Cisco Systems, Inc. (NASDAQ:CSCO) generated $3.6 billion in software revenue in Q2FY21, highlighting the success of its business model transformation to place more focus on a subscription approach for its software revenue.
The strategy seems to be paying off because Cisco generated 76% of its software revenue through a subscription model. The latter is a smart move for the company because it promotes recurrent revenue, while at the same time making it easier for the networking and cybersecurity giant to tap into operational efficiencies.
The subscription model has contributed greatly to the company’s ability to tap into rapid growth for five consecutive quarters while differed product revenue has returned double-digit growth for 6 consecutive quarters. It also played a notable role in overcoming the challenging business environment in the past year. Some of Cisco’s other business areas including security, data center switching, Catalyst 9K, Wireless and Webex segments boosted the company’s revenue in Q2FY21.
Cisco’s performance forecast
Cisco did not provide a revenue forecast for its entire fiscal year or Q3FY21, perhaps due to the uncertain nature of the markets and the diverse nature of its products and services. However, the company did reveal through the quarterly report that its quarterly dividend grew by $0.01 per share which shows the company’s commitment to delivering value for shareholders.
As for its performance in the future, Cisco is optimistic that it can continue tapping into more growth opportunities which it hopes will yield more value. The company has been investing heavily in segments such as digital and online security, 400G, cloud and the next generation of applications. Cisco hopes to leverage more growth opportunities as more markets dive deeper into the digital space. The shift should provide long-term growth opportunities for the company, while securing strong revenues and profitability.
Cisco is also banking big on the future of work. The pandemic demonstrated the need for employers to target workflow flexibility through remote work. The ability to work from anywhere is a game changer for many companies across the world and Cisco is strategically positioning itself to provide the necessary resources to make remote work possible.