Cisco Systems plans to lay off 7% of its workforce, marking the company’s second round of job cuts this year as it shifts its focus toward rapidly growing technology sectors like artificial intelligence and cybersecurity.
While the San Jose, California-based company did not disclose the exact number of positions affected, with 84,900 employees as of July 2023, the reduction would impact approximately 5,900 jobs. This follows a previous round of layoffs announced in February, which saw about 4,000 positions cut.
In June, Cisco announced a $1 billion investment in tech startups, including Cohere, Mistral, and Scale, to support the development of reliable AI products. The company has also recently partnered with Nvidia to create infrastructure for AI systems.
These layoffs at Cisco follow Intel Corp.’s announcement two weeks earlier that it would cut around 15,000 jobs as it seeks to revitalize its business in the face of competition from rivals like Nvidia and AMD. Intel’s quarterly earnings disappointed investors, causing a sharp drop in its stock, while Cisco’s shares rose about 6% in after-hours trading on Wednesday.
In its push into cybersecurity, Cisco launched a cybersecurity readiness index in March to help businesses assess their resilience against cyberattacks.
Cisco reported earnings of $2.16 billion, or 54 cents per share, for its fiscal fourth quarter ending July 27, a 45% decline from $3.96 billion, or 97 cents per share, in the same period last year. Excluding special items, adjusted earnings were 87 cents per share.
Revenue dropped 10% to $13.64 billion from $15.2 billion. Analysts had expected adjusted earnings of 85 cents per share on revenue of $13.54 billion, according to FactSet.
For the current quarter, Cisco forecasts adjusted earnings between 86 and 88 cents per share on revenue ranging from $13.65 billion to $13.85 billion. Analysts anticipate earnings of 85 cents per share on revenue of $13.74 billion.
Edward Jones analyst David Heger noted that Cisco is beginning to see a recovery in demand after a slowdown in recent quarters, highlighting a 6% increase in product orders, excluding those from its recent acquisition of cybersecurity firm Splunk.
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He added that “the restructuring will help offset the earnings impact from interest expenses associated with financing the Splunk acquisition and will rationalize combined workforces.”
