Cisco grows and improves forecasts, but cuts 4,000 posts to focus on AI

Cisco Systems, in its fiscal third quarter, reported a 12 per cent increase in revenue to $15.8 billion, beating forecasts. Earnings in turn rose to $1.06 per share, above expectations. Above all, the network infrastructure and technology giant lifted the curtain on a brighter outlook: it reported sales forecasts for its fiscal fourth quarter that exceeded analysts' estimates to date, demonstrating that the development of artificial intelligence is fuelling demand for its products and services.

In the after-market the stock gained 16%, part of the continued rally of the hi tech sector on Wall Street despite fears of excesses. Since the beginning of the year it has gained over 30 per cent.

Revenues for the current period, which ends in July, will be between $16.7 billion and $16.9 billion, the company said. Excluding certain items, earnings per share will be around $1.16 to $1.18. Analysts had instead assumed sales of $15.8 billion and earnings of $1.07 per share, according to data compiled by Bloomberg. In particular, Cisco expects orders of $9 billion from so-called hyperscalers, the large data centre operators, almost double the $5 billion previously indicated.

At the same time, the company announced a restructuring plan that will allow it, in its plans, to invest more in AI and other growth opportunities. The cuts will entail extraordinary costs of one billion and will affect fewer than 4,000 jobs, almost 5 per cent of the total workforce, said Chief Executive Chuck Robbins.

"The companies that will win in the age of artificial intelligence will be those with a focus and sense of urgency and discipline in continually shifting investment to areas where demand and long-term value creation are strongest," the CEO explained. The roles eliminated, he added, will be accompanied by 'clear and strategic investments', including silicon chips, fibre optics, security tech and increased use of Ai by employees themselves.