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Cisco Stock Jumps 14% on AI Orders Despite 4,000 Job Cuts

Cisco's stock rose 14% in extended trading after reporting quarterly results that surpassed Wall Street estimates. The company posted $15.84 billion in revenue and significantly increased its full-year guidance, largely fueled by robust demand in the AI and hyperscaler sectors, which generated $5.3 billion in orders year-to-date. Despite this positive financial momentum, Cisco announced it will cut nearly 4,000 jobs as part of a strategic realignment. CEO Chuck Robbins stated the layoffs are necessary to concentrate investment on long-term value creation in the AI era. The strong performance in networking revenue and raised guidance bolstered investor confidence.

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Cisco Stock Jumps 14% on AI Orders Despite 4,000 Job Cuts

Cisco's stock surged 14% in extended trading following the release of earnings and guidance that surpassed Wall Street expectations, driven by strong Artificial Intelligence (AI) demand. The networking giant also announced a workforce reduction of nearly 4,000 employees as part of a strategic realignment.

Quarterly Financial Performance vs. Expectations

Cisco reported robust financial results for the quarter ending April 25, exceeding analyst consensus across key metrics:

  • Earnings Per Share (Adjusted): Reported at $1.06, beating the expected $1.04.
  • Revenue: Reached $15.84 billion, surpassing the expected $15.56 billion.
  • Net Income: Increased to $3.37 billion (or 85 cents per share), up significantly from $2.49 billion the previous year.

For the quarter, revenue saw a 12% year-over-year increase, reaching $15.84 billion from $14.15 billion in the prior year.

Guidance and AI Market Strength

Despite the layoffs, the company provided an optimistic outlook, heavily citing AI infrastructure demand:

  • Fiscal Fourth Quarter Guidance: Cisco projected adjusted earnings per share between $1.16 and $1.18, with revenue expected to be between $16.7 billion and $16.9 billion. (Analyst consensus was for EPS of $1.07 on $15.82 billion in revenue).
  • AI and Hyperscaler Orders: The company reported securing $5.3 billion in AI infrastructure and hyperscaler orders year-to-date. Consequently, it raised its full-year expected orders to $9 billion, up from a previous estimate of $5 billion. The expected revenue from this market segment for the fiscal year is $4 billion, up from $3 billion.
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Workforce Reduction and Strategic Focus

In a move signaling a corporate restructuring, Cisco announced it will cut fewer than 4,000 jobs this quarter, representing less than 5% of its total workforce. CEO Chuck Robbins framed these cuts as necessary to sharpen focus on high-value, long-term growth areas within the AI era.

"The companies that will win in the AI era will be those with focus, urgency, and the discipline to continuously shift investment toward the areas where demand and long-term value creation are strongest," stated Robbins.

Cisco disclosed that severance and associated costs are expected to result in pre-tax charges of $1 billion, with approximately $450 million recognized in the fiscal fourth quarter.

Segment Highlights

Key revenue streams showed strong performance:

  • Networking Revenue: Increased by 25% to $8.82 billion, exceeding the StreetAccount consensus of $8.47 billion.
  • Security Revenue: Remained relatively flat at about $2 billion, compared to the consensus estimate of $1.99 billion.

During the third quarter, Cisco also showcased new products, including switches and routers utilizing its next-generation processor, and debuted a leaderboard for ranking generative AI models based on cybersecurity robustness.

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