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Cisco Systems (CSCO.O) shares jumped 19% in premarket trading on Thursday, a day after it outlined nearly 4,000 job cuts and raised revenue forecast on strong hyperscaler demand, boosting investor confidence in its AI infrastructure push.
If the gains hold, the networking gear maker's stock would be on track for a record high, adding about $75 billion to its market value at current price levels of $120.98.
The restructuring, expected to cost $1 billion, is aimed at shifting investments toward AI and related growth avenues, Cisco said on Wednesday. The job cuts, planned for the fourth quarter, represent less than 5% of its workforce.
Cisco, whose shares have gained about 32% this year, said it was strategically investing in silicon, optics, security as well as employees' use of AI across-company and reducing roles in some areas.
"Cisco feels a lot like Intel here, as the puck has gone to where CEO Chuck Robbins invested — rewarding the company for its custom silicon and optics," said analysts at Melius Research.
The firm has taken $5.3 billion in AI infrastructure orders from hyperscalers so far this fiscal year and raised its full-year order expectation to $9 billion from $5 billion previously.
The San Jose, California-based company supplies high-speed networking equipment, such as switches and routers, that data centers use to run AI.
"We think this networking momentum can continue as this space has a clear secular tailwind from AI inference," Melius added.
Last month, Cisco unveiled switches designed to connect different types of quantum computers, advancing its push toward a network of quantum machines, in line with efforts by peers such as Alphabet’s Google (GOOGL.O) and IBM (IBM.N).
Cisco trades at a forward price-to-earnings ratio of 22.77, compared with Arista Networks' (ANET.N) 35.64 and Hewlett Packard Enterprise Co (HPE.N) 12.37.
