Cisco is set to cut more than 4,000 jobs as part of a workforce “rebalancing,” news that comes on the heels of a robust earnings release and strong full-year guidance from the networking giant. Published reports indicate the move is part of a $600 million restructuring and that the changes will also impact Cisco’s real estate holdings.

A Cisco spokesperson in a statement said the moves will impact “roughly 5% of our workforce.” Cisco counted approximately 83,000 full-time employees at mid-2022.

Cisco management hinted at the moves during its latest earnings release late yesterday.

“We're actually speaking to our employees tomorrow about this,” Chairman and CEO Chuck Robbins said during the call, according to a transcript. “So, I'd be reluctant to go into a lot of detail here until we're able to talk to them. I would say that what we're doing is rightsizing certain businesses.”

Robbins explained the vendor is moving “resources” into its enterprise networking space and its growing security operations. “Those are important areas,” Robbins said, perhaps to the chagrin of “resources” not in those areas.

CFO Scott Herren spun the cuts as a “rebalancing” and “don’t think of this as a headcount action that is motivated by cost savings.”

“As we look across the board, there are areas that that we would like to invest in more,” Herren said. “And so this is about just rebalancing across the board. In a perfect world, you'd have 100% skill match and you can take the people in the areas or the skills in certain areas and just move them to where we need to invest and unfortunately, that's not – it's not a perfect world.”

Herren further explained that “if you look at the number of jobs that we have opened in the areas that we're trying to invest, it is just slightly lower than the number of people that we believe will be impacted.”

And in terms of the cost savings, Herren added that “by the time we get to the end of the year, our expectation is we have about the same headcount that we had at the beginning of the year.”

Actual cost savings will likely come from Cisco unloading some of its smaller office locations.

“We've got a long tail of small offices distributed around the world that are significantly underutilized, and in fact, unused in some cases,” Herren said. “That will generate some savings, not much in fiscal 2023, but longer term that will generate some savings.”

Cisco’s move was awkwardly tied to the vendor also pushing out robust expectations for its new fiscal year. Cisco’s management expects full-year revenues to increase between 4.5% and 6.5% for the full fiscal year, which would outkick the 4% increase it posted in the fiscal year 2022.

Herren cited Cisco’s growing annualized recurring revenue stream tied to its software subscription services, “significant backlog, strong [remaining performance obligations], and easing supply situation” as reasons for its robust outlook.

Cisco’s management had been hedging its bets on future performance, noting supply chain concerns were clouding its forecasts. The vendor had been tapping into the volatile broker market to source some of its supplies, which had been driving up costs.

Robbins said the vendor is gaining more confidence in its supply chain.

“We are encouraged by what we are seeing with modest improvement in certain component availability as shortages continue to ease from last quarter,” Robbins said. “The redesign of many of our products has also helped bring supply stability and more resiliency.”

Robbins added that the vendor is also gaining “greater visibility in the ramp of customer product deliveries, which in turn gives us greater confidence in our fiscal 2023 outlook.”

Despite the robust expectations, Cisco does remain cautious on potential recessionary concerns.

Robbins said Cisco was seeing some “emerging cautiousness in Europe,” which was linked to that region’s ongoing energy price volatility and “is leading customers to assess their overall spend.” The exec did add a quick marketing note that this does “present an opportunity for us as our technologies like IoT, Silicon One, and power over Ethernet [PoE] drives a significant reduction in power consumption.”

Cisco is seeing the opposite in Asia, which Robbins said “was actually pretty resilient.”

“They're clearly aware of the economic situation that's going on, but we had five regions last quarter that were positive after big positives a year ago, including India, which grew significantly after significant growth the prior year,” Robbins said.

The Americas is “mixed. We have some customers who are powering forward and other customers who are taking a little cautious outlook,” Robbins said. “We think by December we'll have better visibility to the 2023 budgets, which will be helpful.”

Cisco's stock surged on the news, trading up more than 4% mid-day Thursday, despite the broader Nasdaq trading slightly down.