Cisco CEO Chuck Robbins acknowledged his company’s declining security business compared to rivals Palo Alto Networks and Fortinet on the vendor’s first-quarter fiscal 2022 earnings call.

“I will say that we have room to get better in security, and the teams are working hard on that,” Robbins said, according to a transcript. “There’s a lot of innovative work going on.”

Cisco’s security business grew 4% compared to Q1 of 2021. CFO Scott Herren credited Cisco’s cloud-based security services for this growth, but also noted declining security hardware sales including firewalls during the quarter.

Meanwhile, the company’s subscription-based security portfolio grew 15%, driven by cloud security and zero-trust platforms, Herren added.

But as investors on the call pointed out, the rate of revenue growth in Cisco’s security business has shrunk over the past few years while its competitors continue growing by double digits. That revenue dropped from 12% growth in 2020 to 7% growth in 2021, and now Cisco’s security business is at a 4% growth rate.

“It’s a combination of we’ve got some work to do, which the teams are working on, and then the transition [to subscription-based security] and a little bit of supply chain,” Robbins said. “But we would expect, over the next two to three years, for that business to continue to get better, and the teams are committed to make that happen.”

Herren echoed Robbins’ words about growing the subscription side of the business. “That’s where we focused a lot of our innovation,” he said. “As that becomes a more and more prominent part of our overall security product portfolio, that’s where you'll begin to see more acceleration in the growth rates.”

Overall, Cisco posted $12.9 billion in revenue, up 8% year over year, on earnings of 82 cents per share. Analysts, however, expected slightly higher revenue growth to $12.99 billion, and this sent Cisco stock plunging late Thursday afternoon.

Cisco executives blamed the ongoing supply chain constraints for the revenue miss.

“We have been taking multiple steps to mitigate the supply shortages and deliver products to our customers, including working closely with our key suppliers and contract manufacturers, paying significantly higher logistics costs to get the components where they are most needed, working on modifying our designs to utilize alternative suppliers where possible, and constantly optimizing our build and delivery plans,” Robbins said. “We are doing this at a breadth and scale that is significantly greater than most in our industry.”

These measures, however, also add to Cisco’s expenses, he added. “When combined with cost increases we are seeing from many of our suppliers, these factors are putting pressure on our gross margins,” Robbins said. “While we thoughtfully raised prices to offset this impact, the benefits are not immediate and will be recognized over the coming quarters. Our focus remains on our customers to ensure we provide them with the products they need as quickly as possible.”

In terms of its individual business units, Cisco’s networking revenue increased 10% year over year with double-digit growth in campus switching led by the Catalyst 9000 and Meraki switching products.

Hybrid Work, which includes Webex and other meetings and contact center services dropped 7% compared to a year ago.

Cisco’s Internet for the Future business, which includes its Silicon One and optical portfolios, jumped 46% year over year driven by strong webscale-customer sales. “We also saw benefits from our acquisition of Acacia,” Herren said on the earnings call.

Optimized Application Experiences grew 18% with triple-digit growth from ThousandEyes and double-digit growth from Intersight.

As Cisco continues continue to transition its business to more software and subscriptions, the company reported software revenue was $3.7 billion, an increase of 1% compared to a year ago, and 80% of software revenue was subscription-based, which is up 2 percentage points year over year.

Total subscription revenue was $5.5 billion, an increase of 4%, and total subscription revenue now represents 43% of Cisco’s total revenue. Annualized recurring revenue hit $21.6 billion, an increase of 10%.

Looking ahead to the second quarter of fiscal 2022, Cisco expects revenue growth between 4.5% and 6.5% year on year with per-share earnings between 80 cents and 82 cents.