Cisco announced today its plans to cut 7% of its global workforce and reorganize its business units focusing on networking, security, and collaboration. This restructuring will result in a pre-tax charge of $1 billion to its earnings.

The latest job reductions affect around 6,000 positions. Earlier in the year, Cisco eliminated 4,200 jobs, incurring an $800 million pre-tax charge.

The company is accelerating its focus on three strategic areas—AI networking, security, and collaboration, according to CEO Chuck Robbins during the fiscal fourth-quarter earnings call.

Robbins mentioned that Cisco is reallocating hundreds of millions of dollars into AI through its primary technologies including networking, cloud, cybersecurity, and silicon. “This significant realignment is necessary to keep pace with the rapidly evolving market,” he stated.

“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.”

As 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 reference to AI advancements, Robbins articulated that Cisco has recorded approximately $1 billion in AI technology orders from hyperscaler clients this year, with expectations to match this figure next year.

“Up to this point, having three of the top four hyperscalers utilize our Ethernet AI fabric and Cisco validated designs for their AI infrastructure, we foresee another $1 billion in AI product orders for fiscal year ’25,” Robbins mentioned. “This growth is driven by numerous production use cases with hyperscalers, a significant number involving AI. We’re also seeing multiple design victories, about two-thirds of which are in the AI sphere beyond the webscale AI opportunity,” Robbins detailed.

Regarding the adoption of AI in enterprise settings, Robbins observed that it was still quite limited, but there is a starting to see some buildup in the enterprise pipeline.

“For the first time this quarter, we’ve heard that enterprise customers are upgrading their infrastructures in anticipation of AI,” Robbins remarked. “Sometimes, they are reallocating their AI budgets towards modernizing their infrastructure to prepare for AI. We believe that we are ideally positioned to benefit significantly from the spread of AI applications in the enterprise sector,” he added.

“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.

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