Cisco Announces Layoffs Amid AI-Driven Restructuring

Tech Company Lays Off 5,500 Workers to Invest More in AI, Despite Making $10.3 Billion in Profit

Despite tech conglomerate Cisco posting $10.3 billion in profits last year, it's still laying off 5,500 workers as part of an effort to invest more in AI, SFGATE reports. It joins a litany of other companies like Microsoft and Intuit, the maker of TurboTax, that have used AI as justification for the mass culling of its workforce. The layoffs at Cisco came to light in a notice posted with the Securities and Exchange Commission this week, affecting seven percent of its staff. In a short statement, CEO Chuck Robbins used the term "AI" five times, highlighting the company's efforts to keep up in the ongoing AI race. Earlier this year, Cisco also laid off 4,000 or five percent of it staff, saying that the company wanted to "realign the organization and enable further investment in key priority areas." In short, companies are no longer hiding their optimism over replacing human labor with AI, an unfortunate reality for those looking to maintain a stable job. But whether this "realignment" will pay off in the long run remains to be seen. The layoff news helped boost Cisco's stock price on Wednesday, going from $45.04 in the morning to spiking over $48 per share in after-hours trading. We've already seen similar spikes in the stock prices of other tech companies announcing layoffs. Cisc's layoffs are also part of another pattern: tech companies saying they are shifting resources to boost their AI efforts and therefore they need to lay off people as part of a restructuring campaign. While many companies have used AI as a public-facing excuse for their restructuring efforts, experts remain skeptical and think the tech is instead used as a cover. "Fighting against robots is a nice cover story," University of Oxford economist and data scientist Fabian Stephany told Business Insider earlier this year. "But if you have a closer look, it's often old school, simple economic dynamics like outsourcing or lead management cutting costs to increase salaries in other places."

Cisco Layoffs, AI And Security Focus: 5 Things To Know

Cisco CEO Chuck Robbins cited 'several $100 million-plus transactions in the quarter.' Deep cuts at Cisco Systems appear aimed at readying the 40-year-old networking giant for increased customer demand to modernize technology for improved security and artificial intelligence growth - areas where Cisco partners can see business gains in the new fiscal year. These are some of the biggest takeaways from the latest quarterly earnings report by the San Jose, Calif.-based company - and CRN 2024 Channel Chiefs member - with Cisco revealing more signs of customer excitement for the AI era. Cisco's 2024 fiscal year ended July 27. [RELATED: The 10 Biggest Tech Company Layoffs Of 2024 (So Far)] Cisco's own excitement for the AI era came through in an optimistic forecast for the first quarter of fiscal year 2025. The vendor predicts revenue of $13.65 billion to $13.85 billion, above Wall Street consensus by $215 million, according to a report from William Blair. The vendor's full fiscal year revenue forecast of $55 billion to $56.2 billion is in line with Wall Street expectations and represents 3 percent year over year growth including Splunk, according to the investment firm. The customer demand environment appears headed in Cisco's direction, with CEO Chuck Robbins (pictured) citing "several $100 million-plus transactions in the quarter with global enterprises who are leveraging the breadth of our technology platforms to modernize and automate their network operations and deploy next generation machine learning and AI applications" during the vendor's quarterly earnings call Wednesday. Cisco also saw product orders grow 14 percent year over year including Splunk, 6 percent year over year excluding the subsidiary. A year ago, orders fell 14 percent, according to a Bank of America report. And last quarter, product orders were flat without Splunk, 4 percent with it, according to William Blair. The data supports "the thesis that networking demand has troughed, setting the stage for a recovery in fiscal 2025." Here's more on the Cisco layoffs and AI and security opportunities ahead for the vendor and its partners.