Cisco has reported continued revenue declines for its collaboration meetings and device solutions, offset by cloud calling and contact centre growth.
In Cisco’s latest earnings call for Q3 FY24, CFO Scott Herren outlined that collaboration sales were generally flat, with meeting revenues continuing to decline and a fall in devices. Growth in cloud calling and contact centre established this, ensuring collaboration revenues steadied at $987 million year over year.
Herren commented:
Collaboration was flat, driven by growth in our cloud calling and contact centre offerings, offset by declines in meetings and devices.”
CEO Chuck Robbins stressed that collaboration product order growth was “positive, ” suggesting that the long-term health of Cisco’s collaboration business looks rosy.
“At a time where customers are ruthlessly prioritising their IT investments, we saw product order growth in two of our largest product portfolios, data centre switching and campus switching, as well as product order growth in our security and collaboration product categories,” Robbins added.
“We see customer product implementations progressing in line with our expectations, and we expect these deployments to be largely complete by the end of our current fiscal year,” Herren expanded. Cisco’s fiscal year ends in July.
Collaboration sales had increased by three percent in both previous quarters, with Robbins and Herren crediting the growth to new collaboration software releases, collaboration devices, and calling, despite the ongoing decline in meeting sales.
Other Notable Operational Highlights
There was otherwise little mention of collaboration and Webex this quarter, with much of the earnings call celebrating the impact of Cisco’s Splunk acquisition, which was confirmed this past quarter.
Cisco stresses that Splunk greatly enhances its security and observability portfolio, supported by its groundbreaking new security solution, Cisco Hypershield. Robbins says Cisco identified 5,000 existing customers who “have the potential to become meaningful Splunk customers” and noticed “significant opportunities for revenue synergies by leveraging Cisco’s robust partner and customer ecosystem in markets where Splunk had limited or no presence.”
“Splunk significantly expands our portfolio of software-based solutions, contributing over 4 billion in annualised recurring revenue, and adds to our position as one of the largest software companies in the world,” Robbins said. “We are thrilled to welcome the Splunk team to Cisco and are very excited about what we can deliver for our customers as we integrate our complementary security and observability capabilities.”
However, Robbins highlighted that even excluding Splunk, Cisco saw revenue growth in security and double-digit growth in observability year over year. Robbins credited customers looking to “enhance their digital resilience with Cisco’s technologies”.
Lastly, similar to product order maturation, Robbins highlighted that enterprise customers representing early adopters of AI would benefit from Cisco’s NVIDIA partnership for easy-to-deploy cloud-based and on-prem networking solutions.
Robbins emphasised his “confidence in our line of sight to $1 billion of AI product orders in fiscal 2025”.
Cisco’s Quarter in Financial Health
Cisco’s Q3 FY24 was generally positive, as reflected by Cisco shares rising by roughly five percent in the wake of the earnings call.
This was boosted by revenues being reported higher than guidance. Revenue for the quarter declined by 13 percent to $12.70 billion from $14.57 billion, surpassing analysts’ expectations of $12.53 billion. The product business contributed $9.02 billion in revenue, exceeding estimates of $8.95 billion. Services generated $3.68 billion in revenue, higher than analysts’ projections of $3.58 billion.
FY24 guidance rose from $53.6 billion to $53.8 billion as the business enters its final quarter of the fiscal year.
Herren attributed these figures to customers consuming the products shipped over the last few quarters in line with Cisco’s expectations, stabilising demand. Both Herren and Robbins underlined the addition of Splunk as a critical future catalyst for growth.
“We delivered a solid Q3 performance in what remains a dynamic environment” added Robbins. “Our unique ability to bring together networking, security, observability, and data enables Cisco to offer our customers unrivaled digital resilience for the AI era.”
What Else Has Cisco Been Up To Recently?
Earlier this month, Altafiber launched an all-on-one calling, messaging, and meeting solution, “Business Calling with Webex“.
According to regional telecommunications service provider altafiber, Business Calling enhances communications with user-friendly features and an intuitive Webex application, offering improved collaboration experiences for organisations and their customers.
Meanwhile, last month, Cisco began a pilot project with Morgan Solar that uses solar energy to power collaboration and meeting spaces.
The new concept merges Morgan Solar’s Energy Blinds technology, which captures solar energy, with Cisco’s Power-over-Ethernet (PoE) switch to aid in energy distribution. It also integrates Webex, which senses when a room is unused, maximising energy savings and minimising waste.
