Cisco Systems Stock Tumbles Amid Cautious Guidance, Job Cuts—Key Indicator to Watch

Cisco Systems, Inc.

Shares in computer networking giant Cisco Systems (CSCO) tumbled more than 5% in extended-hours trading Wednesday evening after the company issued softer-than-expected current quarter guidance and unveiled plans to slash 5% of its global workforce.

The legacy computing giant said it sees fiscal third quarter adjusted earnings of 84 to 86 cents, with the top end of that range falling considerably short of the 92 cents-a-share consensus view. Revenue guidance also missed the mark, with the company’s projected range of $12.1 billion to $12.3 billion coming in below analysts’ estimate of $13.09 billion. Full-year guidance disappointed as well. Cisco expects the bottom line to range between $3.68 and $3.74 per share on revenue of $51.5 billion to $52.5 billion. Wall Street had forecast adjusted earnings of $3.86 on revenue of $54.26 billion.

Cisco CEO Chuck Robbins said the company was taking a cautious approach on its guidance due to uncertainty surrounding the macroeconomic outlook. “In terms of the macro environment, we are seeing a greater degree of caution and scrutiny of deals given the high level of uncertainty,” Robbins told analysts in a post earnings call. “As we’re hearing this from our customers, it’s leading us to be more cautious with our forecast and expectations,” he added. Robbins also noted challenges arising from customers taking longer to deploy higher levels of inventory shipped to them and highlighted weaker demand from telecommunications and cable service provider customers.

Cisco also said Wednesday that as part of a restructuring plan, it plans to trim its global workforce by 5%, representing a loss of around 4,250 jobs. What started as a busy month for tech layoffs in January has continued into February, with Cisco, joining Snap (SNAP), DocuSign (DOCU) and Maplebear Inc. (CART) this month reducing headcounts in order to drive down overhead expenses.

Since gapping below the 200-day moving average in mid-November, CSCO shares have struggled to regain upside momentum. Investors should keep a close eye on a long-term uptrend line the price has managed to remain above in recent months. An expected post-earnings breakdown below this key technical indicator on above-average volume could potentially act as a catalyst for another move lower.

Cisco shares fell 5.3% to $47.63 in after-hours trading Wednesday.

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As of the date this article was written, the author does not own any of the above securities.