Cisco Systems (NASDAQ:CSCO) announced a major restructuring initiative on Wednesday aimed at sharpening its focus on high-growth segments such as artificial intelligence, after reporting record third-quarter revenue results.
The company said the overhaul will result in approximately $1 billion in charges related to severance payments and other restructuring expenses. Cisco also confirmed plans to reduce its workforce by fewer than 4,000 employees during the fourth quarter, representing less than 5% of its global staff.
Cisco shares jumped more than 18% in premarket trading on Thursday following the announcement.
Cisco Raises Revenue Outlook on Strong AI Demand
Cisco said around $450 million of the restructuring costs are expected to be recognised during the fourth quarter of fiscal 2026, with the remaining charges scheduled for fiscal 2027. The company noted that most of these costs will be cash-based.
The networking giant also lifted its fiscal 2026 revenue guidance to between $62.8 billion and $63 billion, compared with its previous forecast range of $61.2 billion to $61.7 billion.
For the fiscal fourth quarter, Cisco is projecting revenue growth of 14.5% year over year, substantially above Wall Street expectations of 7.8%.
“Demand remains robust, with AI revenues expected to grow 4x YoY to ~$4bn in 2026,” analysts at Bank of America led by Tal Liani said. “Strength is driven by Hyperscaler demand, Campus refresh, pricing increases, and Enterprise AI spend.”
Bank of America maintained its Buy rating on Cisco shares and increased its price target to $114 from $95.
AI Infrastructure Spending Continues to Accelerate
Cisco has benefited from a surge in spending tied not only to AI processors, but also to the high-speed networking infrastructure required to connect large-scale data centres.
During the third quarter, orders for Cisco’s networking products increased by more than 50% from a year earlier, while orders for data-centre switching products climbed over 40%.
The company posted record third-quarter revenue of $15.8 billion, up 12% year over year and above analyst expectations of $15.54 billion, driven by stronger demand across its product portfolio.
“Cisco delivered record quarterly revenue in Q3 and we saw very strong, broad-based demand for our products, demonstrating the relevance of our technology for connecting and securing AI,” said Chuck Robbins, chair and CEO of Cisco. “Cisco is well-positioned as the critical infrastructure for the AI era, building on our technology leadership and customer trust, while innovating at the speed and scale that our dynamic world demands.”
Cisco Sees Multi-Billion-Dollar AI Revenue Opportunity
Cisco reported adjusted third-quarter net income of $4.2 billion, or $1.06 per share, representing a 10% increase from the same period a year earlier.
During the company’s post-earnings conference call, Cisco chief financial officer Mark Patterson said the company could generate at least $6 billion in AI hyperscale revenue during fiscal 2027.