UPDATE 1-Cisco shares hit record on strong forecast, AI push with job cuts
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Updates share movement
By Kanishka Ajmera
May 14 (Reuters) - Cisco CSCO.O shares surged 17% to a record-high on Thursday, set for their biggest single-day gain in over two decades, after it posted AI demand-powered strong results and announced nearly 4,000 job cuts to redirect investments into technology.
The jump, if sustained, would mark the best day for the stock since a robust earnings reports in May 2002 sparked a furious rally in the aftermath of the dotcom crash.
The networking gear maker's near-$400 billion market capitalization was set to swell by about $70 billion.
Cisco has emerged as a big winner from Big Tech's AI spending spree, thanks to its key role in supplying gear crucial to the functioning of data centers. The stock had gained 32% this year by Wednesday's close.
The company raised its annual revenue forecast on Wednesday and said its AI-focused restructuring, expected to cost $1 billion, will shift investments toward AI and related growth avenues.
The fourth-quarter retrenchments would represent less than 5% of its workforce, Cisco said. It added that it was strategically investing in silicon, optics, security as well as employees' use of AI across-company and reducing roles in some areas.
"Cisco feels a lot like Intel here, as the puck has gone to where CEO Chuck Robbins invested — rewarding the company for its custom silicon and optics," said analysts at Melius Research.
The firm has taken $5.3 billion in AI infrastructure orders from hyperscalers so far this fiscal year and raised its full-year order expectation to $9 billion from $5 billion previously.
The San Jose, California-based company supplies high-speed networking equipment, such as switches and routers, that data centers use to run AI.
"We think this networking momentum can continue as this space has a clear secular tailwind from AI inference," Melius added.
Last month, Cisco unveiled switches designed to connect different types of quantum computers, advancing its push toward a network of quantum machines, in line with efforts by peers such as Alphabet’s Google GOOGL.O and IBM IBM.N.