Cisco jumps 14% after beat, raises outlook

Cisco shares rose 14% in after-hours trading after the company beat Wall Street estimates and raised its outlook.

The company also said it will cut fewer than 4,000 jobs, or under 5% of staff, with layoffs set to start on May 14.

For the quarter ended April 25, revenue rose 12% year on year to about US$15.8 billion and net income increased to US$3.37 billion from US$2.49 billion.

Cisco expects fiscal fourth-quarter revenue of US$16.7 billion to US$16.9 billion and adjusted earnings of US$1.16 to US$1.18 a share.

LSEG analysts had expected US$15.82 billion in revenue and US$1.07 in adjusted earnings per share.

Cisco said AI infrastructure and hyperscaler orders reached US$5.3 billion so far this year. It lifted its full-year target to US$9 billion from US$5 billion.

🔗 Source: CNBC

🧠 Food for thought

Implications, context, and why it matters.

Cisco rebuilt its approach before the AI surge

Cisco’s recent AI gains grew from a strategy change that started in 2018 and unfolded over several years 1.
The company began selling hardware and software on their own. That move, called disaggregation, fits the needs of large cloud providers such as hyperscalers 1.
Silicon One, its family of programmable networking chips introduced in 2019, helped drive that shift 1.
The layoffs are part of a longer realignment that moves spending toward faster-growing areas such as AI and cybersecurity 2, 3.

The AI wave brings higher costs and new network demand

Cisco still faces pressure on gross margins as memory chip prices climb, since those chips are a large part of its products 1.
To deal with that, Cisco raised prices. It is also revising terms with channel partners, the resellers or intermediaries that help sell its products, plus customers to handle changing component costs 4.
The company also wants to help telecom and internet service providers earn money from AI through sovereign clouds, which keep data inside one country, plus AI data center services including AI workload hosting 5.
Agentic AI can raise the number of large language model (LLM) requests in each query by 8 to 10 times 5. That is driving fast growth in AI-related wide area network (WAN) traffic 5.