Cisco announced plans to cut over 5% of its workforce, affecting over 4000 employees, to expand its artificial intelligence (AI) business. The company is reportedly restructuring its workforce to invest in other fast-growing business areas. The company has also increased its annual revenue forecast due to demand from “hyperscalers.” 

As of now, Cisco has not revealed which teams and regions are impacted by the recent restructuring drive. However, it is said that the impacted employees will be notified on May 14.

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In an internal memo, Cisco CEO Chuck Robbins said that Cisco achieved a record Q3 revenue of $15.8 billion, marking a 12 per cent increase year-on-year. Despite the profit, the company needs to make a hard decision, he added.

 “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,” Robbins said.

The company further stated that it is focusing more on resources such as silicon, optics, security, and AI-driven workplace tools as it scales back in certain business areas.

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Ryan Lee, Direxion's senior vice president of product and strategy, added, “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.”

The company claims to offer support, bonus payments, and other benefits to the impacted employees. In its regulatory filing, Cisco expects to spend over $1 billion in severance pay. In addition, the company also claims to offer access to Cisco U courses and certifications to impacted employees for up to 1 year.