Cisco sees growth in services, security products in Q2

Cisco posted better-than-expected second quarter results, though revenue remained flat year-over-year.

Cisco on Tuesday published better-than-expected second quarter financial results, with growth coming from services and security products.  

Non-GAAP net income for the quarter came to $3.4 billion, or 79 cents per share. Revenue was $11.96 billion, flat year-over-year.

Wall Street was expecting earnings of 76 cents on $11.92 billion in revenue.

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Overall, product revenue was down 1 percent year-over-year, totaling $8.57 billion. Within that category, security revenue was up 10 percent to $822 million. Revenue from infrastructure platforms declined 3 percent to $6.39 billion, while applications revenue was flat at $1.35 billion. Revenue from "other products" declined 39 percent to $4 million. 

Service revenue was up 2 percent year-over-year, reaching $3.39 billion. 

"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," CEO Chuck Robbins said on a conference call. "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"

CFO Scott Herren noted in a statement that Cisco continues "to grow deferred revenue in double-digits through the shift to more software and subscriptions."

Deferred revenue in Q2 was $20.8 billion, up 12 percent in total, with deferred product revenue up 16 percent. Deferred service revenue was up 9 percent.

Remaining Performance Obligations came to $28.2 billion at the end of Q2, up 13 percent.

Tech analyst Patrick Moorhead noted that, in addition to its double-digit growth in security sales, Cisco also reported strength in Cat 9K, data center switching, wireless and Webex portfolio numbers. 

"For webscale customers, it was the 5th consecutive quarter of rapid order growth increasing to triple digits," Moorhead added. "This is important as these customers had walked away in many parts from Cisco opting for their own designs. In a very rough period for infrastructure providers, I believe Cisco proved its resilience by balancing infrastructure against software, security and collaboration businesses."

Cisco on Tuesday also declared a quarterly dividend of 37 cents per common share.  

For the third quarter, Cisco expects revenue growth of 3.5 percent to 5.5 percent year-over-year.