Chuck Robbins
Chair and Chief Executive Officer at Cisco Systems
Thank you, Marilyn, and hope you all are doing well. This was another strong quarter for us, and I am proud of what our teams have achieved. In Q3, we delivered our strongest ever revenue, non-GAAP income, non-GAAP EPS and operating cash flow. We also continued to successfully execute on our strategy, driving solid growth in ARR to nearly $24 billion and posting double-digit growth in subscription and software revenues. Based on our strong Q3 performance, we are once again raising our fiscal 2023 outlook for revenue and earnings per share, which Scott will cover shortly.
As we look ahead to fiscal year 2024, we expect to see modest revenue growth, even with the tough compare of double-digit growth in fiscal year 2023. Now, before I go through our Q3 performance, I'd like to discuss three key areas that will help drive our long-term growth. First, we are pleased with continued success in our movement towards more subscriptions and recurring revenue. In Q3, we delivered 18% growth in software revenues. We also have $32 billion in remaining performance obligations, and we expect to see this momentum accelerate.
Second, security continues to be an enormous opportunity for us. As you've heard me say, we've revamped our strategy, put a world-class team in place, and made this a top priority for the company. Over the coming quarters, you will see new innovations in this space, building on our strong Cisco Security Cloud strategy, including at Cisco Live next month. Based on the rapid progress we are making, we are optimistic about our opportunity in this fast-growing market.
And third, generative AI and cloud. At Cisco, we already use predictive AI extensively across our portfolio. In addition, our core networking technology is already powering some of the leading AI models run by hyperscalers around the world. We have also moved rapidly to leverage generative AI capabilities in our own products, which you will hear more about in the next few weeks and beyond starting at Cisco Live.
Now, let me discuss our quarterly performance. As I mentioned, in Q3, we delivered our highest ever quarterly revenue and non-GAAP earnings per share exceeding the high-end of our guidance range. We saw healthy margins and record non-GAAP net income, which reflect our strong operating discipline. All of this contributed to record operating cash flow in Q3. As we expected, the actions we took to mitigate supply constraints have continued to pay off.
Price realization as a result of the actions we put in place last year helped offset inflationary pressures. Our disciplined cost management enabled us to continue to expand gross margins, as well as prioritize our strategic investments to drive long-term growth. As it relates to customer demand, it is being shaped by a few factors that we believe are impacting the entire industry. First, our increase in product shipments is often leading customers and partners to absorb these shipments prior to placing new orders. Second, the significant reduction in product lead times reduces the need for extensive advanced ordering by our customers and third, macroeconomic conditions.
With this said, in our discussions with customers such as the ones we had at our most recent global Customer Advisory Board event earlier this month, they continue to invest in key technologies that are core to their overall strategies. As we previously shared, given the unprecedented demand for our technology during the pandemic, we believe sequential order rates are far more informative than year-over-year rates. Just like the prior two quarters, our sequential in Q3, were in general alignment with historical ranges coming in one point below the historical range.
In addition, our order cancellation rates also remain well below historical levels, indicating the strength of our backlog and portfolio. In terms of our backlog, we continue to expect that we will end the fiscal year with roughly double our normal product backlog. Now, let me share a bit more detail about some of our newest innovations.
Regarding our webscale customers. They are currently consuming and implementing their prior significant technology investments. There remains a huge growth opportunity across all these customers enabled by our portfolio of hardware, software, silicon, and systems. We already see early design wins in AI infrastructure and continue to see other wins and competitive displacements leading to continued share gain in this space. In our networking business, we remain focused on building solutions that drive a higher return on investment and sustainability.
In March, we introduced 800-gig capability to our Cisco 8000 platform with the industry's first 28.8 Terabit Line Card powered by Cisco's Silicon One ASICs and Pluggable Optics. This new platform can deliver up to 68% power savings and 83% space savings compared to 400-gig solutions, helping to reduce operational costs and carbon emissions as well as enabling the densification of networks to support use cases such as AI/ML and IoT. This continues to drive positive customer feedback and we are excited about this opportunity.
To compliment our own innovations, in Q3, we closed the acquisition of Valtix, which is aligned to our security cloud vision for providing protection across multi-cloud environments with a seamless experience. We also announced our intent to acquire two companies that further extend our capabilities in cloud, security and full-stack observability. Before I close, I also want to share once again how incredibly proud I am that for the third year in a row, we were ranked number one in the U.S. on Fortune Magazine's 100 Best Companies to Work For and in 14 other countries around the world, we were also ranked as the number one Great Place to Work, reflecting Cisco's position as a premier destination for top talent worldwide.
To summarize, our ability to navigate uncertainty was demonstrated by our record results. Our performance remains solid and reflects the strength of our strategy and the benefits from the investments we've made over the last several years. Our operational discipline and excellence in execution are driving record earnings, cash flow, and shareholder value. As we look towards Q4 and fiscal year 2024, I'd like to share a few observations.
As I mentioned earlier, as of now, we see modest revenue growth in fiscal year 2024 on top of our strong performance in fiscal year 2023. You can also expect us to grow earnings per share at a higher rate than revenue in Q4 fiscal year 2023 and full-year fiscal year 2024 reflecting improving gross margins and strong expense management. Lastly, we expect to continue our stock buybacks at the higher levels you've seen over the last two quarters.
I'd like to thank our teams for their focus and execution and our customers and partners for the trust they placed in us. As cloud, AI and security continue to scale, Cisco's long-established leadership in networking, and the breadth of our portfolio, give me the confidence in our ability to capture the many opportunities ahead.
I'll now turn it over to Scott.