Cisco reports record revenue and then announces massive lay-offs.
The firm says it had an excellent quarter, increased its full-year revenue forecast and highlighted growing demand for AI infrastructure. In addition, it confirmed that it would be cutting less than 4,000 jobs, which equates to approximately 5% of the firm’s workforce.
This highlights the shift in focus at many of the world’s big technology corporations. Even those reporting healthy earnings are laying off workers as they allocate resources towards AI, cybersecurity and data center infrastructure.
According to Cisco, the layoffs will enable it to change its cost structure while allocating funding to its more rapidly growing sectors, including AI, cybersecurity, silicon, optics and advanced networking solutions for contemporary data centers.
The firm’s CEO Chuck Robbins called it “a quarter of record revenue and double-digit growth.” He added that the firm itself was increasing its use of AI and preparing for future demand from AI infrastructure.
The figures looked good.
Cisco Hits Record Revenues Amid Strategic AI Pivot and Workforce Reductions
Cisco delivered fiscal Q3 revenues of $15.8 billion, representing an increase of 12% compared to the year before. It represented the strongest quarterly figure in Cisco’s corporate history. Moreover, Cisco increased its outlook for annual sales due to the increased demand from hyperscalers developing artificial intelligence models.
This trend is currently one of the main drivers of networking industry. Development of large-scale AI requires additional data center capacity, faster network equipment, and other improvements. Cisco wants to be more involved in that market.
Unfortunately, even such strong results could not save jobs.
According to Cisco, the layoffs will involve no more than 4,000 employees. Considering that there are currently no exact figures available, it can be assumed that it represents less than 5% of its total workforce.
Cisco employed about 86,200 employees prior to laying off people.
The firm claims that the company restructuring will allow for saving money for other ventures that will offer better prospects for growth. In essence, the company is allocating fewer resources to slow-moving business and more resources to AI-based products and solutions.
It is a common practice across the tech industry.
Cisco’s Pivot to AI Amidst Layoffs and Security Hurdles
In the last two years, most of the big tech companies reported strong earnings, yet simultaneously announced layoffs. It is typically presented by companies as a step towards increasing investment in artificial intelligence, namely cutting costs on old businesses and investing more into AI-oriented solutions.
This move by Cisco clearly follows this trend.
This restructuring move is certainly not going to come for free. The corporation stated that up to $1 billion would have to be allocated to pay compensation packages and other costs associated with the move before taxes. About half of this amount, about $450 million, should go toward the current quarter, while the rest will be allocated over the next year.
However, Cisco had been undergoing various restructuring moves recently.
In 2024, the company fired thousands of employees in two restructuring moves. Then, the following year, it reduced its workforce by cutting more than 150 jobs. This move represents an ongoing attempt to adjust the structure of the company toward newer markets.
However, Cisco faces many challenges unrelated to staff reductions.
These include the threat of vulnerability of its routers and firewalls, as well as issues of cybersecurity related to previous data breaches at Cisco. All of this poses further difficulties to the attempts of Cisco to become a significant cybersecurity player.
However, investors continue to invest in cost-cutting firms despite the optimism in AI growth. This leads to an interesting paradox within the sector, where profitability does not translate to employment security anymore.
Why Record Profits Aren’t Saving Jobs at Cisco?
For employees, it might be challenging to adjust to this new reality.
While Cisco reported strong financial performance, record-breaking revenue, better demand from AI customers, and positive expectations for the future, the corporation still concluded that it needs to reduce staff numbers.
In summary, the overall theme is evident.
Firms within the tech industry are restructuring their operations with a focus on investing in AI infrastructure, cybersecurity solutions, and expansion of data centers. Firms that used to emphasize regular growth within traditional network technologies are looking to explore AI opportunities.
This decision by Cisco is more of a strategy than anything else. Cisco sees its growth in artificial intelligence technology, networking technologies, and security products instead of traditional business sectors.
It might be an effective strategy to compete in the coming years.
However, for those who will lose their jobs, it provides no consolation at all despite Cisco earning record revenues.
