Cisco Systems (CSCO) 15 May 192019 Q3 Earnings call transcript

Welcome to Cisco’s Third Quarter Fiscal Year 2019 Financial Results Conference Call. 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.

Michelle. Thanks, Cisco’s XXXX to call. earnings quarter third 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 this referencing will non-GAAP Throughout otherwise. conference terms and GAAP call, results of product in be we of and stated both product results results and unless geographic will customer financial in revenue and discuss terms orders will throughout on All made call a basis. comparisons made be year-over-year this matters discussing will we XXXX. be include providing including of statements the be will forward-looking fiscal the fourth quarter guidance for we The today subject our factors Forms materially statements. discuss XX-Q, contained and cause to reports those on indentify uncertainties XX-K They with risks results to the actual forward-looking recent could from in we specifically risk important filed SEC, documents which the that the most are in that and detail differ in the the see accompany and With guidance, please for further respect to also press that call release slides this details. comment during not the through disclosure. public quarter on guidance will its financial done Cisco explicit unless it an is we XXXX. revenue XX, the of business sale October on completed from in expense or no QX, that QX accordingly In had our SPVSS business and fiscal

from results. orders normalized exclude be is all of to historical information and the business we SPVSS such, revenue, will product As non-GAAP, the discussing our

call in help during been turn this and historical normalized now the impacts. guidance understand financial way. on earnings today's information our same in has provided business the that Chuck. slides accompany to will provided call QX and we over We I these it The call website to our for the have SPVSS

of the across of geopolitical Technology heart ability execute had environments. everyone. in business, despite another continues to strong infrastructure. strong uncertainty at our and ever IT Thank the quarter, and performance and We and be afternoon, customer resonating good differentiated macro they In we Marilyn, their ongoing strategy and more market-leading the margins, demonstrating with our operating the to you, quarter portfolio them non-GAAP our the transform earnings delivered innovation than flow. both revenue, as cash growth, is now

continue of opportunities of we our future growth help achieve objectives, am the Cisco to business I us. As ahead customers confident about and their the

others coming New the AI, for are technologies like cloud, and revolutionize businesses deliver and together way and we to IoT, operate our X among our experiences WiFi XG, teams. customers new

changing their are fundamentally the our address in technology the IT environments. infrastructure rising way customers approach complexity We to their

We This our designed any matter application, the to users connect are allow are. intent-based devices their and only architecture securely foundation. to the no building where is at with integrated any security multi-domain over customers network to they

in outcomes. are intelligence portfolio, like business We customers entire the learning across and have machine capabilities faster and resulting greater insights integrating artificial better so

Now business. Platforms. highlights for our with across Infrastructure Starting some

working customers enterprise been networking strong market to We continued across access help innovation to users, resulting to integrate portfolio traction manage wired, tremendous we've our Over years, enterprise wireless, across our networks. a including brought of intent-based things the and past several their to devices, and portfolio. in SD-WAN networking connecting more enterprise routing, our

enterprise position in the data a throughout. and agility ability is must security, insights be optimized capabilities deliver for Enterprise wireless which truly high wireless our the both XXXX real-time integrated are for networking built campus our our for cloud Cisco this and leveraging cloud launch WiFi access networking. platforms demand immersive to with seamless era for networks to portfolio performance, we architecture and connectivity, automation garner low and our subscription-based software our wireless of customers. generates scale unique customers. density, purpose recently and portfolio first end-to-end the combining controllers, networks. pervasive and creating for our access and experiences wired of analytics We By switches X wireless are Catalyst today an new with with We broad into moving core expanding announced security a points, over of for latency and points switches, several from

our Samsung, open our additions, have XXXX family Apple, expanded others history. to on-boarding most Intel, also simple. in We portfolio ecosystem make enterprise comprehensive and the include we our partnership completed With now newest Wi-Fi to networking refresh roaming Catalyst

networking with across rebuilt intent-based access have our wireless. wired and We entire portfolio

HyperFlex drive have subscription policy enabled software model. applications is cloud. system one also our In hyperconverged strategy to across consistency now our unified simplicity and where our offering and customers' matter or operating bring center, data deliver data by multi-cloud the the operational policy that a to and We and all management ACI by consistency architectures platform extending to no networks resides

Cloud, Web Azure and of how web-scale great work continue new Google deliver with partnerships Services, Microsoft innovation. Our Amazon to we are with to examples providers

cloud and in we private data center a recently applications that AWS, allows in or secure introduced cloud Cisco a Web customers running ACI service For environments. Amazon for example, to Services manage

applications for ease. secure platform with customers to centers We help their from expanded our with build greater data We also Anthos partnership multi-cloud Google. everywhere private clouds support public announced to

data Going portfolio, for with our forward, experience our enterprise HyperFlex, multi-cloud cloud the center this deliver and integrate best broad we platform customers. ACI, Stealthwatch will to including SD-WAN,

security. to Moving

of enterprises double-digit see helping We security another with largest of strong Cisco world's globally. cybersecurity our driven portfolio. by with continue to experts company is the world-class quarter our customers thousands momentum growth cybersecurity for

integrates of into the modern security continuum networking domain. and covers portfolio entire enterprise every the threat Our

for customers the of transform and secure multi-cloud our rapidly networks enabling their are to We all evolving world.

Stealthwatch, architecture an verifies strongly By have and trust detects platform zero We Tetration, we with Umbrella, customers. is continuously that offer ISE, a threats and combining end-to-end that Duo, resonating trust.

to applications. turning Now

looking meeting increasingly experiences their critical are transforming how to operate to more delivering We how continue platforms collaboration we manage and is becoming always on their to and cognitive de we facto the Connect, At Customers our facial execute work. These collaboration to meetings. and enhance are personalized and making productivity, insights, collaboration simple for quickly seamless. to AI intelligence experiences very becoming well cognitive enterprises and standard helped business. WebEx our capabilities and within The and launched portfolio, integrating our innovations new bring include calling, all introduced new customers' people context WebEx ML recognition, increase Enterprise we several to which work workforce.

of every meetings, Going devices, intelligence calling, see level our this center. contact forward, portfolio you'll piece collaboration into of messaging, across integrated greater and

smarter Intelligence of unparalleled is and offer application To as to We AppDynamics software faster against growth AppDynamics also the Enterprise strong their adopt transform proud innovation. platform I'm customers The of end-to-end our innovation to a connected have to ability partner the in and teams I'll our application own most our to to and priorities user architectures application More across decision-making. now progress partner. subscriptions. customers most profitable of strategic increasingly businesses on an to differentiated made customers important. devices Cisco ever, visibility applications all in for summarize, help thousands the to more cloud must another better performance transformation rapidly from leader it analytics end-to-end need drive manage over very quarter and the of comprehensive end-to-end our experience. had growth, you. execute market Application get is all with customers, for our and Kelly successfully providing delivering their our that performance of underlying and our We than and environments infrastructure out IT the trusted turn IT and strategy simplify, architecture investments. is secure transform, network accelerate

Chuck. quarter X%. We followed of orders flow. orders well the growth across $XX.X EPS billion, up Thanks the and was business. Product was our with executed operating I'll with the guidance for solid strong Great. by QX. strong cash results revenue for a a QX start Total X%. momentum grew summary revenue financial margins quarter

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

Total support. our some Cat grew solid X% Switching by all strong performance in provide X% AppDynamics. into was Infrastructure was HyperFlex good software and QX our and also across with growth pleased revenue threat detail with Security with by to across in more up and across X% growth saw billion. solid platforms up had strength And me Communications Center driven revenue driven growth ramp TelePresence with growth was We growth with Data We're Service XX% integration threat. continued Security was driven in software, both very grew and Routing with growth by portfolio. servers. by wireless up portfolio. businesses. Let solutions of was on $X.X We in up portfolio. access, quarter revenue. all driven and in Unified another product growth entire a up Duo Applications the the advanced the solid saw of ACI SD-WAN. XK X% and the the unified identity businesses.

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

in at Software basis year-over-year. acquisitions subscriptions total with on We positive momentum a up impact orders X%. was QX total point look there product XX% were the year-over-year, revenue, revenue. we QX of impact X When of solid software our points saw results growing on XX

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

of Tax XXXX a quarter billion Normalized was allocation net flow ended $X.X to From perspective, QX $X.X of total We related the QX and investments XX%. XX%. EPS billion GAAP a billion QX and we shareholders the share was for billion cash, $X.X Act billion returned during flow our terms $X.XX. was up dividend. capital of cash was Cuts comprised the $X bottom billion. QX Jobs was of $XX.X perspective, of fiscal the paid operating In of and equivalent of $X.X taxes $X.X billion cash operating line that in up and we foreign from income quarterly with repurchases to cash

organically inorganically We and in continue to innovation our pipeline. invest

terms We our the seeing had areas. in and growth and making value. investment moves executed We're in To Luxtera returns In line and summarize more to on profitability. delivering growth QX. R&D and acquisition. our we long-term we are the well shareholder closed of strong shift These and innovation subscriptions for innovation strong with on of a we're investments strategy with M&A, driving consistent software the the growth top increasing

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

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

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

Kelly. questions and queuing the the and begin for ahead process. Thanks go to Michelle, lines let's open start

Sachs. you. Thank with Rod Goldman Hall

You may ahead. go

so the one. ask a I'm on and just the rate trade obvious order from going first tell the contemplated that? us guidance guys. if idea wonder is guess there of situation us I to kind that be you question. and for Thanks you thought, some to could for XX% lot the then know went another about had would volumes the of you elasticity an business? of in if question. price XX% effects, can anything give you guys And exposure and that increase, comment much the how I it obvious I one else Yes said that's

is down worse we That number have quite a The XX%. second lot is than obviously would the orders Provider Service one expected.

on color could wonder give more if you I Thanks. us happening there? So, what's just any

Rod. Thanks Sure.

So remember when three months tariffs XX% the were ago the tariffs, we many on we had to announced, if strategy. phases our said, back basically you

the administration sure The first was they with make we understand the the would dialog to impact. continue

where which that chain, we've last you make is, our years. second XX always needed. optimize doing to adjustments I'll the is, hard the necessary been done The the third we we've then last team do continue And supply we'll the been which six for if will pricing months. incredibly working what has over is tell

do on Friday tariffs tariffs. the have to the we everything week that to move to deal And and that the with teams indication when actually completely saw in morning, need the so we were last we XX% to going on executed kicked

that to based And we done the do -- operationally work we forward. is minimal at us. have baked impact behind this point teams are guide see all going is We our needed now the absolutely and all it very great on into

that's first So the question.

provider driven, where look what several The lumpy second saw quarters and was look and impact Kelly. I at overall had Americas. we the And service as just The think the of always most result. the data spend And down customer business, the being question in this a that CapEx year-over-year, it's on XX%. almost CapEx the was we in about spend stall, see if was talked you U.S., the highly is big this you big and very seen business customers we've we've of --

said this real out were So, network until that get into the to these one XG next we from always relative something lumpy. be build we quarters quarter going have a to is we knew to that

it to have So, isolated indicate innovation I very teams the that our is the into that customers. with commercial continues brought was public portfolio the sector our business still in resonating the and strength enterprise to think and our and that our Americas,

guys. it such Appreciate too. execution on a Great. environment Nice the job in tough

you. Thank

Thank you.

please. question Next

you. Ittai Oppenheimer. with Thank Kidron

ahead. You go may

a Clearly on how out a great the and big competitive they'll four there? doing marketplace, zoom about there, in doing, potential noise. maybe and we've over but making in and lot a positioned you level seen how you is from applications, well now that Help the again think could last the headwinds about how business do congrats WebEx, you of execution. deceleration us feel in is competitively about over Thanks, think Chuck, quarter do talk AppDynamics addressing the marketplace quarters.

Thanks, Ittai.

of very over Amy's We're one, quarter first WebEx the done year phenomenal what's of is happy the rate that grow the a to And where So, very going is so that business BroadSoft the had leadership. last solidly. that. we've a of comments. couple remember the benefit with job Number been has modernizing on. is platform under other the in this normalized team continues to run The thing really

So growth the some over that last boosted the obviously, of by were, seen rates that you've quarters. few

with collab was showing Enterprise collaboration simple be on stuff I’ll focused front. taking great rich as a think announced four tell four more take What on the see is simple is So that great, I the show endpoints changing. WebEx, we frankly into some a customer you that's if competitors what, the in numbers can to cognitive game of new at and And that Connect, they're well. our going a experience with endpoints we experience. WebEx we

business modern varying now things the our that focused in is technologies. been So, and on one we've of transitioning of right customers this to of customers our we're all have our combinations for because platforms, so years

to And to need you it, we if that pretty that things demo which we top when big platforms, it, get competitive. do capabilities the you a the the are of is we modern on think it cognitive -- haven't of of you very seen one most should So it's powerful. put get everybody

we're confident very space. we So in where are this

good. Good Very luck.

Thank you.

Ittai. Thanks,

question please. Next

Vijay Thank from Bhagavath Deutsche you. Bank.

You ahead. may go

Chuck, Hey, Kelly, thanks. Yeah, Marilyn…

heard up a you speak can We're a hearing you. time bit? having Vijay,

guys you me? Can hear Yeah.

you. Thank better. That's Yeah.

yeah. Yeah,

do in on question, quite with programs. the would seemed your in WiFi you that business that. on mitigation Honestly General you your the like X, core I And I'd on call this contributions. honestly, switch. going flow excited commend for mean earnings Campus to like I recent then programs, to monitor many First, to social what's the We commend addition news on Manager

helpful you product just of heading be of how back refresh core, the Wi-Fi forward So refresh a to my the for Campus there impactful is Thanks. question kind new the this all new point is, this would us and or into X and across is half, a and the pull portfolio swap? XXXX Catalyst

comments, for your Thanks Vijay. Yeah.

the space, XXXX And with family is the the a every as the have Wi-Fi launched completed Catalyst -- points. – ago, a and routing And product you go We ago, enterprise routing as and our back look, accomplished with step enterprise mandatory summer years XXXX on the look portfolio the weeks switching XXXX. through well subscription networking subscription. Catalyst think access a portfolio. if it. And of switching the software single first back sold enterprise space, our all we the today, on I of enterprise two networking we in -- team space didn't have at product are enterprise refresh, campus two On the to the platforms in we going has across what a

made those a that phenomenal. progress it operating teams to running all They've can operating it now had platform, the deploy customers consolidated automation under the So, across also single single policy. we systems platforms. so We've multiple and different our is that running is have -- a system

of work So, that it's incredible been have amount the teams an done.

as at transition. Now early the I in when -- look customers very talked still we're about the we've with

need high to into so you the seven called at what when and last early then what's experience been And don't also drive immersive Wi-Fi used be you for at products XXX.XXax. you portions backbones. years, it's the possibilities of get could to these organizations And what the we happening X upgrade I see we're look transition. you now effectively to is switching small latency days in assume portfolio points performance get the but the And going low is -- you used very two know the to just access for, this keep of -- If small very customers still we've years, Campus years. seven five believe portions to and the

is to great transition network their so an cloud for wired say behind refresh great modernize on a like through. our they're we wireless the every this guys beginning of that as think infrastructure based it's customers going network they and all overarching Our

we how at today. look that's So it

Thank you.

question Next please.

Sami Badri Suisse. with Credit

You may ahead. go

M&A, you just and focus that strength you Or this new are in of that that the have I'd security in legacy more campus, in thank the specifically more that made? market? question. Or being to like you mainly acquisitions finally for you are guys forward in acquisitions strength the refreshing by quarter on Hi, Is and the being driven more from the to is that Given the the some you've had? made predominantly integrated the going you security offerings legacy? you pulling is all saw.

you give and let then, color some of breakdown I'll you numbers. Kelly, I'll the on comment the

about assumption think, this with had think data that, they today, and at underlying is you in if of users the edge being security customers network our on build based their the I the what's driven had the -- happening architecture they center. private applications they

was that And applications protected that's of the our center, They everywhere. you running operating have have architect data that hundreds this IoT SaaS They have private between are so, and you branches an where occurring explosion environment parameter. in have there. in their out your now way clouds. connectivity they customers they And different users places, are mobile public applications, of

building the of couple have and architecture so a whole last our the over has changed been And completely years. notion security of towards that teams

think really been is part across the is where threat you is and our happens in and driving and that the also new architecture very, those -- it's that's capabilities, we that And a software-rich actually all that traffic And data protect threat in making is, that -- very defend very, we've what it highly here. subscriptions. their concentrated have then So these investing business see can these same I surface the growth what's of is, across same acquisitions. threats and area, continuum dynamically why same wherever to customers'

this And is our so, of rest we we're also drive have Kelly? the that business, portfolio. in trying what recurring piece which to of

Yes.

we're Security it -- including I'll advanced the don't we the to earlier drivers, I forget this the obviously, was Networking benefit very tell embedding I growth portfolio, to big are network only in part mean, security you, of the great a it's from the so entire security into is the talked just revenue threat, Enterprise add security, about can -- growth we it. across broad-based. broad-based that comments to think is cloud portfolio. And portfolio, seeing in Duo I Chuck's comments, that add that, I acquisition very Enterprise because was thing But also

of some And disclosing because quarter, you. total then Thank this. the It's giving are if recurring you just, comments follow-up just it. this percentage that Got you're around small wondering, after Just out. subscription? of revenue revenue just

we're given about we if haven't Financial we software out was software but not No, think I again, actual it out the than portfolio really we our last in at And number, had time very Yes. Conference. quickly Analyst revenue the then. talked line, faster gave growing the what

right. you. All Thank

the well track on ahead told Conference we would everyone or we in at So, Financial Analyst where of be XXXX.

Got it. Thank you very much.

Okay.

Thanks, Chuck.

question? Next

Paul with you. & Co. Thank Silverstein Cowen

so a what Kelly, Thanks. forward? DRAM? you And Two that about switching I that XX% respect with shortly, and peers for the erosion Or apologize related and sure. commented in your is earlier And into about you've of you just it us the if have your shifted price Are going of rate supply I your this of announced on deployments. then, specifically there's China, and of chain out tariff, but make guidance? to your want comment Chuck, exposure a wireless to question, you LAN but misunderstood, incorporated telling a smaller the seeing no quick I pause question. matter then you're you some clarifications all just about talk can

et XXXX, waiting Points, that are are Wi-Fi upgraded X the pent-up X, As your you've customers demand? rolled now Access seeing Wi-Fi you cetera, you out new for

I'll with you and can then hit first the wireless. Chuck maybe the few start So on

was to X.X very a And continue year-over-year. Q you'll from is price. on impact, it disciplined in see price, the Paul, be points what on So, product rate gross we margin

quarters. tailwind on what last DRAM and became few line, And expected has this yes, question in So not, your as if a DRAM, slightly right been to quarter for in turned better us QX. we the than in

up guided part just where our So that a the comment I QX we benefiting actually I margin didn't where bit is ended on that. And little on at margin We're gross why the XX.X%. I'll guidance. in, have as be and from we there we've -- chain in baked what our our manufacturing Chuck our said, our will there it working still And is exposure but baked have suppliers. of we question, if greatly some gross tariff -- China, greatly, reduced than with from supply in happening

impact again, that that we're to the mitigate. So expecting -- we're trying

We have gave we guide in that. that we manage the for QX through we can think incorporated and

we'll Of goes as course, be the watching that quarter on.

to we've Yes. same of any And, not the -- ones I the think, earlier the the most on WiFi general, on transition are I front. and I the think new don't now keep saw think customers I in they'll X-enabled to then just comments -- I But think think our out build some we've Wi-Fi change think. that and Paul, don't in -- I substantive I Wi-Fi, week, of customers continuing our seen moving.

so We the of -- launched it for was -- the quarter, early last take in any too our week

Yes. have just done that's any, you, when launched. our the line. mean And we I'll tell amazing have tariffs, We the wouldn't job. teams I bottom an given

immaterial week at this point everything do baked hard to with the literally And the so and worked last a guide. teams needed incremental it's it's it. point so we on to relatively to in And executed where everybody deal

Super. Thank you.

take our question? We'll next Paul. Thanks,

Markets. Suva Global with you. Citigroup Jim Thank

ahead. go may You

much. Thank you very

the Thank just the have sales be end it think, XX% or a something, companies -- in cloud maybe haven't was but talked such your if have spending. markets different? pretty correctly, reading Can a north you the digestion of lot you I remember pauses whether that. a I environment. bridge outlook economic on XX%, your cloud uncertainty Some are help as about demand, inventory results Because right, of I'm did if overbilling appears, maybe below we've better a it seen of your It pulse you in a heard little about inventory, pause lot in us gap you. but channel? Or and

Yes.

I business, stress area the across see only But and risks. the a world. look, the we if provider. see think, service you the look SP. ago, of But SP of to we it up. at quarter, -- end if the was real in was our the in on the around in ended where from linearity beginning the same the watch back you we pretty just was was We guys rest And We our the year same quarter a saw where the shows same you of same TV watch. general the based shift same quarter as the go obviously quarter much

So of substantive SP, saw I don't change. think any we outside

never haven't what to but that's guess not want the to was published meeting we've out out given that really kind not our I number – your I really It saw just is. make you web-scale sure we there it our – No. exposure that's SP. And note I say – when Jim scale, because you correct cloud that like clarify web what if you're just the subset of

you. Got

for Okay. you. Thank greatly so Thank much Its clarification. appreciated. you the

please. question Next

Morgan with Faucette James Stanley. you. Thank

Great. perhaps ask a a couple Thank wanted just to couple of small for things. maybe you much. of questions I on very Kelly

First deferred know a down revenue there's I and bit some was XXX. little quarter-over-quarter that adjustments been around

then and just numbers some And from mix of there. get anything the can the lot at So of I the if margins in benefit we're there was was gross the a components And improvement reflection rest seemed the least you if tailwind just is so know were a got wonder, in if little see you happening But doing perhaps I'm unique what region. there. kind and like that that interpreting also addressed concentrated it wondering, reported we of And APAC there that world? didn't correctly. we

Yeah.

month-to-month billing. the will collab They've we by ago Yeah thing say to maybe driven So in the it's – a revenue. gone a pickup. much I changed business. our deferred deferred kind of talk of is first revenue and is the calls this only no really great couple of – that's kind about more

might pay it therefore, in anymore go – it with doesn't the we or customers through be deferred So financed would they'd revenue it past whereas flow might – through upfront.

Now the balance month-to-month it's which how is just it's sheets. recognized really going again through

it. that's what's driving So really

the you And Security from rest well paying big collab the subscriptions the just as of operational quarter-on-quarter as change the change ago the really like the thing of accounting is the upfront. shift versus business look is If business Enterprise of growing those at because the tick-down the all standard ramp quarter-on-quarter. a But going to – from our down. of year only you month-to-month know, with businesses the a more as portfolio are of is

I there? just ask And so there? should that follow-up are that happen And can going or other And could when to volatility a being of expect drag? the some you that see across stop to a parts quick we business we see just –

No.

think to I mean, of see going going I there. just again the is our offer through think But start changing going we're to the business we're you're what think that continue building continue rest is to collab I to the how just I – and up. offering

the that see say next to few growing quarters. So, get I'd back you'll here over

APAC. in then major margin seemingly reason Any that? the concentrated And for Okay. gross is

Service Japan was in margins that in mostly and and APAC average by to had isolated But gross deals typical Actually, very literally it's Japan. driven Yeah. – the in lower have that big in our some mostly we very the that. margin focused Provider some

Thanks. Great. Okay.

Yep.

next please. the question ahead Michelle, let's and go take

you. Steves RBC Mitch Markets. with Thank Capital

may sir. go ahead, You

kind Hey, some securities I only two. side have the and of maybe question. in back for secondly taking my One half update. guys. Thanks

plus. On the with growing security side, XX%

and people owner. as of think that have a that would Cisco ago back couple of a believe shared viewed I would years kind never

considering terms of provide maybe the a the do environment what that's same? little are changed guys guys has you to know demand figure And us think And guys better products I that's of teens solid. first back grow any Cisco something of sort more think of what the commentary to let's IT has kind I give sustainable Can I that Because are worse terms it selling? difficult guess half? kind is I mean the bit in spend then the in it's already guys you or out half kind growth? secondly, you going of you out been secondly you growth the So number. of to you view what think of historical or of instead then used XX% call

So know there I to well. you color can just if as any give wanted

Yeah, Mitch.

are security front really our what on So, The – the remember I I conversations I going be things for would – next talking of year the think for changed. couple we're tell a our about building me, in architectures look And customers ago after. I years know it's our And have to about customers that building. year was and can earlier. we're where team

were so, and with cases I they were they debating right. was them about where And investing in some because

be buy – And So to to perimeter do it think of built. to they've around. -- it is have strategic you to historically that what believe and we've grow. defend have the I threat in and they just e-mail, had firewall buy what just all from this have where if just contributed then the that's continue lots architecture some you the and And don't like which as seen can information communicate. dynamically this. vectors very you a platform you those and necessarily you're a I'm requires – the put across ingest I – architecture defending all – can best-of-breed teams I'm acquisitions different And here defending sources we've that approach when same If really opposed I today a I

as growth are. But rates on sure we're do. where see. I teams the we'll with based think other I'm to that and move that we quite happy So far things they'll acquisitions as have around

very good time. a for a business solid us for long it's think I

what look as have I the far add IT to to anything – don't As you've heard. we spending what

And going greater have from is lot any execute the continue certain that couple of And months I amazed think prepared as a play I else. at at but – to dynamics over the that around in I've the anybody issues. our There can today's we're been I've – don't geopolitical do. now in a just we've are We've said going to global in I to what's six think lot the macro visibility – happen There heard of cases. don't issues comments pretty on I economy than of years. we some things early resiliency repeatedly of there's world. the world that last certainly said

So.

Thanks, Mitch.

much. Got it. Thank you so

Apologies Yep. that. for

question Next please.

Thank Instinet. you. Nomura from Jeff Kvaal

ahead. go may You

you. Thank Yes.

Just following up web on scale. the prior about question

XXX-gig regard a particular have scale what think you progress when entry been your forward efforts do web pay-off, Your tell has look on that migration for what to number of think to point is you if us years. in can an the little vertical? in bit might you. Or for a TBD that I'm you about we wondering,

very And web-scale with of going valid we question. lot things a a providers have it's Yeah, today. on the

opportunity I represent think insert. certainly us an to XXX will for gig

is have known opportunity. decades working think the with the you providers. telcos points from an that I and transition really service for that where architectural We've

really You a typically don't architecture. transition. It insert into requires an existing

We're I made away. thinking gig representative those relationship still time making the on. got have discussions to side. on ton would We've spending any with that of plugging So, lot We've I a are our keep going to time us. deep things technical XXX to and be But that. think of lot progress. about think progress of on give line kinds going and wait a They're you we're of just Campus a of

So, plugging long-term to making big progress are make we're away. keep and we these that continue decisions they're going to but

crossed. margins or Fingers mix can timeframe increase. can tell And I'll mean then then to side your to you Well, guess tell to intermediate from would choose does guess? I like what keep an over be the you asking gross whatever guess. where What software I -- about continue Kelly you the Okay. us timeframe I you us I

were when Yes, I the you we've up moved of the And again XX% just I back go I X.X look guiding if of up come I back another XX%. our moved the our couple point years to I and you when guided if up. you And QX years margins. where steadily three over we three last -- mean XX% over steadily go years gross guide to XX%. We've think look think to at last get

going seeing up we're through there. you're our again as go gross margins So, that

and always I there's think puts takes.

we're us it's natural to DRAM It's and quarter with again the erosion turnaround but or if price going can lot whether have that's us driving have else. do productivity. a see help is going positivity helping every tariffs help we We us offset to we that anything there. we incremental costs

software continue So, now making the to it's great and is XX% goal shift our to reason a margin innovation drive we're here good. besides accretion. to the we're I whole the XX% pretty is And think whole to way guiding

just see shift you're to us So, going to that portfolio our continue way.

Okay. Thank you.

Yes. next question. let's All right the Michelle, tee-up

go Piper with Fish may you Jim you. ahead. Jaffray, Thank

but Thanks. maybe there off kind going the revenue just around Hey related expect you Chuck going question its a impact of and just lower you higher we Maybe Kelly quarter what orders Maybe should the then Like gross here. are specifically were congrats could initial VNS with know cycle Rod's is But margin shift to you seeing fantastic expect days. going be do products to already? or any to and execution you contribution discuss to I before what Kelly early to on for on to? back XG. of benefit the model? saying in

in have think these even of out. are XG one Jim a quarter the connections look they when Number forecast future -- money basically. wait sometime where of We're how And spending the to guys. they're so lots we're is really today there's saw -- big today will gets their to their begin be the first to into would selling going have the XG relates let they're to on backbone see it's technology play. where they to dedicated core going macro -- infrastructure last with to networks backbones and incredibly routing it evolve we to that calendar the obviously obviously believe and of the run them us packet traffic. point that We're the when accommodate architectural the which it their see and the XXXX. don't to always healthy radio we XG And the primarily Okay. on like see on impact play from -- they I data technology they're be that capacity call build out going that but to XG then we for the we where early couple a the I for designs felt should we'll for new as increases front they're going plays in sometime to existing CapEx is networks new portion would where and of me leveraging begin networks come but But working have big said core And XG. core out these things we've and building to they XG networks trials is them when also we generally obviously the number out.

portfolio than customers automation VNS is looking everything think Yes. just our on customers the are and little different SP a don't Everybody's I Enterprise And entire I just I right? and say moving right? throughput just for would core less enterprise that more everything are that the or it's less the we're Prices more direction. and And whether else. it's just and for the nature driving getting SP of beast software-defined

-- the we're in portfolio. values is VNS-specific nothing the it's it's that value our to the but software bringing the So, customers. software The entire where automation

Thanks. Great. Congrats again.

Thanks.

please. question Next

Thank you. Wolfe Milunovich from ahead. you may Steve Research, go

Thank you.

growth sort externally on to the tweak still and that maybe return I culture when First drag employee Kelly the talking you net the I of any to think you which results deferred I of order bridging concern of us the could wanted quarter. assess think part revenue out bit you XXX you look next Score year-over-year the think how of us growth? a that of X.X% to a Chuck you're kind that gave X% in impact which you might we're maybe then is if of culture the and X% like about bit could terms Promoter M&A seeing. And while And about you if how Net came and your in. a then your surveys update that's things And

Kelly?

Yes sure.

So, I'll take first. the topline

up public were the like for the X% if at they for of Chuck again the for all rest sector X% enterprise the orders business XX% X% you yes, So, look said commercial. growth

And have visibility and good as can the of sales have regional seeing. we So that's -- with strengths. had guide into what's all they're sitting we backlog. terms leaders where you our We we service work all we provider know pipeline we very great when in in what It's we -- issue. have the

very with comfortable we factors. feel So, those of that the based all you we're giving on guide

in we saw basically it's So, slowdown that the SP for orders. incorporated the

Duo and from In terms really acquisition. we talked tiny question the very acquisitions. a It's about so inorganic of only as revenue the Luxtera yes of our bit

the compared X.X quarter it was points only a was the number quarter. small our this relatively so And impact to XXX points basis only it was XX other So, growth. of

we're deferring. the X% perspective. Even from slightly was Networking on -- it for it's that's deferring. of we and because on one over example driver the more So, that a X% though -- are portfolio margin then points we're we're X.X like last, Enterprise puts deferring on of still takes the the And deferring deferred still

of we little it's subscription material. nothing but replacement a kind So new your bit, on. rate we these have as that -- that the have hurts That products

and XXX fairly acquisitions small. are So from a revenue, the

we employee’s, a who communities their the and frequent giving focused basically what's is think we've lot employees a -- our running it's deeply to Cisco, is the things do on communication. been I discovered prioritizing of because that so I've focused but for it love trying on we us the culture have giving highly always to great talent. back authentic upon people they to ability ability in we've guess, really, a to clear that core to back world business. what And part want issue, been and an with give environment been work we've look on And We've our communication really Steve, that about competitive care today's back. just an our them of to been And incredibly and amplifying I create way where environment in told that do metrics contingent

interconnected. the so very are And two

the one you great rate As I you tell around moved at it? up. work. we've places employer how we look do ranking, external The as mean -- world, if far every I to

where one world. we're -- when the I became which months two one in over world, were And -- six. come obviously And of the Glassdoor and we rated CEO, X.X ago, XX% things. U.S. for around rankings I number the the think countries in out number in the input number think maybe rate we're directly from to employees. all kinds countries XX those that we around watch just U.S. that XX I the above recently, And is came we And those XX we're of

it's important job actually working we're results. they important much think it. a better help We and -- your of on it's So employees do overall because because very when hard are the happy,

somewhat cyclical. it's So

Thank you.

time All one for right. have I last believe, we question.

Thank you. from Pierre Ferragu New Research, Street ahead. go you may

integrated how vendor. questions. the gets leading you talk technology platform more thank small I heard you of cloud Chuck, for about taking Hi, and my Cisco with

IT hearing the love different is a the having imagine, can cloud. migrate you to I -- going time As into this cloud that will to that Enterprise the that expand long quite

idea Is of vendors? have market do big the in with that to already vendors. of curious the technology? in is big to integrated don't any business -- today. business. in you the you rate of And is moved partnership any model you course that go it was market from bit if how idea Cisco cloud your how your to more revenues that cloud I Do of So how you so go And I are of clients? directly with a know have hear if the you it your today to take in with are terms technology on to that something

Yes. is is cloud transition technology same with which integrated It's word Thanks because in like enabling we cloud hard the offered to to to that cloud the either or really the platforms use. to building our quantify off the you cloud providers Pierre. as the the that customers we're or expand or to put

technology the everything private of we routing from now security from announced virtualized functions appreciate stacks talked Kubernetes even SD-WAN done. then for or AWS and into and of offering services integrating Stack like about the you from some We virtualized integrating security -- cloud it off these of what coming developers, with they that data technology that. center with Google to to stack So gateways it's ACI the we still Azure extending up that integration recently the with our our the hybrid on-premise that we've cloud Azure and

didn't cloud, applications employees where awful talk So some fact they the play. there's move about cloud. their moving to we are while to lot an of that areas customers We the the

which is a focused really our that what been undertaking. have cloud transition on opportunity this evolve big customers the been to to this which so And is to access portfolio enable there's we've

amounts more So that is only move massive our I continue technology it you'll and area. see to us drive customers' in our touching really of this think portfolio facilitates

question. the appreciate So

complex wrap has time that to up. I everybody spending going dynamics macro Obviously, do forward. we proud accomplish. can with for We're operating want today. well we're to geopolitical right and very teams our we now. we continuing in what that's on to the to and I'll control But that environment continue us as we're So of execute thank things what plan as an

look talking So for forward with quarter. spending we today again to time and next you to us thanks

is Thanks This Chuck. Marilyn.

Just here. the to up want close call

on explicit FD, We Regulation policy of financial comment call. now XX, time. reflect to which at will on public light it's in during to quarter Eastern to that quarterly PM Wednesday, done Cisco's earnings Pacific fourth call close August annual PM XXXX through conference I'd X:XX guidance audience will the our like Time, not the Cisco's So an fiscal disclosure. quarter unless X:XX XXXX plan the next remind its results Again and is be

you and week. through speaking much the today. have remainder contact department further joining questions, to you the forward to the free for with feel we're very any Relations If Cisco Investor looking you Thank of

call. you today's thank for participating on conference And

If call to call its in you like XXX-XXX-XXXX. the you would may entirety, to listen

For participants concludes dialing dial from today's call. outside the This XXX-XXX-XXXX. U.S., please

at you. You may this Thank disconnect time.