Cisco Stock Surges 17% on AI Orders, Cuts 4,000 Jobs in $1B Restructuring

Cisco (CSCO) soared 17% in extended trading on Wednesday after the networking giant issued results and guidance that topped Wall Street projections — alongside a plan to cut fewer than 4,000 jobs, representing less than 5% of total employees, in a restructuring costing up to $1 billion.

The company said it has received $5.3 billion in AI infrastructure and hyperscaler orders so far this year, raising its full-year target to $9 billion from $5 billion. Revenue for the quarter ended April 25 hit $15.84 billion, up 12% from $14.15 billion a year earlier, against expectations of $15.56 billion. Adjusted earnings per share came in at $1.06, beating the $1.04 consensus.

Net income rose to $3.37 billion, or 85 cents per share, from $2.49 billion, or 62 cents, a year earlier. The fiscal fourth quarter guidance blew past estimates: Cisco called for $1.16 to $1.18 in adjusted EPS on $16.7 billion to $16.9 billion in revenue, versus analyst expectations of $1.07 on $15.82 billion.

Shares have gained 33% this year, topping the Nasdaq's 14% advance. Should the after-hours gains hold through Thursday, it would mark the sharpest rally since 2002.

What Moved the Market: AI Orders Triple as Hyperscalers Open Wallets

The catalyst is the AI order book. Hyperscaler AI infrastructure orders hit $1.9 billion in Q3, more than triple the $600 million recorded a year earlier. Year-to-date orders have already surpassed the $5 billion full-year target with one quarter still to go. Cisco raised its expected fiscal-year revenue in that market to $4 billion, up from a prior projection of $3 billion.

CEO Chuck Robbins wrote in a blog post Wednesday that the latest round of cuts will begin on May 14.

He framed the layoffs as reallocation, not savings: "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.

I'm confident Cisco will be one of those winners. This means making hard decisions — about where we invest, how we're organized, and how our cost structure reflects the opportunity in front of us."

Cisco said severance and other costs will result in pre-tax charges of $1 billion, with about $450 million recognized in the fiscal fourth quarter.

The Numbers: Networking Booms, Security Flat

Cisco's networking revenue increased 25% to $8.82 billion, exceeding the $8.47 billion consensus among analysts polled by StreetAccount. Security revenue was flat at about $2 billion, compared to StreetAccount's $1.99 billion consensus.

During the third quarter, Cisco announced switches and routers using its next-generation processor. The company also debuted a leaderboard for ranking generative AI models based on their robustness against cybersecurity attacks.

While Cisco has trailed many data center peers in the AI race, Wall Street has been rallying to the company's story, pushing the stock to a record late last year, finally surpassing its dot-com high. The after-hours surge to $119.40 reflects market approval of a restructuring framed as growth investment rather than cost-cutting.

$119.40 is the after-hours level that confirms the breakout. Holding that level through Thursday's regular session would validate the 2002-level rally magnitude and signal institutional conviction that Cisco's AI pivot is translating to sustained revenue beats.

$16.7-16.9 billion is the Q4 revenue guidance that tests the narrative — a 10% sequential increase that suggests the AI order momentum isn't slowing. The $9 billion full-year AI order target is the structural number that justifies the valuation re-rating.

If hyperscaler spending holds at triple-digit YoY growth rates, Cisco's networking backbone becomes a critical AI infrastructure layer rather than a legacy hardware play.

The 4,000 job cuts are the trade's clock. Watch whether the reallocation to AI, silicon, optics and security produces tangible product announcements in the next two quarters — or whether the restructuring becomes a recurring theme.

Robbins said the company is "no longer configured for where the business is heading." The next earnings call will show whether that reconfiguration is already showing up in margins.