Cisco Systems CSCO-Q forecast better-than-expected first-quarter revenue on Wednesday and said it was cutting 7% of its global work force as it shifts focus to high-growth areas, sending its shares up 5% in extended trading.
The San Jose, California-based company estimates it will recognize pre-tax charges of up to US$1 billion in connection with the plan, with $700 million to $800 million of these being recognized in the first quarter.
Cisco said in February it would cut 5% of its global work force, or more than 4,000 jobs, while lowering its annual revenue target.
It expects first-quarter revenue in the range of $13.65 billion and $13.85 billion, the mid-point of which is higher than analysts’ average expectation of $13.71 billion, according to LSEG data.
Last week, Reuters exclusively reported that Cisco would cut thousands of jobs in a second round of layoffs this year.
The company, the largest maker of routers and switches that direct internet traffic, has been grappling with sluggish demand and supply-chain constraints in its mainstay business.
That pushed it to diversify with moves such as its $28-billion buyout of cybersecurity firm Splunk, which it completed in March. The acquisition is expected to reduce its reliance on one-time equipment sales by boosting its subscription business.
“As we look to build on our performance, we remain laser focused on growth and consistent execution as we invest to win in AI, cloud and cybersecurity, while maintaining capital returns,” CFO Scott Herren said in a statement.
The company launched a $1-billion fund in June to make investments in AI startups such as Cohere, Mistral AI and Scale AI. Cisco said at the time it had made 20 AI-focused acquisitions and investments over the past few years.
Cisco reported revenue of $13.64 billion for the fourth quarter ended July 27, compared with an estimate of $13.54 billion.
Its adjusted profit per share was 87 cents, compared with an estimate of 85 cents.