Cisco CEO Chuck Robbins participates in an interview with Bloomberg Television at the World Economic Forum in Davos, Switzerland, on January 18, 2023.
Holly Adams | Bloomberg | Getty Images
Cisco Microsoft shares rose about 8% on Thursday and were on track for their best day since March 2020, after the computer networking company said it would cut 7% of its workforce and reported quarterly results that beat analysts' estimates.
Cisco's results were better than expected, Morgan Stanley analysts said in a note to investors.
“Cisco’s better-than-expected Q4 results and order numbers were a relief, and helped Cisco return to more predictable patterns after nearly 4 years of turmoil,” wrote analysts who recommend buying the stock.
Cisco reported revenue of $13.64 billion for the quarter, beating Wall Street estimates of $13.54 billion. Revenue fell 10% from the year-ago quarter, marking the third straight quarter of declining sales. Net income fell 45% from a year earlier, but earnings still beat expectations.
Analysts at Bank of America noted that network sales fell 28.1% year over year, but said that was mostly due to difficult comparisons, and that the focus of the quarter was on the recovery in orders.
“Data center switching orders were up double digits year-over-year, while campus switching and routing orders were up in the high single digits,” the analysts, who have a buy rating on Cisco, wrote in a report. AI-related orders have surpassed $1 billion and revenue will start to pick up in the first half of 2025, they added.
The company’s core networking business, which includes routers and switches, has suffered since large companies began moving to the cloud. Cisco’s sales have been partially offset by recurring revenue from its software and securities businesses.
Cisco said in a statement that it is implementing a restructuring plan through layoffs that will result in a $1 billion pre-tax charge to its financial results and “will allow it to invest in key growth opportunities and drive greater efficiencies across its business.”
CEO Chuck Robbins told CNBC's “Squawk on the Street” on Thursday that the company will try to move some employees to other roles within the company.
“The big question we talked about when we talked about this is, is everyone going to think this is AI-based?” Robbins said, adding that there is an aspect of AI that can be used to make general and administrative tasks more efficient using automation systems.
It’s Cisco’s second major round of layoffs this year. The company said in February it would eliminate 5% of its workforce, or more than 4,000 jobs. Cisco had 84,900 employees at the end of fiscal 2023, before the initial cuts.
— CNBC's Michael Bloom and Ari Levy contributed to this report.
WATCH: Cisco CEO Chuck Robbins talks Q4 results
