A picture of Chuck Robbins at a press conference, calm and collected, the type of CEO who never seems shaken, has gone viral in the tech community. Beneath that calm, however, is one of the more subtly challenging tasks in American technology: persuading a business that made its fortune by selling physical hardware to sincerely believe it has a software future. Most people are unaware of how long Cisco has been in this business.
Selling routers and switches, the physical infrastructure of the internet, helped the company establish its reputation and earn a $245 billion market capitalization.
Data traveling over a corporate network in the 1990s and early 2000s had a good chance of passing through a Cisco device. It was a fantastic business. When cloud computing emerged, businesses began contracting out their networks to Google Cloud and Amazon Web Services, which made the hardware in server rooms seem less necessary.
Robbins, who became CEO in 2015, was able to discern that change. He began making it known that Cisco would switch to a software and subscription business model. Saying that during an earnings call is simple. It is quite different to implement it within a company that employs tens of thousands of people, has a deeply ingrained sales culture centered on hardware cycles, and has shareholders who demand predictable outcomes.
Restructuring was a painful part of the transition. Cisco eliminated about 5,500 positions in 2016 in order to reallocate funds to software, cloud, and security. Although the layoffs were not as large as some early reports had suggested, they were still substantial enough to indicate that this was not merely a cosmetic change. The internal culture change might have been more difficult to handle than the headcount cut. It appears to be a “change in DNA,” as former Cisco director Rami Tamir put it. Hardware manufacturers optimize for product cycles and shipment volumes. Software firms consider recurring revenue and retention rates on an annual basis.
Although not always in a straight line, acquisitions eventually became a crucial component of the strategy. Robbins was pursuing a recurring revenue model, and Cisco spent billions acquiring software firms like AppDynamics, Duo Security, and BroadSoft. However, some criticized it for spending money on optical networking companies like Acacia.
At the time, William Blair analysts pointed out that optics acquisitions were “the furthest thing from software,” which raised legitimate concerns about the degree of commitment to the pivot. Even though big businesses openly pledge to change their identities, there is a perception that they occasionally hedge them.
Though not yet complete, progress was evident by 2020. Software accounted for about 31% of total revenue, with 78% of that coming from subscriptions, exceeding the company’s internal goal. However, the primary source of income continued to be infrastructure hardware, and COVID-19 was highlighting how precarious this reliance had become. Enterprise IT spending stalled, supply chains collapsed, and Cisco’s hardware sales dropped 16% in a single quarter. The pandemic made the urgency unquestionable, something that years of strategic memos were unable to accomplish.
When Cisco paid $28 billion to acquire Splunk in March 2024, it was the clearest indication of its future. Cisco’s biggest investment in a software-first identity was Splunk, which assists businesses in analyzing real-time data to identify and address cybersecurity threats. The acquisition, when paired with Cisco’s current security portfolio, propelled the business further into a market where artificial intelligence is currently changing the rules more quickly than most vendors can keep up.
And that’s when things start to become truly fascinating. Cisco reported $1.3 billion in AI-related orders in the first quarter of its fiscal year 2026, surpassing the total for the entire fiscal year 2025. For the entire fiscal year, the company anticipates $3 billion in AI orders. Revenue exceeded analyst projections by 7.5% to reach $14.88 billion. These figures do not represent a failing business. These figures indicate that the protracted, difficult transition is beginning to yield results that manifest in real revenue rather than merely strategy presentations.
Whether Cisco has completely overcome the weight of its hardware history is still up for debate. Dividends are increasing, AI orders are speeding up, and the stock is trading at a fair multiple. However, unlike the hardware markets, the software and security industries are highly competitive and rapidly evolving. It’s still one of the most interesting stories in enterprise technology to watch this company navigate that environment, trying to create something truly new while bearing the burden of its legacy. The battleship has changed course. The question of whether it turned quickly enough will be answered in the coming years.
