Cisco shares soar after best ever quarter

CEO Chuck Robbins says Cisco will use the Catalyst 9000 product range as a template for future launches

Cisco has boasted of its successful shift to a recurring revenue model after reporting its best ever quarter.

For the three months ending 28 July 2018 Cisco saw revenue grow six per cent year on year to $12.8bn (£10.1bn), while net income increased 57 per cent to $3.8bn.

The vendor's revenue grew six per cent for the full year, to $49.3bn.

Recurring revenue accounted for 32 per cent of Q4 revenue, up one percentage point on the same quarter last year. Revenue from subscriptions made up 56 per cent of total software revenue, up five percentage points.

Cisco has now reported its third consecutive quarter of year-on-year revenue growth.

On an earnings call, transcribed by Seeking Alpha, Cisco CEO Chuck Robbins said Cisco will continue to apply a subscription model to future product releases in much the same way as it has done with its Catalyst 9000 range of switches.

"When we began the sale of the Catalyst 9000, that was the first attempt to sell a subscription software offering on top of a core networking product and that has gone, as we've said on prior calls, reasonably well," he said.

"I'm very pleased with how the adoption has been from our customers - they understand the value. We knew when we started that process that we would need to deliver significant innovation that wasn't available in the traditional methodology of buying it in order for our customers to adopt.

"You'll see [that] over the next coming quarters when we bring new products to market - particularly in the enterprise networking space, but across the portfolio - we will apply that same strategy.

"I think we've been pleased and our job now is to ensure that the operational infrastructure of the company is prepared and we're working towards being able to ensure the customer is deriving the value from that software, as well as obviously putting in the operational capabilities to ensure the renewals and so on. That's what we're focused on."

In Q4 Cisco pulled in around two thirds of its revenue from product sales, with the last third coming from services.

The bulk of revenue came from the Americas, at $7.6bn, with $3.2bn coming from EMEA.

Cisco's share price climbed almost seven per cent in after-hours trading.