How Cisco’s Business Segment Performed in the Third Quarter
Product revenue rose 5% in fiscal 3Q18
Cisco’s (CSCO) product revenue rose 5% in the fiscal third quarter driven by Cisco’s diversified portfolio of solutions, while its infrastructure platform revenue rose 2%. In the infrastructure business segment, the routing revenue fell due to weakness in the service provider division, while switching revenue rose driven by strength in the data center and campus division.
Cisco also experienced growth in its wireless division due to its Meraki and Wave 2 offerings. Data center revenue rose in the double digits driven by servers and HyperFlex.
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Applications revenue rose considerably
The applications revenue rose 19% YoY (year-over-year) in the third quarter due to strength across businesses and solid growth in UC Infrastructure, AppDynamics, and TelePresence endpoints.
Cisco’s security business revenue for the quarter rose 11%, and the firm saw a strong performance in unified threat, advanced threat, and web security. Deferred revenue rose 38% YoY, as Cisco continues to transition towards subscription-based software offerings.
Cisco’s Services business also rose 3% with advanced services and Software & Solution Support experiencing growth. Similar to peers such as Nokia (NOK), Hewlett Packard Enterprise (HPE), and Ericsson (ERIC), Cisco is also looking to transform its business by delivering software offerings, leading to an increase in subscription and recurring revenue.
In the third quarter, Cisco’s recurring revenue accounted for 32% of total revenue, up from 30% in 3Q17. Subscription revenue accounts for 55% of total software revenue. During Cisco’s fiscal 3Q18 earnings call, its chief financial officer, Kelly Kramer, stated, “We drove good growth in deferred revenue, which was up 9% in total with products up 18% and services up 4%. Deferred product revenue from our recurring software and subscription offers was $5.6 billion, up 29%. We saw strong momentum in Q3 product orders, growing 4% in total.”