Cisco to cut 5% of its global workforce despite a “solid Q2 performance”

Cisco has announced plans to cut 5% of its global workforce, equivalent to more than 4,000 jobs, confirming recent speculation over the scale of cuts facing staff at the networking giant. 

CEO Chuck Robbins revealed the layoffs in an investor call on February 14, with challenging macroeconomic conditions being primarily to blame.

Customer hesitancy and a downturn in purchasing among telecommunications and cable service providers – a key revenue driver for Cisco – has had a significant impact on business outlook, Robbins said.

“We are seeing a greater degree of caution and scrutiny of deals given the level of uncertainty,” he said. “As we’re hearing this from our customers, it’s leading us to be more cautious with our forecast and expectations.

“This industry has seen significant pressure and they’re adjusting deployment phasing, which is weighing on our business outlook. Given these factors, we are adjusting our expenses and investment to reflect the current environment.”

Cisco said it will incur charges of roughly $800 million through the layoffs, largely due to severance payments and other associated costs. The firm said it expects to report full expenditures on this front by early 2025.

Cisco layoffs cut deep despite “solid” results

The redundancies come despite what Robbins described as a “solid Q2 performance” that saw the company make gains in its software segment.

“Overall, our Q2 results continue to advance our strategic business transformation around driving higher levels of software subscriptions and annualized recurring revenue, both of which showed performance gains in the quarter,” Robbins told investors.

“Our pending acquisition of Splunk also further supports our transformation strategy by fueling stronger growth, expanding our portfolio of software based solutions, and generating higher levels of ARR with roughly $4 billion of additional ARR upon closing.”

Robbins added that the Splunk acquisition will make Cisco “one of the largest software companies in the world”.

Cisco announced plans to acquire Splunk in September 2023 as part of a deal worth $28 billion, making it one of the largest acquisitions of the year.

The acquisition faces challenges from a regulatory perspective, however. Earlier this month, regulators in the EU said they will make a decision on whether to clear the deal by March.