Cisco is in the years-long process of shifting from a hardware-centric business focused on switches and routers toward a broader software and services strategy, aiming to position itself as a central player in cloud, security, and AI-driven networking.
Cisco remains a dominant hardware vendor but has spent recent years investing heavily in software to build recurring revenue streams, said Jack Gold, president of J.Gold Associates. In fact in its Q3 earnings call in May, Cisco said that 49% of total quarterly revenue now comes from subscriptions to software, security and contract support rather than one-time purchases.
“What they are trying to do is get to a place where rather than just sell you a server or network switch and I’m done, is make themselves into basically a cloud service provider,” said Gold.
At the core of Cisco’s strategy is its growing focus on security and network visibility. With its equipment embedded across enterprise, telecom, and service provider networks, Cisco has a unique vantage point into data traffic. Gold noted that this visibility allows the company to expand into advanced security offerings, particularly as artificial intelligence introduces new challenges.
One emerging opportunity is identity management for AI agents. While identity tools for human users have been around for decades, managing identities for potentially millions of AI agents represents a largely untapped market. “This is a greenfield environment,” Gold said, adding that many organizations are still uncertain how to approach the issue.
In May Cisco announced plans to acquire Astrix Security for an undisclosed amount to bolster its AI agent security portfolio. Astrix is known for its security platform that specializes in identifying, managing and securing AI agents and non-human identities, such as machine-to-machine connections.
Cisco is also working to unify its existing portfolio into integrated platforms, which Gold says is its greatest challenge. “They still have a lot of ‘components’ that are not fully integrated at their customer sites. That’s why they are trying to build an overarching cloud management console. But it might be problematic for many customers who still have individual components they’ve had in place for years to fully get the overall integration in place, especially if they also have other vendor’s networking products in place,” he said.
Cisco did just this month roll out an overarching management scheme called Cloud Control that promises a single management plane spanning networking, security, compute, observability, and collaboration.
Competition remains strong. Rivals like Hewlett Packard Enterprise and Palo Alto Networks are pursuing similar platformization strategies, while cloud providers including Amazon Web Services, Microsoft, and Google offer security and identity solutions tied to their own infrastructures. However, Cisco’s strength lies in its extensive installed base and partnerships across enterprises, hyperscalers, and semiconductor firms, Gold said.
Despite some smaller product lines, such as its UCS server business and Webex, Gold believe Cisco retains a significant advantage due to its scale and reach. “They’re the 800-pound gorilla in this space,” Gold said.
Looking ahead, Cisco’s ambition is to become more than a hardware provider. The company aims to act as a comprehensive network fabric operator—effectively overseeing and securing the flow of data and AI-driven activity across complex environments.