Cisco shares jumped more than 13% Thursday. The rally followed an earnings report Wednesday that showed the networking giant’s multi-year pivot to AI infrastructure is finally paying off.

For the third quarter ended April 25, Cisco reported record revenue of $15.8 billion, up 12% year over year, topping the high end of its guidance. The company also raised its fiscal 2026 outlook, lifting its AI revenue target to $4 billion (from $3 billion) and AI orders target to $9 billion (from $5 billion). It guided current-quarter revenue as high as $16.9 billion, above Wall Street expectations.

“In Q3, we once again delivered double-digit growth on both the top and bottom lines, which exceeded the high end of our guidance, coupled with record non-GAAP operating income,” Cisco CFO Mark Patterson said in a statement. The results, he added, show “great execution and financial discipline by our teams.”

Chuck Robbins, Cisco’s chair and CEO, said the company is “well-positioned as the critical infrastructure for the AI era, building on our technology leadership and customer trust, while innovating at the speed and scale that our dynamic world demands.” Cisco, No. 83 on the Fortune 500, has a market cap of over $450 billion. 

The triumphant quarter is just the latest chapter in one of the most stunning AI-fueled turnarounds of the era. After soaring and then plummeting during the dot-com crash, Cisco took nearly 26 years to reclaim its 2000 highs, which it finally did in December 2025. Since then, the stock has gained nearly 50% and on Thursday hit a new intraday record of $119.36 per share.

From dot-com darling to infrastructure workhorse

Founded in 1984, Cisco is traditionally known as the backbone of the internet—its routers, switches, and networking hardware have powered enterprise and carrier networks for decades. Enterprise networking, data center switching, security appliances, and collaboration tools like Webex became the core pillars of its business. During the dot-com era, Cisco briefly became the most valuable company in the world, with a market cap above $500 billion in March 2000.

Then the bubble burst. Cisco’s market cap collapsed to around $60 billion by October 2002, and over the next two decades it evolved into a large, profitable, slower-growth infrastructure vendor.

By the early 2020s, Cisco saw an opening to reassert itself. Over the past few years, it has integrated AI across its product line and ramped up R&D in high-speed data center networking, silicon and optics for hyperscale networks, and security for AI workloads. The strategy rests on three pillars: data, the networks that move it, and the security that protects it.

In March 2024, Cisco closed its $28 billion all-cash acquisition of Splunk, anchoring its security strategy. That same year, it unveiled Hypershield, an AI-native architecture that embeds protection as a software fabric across networks, servers, and clouds.

Slimming down as it scales up

Cisco has also been slimming down through multiple restructuring cycles. On Wednesday, Robbins announced a Q4 workforce reduction of fewer than 4,000 jobs—less than 5% of total headcount. Impacted employees will receive a pro-rated FY26 bonus and placement support, he said in a blog post.

“The companies that will win in the AI era will be those with focus, urgency, and the discipline to continuously shift investment toward the areas where demand and long-term value creation are strongest,” Robbins wrote. That requires “making hard decisions about where we invest, how we’re organized, and how our cost structure reflects the opportunity in front of us.”

Cisco frames the cuts as an AI-driven strategic shift, which reallocates investment toward AI infrastructure, silicon, optics, and security, rather than AI directly replacing workers, the stance some other tech companies have taken.

Cisco expects about $1 billion in gross costs from the layoffs, William Kerwin, senior equity analyst at Morningstar, wrote in a note this week. “We expect this to provide modest benefit to operating spending, but primarily to allow the firm to reinvest in growth areas, which we like,” Kerwin said.

“Cisco’s markets are far from shrinking—growth has accelerated,” he told Fortune. “We think this is a re-allocation of capital to focus more on the AI opportunity ahead.”

Morningstar, which assigns Cisco a “wide moat” rating, raised its fair value estimate to $90 from $75, citing higher forecasts for campus and AI revenue over the next five years.

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