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Cisco Expects Revenue Coming From Subscriptions To Increase To 50%

By John F. Heerdink, Jr.

As per reports, Cisco Systems Inc. (CSCO) forecasts that within four years, about half its revenue will come from software and other recurring sales, however, the high chip prices in its hardware business will keep pressuring overall profits, informed its chief financial officer. The company is shifting toward selling recurring subscriptions for software such as its WebEx collaboration service and cybersecurity services.

Cisco expects revenue coming from subscriptions to increase from 44% for its fiscal 2021 ended July 31 to 50% by fiscal 2025. The company gave a fiscal 2025 revenue forecast expecting a compound annual growth rate of 5% to 7%, with a midpoint of $62.9 billion.

Scott Herren, Cisco Chief Financial Officer informed that the company’s software units do have higher margins than its hardware business, but some subscription revenue is also expected from services that have lower margins than software. Also, a global shortage of parts such as computing chips, memory chips, and even power supplies will pressure gross margins in the company’s hardware business, which the company forecasts will keep growing.

“The component shortages that everyone’s dealing with right now have led to price increases, and those price increases are going to be with us for quite some time. We’re a (Taiwan Semiconductor Manufacturing Co) customer, and they did an across the board price increase the range anywhere from 8% to 20%. We are subject to that,” stated Herren.
 
 

Cisco Systems, Inc. (CSCO) is a global technology leader that designs, manufactures, and sells Internet Protocol-based networking and other communications technology. To learn more about Cisco Systems, Inc. (CSCO) and to continue to track its progress please visit the Vista Partners Cisco Systems, Inc. Coverage Page


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(Read Original Story: Cisco forecasts growth from software shift, but chip prices pressure profits in Reuters)


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