Cisco has drawn up a hitlist of 5,000 existing clients which have the potential to become “meaningful” Splunk customers, its CEO said following quarterly results showing a double-digit revenue decline.
Cisco’s revenues slumped 13% to $12.7bn in its fiscal Q3 2024 ending 27 April. Though in line with expectations – and coming on the back of tough prior-year comparables – this is its steepest quarterly top-line decline since 2009.
Executives on the earnings call were quick to talk up recent blockbuster acquisition Splunk, dubbing it a “catalyst for further growth”, however.
Steepest decline in 15 years
It’s been 15 years since Cisco’s top line tanked by a higher percentage (see below).
A 27% plunge in networking revenue did the damage in Q3, with collaboration revenue coming in flat, security revenue up 36% (up 3% excluding Splunk) and observability revenue up 27% (up 14% excluding Splunk).
EMEA revenues fell 9%, with Americas down 15% and APJC down 12%.
Net income also slipped 41% to $1.9bn.
“Customers are consuming the equipment shipped over the last few quarters in line with our expectations and we are seeing stabilisation of demand as a result,” Cisco CFO Scott Herren said.
Splunk hitlist
Swatting aside Cisco’s quarterly revenue plunge, Robbins claimed Cisco is “well positioned to drive long-term growth” thanks to its transformation from a hardware to a software-based vendor.
The addition of Splunk, which will contribute over $4bn in annualised recurring revenue, “adds to our position as one of the largest software companies in the world”, Robbins noted.
The vendor has identified 5,000 existing Cisco customers who have the potential to become meaningful Splunk customers, Robbins said.
Cisco sellers have been incentivised to go after these customers.
“We also see significant opportunities for revenue synergies by leveraging Cisco’s robust partner and customer ecosystem in markets where Splunk had limited or no presence,” Robbins added on an earnings call (a transcript of which can be found here).
Determined to get its money’s worth from the $28bn acquisition, Cisco announced the integration of Cisco XDR with Splunk Enterprise Security at last week’s RSA Conference, Robbins noted.
Subscription addiction
The Nasdaq-listed outfit’s subscription revenues rose 12% to $6.9bn in Q3 to represent 54% of the total. Without Splunk, the figure grew 5% to represent 53% of the total.
Annual recurring revenue ended the quarter at $29.2bn, up 22%, meanwhile.
“We have transformed our business model with revenue from subscriptions now accounting for more than half of our total revenue even before the addition of Splunk,” Robbins concluded.
