In a significant move, Cisco Systems has announced plans to cut approximately 7% of its global workforce as part of a restructuring plan aimed at investing in key growth opportunities and driving efficiencies within the business. This decision comes after the networking giant reported its third consecutive quarter of declining revenue, marking the first full fiscal year drop since 2020.

The announcement was made in a filing by Cisco, revealing that the restructuring plan will result in pre-tax charges totaling $1 billion in financial results. Of this amount, $700 million to $800 million will be recognized in the current quarter, with the remaining charges spread throughout fiscal 2025.

Despite the restructuring efforts, Cisco managed to surpass analyst expectations in its latest quarterly results. The company reported earnings of 87 cents per share, adjusted, surpassing the estimated 85 cents per share. Additionally, revenue came in at $13.64 billion, exceeding the projected $13.54 billion.

The decline in sales was evident in the fiscal fourth quarter, with revenues falling by 10% from $15.2 billion in the previous year. This marked the third consecutive quarterly decline in revenue for Cisco, as well as the first time the company experienced a full fiscal year decline since 2020.

Looking ahead, Cisco has projected that the downward trend will continue for at least one more period. For the upcoming first quarter, the company anticipates revenue ranging between $13.65 billion and $13.85 billion, falling short of the previous year's $14.7 billion figure. Analysts had predicted revenue of $13.7 billion for the same period.

In previous quarters, Cisco attributed the decline in revenue to certain clients setting up equipment received in previous periods. However, the company managed to outperform expectations in the latest quarter thanks to increased subscription revenue from the $28 billion acquisition of Splunk, which closed in March and marked Cisco's largest deal ever.

The core networking business, which includes switches and routers, has been experiencing a decline due to the shift towards cloud computing by large enterprises in recent years. In response, Cisco has been focusing on bolstering its software and security business to diversify its offerings and generate more recurring subscription revenue.

In the latest quarter, networking revenue saw a significant decline of 28%, dropping to $6.8 billion. On the other hand, security revenue experienced a notable increase of 81%, reaching $1.8 billion, while collaboration revenue remained relatively stable at approximately $1 billion. Splunk contributed $960 million in revenue during the same period.

Net income in the latest quarter experienced a substantial decrease of 45%, falling from $4 billion or 97 cents per share in the previous year to $2.2 billion or 54 cents per share.

Prior to the extended trading session on Wednesday, Cisco shares had experienced a decline of 10% this year, while the Nasdaq had seen an increase of approximately 15%.

As Cisco navigates through this challenging period, the company remains committed to restructuring efforts aimed at positioning itself for future growth opportunities and enhancing operational efficiencies.