Cisco to Reduce Global Workforce by 7% as It Shifts Focus to High-Growth Areas

Cisco Systems announced on Wednesday that it will cut 7% of its global workforce, a move aimed at realigning the company’s focus towards high-growth sectors such as AI, cloud, and cybersecurity. This decision will result in pre-tax charges of up to $1 billion, with $700 million to $800 million expected to be recognized in the first quarter.

This latest round of layoffs follows a February announcement where Cisco stated it would reduce its workforce by 5%, affecting over 4,000 employees, and revise its annual revenue targets.

Despite the layoffs, Cisco’s shares rose 5% in after-hours trading following a positive revenue forecast. The company projected first-quarter revenue between $13.65 billion and $13.85 billion, surpassing the average analyst estimate of $13.71 billion, according to LSEG data.

The company has been facing challenges with sluggish demand and supply-chain issues in its core business of manufacturing routers and switches. To counteract this, Cisco completed a $28 billion acquisition of cybersecurity firm Splunk in March, aimed at reducing dependence on hardware sales by expanding its subscription-based services.

Cisco’s CFO, Scott Herren, emphasized the company’s commitment to growth through investments in AI, cloud technology, and cybersecurity, while also maintaining capital returns. In June, Cisco launched a $1 billion fund to invest in AI startups like Cohere, Mistral AI, and Scale AI, adding to its portfolio of AI-focused acquisitions and investments.

For the fourth quarter ending July 27, Cisco reported revenue of $13.64 billion, slightly above the $13.54 billion estimate, with adjusted earnings per share of 87 cents, surpassing the anticipated 85 cents.