Cisco Cuts 4,000 Jobs on the Same Day It Posts $15.8B Record Revenue

The Same Day, Two Headlines

On May 13, after the closing bell, Cisco posted its best quarterly results ever. Revenue came in at $15.84 billion, up 12% year-over-year, beating Wall Street's $15.56 billion estimate. Non-GAAP earnings per share hit $1.06, clearing the $1.04 consensus. It was Cisco's 16th consecutive quarter of beating revenue expectations.

The very next morning, May 14, the company began notifying nearly 4,000 employees that their jobs were gone. The cuts represent under 5% of Cisco's global headcount. Severance packages, pro-rated bonuses, job placement support, and one year of access to Cisco University training were offered to affected workers.

Cisco stock surged as much as 20% in pre-market trading following the announcements, on track for its sharpest single-session rally since 2002. Investors read the layoffs not as a warning sign, but as a signal that management is serious about reallocating capital toward higher-growth areas.

Not a Cost Cut - A Reallocation

Cisco CFO Mark Patterson was direct on the investor call: 'This was really not a savings-driven restructure. Things are moving incredibly fast right now. This is more realigning from an already strong base - really realigning resources around silicon, optics, security, and AI.'

CEO Chuck Robbins echoed that framing in a blog post: '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 confirmed that cuts in some areas would be matched by investments in silicon, optics, cybersecurity, and employee-facing AI tools.

The restructuring will carry up to $1 billion in pre-tax charges. Around $450 million is set to hit the books before fiscal year-end, with the remainder pushed into fiscal 2027. The math Cisco is presenting: spend now, realign the cost base, accelerate AI revenue.

AI Orders Are the Story

The underlying driver of both the strong results and the restructuring is Cisco's position in AI infrastructure. In Q3 alone, the company booked $1.9 billion in AI infrastructure orders from hyperscalers - compared to $600 million in the same quarter last year, a 217% jump.

Year to date, Cisco has secured $5.3 billion in AI infrastructure orders. Management raised the full-year AI order target to $9 billion, up from a prior estimate of $5 billion - 4.5 times what Cisco pulled in from AI orders across all of fiscal 2025. Full-year AI revenue guidance was also revised upward, from $3 billion to $4 billion.

The products driving this are Cisco's Silicon One custom networking chips and Acacia Optics, which handle the high-speed interconnects required when AI workloads are distributed across multiple data centers and hardware configurations. Cisco also recorded five new hyperscaler design wins in Q3 alone.

A Pattern Worth Noting

This is not the first time Cisco has announced strong earnings and layoffs simultaneously. In 2024, the company ran two separate rounds - roughly 4,000 in February and another 5,600 in August - totaling about 7% of global headcount across the year. In mid-2025, a smaller round of 221 California positions followed, concentrated at the Milpitas campus and San Francisco office.

The timing also carries a contradiction worth noting. As recently as August 2025, CEO Robbins told CNBC that he did not want to use AI as an excuse to reduce headcount. Days later, layoffs tied to AI efficiency gains were announced. The Q3 FY2026 round follows a near-identical pattern.

Cisco is not alone in this dynamic. Layoffs.fyi tracked over 103,000 tech workers losing jobs globally in 2026 through mid-May, approaching the full-year total for 2025. US tech companies cut 85,411 positions in the first four months of 2026, a 33% increase year-over-year, per outplacement firm Challenger, Gray and Christmas. LinkedIn also announced a roughly 5% workforce reduction this week despite reporting 12% quarterly revenue growth.

What to Watch Next

• Cisco's AI infrastructure revenue is scaling fast enough that management doubled its own order forecast mid-year. Teams evaluating networking vendors for AI workloads should track Silicon One and Acacia Optics as the products Cisco is betting its restructuring on.
• The cuts are targeting legacy switching, routing, and parts of the Talos and Splunk security orgs. Roles in those areas are being phased out in favor of AI networking, silicon design, and cloud security hires.
• Affected employees were offered severance, a pro-rated FY2026 bonus, job placement support through a program that reportedly helped 75% of prior participants find new roles, and one year of Cisco University access.
• The $1 billion restructuring charge is a one-time cost. Cisco's Q4 guidance and FY2027 outlook will be the real test of whether the resource reallocation delivers the AI revenue growth management is projecting.

Sources