Cisco layoffs: Cisco Systems has announced plans to reduce its global workforce by 5 per cent, equating to over 4,000 job cuts, and has revised down its annual revenue target amid challenging economic conditions. This decision comes amidst widespread layoffs across the tech industry this year.

Following the announcement, shares of the networking equipment manufacturer experienced a decline of more than 5 per cent in extended trading on Wednesday, as Cisco adjusted its revenue forecast to a range of $51.5 billion to $52.5 billion, down from the previously projected $53.8 billion to $55 billion.

CEO Charles Robbins acknowledged the ongoing weak demand from telco and cable service provider customers during a conference call. Analysts anticipate continued pressure on demand for Cisco's products, particularly as clients in the telecom sector focus on reducing inventory of networking equipment.

Analyst Joe Brunetto from Third Bridge predicts that the backlog of networking hardware inventory will likely be resolved by the second half of 2024 or early 2025.

Amid these challenges, Cisco is concentrating on artificial intelligence and has formed a partnership with Nvidia to drive growth. CEO Robbins revealed that Nvidia has agreed to incorporate Cisco's ethernet technology into its own, widely used in data centres and AI applications.

Cisco's third-quarter revenue forecast of $12.1 billion to $12.3 billion fell below estimates of $13.1 billion, according to data from LSEG.

Reports earlier this month indicated that Cisco, with its 85,000 employees, was planning layoffs and restructuring efforts to focus on high-growth areas. The company anticipates incurring an $800 million charge before tax related to the layoffs, primarily consisting of severance and other costs, with the majority of charges expected to be recognised in the first half of fiscal 2025.

In the second quarter, Cisco posted an adjusted profit of 87 cents per share and revenue of $12.79 billion, surpassing estimates from LSEG.

(With Reuters inputs)