Chuck Robbins, Cisco CEO & President, at WEF in Davos, Switzerland on May 25, 2022.
Adam Galica | CNBC
Cisco announced plans to cut 5% of its workforce on Wednesday, a decision that will result in the elimination of about 4,250 jobs. Cisco shares fell as much as 9% in extended trading.
It is the latest tech company to shrink in 2024 as the industry continues to squeeze costs following the market downturn that hit two years ago. January was the busiest month for industry job cuts since March, as Alphabet, Amazon, Microsoft and SAP said they were cutting positions, as did eBay, Unity and Discord. So far this year, 144 tech companies have laid off nearly 35,000 workers, according to the website Layoffs.fyi.
In addition to revealing the job cuts, Cisco reported strong fiscal second-quarter results but gave a light forecast. Here’s how it did compared to the consensus from LSEG, formerly Refinitiv:
- Earnings per share: 87 cents, adjusted, vs. 84 cents expected
- Income: $12.79 billion, vs. $12.71 billion expected
Cisco’s revenue fell 6% year over year during the quarter ended Jan. 27, according to statement. Net income fell to $2.63 billion, or 65 cents per share, from $2.77 billion, or 67 cents per share, in the prior quarter. The company has yet to close its $28 billion acquisition of the monitoring and security software maker Splunk. Cisco now expects to complete the deal late in the first calendar quarter or early in the second quarter, CEO Chuck Robbins said on a conference call with analysts.
Networking products revenue came in at $7.08 billion, slightly below the consensus of $7.10 billion among analysts surveyed by StreetAccount.
On guidance for the fiscal third quarter, Cisco called for 84 to 86 cents in adjusted earnings per share of $12.1 billion to $12.3 billion. Analysts polled by LSEG were looking for adjusted earnings of 92 cents per share on revenue of $13.09 billion.
For the full year, Cisco sees $3.68 to $3.74 in adjusted earnings per share and $51.5 to $52.5 billion in revenue. Analysts had forecast $3.86 in adjusted earnings per share on revenue of $54.26 billion.
Guidance excludes impact from Splunk.
Robbins highlighted the challenges of coaching during the call.
“In terms of the macro environment, we are seeing a greater degree of caution and deal scrutiny given the high level of uncertainty,” Robbins said. “As we hear this from our customers, it makes us more cautious with our forecasts and expectations. Second, as we discussed last quarter and then saw in results from other technology providers, customers have taken time since the beginning of fiscal 2024 to develop the increased product levels that have been shipped to them in recent quarters and this is taking longer than our initial expectations.”
Demand remains subdued among telecom and cable service provider customers, Robbins said.
Cisco said it was raising its dividend by a penny to 40 cents a share.
— CNBC’s Ari Levy contributed to this report.
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