Cisco Second Quarter: Profit Slips, Revenue Flat

Cisco second-quarter revenue was flat and profit was down from the year-ago quarter with declines in product and data center revenue.

For the quarter, Cisco reported $12 billion in revenue. That’s the same amount it reported for the year-ago quarter.

Profit dropped to $2.5 billion, down from $2.9 billion for the year-ago quarter.

Chuck Robbins is Cisco‘s chairman and CEO. He said there’s encouraging signs of strength across Cisco’s business as the recovery takes shape.

Cisco’s Chuck Robbins

“Over the past year, our customers have relied on our innovation to accelerate their digital and cloud capabilities while protecting them from an expanding threat environment,” he said. “In my numerous conversations with customers, it is clear that our technology will be a powerful engine for their recovery and growth as their technology needs continue to evolve at a rapid pace.”

Product Revenues

The enterprise market remains soft, Robbins said. That’s driven by some elongated sales cycles and a continued pause in spending brought on by the pandemic.

“From a product revenue perspective, we saw strength in our Catalyst 9K, data center switching, security, wireless and WebEx portfolios,” he said. “The transformation of our business to more software and subscriptions continues to show great progress. We achieved $3.6 billion in software revenue, with 76% of our software revenue sold as a subscription.”

Cisco also had its sixth consecutive quarter of double-digit growth in deferred product revenue.

“We continue to accelerate our pace of innovation,” Robbins said. “I am confident in our ability to capture the long-term opportunities ahead in areas such as cloud, 400 gig, 5G, security, hybrid work and next-generation applications.”

Strong Security Revenue

Cisco reported strong growth in security revenue driven by increasing adoption of its next-generation cloud-based architectures.

“With the rapid growth in modern applications and more distributed work environments, our customers are adopting new security architectures as identity and data privacy are increasingly critical,” Robbins said. “The recent SolarWinds breach only highlights the urgent need for advanced threat defense.”

Cisco also reported double-digit revenue growth for WebEx, with nearly 600 million quarterly average users.

“In addition, we are connecting over 6 billion calls every month for our customers around the world,” Robbins said. “We are bringing incredible innovation to the collaboration market at an unprecedented pace.”

Scott Herren is Cisco’s CFO. He said infrastructure platforms was the product area most impacted by the COVID-19 environment.

Moor Insights’ Patrick Moorhead

“Service revenue was up 2% driven by growth in our maintenance business, as well as solution support,” he said. “And we continue to transform our business delivering more software offerings and driving more subscriptions.”

Tech analyst Patrick Moorhead with Moor Insights and Strategy said Cisco exceeded revenue and earnings per share expectations.

“In a very rough period for infrastructure providers, I believe Cisco proved its resilience by balancing infrastructure against software, security and collaboration businesses,” he said.