Cisco cuts thousands, looks to profit as enterprises prep for AI

　　As it continues to absorb its massive acquisition of Splunk, the restructuring of Cisco continues apace.

　　On Wednesday evening's earnings conference call, Cisco executives framed this year's second layoff both as a market inevitability and a sign that its management team is operating at peak efficiency.

　　Scott Herren, Cisco's CFO, said this round of cuts, which will reduce Cisco's workforce by 7%, is "not about cost savings" but "finding efficiencies across the company" so it can "pivot more resources" into its AI, cloud and cybersecurity businesses.

　　Herren said to "think of it as reallocating versus being in pursuit of cost savings."

　　Earlier this year, Cisco cut about 4,000 jobs, and, in 2023, Splunk axed about 500 and Cisco cut a few hundred more as the two companies combined. Splunk's $28 billion acquisition by Cisco, closed earlier this year.

　　Cisco employed around 84,900 at the end of its last fiscal year (July 2023), so the new round of cuts will hit somewhere between 5,500 and 6,000 people.

　　(Source: Cisco and Light Reading reports)

　　Pivoting to subscriptions, software

　　The company's earnings report for its full 2024 fiscal year, which ended July 27, 2024, revealed that subscription revenue had reached $27.4 billion annually, including revenue from its Splunk acquisition.

　　That subscription figure represents 51% of Cisco's total yearly revenue. The networking giant's total software revenues were $18.4 billion, up 9% year over year, and its software subscription revenue was $16.4 billion, up 15% annually.

　　The company reported a (non-GAAP) profit of $0.87 a share on revenues of $13.64 billion, both above expectations. According to Seeking Alpha, Wall Street analysts anticipated earnings per share of $0.85 and revenue of $13.54 billion.

　　Jonathan Davidson, formerly EVP and GM of Cisco Networking, is out after 22 years at Cisco. According to a blog post by Cisco CEO Chuck Robbins, the executive who was the face of the company's service provider business for several years has "stepped away" from his role.

　　Cisco is reorganizing several business units under Jeetu Patel, its new executive vice president and chief product officer. Patel is leading its Security, Collaboration and Networking units, which have been combined into one organization.

　　AI spending spree

　　During the earnings call, Cisco's Robbins said that, excluding Splunk, Cisco's sales across its entire technology portfolio were "incredibly balanced," noting that sales in wireless equipment, enterprise routing and switch and collaboration were all up over the year.

　　Robbins said this indicated that the supply chain issues of the past few years have been worked out, and now enterprises seem to be focusing on getting ready for AI.

　　"The one thing I would say that we heard for the first time this quarter that we haven't heard before is that enterprise customers are now actually upgrading their infrastructure in preparation for AI," Robbins said on the earnings call. "In some cases, they're taking some of the dollars that they've set aside for AI to spend it on modernizing their infrastructure in order to get ready for that."

　　Robbins gave an example of one customer, a logistics provider, buying "the cross-portfolio solution – whole platform" of Cisco's tech so it could enable "AI-powered robotics and AI-powered supply chain visibility, etc.," Robbins continued: "So we think we're beginning to see customers prepare for AI applications, even though in many cases they may not know the full range of what they may be deploying, but they know they need to be ready."