Cisco Systems (CSCO) 14 Nov 182019 Q1 Earnings call transcript

Welcome to Cisco’s First Quarter Fiscal Year 2019 Financial Results Conference Call. At the request of Cisco Systems, 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.

Michelle. Thanks, Cisco’s XXXX to call. earnings quarter first everyone, quarterly fiscal conference Welcome, Kelly is Investor our Chuck and of Mora, Chairman our and CEO; This Head by Relations, Marilyn I’m joined and Kramer, CFO. Robbins, webcast our have call. should following will earnings a supplemental you now, the with available Investor seen including on By slides made the in press our release, corresponding website be section information Relations found GAAP information website. cash full statements, be the flow can to financial and other information, section sheets, Income information non-GAAP balance statements Relations also of in financial Investor reconciliation our

of is made and to press guidance, our website to for statements. with As Reporting including customary that identifies documents will from period's have that to call today please and our reclassifications unless in further call, be risks financial contained documents. results the website. these terms cause The specifically revenue for results otherwise. we we on materially actual to we access matters on we have in include the forward-looking QX and XX-K discuss SEC, respect detail most non-GAAP filed presentation. those will amounts geographic, Financial slides see second of this this results details. uncertainties recent discussing the subject accompany the could basis fiscal reports certain Click forward-looking call period posted a otherwise. the the will to on of are reclassified important to throughout statements conference quarter the guidance amounts results in and also be we this the risk been providing section prior and that the be which release terms orders both be current customer in factors Throughout referencing the The discuss XXXX. product They Forms in differ With to conform All comparisons of our product on year-over-year will and made stated unless stated GAAP will in

reminder, With comment is turn a that, during explicit will not the public Chuck. its disclosure. unless it on Cisco to guidance financial As I’ll now done over it through an quarter

another afternoon, Marilyn, that our and in you, out operating and three and We good strong more cash flow earnings accelerated that is and expanded ago delivered We clear share margins everyone. driven geographies, categories, we generated quarter. transformation software the growth absolutely to It growth. double-digit great customer years This revenue strategy by and is working. our growth, Thank subscription saw of transition across and offerings. innovation We differentiated execution, per broad-based was segments. all product strong laid

users to creating our application. are clouds today's positioned In facing significant evolving applications access value an are standalone with experience long-term number the at The environment of an seeing complexity enterprise of increasingly over Customers expanded to has rate. new growth and with level now for of our expecting a integrated increasing include products. connected well capture are devices unprecedented platforms there's on multiple value always shareholders. any to opportunities ever an We while

networking we industry. on device the This our architecture and on user application an running simplicity, any We automation, as customers. network security agility connect any securely network drives a anywhere. changing are deliver opportunity We're multi-domain to any that for architecture enormous fundamentally designed an is any us for and to that building creates intent-based

applications, proliferation of data brought to with capturing disrupt complex from business entire private cloud SD-WAN. networking architecture next architecture. We and portfolio. how agility. Catalyst with additions at capable the XXXX. new exciting secured our switches would The the their our for enterprise Now is This innovation family, extend applying Starting of we ramp to automate across branch routing, allows the switches. series we to efficiency enterprise security wired, environments. to more resonates infrastructure and and Catalyst Partner and the strong let's deliver is XXXX we deployments our and our midmarket this connected to a strongly that newest look detailed controller. continue business year of Catalyst take proposition and XXXX ago customers. a operations, value including into from policies strategy traffic over platforms, on customers would multiple continued and additions our intent-based launched results several flows at This wireless, XXXX growing a of set new driving to our Yesterday, the announced as family new customers of out intent our managed simple it customer We and across XXXX and Summit intent-based The CatXK devices and be wireless market a

customers customers consistent virtually help wireless XXXX We cloud our our services security, automation and any Catalyst ultimate switches. run and on-premise anywhere running or continue flexibility, The to from gives and XXXX wired environments. embedded on analytics across

unifying the Cisco portfolio. a integrate with SD-WAN We major how environments, entire into branch confidence. to driving more We as and way choice cloud our is cloud the change the the the for faster our secure also security. announced is our grows. multi-cloud virtualized SD-WAN technologies center great with help simplest for new the This to expansion provide need a in is security In data infrastructure move of modern the to customers example architectural network. organizations embrace cloud

address multi-cloud strategy growth to Our public, increasing our combination workloads data customers securely to connectivity and while enabling is or any across private, enable environments. of

to Nexus application network may transform help to scale tremendous traction innovation we resiliency. ACI, in for efficiency, the resulted as in has their the recently Nexus they unveiled XK, industry-leading with data the our switch and cloud support UCS Building from switches. our new Nexus invest solutions security to architect our This and wherever of success we workloads centers and improved XXXG on reside. customers continue portfolio We

to to center networking environments in the also high-bandwidth portfolio, to the week to data of we XXXG their providing workload hybrid scale to any our them of solution Web scale, ACI XXXG cloud Enterprises, cloud. providing bandwidth Amazon enable Cisco and customers Services. providers, addition web Nexus portfolio compact, to for best The the introducing committed hybrid brings power Kubernetes but by extends company fabrics. industry's of world. powering only market our only XXXG XXXG the breed intent-based and is for the not from with on the the Last transition service in build fully automated, are multi-cloud to deliver architectural increased leading We first today's customers solutions expanded portfolio

to designed Kubernetes monitor our on-premise cloud secure, customers AWS hybrid applications and are cloud. is easily We connect, to delivering enable a that based across the solution and

our we to security performance business Turning delivered with double-digit another robust again growth.

one partner. number customers' our be to is goal security Our

cloud, building data Edge applications are effectively the security center integrated focused into from wherever to a and and customers, are quickly We are. spanning users, on rapidly detecting, and threats, devices, the portfolio data responding the comprehensive our containing, to they protected

zero-trust SaaS intent-based to access Duo to continue is important coverage. portfolio. securely of integration security allow of add unified expanding role cloud We broad cloud-based our us any architecture designed authentication. play example endpoint which solutions and device. a authentication Cisco's any cloud access and this easily A visibility offerings our and network, to an connect for multi-cloud of extending to our simplifying application is environment security network more identity provides security and great The based to policy with and multifactor acquisition security device, Duo users solutions in for Security on products Duo's on platforms recent

be to for agility. intelligence continues critical business data Moving to applications, and outcomes to improve organizations

of quarter Our in AppDynamics double-digit solution uniquely addresses this another strong need resulting growth.

capabilities a our real-time customer single create to making business for solid people to leader. connect, quarter in every monitoring innovative collaboration collaborate, business and application us and achieved continue analytics provides clear base the and and the Our We market unparalleled set day. our standard insights how growing

customers the helping great with AI board future has through interoperability experiences, our and mini the teams XX-inch WebEx capabilities, WebEx their portfolio with collaboration had customers the accomplished of never with service Share. our of devices, increased recognize we our all WebEx Room Yesterday, team extend we collaboration with sizes new Customers calling we cloud productivity, WebEx by expanded and collaboration to enhanced customers' rich and than innovations our investments cloud on-premise enabled value is solutions. bring soft using unique them across cloud This any tools offerings cloud with and help We're greater. room to quarter collaboration In full the through These more our through defining Kit on-premise solutions suite our XX% modern are of new transform delivering solutions. and and productivity device include with experience, collaborative a XXX and total providing our to from providers, enabling workspaces. anywhere. broad portfolio solutions Fortune of comprehensive share data the summary, a We the of calling availability and opportunity been end-user. a new our hybrid of

our we as software to continued offerings. more a to growth and and is accelerate cloud-based our drive their them Our against looking help well transform in executed are multi-cloud world to continued Cisco operate portfolio, delivered partner our and strategy, to customers as innovation across It a to businesses. clear trusted

strength us We our provides continue IT to a of our over Kelly, innovate and power secure, portfolio we more foundation customers now the XXXX We across with it a bring year turn long-term for our you. growing differentiation are multiple model with infrastructure. as I'll well to strong positioned and automated, our domains business to create portfolio, simple combined growth fiscal shareholder value. the with and of believe to

with EPS, $XX.X revenue for orders strong I'll We continued in for All operating cash QX. executed our had followed well Total by grew growth, start the orders, the up quarter the financial guidance with Chuck, momentum product business across flow. right, a was which revenue billion thanks of margin, We and X%. X%. summary results

non-GAAP was XX%. non-GAAP billion up EPS up XX% net XX.X%, margin $X.X non-GAAP and Our income was operating $.XX was rate

had ramp in offerings the growth of driven in our XK. Routing $X.X Let provide Wave across more strength Provider. with Nexus platforms growth and with X X% Wireless continued another revenue. center the the with quarter X% product Switching me Infrastructure growth Total detail by up was strong to our growth double-digit Campus to billion. driven Meraki. businesses. great by CatXK had growth grew by and driven some QX in revenue all Service data on returned

also servers all growth driven good We up in Access, solutions growth performance was Unified was revenue the center saw in up XX% by Advanced XX% data and X% TelePresence We Communications, support. Identity and good growth Service Security saw Unified businesses. Threat. with & by was strong Hyperflex. and AppDynamics. driven Applications Threat with and across up in software

and delivering our transform business to subscriptions. software continue more We offerings driving more

most a positive percentage revenue. as our the orders continued acquisitions business forward we I'm adopted There is of you, total change. total with XXX to subscriptions look This show there our were does product of momentum of When saw offerings no We customers changes an our transformation. is software going purely QX we points in been point X impact subscriptions after year-over-year in the at QX. impact year-over-year. sorry, an X%. ASC meaningful the to the QX cycles. remind results metrics, basis metrics growing XX% impact total We think and up strong Software that impact not does accounting conversion it revenue. revenue, on To software our or It cash was metric XX software have

APJC gross In X.X X%. service emerging up segments up the our QX and was XX.X% was Looking EMEA margin grew points. X%, Sector Total was Provider XX%, margin with was geographies, a Enterprise total XX%. Public up Service Mexico point. Commercial XX.X% XX% From up up up up up plus grew margin at was grew was points and profitability XX.X% and our customer X%, XX%. was Americas X.X markets non-GAAP BRICS Product X%, X.X X%, up gross gross was perspective,

Our operating points. XX.X% X.X up margin was

our cash allocation XX%. total was flow was a also investments of We GAAP cash the billion. returned equivalents bottom to legal In capital investment $X.X billion up closed shareholders the was R&D growth $X.X and Arista for up consistent we areas. quarter $XX.X To cash, billion dividend. value. QX the These software in we're received net From and QX we ended repurchases billion two to terms up $X profitability, topline on of strong the we perspective we long-term increasing was flow Normalized quarterly perspective in an Security and the with shift million summarize, with for free innovation and and during QX of executed $X.X our $X.X billion we in had and a a share for that returns line XX% $X.XX. perspective, billion billion settlement great X%. acquisitions seeing driving well from delivering with making QX with EPS July of of innovation cash from and and operating operating comprised income investments $X.X QX, of growth cash flow shareholder $XXX with we're From our Duo moves subscriptions, was M&A strategy growth in systems. are more

have Let October QX me earlier. which guidance business quarter of fiscal the guidance forward-looking reiterate guidance Marilyn second that our the Note referred year second our XX, quarter XXXX. exclude normalized the type This fiscal divested that for of for to we XXXX. includes on to information we SPVSS XXXX

that slides have accompany call. historical SPVSS information the this the in financial We provided for business

now margin to The range XX.X% X% to the We the to XX.X% margin it rate anticipate operating Q&A. gross to non-GAAP revenue expected so is can We non-GAAP be from I X% year-over-year. XX.X% to tax in earnings to a Non-GAAP is provision into the will back $X.XX. turn $X.XX in be growth of the the in to XX.X%. is non-GAAP Marilyn to to at expected expect range rate range rate move expected range per we in share of be of XX%.

and Michelle. of reminder, now to lines for you that and question I'll Thanks ahead it as one only. yourselves all Kelly. to let's a turn the open I limit you Michelle, over go questions ask

Research, Thank you. you ahead. go Morgan from Stanley Investment James may Faucette

in implementation on implementations maybe to Chuck you because answer around one this customer but of as guess is what the Kelly I been past is, I'll any tariff tariffs. macro the volatility we've of or well if as quarter you're the exchange key lot and much. you've change appropriate, conditions of a this these rates very questions guys investors you you Thank behavior of from seen think pending either you've getting seen, world pending in seeing

size, So wondering forward I any change deal customer pulling cetera? you deals if Thank et are you is seeing am reducing much. whether very or

me, first thanks Kelly. over comments it I'll give me let of and let So then to some pass James, all you

But I tariffs on immaterial told call, to the month First XX% we that implemented after in demand demand I can – week last of no we from from we with were not we impact. you saw we all, go, pricing the us week perspective that. any to tell which when a a QX, we implemented so think the them did the change absolutely changes before you would the we the and we did see

customers to sales have to indication only could that and forwards. around talked handful you tell of they doing have leaders are We are I the pull probably right world all of that any us a there any now made the

of that consistent. the view last incredibly first week is week quarter Now see, there not of that the and quarter the outside don’t our doesn’t that momentum the do mean we we was in this stuff a broad-based issue general as from but to

comments? any Kelly So,

I'll QX, – to to I through it look linearity Yes, if some add was just as the I the month say it exact XXXX. quarter by QX was add the in that, at of same mean

So see pull we XX% the we churns didn't for any didn’t [ph] see ins.

specific. the specific were made to on impact that We progress, Just we we've surgical everybody, price versus we working and applied of we of products passed this kind for with we broad-based. are our but we overall and where chain as on possible passed mitigate it, remind the much we as supply were mitigate couldn’t for and just to impacted actively very very that

the the still Chuck hope that straightforward, potential would underlying said, the drives but like but that is strength I demand environment QX, it's into underlying the is IT some of pretty it Going there.

with other can two tell tariffs I conversation Yes, any just at quick haven’t personally the point. this customer comments, you I had around one

to agreement to I this least Secondly, once positive and for we've to top and priority will hopeful past at I some become they that remain move discussions fairly some that before that begun headlines has the more anything got come midterms think relative hear a optimistic we significant. the we administration to the we're the

ahead next question We'll and the the please? go for Thanks question take James.

Thank you ahead. may you. go Vijay Bhagavath Bank, Deutsche from

good Yes Marilyn. afternoon, Kelly. thanks Yes, Chuck,

Hey Vijay.

Hey Vijay.

of Yes, to I see you I the of x of hi. give seeing a happen, across subscriptions would was customers both which helpful? that question dollars share to the we get could and is data any it saying, budgets, for your share be a and of subscriptions we anecdote the software very portfolio extended if picture Thanks. if yes spending in figures, starting of is kind more are bigger percentage are you have promise the sales may, you model to higher the dollars, the purchasing now us expanded that IT purchasing have starting customers

Yes, thanks Vijay.

this because week and there's recognition Summit of was this I heart right at in comment, the Partner me occurring a now. the Let that our presentation marketplace is think significant at the

is are to everywhere, they customers workers at and involve you dealing still customers. have data over They interconnectivity Edge, with obsolete which the our that a cloud are increased of the IOT well they they're infrastructure. original look did most does services Edge, SaaS the that with providers, dealing with. dealing their IT our that data have on suppliers in it's multiple see at If with, what And applications mobile truly what assumptions and customers XXX are world They completely the from investments has explosions done define made center. beyond consuming beginning

of infrastructure the so just anymore. don’t exist was traffic by flows built that assumption fundamentally IT And

the and cloud policy, and And looking branch at automation drive a center simplicity need that we're having of are is the seeing single and more provide and they from what architecture the now the to the to that capability. more campus to so to data security, into they

like seeing that our So which the software defined for with policy connected of give ACI centers, talked in and was access extend customers in big them in data are can the week need seeing we architectures in policy. the the the the us actually to being and things you into ability one multi-domain DNA this extend that connect we policy so about our drive technology Campus you're Campus

branch cloud You saw the with we with week this SD-WAN our integrated our it security portfolio. where

of more that more our So adopting. come licenses think broad-based that continue through and I customers seeing to we're software and in see these we

we we thought out I So Vijay. play exactly that any…? Kelly that as are think

it's No fine.

Thanks.

All go question the right, thank you. Michelle, take please. and ahead next

Hall Rod from you. Thank you Goldman go ahead. Sachs, may

say, guys, for that hi for guess the you I thank no conservatism? ideas the how mean But down. in growth. on really go go I'm cetera? been contemplating in I if What are we I anything better of strong SPVSS and et the X%, and better if things elements get revenue you I like dragged It question. guidance? deal, do then, you'll curious I might just right aren’t. thinking Can Yes, product quarter forward conservative probably of could how to feels pretty you about are give it trade you've which in you quarter us that's now any wanted And terms know know that guidance focus say what was we this of a let's in

Hey for question. Rod, the thanks

strong would two we've last Let seen specifics the were some also combination quarters color give about talked a most think in as that frankly environment, honestly and of but then innovation. I you Kelly the answer I math. macro say me we've years a and the quarters it's just on can the the some, consistent little probably

that look continue what put at you're the our the to We're week, you this the of execution. have proud see done. and delivered number innovation think going we there we in at If the that strong technology I to and you have look portfolio teams really announcements out of

really customers and shift So earlier was the to play I of by out. talking that think architectural beginning is that the recognition I about this

the how on really about both we growth performing. revenue feel product good outlook. So the Kelly I'll let we're and comment

Yes, actually. say I'd

trying actually and growth But in like you periods don't Rod, really SPVSS think pretty forget theoretically the I guidance X% both again you were expecting. excluding guide is of a than obviously I that the is good better have depending in we is underlying tougher the maybe year out feel gave because confidence. strength this tariffs mean guys just the of good what midpoint on I'm a strength comparison solid there we a much see us to but balance and unknown with macro do, I lot it ago. gives of

very good actually about I So call. the feel

I meant more Why that asking. strong from just that Kelly, view. the just comment the I you aggressive What with on that not I was what of point disappointing guidance so really say I one that. I a were Hey it mean quarter. didn't be guess was on was growth in guidance reported would

then is it, a one up got I which you get want there. - I is good to do out - point Yes, there bring there

strong strong QX to Our again growth the very we back in and was know accounting rules, very Enterprise. have a very, new ASC you presence as under XXX, in

these big business is well. we rule sign revenue. going Enterprise agreements under the very accounting will new accelerate Our Enterprise Whenever multi-year that very,

this I in a software one QX came big Enterprise with strong was some have this because enterprises agreements very, multi-year have in happen large might but two large any we where one, very quarter one. in very So current to

it, very the fundamentals underlying additional to overall positive. but piece that's all one So are I'd of say very,

agreements reflective of enterprise these think asked? what actually question the I Vijay are

a point. That's good

you. Thank Great.

Alright, thanks Rod.

please? Next question

Paul Thank Cowen from and company. you. Silverstein

You may go ahead.

from far you less far are there occurring but hear U.S. will I if and or so. just throughout bigger citing thought other strong, hoping but you question, for XXX the and has that answer the And environment. been Kelly, can't drag just it are answer plenty keep And you arises I'm of world. that? even Chuck, of the the strength different is from a Chuck two macro the questions you places shifts the address quick this the pricing on question and

outstripping and your is In broad fact, a from what we macro I the don't revenue across base, strong on think far apply yet the would perspective. very geographies see word very and strong

you the Catalyst you that know my would has is early disconnect, architectural you Switch how you is you you do process, still far time still that would answer question be, you. for the – the much how do to are cycle, If Thank think to think Where how it’s period? go? strength in to can't I think upgrade come?

Thanks four Paul. Thanks questions. the for Okay.

kidding. Just

about So things. other talk and Kelly, pricing you'll

Let me you the give Paul. broader answer

think dollar I to up than would when GDP what orders I our you're face and we in say right were moved that's mean at rising an directly and perspective very, see and on countries when connected results different of we I you you the emerging is a with XX% were look the we've global seen it. historically we what

of it been macro this us I've for is - question how of our beginning two When began last it to is our your how we perform execution. is calls much think insight much give and answering macro, differently into the this of was execution, will what's which the the that much I to how of perceived is than us asked that it the innovation. own think be maybe in I

the very clear, thing countries, to board. other is across in out I'd emerging that way just The and the by be - consistent the it point was

It in had we India. in, our growth was strength incredible have strength did in XX% of quarter second So we incredible plus India.

good intend a you service and thing providers. for I do even just quarter, re that at the So win this up. other key drive productivity tough economic result you that - a we some great to cost environment the to had of and doing have the not of is infrastructure, there. in of large to at the we the teams deal public the drive in a customers things in out our really market the in the there you ending the one think and are heart know automation at a But And SD-WAN architecting heart to that tough it's sector large and that We want when job environment, so is business. a consider stuff what is productivity at continue to the you're and of job you look economic of a cost heart is us done is drive the to want when we're strategy and your

So do is to you're at - it's have environment. unclear you what spending this is a of to tough going this the to to sort a achieve what because do macro it macro shift environment point, significant any trying connected me in when to

going that's goes, - that to see so to we're have how So it but question.

the look CatXK, half incredibly what ago. incredibly just We On still product a mean a it to market we're another I launched we a and year similar early. addresses launched early. that size is

the front it And customers see you're that's this so, end into wireless you'll seeing, In the we innovation to we're week. the just fit on that. portfolio SD-WAN announce of the get as that and addition adopt spring we overall architecture to announced then going integrated within the architecture in

the about good plays how and we'll see we where feel macro out. So are we

better last tick up, but we impact on slight so than quarters in X.X rate And points. say from down, in about on Paul, saw slightly of has a couple up project a price, from what the that QX still XXXX, it was it X.X points but

you. Thank

Thank right. All you.

question. Next

Chatterjee, JPMC. ahead, may Samik you. from Thank you go

question Hi, macro my your EMEA of for taking thanks focus which had just kind is question. on another business. I to

offensive customers more, look a seeing and more that around bit the invest no deals You of clarity how kind to do have like? of we had as off a some strong around sort start kind Brexit, you to of enterprise of kind quarter kind will given there's which any are what of And are where come strength? driving building there, point you that clarity more starting the to this countries eventual – get building the you

you is time and commentary color I and some uncertainty. face a numbers. ongoing in make on I'll we've Again, lot seen think uncertainty resilience there's the Europe this shows let been But think world of up held I'll a for around us the that of some Europe, give details that Kelly there where the I a in

it's four and consistent and got pretty have say the elections, last had Italy, Kelly been you've still what, You we been got I'd Merkel's you've you've six quarters strength growth. announcement continued it's to fairly yet for Brexit, consistent see

good teams our job a doing So are there.

I on like can any continue think to opinion. think these Brexit and I that of issues do any that we'll but execute help clarity in my nothing

So Kelly?

exceptionally it I'd enterprise broad say just very I'd is say is strong. based.

there's been UK think it resilient last said for back pretty the to quarter, specifically the just it's - us I So go four and IT I does has environment. as no is it so a good

Okay, thank you.

Alright, thank you.

question? Next

Citigroup Suva Global from you. Thank Markets. James

You may go ahead.

it’s sort going have pricing. to and the Kelly, to question have and up, so Chuck months, in forward Can of was what what just just or did memory softened, one past XX how Jim remind company that Hi, is strategy appear and think the you we as your I your is much. I about us Suva. XX one pricing going question. impact of on strategy importantly, just say have when memory or prices pricing or you more that actions should company?. the Thank memory

and a tight just supply. all Yes, with of around up was prices and XXXX of specifically, for a so XXXX what was it going it DRAM did consistently the historical memories we and very combination

increases purchase I are the did the try was bought our the starting a seeing impact. higher we see last everything good news strategy tailwind a when being this they prices second headwind supply. still and We to could to big is securing call, a we to were price though commitments to we quarter. still our and We in in forward year ahead. fiscal look are we from year-over-year had it than So quarter. minimize the inventory We alluded ago. The We of seeing go in like half should

a will time that DRAM and impact then we over tariffs, and goodness. And impact be that and we will much for to next get costs did, the of to increases with fully us, be like tailwind good a this through be QX we doing the quarter memory then lesser as price pass-through expect which quarter lot QX did we're we well. So

for much the Thanks very details.

Yep.

please? Next

Tejas from you. Venkatesh Thank UBS.

You may ahead sir. go

out And portion strength that your maybe the business. last strength but are acquisition. And focus somewhat you. was coming XXXX. secondly, Viptela were the since is to a the I'm wanted routing from John it down on Provider, routing XX%, the lot businesses routing related, significant that reported which is versus are Roy year and a Service enterprise enterprise I after for there I in [ph]. called you quarter? think on up Where of accelerating best orders Thank

partly that's that Now it integrated going? how is

would consistent globally. I incredibly It of So at say our you was if consistent our was the business breadth enterprise across incredibly it portfolio. look

XXXX. team the the about of space. that we driven product think talked it's forward we the QX largely in perspective. in by know proxy we represented back - and revenue in in side CatXK of every by the our you had that's I also category strategy and grew with sort from automation brought We've And in enterprise this the a before,

I adoption you'll think continue. If rolled security back we of the that We we felt said week made you call, QX. so and the into native that be to with even in we've SD-WAN that go to portfolio see the QX begin that with integration this confident continued a out our that Solutions seen cloud that we announcements would and saw

think our think it. they we're I operational any the from our the that? the of architectures simplicity what's comments of forward - that I cost the gain can teams understand Kelly, are that helping some So, and on bringing that's job good and a doing driving customers

was it just when mean basically I I across look basically across all business Yes, about everywhere. our across

based. So it was again broad

right. the question. Thanks All for

Michelle? Next question please,

Thank you. Badri. Sami

go from may ahead You Credit Suisse.

in to Provider with has earlier do main made being question XX%. growth the up you. India comment a you Thank Service and about My quarter

acceleration you part think I If Provider then the perspective some where the Service quarter being be about is, the the to the the of be coming noticeable? vertical are in Provider of some the seeing or see into the segment maybe type give spending with that? And that second or you on next back XG were next very in would revenue quarters deployments spending exclude And to down two, year start you four held the Service flat XG do India picture? would to or growth we onset customer were in customer deployment do spend and think to if a

Kelly. Go ahead,

EMEA Service and say, our on I'll Service Provider will in first as just the excluding I the take the this was Yes, Americas India. segment up Provider one well.

Provider but not was very up Service as though So was again, had Yep. it a a well, it driven India everywhere. by strong India

I on to is their we've prepare would some different lot and where helping markets customers, before, different architectures we them of to ways architectural and simplify or market transitions had this a a that say this networks, couple just their Asia in for a obviously quick re-architect characterization about in XG. wins we're of talked phases big try of different we're and seeing their

think, that planning today on executing CEO rollout been XG. say better but what a their is saying So about I'll been with had we're plans. I with the we've many still customers call talking of one and I we've doing

we're and our to teams So on designs the architectural in discussions working actively are accommodate.

go to into going trials. see You're them

we'll for a But some but staying it'll going of the see then how into still that, see faster, next In I now. some U.S. goes could trials before based broad we we're obviously fact you've close providers anything it in of be of quarter right be move if we beneficiary heard all first to it calendar believe movement. the are looking if year. we're calendar XXXX they

you. Thank it. Got

Thanks Chuck, next please?

Kvaal Jeff Nomura you. Instinet. Thank from

may ahead. You go

your us memory for this you've them Thank you? clarification. then the you. pass I'm hoping an have for help a XXX though It prices not have the focused right? are a market. that the market, the Thank enterprise through could And the that question side, have on side, gig or I if when of is now Web-Scale you're on of Chuck Yes you you. or from Kelly opportunity think Web-Scale increases January if make wondering into a anything and I some understand baked language tariffs outlook seems and if guess clarification The in into maybe I or on I peers will insertions be that space in to your primarily question what

XXX if our my I misrepresented apologies Yes, so Jeff gig strategy.

I think opening insert, as absolutely that to opportunities we I comments well. this said we architectural in so for the non-incumbents does script on were focused will look I we transition that we Web-Scale. the opportunity the think gives were represent those And were in an that

a when much the have forward have we're Nexus, the at delivering. we're XXX we gig bringing I with look be advantages merchant have an going you do we'll then to think and ASIC version like we we based version

compatibility some ACI cloud We've got boards. automation, We from We co-chairing backward public can forward to cloud these. the We're into telemetry. the provide extend private optics, have us. that going and across standard differentiators for are security

we lot The data ability the we a So teams think ACI have we security analyze of advantages. policy. flows have with - to automation

breadth well as portfolio center teams whole absolutely data the years will going Web-Scale actually as So the a our ago, But that the be the space. the have in go options we'll we that big we're we think in based here. after that introduced as opportunity intent see differentiator to XXX do an the of gig

can up I as and certainly incorporated baked tariff if guide and have from that's some you bit on to will an go January around so well the on gave will have some costs clarification, offset they prices in memory as in through, the still in an about all the was and costs I component I talking with so we costs I still margins. well said And outlook, yes, the as on XX% of, the assumption costs, I in the like MLCC when memory assumption as QX what headwind have pushing gross

Kelly, I'm meant much on there Yes. through going memory is how side pass a to that on be. revenue or tariffs was sorry the I

Yes, same. tell overall an it’s the I'll perspective. from you

we on as been a if quotes do both yet, before when will tariffs at in they increase the well the price order will through as system at lead cut Let's we the assume they in the have January cut a down while side brought quotes inventory haven’t taken the lower take that do honor in, that because the in through data cost. it cuts cost the the has even will

see, So January. and on be big tariffs XX% have both to from margin baked they the some we'll the the go the full I go side the we'll impact, in real in revenue and feel But third to XX%. quarter. incremental If when

Okay, thank much. both you very

Yep.

Jeff. Thanks

question? Next

Srini Pajjuri you. Capital. Thank Macquarie from

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little a more then talked Thank you it for the a one should metrics some recurring going is going have of one you. clarification do question, not the you to in about being that what expect you some And you a ASC taking then relevant those us forward? quarter on? forward. my or used question benefit revenue is, targets on or XXX, first QX bit And question. forward? more and Kelly, just the that any of focus for Thank any on Could going as sort to if metrics give that on color we and give front metrics us you new you

in going was So, large we earlier recognized that very ASC on multi-year The a had the so that was two we making on content, I question XXX, the enterprise upfront. will heavy we recognize point that because now little quarter first abnormal benefit software deals were new this from very rules, forward. you was, this accounting

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to very going to we're this continue in So hard move direction.

on metrics the so, your then . to And

question Second there.

XXX for the before think right. out as which metric another and And XXX subscriptions then past we was the we we they deferred front. it point about that recognized And that to XX% an we that we renew say software, about over was sold deferred. what looking that now the ASC in XX% three-year XXX used the talked increase used right they deferred XX% XX% CatXK XXX, count selling example. term. of use that We're With is the just and I'll term. it continues ASC a would where sell three-year is for previous CatXK that and recognize to to why We've that's is for So of we $XXX our percentage sold

eleven up XX% other is what but is that we renew. recognized full Now front,

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we're think with meaningful. as kind stickiness customer. So making why subscriptions that even making as transformation. to using not It and CatXK example that with using and them. still it's we That's offers the that subscription having like shows still it of of shows to have And build progress isn't ability meaningful. that the we're recurring nothing's with continue have looking changed that again at the that our out the We

Great, thank you.

Yep.

thank Alright, you.

please? Next

on great Piper from thanks Q and Jaffray, congrats - you Hi question Fish ahead. James James Fish go for quarter. guys, you. a may the Thank

that over move buyback a the Just popping months. And of environment, up are to I quick more. your today? there's large win there? one bassinets what deal and guess, from is come more How just impact me, the And a thoughts M&A Edge plan? lot few being last were around impact viewing M&A will secondly, that made towards One the distributed and Cisco topic to share a is Cisco been Thanks. larger enough this a along how pipeline if are would

cloud, me bit talk going applications Let a Edge bit little announcements, see to with of a little a question. happening what our of talk little and just about a we on some bit the then with M&A I'm the and cloud of pile and into about discussion we'll around the

building that's us us the these Edge and I cases leading in strategic that incredibly with some important to partnerships hear first of off the you Provider. think Web-Scale So many is what's

out our Edge and by to. at as need data very within applications that Access Kinetic used Some fabric customers today of days. developers to We've that products why for us to our because, the the built being from technologies process you so services to able ability and services aggregate where XXX at that's data the the give an you there's Edge run involved application Edge, be like we you those actually run can also some into know put component are data the are multifaceted early micro

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for accommodates architect have And an to you anything so that environment anywhere.

to And that actually continue customers to build for so, with good over and time we enables technology our deal it. that this is us think we'll

these private part Web-Scale enabling of these want Kubernetes so things with we I that relative cloud we announcement. are our announcement. Amazon done this, to and with is our actually with that did and we developers between talk thing solution cloud. And partnerships We've are about that other Google because build move seamlessly important applications to reason once The them the then the to just have that public like it

like. happen want map creating that the start for to going to Kubernetes built at of them cloud policy customers move and the can I into them being if ACI complex it in cloud going apps think take cloud. necessary our to forth, build core now what the So private cloud them extended with public they private that the move can future the the is extend we're cloud into to public and going they instead cloud ACI an any their on architecture back is architecture actually applications if to in customers is be And software in into they this give can they and seamlessly into they seamlessly they're or

we of the a So we're was value in and trying the more to There future. actually simple much make that think Edge question? combination that and the brings the network

pipeline. M&A about Yes,

for how we at bearing we Oh M&A, arises would opportunity think the us deals sorry last it's it. on look you've zero say about strategically over have and it that the done Jim. any will We've that if always good few fiscally. months that I seen And said aligns

continue part and for that's we'll us to plan our look perspective how We that to sense continue makes us opportunities that of from at it. are look for the make and and financial at sense

Thanks.

Thanks, Jim.

please? question Next

you. Thank

with James. for and from question more Simon that time have We Raymond one comes Leopold

here I the one wanted thematic. one in Great. for ask and Thanks end. quick just to one at me squeezing

and think Cisco about one like could some layoffs how the reports pruning, to of you address know On some get I if you the press I'd understanding regularly that? there were about quick does products. thematically And SD-WAN an

You've this it SD-WAN headwind how the tailwind over but like a see is this been is quarters? in a marketplace my while let's your you. router now do looks Thank the getting it's this for traction, and next say but for you a platforms, out for thought several business playing

me Okay, so both. let address

I've all transition. this about The issue and actually – and right is reduction an And right going what's OpEx on not very employees taken of this now that's of first talked it's we've experience with now customer majority going of on on is head is part restructuring our the that the first directly.

take relative customers company what for has has this the Martinez order customer in step back we our to how at May to you been with together software these dealing great sales to brought going the If needed look we this to lifecycle organization. to you'll of offers drive need portfolio. to strategy successful And how if that and want are actually Maria need our new in the it's get be done we're structured out to she in with an any and from a them relative the portfolio where that software be is recall for to future, renewals this we we expeditiously in building just, unfortunate customers and putting and force a year to us experience for very we've

again I've right on with going for clear So what's now. them with about that's very going transparent what's And very been really we've driver our been open the predominant on. employees, and

side, generally On think the I SD-WAN probably you – described. it's you're what accurate

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at So Edge. you're various going see to the flavors

on flexibility dynamically You're a how because high that running you but need of ISRs software type performance on branch. all the going to you branch, you see only some out platforms XXX high software way end traffic the in up your route want to still

enterprise SD-WAN I a of part big you So last think a frankly few the over and quarters positive consistency the business, that. I view think as seen when see the it we've I is

you. thank Great,

Thank you.

have you. of I couple just comments. Thank a

the that are I of macro a incredibly teams economy level with, that think well. just shown out I'll think clearly I not think expected. has people you some There's many I our you there, uncertainty but executing resilience leave know

actually I years or the what that that is an transition ago customers our is beginning I we're existential now. see five viewed through our what the undergoing think cloud growth the fundamentally to the here that while cloud is believe as business and that our to cloud four and threat was driving are to coming

innovation we We So about feel where quarter. look forward the feel talking for we are. about guys you us next feel execution. to Thank good we and good joining team's we good about to you our and

Thank you, Chuck. Michele. Go ahead

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