Cisco CEO Chuck Robbins participates in a Bloomberg Television interview at the World Economic Forum in Davos, Switzerland, on Jan. 18, 2023.
Hollie Adams | Bloomberg | Getty Images
Cisco shares jumped about 7% on Thursday for their best day since November 2020, after the computer networking company said it’s cutting 7% of its workforce and reported quarterly results that beat analyst estimates.
Morgan Stanley analysts said in a note to investors that Cisco’s results were better than feared.
“Cisco’s FQ4 beat, and better than expected order numbers were a relief, and supported Cisco falling back into more predictable patterns after nearly 4 years of disruption,” wrote the analysts, who recommend buying the stock.
Cisco reported $13.64 billion in revenue for the quarter, ahead of Wall Street estimates of $13.54 billion. Revenue fell 10% from the year-ago quarter, marking the third straight quarter of sales declines. Net income plummeted 45% from a year earlier, but profit still exceeded expectations.
Analysts at Bank of America noted that networking sales were down 28.1% year-over-year but said that was mostly due to tough comparisons, and that the focal point of the quarter was on order recovery.
“Data center switching orders were up double-digits YoY, while orders for campus switching and routing were up high-single digits,” the analysts, who have a buy rating on Cisco, wrote in a report. They added that orders tied to artificial intelligence crossed $1 billion and revenue will start to ramp in the first half of 2025.
The company’s core networking business, which includes routers and switches, has struggled since large companies started moving to the cloud. Cisco’s sales have been partially offset by recurring revenue from its software and securities businesses.
Cisco said in a filing that it’s implementing a restructuring plan with layoffs that will result in $1 billion in pretax charges to its financial results and will “allow it to invest in key growth opportunities and drive more efficiencies in its business.”
CEO Chuck Robbins told CNBC’s “Squawk on the Street” on Thursday that the company will try to move some employees into other jobs at the firm.
“The big question that we talked about going into this is, is everybody going to think that this is AI-driven?” Robbins said. He added that there’s an aspect of AI that could be used to make general and administrative tasks more efficient using automation systems.
It’s the second major round of layoffs this year for Cisco. The company said in February that it was eliminating 5% of its workforce, or over 4,000 jobs. Cisco had 84,900 employees at the end of fiscal 2023, before the initial cuts.
— CNBC’s Michael Bloom and Ari Levy contributed to this report.
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