Cisco to cut about 4,000 jobs in AI-focused restructuring as orders surge

By Juby Babu

May 13 (Reuters) - Cisco said ‌on Wednesday it ​would ​cut nearly 4,000 jobs, as part of a restructuring aimed at shifting investment toward artificial intelligence and related growth areas, and raised its annual revenue forecast after ‌a surge in hyperscaler orders.

Shares of the San Jose, California-based networking equipment maker ⁠rose more than 16% in extended trading.

"The companies that will win in the AI era will be those with ‌focus, urgency, and the discipline to ‌continuously shift investment toward the areas where demand and long-term value creation are strongest," CEO Chuck Robbins said in a post on Cisco's website.

The company said it was making strategic ​investments in silicon, optics, security and employees' use of AI across the company, as it reduces roles in some areas.

Cisco has taken $5.3 billion in AI infrastructure orders from hyperscalers so ⁠far this fiscal year, and raised its full-year order expectation to $9 billion from $5 billion previously.

"Though much will likely be made about a ​slight decrease in headcount, the post-market move we are seeing is truly the result of hyperscaler capex spilling downstream. This move validates that this ​capex is about more than just chips," said Ryan ‌Lee, Direxion's senior vice president of product and strategy.

Cisco is benefiting as companies expand spending beyond AI processors to the high-speed networks required to connect ⁠large data-center systems. Its networking product orders grew more than 50% in the third quarter compared to a year earlier, while data-center switching orders rose more than 40%.

Shares of the company have risen 32% this year.

On ⁠a post-earnings call, Cisco's finance chief, Mark Patterson, said it is "reasonable" to expect at least $6 billion of revenue ​on the AI hyperscale side in fiscal 2027.

The company reported revenue of $15.84 billion for the third quarter ended April 25, beating analysts' average estimate of $15.56 billion, according to data compiled by LSEG.

It now expects fiscal 2026 revenue ‌in the range of $62.8 billion to $63 billion, compared with its earlier forecast of $61.2 billion to $61.7 billion.

Cisco will reduce its workforce by fewer than 4,000 ‌jobs in the fourth quarter, representing less than 5% of its workforce. It had about 86,200 employees ⁠as of July 26.

The restructuring plan is ‌expected to cost Cisco up ​to $1 billion, with about $450 million to be recognized in the fourth quarter and the remainder in fiscal 2027.

(Reporting by Juby Babu in Mexico City; Editing by ‌Shinjini Ganguli)

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