Cisco Systems moved to reshape its cost structure and investment priorities this week, saying it will eliminate nearly 4,000 roles and increase spending in AI-related areas after reporting stronger-than-expected demand from hyperscalers. The company said the restructuring, which it expects to carry a near-term charge of about $1 billion, is intended to free resources for growth opportunities in AI, silicon, optics and security.
The firm said the planned workforce reductions - scheduled for the fourth quarter - account for under 5% of its overall employee base. Cisco also indicated it is investing in making AI tools accessible across its employee population while reducing headcount in select areas of the business.
Investors responded quickly. In premarket trading on Thursday the stock climbed 19%, lifting the share price to about $120.98. That move would translate into roughly $75 billion of added market capitalization and, if maintained, place the networking-equipment maker on course for a record high. Cisco shares have advanced roughly 32% year-to-date.
Orders for AI infrastructure have been a focal point of the companys recent commentary. Cisco reported it has taken $5.3 billion in AI infrastructure orders from hyperscalers so far this fiscal year, and it raised its full-year order expectation to $9 billion from its prior $5 billion projection. The company supplies high-speed networking hardware - including switches and routers - that data centers use to operate AI workloads.
Analysts at Melius Research framed the companys move as a strategic pivot toward the areas where its chief executive has chosen to place bets, highlighting in particular Ciscos custom silicon and optics as a rewardable investment focus. Melius also said the firms networking momentum could persist, supported by what it described as a secular tailwind from AI inference.
Last month Cisco introduced switches intended to interconnect different types of quantum computers, a product push the company presented as an extension of its efforts to build networks for advanced compute environments.
On valuation metrics cited by the company, Cisco trades at a forward price-to-earnings ratio of 22.77. For comparison, the article noted Arista Networks at 35.64 and Hewlett Packard Enterprise Co at 12.37.
Contextual note - The company described the actions as part of a broader effort to reallocate investment into AI-related growth avenues while managing costs in other parts of the business.