Cisco has announced plans to cut nearly 4,000 jobs in its fiscal fourth quarter, even as it reports record revenue and strong growth in artificial intelligence and enterprise networking. The layoffs, representing less than 5% of the company's total workforce, come despite a standout third quarter in which revenue hit $15.8 billion – a 12% year-over-year increase.
CEO Chuck Robbins explained the decision in a blog post, stating: “We are making changes today that will result in the reduction of our overall workforce in Q4 by fewer than 4,000 jobs, most notifications will begin on May 14.” He emphasized that while roles are being cut in some areas, Cisco is making “clear, strategic investments – particularly in silicon, optics, security, and in our employees’ use of AI across the company.”
The layoffs are the latest in a series of workforce reductions at Cisco, which has periodically restructured its operations to focus on high-growth segments. In 2024, the company cut around 4,000 jobs, and earlier in 2023, it eliminated about 3,500 positions. The pattern reflects Cisco’s ongoing pivot from traditional hardware-centric networking toward software, subscriptions, and AI-driven solutions.
Despite the job cuts, Cisco’s financial results paint a picture of a company riding the AI wave. AI infrastructure orders from hyperscalers reached $1.9 billion in Q3, up from $600 million a year earlier, and the year-to-date total of $5.3 billion has already exceeded initial fiscal 2026 expectations. Robbins noted that full fiscal year 2026 AI infrastructure orders are expected to reach about $9 billion, which would be 4.5 times fiscal 2025 levels.
The company’s bread-and-butter networking business also delivered strong results. Networking product orders grew more than 50% in Q3, led by triple-digit growth in service provider routing and compute, along with solid gains in data center switching, campus switching, wireless, enterprise routing, and industrial IoT. Enterprise data center switching orders grew more than 40% year-over-year and have now grown double digits in seven of the past nine quarters.
Cisco’s Acacia optics business was a standout performer, posting over $1 billion in Q3 orders. Robbins called the unit “on fire,” noting that it is on track for more than 200% growth in fiscal 2026. The company shipped over 750,000 units of 400G and 40,000 units of 800G coherent pluggable optics – figures that Robbins said exceed the nearest competitors.
Another key growth driver is Cisco’s Silicon One architecture, which has become a major differentiator in the market. The recently introduced Silicon One P200 chip secured three hyperscaler customer wins in Q3 and early Q4, marking its first scale-across adoption. The 51.2 Tbps P200 routing processor features deep buffers and supports Octal Small Form-Factor Pluggable (OSFP) and Quad Small Form-Factor Pluggable Double Density (QSFP-DD) optical form factors, enabling a single system to handle 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. 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.”
Beyond hyperscalers, Cisco is seeing increasing AI adoption among non-hyperscaler customers. In Q3, orders from neocloud, sovereign, and enterprise customers for AI infrastructure totaled about $300 million, with a $3 billion pipeline. Robbins noted “consistent triple-digit order growth each quarter in FY26, indicating broadening AI adoption beyond hyperscalers.”
The company is also benefiting from its own supply chain control. CFO Mark Patterson explained that designing their own silicon gives Cisco greater control over the entire supply chain – from wafers and substrates to assembly and test. This vertical integration helps mitigate external supply risks, which is especially important given the industry-wide memory shortages. Patterson said Cisco has enacted over 20 programs to reduce memory utilization across its portfolio, including a new wireless product set to become orderable in Q4 that will require 50% less memory. Additionally, the company has signed a three-year supply agreement with DRAM supplier Nanya.
Cisco’s campus networking business also posted record orders in Q3, growing more than 25% year-over-year. Robbins attributed the strength to “exceptionally strong demand for our next-generation switching, routing, and wireless portfolio, which continues to ramp faster than prior product launches.” A recent survey of 3,500 global enterprise technology leaders showed that 93% are accelerating their network modernization plans due to AI-driven traffic increases, with traffic expected to triple over the next three years. “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 layoffs come as Cisco continues to reshuffle its workforce to align with shifting priorities. The company has been investing heavily in AI, security, and optics, while scaling back in legacy hardware areas. In recent months, Cisco has also made strategic acquisitions, such as grabbing Astrix to secure AI agents, and has open-sourced an agentic AI security spec. These moves underscore Cisco’s determination to be a leader in the AI era, even as it makes the “hard decisions” Robbins alluded to.
Analysts have generally viewed Cisco’s strategy positively, noting that the company’s strong performance in AI infrastructure and networking positions it well for long-term growth. However, the recurring layoffs highlight the challenging transition from a hardware-centric to a software-and-services-driven business model. Cisco’s workforce has shrunk from a peak of over 75,000 employees in 2019 to around 84,000 currently, with cuts totaling more than 10,000 positions in the past two years.
The company’s financial strength provides a cushion for these transitions. Cisco ended Q3 with strong cash flow and a healthy balance sheet, allowing it to continue investing in R&D and acquisitions. The $9 billion in expected AI infrastructure orders for fiscal 2026, combined with the booming Acacia optics business and robust networking sales, suggest that Cisco’s core business remains healthy even as it restructures.
Employees affected by the layoffs will receive severance packages and outplacement services, according to Robbins. The company has not disclosed which specific departments or locations will be most impacted, but the cuts are expected to be spread across the organization.
As Cisco navigates this period of change, the company’s focus on AI, silicon, and optics appears to be paying off. The $1.9 billion in AI orders from hyperscalers in Q3 alone dwarfs the $600 million from a year ago, and the pipeline of non-hyperscaler deals suggests that AI adoption is accelerating beyond the largest cloud providers. Enterprise customers, meanwhile, are upgrading their networks to handle AI-driven workloads, lifting Cisco’s core switching and routing franchises.
Cisco’s strategy of designing its own silicon gives it a competitive edge in both performance and supply chain control. The Silicon One P200 chip, with its 51.2 Tbps capacity and deep buffers, is well-suited for geographically dispersed AI clusters. The company’s ability to ship over 750,000 400G and 40,000 800G coherent pluggable optics units demonstrates the scale of its manufacturing capabilities.
Robbins summed up the company’s philosophy: “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.”
With strong revenue growth, surging AI orders, and a clear strategic direction, Cisco is positioning itself to thrive in the AI-driven networking landscape. The job cuts, while painful, are part of a broader effort to streamline the company and redirect resources toward the technologies that will define its future. As the company moves forward, its investment in silicon, optics, security, and AI will be key to maintaining its relevance and leadership in the industry.
Source: Network World News