Cisco is laying off 5% of its global workforce after reporting $12.8 billion in Q2 2024 revenue – a 6% year-over-year decrease that put the vendor back in the realm of its early 2019 quarterly revenue.

By realigning investments and expenses to better represent the current macroeconomic environment, Cisco expects this restructuring will maximize shareholder returns.

Cisco shareholders took in $2.8 billion in Q2 cash dividends and share repurchases, with that number hitting $5.7 billion for 2024 to date. “We plan to continue our share repurchases at the current quarterly level throughout fiscal 2024,” Cisco CFO Scott Herren said during the company’s latest earnings conference.

“Similar to 2023, we have seen most major tech companies lay off thousands of employees as companies look to trim down costs and focus on profitability,” Third Bridge analyst Joe Brunetto told SDxCentral. “Cisco had almost 85K employees as of last year, suggesting that the move will reduce headcount by approximately 4,000,” he said.

The networking vendor also shared updated revenue expectations for the second half of 2024, projecting Q3 revenue between $12.1 billion and $12.3 billion. The revised guidance is driven by macroeconomic uncertainty, Cisco customers steadily working through their backlog of shipped products and weak performance in the service provider market.

Specifically, Q2 product revenue was down 9% at $9.2 billion. Networking – Cisco’s largest product category – was down 12%, and switching, wireless and routed optical networking sales declined, “driven primarily by weakness in the enterprise, service provider and cloud markets,” Herren said.

Cisco’s Q2 service provider and cloud markets were down 40%, enterprise was down 6% and the public sector declined by 5% year over year. Geographically, sales were down 10% in the Americas, down 8% in EMEA and down 27% in Asia-Pacific.

Though product orders declined 12% this quarter, that figure represents “a significant improvement” from Q1, Herren said. “Customers continued to work down product shipments from prior quarters.”

That inventory digestion issue is largely an enterprise and service provider concern, Cisco CEO Chuck Robbins said. Cloud providers, in particular, have more than 20 weeks' worth of inventory to deploy.

“We have a lot of our enterprise products that are tethered to the cloud for management perspectives. And so, we see the lag between when we ship it to the customer and when they connect it,” Robbins reiterated.

By 2025, however, Cisco expects the telecom service providers will begin investing again. “We originally had anticipated that they would begin to invest in the second half of this year, and we no longer believe that to be true,” Robbins told investors. “The consumption issue is temporary through the end of the year. The macro thing is one that we're going to have to wait and see, and the service provider/telco probably similarly.”