Cisco Systems (CSCO) saw its shares jump 14% in extended trading on Wednesday after the networking giant lifted its full-year revenue guidance and unveiled plans to cut approximately 4,000 jobs—representing about 5% of its global workforce—to reallocate resources toward artificial intelligence initiatives. The after-hours rally came as investors cheered the company's strong fiscal third-quarter results and a significantly raised outlook for fiscal 2026.
AI Orders Drive Growth
For the quarter ended April 25, 2026, Cisco reported revenue of $15.8 billion, a 12% increase year-over-year, with GAAP net income of $3.4 billion, or $0.85 per share. Adjusted earnings came in at $1.06 per share, up 10% from the prior year. The company now expects full-year fiscal 2026 revenue in the range of $62.8 billion to $63.0 billion, up from its previous forecast of $61.2 billion to $61.7 billion.
Chief Financial Officer Mark Patterson highlighted "double-digit growth" and disciplined financial management, noting that Cisco has already booked $5.3 billion in AI infrastructure orders this fiscal year. The company also raised its AI order target for fiscal 2026 to $9 billion, nearly doubling its earlier projection of $5 billion.
Restructuring and Cost Savings
The workforce reduction is part of a broader restructuring aimed at sharpening Cisco's focus on high-growth areas such as silicon, optics, security, and AI. The company anticipates up to $1 billion in pre-tax charges related to severance, termination benefits, and associated expenses. Approximately $450 million of those charges will be recognized in the fiscal fourth quarter, with the remainder expected in fiscal 2027.
CEO Chuck Robbins described demand as "very strong, broad-based," positioning Cisco as "critical infrastructure for the AI era." The company's networking segment continued to lead, with product revenue climbing 17% and networking sales surging 25% to $8.82 billion. Total product orders jumped 35%, while networking product orders rose more than 50%.
Guidance and Market Reaction
For the fiscal fourth quarter, Cisco guided revenue between $16.7 billion and $16.9 billion, with adjusted EPS of $1.16 to $1.18. That comfortably exceeded the Bloomberg consensus of $15.8 billion in sales and $1.07 in earnings per share. The upbeat forecast pushed Cisco's stock to near all-time highs, with options markets pricing in a potential swing of about 8% this week, according to Investopedia.
JPMorgan analysts noted that investors were watching closely to see whether Cisco could sustain sales momentum amid high memory prices and ongoing supply constraints. The company's adjusted gross margin slipped to 66.0% from 68.6% a year ago, partly reflecting estimated tariff impacts under the current trade environment.
Competitive Landscape
Cisco's aggressive push into AI infrastructure intensifies competition with Broadcom (AVGO) and Nvidia (NVDA) in the high-end networking chip market. In February, the company launched its Silicon One G300 chip and a new router designed to handle massive data throughput in AI data centers—a segment that Reuters describes as a fast-emerging battleground.
Security revenue held steady, while collaboration dipped 1% and observability edged up 3%. The company continues to return capital to shareholders even as it invests in new growth avenues.
