Cisco layoffs cut deeper than expected as firm ramps up AI focus

Networking giant Cisco is the latest tech company to slash jobs while pledging to refocus on AI as well as cybersecurity. 

The company said it would slash its global staff numbers by 7% – more than 6,000 jobs – following a drop in revenue of 10% in its fourth quarter. That follows a first round of layoffs earlier in the year which cut the workforce by 5%.

Cisco's core networking equipment business has struggled due to supply chain disruptions and a wider slowdown in enterprise spending, though CEO Chuck Robbins said in a conference call that demand was beginning to return.

The company has sought to diversify, purchasing big data monitoring platform Splunk last year for $28 billion and said in June it would invest $1bn into AI tech startups.

CFO Richard Scott Herren said in a conference call that the layoffs weren't about cost savings but reallocating resources into growth areas.

"But it's much more about finding efficiencies across the company so that we can pivot more resources, much like we did last year, into the fastest growth areas within the company, which are pivoting more into AI, pivoting more into cloud, and pivoting more into cybersecurity," he said.

Robbins said Cisco had topped $1bn in AI orders with web scale customers, with three of the top four hyperscalers deploying Cisco's ethernet AI fabric. While telco and cable customer demand remained muted, he said there was strength in EMEA driven by AI operations and autonomous networks.

"AI is transforming every aspect of our customers' IT environments," Robbins added in a conference call. "They need to modernize their infrastructure, harness the full power of AI and data, and improve their cybersecurity posture, all while building agility and resilience across their entire digital footprint."

Cisco layoffs are the latest in big tech’s AI-fueled ‘streamlining’ spree

Cisco is the latest in a string of tech companies to restructure to better invest in AI to take advantage of the boom in generative AI. 

Intuit said last month it would cut 10% of staff, but aimed to replace the 1,800 lost roles in order to focus on critical areas, such as AI.

Similarly, last year Dropbox slashed its workforce numbers by 16% in order to refocus on AI product development. Those cuts come amid wider layoffs in the tech industry, including cuts earlier this year at Google and Amazon.

"Cisco announced a restructuring plan to allow it to invest in key growth opportunities and drive more efficiencies in its business," Cisco added, saying in a financial filing that the total cost of restructuring would be $1bn.

"Cisco expects to recognize approximately $700 million to $800 million of these charges in the first quarter of fiscal 2025 with the remaining amount expected to be recognized during the rest of fiscal 2025."

Cisco results

The confirmation of layoffs came alongside Cisco's fourth quarter and annual financial results. For the fourth quarter, Cisco reported a decline in revenue of 10% year-on-year, down to $13.6 billion. 

This marks a sizable decrease, but above Cisco's own guidance — with earnings per share down 44%. Full-year revenue was down 6% to $53.8 billion.

"We delivered a strong close to fiscal 2024," said CEO Robbins in a statement. "In our fourth quarter, we saw steady customer demand with order growth across the business as customers rely on Cisco to connect and protect all aspects of their organizations in the era of AI."

In its guidance for the next year, Cisco predicted revenue to grow slightly for the quarter and the full year.

Cisco's Splunk big data platform also drove sales, marking a promising start to the company’s integration with the tech giant. Product order growth was up 14% year over year, though only 6% without Splunk, which made up 51% of subscription revenue.

Cisco announced it would buy Splunk last year for $28 billion to help its growth in AI, and the acquisition was finalized in March this year.