Record revenue, raised guidance, and a workforce reduction land together as Wall Street rewards the networking firm’s repositioning around AI infrastructure

Cisco Systems delivered one of the more striking earnings reports of the season on Wednesday, posting record quarterly revenue, raising its full-year guidance, and simultaneously announcing the elimination of fewer than 4,000 jobs. The combination produced a sharp rally in the stock, with shares climbing as much as 20% in after-hours trading and helping lift the Dow Jones Industrial Average back above 50,000 the following session.

The reaction crystallized a pattern that has defined enterprise technology earnings over the past year: investors are rewarding companies that pair clear AI revenue traction with disciplined cost moves, even when those moves come at the expense of headcount.

The Numbers

For the fiscal third quarter ended April 25, 2026, Cisco reported revenue of $15.84 billion, up 12% from $14.15 billion a year earlier and above the $15.56 billion analysts polled by LSEG had expected. Adjusted earnings per share came in at $1.06, ahead of the $1.04 consensus estimate. GAAP net income reached $3.4 billion, a 35% increase year-over-year.

The order book was stronger still. Total product orders rose 35% year-over-year. Networking product orders climbed more than 50%, and data-center switching orders rose more than 40%, reflecting accelerating demand for the infrastructure that underpins AI training and inference workloads.

The headline figure that drew the most attention from analysts was the company’s AI infrastructure pipeline. Cisco said it has secured $5.3 billion in AI infrastructure orders from hyperscale customers so far this fiscal year, and raised its full-year order target to $9 billion, up from a prior projection of $5 billion. Its forecast for AI-related revenue in fiscal 2026 was lifted to $4 billion, up from $3 billion.

Looking ahead, Cisco guided to fourth-quarter revenue of $16.7 billion to $16.9 billion and adjusted earnings of $1.16 to $1.18 per share, both well ahead of analyst consensus. Full-year revenue guidance was raised to a range of $62.8 billion to $63 billion. The company said both ranges account for the estimated impact of tariffs under current trade policy.

The Layoffs Investors Cheered

Hours after the earnings release, Cisco confirmed it would reduce its workforce in the current quarter by fewer than 4,000 employees, representing less than 5% of its roughly 86,000-person global workforce. The company expects to incur up to $1 billion in restructuring costs, with about $450 million recognized in the fiscal fourth quarter.

In the company’s framing, the cuts are about reallocation rather than retrenchment. CEO Chuck Robbins said Cisco is positioning itself as critical infrastructure for the AI era, and the company described the reductions as part of a shift toward AI, security, silicon, and optics. Cisco said affected employees would be offered pro-rated fiscal 2026 bonuses, internal and external placement services, and one year of access to its Cisco U courses and certifications covering AI, security, and networking.

What is striking is the market’s response to a firm cutting jobs at the same moment it reported record revenue and raised guidance. Several analysts characterized the layoffs as a reallocation of resources rather than a response to weak demand, noting that the up to $1 billion in restructuring charges suggested Cisco was repositioning around higher-growth businesses. That interpretation drove the share rally, with reports describing the move as on track for the stock’s sharpest single-session gain since 2002.

What It Says About The Cycle

Cisco’s report joins a clear trend across enterprise technology. Companies including Meta, Google, Microsoft, and Salesforce have all announced versions of the same playbook over the past 18 months: strong financial results paired with workforce reductions framed as a pivot toward AI. In a number of these cases, the strong results have been described by management as the reason the cuts could happen — capital is being redirected toward higher-growth product areas rather than preserved in legacy organizational structures.

For investors tracking AI capital expenditure cycles, the Cisco update sharpens the picture in two ways. First, it confirms that demand from hyperscale customers for AI-related networking and switching gear continues to accelerate, with order growth running well ahead of revenue recognition. Second, it shows that legacy networking incumbents can credibly position themselves inside the AI infrastructure buildout, not only as suppliers of chips but as suppliers of the systems that connect them.

The broader market took the cue. The Dow Jones Industrial Average climbed about 0.75% the following session to retake 50,000, while the S&P 500 and Nasdaq Composite each set fresh records, closing at 7,501.24 and 26,635.22 respectively. AI-related names continued to lead the rally, even as cyclical sectors lagged.

The questions for the quarters ahead are whether Cisco can convert its raised order pipeline into recognized revenue without margin compression, whether tariffs reshape the demand picture, and whether the AI-driven order strength now visible at hyperscalers extends to enterprise customers. The next test will come with fourth-quarter results and the company’s initial fiscal 2027 outlook.

For now, the market has registered its verdict. A record-revenue quarter paired with significant job cuts produced a rally rather than a sell-off, an outcome that says as much about how investors are interpreting the AI cycle as it does about Cisco itself.