These might be uncertain times for the computer networking industry, but you wouldn’t know it going by the recent performance of pack leader Cisco, which has just recorded a 44% jump in quarterly profits on top of a 5% increase in its total revenue.

Cisco’s performance came as a surprise to Wall Street analysts, given that the company is in the midst of a radical overhaul, attempting to adapt its legacy business to what is sure to be a very different future.

Cisco is better placed than most of course, having successfully emerged from the 1990s to become one of the world’s most dominant computer networking hardware companies. But just like rival tech giants Microsoft, Dell, and HP, Cisco is struggling to adapt to a rapidly-evolving computer eco-system in which customers are looking to their technology suppliers for increasingly sophisticated services as they seek to connect to an internet that no longer involves just computers, but also things like mobile devices, sensors and even cars.

So yesterday’s announcement that the company’s fiscal Q2 earnings rose by 44% fairly unexpected to say the least, and has been welcomed by analysts as a cautious sign that economic conditions in the tech industry might be improving.

However, Cisco’s CEO John Chambers warned against too much optimism, acknowledging that the company faced a “challenging economic environment” as it struggled to adapt its businesses.

“Cisco delivered record earnings per share this quarter and record revenue for the eighth quarter in a row in a challenging economic environment,” said Chambers.

“We are making solid progress toward our goal of becoming the number one IT company in the world.”

Cisco still faces questions about what it can do to build up its revenues further, but the company does at least appear to be well aware of the problems it faces. Mr. Chambers, who has led Cisco for 18 years now, has cut out much of Cisco’s consumer businesses as he looks to reinvent the firm, focusing on providing complex services such as software defined networking (SDN) for big businesses, governments and telecommunications companies.

The company’s latest ad campaign is probably the biggest indicator of where Cisco sees itself going. Extolling the virtues of the “Internet of Things”, it depicts a world in which connected cars talk to traffic lights, and even trees are connected to the web, as scientists battle to control global warming. Cisco is making positive steps forward in this direction, but it has a long way to go before it can build out a software and services business that’s anywhere near as successful as its main hardware business.

However, at least Cisco has the money in the bank to implement its ideas. The Wall Street Journal reports that its cash reserves now amount to a healthy $46 billion, while the company continues to boast one of the highest gross profit margins in the tech industry.

Cisco reported a net income of $3.14 billion from the second quarter, with revenues rising by 5% to $12.18 billion over the same period, in spite of a 6% slump in European sales. Instead, Cisco rode the wave of economic recovery in both the Americas and Asia, in particular with areas such as cloud computing and video.