Chuck Robbins
Chair and Chief Executive Officer at Cisco Systems
Thank you, Marilyn, and thanks to all of you for joining us today. I'm very proud to share that we had a strong end to our fiscal year in the midst of an incredibly dynamic environment. In fact, we set several records with our performance this year.
Let me first touch on those. For the full year of fiscal 2022, we delivered record non-GAAP EPS of $3.36, record product orders, which fueled our backlog to the highest level ever recorded, as well as our second strongest year of revenue in the history of the Company at $51.6 billion.
We continue to see strong customer adoption of our software and subscriptions, driven by the targeted investments we've been making. We also had record net income, which reflects our operating discipline, despite external challenges, including supply chain and inflation.
Our ongoing business transformation continues to show progress across our KPIs, with annualized recurring revenue or ARR and remaining performance obligations or RPO, both setting record highs. These important metrics illustrate the increasing recurring nature of our revenue streams. This, combined with our record backlog, provides us with enhanced visibility into our business looking forward.
While this was certainly a complex year, we executed well. I want to thank our teams for their perseverance, determination and unwavering commitment to our customers and our partners. Our team's commitment to accelerated innovation has put us in a unique position of strength for fiscal '23 and over the long term. Now, I want to be clear on our outlook for fiscal '23. We expect strong performance across our portfolio, driven by our continued focus on innovation and easing of supply constraints to drive solid top line growth and profitability. While we anticipated some moderation from the unprecedented product order growth of last year, demand signals remain solid. We do expect to continue to experience higher costs in the short term, driven primarily by higher component, freight and logistics costs, which is reflected in our Q1 guide. However, as you'll see in our annual guidance, we expect this margin pressure to begin to ease as the year progresses. Long term, there are many multi-year growth opportunities ahead of us, that gives me confidence in our future.
There are currently more technology transitions occurring concurrently than I've seen in 20 years. Long-term megatrends like hybrid cloud, hybrid work, security, IoT, 400 gig and beyond, 5G and Wi-Fi 6 as well as the move towards application observability will likely provide tailwinds to our growth. With our portfolio in such a strong position to help our customers, I'm quite optimistic about what's ahead.
Before we discuss the quarter in detail, I want to provide some additional color on the supply situation and how we continue to build greater resiliency. After a challenging April due to the COVID-related shutdowns in Shanghai, and the impact on semiconductor and power supplies, overall supply constraints began to ease slightly at the back half of the fourth quarter and continuing into the start of Q1. While the component supply headwinds remain, they have begun to show early signs of easing. The decisions we made and the multiple actions we have taken over the past two years are helping to improve our resiliency and will help offset cost inflation. These include adding new suppliers, leveraging alternative suppliers, redesigning hundreds of products to use alternative components with similar capability and targeted price increases, all of which position us for the future. These actions along with the tremendous efforts by our supply chain team and the investments we've made in building capacity to meet growth have the potential to drive momentum into fiscal '23.
Moving to performance highlights in the quarter. We delivered revenue above the high end of our guidance range, and non-GAAP EPS came in at the high end of our guidance range. We achieved healthy operating margins and generated solid cash flow and returned nearly $4 billion to Cisco stockholders through cash dividends and share repurchases. With annual product order growth of 14% for the fiscal year, we exited the year with record product backlog. In addition, our RPO totaled more than $31 billion, and when combined with low cancellation rates, which remain below pre-pandemic levels, this sets the stage for increased visibility and strong revenue growth as we head into fiscal '23.
In terms of our product orders this quarter, we delivered the second highest orders in absolute dollars in the history of the Company. It was second only to our performance in Q4 of fiscal '21 and on a sequential basis, it was up greater than 15% with strong growth in enterprise, commercial and public sector.
From an annual growth rate perspective, we clearly faced some very tough comparisons from the record orders we saw in Q4 last year, where we had over 30% growth. Based on that, the year-over-year decline was not a surprise nor is it concerning. It's important to keep in mind that in the near term, the rate and pace of our revenue growth is much more a function of component availability than on our quarterly product order growth. With RPO of over $31 billion, almost $17 billion, of which will be recognized as revenue over the next 12 months, and a record backlog, we have great top line visibility. Thanks to the relentless effort of our entire organization, the business remains stronger than before the pandemic.
From a demand perspective, we continue to experience solid customer activity beyond our ability to deliver as is reflected in the growth of our backlog that we saw throughout the quarter. While our business is not immune to macro trends, we will remain disciplined in our operations, while benefiting from robust multiyear investment trends and the technology transitions I mentioned earlier. Our innovation is helping our customers and partners navigate an increasing amount of complexity, and there is a greater sense of urgency to leverage leading-edge technologies to deliver on their strategic objectives. This is leading them to consistently look to Cisco and our unique and differentiated innovation to help them advance their most pressing business priorities.
We recently held our Cisco Live customer event in-person for the first time in three years and had over 15,000 in attendance, including thousands of our largest customers and many more participating virtually. Our discussions with them focused on strategic projects, supply assurance and the critical role Cisco can play to support their long-term technology road maps. They did not indicate any fundamental shift in their commitment to technology investments. Regardless of what the coming quarters may bring, we have a proven track record of being able to adjust in difficult environments. Our value proposition to our customers remains as strong as ever.
In our webscale business, we continue to see momentum even as the business becomes larger, as product orders were up more than 50% on a trailing four-quarter basis. We see significant opportunity ahead as these customers build out massively scalable cloud networks and increasingly turn to Cisco to help them meet accelerating demand for cloud services.
Our leadership in silicon, optics, software and systems enables us to win as hyperscalers value industry-leading performance and innovation. We are expanding our footprint, driven by data center build-outs with our Silicon One-based Cisco 8000 routers, the fastest-growing platforms in Cisco's history.
Together with optics from Acacia, we have a strong foundation for 400-gig and beyond to re-architect the Internet with routed optical networking. In addition, we recently booked and shipped our first 800-gig systems to one of our webscale customers. On the IoT front, we also now have more than 200 million connected things on our cloud platform with growth driven by connected car. We finished fiscal '22 with product orders in excess of $1 billion and growing double digits. We continue to make progress on our transformation to more software and subscription-based recurring revenue. ARR of approximately $23 billion was up 8% with product ARR increasing by 13%.
We had strong subscription revenue this quarter, driven by our growing portfolio of recurring offers. While our software revenue was down slightly, once supply constraints improve and we begin to increase product shipments, we expect to see an improvement in software, subscription and services that are attached to hardware products in our backlog. The investments we've made in innovation are paying off as our competitive position is very strong.
In Q4, we introduced several new cloud delivered innovations across our portfolio to help organizations drive productivity and resiliency. We launched Nexus Cloud, a platform to help our customers deploy, manage and operate their data center networks from the cloud. In addition, we introduced Calisti and Panoptica, two new cloud native API-first tools for faster and better application development. We also announced AppDynamics Cloud, a next-generation version of our observability platform for cloud native applications.
In addition, we shared our strategy to help our customers connect their entire security architecture with our new platform, Cisco Security Cloud, which will be a game changer for them as they look to secure their multi-cloud environments with a single cloud-delivered security platform. This is just one part of our broader security innovation cycle. Building on the double-digit growth we saw in security this quarter, we are investing across our security business, focusing on cloud based offerings, best-in-class AI driven threat detection and end-to-end security architectures. These innovations position us well for leadership in the security market.
In summary, we executed well on our strategy and transformation during what remains a very dynamic time. This led to a strong close to our fiscal year, setting several records across our business, thanks to the solid execution from our teams, our market-leading innovation and our continued growth of recurring revenue. We also took decisive actions to help offset inflation and build resiliency in our supply chain, while investing in our business to position us well for long-term growth. The power of our technology continues to be a critical driver of economic growth and productivity. Our results and outlook demonstrate the critical role that Cisco plays as a leader in bringing innovative technology solutions to customers today and into the future.
As we move into fiscal 2023, we remain guided by our purpose-led culture and deeply committed to delivering value for our customers, partners and investors as well as continuing to be an amazing place to work for our employees.
I will now turn it over to Scott.
