Cisco executives talked up growth opportunities the company sees in the cloud and security markets, seeking to paint a bright picture even as its quarterly product orders fell 23% in its fiscal Q3 2023 (ended April 29).
CEO Chuck Robbins said on an earnings call demand is being shaped by a trio of factors. These include Cisco’s increased product shipments, a reduction in product lead times which eliminates the need for extensive advanced ordering and macroeconomic conditions. He added the service provider space accounted for 41% of the year-on-year order decline and pointed to large enterprises as facing the same issues.
While the year-on-year order drop was significant, Robbins said it is actually sequential shifts in volumes which are a better indicator of momentum shifts in its business. And by that measure, FQ3 was “at or slightly below the low end of our historical ranges.” In fiscal Q4, it expects to be in line with historical ranges.
“So, you know, our view based on what we see today is that we can still deliver positive growth in fiscal year '24, even on top of the good growth year we had this year,” he said.
In terms of growth drivers, Robbins said “security continues to be an enormous opportunity for us.” He highlighted the company’s acquisition of cloud network security company Valtix, which closed in FQ3, as well as deals with Lightspin and Smartlook which are aimed at extending Cisco’s capabilities in cloud, security and full-stack observability.
Robbins added that over the coming quarters “you will see new innovations in this space, building on our strong Cisco security cloud strategy, including at Cisco Live next month.”
Financials
Consolidated revenue of $14.6 billion was up 14% year on year, with net income up 6% to $3.2 billion. Product sales made up the bulk of revenue at $11.1 billion while Service accounted for the remainder.
Broken out by segment, Secure, Agile Networks revenue was up 29% to $7.5 billion thanks to double-digit growth in switching revenue. Internet for the Future revenue was up 5% to $1.4 billion thanks to strength in its Cisco 8000 routing product. End-to-End Security inched up 2% to $958 million and Optimized Application Experiences rose 12% to $204 million, with double-digit growth in its ThousandEyes product category. Collaboration revenue, however, fell 13% to $985 million.
Total software revenue was $4.3 billion, up 18% year on year, with 82% of software revenue being subscription based.