- Cisco posted Q3 FY26 revenues of $15.8 billion, up 12% year over year
- Hyperscaler orders are driving demand
- Still, the vendor is cutting its workforce in by about 4,000 people
Earlier this week Cisco announced its Q3 FY26 earnings with record revenue of $15.8 billion, up 12% year over year, and double-digit top and bottom-line growth. But ironically, it also announced that’s it’s laying off “fewer than 4,000 jobs.”
In a blog posting Cisco CEO Chuck Robbins said that being one of the winners in AI and network infrastructure “means making hard decisions - about where we invest, how we’re organized, and how our cost structure reflects the opportunity in front of us.”
The cuts in the workforce began this week and will continue through Q4. The reductions will account for less than 5% of Cisco’s total global workforce of about 86,000.
“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,” said Robbins.
AvidThink principal Roy Chua said, "On the 5% job cuts, it's not clear which groups will be targeted. But I would suspect some across the board cuts that are performance-based and in functions that can be automated or made more efficient with today's AI capabilities. It's the in-thing to reduce headcount in tech companies to create a forcing function to drive the remaining employees to adopt AI where they can. A 5% cut is less drastic than many other companies (like Block for instance) and, if appropriately managed, could improve productivity. Or, in the worst case, they'll end up rehiring if the AI thesis doesn't work for some roles (as we saw with Klarna).
Earnings for fiscal Q3 2026 were great
Cisco reported record revenue of $15.8 billion. That’s up from $14.15 billion a year earlier, an increase of 12%. Net income rose to $3.37 billion, or $.85 per share, up from $2.49 billion, or $.62 per share, in the year-ago quarter.
The company touted huge growth in demand for its networking products, including those targeted at the hyperscalers.
According to Futuriom analyst Scott Raynovich, “Cisco's revitalized numbers show its product refresh have put it at the center of AI infrastructure deals, fueled by its strategy to supply a full stack of integrated AI networking hardware and software, including its own optics and custom silicon.”
Compared to Ericsson and Nokia’s quarterly earnings, Cisco’s stands out as a bright light for the industry, which has faced headwinds.
Ericsson reported a 10% sales drop and a step-back from the North American market, due to lack of demand for 5G standalone gear in that market.
One of Cisco’s growing businesses is wireless technology, but hyperscaler orders are way up. Robbins said, "The year-to-date total of $5.3 billion in orders taken from hyperscalers already exceeds our prior expectation of $5 billion for FY '26, with a full quarter remaining.”
He added, “Given this strong demand, we now expect to take AI infrastructure orders of approximately $9 billion from hyperscalers in FY '26. 4.5x our FY '25 total. We expect to recognize approximately $4 billion in AI infrastructure revenue from hyperscalers in fiscal year '26.”
Even without hyperscaler orders, which grew triple digits, according to Robbins, product orders were up 19% year-over-year.
Meanwhile, Nokia sees its AI and cloud addressable market growing at a 27% compound annual growth rate (CAGR) through 2028, with the broader network infrastructure addressable market tracking to 14% CAGR. Hyperscaler capex for 2026 looks to run past $700 billion.
Nokia sales rose 4% to $5.26 billion (€4.5 billion) in the quarter, with operating profit of $329 million (€281 million). AI and cloud customers drove the performance, with that segment growing 49% and accounting for €1 billion in new orders — most of them in Optical Networks, where net sales rose 20%, Fierce Network reported in April. Telco customer sales slipped 2% over the same period.
Cisco’s most direct competitor, Arista Networks, also had an excellent quarter, according to the company’s earnings — reporting revenue of $2.7 billion in Q1 2026, or 35.1% year-over-year growth with cash flow from operations of $1.69 billion. The company attributed its growth to demand for AI and data center equipment.