Cisco Rewrites Its Playbook: Layoffs, Record Sales, and a $9 Billion AI Target

Cisco’s third-quarter results tell a tale of two transformations. The networking giant posted a record $15.84 billion in revenue, well ahead of the $15.6 billion analysts had penciled in. Adjusted earnings per share of $1.06 also beat the consensus estimate of $1.03, propelling the stock to a new year-high of €101.64 and a 56.61% gain since January. But behind the headline numbers lies a far more dramatic shift: the company is axing roughly 4,000 jobs—about 5% of its global workforce—while pouring that capital and talent into artificial intelligence infrastructure.

The move, announced around May 17, is not your typical cost-cutting exercise. Chief Financial Officer Mark Patterson described it as a targeted reallocation of resources, and the price tag reflects that ambition. Cisco expects a pretax charge of up to $1 billion to cover severance, retention, and the cost of retooling teams toward AI, silicon design, optical networking, and cybersecurity. Affected employees are being notified from mid-May onward, with pro-rated bonuses for the current fiscal year, job-search support, and access to certifications in AI and network security. Chief Executive Chuck Robbins insisted the company is investing from a “position of strength.”

That strength is most visible in the order book. During the quarter, Cisco booked $1.9 billion in AI-related infrastructure orders—roughly three times the level a year earlier. For the full fiscal year, the tally has already reached $5.3 billion, prompting management to raise its target for AI infrastructure orders to $9 billion from a prior $5 billion. The rush of demand from hyperscale cloud providers, which the company dubs a “networking supercycle,” is reshaping how investors value the stock.

Should investors sell immediately? Or is it worth buying Cisco?

The market’s reaction has been emphatic. Shares climbed 3.06% on the day of the results, extending a blistering run that saw the stock gain 24.06% over the prior week and 45.99% over the past 30 days. Analysts are scrambling to update their models. HSBC upgraded the stock to “Buy” with a $137 price target. KeyBanc set a target of $125, while Rosenblatt Securities and Evercore have both pegged the stock at $150. Institutional investors are piling in: Commerzbank FI boosted its position by 49.5% to about 2.35 million shares, and Abacus Wealth Partners increased its stake by 232%.

Cisco’s own guidance reinforces the narrative. For the fourth quarter, the company expects revenue between $16.7 billion and $16.9 billion, with adjusted earnings per share of $1.16 to $1.18. That would bring full-year revenue to between $62.8 billion and $63.0 billion. While the layoffs may seem jarring against such a growth backdrop, Robbins and Patterson argue the timing is deliberate: faster allocation of resources into higher-margin AI adjacencies is the priority, not preserving headcount in legacy networking.

The next tangible event for shareholders is the quarterly dividend. Cisco declared $0.42 per share, with the ex-dividend date set for July 6 and payment scheduled for July 22. Between now and then, the market will be watching whether the order surge can sustain the stock’s recent valuation. If the AI pipeline continues to swell, the job cuts will be remembered not as a sign of distress but as the price of a pivot—one that cost $1 billion upfront but promises $9 billion in returns.