Cisco Systems is set to reduce its workforce by 7%, marking its second round of layoffs this year, as the company refocuses on faster-growing sectors within the tech industry, such as artificial intelligence and cybersecurity.
The San Jose, California-based company did not disclose the exact number of positions being eliminated. With a workforce of 84,900 as of July 2023, the estimated reduction would impact approximately 5,900 jobs. Earlier in February, Cisco had announced plans to let go of around 4,000 employees.
In June, the networking giant revealed plans to invest $1 billion in tech startups including Cohere, Mistral, and Scale, aimed at advancing reliable AI solutions. Additionally, Cisco recently formed a partnership with Nvidia to create AI infrastructure.
These layoffs come just two weeks after Intel Corp., a major player in the semiconductor industry, announced plans to reduce its workforce by roughly 15,000 jobs in an effort to revitalize its business and better compete with stronger competitors like Nvidia and AMD. Following Intel’s disappointing quarterly earnings, its stock plummeted, while Cisco’s shares saw a 6% increase in after-hours trading on Wednesday.
Cisco has also ventured into cybersecurity, launching a cybersecurity readiness index in March to help businesses evaluate their ability to withstand cyber threats.
On Wednesday, Cisco Systems Inc. reported a fiscal fourth-quarter profit of $2.16 billion, or 54 cents per share, for the period ending July 27. This marks a significant decline of 45% compared to the $3.96 billion, or 97 cents per share, it earned during the same quarter last year. When excluding one-time items, the company posted adjusted earnings of 87 cents per share in the latest quarter.
Revenue decreased by 10% to $13.64 billion, down from $15.2 billion.
Analysts had anticipated adjusted earnings of 85 cents per share and revenue of $13.54 billion, according to a FactSet survey.
Looking ahead to the current quarter, Cisco is projecting adjusted earnings between 86 cents and 88 cents per share on revenue ranging from $13.65 billion to $13.85 billion. Analysts are forecasting earnings of 85 cents per share on revenue of $13.74 billion.
Edward Jones analyst David Heger mentioned that Cisco is beginning to experience a rebound in demand after a slowdown in previous quarters. He highlighted a 6% increase in product orders, even excluding contributions from its recent acquisition of cybersecurity company Splunk. Heger also noted that “the restructuring will help mitigate the earnings impact from interest expenses tied to financing the Splunk acquisition and streamline the combined workforces.”
