CEO Chuck Robbins told investors that software and recurring revenue growth continues. Robbins also touted its partnerships with large customers such as Alphabet's (GOOGL) - Get Report Google, Microsoft (MSFT) - Get Report and Alibaba (BABA) - Get Report that are developing hybrid cloud architecture.
Cisco earned 61 cents per share, topping forecasts of 60 cents. Revenue of $12.1 billion declined 2% but matched forecasts. Importantly, Cisco said it expects fiscal second-quarter revenue to grow 1% to 3%, with non-GAAP earnings of 58 to 60 cents per share.
Shares gained 5% to $35.90 after the market close on signs that Cisco's revenues are expanding.
The networking company, based in San Jose, Calif., has been shifting emphasis from hardware to software and services with recurring revenue. In the first quarter recurring revenue was 32% of total sales, up more than 3 percentage points from the same quarter last year and up 1 percentage point from the fourth quarter of fiscal year 2017.
Security was Cisco's fastest-growing product, increasing 8%. "Security is fundamental to everything we do," Robbins said.
Applications revenue rose 6%. Robbins said that AppDynamics, an application analytics and monitoring outfit that Cisco acquired for $3.7 billion in March, helped drive the results.
Robbins also pointed to Cisco's hybrid-cloud partnership with Google, announced in October. The companies are developing a cloud architecture that combines on-premises infrastructure with Google Cloud Platform.
"Over the last few months our engineering teams have been working closely together," Robbins said. Cisco has engaged with the mega cloud companies such as Google, Microsoft and Alibaba as they made "major architecture decisions," he told investors.
Meanwhile, Cisco's cash continues to grow, with the company reporting $71.6 billion in cash and marketable investments, $69.1 billion of which was overseas.
While Cisco has spent cash on acquisitions, Republican tax proposals could replenish the company's liquidity. In particular, Cisco would benefit from a proposal to tax offshore profits at 12%. The company held $67.5 billion at overseas subsidiaries at the close of fiscal year 2017.
CFO Kelly Kramer said that tax policy has not affected Cisco. "We are lucky to have a great cash flow and access to capital," she said. If the government passes a tax break on repatriated cash, Kramer said Cisco would continue to fund its dividend from earnings growth but could get more aggressive with buybacks. Cisco will also maintain "firepower for the right acquisitions," she said.
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