HITS

Cisco continued to make progress on its key initiatives, including an expansion of its artificial intelligence (AI) capabilities, in the third quarter (ended April 28) and exited the quarter with “solid business momentum” and confidence about “future growth opportunities,” according to company CEO Chuck Robbins.

“We had another great quarter,” he said May 16 on an earnings call, adding the company was “executing well against the strategy we put in place three years ago,” after he was appointed Cisco CEO. The company’s “innovation pipeline has never been stronger and we continue to transform our business to reflect the way customers want to consume our technology,” he told analysts.

In applications. Cisco “further enhanced” its AI and machine learning capabilities across its “collaboration portfolio” via the recent acquisition of Accompany, a privately-held Los Angeles startup, he said. Accompany’s AI-driven relationship intelligence platform provides “robust insights and intelligence to improve meeting and team experiences,” he said, noting Cisco completed the purchase a week earlier.

Cisco “delivered another quarter of accelerating revenue growth,” he said. Revenue grew 4% in Q3 from a year ago to $12.5 billion, while profit increased to $2.7 billion (56 cents a share) from $2.5 billion (50 cents a share).

Infrastructure Platforms revenue grew 2% to $7.2 billion, while applications revenue jumped 19% to $1.3 billion and security revenue increased 11% to $583 million. Services revenue grew 3% to $3.2 billion. The only decline was in other products, where sales fell 6% to $249 million.

The company’s Q3 “performance was driven by the acceleration of our intent-based networking portfolio, continuing strong customer demand for our innovative solutions, and the increasing value of the network,” Robbins said. Cisco also “made steady progress in shifting more of our business toward software and subscription,” which he said “resulted in broad-based strength across our products and geographies.”

From discussions with Cisco customers globally, it’s “clear that the network is playing an increasingly critical role in helping them manage their complex environments,” he said, adding: “They’re consuming services from multiple cloud providers, multiple” Software-as-a-Service (SaaS) applications, “connecting billions of new devices, which are generating massive amounts of data and the network is pervasive across all of these environments.”

The “strength” that Cisco saw in its security business in Q3 was “driven by our integrated architecture combined with best-of-breed products,” he said, adding the company was also “leveraging artificial intelligence on machine learning to reduce time to detection and remediation.”

In Infrastructure Platforms, Cisco continued to see “very strong adoption” of its Catalyst 9000 subscription-based switches, he said, calling that the “fastest-ramping new product introduction in our history.” The Catalyst 9000 now has more than 5,800 customers, up from 3,100 last quarter, he noted, adding Cisco recently introduced additional intent-based networking “innovations,” including new access solutions and routing software subscriptions that expand the company’s software-defined Wide Area Networking (WAN) capabilities onto “any platform.”

Asked by an analyst what Cisco was seeing in terms of attach rates for Catalyst 9000 subscriptions, he said: “It’s been very consistent over the last four quarters, I think, since we put it in the marketplace in Q4 of last fiscal year.” The fact that it added 2,700 more customers in Q3 meant “we added over 40 customers per day that acquired the Catalyst 9000 for the first time,” he said.

Because Cisco has about 840,000 customers, there’s still “a very long list of customers that are still available to us to deliver” Catalyst 9000, he went on to say, underscoring the opportunity that remains for the company.