Cisco Systems (CSCO) 10 Feb 212021 Q2 Earnings call transcript

Welcome to Cisco's Second Quarter Fiscal Year 2021 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.

second XXXX Cisco's Call. earnings to everyone, quarter quarterly fiscal conference Welcome, I’m welcome is Investor our Chuck and of Mora, Chairman pleased and CEO; This Head by Relations, Marilyn CFO. Herren, Scott our I'm joined and very to Robbins, have By press release. our now, seen earnings you should corresponding slides, call. information, including A will on available the made webcast section in website following with our the supplemental be Investor Relations found cash in GAAP to Financial can non-GAAP flow sheets, statements full balance information website. and statements, of Income also section information, be the Information Relations our financial other reconciliation Investor both conference and discuss this call, of customer Throughout we in product will terms results financial will revenue otherwise. be referencing orders, and in geographic stated and results GAAP results and terms non-GAAP product of unless call year-over-year throughout on be made basis. comparisons a All this will be the The the for quarter forward-looking today discussing will we matters be include we guidance XXXX. providing statements, will of fiscal third including and in specifically documents COVID-XX, to forward-looking which They including results the that factors uncertainties, identify subject recent important most from the with discuss we XX-K filed cause materially contained on risk those reports the and are to actual could statements. Forms in XX-Q, our in the risks that detail differ SEC, the slides this respect guidance, also press please With for release that to accompany further and see call details. its Cisco quarter unless will an during guidance disclosure. on not it explicit comment the financial is public done through it Chuck. to turn over I'll now With that,

Marilyn. Thanks,

are safe and vaccines This all, of healthy. give of healing path I you First and a recovery. to hope families that is your promise us full and year of as all

expansion This the of past non-GAAP sheet. a guidance strong further top of team balance future EPS and in of margin and look our We strengthening and our supported to performance landing at are lies coming delivered forward the our by all end above optimistic ahead. the what our expectations high quarter, range with revenues about

in year-over-year signs with are customer growth we improvement seeing encouraging takes shape rates. our of all the segments as across recovery showing importantly, strength More business

Our a connect, innovating pandemic remarkable have a their done our throughout executing and world. customers partners to secure in the accelerate job help cloud-first agility employees and automate and to digital

issues embracing partnering to business and work. on are that secure environments resiliency, are with success: hybrid their modernizing We IT them their core essential

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security, be building agility simplicity, with are as service. we built-in consumed automation solutions can that networking a First, and

we experience. Second, of optimizing DevOps agility application and are user greater end customers' that scale and cloud-native the our best experiences, deliver speed, enabling applications

are and efficacy for end-to-end by at secure and our with cloud. home in with high an being meeting and are Fourth, delivering solutions the integrated demand workplace delivered Third, top Fifth, are efficiently whether future ever-growing the collaboration building access, or building internet and privacy are and partners, the experiences highly higher low a matter or for latency we're with of on-prem we speeds. connectivity future the the hybrid, work best we priority, the customers workers no security security safer transforming in office. that a

need no am and this solutions deliver strategy carrier users and we right customers holds. move closer workloads confident while innovation to what networks. extending and the is and edge network that enhancing are developing world matter to apps the I as integrated and for a Lastly, experience the capabilities new devices, distributed that developer future enterprise our the

a to subscription. our quarters as $X.X and some of and brought and XX% of signs of on in by perspective, Security, nearly and our growth some XK, remains soft, more software public in in billion gradual software business great a moving elongated revenue, driven led as improvement The we The orders. revenue service Switching, the pandemic. performance a sales sector quarter, by by of saw in transformation subscriptions strength to Now Center From show spending customers revenue product our market we order product for portfolios. see Catalyst together achieved to continued among Data this progress, commercial, three account Enterprise to continue Wireless with provider software sold we our continues our WebEx pause businesses, which cycles

of We also our product in growth consecutive double-digit quarter revenue. deferred sixth our saw

to applications. to next-generation gig, our I work XG, pace solutions hybrid continue of We invest XXX Security, innovation, opportunities as and confident models. the our digital and ability capture unique as we consumption in such in ahead in capabilities accelerate areas Cloud, delivering am flexible long-term

are of for Looking as recent as IT remains growth priorities, among migration and cloud top software, XXXX. Cisco year-over-year CIOs' infrastructure. budget spending forward-looking network indicate well as ahead, including IT cloud we spending cybersecurity well-positioned surveys cautiously And optimistic, calendar infrastructure,

market, We uncertainty behind us pandemic in vigilant mindful the which the and is are not and also its yet. of about the influence fully

saw is of family, secure, intent-based suite this growth. another agile Catalyst and platform how building help momentum A reflected touch highly revenue portfolio subscription-based, environments, me of networking. are customers nature networking cloud-native of good modern distributed on our example we are To achieve networks deliver IT is a double-digit them Infrastructure XK the change fundamentally to unified quarter must the architected. our this, let in and our their which manage Platforms. Now, complex of To

delivering infrastructure decision-making. observability from to the to give insights customers for also the stack our greater full are application We better faster,

portfolio security this well as leading Intersight, We of our are doing key and like ThousandEyes through our as elements innovations. AppDynamics,

the their global transport playing an infrastructure, future. for in customers in important networks leader a helping As network are we role build

and order This fifth increasing is on business, SD-WAN digits. XX% has RAN core we delivered XX-month platforms center triple a platforms, services. we on on optical automation capabilities. Edge very better mobile over our efficiency quarter capture invest Silicon as in routing, of routing, enable One consecutive other a our trailing switching rapid to XG reflected focus heavily and Wi-Fi Cisco on growth, gig continue had Open transitions portfolio, data – built our We And In grew web-scale XG, and orders silicon delivering and our to XXX a which to optics to market. over the basis, X

By on large customers Silicon power, in see our as our as of in environmental well switching network save can incredibly up are One, a performance While vary energy due to deals, reduction their our ability can building also to network in we a significant our meaningful timing further confident strengthen of footprint cost savings. position. the we quarter-to-quarter resulting XX% to

meet and leading-edge why Our in agreement technology will space. bandwidth to just next connectivity. This another us still we to confident economics will both to high-speed the is requirements deliver optical I'm generation providing reason web-scale is the acquire of networks, win which the Acacia continue enable critical to to

portfolio the If from As cloud-managed cloud, I've will. it majority to can and we to of cloud-driven, be the we deliver mentioned, delivered-as-a-service. we our plan transition

with at solutions. looking along are example, creating cloud service other as For SD-WAN offering security new a we plus

capabilities We deliver. one cloud else seamless networking control, to provide that the simplified can end-to-end also with reliability security, and will no on-ramp automation, plus

Security, we growth to cloud-based by to delivered which of access data and our and next adoption increasing driven from of fast revenue quarter Moving anywhere. strong can architectures, enable generation another secured applications

breach security adopting and recent urgent environments, With applications new SolarWinds are the threat our are customers for privacy The data work rapid distributed the growth architectures increasingly highlights only more in identity need and advanced modern as defense. critical.

our we comprehensive the an surface since delivered automating customers also to generally solutions it security on June. Umbrella, Cisco capabilities the Over and highly committed We're native stack remain effective last in organization's and extends on and secure became hybrid integrated policies cloud seeing benefits framework across and workload already internet the any delivered end-to-end security response portfolio on-prem Zero of available This best-in-class platform. architecture, service delivering cloud for built while Trust Viptela. Our have developed and unified our gateway, leading simple, cloud access platform this across protection to offers minimizing cloud. edge delivering a and SecureX, secure simplified footprint. Meraki detection cloud are SD-WAN attack where We X,XXX any security

our portfolio, focused an intelligent which collaboration insights. solutions enable on an secured we're includes and to will workforce Applications productive building collaboration, with automation, that workplace, Turning and engaged, built

our are. no customers, best is they where to matter deliver aim experience collaboration Our for the

stay strong with XXX the our are of work able I'm resulting million revenue ensure connected WebEx done Our growth. productive. momentum continued, has nearly users still to in to that proud and team average double-digit quarterly WebEx

for month every addition, are the we billion around calls connecting world. X over customers In our

to are an collaboration We market at innovation pace. bringing the incredible unprecedented

XXX we a in-person better deliver privacy feature than interactions. event, At than innovations, experiences. new product introduced to more and inclusive is to XX experience our and integrating just security deliver goal recent Our WebexOne

the Desk platforms. Some Webex Pro and series powerful include noise of language capabilities translation, our we cancellation, real-time new announced

improve Our business Slido Webex cloud-based Center vision recently announced with we is customer clear intent furthers suite strong. building our WebEx and a our our technologies to and strategy our as In of acquire to Contact these IMImobile combine of remains interactions. summary, applications

in at speed our We and results in coming are with earnings delivered and innovating above executing stated coming solid guidance. with our revenue and QX high-end the

we're recovery phase, gradual believe our the customers to innovation to proud Cisco years we am partner what The achieved. of will we turn trusted well so incredible partnerships of into our As serve the have ahead. in I as choice. us move continue their and will building teams

communities to their ongoing even come. has years society, While well year Cisco growth to now over in to approach turn many around be we as our long-term to and deploy heart position we stronger customers the CFO believe in drive post-pandemic firmly I committed power to financial an it powering win look populations in technology disciplined walk next capture the new and underserved of to more opportunity to the investment why networks too to inclusive are generation at our I'll and innovation, we and ahead past organizations. inclusivity world, Scott, the of results. to is the to believe positioned all. opportunities our their our an for through With our expect highlighted is for future inequities which far

record Scott experience transitions of software transformation we a strong has the be as proven look to has continued plan to in to SaaS partnering model to Scott, him successful next you. phase our with and Scott recurring know, proven from I'll perpetual track and leading licenses over you powerful a and addition of Cisco's As to team, business forward subscriptions.

Thanks, Chuck.

by time such at company's start team how the Cisco pivotal me join am transformation. a to the saying Let excited I in

observations of initial our growth will drive years several focused, software and the exciting services. from my our performance Chuck that impressed of the also key revenue goals and years. the laid the to here laid and quarter, I be Achieving turning team in thought share company out call at It's Before time its the transformation. and and ago the team company driving is on earlier three strategies that made the XX% unified out Cisco the It's priorities. in in joining an this leadership progress clear next I'm I'd to the by our over has role.

and examining and In priorities, growth, to term. creation properly on maximize investments, a through setting focus metrics and profitable I'm operating insight terms and the understand organic disciplined value following; strategic transformation business management key financial the to to you driving continued and our providing both value include longer my also plan committed of needed long-term efficiency, inorganic. they a

results our for with I'll followed turn start QX. to our by for the results. financial a summary let's the Now quarter, guidance of

three the range, of good billion we net our areas two sequential $XX.X flat Our guidance revenue growth gradual results in a product execution out came year-over-year, Total margins several our see geographies. continuing in reflect top earnings of at QX rate growth of strong challenging and per and recovery key in in overall in income and very environment. with share as non-GAAP of improvement

year-over-year. basis XX was share coming per was up up end non-GAAP XX.X%, our non-GAAP earnings $X.X net and range was income X%, of guidance and margin above the points; operating non-GAAP X% Our billion up high in $X.XX

me X%. was infrastructure let more some revenue. Total on down X%, product detail $X.X was down Now QX our billion, platforms provide revenue

Data servers, the primarily revenue Applications with contraction. continued driven environment. declined As in also Cat products we by driven within strong Meraki. flat provider, of the see declined by continued continue COVID was momentum weakness is Routing area strong was continued X we overall, solid of center impacted center the market the saw revenue to as overall, experienced Switching double-digit growth in Wi-Fi our strengthened XXXX, working. growth switching we a and solid continuing flat by this innovations we our endpoints. the growth XXXX offset by the wireless across campus reminder, in criticality and had Security the saw of driven with product product growth by growth This Communication most products data strong declines ramp switching. Webex and portfolio. service was up driven Unified of was by TP remote XX% and Nexus

delivering Our cloud with growth solution support. And in driven continue business Umbrella revenue and software more security of growth offerings portfolio strong driving performed Service well continued our momentum as more we by and business, Duo well maintenance to and as X% double-digit subscriptions. our was offerings. up transform our

for up portfolio mentioned see and continued Remaining up services points total as of was RPO The growth demonstrates service were another QX for obligations software happening. of broad $XX.X performance year-over-year, of billion, end Chuck in earlier. product the at as XX%. and software XX% the subscriptions of up Software strength XX% the revenue, and up was XX%, recovery we indicator were RPO RPO of or X our

orders up were total X%, a from improvement QX. significant of orders product in terms In QX,

XX% Americas was our margin was positive mix, Mexico points, XX by XX.X% driven gross commercial service was Looking The down basis geographies, basis customer X%. some service XX X% X%. growth margin product benefit X%, pricing. were up down Total was up enterprise up points including sector software was gross partially points offset up markets gross XX XX.X% improvements was XX.X% at gross and product by the with segments, was and up were total down X% and XX%, margins X%, up down provider product our In margin down was plus XX%. emerging BRICS up and public the EMEA in Non-GAAP was productivity basis year-over-year. APJC

from income and and billion up balance of cash billion $X.XX. investments billion equivalents line as bottom $XX.X with was lower the a GAAP per the by net and of perspective, $XXX total with timing expected, QX flow share QX payments cash ended terms sequentially. the In earnings was quarter, of for $X.X beginning down $X We driven restructuring a million Operating receivables XX% payments. cash,

of reflects And free XXth increasing stability in of year-over-year. to reinforces quarterly to strength cash flow. dividend per of shareholders, billion and $X.XX quarter increase capital our to to shareholders our the for We our dividends today perspective, commitment we've increase the expect up cash returned shareholders dividend year. operating From to the $X.X $X.X a cash capital X% dividend the $X.XX we of flows. flow represents $X.X the we fiscal over growth of XX% our comprised returned year normalize course was our billion million our and allocation quarterly This the confidence billion share, our returning of that to which and Year-to-date, to consecutive and during announced $XXX share ongoing repurchases. the

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

an under the During Acacia amendment agreement which to previously agreed announced Communications. acquire QX, to merger definitive we we

subject acquisition We fiscal approval. Acacia expect our stockholder in Acacia to to conditions, closing complete the QX including

strategy center our our addition, to native offerings. M&A contact solutions acquire the on income shift and investments, growth us enhance targeted announced per internal driving of and allow we to and growth are We're position communications new differentiate and a and we value. our in SaaS platform further investments strengthen and to services To In with of shareholder an and provider intent with our making R&D share focus company based cloud software to margins software cloud non-GAAP summarize, innovation growth. our consistent Webex IMImobile, the Slido and executed with These more earnings growth innovation and seeing we're well the market net to our long-term strong continued and returns areas. subscriptions in our delivering complimenting

although fiscal for of include subject roughly along forecast six revenue assumed information years. incremental to We've impact XXXX. guidance million $XXX the is for every does to regarding total and quarter looking occurs we which of extra our reiterate week, approximately to third an revenue referred impact growth, QX difficult as guidance guidance forward follows. extra earlier. that week the Marilyn week, sales factored expenses, and let five X% on guidance our it's cost into is to me have the to X% of disclaimer Now, both This extra of with year-over-year operating The expenses. this the QX for

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

ahead go and let's Michelle, Scott. the queue up Thanks, Q&A.

Thank you.

Marshall from question first Our Meta comes Morgan Stanley. from

You may go ahead.

Maybe when a in Thanks. work will looks return a take like? that wanted me, what sense when where of employees start in versus the the like to to I think investment just that and return office? you get place hybrid off do for architecture And you workplace organizations to to Great. Thanks. are planning feel of kind for

thank you. Meta, Yes,

we under to had offices late mid have begin think that sort operating to is the we back of – I probably summer. in come that to will premise the a what been – customers thinking been

September. be we’ve for the suspect prepare you if of as I return, But you begun York back an our in in to ready We Wi-Fi news infrastructure look begin case, New their for the heard may networks. some they I say companies get on watching this those think that as people wireless that offices uptake were morning, have companies to come the the example, believe put will to load that they to seen office require switching and as that that X, return. as significant would

meeting, a every in future believe We going be are in the hybrid even also back to meeting office. that people is the when

model You’ll in also have drive most room our could order the which people remote. and will will And video to infrastructure. that, you’ll but which putting office, customers switching we they lead have, accommodate units in again the accommodate hybrid conference suspect have work people will every to in bandwidth requirements be also of

playing we see way that worker we’ll So around of few progress the return. expect that��s as X out have continue safety prepare over the the next it Wi-Fi to some and they some the we our portfolio and with months. solutions build see from to that And would the we outs collaboration customers

Great. Thanks.

Next question, please?

Jim Suva Investment Research. from you. Citigroup Thank

ahead. may You go

Thank you very much.

are your a investors are I up some little bit the an a comps year-over-year, the at hey, off leverage week. revenue much little be costs quite per extra less there But EPS of travel. more I the not share? wouldn’t earnings flow-through Why is think guidance, of Looking line asking bottom year-over-year think bit impressively there’s also and easy there. with to guidance additional about, There

this It’s Yes, thanks, couple revenue, commentary. bring in a extra I about $XXX QX there’s think the we opening have it additional touched in along you Not million. it to in does And with well. only And additional brings bear as along on the mind. the spend question. Jim, for things week

you year-on-year Our year, from plans through compare expectation million spend. through, coming $XXX about we is last have Coming comp when also reset. additional of

and well. an commissions The last than as on FX. is on track dollar this the having and different as are expect, of you’d us a they weakness year, effect year were So bonuses

through And to when OpEx the those line. COGS you the that’s up, add and drops so what

get just of track, We your question would on been. have next what to maybe are ahead

things the we are continues track into for this That factoring on us year, there billion through all quarter. well. for are We’re to this but coming of $X behind our go talked that there point, Almost that that savings some about this is with spend rate restructuring. the year-on-year of at

to forward Scott. details. Scott. thanks you, And with I’m looking color welcome. the you. and working And Thanks, Thank It’s for Jim.

you. Thank Jim. you, And

Jim. Thanks,

please. question, Next

Thank Ittai Kidron from you. Oppenheimer.

may ahead, You go sir.

new Scott, color? have give can on to bigger a now versus luck, good Maybe In in of you here us the I you moves guess give little and a a a that here the Thanks, ways in company. perspective bit different on little orders more, and first It and just and about Enterprise, more questions, of your Chuck, seems couple declined company. in to picture perhaps second operates should to lag before what a us I they’re that like role. clearly the Cisco have been impacting for significant Cisco and a about think a going around. it could you forward and a way others. question, difficult growth a the do pandemic? I’m you, bigger more differently you very understand the Chuck. year trying the normalize expect into improve? heading then bit When ago learned of picture the you one all and going It’s thinks And the the we of year kind forward? And implemented how lessons X% how

see thank a impacted although you. saw Ittai, midst the Think did in But not struggle Think all we across that the transportation, still of that hospitality, you technical think the are would Enterprise, saw look if by to Service we financial segments, vertical look, those I movement and is, improvement year-over-year. Provider, manufacturing. services. we tell are it’s industries negative sector. still positive in perspective, improvement first directly that pandemic retail, pandemic. at Think continue And And, services. Public industry Commercial Yes, from then what – you And from I customer the energy. of

future come as as look to are will that industries the pandemic by the well. that will And we out depressed thing this from perspective, gives and being recover us that those it so think of I confidence that obviously

sign just obviously came lead, followed. that X% also on following. been when we was Commercial perspective, is the that which past good other and gives the think saw in thing bounce. So confidence really is then an Commercial that the crisis, of it Enterprise it’s the we’ve positive seeing we But business And quarter U.S. reflected a out that orders Enterprise And I nice us of globally. future grew a go X% this from XXXX the

picture, comments, outlined the to relates the my of lot Earlier it strategic in actually in say think that we’ve a I’d web-scale flexibility. I optimistic we we’re As the I that all on. bigger about six customers giving space. about the are our talked pillars we super made progress consumption focused

revenues, We XX% continue were will only I that our deliver it think to of on which software $X.X billion coming increase. this again, quarter. And software, and from

I growth more combined and a continued continued So six think options three web-scale years. pillars software do next trying is focus consumption those other to two customers and that with to we’re on flexibility our to what over for opportunities transition and the and

Very good. luck. Good

Ittai. Thanks,

Next question?

Company. Paul Cowen you. Thank Silverstein & from

go may You ahead.

the for of terms operating questions. and can was? company hopefully thoughts the at that of both In as in us drive and even of tell gross you where line taking Thanks structure both the with to better Scott, upside any that, price asset can what mortgage connection and you the the rate degradation from? resiliency

pricing the and Yes, you’ll last we’ve with over obviously, week, several seen quarters. the than for Q, see trailing seen next second QX four It we’d give the point. than really data X.X% but what seen and was what had this thanks, in slightly better we in actually modestly actually the quarter, better Paul. you The what ahead quarters. go the I’ll in And over line was mix

mix the quarter. So was as pricing expected during second

look longer-term, I the gross to think It little. around bounce is as margin going does. always you a

supply being is of of and a part not services what amount everyone think of have that benefit view of that think concerns offset but semiconductors. is the who products margin of chain factoring we some by you’ve mix of is greater our I software seen, significant that into there now I building that from ahead in contain the a gross us, somewhat right just from

we’re what supply to So do on chain us front. expect doing the you’d

on of that front. all our suppliers contacting are We key

protect of have, kind all volume supply that we leveraging chain the we ensuring that goal customer We’re further purchase with extending can shipments. of a out,

from a headwind in – there’s coming current bit chain. So supply of the supply just little those a lines the

some the to if trust supply at I world that’s transitory though, should commentary, Scott, It that the back normal. chain assuming pass you look out, issue point. beyond net we be that’s going Hey if a goes to positive sounds a there like trajectory

growing think And, mean, Cisco you’ve talked of higher through that’s of about right. business business, percent do I that at seen really coming our from growing job a the the margin. we’ve services. I the and comes a nice obviously, and percent software of

Appreciate you. Thank it.

please? question, Next

Ferragu Pierre New from you. Thank Street Research.

ahead. go may You

my you quarter have goes. record your my for Thank gross just model was XX.X% margin. reported my Hey. taking you I far for the checking this I question. Scott, a question is you actually and I on model, as think a as for back

back I far. think quite it goes

front. that like, stuff congratulations, a on So great

Thanks.

And transformation? expect expect But along how up we and structural we this transition ups and we want gross accelerate expansion should gross to is down, throughout should continue in the of you we about going your margin where should now margins a phase head Are think with my actually margin question course? in to over-time with Cloud?

because Yes, XXXX, model we’d reported to Pierre, your again, gross this our the back was quarter must margin fiscal since of go highest second XXXX.

we right should still product again, up everyone again, to in that that goes and next there building just services as I given slight based And I of is that drive little the a I of memory. going same headwind couple the a positive chain quarters over semis. on in margins. of this the mix from the concerns expect around trends. But think you’re market supply longer-term, from some gross on of that’s everyone be would Longer-term, a impact to of software standpoint. set see that have where terms So And bouncing

same if I the up have And follow theme. on Great. maybe quick a

in You extending a evolve next increase as service you the mention grab of to in What’s for for share that portfolio the Cloud-based? up technology product deliver transition. you to the

the of short Chuck. one. It’s take margins impact pretty the gross Pierre. time. very here that proud immediate by And delivering being Hey, I’ll is he record had Scott

I’m impressed. very

high impact. Yes, exactly,

those you our So as I Cloud-managed. enterprise property we’ve the those offerings, have capability that’s at together we’re frankly, the Think those capability over with what Meraki in what – about done as had integrating are as taking how and core that is uniquely – as a Cloud-delivered the do the have. look delivering well think take both bring portfolio, that Cloud to platform we Security the we’re as-a-service technologies a taking of we and to whole years as we of about like which, discussion lot rest portfolio, the and delivering SD-WAN we’ve a capabilities intellectual going we’re and unique service,

think forward. so I move see those that to And you’ll continue where are areas

anything In over a that sort we've virtualized addition of that now can deliver anything years, you pure as software. that's service, the to

of every at looking we're So aspect portfolio. the

Thanks, Chuck.

Thanks Pierre.

Next question.

Thank Research. you. Wolfe Jeff Kvaal from

ahead. go may You

you public I'm type very for product you. that wondering a And into, story? guess to dynamics the and Yes. of I'm could if you understand sector Silicon help us just with I One durability I then of lines two, you Thanks which secondly, the ask Thank much. the progress, what in are applications could strengths. web-scale expectation first help is was hoping the us wondering, the is better involved

Yes. Thanks, Jeff.

second the start let of sector. the me with So durability the one, public

to realized and occurred year over some the around think comments continue these is that's that I that'll and that future. that digital U.S. invest thing on two infrastructure, of flowing the the for they and is other I both sorts and last in have and of clearly period be crises have there countries certainly But technology stimulus that’s in world think for prepared helping. infrastructure in time, the I the obviously think to this one, in has

and some and will spending perspective. beefing And they're their given we've that think these the pre-pandemic. dependency need think I their to on the they we notwithstanding stimulus, of So what technology the of take I so greater over seen to last conclusion sort investments more see we than what years of have that allies that from less come fact, up post-pandemic be saw themselves on few some countries in

still think years come. I a out, goes you stimulus positive to a see for once net, think segment I a So few

clear we I'll the that to the few what take over many that has today and years of work last put of explain, have quarters that, just marathon minute to given. to me five a the has we've you do. lot is heard a the more information say begun years, work have become the And front, over a last this over And gave than was got five me to On actually pay-off. in teams web-scale we our last

year-over-year so saw we this digit portfolio. web-scale quarter our And triple growth in

quarters, four prior that the growth comments earlier to will tell in said the from range I I you XX% rates XX%. As

up five series been franchises. gig So last perspective, XXXX portfolio we about. for we've it's December which we're announced the XXX winning the selling quarters we're in a as you asked of talked From XXXX,

selling we're we're silicon, of some XXXX selling our well. selling are We and as Catalyst the portfolio the rest

ask to the that And other work it's And tell put we last And it made, are so four that to a we how feel about probably going investments perspective. relative finished, it's that, And you're hard you we've we last segment. you segment. from been averaged tell the service is material is last what but we in. of quarters, XX% over I'll the question SP that I'll just them, quarter the selling pretty size broad-based it our thing XX% good the is of was provider

it's where to gotten a it's So meaningful. point it

the So that's like decided big over have deal the – give will service Again, business big about information additional years much we've driven, that why this we to provider driven. today. the we'll business talked customer be

tendency have look think be quarters, it's eight be a it But going – be it positive. to quarters, four if of it you over quarters, So to should the continue I at to a six course will lumpy.

you, Thank Congratulations. Chuck.

Thanks.

please. Next question

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

provider Yes, one thanks of is the for the as the rate question. I be, had of well. in two guess, here surprising growth most One order numbers I would service X%.

that, just Chuck. a from unexpected what And a that? instance, with color, help you me. anything, understand if growth me could more you But curious you little part us Scott if quantify think can year-over-year for revenue I Just how that you there maybe drove way bit could turnaround you well. If impact, And huge just little second of I wanted quarter. the into answer for last there. bit on thing to margins gave to think affected then move dig help I the is back on based FX has those, dollar Thanks. ask, and any to us quantification the as you the

Hi Rod I'll take the first one.

And where XX% of that's represents are which saw down On about because web-scale, XX% the and positive the telco representing what the quarter digit from you perspective, stages XX% We that is of primarily in which saw a saw business at roughly segment. business segment. growth is in then triple and if cable, SP the look our space, an of XG. in growth in with was so yes, we we order the we

have world packet were mobile orchestration, backhaul, core. working roughly with solutions customers XX around on that We with the XG with

see provider core some few same packet that success of being backbone well a fact early made, so those decisions the degree – to And we've built. And seeing of means that positive SP begin we're which bode backhaul as will particular be seeing give is the will being are last show the the space build-outs in the a that confidence network as And having We're I core us web-scale been we And over that in transition. in decisions me space. the would high that get made. service progress the will news years. we're think we just for stuff saying the sub-segment good core backbone products

over been few build tailwind So success this the the segment XG this web-scale and right has the I many, a then hopeful and could with for outs for think, with next many us. for tough now years be underway years, that a we're us

is the this on Rod impact. And FX Scott

most As we you know in price USD. in markets

from FX have we worldwide impact the in limited obviously employees them a there's of dollar, So course pay you and with on line. local top the weaker currency. But

bit hesitant can that on you translate headwind a works. that's so OpEx side. the for for you us has the second during a back, but it understand on I'm headwind exact has figure a creates of when way – a so created it And the the us that, And it quarter. to it dynamics give just an you

you. Thank Okay.

Thanks Rod.

question. Next

Securities, from ahead. go may you Bank America of Liani Tal

a have and understanding so from change closure of two up I so questions. ask will my Acacia what that's Hello, seen is one. general now far, the way. clarification and we've One in the it easy versus What's just holding I'll the delays

versus routers. discuss The your four seeing next next on legacy you that When change, Where trends question year? vertical. switches you the increase than we the focus want you're basis Thanks. Can of the the quarters? for is four second the to outlook a you calendar I or product meaning where a quarters rather see are on the previous kind – what and is understand areas

am So second Tal, on the before start. clarification for going to one ask I I

about about product you So are about in you the good the space? we from a general? talking Are in enterprise next just just perspective or talking what over do quarters you're feel few

to Exactly. than the vertical level I'm understand trying level. product the rather it at

got Yes, it.

Okay.

we didn't have occurred, quite clear So approval, it have it's on the think what thought did, time. we we China didn't Acacia thing, I in we

they between and put deal performance out. not XX get we this shareholder price So expired the Chinese in they approval the the I me subsequently price was our keep then pretty because not think them so with was the honest, had our but contract to And and deal original proxies months got and was we astounding, the up Scott the out of and approval have question. I renegotiated candidly think

should that it'll expect Tal. we happen QX happen, during So

approval no the more done, get. shareholder vote to up point. at So is there's It's approvals China just to this

is good in shape. we So that think pretty

let now. the of me tell how sort feel run through portfolio on I right just the the On front, I'll second you and about everything

the portfolio, not XXXX is it, the if XG call for stuff in you the positive over the to good want expect where XXX a in portfolio is Infrastructure, of would whatever the at you the service next shape, really years. mass-scale built but that's being data next Mass-Scale to the some look centers, gig, So and be I for and think, and provider I three contributor, other it year think to two over very that I only

I infrastructure, campus begin look we going customers at We've I come the at to quarter think look I that – switching with they last X. in for WiFi upgrading. demand if think significant growth back there's to saw seen are

use to every add to they these as to accommodate effectively you an XX% upgrade the you WiFi that, driver. but – during the WiFi Just be last they've infrastructure that the And X on grew don't come video way room is on and to quarter. data a I like And likely what that to load happens that pandemic. a we conference to lot will when had video We to point typically also think require that a and disclose anywhere, is put it's in think customers going of back continue you we our WiFi, office that it. put give to going accommodate, when the underlying used for video go load it orders will

the The that continues well. a us. forward. integrated as there. we have I to I as we think technology think security, service seeing We So SD-WAN to be our growth Catalyst good We're about cloud I portfolio, think for technology with going good differentiator XXXX that's move the WiFi feel deliver Xportfolio. And a as

I'd the how portfolio evolves, months on couple security – to to a teams we about the I are feel very what six differentiated Within so say working another tracks see they we need that say or strategy, of but I'd good on plan that need do.

and execute. is to just portfolio current performing Our well need they

So we have to see that.

probably done that, would the space, are included brought performing the the Again, in view that a platform. the in the on an phones job not I they've forward way with on applications have when think, teams to you WebEx it's too. amazing to all there's you have what you think remember remember space got

as double up while WebEx digits Scott said. was So

that stack and improve I I I the have We're at to we we're edge team working which have teams strategy, the us is – to looking think think next take share over will doing you'll And pace that really like things the has the nascent. we got portfolio What I awhile. been WebEx somewhat nascent, the job. back. good to handset the just somewhat observability on which business, a I see I a on shape And actually, are miss? full as But feature working of portfolio continue think chance year, as drag also aspect well. think in did and the then You've are feel velocity, probably service of like And in think suite there is but work the the innovation, good the they're execute. a that's I in as our

Right. Thank you.

Next question, please.

may Samik ahead. go you Chatterjee from JPMorgan,

to If that we here? would going hardware Hi, to drivers a into the here, segment the particularly more security that just how it we to have expected the a to dig more you deeper on security is the have see on Chuck thanks for question. SolarWinds. customers should segment particularly or software or recent expect be demand more can bit Is momentum come the bit seen from? respond particularly you wanted if demand for events the

Yes.

that we think firewall portfolio I that had across actually really see we is network in security. a quarter and cloud what good

missed, you'll across in was a missed, and see portfolio. is see what buildup, phases what of the you have any I there. from do I because miss that SolarWinds move would going quarter across of me board, most what going customers am like, I the the caused the I early And we're that, impact positive then a to think they're where are it what think into from to good assess what I So I, need,

So try cloud assessments. technology of sorts parts being of the we're of the consume as situations. the lot those of it's firewall, early midst sort possibly saw then build a kinds our as consuming customers from security, and think those and the whatever doing we I to of customers the to network now, right in pandemic when VPN are with absorbed they of been that with But, feels could then we it security avoid like right combine now much can that

think continue for positive will us. be So would I to that that

you. Thank

please? Next question,

& Simon Leopold Raymond you. Associates. James Thank with

ahead, go may You sir.

Thanks for easy then first one. ask I thematic more question. and wanted to a one of an the taking

wondering quarter, And legacy is in you hopefully, side help the revenue if quantify easy get the me ability environment if the the then in to highlighted it the to people long could campus you've if see maybe of could number in broader are work, just terms components, many a your constraints, you you back On you – as how trend, But work, that. that cycle, cost imagine any like offsets have there to supply understand over. chain as because positives go products – the getting developing legs some to sounds CAT Wi-Fi XK not I of back good. maybe well sounds rolling

term. you if going longer on the Just over Campus in Thank build could a bridge you. on what's

All right. to take supply Scott, chain? you want

our supply of throughout evolving, didn't it's and you really the we on Yes, ability any quarter. on has chain out quarter. see to impact get know, stayed The scenario, product door team been as the the top second the during

both look it QX, line been something at headwind factored in second least, quarter it our margin on at – a top we us. gross in is As and on really that for into hasn't the the ahead guide, expectations significant the our been line. hasn't is But that

is navigating, a build pretty good and are And a doing teams ahead, it's job on certainly that built I think Yes, some to unknowns and But the into certainly done there's trying to job that our I of guide. complex. trying that buy have think inventory. think I the good teams it

described Campus what the customers. would expect think I for most what front, is On actually I I

else the when going go it? going to distance Are shrink space? footprint? Do based of in in everything no their out, you coming going look the and to home? think, don't And if I is they when this future they the beyond they go Simon, early that at occupied that one somewhat what sitting does at to we they own Does things really maintain that actually want those be, shared think back, they office need net that where employees And in get with productive we're it are do COVID stay us? employees stay question a lot that discussion so space like mean on – is safe to own because I like? the someone to personally ask beliefs in in want the customer the discussions in Does comfortable or we you customers I before more understand. of in people to want the shared home. think now have my more I else. philosophical until that mean the a back post-COVID it days is that What's even footprint? is it? come think, of earlier don't and social they're that going their don't opinion that But some I that space of believe Are to feel a office a day the kinds well pandemic we

think sort – moved People mentally. we I people it. actually struggle that of they're into are phase where not enjoying

I the One the I mind from to home. from of of forced don't our employees like said to home. don't working work me other option day, being

follow-on what just that seen to they're on with see And based or work I customers, employees' Enterprise space issues, and believe now. know and really fair are home days we'll Wi-Fi going it's week hopefully space we've over in accommodations three don't where concern with That's landing what versa. yet. is a space, the beyond upgrading infrastructure Commercial the office what home the we've question vice concern seen concern. week switching, other lead the quarter. that two ready, amount future going tells sort based or from are from does for from And pandemics they're here the getting we customers work a wireless where on work to over and everybody's in and X, The going of to the so believe, days But people a me of I that do to be hybrid, this

you. Thank

Thanks, Simon.

question? Next

from Barclays. Long Tim

may go You ahead, sir.

as if well. Thank I could you. Yes, two

Chuck, the very on well. XK First, maybe, Cat doing still

coming you Just will think due. be kind some what earlier of the when adopters licenses curious the are impacts of

maybe we of who competitors are serving Thank this you. on in there. there? traditional to see wins white is with from white Is just the Kind winning you're you inning So And of you then second where base? starting Cloud or box of are any curious against impact customer against Cloud business, just what to kind or are go kind what can back limit box that that?

thanks. Tim,

the the piece, – good, a on a is it about that think of XXXX. gives it So of I you're think Cat our I've this way and about I is the meaningful fiscal to in XK, said us size test it's before asking think it's and processes because value the that which really it our this stuff would I the material. it's side on renewal that renewal not I calls And license year year all proposition in think significantly couple chance because really is fiscal –

to of teams working it. and ready for are the get to So now be hard ahead right try that

XXXX announced I'm December of in we that launch, a would On the we that had we about future we talked be would the when I We sell what we Cloud right say playing front, internet of is silicon launch, systems. – the those of our boxes. would we sorry, them all mean, we software. our three And them have scenarios white would integrated customers out I sell or systems, would now. sell actually

XXX customers So have on who standardized we for our gig. have systems

are what who we boxes, our putting it and to actually customers in white would We silicon them testing which have do. is expect

them the be me to stack calling are, their you, running with we're on out. software some customers quite And our would evident have hardware. We competing people they short of

a that to we the that and I And fact and successful have are teams be a the traditional in about back first position XXX the these the going to ago have years back. and do that. think to occurred were the and think we to space, in earn players hard begun been we work lot gig when try wave transition back way that our missed in talked that work business I

of done. proud what they've really I'm So

Thank Okay. you.

have we Michelle? question. for last time Hey, one

from Credit Badri Sami Suisse. Thank you.

You may ahead. go

Sami?

open. line your Sami, is

you are mute? on Sami,

so. I don't think

There you are.

We We didn't hear before. hear you now. you

Perfect. Okay.

Sorry about that.

to and for cycle. this year Chuck. thing in this question come going supply of a One is people lot providers then vendors? has I really not equipment is telecommunication from effect equipment is are point, And about trying XG call that are chain to question just XG what's the and at we're think regarding the the understand telecommunications really, And consume anything up to three in the for other the the Scott. these how different First

of closed in do closures include M&A prepared that be XQ, the of fiscal versus there inorganic a already And organic acquired breakout inorganic, of fiscal some have You to any deals XQ. projections in has that or other revenues? are guide for would if and give Does you're helpful. us

take the me XG. Let

orchestration. customers participate hybrid core think in will we and that's networks; believe I And when radio they've on the that's standalone been this XG they will over of from the as they've been they're and building up out services in I most backbones backhaul, that we seeing is most now mobile cases with for in built. XG/XG mobile right core standalone case, And and is what on a the years where And that running core customers out in, build-out. there bandwidth build we see like that going that's XG to think cases, some decisions many building enterprise in that making you're backbones, to what begin packet the upgrades these be benefit and many you have been the elements with they've providers XG serve these some working traffic exceptions that of are networks. network most couple XG, sure, a packet backhaul; out of those the of support building the next out what capabilities; – believe to our load we to been –

participate we're kind right life we where on Scott, are question? M&A having touch networks. good areas these cycle the the that's the success to of want they based that in now. are where on you of So we And in

expect not of we couple quarter the closed a we've Strategically some have more adding did quite got do we guide, both were that of guide. at they which of Sami, acquisitions QX expect during quarter. small. to ones but of meaningful close in second are Sure. terms meaningful that Acacia meaningful. the to factored but on we during some We've important which the the those quarter, Obviously, be will the IMImobile have would during to close impact got level in this Neither point.

point which close, – those they'll it's closed the at insight this why some and are our not they're exactly get So – them. not expectations as as what certain those when currently is give into we you into close, factored for we'll guide

Got you it. Thank much. very

right. All

innovation some performance right are see that And have lot continue we Just remain and and lot hopeful the time. we feel announcing. of where optimism. come the of that complicated proud proud optimistic I pandemic. the I a of end done. like is everybody at where a we our are is think that up of I that the all during we'll And from coming with have a midst case; work based continued the that and in to business in be of what gives the perspective, definitely teams this for spending this built of to innovation want thank the be that now recovery, which as that fairly that of I'm us wrap we of again, there'll what Live everybody hope on we're we the today business, just a up, I'm Cisco we to we beginning through stays recovery. March have improvement our as time about safe And we us through

over back I'll you to of it on And, you. next all look forward we'll So to call. turn talking Marilyn, the to

on call, quarter XX, May Thanks, Pacific Chuck. will XXXX be fiscal Time, at Cisco's which our next reflect results, quarterly Eastern third X:XX will XXXX, PM PM earnings Wednesday, conference Time. X:XX

to As next Sachs a several the remind audience meetings reminder, few the guidance the through Goldman to we close done We unless weeks over Regulation during call. of explicit Again, will be FD, policy Technology to hosting its conferences light and public in investor plan disclosure. is comment is like and on Internet now quarter Cisco's the financial presenting not it I'd that Conference the tomorrow. at including

great team. day. any have Investor you If free to contact a further the questions, Relations Have feel

call. participating for today's on you Thank conference

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

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

time. You at may disconnect this