Cisco Systems has announced plans to lay off nearly 4,000 employees as part of a restructuring initiative designed to refocus investment toward artificial intelligence (AI) and other growth areas. This decision comes in light of a significant increase in orders from hyperscale companies, allowing the tech giant to raise its annual revenue forecast.
In response to this news, shares of the San Jose, California-based networking equipment maker surged over 16% in after-hours trading. CEO Chuck Robbins emphasized the need for companies to exhibit focus, urgency, and disciplined investment strategies to thrive in the upcoming AI era. In a recent update on Cisco’s website, Robbins highlighted the strategic nature of these layoffs, which occur alongside investments in silicon, optics, security, and enhancing employees’ engagement with AI technologies.
This fiscal year, Cisco has secured approximately $5.3 billion in AI infrastructure orders from hyperscale clients, increasing its full-year expectation to $9 billion—up from a previous forecast of $5 billion. Analysts, like Ryan Lee from Direxion, suggest that the recent market movements reflect broader trends in capital expenditures, indicating robust demand for networking solutions that go beyond just AI chip technologies.
As organizations ramp up their spending to accommodate high-speed networks necessary for connecting extensive data-center systems, Cisco is experiencing a sizable boost in its product orders. Specifically, orders for its networking products have soared over 50% in the third quarter compared to the same period last year, with data-center switching orders climbing more than 40%.
On a recent earnings call, Cisco’s finance chief Mark Patterson projected that the company could generate at least $6 billion in revenue from AI hyperscale business by fiscal 2027. The company reported third-quarter revenue of $15.84 billion, surpassing analysts’ expectations of $15.56 billion.
Looking ahead, Cisco has revised its revenue outlook for fiscal 2026, now anticipating figures between $62.8 billion and $63 billion, compared to an earlier estimate of $61.2 billion to $61.7 billion.
The upcoming workforce reduction, which will amount to less than 5% of Cisco’s total workforce of around 86,200 employees as of late July, is expected to cost the company up to $1 billion. Of this cost, approximately $450 million will be recognized in the fourth quarter, with the remaining amount to be accounted for in fiscal 2027.
