Cisco Systems shares posted their biggest gain since the Dot-Com boom-and-bust era after the networking giant delivered third-quarter results that beat analysts' estimates. The company also announced a workforce restructuring, aligning with a broader hyperscaler playbook that cuts labor costs and redirects capital toward AI infrastructure and data-center buildouts.
Cisco raised its fiscal 2026 outlook, guiding for $62.8 billion to $63 billion in revenue and $4.27 to $4.29 in adjusted EPS, while also issuing a stronger-than-expected fourth-quarter sales forecast.
The catalyst that sent shares into a parabolic move early in the U.S. cash session was demand for AI. Cisco boosted its expected fiscal 2026 hyperscaler AI orders to $9 billion from $5 billion, signaling stronger traction in supplying the networking infrastructure needed for data center buildouts. Shares surged more than 16%, marking their best day since May 2002.
Stock is at a record high.
UBS analyst Simon Penn summed up third-quarter results and guidance:
They reported EPS and revenue beat and Q4 guided EPS and revenue was upgraded.
Q3 EPS was $1.06 versus forecasts of $1.04 and Q3 revenue was $15.8 bn versus forecasts of $15.5 bn.
Looking forward, they increased Q4 EPS guidance to $1.16-1.18, above forecasts of $1.07. Q4 revenue guidance also beat, at $16.7-$16.9bn versus estimations of $15.82.
Cisco reported FY2026 orders from hyperscalers $9 bn, up from prior $5 bn.
CEO Chuck Robbins wrote in a blog, "The companies that will win in the AI era will be those with focus, urgency, and the discipline to continuously shift investment toward the areas where demand and long-term value creation are strongest."
"While we are reducing roles in some areas, we are making clear, strategic investments," Robbins added. That includes spending on chips, fiber optics, security, and the use of AI by its own employees, he noted.
Robbins said the company will undergo a workforce restructuring and shed fewer than 4,000 jobs, or less than 5% of the total employee base. This restructuring comes as it pivots toward data center buildouts.
Here's analyst commentary from Goldman's Nelson Armbrust:
Cisco Earnings Validate Networking is an AI Bottleneck
Drivers of the Earnings Beat : Cisco +15% pre mkt, the primary catalyst was a massive acceleration in AI infrastructure orders, which reached $1.9 billion in the quarter alone. Year-to-date AI orders hit $5.3 billion, prompting management to nearly double its full-year AI order guidance from $5 billion to $9 billion. Beyond AI, the beat was supported by a 50% year-over-year surge in networking product orders and a multi-billion-dollar campus networking refresh cycle. Additionally, Cisco announced a strategic restructuring to cut approximately 4,000 jobs (5% of its workforce) to reallocate capital toward high-growth areas like silicon, optics, and AI.
Broader Market and AI Infrastructure Implications
Validation of Hyperscaler Capex: Cisco's results provide a "clean" data point confirming that AI spending by hyperscalers (Meta, Microsoft, Google) is not just sustained but accelerating. This reduces fears of an imminent "AI air pocket" in capital expenditures.
Networking as the New AI Bottleneck: The shift in demand toward Cisco's Silicon One and Acacia optics suggests that the market is moving from a "compute-first" phase (Nvidia GPUs) to a "connectivity-first" phase, where high-speed networking is critical to prevent data bottlenecks in massive AI clusters.
Goldman's Delta One desk noted:
Cisco delivered strong guidance while continuing to cut heads… effectively reinforcing the "AI replacing labor while driving infrastructure demand" story.
Across the major hyperscalers, white-collar workers remain on edge as layoffs accelerate - from Meta's plan to cut roughly 10% of its workforce to Oracle's elimination of thousands. The pattern of behavior among hyperscalers is capital reallocation by slashing labor costs to free up more spending for AI infrastructure, with capex estimates approaching $700 billion this year. That AI-driven