Cisco Systems told CNBC on Thursday that the rapid rise in demand for artificial intelligence software and hardware is propelling the networking industry toward what it called a "networking supercycle." The company reported stronger-than-expected AI infrastructure and hyperscaler orders for the fiscal year and raised its guidance on those orders from $5 billion to $9 billion.
The market reacted sharply. Cisco's shares climbed more than 15%, marking the firm's best trading day in excess of two decades.
As the company pivots more of its operations to AI-related segments, including investments in silicon and optics, Cisco announced plans to reduce its workforce by roughly 5% - a cut that amounts to under 4,000 positions. Management said the restructuring will incur a charge of approximately $1 billion.
Company management outlined the timing of those costs, stating roughly $450 million of the restructuring charges are expected to be recorded in the fourth quarter of fiscal 2026, with the balance to be recognized during fiscal 2027. Cisco characterized these charges as primarily cash-based.
On the pace of change in the AI market, CEO Chuck Robbins told CNBC: "Given the speed at which the market is moving, we need to make a rapid reallocation of resources." He added: "By the way, a lot of the people that are potentially impacted will actually go take those jobs."
Robbins also noted the uncertainties around forward bookings in AI infrastructure, saying the market's character makes it difficult to lock in projections. He explained that Cisco has opted out of certain projects with hyperscalers even as the company continues to pursue other opportunities. "We don't have visibility completely yet, but we have enough understanding of our relationship and the design wins and what their capital commitments are that we feel good about where we're headed," he said.
The CEO addressed an AI model known as Mythos, which has drawn meetings at the White House with senior technology executives. Robbins reported that Cisco is now discussing that AI model with every customer it talks with.
Cisco is participating in Anthropic's Project Glasswing, which provided a select set of companies access last month to test the model and assess cybersecurity implications. Robbins emphasized the need for agility in responding to the evolving market, saying: "You have to be agile, and you have to be ready to move."
This reshaping of priorities and the financial adjustments tied to workforce reductions underscore Cisco's strategy to concentrate on AI-driven product lines while accepting short-term restructuring costs. The company is positioning itself to capture increased demand from hyperscalers and other large customers even as it manages visibility and booking challenges in the AI infrastructure market.