reductions. “These results are even more impressive given the complex environment we’re operating in — a rapidly changing market, with intensifying competition, and a global shortage of components critical to support our portfolio and the AI buildout from our customers.” He praised the team’s delivery of record revenue and double-digit growth in top and bottom lines.
Employees whose roles disappear will hear details directly from leaders. Support includes resources, benefits tailored by country and help finding new opportunities. “To those leaving Cisco, thank you for your contribution, your dedication, and the mark you have made on this company,” Robbins added. “We are deeply grateful and are committed to handling this transition with the care, clarity, and respect that defines our culture.”
The announcement arrives as Cisco pushes new hardware. The company introduced switches and routers powered by its latest processor. It also launched a leaderboard that ranks generative AI models on their resistance to cybersecurity attacks. Such moves aim to position Cisco as more than a pipe provider in the AI age. It wants to supply intelligence and security across the network.
Wall Street responded with enthusiasm. If today’s gains hold, this marks the stock’s sharpest one-day rally since 2002. Cisco briefly surpassed its dot-com peak late last year. The AI tailwind appears strong enough to outweigh near-term cost pressures.
Yet the human side cannot be ignored. Nearly 4,000 families face disruption. Many worked at a company long viewed as stable. Cisco employed about 86,200 people as of last July. The cuts, though smaller than some past rounds, still sting in a year of strong performance. Discussions scheduled for May 21 at the Cisco Beat will likely surface more questions from staff.
Industry watchers see this as part of a broader reset. Companies chase efficiency to fund the massive investments AI demands. Focus sharpens. Organizations slim down in areas removed from the growth epicenter. Cisco’s experience reflects that pressure. Record revenue. Surging orders. And payroll discipline all at once.
The coming quarters will test whether the strategy pays off. Higher AI revenue targets, continued networking strength and disciplined spending could lift Cisco further. If hyperscalers keep expanding data centers at current rates, the networking supercycle Robbins has referenced may deliver sustained gains. For now the market believes. The stock price says as much. The people impacted may hold a different view.
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