Cisco’s software push fuels Q4 profit & revenue growth

Cisco Systems topped Wall Street targets for quarterly revenue and profit and forecast first-quarter sales above estimates on Wednesday, as the network gear maker’s transition to a software-focused company gains traction.

The company’s net income rose to $3.80 billion in the fourth quarter ended July 28, from $2.42 billion a year earlier.

Cisco, like other legacy technology companies, has been launching new products focused on high-growth areas such as cyber security and Internet of Things to cushion sluggish demand in its traditional routers and switches business.

“We’re seeing the returns on the investments we are making in innovation and driving the shift to more software and subscriptions,” Chief Financial Officer Kelly Kramer told analysts on a post-earnings call.

The company forecast first-quarter revenue growth of between 5% and 7%, implying $12.86 billion at the mid-point, and adjusted profit of between 70 cents and 72 cents per share.

Total revenue rose 6% to $12.84 billion. Subscriptions, which provide a more steady revenue stream, represented 56% of total software revenue in the reported quarter, the company said.

Revenue in the security business, which offers firewall protection and breach detection systems, rose 12% to $627 million, beating estimates of $615.8 million. Deferred revenue in the business jumped 23%.

Revenue in its infrastructure platform division, which houses the company’s traditional business of supplying switches and routers, rose 7% to $7.44 billion. Analysts had expected revenue of $7.32 billion.

Cisco said in August it would buy cyber security provider Duo Security for $2.35 billion, the latest in a series of acquisitions by Chief Executive Officer Chuck Robbins as he builds out the company’s newer businesses. CFO Kramer told Reuters that Cisco is looking at more acquisitions in the security space.