Cisco Systems has posted its first increase in quarterly revenue in more than two years — as the network gear maker’s strategy to transition to a software-focused company begins to take off.
Total revenue of Cisco rose 2.7 percent to $11.9 billion – driven by 3 percent growth in product business to $8.7 billion and 2.9 percent increase in service revenue to $3.2 billion in the second quarter ended January 27, 2017.
Revenue by geographic segment was: Americas up 5 percent, EMEA flat, and APJC down 2 percent. Cisco does not reveal India revenue. Cisco generates $7 billion from Americas, $3 billion from EMEA and the balance $1.8 billion from Asia Pacific including Japan, China and India.
The Q2 performance of Middle East and Africa, and Asia Pacific including Japan, China and India is a major concern for Cisco considering the revenue.
Chuck Robbins, chairman and CEO of Cisco, said: “The network is more critical to business success than ever, and our new intent-based networking portfolio has great momentum including the fastest ramping new product in our history.”
Revenue from its infrastructure platforms category, which includes switching, routing and data center businesses, grew 2 percent to $6.7 billion.
Revenue from Cisco’s security business, which offers firewall protection and breach detection systems, rose 6 percent to $558 million.
Cisco’s revenue from applications increased 6 percent to $1,184 million.
The world’s largest network gear maker posted a net loss of $8.8 billion compared with a profit of $2.3 billion — due to an $11.1 billion charge related to the recent changes to the U.S. tax law.
TBR analyst Kelly Lesiczka said growth in Cisco Services revenue was driven by inorganic contributions from AppDynamics and Broadsoft combined with increase in demand for software and solutions support associated with expanding adoption of its intent-based networking capabilities.
While the acquisitions provide Cisco with capabilities to expand its addressable market into cloud- and software-based solutions, the integration and portfolio business development costs pressure margins in the short-term. Cisco Services gross margin fell 20 basis points to 67.4 percent, TBR said.
