Cisco to cut nearly 4,000 jobs despite strong growth in AI, enterprise networking
Cisco saw growing demand for AI infrastructure from hyperscalers in Q3, and on the enterprise front, it reported solid gains across data center switching, enterprise routing, wireless networking, and industrial IoT.
Despite reporting positive financial news — including record third-quarter revenue of $15.8 billion, a 12% year-over-year increase — Cisco said it will eliminate almost 4,000 jobs. The layoffs represent less than 5% of the company's total workforce. Most notifications will begin on May 14, according to CEO Chuck Robbins.
“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 in a blog post. “While we are reducing roles in some areas, we are making clear, strategic investments – particularly in silicon, optics, security, and in our employees’ use of AI across the company.” He emphasized that these investments build from a position of strength and focus on technologies that will accelerate growth, deliver innovation, and define Cisco's future.
Robbins further noted: “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.”
Key Financial and Operational Highlights from Q3
On Cisco's call with financial analysts, executives shared a number of positive results for its fiscal Q3. Networking product orders grew more than 50% in Q3, led by triple-digit growth in service provider routing and compute, and strong gains across data center switching, campus switching, wireless, enterprise routing, and industrial IoT.
AI infrastructure orders from hyperscalers reached $1.9 billion in Q3, up from $600 million last year. Year-to-date AI orders total $5.3 billion, exceeding FY26 expectations. For the full fiscal year 2026, Cisco expects AI infrastructure orders to reach approximately $9 billion, which is 4.5 times FY25 levels.
Cisco's Acacia optics business posted more than $1 billion in Q3 orders and is on track for more than 200% growth in FY26. Over 750,000 units of 400G and 40,000 units of 800G coherent pluggable optics shipped, exceeding nearest competitors. Robbins described the Acacia business as “on fire.”
Non-hyperscaler AI infrastructure orders — from neocloud, sovereign, and enterprise customers — totaled approximately $300 million in Q3, with a $3 billion pipeline. Robbins noted consistent triple-digit order growth each quarter in FY26, indicating broadening AI adoption beyond hyperscalers.
The Role of Silicon One and Supply Chain Control
Robbins called out Cisco's Silicon One architecture as a key contributor to the positive quarter. The recently introduced Silicon One P200 chip secured three hyperscaler customer wins during Q3 and early Q4, marking Cisco's 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 the box to support geographically dispersed AI clusters. A single P200-based system handles traffic that previously required six 25.6 Tbps fixed systems or a four-slot modular system.
Robbins explained that having proprietary silicon is critical for relevance with hyperscalers. “If you don’t have silicon, you’re going to struggle to be relevant to the hyperscalers. And I think that’s what we’re seeing. 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.”
Cisco CFO Mark Patterson added that Silicon One provides supply chain control. Designing its own silicon from the ground up mitigates external supply risks. “The fact that we’re directly managing wafers, substrates, assembly and test really gives us much more control over the supply chain,” Patterson said. He also discussed memory shortages, an industry-wide issue, noting that Cisco has implemented over 20 programs to reduce memory utilization across the portfolio. In the wireless space, products becoming orderable in Q4 will require 50% less memory. Cisco also secured a three-year supply agreement with DRAM supplier Nanya to bolster capacity.
Enterprise Networking Momentum
Beyond AI, Cisco's core networking business continues to perform strongly. Enterprise data center switching orders grew more than 40% year-over-year and have grown double digits for seven of the past nine quarters. Robbins noted that the AI infrastructure opportunity in enterprise is ramping, with Nexus switch orders tagged for AI deployments up almost 50% sequentially in Q3.
Within campus networking, Cisco achieved record orders in Q3, growing more than 25% year-over-year. Demand is exceptionally strong for the next-generation switching, routing, and wireless portfolio, which is ramping faster than prior product launches. Robbins referenced research conducted with around 3,500 global enterprise technology leaders, which confirmed increased urgency to modernize campus and branch networks. Traffic across these networks is expected to increase threefold over the next three years because of AI. As a result, 93% of respondents are accelerating their network modernization plans. Robbins concluded, “These findings support our belief that we are still at the start of a multi-year, multi-billion-dollar campus refresh opportunity.”
The job cuts come as Cisco repositions itself for the AI era, shifting resources from legacy areas to high-growth segments. The company is investing heavily in silicon, optics, security, and AI tools for its own workforce. The layoffs are part of a broader trend in the tech industry where companies are rightsizing after pandemic-era hiring sprees, even while they report robust financials. Cisco's move mirrors actions by other major technology players that are balancing cost discipline with strategic investments.
Industry analysts note that Cisco's strong performance in AI infrastructure and enterprise networking positions it well for future growth. The combination of proprietary silicon, optical offerings, and a broad networking portfolio gives Cisco an edge in serving both hyperscaler and enterprise customers. However, the workforce reduction underscores the company's commitment to efficiency and reallocation of resources. Employees in roles that are being cut will receive notifications starting May 14, and Cisco has stated it will provide support and severance packages.
As the AI infrastructure market continues to expand, Cisco expects to capture a significant share. The company's focus on silicon development, its Acacia optics business, and its enterprise networking refresh cycle are expected to drive sustained revenue growth. The job cuts, while painful, are part of a strategic realignment that Cisco believes will ensure long-term competitiveness. With a record quarter behind it and a clear vision for the future, Cisco is navigating the transition into an AI-driven networking landscape.
Source: Network World News