Cisco's security division sees a boost from Splunk, amid a dip in core networking sales
In a significant move, Cisco, the global networking giant, completed the acquisition of Splunk in March 2024, marking its largest acquisition in its 40-year history. This strategic move has had a profound impact on Cisco's security revenue and overall business strategy.
Since the acquisition, Cisco's security revenues have experienced notable growth. In the third quarter of fiscal 2025, security revenues jumped by 54% year-over-year, with orders growing in the high double digits. This growth was driven by Splunk's observability tools and Cisco's extended security offerings like XDR and SASE. The acquisition has also added over 370 customers to Cisco's market presence.
The integration of Splunk's advanced analytics and security capabilities is a key aspect of Cisco's strategy. This integration is aimed at tying networking to security and observability, and it has led to a dozen updated data integrations between Cisco and Splunk's security and networking portfolios.
Cisco's big bet on Splunk is aimed at accelerating its ability to grow its business and capture broader opportunities in the cybersecurity market. The company continues to make acquisitions in the security sector, as seen with the acquisitions of DeepFactor and Robust Intelligence during the quarter.
The growth in Cisco's security business is attributed to the integration with Splunk's offerings. Without Splunk, total revenue would have been down 14% in the first quarter of Cisco's fiscal year 2025. Excluding Splunk's contribution to the quarter, security revenue was up 2% in the first quarter of Cisco's fiscal year 2025.
Security revenue accounted for 20% of total product revenue during the first quarter of Cisco's fiscal year 2025. This shift to a security-first business is key to Cisco's future, but it isn't quite there yet, according to Zeus Kerravala, founder and principal analyst at ZK Research.
However, the growth in Cisco's security business is a positive sign for the company's transformation into a software and AI-driven company. The acquisition of Splunk aligns with Cisco's strategic shift towards software and AI solutions, enhancing its capabilities in data analytics, security, and observability, positioning it as a leader in AI-driven infrastructure and software.
Cisco is also leveraging AI to optimise its operations and improve service delivery, demonstrating its commitment to innovation and operational excellence. The company is strengthening its position through partnerships with industry leaders like NVIDIA, enhancing its role in AI infrastructure and cybersecurity.
Despite the decline in Cisco's core networking business, with networking revenue down 23% to $6.8 billion in the first quarter of its fiscal year 2025, the cross-selling opportunities between Cisco and Splunk's portfolios are materializing. The integration of Splunk is aimed at offering more comprehensive solutions, enhancing Splunk's capabilities through acquisitions like Snap Attack, which further boosts Cisco's security offerings.
In conclusion, the acquisition of Splunk has been a pivotal step in Cisco's transformation into a software and AI-driven company, significantly boosting its security revenue and strategic position in the technology landscape. The company's focus on integration, innovation, and partnerships is a testament to its commitment to leading the way in the evolving technology market.
- The integration of Splunk's advanced analytics and security capabilities, such as threat intelligence, is a key part of Cisco's strategy to tie networking to security and observability, thereby enhancing its technology offerings in cybersecurity.
- The growth in Cisco's security business,propelled by its acquisition of Splunk, has positioned the company as a leader in AI-driven infrastructure and software, using technology to optimize operations and improve service delivery in areas like data analytics, security, and observability.
