CSCO Stock Soars To Record Highs Amid Expectation Beating Guidance, Job Cut Announcement

• CSCO expects revenue between $16.7 billion and $16.9 billion, higher than analyst expectations of $15.8 billion for the quarter ending July.  
• Cisco made the job cuts in order to raise spending on silicon chips, fiber optics, and security. 
• Cuts will result in as much as $1 billion in severance costs.

Cisco (CSCO) shares hit record highs on Wednesday and soared nearly 20% after-hours after the company’s earnings and revenue guidance for the quarter ending July broke past analyst expectations, while job cuts in favor of repurposing spending on AI-related services aided sentiment. 

CSCO’s revenue increased 12% in the quarter ended April 25 to $15.8 billion from $14.15 billion a year earlier, beating expectations of $15.6 billion. Net income rose to $1.06 per share, higher than the $1.04 expected as per data from Fiscal.ai. 

The networking hardware firm sees its revenue for the quarter ending July to be $16.7 billion to $16.9 billion, higher than market expectations of $15.8 billion, as per Fiscal.ai. Excluding some items, earnings will be roughly $1.16 to $1.18 a share. Analysts expect a profit of $1.07 a share.

CSCO Layoffs 

Chief Executive Officer Chuck Robbins announced in a separate blog post that the company will lay off 4,000 employees, which is roughly less than 5% of its workforce. 

“The companies that will win in the AI era will be those with focus, urgency, and the discipline to continuously shift investment toward the areas where demand and long-term value creation are strongest,” he said. 

“While we are reducing roles in some areas, we are making clear, strategic investments,” Robbins added. Plans include boosting spending on silicon chips, fiber optics, security, and the use of AI by its own employees, he said. 

Cisco said in a filing that severance and other costs will result in pre-tax charges of $1 billion, and that the company will recognize about $450 million of that in the fiscal fourth quarter. 

CSCO AI Guidance 

Cisco reported receiving $5.3 billion in orders for hyperscaler and AI infrastructure so far this year. Consequently, the company raised its order expectations for the current fiscal year to $9 billion, up from the previously projected $5 billion. Additionally, Cisco now anticipates fiscal-year revenue in this market to reach $4 billion, an increase from its earlier $3 billion forecast.

Cisco intends to function in the AI networking space. Key rivals include Arista Networks (ANET), Juniper Networks, which was recently taken over by Hewlett Packard (HPE), and Broadcom (AVGO). 

CSCO Retail View 

Retail sentiment on Stocktwits was “extremely bullish” with “extremely high” message volumes.

One user expressed bullishness by saying that if a trader can’t make money when CSCO goes up, there is a problem. 

Another user was awaiting analyst ratings on Cisco following the stellar earnings. 

The stock has gained 32% year-to-date. 

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