Cisco Systems announced on Wednesday that it will cut 7% of its global workforce as part of a strategic shift towards high-growth areas. The San Jose, California-based tech giant estimates that this move will incur pre-tax charges of up to $1 billion, with $700 million to $800 million of these charges expected to be recognized in the first quarter.
This decision follows an earlier round of layoffs announced in February, when Cisco revealed it would reduce its global workforce by 5%, affecting over 4,000 jobs. At that time, the company also lowered its annual revenue target, reflecting ongoing challenges in its core business areas.
Despite the substantial workforce reduction, Cisco’s shares experienced a 5% increase in after-hours trading. This uptick came after the company reported a forecast for first-quarter revenue that exceeded analysts’ expectations. Cisco anticipates generating revenue between $13.65 billion and $13.85 billion for the first quarter, surpassing the average analyst estimate of $13.71 billion, according to LSEG data.
Cisco, a leading provider of routers and switches essential for directing internet traffic, has been facing slow demand and supply-chain disruptions in its traditional business sectors. To address these issues, the company has diversified its portfolio, including a notable $28 billion acquisition of cybersecurity firm Splunk, completed in March. This acquisition aims to reduce Cisco’s dependence on one-time equipment sales by enhancing its subscription-based revenue streams.
CFO Scott Herren highlighted Cisco’s commitment to growth and execution, stating, “As we look to build on our performance, we remain laser-focused on growth and consistent execution as we invest to win in AI, cloud, and cybersecurity, while maintaining capital returns.”
In line with this strategy, Cisco launched a $1 billion fund in June to invest in AI startups such as Cohere, Mistral AI, and Scale AI. The company has made 20 AI-focused acquisitions and investments over recent years, aiming to strengthen its position in the rapidly evolving tech landscape.
For the fourth quarter ending July 27, Cisco reported revenues of $13.64 billion, slightly above the $13.54 billion estimate. The company’s adjusted profit per share was 87 cents, exceeding the expected 85 cents.
As Cisco navigates this transition, the focus will remain on leveraging new technologies and diversifying its revenue streams to sustain long-term growth.
