Cisco’s (NASDAQ: CSCO) latest quarter gave investors a clean headline: better-than-expected results, a higher forecast, and a much bigger AI opportunity than the market had been modeling.
The stock responded the way bulls hoped, jumping more than 16% in extended trading after Cisco reported third-quarter revenue of $15.8 billion, up 12% from a year earlier, and raised its full-year revenue outlook to $62.8 billion to $63 billion.
But the same update also carried a second message as Cisco is cutting around 4,000 jobs, which is roughly 5% of its workforce.
The move is seen as restructuring around AI and other faster-growing businesses.
Cisco stock: Q3 beat that moved the market
The market reaction was driven first by the numbers as Cisco said product orders rose 35% year on year.
The networking product orders accelerated to more than 50%, and AI infrastructure demand from hyperscalers was strong enough for the company to lift its fiscal 2026 AI infrastructure orders target to $9 billion from $5 billion.
Cisco also said it had already taken in $5.3 billion of those orders year to date.
That is the kind of update investors wanted to hear from a company long seen as a legacy networking name trying to prove it can matter in the AI buildout.
Cisco raised its full-year revenue outlook and pointed to continued momentum in the fourth quarter, which suggested the business is not just benefiting from one strong quarter.
CEO Chuck Robbins said Cisco is “well-positioned as the critical infrastructure for the AI era.”
Restructuring to chase AI growth
The job cuts look less like a sign of distress than a reallocation of resources.
In a memo to employees, Robbins said the companies that win in the AI era will be those with “focus, urgency,” and the discipline to shift investment toward the areas with the strongest demand and long-term value creation.
He said Cisco would reduce its overall workforce in the fourth quarter by fewer than 4,000 jobs and begin most notifications on May 14.
Cisco also said it would keep investing in silicon, optics, security and employees’ use of AI across the company.
That makes the cuts easier to read as part of a broader strategic reset.
Cisco is saying demand is strong enough in AI-related infrastructure that the company wants to move money and talent away from slower areas and toward the parts of the business with the best growth profile.
The company expects the restructuring to cost as much as $1 billion, including about $450 million in the current quarter.
What it means for Cisco’s future
Analysts say the key question for investors is whether Cisco can translate its AI momentum into sustained long-term growth.
The sharp rally after earnings reflected growing confidence on Wall Street that Cisco’s AI infrastructure business is becoming a meaningful growth driver.
Several analysts viewed the restructuring as part of a broader effort to reposition Cisco around higher-growth businesses such as AI networking, security, silicon and optics.
They noted that the planned job cuts and up to $1 billion in restructuring charges suggest Cisco is reallocating resources rather than responding to weak demand.
The post Cisco stock is rising, but what's behind the 4,000 layoffs? appeared first on Invezz