Cisco Systems Inc. saw its shares jump on Wednesday after the networking equipment giant issued a strong revenue forecast, fueled by growing demand for artificial intelligence infrastructure, while also announcing plans to cut jobs as part of a strategic shift.
Revenue Outlook Beats Expectations
The company projected revenue for the current quarter above Wall Street estimates, citing robust orders for networking gear used in AI data centers. Cisco's pivot toward AI and cloud networking has helped offset a slowdown in traditional enterprise spending.
Job Cuts as Part of Restructuring
Alongside the positive forecast, Cisco revealed it would reduce its workforce by approximately 5%, or about 4,000 jobs, as it reallocates resources to higher-growth areas like AI, cybersecurity, and cloud. The restructuring is expected to cost around $600 million in severance and related charges.
CEO Chuck Robbins emphasized that the job cuts are not a sign of weakness but a necessary realignment to capture AI-driven opportunities. "We are making strategic investments in areas that will define the next era of networking," Robbins said in a statement.
AI Demand Drives Growth
Cisco's results reflect a broader trend of tech companies benefiting from the AI boom. The company's networking switches and routers are critical components in data centers that power AI workloads. Revenue from its Webex collaboration platform also showed resilience.
Analysts noted that Cisco's ability to capitalize on AI infrastructure demand could provide a sustained growth trajectory. "Cisco is well-positioned to benefit from the AI revolution, given its strong foothold in enterprise networking," said an industry analyst.
Market Reaction
Investors reacted positively, sending Cisco shares up more than 6% in early trading. The stock had been under pressure earlier this year amid concerns about slowing enterprise spending, but the AI-driven forecast has renewed confidence.
The job cuts, while significant, were seen as a prudent move to streamline operations and focus on high-margin businesses. Cisco joins other tech giants like Google and Microsoft in restructuring to prioritize AI.
