Shares of the networking giant Cisco Systems Inc. soared 20% in extended trading today after it reported solid third-quarter earnings and revenue numbers and announced a new round of job cuts. The company said it’s going to cut less than 4,000 jobs, representing less than 5% of its total workforce.
Cisco’s results were hardly stellar, although they did come in ahead of expectations. The company delivered adjusted earnings of $1.06 per share, coming in just ahead of Wall Street’s target of $1.04 per share. Revenue for the period rose 12% from a year earlier to $15.84 billion, compared to the Street’s target of $15.56 billion. On the other hand, Cisco’s overall profitability improved quite a bit. The company reported net income for the quarter of $3.37 billion, up from a profit of just $2.49 billion in the same period one year earlier.
Looking to the fourth quarter, Cisco said it’s anticipating earnings of between $1.16 and $1.18 per share on sales of between $16.7 billion and $16.9 billion. Those numbers suggest an even better quarter lies ahead, with Wall Street targeting four-quarter earnings of just $1.07 on $15.82 billion in sales.
Cisco Chief Executive Chuck Robbins (pictured) told analysts on a conference call that the company has so far received $5.3 billion worth of orders for artificial intelligence infrastructure and from hyperscalers so far this year. For the full year, it’s expecting that total to exceed $9 billion, he added, up from an initial target of just $5 billion. The company also expects $4 billion in total revenue this year from that market, up from an earlier projection of just $3 billion.
Although Cisco struggled to gain much momentum earlier on in the AI race, the company’s story has gotten some legs in recent months, pushing its stock to a record high late last year, finally surpassing its dot-com era high. This year, the company’s stock has continued to rise, gaining more than 32% so far, more than double the 14% gain of the broader Nasdaq index.
In a blog post published today to coincide with the earnings results, Robbins said that the latest round of job cuts would begin the very next day. It’s the latest in a growing number of technology companies to announce job reductions that have been pinned on the rising adoption of AI.
“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,” Robbins wrote. “I’m confident Cisco will be one of those winners. This means making hard decisions — about where we invest, how we’re organized, and how our cost structure reflects the opportunity in front of us.”
The layoffs announced by Cisco add to the growing number of job cuts in the technology sector this year. According to the website Layoffs.fi, the industry has now slashed 103,571 jobs so far this year, approaching the 124,201 figure it reported for all of last year.
In its filing, Cisco said costs such as severance pay for terminated employees will result in pre-tax charges of around $1 billion, with $450 million of that set to be recognized in the fourth quarter.
During the quarter, Cisco announced a number of new switches and routers based on its next-generation network processor, as well as a new Universal Quantum Switch, which is designed for quantum computing systems. It also closed on a couple of major acquisitions, buying the Israeli cybersecurity firm Astrix Security Ltd. in a deal valued at close to $300 million, and the AI-native observability startup Galileo Technologies Inc. Both acquisitions were made to enhance Cisco’s “agentic” security offerings, the company said.
Cisco will hope that the acquisitions can ignite new growth in its security division, for revenue was flat in the prior quarter at just below $2 billion, in-line with the Street’s consensus estimate of $1.99 billion. The networking segment was the real growth driver, with revenue there up 25% to $8.82 billion, exceeding the Street’s $8.47 billion forecast.
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