Cisco to cut 7% of workforce, restructure product groups

Cisco today said it is slicing 7% of its global workface and reconfiguring its networking, security and collaboration business units as part of a restructuring that will result in a $1 billion pre-tax charge to earnings.

The current round of layoffs will impact about 6,000 jobs. Earlier this year, Cisco cut 4,200 jobs in a move that cost the company an estimated $800 million in pre-tax charges.

Cisco is trying to move more quickly into three core areas – AI networking, security and collaboration – and wants to use this restructuring to pump more resources into those growth areas, said CEO Chuck Robbins during the company’s fiscal fourth-quarter financial call.

“We actually are shifting hundreds of millions of dollars into AI,” Robbins said, through a variety of Cisco’s core technologies, such as networking, cloud, cyber and silicon. “It’s a meaningful shift, but we feel like the market is moving so quickly, we have to do that,” he said.

“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. [We] are pivoting more into AI, pivoting more in the cloud, and pivoting more into cyber security,” said Cisco CFO Scott Herren during the call. “So think of it more as reallocating versus being in pursuit of cost savings.”

At part of the restructuring, Cisco is combining its networking, security and collaboration teams into one group. That includes the security technology Cisco gained through its Splunk acquisition; the entire Splunk product line will be brought into this new organization, Robbins said. Notably, the Splunk acquisition contributed $960 million to Cisco’s fourth quarter.

Cisco is bringing its entire product portfolio together as one team, Robbins said, and the combined group will be led by Jeetu Patel, Cisco’s executive vice president and chief product officer. Patel previously was Cisco’s executive vice president and general manager of security and collaboration. In other leadership moves, Jonathan Davidson, executive vice president and general manager of Cisco networking, will be moving into an advisory role to Robbins.

Cisco is executing deep product integrations across its portfolio, and it’s delivering on a platform strategy for customers, Robbins said. “With the pace at which the AI revolution is moving, and what our enterprise customers need from us, and as security and networking continue to become more tightly intertwined, I just felt like it was important for us to have a single leader,” Robbins said.

In terms of AI, Robbins said Cisco has seen about $1 billion of AI technology orders from hyperscaler customers this year, and it expects to see about the same amount next year.

“To date, with three of the top four hyperscalers deploying our Ethernet AI fabric, leveraging Cisco validated designs for AI infrastructure, we expect an additional $1 billion of AI product orders in fiscal year ’25,” Robbins said. “This momentum is being fueled by multiple use cases in production with the hyperscalers, several of which are in AI. In addition, we have multiple design wins with roughly two-thirds of these in AI over and above the webscale AI opportunity,” Robbins said.

As for AI use in enterprise environments, Robbins said there wasn’t all that much yet, but “we are beginning to see the enterprise pipeline build a bit.”

“We heard for the first time this quarter … that enterprise customers are now actually upgrading their infrastructure in preparation for AI,” Robbins noted. “And in some cases, they’re taking some of the dollars that they’ve set aside for AI to actually spend it on modernizing their infrastructure in order to get ready for that. We believe we are well positioned to be the key beneficiary of AI application proliferation in the enterprise.”

“We think we’re beginning to see customers actually prepare for AI applications, even though, in many cases they may not know the full range of what they will be deploying, but they know they need to be ready,” Robbins said.