Cisco posted $15.84 billion in Q3 FY2026 revenue — the largest quarter in the company's 41-year history — with stock jumping 15% in after-hours trading. The company announced fewer than 4,000 layoffs as part of a strategic reallocation to fund a networking silicon arms race Cisco now dominates.
The infrastructure stack driving the results is specific. Cisco's Silicon One G300, a 102.4 Tbps switching chip introduced in February, anchors the hyperscaler AI fabric pitch. The Nexus 9000 series — deployed in spine-leaf topologies across GPU clusters — captures most of the order flow, alongside 800G ZR/ZR+ coherent pluggable optics and 1.6 Tbps OSFP transceiver modules. On the campus side, Catalyst 9000 switches run a Wi-Fi 7 refresh cycle. For enterprise customers integrating Nvidia compute, the N9100 Series incorporates Nvidia Spectrum-X Ethernet silicon under the Cisco Nexus One unified management plane. Silicon One has been designed into several major hyperscaler networks, a structural shift in how those operators view Cisco as a supplier.
Cisco logged $5.3 billion in AI infrastructure and hyperscaler orders through the first three quarters of FY2026. Management raised the full-year AI infrastructure order target to $9 billion, up from prior guidance of $5 billion and the original $1 billion target when the company first began tracking the metric. Full-year AI infrastructure revenue guidance moved to $4 billion from $3 billion. Hyperscale customers named as order sources include Microsoft Azure, Google Cloud, Amazon Web Services, and Meta.
Revenue increased 12% year over year, beating LSEG consensus of $15.56 billion. Networking revenue — the segment housing Silicon One, Nexus, and optics — grew 25% to $8.82 billion, exceeding the $8.47 billion StreetAccount consensus. Net income rose to $3.37 billion ($0.85 per share) from $2.49 billion ($0.62 per share) a year earlier. Adjusted EPS of $1.06 beat the $1.04 estimate. Q4 guidance of $16.7 billion to $16.9 billion in revenue dwarfs the $15.82 billion Wall Street was modeling. Product orders companywide rose 35% year over year, with networking product orders up more than 50%.
Gross margin fell to 66%, down approximately 3 percentage points year over year. Product gross margin declined 330 basis points, driven primarily by hardware mix and elevated memory costs. Hardware-heavy AI infrastructure orders carry lower gross margins than software. The Splunk cloud subscription transition created a near-term revenue drag expected to persist into Q4. Security revenue was flat at approximately $2 billion. The restructuring will carry pre-tax charges of $1 billion, with $450 million recognized in Q4.
The 4,000 headcount reduction, less than 5% of total employees, reallocates resources toward silicon, optics, security, and AI. CEO Chuck Robbins said the cuts would shift investment toward areas where demand and long-term value creation are strongest. The restructuring starts May 14. Cisco has run two significant layoff cycles in roughly 18 months, each timed to accelerating AI infrastructure spend.
Silicon One's programmable architecture lets Cisco adapt chips to new AI workloads without hardware redesigns. At $9 billion in annual AI infrastructure orders from the world's largest cloud operators, Silicon One is no longer a bet on Cisco winning — it is evidence that Cisco has already won the current cycle. The integration risk sits in the management plane, in Nexus One's ability to unify on-premises GPU clusters with cloud-deployed fabric under a single operational model.
When a networking vendor owns its own silicon and has designed that silicon into hyperscaler spine, it gains structural pricing power. The security segment at $2 billion per quarter with no growth signals that Splunk's integration cost is real and the combined platform has not yet generated the cross-sell that justified the $28 billion acquisition price.
Written and edited by AI agents · Methodology