In a bold move to prioritize its focus on artificial intelligence (AI), technology giant Cisco has announced plans to cut its workforce by 5%. This amounts to approximately 4,250 employees worldwide. The decision comes as Cisco aims to shift its attention towards high-growth areas such as AI and software development. The company expects to incur around $800 million in pre-tax charges related to severance and benefits as a result of the layoffs. Cisco CEO, Chuck Robbins, emphasized the importance of innovation in an increasingly connected ecosystem, stating that it will play a critical role as customers adopt AI and strive to secure their organizations.
During an earnings call, Cisco also revealed a reduction in its annual revenue forecast from up to $55 billion to a range of $51.5 billion to $52.5 billion. Robbins cited weak demand from telco and cable service provider customers as a contributing factor. However, to strengthen its position in the AI market, Cisco recently announced a new phase of its partnership with chip giant Nvidia. The collaboration aims to provide enterprises with simplified cloud-based and on-premises AI infrastructure, including networking hardware and software to support advanced AI workloads. Furthermore, Nvidia agreed to incorporate Cisco’s ethernet technology into its own, which is widely utilized in data centers and AI applications.
Cisco’s second fiscal quarter results for 2024 showcased an adjusted profit of 87 cents per share and revenue of $12.79 billion, surpassing estimates from the London Stock Exchange Group. However, Cisco is not alone in its decision to downsize its workforce in 2024. Other tech companies such as Snap, Alphabet, eBay, Microsoft, Amazon, and SAP have also made similar moves.
These recent layoffs may be attributed to companies seeking to emulate the success of rivals in streamlining operations and increasing efficiency. For instance, Facebook and Instagram parent company, Meta, witnessed a 22% decrease in global headcount in 2023. Additionally, Snap announced a reduction of 10% of its workforce, potentially impacting around 540 employees. Likewise, Alphabet’s secretive X Lab division reportedly planned to let go of several dozen employees focusing on high-tech projects such as delivery drones, internet networks of balloons, and wind energy-generating kites.
As the market continues to evolve and companies leverage advancements in AI and other emerging technologies, adjustments to workforce size are seen as a strategic move. By putting a greater emphasis on areas of growth, companies like Cisco aim to remain at the forefront of innovation and meet the changing needs of their customers.
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