Cisco announces layoffs as Q2 earnings beat estimates

Cisco Systems Inc (NASDAQ: CSCO) is trading down in extended hours even though it reported market-beating results or its fiscal second quarter.

Cisco stock down on muted future guidance

Shares are pushing to the downside primarily because the management issued muted guidance for the future. Cisco is now calling for 84 cents to 86 cents of adjusted per-share earnings on up to $12.3 billion in revenue in Q3.

Analysts, in comparison, were at 92 cents a share and $13.1 billion, respectively. Still, Chuck Robbins – the chief executive of Cisco Systems said in a press release today:

The Nasdaq-listed firm saw its product revenue tank 9.0% in the recently concluded quarter which was partly offset by a 4.0% increase in its services revenue. $CSCO is now down close to 20% versus its 52-week high.

Cisco Systems Q2 earnings snapshot

• Earned $2.6 billion versus the year-ago $2.8 billion
• Per-share earnings also declined from 67 cents to 65 cents
• Adjusted EPS printed at 87 cents as per the earnings report
• Revenue inched down 6.0% year-over-year to $12.80 billion
• Consensus was 84 cents a share on $12.71 billion in revenue
• Increased quarterly dividend by 3.0% to 40 cents a share

$CSCO said its gross margin improved 220 basis points in its second financial quarter. According to CFO Scott Herren:

In December, Cisco Systems Inc bought Isovalent - a privately held networking and security company based out of Cupertino, California (find out more).

Cisco plans to lay off employees

On Wednesday, Cisco Systems Inc announced plans of lowering its headcount by about 5.0% as well.

The networking hardware company had a workforce comprising 85,000 in July of 2023 - which means around 4,250 of its employees are expected to lose jobs.

Other notable figures in its earnings release today include $24.7 billion of annualised recurring revenue (ARR) - up 6.0%. $CSCO ended the quarter with $35.7 billion worth of remaining performance obligations (RPO) - up 12% versus last year.

Note that artificial intelligence is expected to result in 170 million layoffs in 2024 as Invezz reported here. Wall Street currently has a consensus "hold" rating on Cisco Systems.