Cisco Systems Inc. continued its fitful progress in transforming itself into a software company as it met expectations on second-fiscal quarter revenues and just topped profit estimates.

The networking giant earned a profit of $2.9 billion, or 57 cents a share, before certain costs such as stock compensation, flat from a year ago. Revenues declined 2 percent, to $11.6 billion.

Analysts on average were expecting an adjusted profit of 56 cents a share on revenues of $11.6 billion, so Cisco barely bested profit estimates. In its first quarter ended in October, the San Jose, California-based company had provided what was viewed as weak second-quarter guidance of a 2 percent to 4 percent decline from a year ago thanks to slower spending by service providers. Shares fell the day after the report by 5 percent.

Today the investor reaction was generally more positive. Chief Executive Chuck Robbins (pictured) said in comments during the earnings conference call that he’s confident in the company’s strategy. But Cisco’s shares, which had risen about 1.6 percent in regular trading, to $32.82 a share, initially fell a little under 1 percent in trading after the market close.

Then after the conference call started, shares began rising again, by about 2 percent. The waffling reaction may stem from Cisco providing an improved but still tepid outlook for the third quarter, with revenues likely to range from flat to negative 2 percent and adjusted earnings coming in at 57 to 59 cents a share, the latter range bracketing analysts’ 58-cent forecast.

Although Cisco didn’t break out software revenues specifically, it’s clear that it needs to get its software business rolling, especially software as a service that brings in reliable, recurring revenues. Its networking business has seen declines for five quarters in a row now, with routing, switching and data center products down by 10 percent, 5 percent and 4 percent, respectively. Service provider revenue plunged again, by 41 percent.

On the positive side, security product revenues jumped 14 percent. Robbins said the company added more than 5,500 new security customers. Collaboration revenues rose 4 percent and wireless product revenues by 3 percent.

Cisco also said its deferred revenues, an indicator of its move toward software, rose 13 percent from a year ago, to $17.1 billion. In particular, deferred revenues from products rose 19 percent thanks largely to subscription-based services and software. “The key hurdle is whether the company can demonstrate its subscription and software focused strategy can work,” Barclays analyst Mark Moskowitz said in a note to clients. “Accelerating growth in deferred revenue is a suitable test.”

Still, some investors may be getting impatient with Robbins’ turnaround. “He needs some time to turn this beast around,” Forrester Research Inc. analyst Glenn O’Donnell told SiliconANGLE. “They gave him about a year, but he’ll need at least another and maybe more.His turnaround strategy is sound, but turning Cisco into a software company will not be easy.”

In late January, Cisco took another step into software with the surprise $3.7 billion acquisition of AppDynamics Inc., a maker of software to monitor the performance of business applications. A year ago, it also bought Internet of Things cloud platform developer Jasper Technologies Inc. for $1.4 billion.

But more are clearly coming. “The only way he can accelerate the transition to software is to do more acquisitions,” O’Donnell said. “AppDynamics was a good move, but he needs more and then he needs to prove Cisco actually can run as a software business.”

The company’s track record so far isn’t great, he said. “It entire culture needs to change and it needs a much different go-to-market approach.”

Photo courtesy of Cisco