Cisco Systems Inc. saw its shares rise in after-hours trading on Wednesday following the announcement of a significant restructuring plan and the release of its quarterly financial results. The tech giant’s decision to cut 7% of its global workforce and its better-than-expected earnings contributed to the uptick in its stock price.

Key Financial Metrics

• Earnings: Cisco reported adjusted earnings of $0.87 per share, exceeding the analyst estimate of $0.85 per share, according to LSEG.
• Revenue: The company generated $13.64 billion in revenue, surpassing the forecast of $13.54 billion, according to LSEG.

Restructuring and Layoffs

Cisco revealed a restructuring plan set to incur $1 billion in pre-tax charges. This plan is aimed at enhancing operational efficiency and enabling investment in growth areas. The restructuring will see $700 million to $800 million of the charges recognized in the current quarter, with the remainder spread over fiscal 2025.

This move follows a previous round of layoffs announced in February, which involved reducing 5% of the workforce, equivalent to over 4,000 jobs. As of the end of fiscal 2023, Cisco employed 84,900 people.

Financial Performance and Market Challenges

Cisco has faced ongoing challenges, with sales declining for the third consecutive quarter. The company’s core networking segment, which includes switches and routers, has struggled as large enterprises shift towards cloud-based solutions. To counteract this decline, Cisco has been focusing on expanding its software and security divisions to drive recurring subscription revenue.

In the fourth quarter, Cisco’s revenue dropped by 10% year-over-year, from $15.2 billion to $13.64 billion. This decline marked the first decrease in annual sales since 2020. For the upcoming first quarter, Cisco anticipates revenue between $13.65 billion and $13.85 billion, down from $14.7 billion in the same period last year. Analysts had projected revenue of $13.7 billion.

The revenue drop has been attributed to clients setting up previously received equipment, affecting new sales. Despite these challenges, Cisco’s acquisition of Splunk, valued at $28 billion and completed in March, has bolstered its performance. The acquisition contributed $960 million to Cisco’s latest quarter revenue.

Segment Performance

• Networking: Revenue in this segment fell by 28% to $6.8 billion.
• Security: Revenue surged by 81% to $1.8 billion.
• Collaboration: Revenue remained steady at approximately $1 billion.

Net income for the quarter fell by 45%, from $4 billion (or $0.97 per share) the previous year to $2.2 billion (or $0.54 per share).

Stock Market Reaction

Cisco’s stock, which had dropped 10% earlier in the year, saw a 5.5% increase in after-hours trading, closing at $47.92. This rebound reflects investor optimism about Cisco’s strategic adjustments and its ability to navigate the current market challenges.