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Q3 Cisco financials show another uptick in sales, services

Cisco financials show a 4% boost in sales as Cisco records its second consecutive quarter of revenue growth and continues to embrace software services.

Chuck Moozakis
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Published: 17 May 2018

Cisco took another step forward in its shift from hardware to software supplier as the vendor posted a 4% hike in sales in the third fiscal quarter that ended April 27.

Revenues topped $12.4 billion for the three-month period, according to Cisco financials. It was the second consecutive quarter in which Cisco recorded an uptick in sales after almost two years of revenue declines. The company's net income totaled $2.6 billion, a slight increase compared to the same period a year earlier.

Cisco's infrastructure, security, applications and service segments all recorded increases in sales -- with application revenues growing the most, at 19%. Most important to Cisco, the company racked up 2,700 new customers for its Catalyst 9000 switches, which underpin the vendor's intent-based networking and software sales initiatives. Cisco now has approximately 5,800 customers for the campus switching platform -- an 87% jump from what it reported in February.

Cisco CEO Chuck Robbins called sales of the Catalyst 9000  "the fastest ramping, new product introduction in our history."

Cisco financials driven by growth in software sales

The switches are sold with subscriptions to Cisco's DNA Center automation and management software, which range from three to seven years in length. It's all part of a larger mission to make recurring revenues a bigger part of the company's sales pie, Robbins said.

"Our performance was driven by the acceleration of the intent-based networking portfolio … and the increasing value of the network," Robbins said about the quarter. "We also made steady progress in shifting more of our business toward software and subscriptions."

To that end, Robbins said recurring revenue accounted for 32% of total revenue in the quarter, a dip of 1% from the earlier quarter but up two percentage points from a year ago. Subscriptions accounted for 55% of Cisco's overall software revenues, Cisco financials indicated.

Within customer segments, enterprise revenues rose 11% in the quarter, while commercial and public sector sales increased 7% and 2%, respectively. Service provider sales dropped 4%.

Robbins said Cisco will continue to focus on multi-cloud and hyper-converged networking approaches. It will also be busy merging its Cisco Spark team collaboration app with Webex, an initiative the company announced in April. Part of that integration will include technology from relationship intelligence company Accompany, which Cisco acquired earlier this month.

Responding to an analyst's question, Robbins said he was most pleased about shoring up Cisco's enterprise portfolio and stabilizing the switch business, which he said was the "No. 1 priority" when he took over the top spot three years ago.

He had less to say about Arista's recent announcement to compete head-to-head with Cisco in the campus networking space, saying only that he believes Cisco's customers will gain advantages from automation and management capabilities built within DNA Center.

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