Cisco's stock rose over 5%

Cisco Systems Inc (NASDAQ: CSCO), a leading provider of computer networking equipment, has projected strong revenue for the upcoming quarter due to a surge in orders, despite planning to reduce its workforce by thousands as part of a strategic overhaul. The company expects revenue between $13.65 billion and $13.85 billion for the fiscal first quarter, exceeding analyst forecasts. As a result, Cisco's shares jumped over 5% in after-hours trading.

Key Takeaways

• Cisco is reducing its workforce by 7%, following a 5% cut announced in February.
  
• The company's fiscal fourth-quarter results exceeded both revenue and earnings expectations.
  
• Cisco’s performance was bolstered by its $28 billion acquisition of cybersecurity firm Splunk in March.
  

The planned workforce reduction of about 7%, which will impact more than 6,300 jobs, is designed to accelerate the company's shift towards cybersecurity, cloud systems, and artificial intelligence. With a continued emphasis on software and services, Cisco observed increased customer investment in network infrastructure during the recent quarter. Moreover, despite a 10% revenue decline in the fourth quarter, Cisco's performance exceeded analyst expectations.

Cisco's performance

The company’s strategic emphasis on new products and services is aimed at leveraging data center and AI spending, focusing on long-term contracts rather than one-time purchases.

Quarterly subscription revenue was $27.4 billion, including revenue from cybersecurity firm Splunk, which Cisco acquired for $28 billion in March. That amounted to more than half of the company's total sales. Shares of Cisco rose more than 5% in after-hours trading Wednesday after inching higher during the regular session.

Cisco’s performance will aid the Dow Jones index, of which it is a smaller member, on Thursday. The Dow led other indices on Wednesday as in-line July Consumer Price Index (CPI) data in the morning session led markets to take a less dovish bet on the Federal Reserve’s (Fed) expected rate cut on September 18. The market now expects a 25 bps cut rather than its prior 50 bps expectation.

Cisco Systems earnings news

Wall Street had forecasted Cisco to report adjusted earnings of $0.85 per share on revenue of $13.54 billion. However, the company, led by CEO Chuck Robbins, exceeded expectations with adjusted EPS of $0.87 and revenue of $13.64 billion.

Despite a 10% year-over-year decline in sales, Cisco's performance was better than anticipated, and future revenue prospects look promising. The company reported a 14% increase in product orders year-over-year, though this was 6% when excluding Splunk. Cisco achieved an adjusted gross margin of 67.9% for the quarter, positioning it among the top companies on Wall Street in terms of pricing power. This strong performance led BMO Capital to include Cisco on its High Quality Stock Screen earlier this week, and Piper Sandler had expressed optimism about Splunk's results before the announcement.

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Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.