Cisco's Security Revenue Line Sets Stage for Earnings Report

Cisco Systems (CSCO) is set to report its fiscal fourth-quarter results on August 12, and the market is eagerly awaiting one key number - AI infrastructure orders. However, management's guidance suggests that security revenue, which was flat at $2 billion in Q3, could be a more telling indicator of the company's performance.

Cisco paid $28 billion for Splunk in March 2024, and customers have been shifting from upfront licensed deals to ratable cloud subscriptions. This has pulled revenue out of the current period, but CFO Mark Patterson has called this a near-term drag on revenue growth. CEO Chuck Robbins has also said that legacy decline is easing.

The pressure on security revenue is expected to ease in Q2 2027, with Cisco's Ahmed Sami Badri predicting that mix compares will become more normalized by then. However, the company needs to show a clear sequential slope in its security segment revenue line for investors to believe that the drag has outlasted its own timeline.