Cisco’s equipment has endured multiple security attacks and flaws on various fronts, including a heightened number of security advisories of late, but it doesn’t appear to be hitting the company’s bottom line. The company still dominates the global switch and router markets and its expanded push into 5G and WiFi 6 is leading the vendor into wider opportunities outside of its traditional domain.
“New technologies like cloud, [artificial intelligence], IoT, 5G, and WiFi 6 among others are coming together to revolutionize the way we operate our businesses and deliver new experiences for our customers and teams,” CEO Chuck Robbins said during an earnings call, according to a Seeking Alpha transcript. “We are fundamentally changing the way our customers approach their technology infrastructure to address the rising complexity in their IT environments.”
Cisco banked $3 billion in net income on $13 billion in revenue during the recently closed quarter. This comes amid a transformational shift in how Cisco sells software and it’s paying dividends, according to the company.
“If you go back two years ago, we didn’t have a single networking product with a software subscription on it,” Robbins added. “And today, every product in the enterprise routing space, enterprise WiFi space, and the enterprise campus switching space is sold with a mandatory subscription.”
Cisco CFO Kelly Kramer, said software subscriptions comprised 65% of the company’s total software revenue, which was up 9% year-over-year. “Everybody’s looking for automation and software-defined everything and I think our entire portfolio is moving that direction,” Kramer said.
The company also highlighted the recent release of WiFi 6 access points and core switches, but since those products arrived during the final week of the quarter their contribution to revenue was negligible. Robbins described the new gear as the “most comprehensive” enterprise networking portfolio refresh in the company’s history. “We have rebuilt our entire access portfolio with intent-based networking across wired and wireless. We also now have one unified operating system and policy management platform to drive simplicity and consistency across our customers’ networks all enabled by a software subscription model.”
Indeed, Cisco believes 5G and WiFi 6 should work together as complementary technologies. “We strongly believe that 5G and WiFi 6 will play a key role in working together rather than overlapping,” Prashanth Shenoy, vice president of marketing at Cisco, told SDxCentral in a recent phone interview.
Network operators are primarily spending money on “building out the macro radio portion of their networks first and they’re leveraging their existing core networks to run the early trials that they have on 5G,” Robbins said. When the number of 5G connections and capacity demands increase, Robbins said he expects operators to “begin to build out these backbones dedicated to 5G infrastructure, which is where we will generally come into play.”
Cisco is already selling packet core technology for burgeoning 5G networks, according to Robbins, but he continues to expect widespread 5G network adoption to begin next year. “We’re working with lots of [operators] on architectural designs and where they’re going but it’s really going to be core routing backbone technology where we’re going to see … the big impact from 5G.”
Patrick Moorhead, founder and principal analyst at Moor Insights & Strategy, summarized Cisco’s results in positive terms. “I think this is a testament to the company’s refocus on security and software, while at the same time succeeding with its core-switching business,” he wrote in a research brief.
Analysts at Jefferies concurred, adding that “another quarter of positive results and guidance supports our view the IT networking environment is very strong right now. … As networks get more complex, we think Cisco’s end-to-end network capabilities become increasingly strategic to enterprise and service provider customers.”