Cisco Systems has announced it will cut nearly 4,000 jobs in the fourth quarter of its fiscal year 2026, even as the networking giant reported record revenue of $15.8 billion for the third quarter, a 12% year-over-year increase. The workforce reduction, which accounts for less than 5% of Cisco's total employee base, comes amid strong growth in AI infrastructure and enterprise networking businesses.
Layoffs amid record revenue
In a blog post, Cisco CEO Chuck Robbins explained the rationale behind the cuts. “We are making changes today that will result in the reduction of our overall workforce in Q4 by fewer than 4,000 jobs,” Robbins wrote, adding that most notifications would begin on May 14. He emphasized that the company is reducing roles in some areas while making “clear, strategic investments – particularly in silicon, optics, security, and in our employees’ use of AI across the company.”
Robbins noted that the moves are designed to position Cisco for long-term success in the AI era. “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,” he stated. “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.”
The job cuts come despite Cisco delivering strong financial results. For its fiscal third quarter, networking product orders grew more than 50%, led by triple-digit growth in service provider routing and compute. The company also saw double-digit gains across data center switching, campus switching, wireless, enterprise routing, and industrial IoT.
AI infrastructure boom
A key highlight of Cisco's earnings report was the explosive growth in AI-related orders. AI infrastructure orders from hyperscalers reached $1.9 billion in Q3, up from $600 million in the same period last year. For the fiscal year to date, Cisco has secured $5.3 billion in AI infrastructure orders, exceeding its full-year expectations for FY26. Robbins guided that full fiscal year 2026 AI infrastructure orders are expected to reach approximately $9 billion, representing a 4.5x increase over FY25 levels.
Cisco's Acacia optics business also posted stellar results, with more than $1 billion in Q3 orders. The company shipped over 750,000 units of 400G and 40,000 units of 800G coherent pluggable optics, exceeding the nearest competitors. Robbins described the Acacia business as “on fire.”
Beyond hyperscalers, Cisco reported approximately $300 million in AI infrastructure orders from neocloud, sovereign, and enterprise customers in Q3, with a pipeline of $3 billion. Robbins noted consistent triple-digit order growth each quarter in FY26, indicating that AI adoption is broadening beyond the largest cloud providers.
Silicon One and supply chain advantage
Cisco's Silicon One architecture played a central role in the strong quarter. The recently introduced Silicon One P200 chip, a 51.2 Tbps routing processor with deep buffers and support for multiple optical form factors, secured three hyperscaler customer wins in Q3 and early Q4, marking Cisco's first “scale-across” adoption. According to Cisco, a single P200-based system can handle the traffic that previously required six 25.6 Tbps fixed systems or a four-slot modular system.
Robbins emphasized the strategic importance of owning silicon. “I’ve said repeatedly on these calls over the last couple of years that as we move to the future, that if you don’t have silicon, you’re going to struggle to be relevant to the hyperscalers,” he said. “And so, when you look at the number we put up and the percentage of that, roughly half is systems, which is Silicon One. It’s a massive differentiator for us.”
CFO Mark Patterson added that designing its own silicon gives Cisco greater control over the supply chain, from wafers and substrates to assembly and test. This vertical integration has become increasingly important in navigating industry-wide memory shortages. Patterson noted that Cisco has implemented over 20 programs to reduce memory utilization across its portfolio. For example, upcoming wireless products will require 50% less memory, while the company has also secured a three-year supply agreement with DRAM supplier Nanya.
Enterprise networking momentum
In addition to AI, Cisco's core enterprise networking business is thriving. Robbins reported that enterprise data center switching orders grew more than 40% year-over-year and have now grown double digits for seven of the past nine quarters. Campus networking saw record orders in Q3, growing more than 25% year-over-year, driven by strong demand for next-generation switching, routing, and wireless products.
Robbins pointed to recent research involving around 3,500 global enterprise technology leaders, which confirmed an increased urgency to modernize campus and branch networks. With traffic across these networks expected to increase threefold over the next three years due to AI, 93% of respondents are accelerating their network modernization plans. “These findings support our belief that we are still at the start of a multi-year, multi-billion-dollar campus refresh opportunity,” Robbins said.
The company's bread-and-butter networking business also saw growth in wireless and industrial IoT segments, with wireless LAN and industrial IoT orders showing strong double-digit gains. Cisco's focus on AI is not limited to hardware; the company is also investing in its employees' use of AI across internal operations.
Balancing cuts and growth
The decision to reduce headcount while reporting strong financials is not unprecedented in the tech industry. Cisco has historically used layoffs as a tool to reallocate resources toward higher-growth areas. The company had previously undergone job cuts in 2024 and 2025 as part of restructuring efforts. In this latest round, Robbins emphasized that Cisco is “making clear, strategic investments” in areas that will define its future, including silicon, optics, and security.
Security remains a key focus, with Cisco recently acquiring Astrix to secure AI agents and open-sourcing an agentic AI security specification. The company's broader security portfolio continues to see traction, though the earnings call focused mainly on networking and AI.
Overall, Cisco's Q3 results paint a picture of a company successfully navigating the shift to AI-driven networking while managing costs. The job cuts, though painful, are positioned as a necessary step to maintain competitiveness and invest in the technologies that will drive future growth. With a record revenue quarter, booming AI orders, and strong enterprise demand, Cisco appears well-positioned to capitalize on the next wave of networking infrastructure upgrades.
Source: Network World News