Cisco shares soar 17%: the market veteran's pivot toward AI has worked

Shares of data center solutions provider Cisco Systems soared nearly 17% in the postmarket on May 13 after an optimistic outlook. The company, which was one of the symbols of the dot-com era, producing routers and networking systems, has become in demand again because of the AI boom. It has nearly doubled its expectations for orders for data center equipment this year. And it has also announced it is cutting thousands of jobs and incorporating AI into its own manufacturing processes.

Cisco, the world's largest networking equipment maker, said it has received orders for $5.3 billion worth of AI infrastructure and hyperscaler equipment since the beginning of the year, with orders totaling $9 billion for the entire fiscal year that ends in July, the company announced. Earlier its estimate was $5 billion. Cisco also raised its revenue forecast in this segment - from the previous $3 billion to $4 billion. This suggests that one of the old-timers of Silicon Valley is successfully turning toward the AI economy, Bloomberg notes.

For the fiscal fourth quarter, the company expects total revenue to be between $16.7 billion and $16.9 billion. Analysts surveyed by the agency were looking for $15.8 billion. Adjusted earnings will reach $1.16 to $1.18 per share, Cisco forecast, compared with the Wall Street average estimate of $1.07 or less.

At the end of last year, Cisco shares hit an all-time high for the first time since the dot-com bubble. This year, they have already added 33% of their value, outperforming the Nasdaq Composite Technology Sector Index, which rose 14%.

At the main trading on Ma 13, the company's securities rose by 2.6%, having updated the record. At the postmarket after the publication of reports and forecasts, the quotes jumped by 17%. If they maintain this growth at the session on Ma 14, it will be the most powerful one-day rally Cisco since 2011, CNBC calculated.

In the third quarter of fiscal 2026, ended April 25, Cisco's revenue grew 12% year-over-year to $15.8 billion and adjusted earnings per share were $1.06. Both figures were 1.5-2% ahead of Wall Street forecasts.

Cisco is revamping its product lineup and releasing new solutions for data centers serving AI workloads. In the quarter under review, the company introduced next-generation processor-based network switches and routers. The company also launched its own generative AI model rating that assesses its resilience to cyberattacks. These changes are helping Cisco attract new customers, including operators of government AI projects, CNBC writes. While Cisco has long lagged behind many of its market competitors in AI data center technology, Wall Street has recently been increasingly supportive of the company's investments in this area, the channel notes.

The company has announced a restructuring plan that will affect less than 5% of its staff or 4,000 employees. They will start being laid off as early as this week. Optimization will entail severance and other one-time costs of up to $1 billion, Cisco said.

"The companies that will win in the AI era are those that know how to maintain focus, act quickly, and have the discipline to reallocate investments to areas with the highest demand and long-term value creation potential," Cisco CEO Chuck Robbins said. He said that despite the cuts in certain divisions, the vendor will continue to make "clear and strategic investments." In particular, we are talking about spending on chip development, fiber optic technologies, cybersecurity and implementation of AI within the company itself, Bloomberg writes.

This article was AI-translated and verified by a human editor