Cisco Cuts 5,500 Jobs Despite $10.3B Profit, Cites AI Push as Tech Layoffs Continue

Cisco Announces 5,500 Layoffs Despite $10.3 Billion Profit, Citing AI Investment

Networking giant Cisco Systems has announced plans to lay off 5,500 employees, approximately seven percent of its workforce, despite posting $10.3 billion in profits last year. The company disclosed the layoffs in a notice to the Securities and Exchange Commission, framing the move as part of an effort to invest more heavily in artificial intelligence (AI) technologies.

Cisco joins a growing list of tech companies, including Microsoft and Intuit, that have cited AI as justification for recent workforce reductions. In a statement, Cisco CEO Chuck Robbins emphasized the company’s focus on AI, using the term five times while discussing the restructuring.

This latest round of layoffs follows a previous cut of 4,000 jobs earlier this year, which Cisco described as an effort to “realign the organization.” The tech industry’s increasing openness about replacing human labor with AI has raised concerns about long-term employment trends in the sector.

Interestingly, news of the layoffs boosted Cisco’s stock price from $45.04 to over $48 per share, mirroring similar stock price spikes observed in other tech companies following layoff announcements. This pattern has led some experts to question whether AI investment is the true motivation behind these workforce reductions.

Fabian Stephany, an economist at the University of Oxford, suggests that these layoffs may be driven more by traditional economic factors such as outsourcing and cost-cutting rather than a genuine pivot to AI. “The AI justification might be a convenient narrative for companies looking to streamline operations,” Stephany noted.

The tech industry’s broader trend of layoffs amid high profits and purported AI investments continues to raise questions about the future of work in the sector. Microsoft recently announced 1,500 job cuts, also citing the “AI wave” as a factor.

As companies realign their resources towards AI development, uncertainty remains about the long-term payoff of these strategic shifts and their impact on the tech workforce.