Cisco Systems is set to implement a second wave of layoffs this year, with thousands of employees expected to be affected, according to sources familiar with the situation. The US networking giant, headquartered in San Jose, California, is making these cuts as part of its strategic shift towards higher-growth sectors, including cybersecurity and artificial intelligence (AI).

The upcoming layoffs, which could involve a number of employees comparable to or exceeding the 4,000 positions cut in February, are anticipated to be announced in conjunction with the company's fourth-quarter financial results, likely on Wednesday. Cisco, which had approximately 84,900 employees as of July 2023, has not yet responded to requests for comment.

The move comes as Cisco faces challenges in its core business of routers and switches, which have been impacted by sluggish demand and ongoing supply chain issues. To mitigate these challenges, Cisco has been diversifying its portfolio, notably through its $28 billion acquisition of cybersecurity firm Splunk in March. This acquisition is part of Cisco's strategy to reduce dependence on one-time equipment sales and enhance its subscription-based revenue streams.

In addition to its focus on cybersecurity, Cisco has been increasingly incorporating AI into its product offerings. The company has set a target of reaching $1 billion in AI product orders by 2025 and has invested $1 billion in a fund to support AI startups, including Cohere, Mistral AI, and Scale AI. Over the past several years, Cisco has made 20 AI-focused acquisitions and investments as part of its broader strategy to integrate AI technologies.

These layoffs are part of a broader trend in the tech industry, where companies are cutting costs in response to significant investments in AI. According to data from Layoffs.fyi, over 126,000 employees have been laid off across 393 tech companies since the beginning of the year. Earlier this month, chipmaker Intel also announced substantial layoffs, cutting 15% of its workforce, or around 17,500 jobs, as it struggles to revive its manufacturing business.

Cisco's share price has fallen nearly 1% following reports of the impending job cuts and is down more than 9% for the year as of Thursday's close. The company's restructuring efforts underscore the ongoing challenges faced by legacy technology firms as they navigate a rapidly evolving market landscape.