How Cisco’s Security Segment Drove Its Growth in Fiscal 2Q16



Revenue rose 2% YoY

On February 11, 2016, Cisco (CSCO) announced its fiscal 2Q16 results. It reported revenue of $11.8 billion—an increase of 2% YoY (year-over-year). While product revenue rose 2%, service revenue rose 3% in fiscal 2Q16.

Product revenue was driven by 11% YoY growth in Cisco’s Security segment in fiscal 2Q16. The revenue from its NGN Routing and Collaboration businesses also rose 5% and 3%, respectively, in fiscal 2Q16. The revenue from Cisco’s Wireless segment was flat YoY. Its Switching and Data Center revenue fell 4% and 3%, respectively.

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Other highlights in fiscal 2Q16

On a GAAP (generally accepted accounting principles) basis, the net income was $3.1 billion with an EPS (earnings per share) of $0.62 in fiscal 2Q16. On a non-GAAP basis, the net income and EPS rose 8% YoY in fiscal 2Q16 to $2.9 billion and $0.57, respectively. Analysts estimated an EPS of $0.54 and revenue of $11.76 billion in fiscal 2Q16.

Cisco’s GAAP gross margin and product margin stood at 62.3% and 61.3%, respectively. The margins were 64.2% and 63.3%, respectively, on a non-GAAP basis. The non-GAAP product gross margin rose from 62.5% in fiscal 2Q15 due to continued productivity improvements. It was partially offset by pricing and product mix.

GAAP operating expenses fell 7% YoY to $4.1 billion. The non-GAAP operating expenses fell by 1% in fiscal 2Q16. The GAAP operating income rose 26% to $3.3 billion. The non-GAAP operating income rose 10% to $3.7 billion in fiscal 2Q16.

The cash flow from operations rose 36% to $3.9 billion in fiscal 2Q16 from $2.9 billion in fiscal 2Q15.

Cisco is a market leader in the networking space. It has a market cap of $112.87 billion. Its main competitors include VMware (VMW), Juniper Networks (JNPR) and Europe’s (VGK) Ericsson (ERIC). They have market caps of $18.38 billion, $8.32 billion, and $28.19 billion, respectively.


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