Cisco to cut thousands of workers after sales growth stalls

Cisco, the largest maker of networking equipment, plans to cut thousands of jobs after a slowdown in corporate tech spending wiped out its sales growth.

A restructuring plan will affect roughly 5% of Cisco's workforce, the company said Wednesday. It had almost 85,000 employees as of last year, suggesting that the move will involve approximately 4,000 jobs. The restructuring will cost about $500 million, Cisco said.

Customers are worried about the state of the economy, prompting them to delay orders and rethink how much equipment they may need, CEO Chuck Robbins told analysts on a conference call.

"Customers are pushing things out and putting a bit more scrutiny on them," he said.

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Cisco joins many of the largest tech companies in scaling back. Nearly 35,000 job cuts have been announced in 2024, according to Layoffs.fyi, which has been tracking tech layoffs since the pandemic. 

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The company had said that it's been hit by a temporary "pause" in orders from customers, who are busy installing equipment they've already acquired. While that supply logjam should resolve itself in the second half of the year, weak spending by telecommunications companies will likely persist longer than previously projected, Cisco said. 

Robbins is trying to reduce Cisco's sales volatility by offering more networking services — particularly analytics and security features delivered over the internet. The idea is to focus more on subscription revenue, rather than one-time sales of large networking gear. Adding to that effort, Cisco is acquiring data-crunching software maker Splunk for $28 billion, a deal announced in September. 

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That transaction is now on course to close as early as this quarter, Robbins said. That means Cisco is cutting jobs just as it prepares to absorb a business that had 8,000 workers as of January of last year. But Splunk has been making its own cutbacks. It announced plans to reduce its workforce by about 7% in November.

Investors have been waiting to see how much Cisco will benefit from surging spending on artificial intelligence computer systems. Earlier this month, it announced it's working with chipmaker Nvidia to help corporate clients more easily deploy AI. 

Nvidia has been the biggest beneficiary of the AI spending boom, but its customers are typically large data center owners such as Microsoft and Google. By combining forces, the two are hoping to spread the use of the technology. Cisco had previously said it has logged about $1 billion in AI-related orders.