Cisco’s High-Stakes Pivot: Record AI Orders and a $1 Billion Restructuring Reshape the Networking Giant

Cisco cuts 5% workforce to pivot to AI, cybersecurity, achieving record revenue and 56% stock surge. Analysts upgrade but caution on stretched valuation.

Cisco is executing one of the most wrenching strategic transformations in its history. The networking giant is cutting nearly 4,000 jobs — roughly 5% of its global workforce — even as it reports a record quarterly revenue of $15.84 billion and a stock that has rocketed 56.61% since the start of the year. The apparent contradiction is by design: CEO Chuck Robbins describes the layoffs not as cost-cutting but as an “agile reallocation of resources” toward artificial intelligence, semiconductors, and cybersecurity.

The price of that reallocation is steep. Management expects total restructuring charges of around $1 billion, with roughly $450 million hitting the current fourth fiscal quarter alone. Affected employees will receive prorated bonuses and job-search support. But the bet is that the upfront pain will unlock a much larger revenue stream: Cisco now targets $9 billion in AI-related orders for the full fiscal year 2026.

The market has already begun pricing in that optimism. On Friday, Cisco shares closed at €101.64 — a new 52-week high — after gaining 3.06% on the day. The weekly advance was even more dramatic at 24.06%, fueled by a fiscal third quarter that beat analyst expectations on both the top and bottom lines. Earnings per share came in at $1.06, above consensus, while operating cash flow dipped slightly to $3.7 billion.

What really electrified investors was the order book for AI infrastructure. Data center switching orders surged more than 40% year over year, driving the broader networking segment up 25%. Hyperscalers placed $1.9 billion in AI-related orders during the quarter — a figure that analysts say reflects broad-based demand rather than reliance on a few large customers.

Wall Street has responded with a rare wave of upgrades. HSBC moved from hold to buy and raised its price target to $137 from $77, arguing that Cisco’s AI role is becoming more structural and that AI revenue is proving more financially impactful than expected. Evercore ISI targets $150 at the high end, while Morgan Stanley lifted its target to $120, noting the company’s forward P/E has expanded to roughly 25 times estimated EPS of $4.70 — up from a prior range of 20 to 21. BNP Paribas now sees $132, citing Cisco’s in-house silicon, Acacia optics, AI data centers, a campus refresh cycle, and its Nvidia partnership. Rosenblatt holds the most bullish call at $150, and a cluster of banks — KeyBanc, Goldman Sachs, and Bank of America — set targets between $114 and $125.

Of 26 analysts covering Cisco, 19 rate the stock a buy or strong buy. Yet the average price target stands at just $119.54, leaving only modest upside from Friday’s U.S. close. That gap reflects a note of caution. Wolfe Research warns that some order growth may be pulled forward by price increases and component scarcity; if hyperscalers later throttle their investment, the stock’s new premium could compress quickly.

The valuation debate is now front and center. Cisco trades at an expected forward P/E of roughly 27, well above its recent historical range but still a fraction of Ciena’s 68 or Nokia’s 32. Those comparisons bolster the re-rating thesis, but they also leave the stock exposed to any stumble in AI network spending.

In the near term, Cisco’s narrative hinges on two variables: the pace of AI order flow and the full impact of that $1 billion restructuring bill. The fourth quarter will absorb nearly half of those charges directly against net income, testing margin resilience. If the AI order momentum holds, the re-rating should endure. If the first crack appears, the market may quickly tighten the new premium it has so generously awarded.