Cisco cutting 7% of workforce, reports earnings and revenue beat for quarter

Cisco shares popped in extended trading on Wednesday after the networking company said it’s cutting 7% of its global workforce and reported quarterly results that topped analysts’ estimates.

Here are the key numbers:

• Earnings: 87 cents per share, adjusted, vs. 85 cents per share estimate, adjusted, according to LSEG.
• Revenue: $13.64 billion vs. $13.54 billion estimate, according to LSEG.

Cisco said in a filing that it’s implementing a restructuring plan that will result in $1 billion in pre-tax charges to its financial results and will “allow it to invest in key growth opportunities and drive more efficiencies in its business.” 

The company said $700 million to $800 million of charges will be recognized in the current quarter, with the rest hitting over the course of fiscal 2025.

It’s the second major round of layoffs for Cisco, which said in February that it was eliminating 5 % of its workforce, or over 4,000 jobs. Cisco had 84,900 employees at the end of fiscal 2023, before the initial job cuts.

Cisco is mired in an extended stretch of declines, with sales falling for a third straight quarter. The company’s core networking business, which includes switches and routers, has been in decline since large enterprises started moving to the cloud years ago. The company has bolstered its software and securities business to diversify and bring in more recurring subscription revenue.

Revenue in the fourth quarter dropped 10% from $15.2 billion a year earlier, Cisco said. Sales for the fiscal year declined for the first time since 2020.

The slide is projected to last for one more period. For the first quarter, Cisco said it expects revenue of $13.65 billion to $13.85 billion, down from $14.7 billion in the prior year. Analysts were expecting $13.7 billion, according to LSEG.

Cisco said in recent quarters that the revenue slippage stemmed from certain clients setting up equipment that they’d received in previous periods.

While the downward trajectory has continued, Cisco outperformed expectations with the help of increased subscription revenue from the $28 billion acquisition of Splunk, which closed in March and was the company’s biggest deal ever.

In the latest quarter, networking revenue plummeted 28% to $6.8 billion. Security revenue rose 81% to $1.8 billion, and collaboration revenue was about flat at $1 billion. Splunk contributed $960 million in revenue.

Net income in the quarter fell 45% to $2.2 billion, or 54 cents a share, from $4 billion, or 97 cents per share, a year earlier.

Shares of Cisco were down 10% this year, prior to the close, while the Nasdaq was up about 14%. The stock rose 5.5% to $47.92 after hours.

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