Cisco shares rise on positive sales outlook, job cuts

(Bloomberg) — Shares of Cisco Systems Inc., the world’s largest maker of networking equipment, surged the most in more than four years after the company gave a positive revenue outlook for the current period and announced plans to cut thousands of jobs as part of a strategic shift.

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The company said in a statement Wednesday that its sales would be between $13.65 billion and $13.85 billion in the fiscal first quarter ending in October. Analysts had estimated a figure at the very low end of that range.

Cisco shares rose 10.3% after the open on Thursday, marking the stock’s biggest intraday jump since March 2020.

The cuts are not intended to boost profits, said Scott Herrin, the company’s chief financial officer. “Cisco needs to quickly pivot to cybersecurity, cloud computing and AI-related products, so they’re freeing up resources to do that,” he said in an interview.

The cuts will reduce Cisco’s 90,400-employee workforce by about 7% — a loss of more than 6,300 jobs. Cisco said the move would result in short-term costs of about $1 billion. The company was also considering buying Splunk, which it acquired earlier this year.

Despite pressure to sell more software and services, Cisco still relies on installing new equipment for a significant portion of its revenue. On that front, the company saw an improvement in the most recent quarter—a sign that business customers are investing in their networks again. Previously, they were more focused on installing equipment they had already purchased.

“The inventory digest period for our customers is now largely over,” Chief Executive Chuck Robbins said on a call with analysts, citing strong demand across all regions and major product lines, including from government customers.

Despite revenue falling 10% to $13.6 billion in the fourth quarter, that beat analysts’ expectations of $13.53 billion. Earnings were 87 cents a share, excluding some items. Wall Street had expected 85 cents a share.

Cisco reported a 14% increase in orders, a closely watched indicator of future revenue. Orders were flat in the third quarter compared with a year earlier, excluding the newly acquired Splunk. Without Splunk, orders were up 6% in the fourth quarter, Cisco said.

Cisco said its first-quarter earnings will be between 86 cents and 88 cents a share, excluding some items. That compares with expectations of 85 cents. Revenue for fiscal 2025 will be $56.2 billion, higher than Wall Street estimates.

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The company is trying to convince investors that new products and services will help Cisco capitalize on spending on data centers and artificial intelligence. Unlike some hardware makers, notably Nvidia, the company has yet to point to billions of dollars in revenue from that area.

Cisco’s management team has tried to focus investors’ attention on its deferred revenue, which they say shows the shift from one-time purchases to long-term contracts is working.

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