Cisco Stock Price Surge 20% After Hours. Cisco Bets on AI to Restructure Business, Layoffs Signal Transformation Resolve

The most noteworthy aspect of this earnings report is the significant shift in both Cisco's AI business orders and its customer structure. Compared to previous quarters, the acceleration of Cisco's AI business in this round is very apparent.

In the third quarter of fiscal year 2025, the company disclosed that AI infrastructure orders from webscale customers had exceeded $600 million, stating that this target was achieved one quarter ahead of schedule.

By the second quarter of fiscal year 2026, AI infrastructure orders from hyperscale customers had risen to $2.1 billion. Simultaneously, the company secured $350 million in AI orders from neocloud, sovereign cloud, and enterprise customers, with a related pipeline of approximately $2.5 billion.

The latest fiscal third-quarter report shows that Cisco's cumulative AI infrastructure orders for the first three quarters of this fiscal year have reached $5.3 billion. More importantly, Cisco raised its full-year AI infrastructure order target from the previous $5 billion to $9 billion.

Changes at the order level are even more telling. Cisco's total product orders in the fiscal third quarter grew 35% year-over-year; even excluding hyperscale customers, growth remained at 19%. Networking product orders grew by over 50% year-over-year, and data center switch orders grew by over 40%. This implies that AI capital expenditure is not confined to chips but is spreading to the networking, switching, and data center connectivity layers.

Meanwhile, Cisco emphasized in its earnings report that demand for AI infrastructure, campus network refresh cycles, and data center switching equipment will continue to be released over the coming years. In particular, high-bandwidth, low-latency network interconnectivity is becoming an indispensable part of AI data centers.

From a market perspective, Cisco was previously viewed as a mature networking equipment company with stable growth but limited upside. Now, as Cisco's AI infrastructure orders and revenue from hyperscale customers begin to carry more weight, the market will view it as an infrastructure beneficiary within the AI cycle.

Cisco announced it will cut approximately 4,000 jobs, representing less than 5% of its total workforce. The restructuring is expected to cost up to $1 billion, with approximately $450 million to be recognized in the current quarter and the remainder reflected through fiscal 2027. The company also emphasized that the saved and freed-up resources will be redirected toward silicon, optics, security, and internal AI applications.

Cisco CEO Chuck Robbins stated in a post on the company's official website that the layoffs do not signal a contraction, but a reallocation of resources toward areas with the strongest demand and highest long-term value. Robbins believes that in the AI era, companies must concentrate limited resources on areas that generate the greatest long-term value, rather than relying on legacy organizational structures to meet new demand curves. For an established tech giant of this scale, such an adjustment underscores its assessment that the AI cycle is a long-term trend rather than a short-term phenomenon.

Combined with Cisco's upwardly revised fourth-quarter guidance, the company's outlook on future operations is significantly more optimistic than in previous quarters.

Cisco currently expects fourth-quarter revenue to range between $16.67 billion and $16.9 billion, with non-GAAP EPS between $1.16 and $1.18. This suggests management believes demand for AI infrastructure and networking equipment will not significantly cool down in the short term.

More importantly, Cisco significantly raised its full-year guidance for fiscal 2026, boosting revenue expectations from the $61.2–$61.7 billion range projected in February to $62.8–$63.0 billion. This indicates that AI orders, demand from hyperscale customers, and enterprise network upgrades have begun to collectively support the company's growth momentum over the coming quarters.

Cisco stock price weekly chart, Source: TradingView

Looking at the weekly chart, Cisco's share price has risen for the sixth consecutive week and continues to hit new all-time highs. The price is currently trading near the $101.78 resistance level at the Fibonacci 0.786 extension. Given Wednesday's after-hours performance, a breakout above this resistance is practically a foregone conclusion, opening up upside potential toward the Fibonacci 1.618 extension level at $131.80.

Regarding the moving average system, multiple moving averages maintain a bullish alignment, further confirming the strength of the stock's upward momentum and the high sustainability of the uptrend.

This content was translated using AI and reviewed for clarity. It is for informational purposes only.