Cisco Slashes 4,000 Jobs in AI Revamp Amid Order Boom
Cisco announced on Wednesday its intention to reduce its workforce by nearly 4,000 positions, a move aligned with a restructuring strategy focused on reallocating investments towards artificial intelligence and associated growth sectors. The company also increased its annual revenue forecast following a significant uptick in orders from hyperscalers. Shares of the San Jose, California-based networking equipment maker experienced an increase of over 16 percent in after-hours trading. According to CEO Chuck Robbins, the firms poised for success in the AI era will be characterized by their focus, urgency, and the disciplined approach to reallocating investments toward sectors that exhibit the highest demand and potential for long-term value creation.
The company announced that it is undertaking strategic investments in silicon, optics, security, and the utilization of AI by employees throughout the organization, while simultaneously reducing roles in certain sectors. Cisco has secured $5.3 billion in AI infrastructure orders from hyperscalers thus far in this fiscal year, subsequently increasing its full-year order forecast to $9 billion from an earlier estimate of $5 billion. While there will undoubtedly be significant discussion regarding a minor reduction in headcount, the after-hours market reaction we are observing is fundamentally driven by the downstream effects of hyperscaler capital expenditures. “This move validates that this capex is about more than just chips,” stated Ryan Lee.
Cisco is experiencing advantages as firms increase their expenditures beyond AI processors to the high-speed networks necessary for linking extensive data-center systems. Orders for its networking products experienced an increase exceeding 50 percent in the third quarter relative to the same period last year, while orders for data-center switching saw a rise of over 40 percent. The company’s shares have appreciated by 32 percent this year. During a post-earnings call, Cisco’s finance chief, Mark Patterson, indicated that it is “reasonable” to anticipate at least $6 billion in revenue from the AI hyperscale segment in fiscal 2027.
The company reported revenue of $15.84 billion for the third quarter ended April 25, surpassing analysts’ average estimate of $15.56 billion, based on data. The company has revised its fiscal 2026 revenue expectations to a range of $62.8 billion to $63 billion, an increase from the previous forecast of $61.2 billion to $61.7 billion. Cisco plans to cut its workforce by under 4,000 positions in the fourth quarter, which accounts for less than 5 percent of its total workforce. As of July 26, the company employed approximately 86,200 individuals. The restructuring plan is anticipated to incur costs for Cisco totaling up to $1 billion, with approximately $450 million to be acknowledged in the fourth quarter and the balance in fiscal 2027.
