Cisco forecast a revenue drop between 3% and 5% for the quarter ahead. Based on this gloomy outlook — and despite the company’s better-than-expected first fiscal quarter 2020 results — Cisco stock fell 7.7% after hours on Wednesday and remained down more than 7% as of this afternoon.

The tech giant reported $13.2 billion in Q1 revenue, up 2% compared to last year. Product revenue increased 1%, led by 22% growth in security products, and service revenue was up 4%. Infrastructure platforms revenue, however, was down 1%. This includes Cisco’s routing and switching portfolios.

“Routing declined due to weakness in service provider,” Cisco CEO Chuck Robbins said on a call with investors, according to a Seeking Alpha transcript.

In fact, Cisco’s service provider revenue dropped 13% year over year, while enterprise and commercial (this is what Cisco calls its small and midsized business customer) both dropped 5%. This followed weaker than expected service provider and enterprise revenue last quarter, which Robbins blamed in part on trade tensions with China.

However, during this quarter that weakness “was more broad-based,” Robbins said.

The U.S.-China trade war continued to contribute to Q1 weakness, he said, but so did other factors including Brexit, Latin American weakness, the 2020 elections, and protests in Hong Kong that also added to this ongoing macro-economic uncertainty.

“While the main challenges continue to be service provider in emerging markets, this quarter we also saw relative weakness in enterprise and commercial,” Robbins said. “Despite these headwinds and because of key decisions we made four years ago to change our business model, we remain well positioned to capitalize on the tremendous opportunities across cloud, automation, 5G, security and collaboration.”

The business model part refers to Cisco’s transition to subscription-based software. Cisco CFO Kelly Kramer said software subscriptions now make up 71% of the company’s total software revenue.

“This transition to software not only aligns to how our customers want to consume our technology, but we also believe it will lessen the impact of macroeconomic shifts in the future,” Robbins said. “Despite the current uncertainty, our innovation pipeline remains strong.”

Jefferies agreed with Robbins’ assessment. In a research note, the investment firm said it’s keeping its “buy” rating on Cisco shares “despite the weaker top line guidance and incremental macro uncertainty.”

“Looking back at historical earnings power — specifically in times of macro-economic uncertainty — it’s apparent that Cisco has been extremely effective at managing its profitability and EPS power,” the research note said. “We see the current situation no differently.”