Driven by AI demand, Cisco's new fiscal year guidance shows stronger growth than expected, with a global workforce reduction of 7%. The stock surged more than 6% in after-hours trading | Financial Report Insights

Despite a global workforce reduction of about 7%, Cisco still expects stronger revenue growth for the new fiscal year than Wall Street expected, reflecting the prospects of AI technology applications driving the growth of IT infrastructure demand.

On Wednesday, August 14th, after the U.S. stock market closed, Cisco announced the financial data for the fourth quarter of the 2024 fiscal year (referred to as Q4) and the full fiscal year ending on July 27, 2024, and provided guidance for the first quarter (Q1) and full fiscal year of 2025.

1) Key Financial Data

Revenue: Revenue for the 2024 fiscal year was $53.8 billion, a 6% year-on-year decrease compared to the previous fiscal year. In Q4, revenue was $13.64 billion, a 10% year-on-year decrease, with analysts expecting $13.53 billion.

EPS: Non-GAAP adjusted earnings per share (EPS) for the 2024 fiscal year were $3.73, a 4% year-on-year decrease. In Q4, adjusted EPS was $0.87, a 24% year-on-year decrease, with analysts expecting $0.85.

2) Performance Guidance

Revenue: Revenue for the 2025 fiscal year is expected to be between $55 billion and $56.2 billion, with analysts expecting $55.67 billion.

After the financial report was released, Cisco's stock rose nearly 0.2% on Wednesday and surged after hours, with the post-market increase quickly expanding to over 5%, and at one point exceeding 6%.

Based on the guidance range, Cisco expects revenue growth of approximately 4.5% in the 2025 fiscal year, reversing the previous year's 10% decline. The growth momentum exceeds Wall Street's expectations, with analysts' revenue expectations at the lower end of the guidance range.

Second Round of Major Layoffs Announced After Six Months, Impacting Over 6,000 Employees

Alongside the financial report, Cisco also announced a restructuring plan in an 8K filing with regulators on Wednesday after hours, aimed at investing in key growth opportunities and improving business efficiency. Cisco expects this restructuring plan to affect about 7% of its global workforce.

This means that out of Cisco's 90,400 employees, over 6,300 people will be laid off. Following the announcement in February this year of a 5% reduction in workforce affecting over 4,000 positions, this is the second major layoff announced by Cisco within the year. Cisco stated that this move will result in approximately $1 billion in short-term layoff costs.

Not only Cisco, but earlier in August, Intel announced plans to cut costs by $10 billion by 2025, resulting in a reduction of over 15%, or about 15,000 employees. The tech industry has been cutting expenses this year to focus resources on developing high-growth areas such as AI. According to data from the website Layoffs.fyi, more than 126,000 people have been laid off by 393 tech companies so far this year. January of this year saw the highest number of layoffs in the industry since March, with Alphabet, Amazon, Microsoft, and SAP all stating they are laying off employees, as are eBay, Unity, and Discord

Company Focus Shifts to High-Growth Areas such as Artificial Intelligence and Cybersecurity

Cisco's Chief Financial Officer Scott Herren stated that the layoffs are not aimed at increasing profits, but rather Cisco needs to quickly enter the fields of cybersecurity, cloud systems, and artificial intelligence products, hence releasing resources to do so.

In June of this year, Cisco announced plans to invest $1 billion in tech startups such as Cohere, Mistral, and Scale to develop reliable AI products. According to media reports, the company recently announced a partnership with NVIDIA to develop the infrastructure for AI systems.

Cisco executives mentioned that as of now, AI orders from large-scale customers have exceeded $1 billion, with an additional $1 billion in AI product orders expected to be added in the 2025 fiscal year