Editor’s note: Cisco services revenue grows for 55th consecutive quarter as the company expands its security and data analytics capabilities to enhance portfolio, writes Technology Business Research Analyst Kelly Lesicka in a review of the tech giant’s latest financials that were announced last week.

HAMPTON, N.H. – Revenue growth in security and software-based services benefits Cisco’s services revenue as the company continues to expand to focus on a recurring revenue model

Cisco’s (Nasdaq: CSCO) corporate revenue declined 2.9% year-to-year to $11.6 billion in 4Q16, while Cisco Services revenue grew for the 55th consecutive quarter, increasing 4.9% year-to-year, to $3.1 billion. Cisco Services contributed 26.7% of total Cisco revenues, improving 200 basis points from 24.7% in 4Q15, driven by an emphasis on innovation to develop security portfolio offerings as well as acceleration of its partnership with Ericsson around integration services and technology solutions.

Services deferred revenue also grew 9% year-to-year to $10.5 billion in 4Q16, supported by product-attached and subscription-based revenue growth. Cisco Services gross margin was 67.7% in 4Q16, improving 210 basis points from the year-ago quarter as the company drove productivity and cost-reduction initiatives.

The acquisition of AppDymanics provides Cisco with security, Internet of Things (IoT) and cloud brokerage professional services opportunities

Through AppDynamics, Cisco will expand in the cloud brokerage market and will capture cloud professional services as clients combat cloud sprawl and seek solutions to optimize their hybrid IT environments. The acquisition provides Cisco with an opportunity to use its IoT services portfolio and Security Advisory Services to transform clients’ operational networks and improve clients’ security, compliance and threat management capabilities.

Expanding resources and increasing awareness of next-generation capabilities enable Cisco to expand revenue in APJC

Cisco continues to strengthen its relationships with government agencies in Asia Pacific, Japan and China (APJC) indicated by its recent smart city engagement with the Guangdong Province in China and digital transformation engagement with the Maharashtra government in India. While APJC is Cisco Services’ smallest geography and accounted for 14.6% of services revenue in 2016, it grew 15.9% year-to-year outpacing growth in the Americas and EMEA.