Cisco is making waves in the tech world, announcing a 7% cut in its global workforce as it strives to adapt and thrive amid shifting market dynamics.
The networking giant reported better-than-expected quarterly earnings, sending its shares up in extended trading, but the news is bittersweet as it marks the second major round of layoffs this year.
In the latest quarter, Cisco posted adjusted earnings of 87 cents per share, slightly ahead of the 85 cents analysts predicted. Business revenue came in at $13.64 billion, surpassing expectations of $13.54 billion, according to LSEG.
Cisco’s decision to cut jobs comes as part of a broader restructuring plan aimed at driving efficiency and investing in key growth areas.
The company expects to incur $1 billion in pretax charges as it realigns its business, with $700 million to $800 million hit this quarter and the remainder spread across fiscal 2025.
This isn’t the first time Cisco has faced such challenges. Earlier this year, the company reduced its workforce by 5%, cutting over 4,000 jobs.
These moves come as Cisco navigates a prolonged decline in sales, with its core networking business—once the backbone of its success—losing steam as enterprises shift to the cloud.
In the fiscal fourth quarter, which ended July 27, Cisco’s revenue dropped 10% from $15.2 billion the previous year, marking the third consecutive quarter of sales declines.
The company’s networking revenue took a significant hit, plummeting 28% to $6.8 billion.
However, there’s a silver lining: security revenue surged 81% to $1.8 billion, buoyed by increased subscription revenue from its recent $28 billion acquisition of Splunk.
Despite the drop in sales, Cisco’s diversification into software and security seems to be paying off.
The company’s focus on recurring subscription revenue is a strategic pivot aimed at stabilizing its finances amid the ongoing transition to cloud-based solutions.
Net income for the quarter fell 45% to $2.2 billion, or 54 cents per share, from $4 billion, or 97 cents per share, a year earlier.
Still, Cisco’s stock saw a 5.5% boost in after-hours trading, closing at $47.92, even as it remains down 10% for the year, lagging behind the Nasdaq’s 14% gain.
As Cisco continues to navigate these turbulent waters, its strategy of cutting costs while investing in growth could foreshadow a leaner, more focused company poised for long-term success.
Only time will tell if these moves will help the tech giant regain its footing in a rapidly evolving market.
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