Key Takeaways
- Cisco plans to cut nearly 4,000 jobs, representing less than 5% of its workforce, to refocus on AI growth.
- The company reported record Q3 FY2026 revenue of $15.8 billion, exceeding expectations, with a year-over-year growth of 12%.
- Cisco aims for $9 billion in AI orders for FY2026, significantly up from a prior estimate of $5 billion, indicating strong demand in the AI sector.
Cisco Systems has revealed its intention to lay off nearly 4,000 employees as part of a strategic pivot towards the burgeoning field of artificial intelligence (AI). This announcement came shortly after the company reported earnings that surpassed market expectations on Wednesday. The planned layoffs, which represent less than 5% of Cisco’s global workforce, resulted in a significant surge in the company’s stock price, climbing approximately 20% in after-hours trading.
Headquartered in San Jose, California, Cisco is positioning itself to thrive in the AI landscape by reallocating resources towards sectors that demonstrate the highest demand and potential for growth. Cisco CEO Chuck Robbins acknowledged the difficulty of these decisions, stating, “I’m confident Cisco will be one of those winners. This means making hard decisions.” He elaborated that the upcoming reductions would affect fewer than 4,000 jobs, which is a minor fraction of the company’s total employee count.
This announcement followed Cisco’s third quarter fiscal year 2026 earnings report, which showcased impressive results that exceeded Wall Street forecasts. The company reported a record revenue of $15.8 billion, surpassing the anticipated $15.56 billion, while adjusted earnings per share reached $1.06, compared to an expected $1.04. Furthermore, year-over-year revenue growth was notable, showing a 12% increase from $14.15 billion recorded in the same quarter last year, which concluded around April 26.
In addition to its strong earnings, Cisco disclosed that it has secured $5.3 billion in AI infrastructure orders from hyperscale cloud providers thus far in the year. If current trends persist, the company anticipates generating approximately $9 billion in AI orders for fiscal year 2026, an increase from its previous estimate of $5 billion. Revenue from the AI segment is also projected to rise to $4 billion, up from an earlier forecast of $3 billion.
Despite the record revenue, Cisco has communicated plans to initiate workforce notifications starting May 14, which will impact its global operations as part of its strategic shift towards high-growth sectors like AI, security, and networking. The company has assured support for the employees affected by these layoffs, offering severance packages, extended training resources, and job placement assistance through both internal and external services. Historically, this program has been effective, helping around 75% of participants secure new positions.
As part of its restructuring plan, Cisco estimates that the associated costs, including severance and other related expenses, could lead to pre-tax charges of up to $1 billion. The company expects to recognize approximately $450 million of these charges in the next quarter, with the remaining balance to be recorded in fiscal year 2027.
In summary, Cisco’s decision to reduce its workforce aligns with its strategy to embrace AI and adapt to evolving market demands. While the company is poised for growth in the AI sector, the impending layoffs signal a significant transition period, underscoring the challenges technology firms face as they navigate the complexities of workforce management amid rapid industry changes.
