After an 87% share price gain over the past year, Cisco reported only 2% year-over-year growth in Annual Recurring Revenue in its latest quarter, down from 3% previously. Subscriptions now account for 49% of total revenue, while the company’s price-to-sales ratio stands at 7.8, above its 10-year high of 5.2.
Cisco’s Annual Recurring Revenue grew just 2% year-over-year in the most recent quarter, down from 3% in the prior period. The product-specific portion of ARR decelerated from 6% growth to 4%, signaling a slowdown in the core subscription business.
Subscriptions now represent 49% of Cisco’s total revenue as the company shifts from hardware sales to software and services. This transition is central to achieving more predictable revenue streams and supporting higher valuation multiples.
Cisco’s current price-to-sales ratio of 7.8 exceeds its 10-year high of 5.2, reflecting high market expectations for its software transformation. A sustained ARR slowdown could undermine the premium valuation if subscription momentum falters.
Strong demand for AI infrastructure has driven a 35% year-over-year surge in product orders, but this hardware boom may be cyclical. The durability of Cisco’s earnings hinges on consistent growth in its subscription base rather than one-off hardware cycles.
