Cisco Systems has said that it is seeing networking equipment demand recovery and that it is reducing its global workforce by 7% in order to concentrate on high-growth sectors like cybersecurity and artificial intelligence.

Following the company's optimistic revenue prediction for the upcoming quarter, shares saw a 5% increase in extended trading.

CEO Chuck Robbins stated during an analyst conference call that the inventory had finished being processed and that the demand climate had returned to more of a normal state. Cisco has been making an effort to lessen its dependency on its sizable networking equipment business, which has suffered as a result of slowing post-pandemic demand and supply-chain interruptions. It said in February that it would eliminate almost 4,000 jobs, or 5% of its global workforce. On August 14, it made an announcement confirming an earlier report about the second round of layoffs.

The San Jose, California-based business projects that it will record pre-tax charges related to the restructuring plan of up to $1 billion, of which $700 million to $800 million will be recorded in the first quarter. According to Michael Ashley Schulman, chief investment officer at Running Point Capital, the layoffs enable Cisco to balance its financial responsibilities and keep its attention on growth areas like software, services, artificial intelligence, and cybersecurity. They also allow it to lower the proportion of hardware in its product mix.

According to LSEG statistics, it anticipates first-quarter revenue between $13.65 billion and $13.85 billion, the midpoint of which is higher than the $13.71 billion average projection of analysts. Cisco agreed to purchase cybersecurity company Splunk last year for roughly $28 billion, its largest-ever deal, in an effort to broaden its portfolio more quickly and take advantage of the AI boom. In June, it also unveiled a $1 billion fund to finance the growth of AI firms like Scale AI, Mistral AI, and Cohere.

In contrast to the projection of $13.54 billion, Cisco revealed sales of $13.64 billion for the fourth quarter that concluded on July 27.