Cisco to Slash Workforce in Effort to Concentrate on Artificial Intelligence Sector

Cisco Systems Inc. Exceeds Expectations with Strong Forecast and Restructuring Plan

In a move to focus on the fast-growing AI market, Cisco Systems Inc. has announced plans to cut thousands of jobs, while also delivering a better-than-anticipated forecast. The company's shares soared on the news, climbing as much as 16% in late trading, following a year that has seen the stock increase by 32%.

The restructuring plan, which will affect fewer than 4,000 jobs, or less than 5% of the total employee base, is aimed at helping the company better serve data center customers handling AI tasks. Cisco, the largest maker of networking equipment, is overhauling products and introducing new ones to capitalize on the growing demand for AI networking solutions.

The company's revenue for the period, which runs through July, is expected to be between $16.7 billion and $16.9 billion, exceeding analyst estimates of $15.8 billion. Excluding some items, earnings are forecast to be roughly $1.16 to $1.18 a share, outpacing analyst predictions of $1.07 a share.

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In the fiscal third quarter, which ended April 25, sales increased 12% to $15.8 billion, with profit climbing to $1.06 a share, excluding some items. The company now expects to receive $9 billion in orders from so-called hyperscalers, the largest operators of data centers, in fiscal 2026, up from a $5 billion target previously.

The AI networking market has been a lucrative one for Cisco, but it is also becoming increasingly competitive, with rivals such as Broadcom Inc. and Hewlett Packard Enterprise Co. vying for market share. To remain competitive, the company is making clear, strategic investments in areas such as silicon chips, fiber optics, security, and the use of AI by its own employees.

The restructuring plan will result in as much as $1 billion in severance costs and other one-time expenses. However, the company believes that the moves will ultimately help it to achieve its goals in the AI market and drive long-term value creation.

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