Welcome to Cisco's 2021 virtual annual meeting of stockholders. At the request of Cisco, today's conference is being recorded. If you have any objections, you may disconnect. Now I would like to introduce Marilyn Mora, Head of Investor Relations. Ma'am, you may begin.
Thank you. Good morning, ladies and gentlemen. Welcome to Cisco's 2021 annual meeting of stockholders. This is Marilyn Mora, Head of Investor Relations, and I'm joined by Chuck Robbins, our Chair and CEO, and Evan Sloves, Secretary of the company. The matters we will be discussing today include forward-looking statements which are subject to the risks and uncertainties that we discuss in detail in our documents filed with the SEC, specifically the most recent reports on forms 10-K and 10-Q, which identify important risk factors that could cause actual results to differ materially from those contained in the forward-looking statements. You will also find full GAAP to non-GAAP reconciliation information in the financial information section of our investor relations website. It is now my pleasure to turn the meeting over to Chuck.
Good morning. It's now 8:00 A.M., and the 2021 annual meeting of the stockholders of Cisco Systems, Inc. will please come to order. I am Chuck Robbins, Chair and CEO, and I will chair this meeting. On behalf of all of us at Cisco, I wanna welcome you and thank you for your attendance. We're holding our annual meeting in a virtual format, and copies of the agenda and rules of conduct are available on the virtual meeting site. With that, it is my pleasure to turn the meeting over to Evan to lead the business portion of the meeting.
Thank you, Chuck. I will conduct the formal portion of this meeting. The polls are open and will close after the presentation of our formal business matters. If you previously voted via the Internet, phone or mail, you do not need to take any additional action. If you have not already voted or you wish to change your vote, please do so before the closing of the polls by using the voting buttons on the portal. After the polls close, we will announce the preliminary results of the votes. After the formal portion of this meeting, we will have a business review presented by Chuck, followed by a Q&A session. During the Q&A session, we'll be answering previously submitted questions as well as questions submitted online during today's meeting.
Any stockholder who would like to ask a question can do so by typing the question in the Ask a Question box and clicking Submit. If we receive similar written questions, we may group such questions together and provide a single response to avoid repetition. If we're unable to respond to a stockholder's properly submitted question due to time constraints, we will respond directly to that stockholder after the meeting using the contact information provided. I would like to acknowledge Cisco's officers that are joining us via telephone. Conall Dempsey of PwC, the company's independent registered public accounting firm, has also called in today. Next, I would like to introduce the rest of the directors that are joining via telephone. Michele Burns, Michael Capellas, Mark Garrett, John Harris, Kristina Johnson, Rod McGeary, Brent Saunders, Lisa Su, and Marianna Tessel.
The board of directors has fixed the close of business on October 15, 2021 as the record date for the determination of stockholders entitled to vote at this meeting. We have an affidavit from Broadridge certifying that notice of this meeting was duly given to all stockholders of record commencing on or about October 25, 2021. American Election Services has been appointed as the Inspector of Election for this meeting. Mr. Jim Raitt, who is representing American Election Services, has called into the meeting. Mr. Raitt has informed me that stockholders owning majority of the outstanding shares of common stock are present in person or represented by proxy, and as a result, there is a quorum of stockholders for this meeting. Therefore, this meeting is now open to proceed with its business. We'll now proceed to the items of business set forth in the agenda.
The first matter to be considered is the election of directors of the company. The following individuals have been nominated by the board of directors upon recommendation of the Nomination and Governance Committee of the board to serve as directors until the next annual meeting of stockholders and until their successors are elected and qualified. Michelle Burns, Wesley Bush, Michael Capellas, Mark Garrett, John Harris, Kristina Johnson, Ron McGeary, Charles Robbins, Brent Saunders, Lisa Su, and Marianna Tessel. No other nominations were received by the deadline of August 22, 2021. Therefore, the nominations are closed. The board of directors recommends that the stockholders vote for the election of each of the nominees. Our next item of business is the advisory resolution to approve executive compensation.
This is a non-binding, non-binding advisory resolution that the stockholders approve the compensation of Cisco's named executive officers as disclosed pursuant to the SEC's compensation disclosure rules. The Board of Directors recommends that the stockholders vote for this proposal. Next is the ratification of the appointment of PricewaterhouseCoopers as the company's independent registered public accounting firm for the fiscal year ending July 30, 2022. The Board of Directors recommends that the stockholders vote for this proposal. I will now introduce a resolution proposed by a stockholder for consideration. Cisco's response to this proposal can be found in the proxy statement. Kenneth Steiner has given notice of a proposed resolution and has notified us that John Chevedden is authorized to act as his proxy at this meeting to present the proposed resolution. Is Mr. Chevedden here to propose the resolution?
Hello, this is John Chevedden. Can you hear me okay?
Yes, sir.
This is Proposal 4, Improve Shareholder Proxy Access, sponsored by Kenneth Steiner. Shareholders request that our board of directors take the necessary steps to enable as many shareholders as may be needed to combine their shares to equal 3% of our stock owned continuously for three years in order to enable shareholder proxy access. Proxy access allows a group of shareholders to nominate a director who will compete with management-nominated directors to see who gets more votes. Competition is good for our board of directors. Currently, a strict limit of 20 shareholders must have owned $6 billion of Cisco stock for an unbroken three years in order to nominate one candidate for the board under our proxy access rules. A strict limit of 20 deep-pocket shareholders with $6 billion of Cisco stock does not allow for a diverse group of shareholders. It is disappointing that management does not support the diversity that this proposal calls for.
As a practical matter, it is unlikely that more than 50 shareholders would participate in nominating a director using proxy access with this proposal. There is hardly any administrative difference in 20 shareholders submitting proof of owning $6 billion of Cisco stock, compared to 50 shareholders submitting proof of owning $6 billion of Cisco stock. Adopting this proposal would show management's commitment to diversity. This proposal is asking for so little in the name of diversity, and unfortunately, management has a take-no-prisoners view. Our current proxy access is way out of balance and too difficult for shareholders to make use of. The evidence is that there has not been 1 proxy access candidate placed on the ballot of any major company during the past 5 years. There have been 500 companies with a shareholder right for proxy access during these 5 years.
5 years times 500 companies equals 2,500 company years without one proxy access candidate. This means that under the current rules, a company such as Cisco would not expect one proxy access director candidate during the next 2,500 years. This is way out of balance as far as shareholders are concerned. Cisco initially adopted this proxy access after Mr. James McRitchie proxy access proposal won 64% at the 2015 Cisco annual meeting. The shareholders who gave 64% support in 2015 would have been in stark disbelief if it had been forecasted in 2015 that there would not be one proxy access director candidate at 500 major companies by the year 2021.
The effectiveness of a good governance proposal like this proposal is that it would not result in more cost, but would instead pay dividends because the mere presence of good governance serves as a guardrail to make sure that management elects the best directors on its own. Because if management does not elect the best directors, then shareholders have a remedy with teeth to make better director nominations known to management. Please vote yes. Improve shareholder proxy access in the name of diversity. Proposal four. Thank you.
Great. Thank you. The board of directors recommends the stockholders vote against this proposal for the reasons set forth in the proxy statement. The business matters for stockholder consideration have been completed and the polls are now closed. I'll share with you the preliminary voting tabulation. Final vote tallies will be posted in an 8-K file with the SEC within four business days and available on our investor relations website. According to the preliminary report of the Inspector of Elections, each of the persons nominated as a director has been elected. Each nominee received the support of at least approximately 88% of the shares voted with approximately 96% average support. The advisory resolution regarding executive compensation has been approved with the support of approximately 89% of the shares voted. The proposal to ratify the appointment of PricewaterhouseCoopers as the company's independent registered public accounting firm has been approved with the support of approximately 95% of the shares voted. The stockholder proposal submitted by Kenneth Steiner was not approved, with approximately 60% of the shares voting against this proposal. I will now turn the meeting back over to Chuck.
Thank you, Evan. The matters for which this annual meeting of the stockholders was called to consider have been completed. Since we have received no notice of any other business to come before the meeting, the 2021 annual meeting of stockholders is hereby adjourned. I will now proceed with a business review presentation. The question and answer session will follow that presentation. Carol, if you could make sure we're on the slide FY 2021 year in review. Fiscal year 2021 was a strong year. We continue to see significant progress on our transformation despite the ongoing challenges of COVID supply chain component shortages. We delivered on our financial commitments. We helped our customers continue their digital transformations and led with compelling innovation and amplified our culture. A few of the highlights. We had $49.8 billion in revenue, up 1%.
Non-GAAP EPS of $3.22, which was flat. Non-GAAP gross margin of 66.1%. Non-GAAP operating income of $16.7 billion, and non-GAAP net income of $13.6 billion. In September 2021, we had our first Investor Day since 2017, where we reported on the progress and laid out our key metrics for our business transformation. We also delivered on the targets that we set four years ago at that Investor Day in 2017. We set a goal of 30% of our revenue coming from software. We achieved 30% in fiscal 2021. A goal of 50% of our revenue coming from software and services. We achieved 53% in fiscal 2021. A goal that 66% of our software revenue be sold as subscriptions, and we achieved 79% in fiscal 2021.
I'm very proud of what our teams have accomplished. If you can move to the next slide, please, Carol. From a capital allocation perspective, from fiscal 2017 through fiscal 2021, we returned $77 billion of capital or 110% of our free cash flow, and we repurchased 1.1 billion shares. In fiscal year 2021 alone, we annualized a dividend. We paid out an annualized dividend per share of $1.48, and we returned $9.1 billion of capital, which is 61% of free cash flow. Next slide, please. As we begin fiscal 2022, if we look at our Q1 highlights for the quarter we finished just 6-7 weeks ago, revenue was $12.9 billion, up 8%. Non-GAAP EPS $0.82, also up 8%.
We hit 80% of our software being sold as a subscription. We had non-GAAP gross margins of 64.5%, non-GAAP operating income of $4.3 billion, and non-GAAP net income of $3.5 billion. Despite the continuing pandemic and despite the component challenges that we face across the portfolio, we had a very good quarter with great balance across the geographies and our customer segments. Next slide. We also began to give transformational metrics. As I mentioned, we've been making progress on the transformation, and we've been sharing these with our, with analysts and investors on a quarterly basis following our investor day earlier this year. We said we were gonna give them annual recurring revenue. In Q1, that was $21.6 billion, up 10%.
Remaining performance obligations, which is effectively software and services revenue that we have not recognized yet, $30.1 billion, also up 10%. Software in Q1 was up $3.7 billion, up 1%, which makes us one of the largest software companies in the world. Our total subscription revenue last quarter was $5.5 billion, up 4% year-over-year, and that was negatively impacted by subscription software that is attached to hardware that is being delayed due to the component situation that we face. Next slide. Before the pandemic, we had identified four key customer priorities that we felt like were aligned to the technologies and the innovation that we could bring.
As we come to the end of year two of the pandemic, we believe that these are even more important to our customers than they were when we went into it. This is the notion that they are all re-architecting or re-imagining their applications. Their applications are their business these days. They're deploying applications everywhere, public cloud, private cloud, their own data centers. They're consuming them as SaaS applications, and we can help them with things like Full-Stack Observability as they continue to run this complex application environment. Every customer is trying to build their strategy to power hybrid work. This was true before, and it's even more true now. The future of work is absolutely going to be hybrid. We believe that 98% of all meetings in the future will have at least one remote participant.
This isn't just web conferencing or meetings. This spans our collaboration portfolio. It spans how our customers think about networking, particularly thinking of the home as a small branch. It is really important relative to security, both with the hybrid cloud as well as with these home workers. It needs to be adaptable because we're obviously going through different waves of this pandemic, and we need to be able to adapt and change on the fly. Secure the enterprise. This is obviously top of mind for every customer, part of every conversation. Their workforce, data, both are more distributed than they ever have been before. The architectures for security are changing. They need end-to-end security, and they need it built into everything we build from the ground up, which is what our teams are doing. Transforming their infrastructure.
As they continue to navigate these hybrid worlds, hybrid work, hybrid cloud, and they're consuming applications from multiple places, the architecture for their underlying infrastructure has to change. They're looking to re-architect their networks to support this modern infrastructure, and it is a sweet spot for us as we help our customers evolve their infrastructure. Next slide, please. For us, as we line up, there's six key strategies that we have that help our customers actually achieve these objectives. First and foremost, in the enterprise, we wanna help them build secure agile networks with technologies like Wi-Fi 6, 400G, 5G. We wanna help them with hybrid work, you know, differentiating from any competitor because we are the only one who has the security portfolio, the networking portfolio, and the collaboration portfolio that they need to make this happen.
End-to-end security, obviously aligning with this transition that we see in the security architectures. The internet for the future, helping our customers navigate 5G, Wi-Fi 6, 400G transition, Routed Optical Networking, networking fueled by Acacia and Silicon One, and then optimized applications experiences. They need applications that are cloud native. They need visibility. Cisco, with technologies like AppDynamics, ThousandEyes, and Intersight, can give them insights that they can't find anywhere else. Capabilities at the edge. The SASE edge, the application edge, and the carrier edge. Our teams are working on innovation to help achieve technology breakthroughs in all of those areas. Final slide. This is all anchored in our purpose. Over the last couple years, this has been incredibly important.
Throughout all the challenges, as we continue to innovate at a speed and scale like we never had before, we remain rooted and guided by our purpose, which is to power an inclusive future for all. It manifests itself through our incredible CSR efforts like Networking Academy, the way our employees come together to support the most vulnerable in our communities, and our commitment to net zero greenhouse gas emissions. It also manifests itself in the technology we build and the way that technology can open opportunities for more people than ever to participate in the global economy. As I said, I'm incredibly optimistic about the future. I can't wait to see all that our teams continue to accomplish for our customers, our partners, our communities, and our stockholders in the year ahead. It is now my pleasure to turn the meeting over to Marilyn to lead the Q&A session.
Thank you, Chuck. We will now address questions which have been submitted by stockholders. As mentioned earlier, any stockholder who would like to ask a question can do so by typing a question in the Ask a Question box and clicking Submit. If we are unable to respond to a stockholder's properly submitted question due to time constraints, we will respond directly to that stockholder after the meeting using the contact information provided. All right. Looks like we have a few questions coming in already. We'll go ahead and take our first question, Chuck. The first one relates to our recently held Investor Day, and this stockholder is asking: You set long-term targets for Cisco above historical levels for both revenue and earnings growth. Why are you so confident you can achieve these goals?
It's a great question. One of the key reasons is that the transformation that we've made and the metrics that I shared earlier around ARR, which is an indicator of future revenue, or RPO, which is a real software company metric that indicates the success of our transformation. It just gives us more visibility than we had when we were running a pure net 30 business. Scott and I took a look at it and believe that, based on the transitions that we made, the renewal base that we've got out there, we felt confident with those targets.
Okay. Thank you, Chuck. Our next question, looks like we have a handful coming on a similar topic here on capital allocation. Do you believe there is a need to change your approach to your capital allocation policy, given the bigger focus you just mentioned on driving growth for Cisco?
No. We believe that the existing approach is acceptable and the right one for our shareholders to continue to return 50% of cash flow. It still leaves us enough capital for M&A activities or other things that we would like to do, so we're very comfortable with that strategy right now.
Our next question relates to some of the metrics you just provided, Chuck, and this question relates to our software and subscription metrics. The stockholder is asking: You provided us with new metrics to measure your transition to a more software and subscription company. Can you tell me which metric is the most important of all in terms of your perspective?
Well, first and foremost, I think the question earlier about the Investor Day long-term targets is an important one, and I think that this transition. There's lots of benefits. There's benefits for the customers. It allows us to innovate more quickly when we're driving just software solutions, but it also provides the predictability that led us to the Investor Day targets that we put out there. I think the two metrics that we've released, in addition to, you know, the normal ones, the ARR metric and the RPO metric are really two that are indicative of future revenues.
Great. Thanks, Chuck. We've got a couple of questions I see coming in here on supply chain, and it looks like investors or stockholders are asking: The supply constraints that you see in the market seem to have continued to impact your business. When do you expect improvement?
That's a really good question. If you know, if you go back to in Q4 of last fiscal year, we had product order growth of 31%, and in Q1 we had product order growth of 33%. We had talked about on our earnings call that we had the largest backlog in the history of the company. It has been a challenge, obviously, and we've said that our revenue growth could have been higher. You know, we expect our current belief is that in the second half of the year, we'll continue to see gradual improvement, the second half of our fiscal year. Then hopefully by the end of the second half of next calendar year, we'll start to see more improvement. 2023, though, is when we're currently thinking that you'll see sort of the demand-supply equilibrium.
Okay. We have a couple questions on this next topic as well, and this pertains to return to work and some of the secular trends in the market. The question is: How is Cisco prepared for return to work in the near term? Then it looks like there's a part two here: Is the company prepared to weather any sort of downturn in the broader IT spending environment?
How are we prepared for return to work? We say return to office 'cause our employees have clearly been working. As we think about returning to the office, I think the advantage we had when the pandemic started and our employees began to work from home is that we build so much of this technology that we were able to make the transition pretty seamlessly, and that actually freed up our employees to help our customers make the transition because it was a very challenging time. I think we have a good hybrid strategy. I think that we've really communicated frequently with our employees about how we're thinking about it.
We're gonna leave the decision at a team level because teams need to decide what the optimum number of days they need to be in the office together, and come together so that if the power of that togetherness is collaboration, then they clearly all need to be in the office at the same time. We don't feel the need to mandate something at a high level that isn't based on what's needed on a day-to-day basis. Secondly, is the company prepared to weather any sort of downturn? I think that, you know, look, historically, we have. We've always shown that we can deal with those.
I will say that I think coming out of the pandemic, or at least at this stage where we are in the pandemic, I think you have C-suite executives, you have heads of state, you have government officials that have all experienced this technology up front and personal in ways that they hadn't before. I think that is leading them to believe in the power of the technology for almost everything they're trying to do in the future, which has contributed to the demand that we've seen. We would expect that to continue. If there is a downturn, then we obviously have a history of navigating those effectively.
Thanks, Chuck. That actually answers the next question we received about changes, you know, to balance between work at home and work in the office. We've got that one taken care of. It looks like, we have one remaining question here in the queue, and this relates to inclusion and diversity. Stockholders are asking, can you talk about how important inclusion and diversity is for Cisco, particularly at the board level?
It's super important, and I think it's reflected in, you know, where we are, both at my leadership team, where I think roughly half of my direct reports are female. I think we've certainly got diversity on the board. It brings a lot of value. It's not just, you know, gender or ethnicity, but it's diversity of backgrounds and diversity of experience. It really creates a much more dynamic and interesting conversation in the boardroom, and so it's super important. I think we've shown leadership here, I think, for the last several years, and we'll continue to do so.
All right. Given that we have no more questions here in the queue, we're gonna go ahead and wrap up. This is all the time we have for questions, given there aren't any. We wanna thank everyone for attending today's meeting, and thank you, Chuck and Evan.
Thank you very much.
I'll now turn it back over to operator. You're welcome.
Thank you.
Operator.
Yep, thank you for participating on today's conference call. This concludes today's call. You may disconnect at this time.