Cisco Systems (CSCO) 17 Feb 222022 Q2 Earnings call transcript

Welcome to Cisco's Second Quarter Fiscal Year 2022 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, Scott is Investor our Chuck and of Mora, Chair our and CEO; This Head by Relations, Marilyn I'm joined and Herren, CFO. Robbins, have should earnings you now, seen By press our release. including webcast Relations be Investor made information, corresponding the following call. our A supplemental in on website will slides, with the section available Investor be Income Relations section other financial and cash flow statements, full statements Information GAAP Financial to can website. non-GAAP found also reconciliation of the our information, balance sheets, in information this and results referencing geographic financial of Throughout terms we GAAP both otherwise. be and stated in conference will we'll call, of and non-GAAP unless product and revenue in results, customer results product orders discuss terms made comparisons this be throughout made basis. All will call on year-over-year a include today forward-looking for XXXX. discussing be statements, be the we year will we third matters the of guidance providing and will quarter full fiscal including The the are on actual identify discuss our factors cause detail results in we subject in uncertainties, the that those the materially important They to recent contained that with specifically to statements. including XX-Q, forward-looking from COVID-XX, could which in XX-K SEC, and most filed risks documents risk and differ the Forms reports see this With please and guidance, also that accompany slides respect release call to press details. further for the financial not comment unless will done explicit during is through it Cisco an on guidance its quarter the public disclosure. I over Chuck. will it turn now to

a in confidence to which the and innovation growth delivered era another my of all-time backlog of In are thrilled deliver and great and transformation by results XXXX of underscore orders, in After say our double-digit These healthy. high fueled pipeline. QX, and transformation. safe our remaining the and for cloud the we product reinforces growth. quarter fueled you Cisco's strong stronger criticality Thanks, we to proving to continued is year, solutions Marilyn. with an be delivered demand I'm success digital and increasing that results relevance all robust last hope an our I exceptional ARR and the year, solid even ability

of ahead customers' world. as navigate We they a our needs pressing most are staying focused dynamic on

are our accelerated moving work to our solutions customers offerings The even global and This and new architectures digital driven more a the and move Our services deliver by of entire ability requires consumption transformation. increasing combined than driving flexible modernized hybrid security portfolio. innovative scale, breadth partnerships with deeper at hybrid faster infrastructure, customers is with across cloud. to ever, our our

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Our third markets. across of again growth all XX% geographic quarter customer with of once and consecutive order momentum or regions higher

and resiliency. For large capabilities our example, over modernize and order the enterprise as in business, investments XX years their growth, enable new networks to delivered XX% customers we highest prioritize in digital

revenue In The We quarters. a edge record convert year into which ago with in us coming need backlog, the more our demonstrated expect web business, computing scale we delivered and the secure, work another our will more more continue. and for doubled pipeline is for as than and opportunity Cisco. As momentum solutions, and incredible will clear becomes hybrid to connectivity, growth digitized, drive our along seamless growing we highly by ahead quarter. hybrid cloud from of believe

on a is which than four-quarter trailing over order was XXX% more up Our growth basis. XX% growth year-over-year,

XXXX optical over rapid part the ZR strategy. driven XXX-gig optical solutions product the routed portfolio, our and and our which line, as performance, exceptional pace grew Cisco Acacia see One. with to of networking traction We're of also tremendous network routed seeing fueled of continue by Optics We the adoption Silicon by XX%,

Our customers. last businesses largest years well Optical double-digit innovations Systems and in in Acacia scale The next-generation players our both us the several space over invested have we've positioned by saw as technologies. adopt growth, significant driven the this web

believe to a making future balanced platform the modernize increased customers revenue X% decisions still critical are portfolio. their by perspective, This with Our growth product next-generation networks, phases our we demand product their build strategic map and Cisco's all a subscription strategies. in spending buying is with majority and their to expect unparalleled our early continue. connect on recognize road and hybrid strong From of portfolio momentum with workforce are delivered We decisions uptake strong quarter networks, securely offerings. out of another and to their customer of led their was our broad-based across their the XG they

cloud, and drive X WiFi investments continue observability, long-term will full performance growing on We large XXX-gig, in trends that security. prioritize including XG, our to the capitalize stack markets, mega and

Our deep our expertise in integration across sets up win. hardware, differentiates and software to silicon along and these the of us areas, us with portfolio,

access at speed help and best hybrid networking to the the build like service customers. recently Our deliver innovations, new as-a-Service work their breakthrough introduced cloud-based first experience, enterprise, to the providers One, scale an innovate Silicon XG on customers deliver team and our built high-end including Catalyst a continues for to and services private XE we industry's points To switches offering never communication enabling X XXXX WiFi before.

was more our by goal compared is or in is transformation this is a committed increasing hardware we Catalyst key this XX%. ARR where our X X of greater are power that recurring emissions to not which XX%. proud ARR, One software the shipments XXXX. way to towards a predictability growth. software of a way. degree software more to the mentioned, subscription performance is sustainable which revenue $X.X also software, our shortage remain are strength the We I'm of and more Annualized by negatively continue through to grew subscription to due lead prior visibility that delayed value to also metrics of was QX, creating of largest transition impacted to net-zero future billion, committed component the example up cloud. service switches efficient situation. as note of X% our remaining largely $XX.X in clearly revenue billion. yet technologies but revenue and In Total us or Product billion $X.X world. revenue one year-over-year. obligations, with both approximately I we business important to provides accelerated to to subscription-based that Building companies just up component by our are attached the to into software demonstrate Scope reduce and to business remain is challenging. our be and progress the to these and perspective, our software XX%, of We An our It's by ARR in XXXX the our The X% the revenue versions. of Silicon in From more RPO are up transformation recurring product continues RPO, macro recognized, XX%

to incredibly products, outpace and expanding software demand Our of continues strong our backlog supply, services.

alternative and of preventing our a us aggressive with of revenue remains take demand. strong action qualifying freight. team through are completing and some of expedited relationships, still headwind significant despite use strong from manufacturing deepening increased semiconductors, supply products, chain continues There Our components inventory very that supplier to positions, to constraints growth

work we've continue constrained to increases. to offset growth. help better In In up about the of have position pandemic chain we for our these we felt supply environment addition, never passed summary, which and impact the and the successfully through our and shortages, continues drive company, costs, through component outlook to the

by outstanding Our vision QX teams. results momentum, clear our reflect healthy a and execution

of never they've offerings. transforming pipeline our dynamic these during our have and we by been engine and business and our so rapidly software transition teams innovation and what I'm very subscription to stronger, accomplished times. Our accelerating more are proud

hybrid opportunities toward I'll turn we creates well industry-leading it the digital our hybrid are differentiated us Scott. epicenter remain delivering the of position transformation consumption to over by and to massive models for momentum about further work for and and We our ahead. portfolio market shifts optimistic customers. future. positions to bringing across now cloud, significant Cisco the our our confident business flexible I believe is which at innovation capture and enhancing

in by areas chain of our supply revenue range and $XX.X saw billion, and spend third Chuck. management. our for We of our of QX increased order line all growth, well, X% a the with our Thanks, geographies. year-over-year, million a portfolio, than demand was product XX% along executed consecutive strong with quarter delivering quarter the including robust business. and for across strength $XXX number services, in up by We across Total quarter. our disciplined products guidance product continued across more strength driven to

environment, end highly continues net per earnings in have significant hinder which, $X.X strong dynamic business Chuck demand as the margin profitability share per in the with coming well convert XX.X%, performed supply-constrained Overall non-GAAP operating Our ability non-GAAP guidance of into billion our this said, was of and with non-GAAP share income range. in of revenue. QX $X.XX of to earnings above to non-GAAP high and we our

up Agile revenue growth, Campus X in in constraints. by billion, revenue, products related had by Switching center our had switching driven Wireless Nexus X%. X%. up the data well, double-digit in led switching and offerings. revenue XXXX supply more double-digit hardware and product X%, Meraki increase strong delays with very Service wireless contracts Looking solid our our QX products. Meraki solid performed driven switching, driven support Networks our by Catalyst had a Total WiFi product $X.X increase growth, revenues at billion, XXXX by driven our offerings. by was detail. $X.X Secure, was down to revenue Within

where offset not revenue, saw just security offset also Enterprise of most down our meetings declines collaboration. of components collaboration quarter, grew primarily within and strength ramp by communication by the of hybrid declined, the was the We slightly across SD-WAN. name X%, strength X%, devices category with broad collaboration be changes by will any to in change next category. driven Hybrid growth from work, work report Beginning Platform-as-a-Service. double-digit which by in to will our we this partially routing End-to-end access, is portfolio, this by compute driven the our continued offerings, servers. portfolio. There in driven

performance growth in portfolio double-digit Trust dual well with strong by Zero Our our driven offerings. performed

scale perform edge, Internet strength from subscription core XXXX portfolio and broad driven future and of in offerings Zero cloud web the ASR driven in part portfolio Trust. XXXX with security growth driven Optical. our growth double-digit with strength by for by strength in by saw well, large the was up the XX%, to our We continued in customers. and Our Cisco

and ThousandEyes networking from experiences strong SaaS with AppDynamics continued growth both contribution continued digits saw application our revenue up double-digit for also XX%, to Acacia, mid-single We by was platform. the its optical Intersight. grew offerings. driven shift in Optimized cloud-delivered

business We on shift subscriptions. and make software continue our progress metrics transformation we to to more our as

or grew ARR ARR, And product strong an X% $XX.X was RPO was Product RPO RPO $X.X an $X.X four up revenue. up revenue Total billion, total of revenue, was recurring was billion, increase revenue obligations the software billion, of an subscription percentage increase X%, of Total points XX%. revenue growth and short-term service Annualized of XX%, to with with billion. XX%, increased X%. represented remaining RPO subscription-based, year-over-year. Cisco's product was or XX% increased Software which $XX.X up X%. XX% $XX.X subscription total performance is revenue billion, of X%. X% increase the of portion

EPS, As to in on a impact acquisitions, and line point our months. convert no next there expectations. XXX material portion on revenue XX with reminder, to basis revenue an the which Relative year-over-year impact approximate was QX growth non-GAAP the over short-term is our positive will

order with to have momentum Total grew exceptionally the continue orders QX. business. product We strength across strong in XX%,

and Looking enterprise was Americas In public up commercial XX% XX%. markets was customer APJC was with was XX% up XX%. segments. XX%. were up and The XX%, up XX%, up both up at the was BRICS Total markets, XX%, up emerging our EMEA sector our and Mexico geographic plus up provider were service

XX broad was at gross down customer it up across margin margin Product XX.X%, As margin decrease was supply higher costs freight product related as in ongoing markets. From geographies a XX.X%, down came and you primarily component see, to was and by driven gross constraints gross total non-GAAP well points margin gross service basis perspective, The our as higher basis and costs. strength points. basis can XXX logistics year-over-year. was XXX XX.X%, points

costs. extended we As The higher been situation continue our lead we’ve which quarters, supply several industry-wide by and supply due times discussing to resulted constraints in to through manage for have us seen remains component the shortages, peers and challenging.

will key purchasing supply We of as partner the address extended and we closely expect we leveraging our commitments impacts, into volume supply to suppliers, which with cost XXXX. fiscal challenges the continue our half our and second continue

our the constraints levels. mentioned, increase backlog into supply well levels historical has the also and slow As our normal I strong in This component a beyond continued build resulted conversion demand revenue. substantial of in our

Additionally, not undelivered is order of impacted but revenue. software, the that recognize to only also to with ongoing supply the the is software our constraints hardware hardware. subscriptions also delivery ships in until backlog impacts customers ability our hardware begin have That such as included which the when we ship

that increase included as give QX that Within was by sense cash, billion. advanced We billion more $XX.X investments remaining scale part more course, than billion, metrics. QX this ending had down software to a primarily is negative related not These XX% in billion. $X.X Of year-over-year, for software our than almost operating with mind billion, on to XXX% backlog our ended revenue future of flow. more an our advanced year-over-year than you a To equivalents payments product was payments amount, year-on-year. backlog XX% flow cash cash growth of $XX.X doubled impacts and our and obligations. the secure backlog, in $X backlog Operating quarter supply. Keeping impact other of driven of performance of $XX cash total

payment as had have approximately result negative CARES Additionally, this our X% flow. the cash This of on a operating million been additional payment made Act. deferred impact quarter, we an tax of $XXX which year-over-year a

we cash for dividend. during the $X.X billion allocation, of $X.X capital of was quarter of our share terms to returned In and billion shareholders comprised billion $X.X quarterly repurchases

share we Given additional future, to authorized today confidence for business the total has approximately repurchases, billion. $XX our have billion Board bringing the in an and our $XX into the

share dividend capital to per higher ongoing our our dividend shareholders during and of the raising the of $X.XX share cash our repurchases which increase, our to stability to repurchase also our excess by represents confidence commitment flows. our $X.XX additional We’re Combination increase. returning quarter, XXth demonstrates quarter our in authorization and

and of position strengthen with innovation and in These closed we internal in us Replex of strategy quarter to with in summarize, M&A We Opsani acquisition differentiate another growth complementing pipeline. our in QX continue areas. to invest full allow demand and our organically observability QX innovation investments offerings. in key the targeted in our our complex enhance We R&D good early consistent had stack environment. To inorganically to our with further and to product a our market robust solid execution are supply-constrained

make growth are innovation on opportunities markets. capitalize to in expanding the our shift and and continue significant model to We investments business making on our addressable progress

shareholder the software drive delivering We’re more seeing shift we to revenue progress as and and growth driving continued subscription value.

Now QX. let guidance our me for provide financial

approximately total $XXX share third translated operating the which reminder, revenue $X.XX earnings year. a to in of to impact was QX week, and As million, of of growth. last benefit The of total a a expenses on included cost year this points quarter sales X benefit approximately and our an was our last into extra per of

to chain quarter, the For revenue in costs supply to growth expect anticipate the of reflecting X% as the continuing margins be shipments to next incurring XX.X% range in our of to non-GAAP protect to XX.X%, range gross increase X%. we be we in We we’re customers.

to $X.XX Our per non-GAAP expected in is be share range is to earnings $X.XX. non-GAAP of expected from margin to operating range the to XX.X% XX.X%,

we per are year is share and the range year-on-year, we to both of full to we be X.X% to increasing $X.XX expect I’ll to the guidance, growth of year earnings back in rate Q&A. X.X% X.X% $X.XX, the now we’re the XX%. a effective assuming of QX up year-on-year. follows: revenue to In our non-GAAP Marilyn full move into non-GAAP X.X% to fiscal tightening range For XXXX, can tax it so turn as

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

Oppenheimer. Kidron Thank from you. Ittai

You ahead. may go

material chain of Should about, results. backlog? talk bit a back unwind? on to we can improvement? a period in improvement? growth this understand dig trying all this really know, see I’m to nice to bit fulfill want of things that, see we gets we as into And two, and the worse, a think Maybe kind of the when just you you And unusual expect little better? just timetable how any little of maybe Guys, three Chuck see like where gotten a I Scott. quarters the good don’t Scott, there scenario here a outsized the just where could of bit Thanks. have I have this mind you quarter-over-quarter, you little is supply

not is to we you would year. up general, saw. to second documented. things and timeline expect for I get supply materially Yes. pretty worse can Scott then Ittai, would We you chain able some being throughout There didn’t takes half have be being in. really a the say don’t what we factories I’ll better. with say All level, of the are some and through were I’d issues get know people improve. little when was as of where question. to Scott, think thanks well quarter, logistics jump have great quarter, and our in for Omicron characterize towards materially and show the that They didn’t this sick during we start that’s wouldn’t macro It effect end But I a the a bit – the begin but consistent. were gives we it. that’s I in add? now of the us to at and with

unwinds our to it’s think question I No, your this I – it And how on a does lumpy sync unwind, Ittai that’s don’t in fashion. believe Yes. in right. with expectations. That’s

demand And supply that just of will unwind and course few gradually as over the happen think more I in get I the next the balance. quarters. think

given a So significant I’m any in expecting not quarter. bump

with the really And of frees up billion of I as does question it got demand think will $XX free to that of when happen it over plenty fulfill. supply free up. time. I a It’s backlog, gradually go off we’ve and up, think supply does

clarify it. much for I point, are you know what backlog you customers all means any figures? this double what Got long the standpoint is ordering? double of is last in don’t know a there to backlog it just of to product? some how Scott, kind have this that Maybe, this from risk order a for elements customer you really waiting time is And have to way these

Ittai, that’s building quarters alert demand only in been to to of something the watching so backlog we’ve we been revenue growth the X% that XX% backlog, to consecutive after range. We’ve for in and been the building substantial we’ve and and three range X% since that. growth began looking

and think as lead are our to I customers the clear our have that it’s for lead times, the components have times lead times responding extended. extended

say, there’s demand. But So I’d is think there. what some real we’re I extension in seeing

a during from demand think pent-up that pandemic. the it’s get combination products didn’t of I done

that of and much trends things and see if ordering, that in customers, the double still edge we there that you we’re talked like of as in about investing the probably when strong growth I commercial it’s several seeing we’ve into. small leading segment. wouldn’t at think these And look we’re that was

either. seeing slow build also down You that not to and the we’re pipeline would see begin probably

point. at Our this is robust pipeline quite

So proxies to understand better. we’re looking for that to try

would point there’s at double in there. indicate this that ordering anything We’re not seeing

Excellent. Thank you so much.

Ittai. Thanks,

please. question, Next

Paul Silverstein from Cowen.

go You ahead sir. may

At will those component as entirely quarters return full four I extent you don’t largely. over in elevated And point, guess, costs, elevated a some normal, as there were and going costs. to respect the are next not semiconductor costs burn Thanks, revert, three the and they your to the if they off they anything and to not, eventually following ago, where with that back far year, large to stickier price year half measure increases freight the your to as if logic logistics costs? to backlog offset, guys. with wrong is

there anything is I – that Before wrong follow-up, the logic? that is with ask

logic. the think, Paul, I nothing there’s wrong with

I the quarter. same the expectations are give that would you last that think gave you I I

range As gross I year. of in think stays this the year, we’re to end of about the through XX% end think in, it through the the XX% margin range the in fiscal I

to increases as said, that that, right Beyond about we’ve we you talked the more you’re this hope logistics put price that’s normal. something previously. in I begin and costs Obviously, that return place, to

point in, not much the We’re out Because that between today. has increases. time of to benefit field gets the But that started this the to benefit on we stay beginning goes see seeing from to there’s gross the then the I the think through The offsets to into quarter field. in increase it and is they more Those margins backlog my those XX% get right now the this those toward to price take price And have from backlog orders out begin year. we credit XX% before end come the and range then expectation those prices the at it in in increases range that and finally this revenue for we’ll to the end we in sell get we’re customers. – the that QX. of fulfilled into of will price

how web XX We improved what’s of Juniper, is a to on years the have cetera, of across the growth the much be FX And late is covering execution enterprise, scale the on carrier that go your this peers, proved of in this see environment it. on ‘XXs. to pure Cisco? Extreme, to best demand – and Chuck, of How market seen course, Got Arista, And much et the revenue has you’d your bubble. I’ve the side, back going growth? part growth of seven.

look the we’re is our executing But you years of obviously, can growth having peers it robust WiFi, share. side. like are mean of certain of because when are The just exist results markets a didn’t out a called in order you certainly as on that say tell scale, who switching the to couple segments I well seeing some rates of web both. areas we areas, order look you ago. gaining in with growth would on well. incredibly our the at we’re as there I I mean, And even of order our definitely side, question. good campus really And a rates That’s then solid the combination technology – at some certain gross technology business, I I when

I – think there’s think really execution. that good I of lot a

portfolio I is great And remember, it’s have hybrid for we’re think shape. the really work, you favor, that and of edge WiFi front our these us. mean are trends all in in our are to cloud, multiyear whether XXX hybrid end technology on compute. gig, whether these I X, transitions it’s positive are XG, that areas

is are I somewhat portfolio those those market-related, positioned So transitions. think our but well for

Appreciate it.

Chuck. Thanks,

Next question.

Badri Credit Sami Suisse. from

You ahead may sir. go

Thank very much. Hi. you

So you the I’ll first like one keep one. this I for hard but a here’s guys. questions got two short,

think your the the to normalized is So guys the what question. When the we the rate? normalization to the to you growth needs down lot to numbers? this actually a is that do first product a XX%-plus trend. is know through at you Or But see and of I thematic you right normalized come look to growth. little some really on that's of want growth when So bit. flow And point, congratulate a back finally happen? us see XX% product think starting And what want do growth order corridor at I rate

billion for deal? the Splunk? have the considerations you buying $XX not, question. And not doing a is internal question been if guys what Are second The

So let guess, me of I answer, both them.

on extra I we And then a that – first from quarter, year. the was quarter order quarter the get a year definitely QX, plus the as we in that last QX, So week of that well. think the experienced first next obviously, because from ago, XX% tougher had one, particularly an compares fiscal

a we constantly of test your good couple but second stories. certainly, have opportunities. in evaluating don't or Until to those see sort the on then, comment not of and here tell all, So question. we On that What us I litmus the and quarters. you for the to potential talking. direct And answer of I a will rumors equally we question, do, I'm forward get look and certainly, on our we you, We very speculations both sure will your will are Scott math We for were base to disciplined every I tougher quarters first is us strategic secondly, be will next fit; continue XX as be you at But probably disciplined go to organic to always opportunities. on we you foremost, we valuation XX on, important, we inorganic focus as and for fit. think companies. very, and tell continue the decisions and first I cultural deal expect and well. are fit as that should financial

Thank it. Got you.

Next question please.

Sachs. Rod Goldman from Hall

ahead. go may You

Great, quarter. thanks gross come wanted guys. I to to back margins for the

were maybe gross the see dynamics And You my there wonder some comment Thanks. just comment the sector? of kind the really were maybe could what And within that and guys public bit margin positive of little second a substantially was really in dig beat a I Chuck, could to if on if the orders. question, surprises wanted the top surprised, end of your on I I guidance non-sequitur, range. then on public but Those you line? strong. sector that into you And

the take I'll one. first

On that the we QX. components the gross for could out margin, Rod, mix during came ship and it had down build we really product that to

gross the earlier, year our end you're guidance said above we I high unchanged. had on that QX as are And range. of I'm sure aware, drove our margin us expectations As above mix favorable product in the for

I as for out year. but headwind it think it's a of QX, the bit equals in we us for a look margins at gross

our unchanged. on And the for so margin expectations full-year are gross

of types on color? give Just little more what products specifically us comment there? you in a can Scott, mix positively

need of It's always kind a those things both had to by what product, size, an just again, through ahead. product billion[ph] backlog, Rather – $XXX across ship When like quarter product have across of a build pretty higher-margin have it's for pretty the you visibility we and lines had and product. have go we given the we than the look parse we good to customer visibility with going to feel a good allowed mix. where and in effect. of go quarters that's supply what us we And into

So that we're end confident the I of the feel going year. this stay to range in through

the our quarters. I in a was is, double-digit years. And catch XX% last lot And had I we quarters straight part, that And below sector But couple looking four look would it's strong and whether the business, question, of most growth, in data on it's the markets education, it's and last at other because particularly of your we've last three straight reality being at the quarters five good a strong positive has the see there it six think, I'm negatively. which been strength. of and it been had you or at five customer quarters the people of and look as the if growth look the public consecutive been, saw at we've broad-based so on consistent in as think some six here, – well out government for

very was across sector. public so And the broad-based it

Great.

Okay, thank you.

Thanks Rod.

Next question.

Tim Long from Barclays.

ahead. go You may

decent in other see year-over-year a still And wanted more about to to talk as maybe Yes, software that it revenues? overall of on the Chuck, a bit. is businesses? some you bit, it Cat ask a Thank XK? Is on quarter. cloud just growth some little the it's start just to then follow-up than in bit the you. moving accelerate But think Is being I the side, we'll little I recovery hampered business. the a products other software when more understand little the

that? Could What's wins, really that again. more You over talked seeing are use kind about customers? you what's the cases, and quarters? new the XXX% basis And little then just a just driving orders than year-over-year you. of Thank you new give product color us last XX% four strong driving competitive

I'm here. pulling out some data

on one, question. I front, the the have first a you Tim, software So good really on think

was perpetual in revenue I from was and two And section on. you that old Scott in called XX% out growth product – to transition got our down to software, that perpetual going think X%. was what's our understand subscription his which we've thing subscriptions, behind XX%. software get been up The

you're to happening we is software time, So expect we it. reason piece XX% a hit way obviously, a That's you're of used sell the because from the actually that, the over on transition some of taking stuff, the it. subscription way and seeing recognized onetime is the

that So just to that play out. got you've continue to has dynamic

that renewals of to and come the have D&A And You $X got through you over then in some mentioned XXXX XXXX in stuff then to ramp. starting earnest beginning billion XXXX, shipped. of on you've rest piece recognize not RPO hardware it's connected software yet upfront sitting backlog over hasn't in we that a is of time. to then and because an that the And a bit the that of

may I said, think a world, So once we've backlog the variables normalized not in to chain in play would you expect should I quarters. this you see I world, But with get revenue now, expect happen those growing so now. that of right backlog, would growth, being software All that in big, clearly when got all get would our that supply several – right for growth expect faster. a we we normal

billion So of a ago, software double double. $X was course, sit of some always ratably. $X there's that little it's is bit that in will now. a almost backlog our it software, Yes. it's That's than in but That And backlog, recognized just sitting year almost right? right more of billion where most

a we once that. still out ramp, it of the cleared the on we're backlog get ramp shipped, So ratable going to and can have

recurring said September, to our we piece business term, in quarter. software product in grow we of all remember in if XX%. right? subscription we compound up, That's of our XX% growth rate longer parts The what annual you XX% grew a to put just expected the So business, we revenue said at product what the

right we're So in I think track on that space.

to trying the Do find you different I'm that? remember? give was franchises the breakdown where in, of let’s

Yes, it me get you. for let

Okay.

front On the I I'd think have side, no, just it don't I me. cloud – in of

win their cases new cases cloud simply we I One one our as we integrated well Silicon our where use around with are use side, have as what On hardware, the is switch operating systems they're winning on. running continuing a here's system to buying they're that that, tell the meaning systems, would – you

buying buying be and running multiple models they that may buy an consumption also be have one We one system customers switch, where may and certain the silicon hardware are integrated silicon.

winning use And those, look I for. so competitive we I'll and variation and not think all new of cases, it's are what don't of that's a

Okay.

want front to new But So have to was cases. don't – was that we'll me we get trying just and – how general, was it's winning now, in I a in – Marilyn are to going right sorry, of many customers I – I of use find it, definitely which in. but franchises a tell you, try and we number that. what

Thank Great. you. Okay.

Next question please.

David Vogt UBS. from

may go ahead. You

a taking to for guys, for Great I second. to back thanks just go my capital allocation question. want

amount to kind free been next in recent that today? the buyback the use on flow with potential the and working acquisitions. years forward And and Over dividends, capital respect comfortable philosophy And ultimately, the of you've the over sheet consistent in changed? chain strength quarter you with correlated although what on years, leverage around the balance of and pretty uncertainty? given supply buybacks, run has flow be needs going several uses seeing, you're five leverage of would given deploying your to the that the position the increase materially to in cash the cash you order Can last business expand your

and there, $X.XX dividend, in the you in to up of business our is you we lot the and additional QX to ahead. in outstanding David. a those buyback it just are that authorization start and $XX all the add saw have the of There's by our confidence that growth see we increase buyback take the short signs billion in to What the saying saw, I'd

in of and alluded $XX for we plans just of equity It us and answer you. dilution XXXX, XXXX. business. to saw question returned, policy. change minimum, to, our a the offset means. There's change the as allocation dividend. There's first do. to no inorganic the billion in we'll excess the have with, organic at Obviously, our our we've We'll, to supporting just foremost, support as starts both shareholders So in through returned overall and no as beyond you you the return that, shareholders policy capital overall growth cap that

Certainly working the to the I amongst balance – sheet got we've strongest would of out peers, strongest sheet feel balance industry. to I the got the of we operations. capital, wager on support there. balance all have say terms in In at keep amount don't our by we've constrained to sheet cash the like we're

talked balance to Obviously, and about making same aggressively does tech-fit Maybe horizon, opportunity that the whether that, about your should to forward? along to a the fit follow-up it or think perspective, leverage ranges you're M&A a perspective you with work financially culture, on a lines. thinking just as cash I as perspective going sheet I that sort business same we your is ultimately, consideration? historically, mean, the of case? you gross really transaction. Or Is on expect there a quick do used debt measured be if from or leverage it's net how in an in using haven't the

fit? as Those anyone. of balance M&A thinking the are that we're it more terms strategic Yes, our the sheet makes what considerations balance kind would it is sheet. M&A. of fit? Is I valuation the it what's of I strength about stack said Chuck play a a to don't those come to into Again, cultural actually the It's back as sense? Does think in relates versus earlier, against up

Great, thanks Scott.

quick I to cases. that jump want Tim double the – answer the in use back on looking was click real and I for give

have use XXXX we five our and players customers – One Cisco So who Silicon who systems. use

their One series routers We have systems. with two the own operating Silicon XXXX that with use

use And We consumption hardware. that we in simultaneously. use flexible have at box least of modes embedded own two two Silicon white One the that their have three

data I to get Tim. that's So trying was the you to that

Thanks Chuck.

question. Next

Marshall Meta Morgan from Stanley.

may ahead. You go

just through Great, pricing to customers. thanks. a Maybe passing question on

those maybe orders what you, of a whether customer? of the are larger in conversations Chuck. increases? by then category for And Just second offset And just pricing kind question those some seeing maybe like attempt of you're to

themes of enterprises, of customers the strongest that Just seeing Maybe are spend. just catch-up – starting as more that specifically, architecture to modernization some see towards terms move in more Thanks. there you're modernization? by you're of are versus what kind

Meta. Yes. Thanks,

that customers length being little get definitely of think we say, understanding they've are taken to gone frustrated, the more the time product. are, it's to primarily price clearly, trying increases. from, I have of So generally being conversations And ahead buy a I'd of because to who the

whatever the our as patience in all are, of inflationary same business out everybody of understands. that Because to customers customers probably generally but running given thing they're most we doing pressure everywhere. in, we are the in general, they're so their And candidly, see

by one transformations out the we that second on see there’s the massive one. hybrid So first work. a that’s being that there, one is And architectural the really driven

center data data in customers well still distributed So one. your for entire to in running as to applications switching we centers. private cloud, the that applications, infrastructure was hybrid cloud in security That’s our are network in rearchitecting which is Obviously, where tells investing UCS, centers demand I saw distributed as new as multiple architecture within deal me to mean, addition well. that data private a have you with portfolio providers distributed data, strong it. extremely users, accommodate

our that XX that are traffic architectures not the So patterns years. the with that aligned last over built creates customers

So first these one. that’s that I then there are the And talked transitions earlier. about

upgrading XXX customers You’ve gig. got to

at is have XXX who ports. booked the now XXX-plus growth. almost We’ve customers We’re XXX-gig XXX,XXX ports. ports orders We had almost which now X,XXX% for quarter, in thousand taken

see we in transition been then based gig, you XG service So services And we some XG. And enterprise XXX see. see things provider those out the space, off. see XXX gig is has transition of taken The – pretty building the and X on certainly them you significant. you are just WiFi

So those the that some are of major see. transitions we

Great. Thanks.

please. Next question,

James Citigroup. Suva from

may go ahead. You

and of think I rest those potentially still because calendar mentioned had costs color my still you’d want you’re increases, want as I I you customers or booked costs. year. understanding little through a mentioned to component did qualify, but year was things this to And level is bit the product the shipping you fiscal for may paying Scott, higher the will already and that year? just margins, who you. put increases get of product, the price Thank at prior have through to –

wonder Thank other? offset if half I the maybe or you. calendar year if just of XXXX, So could in expand each margins second actually they

Yes.

of still you’re have the thinking what the of right we – think in a price as expect see rounds of said a QX benefit remember, first that think I products of again and QX. increases, of about costs of latest price the not – our with in you But of the us. I to we’ve were toward to pre way, it increases. couple the a certainly the are see one backlog had we I earlier, that it think ordered if round end that Jim. Logistics I begin increase, lot It’s most price and

to both the as $XX total $XX of level short-term backlog, had add RPO, we of ahead. visibility better and we have have, I $XX billion of that RPO visibility billion of With ever than look we’ve billion

And year. through fiscal is range margins gross fiscal half. the to is talking So our will about, that stay of in second feel second I’m of the good XX% half that the XX% what that the year

congratulations. Thank for the much so you and details

you. Thank

Jim. Thanks,

question? Next

Bank Tal ahead. go Please America. of from Liani

two I questions on your have segments. Hi, guys. of

one first is on security. The

with trends kind not correlated the of industry trends. Your are

the is going now. can for it we quarters. fourth see Can got acceleration previous the we two before? you service – you and And And down you second but saw growth seeing how you’re revenues. the now is materially, explain services? to also was two accelerating you’re territories last acceleration trends? explain quarter Why slowed as We as First, This much Can quarters, deceleration why of deceleration. we again, these model the why speak you forward? should there over negative

talk the some about Scott thanks I’ll did take I on security, that. let he I’ll Tal, question. know work services and Yes, for because

that we chain elements to components grew over still need of next Scott, want strategy The feel we months, again, teams would on chain get continue have that to I lot working should We in next-generation the issues that the a SaaS the front, a of have you do I we confident SaaS strength to with the in at several you the in about and services? that on firewall also rate. firewalls. that supply a XX On with see improvement issues right but the say continuing are do that particularly And healthy front. some supply areas But software business, the security portfolio. are portfolio, now. XX to talk months have

to bear Yes, hardware. services of that Tal, you And in support have two on what sell we of piece, things. attached mind Most the services is to the ratable. is that’s most

it so time there’s a And always you lag, a big base, to it up. takes right? build revenue up When build ratable

services and contracts, echo fewer stream for that in builds it low. and rates So time. midst product the because ratable it quite our of revenue a speed, deferred but revenue sold to for pandemic, time much takes you growth we over bleeds takes It also it the during look months it show to it of the if of to back the while at And time product that up we’re ramp is, up selling our effect come up takes course, less and go And XX, down. that were to so is out rates back of XX revenue revenue. in

you X%. and Obviously, ratable the at path looks fairly months the with we’re of go ago, XX been what at time back that XX our dealing RPO low. just So ahead growing inside gives a path X% the now look growth a flip the services $XX.X a The you it billion, you the both have but gives is, hardware there when the would billion, the ahead is that’s hardware at sense attached tail to of sense services like. side what services and of the to sales, software, looks if short $XX.X fit growing we’re of what term at

you. Thank

Thanks, Tal.

question? Next

Amit Daryanani from Evercore. Please go ahead.

on of Yes, your the we I product or every has your portfolio back you about really also And the go guess taking solutions not I share. And peers year have campus, one side up get one I’m the sense – do segment the how my a campus as market rest on not think under hybrid side. thanks that think talked question. and campus stacks first up of of for work. lot the of we through peers of on to is I some picking form is

I’d to the and in talking the dominant have to it? marketplace ability your everyone’s love position what about given what you share there. see defend understand You

Yes. question. Amit, part one? I of you repeat could not like understand Would first that your the

lot hybrid you segment was think I And picking for side, peers share. some that year of how just your competitively, the to up go have the Chuck, back about campus then stacks talked as form on of into work? understand, trying a we Yes. up do

how the play market dynamic So you see share out? do

Got it.

Okay.

is So that’s see particular. densification what networks, we We believe WiFi in modernization we’re pure seeing of occurring. this

was So just pre-COVID to support we’re a then reliability, preparing access it. points seeing drives for more robust ensure than what units more more rooms, per infrastructure requiring to We switch will believe which falls which and hardwired, to more into switching through which are be video more and customers putting ports. workspace more conference

automation are cameras IP building going those network. base security an IoT more robust things that campus connecting have incredibly require resilient systems are is expand just to in. We and of and all that beginning

order – growing that – we’ve in sitting growth over imagine market I’m three revenue. I our just can the an is seen that And tell than faster question, based on from think funny we – growth a the And it’s share thing, rates certainly and that is how perspective backlog, cannot concerned. going of and you on based quarters. much second So obviously the It’s I market what’s revenue. last it’s that that’s We not orders the on. on is the

And being more question, buyback just would Cisco this may one. your too Chuck, I midcaps aggressive much inverse is is you to just about take have how for book the start enough. cash quick could if to What scenario on do And the dilution? Fair buybacks? [ph] you offsetting maybe that much a ask it

buybacks during share required $XX aggressive with years several last pretty the I Yes. buyback you mean, quarter. And to you since in billion back, the just over saw the been dilution. returning QX Amit, we if obviously into at beyond the dividend offset billion pretty went well historically, $X.X That’s we’ve you’ll share on XXXX. and see think, aggressive buybacks I look what’s

a I we So demeanor in at don’t or a in change as look think there’s that. stance change

I our you needs We’re organically of the where are growth first. cash the beyond from and priority we that, we’ll The are. constantly has return our what evaluating dividend, organically business the changed. not anti-dilution and policy standpoint, shareholders. Both capital told allocation a to cash of

of think think you So that’s way in aggressive need to about get in There’s policy, the no QX. it first I the you change going half forward. but saw pretty real us

Thank quarter. you Perfect. congrats in and the

Thank you.

question? Next

Samik from go ahead. Please JPMorgan. Chatterjee

from my you’re kind again quick back us at enterprise details to a though all are that? two go want web-scale an strand that’s if just seeing as you service Can Is did your ones. acceleration? you that first orders to within telcos Thanks And of Chuck, customers segment. I there the what second. underlying from at and visibility us seeing seeing of that XX% you driving to orders you. talked to can you provider from the are had I this just my the taking think you quarter XX% follow-up, customer I what with Or acceleration? for then Thank about through orders and you’re help questions. give some straight providing cable point? strength think composition about well from they and Maybe

Samik. Yes,

– sense, the general gave you the web-scale service or us. And roughly on XX%. is at for cable service take or provider incredibly space, numbers space a point was I give overall a give you was the So And telco XX%. over and say segment just strong the say two. to flattish, I’d incredibly strong, I’d provider

on contributors space XX%. was key question? So the were web-scale both what and to the second the second And then that the the telco question, –

growth. Enterprise

I to I whether look across mean at was now. our – product it was consistent. right Enterprise – at growth. across even it you moving geographies seems just – or across across generally be mean, portfolio, or Thank at you verticals, you. it customer every the you super Yes, across look look when it

And It thing don’t think pretty so call not specific was one out. broad-based. I there’s to

the And last that question And do I think with want closing our some to call. remarks? Chuck, for you was close

Marilyn. you. Yes, I do, Thank

the customers with growth technology across RPO order that accomplish revenue, our what we First or component were down our digital the of they growth, despite of pleased growth, proud ongoing the the dynamics, EPS, and continue web-scale world. QX transformation our able happy ARR demands continued all, the the choosing growth, I’m success product to the component balanced in Really in are just path. this as the

and relevance all think criticality couple the of an building thank our teams the want it’s a of I minute employees to to we’re have what incredibly I it built because just what speaks – Cisco difficult years. and to been and take

I deal really think care of great doing of the team take can customers. we to showed resiliency, everything and breakthrough delivered has a our innovation

and thanks talk with – time us So spending you time. to we’ll for next today,

be will p.m. call, now next This XX, Great. earnings p.m. at Thanks, will results X:XX May quarter concludes Chuck. X:XX fiscal on third Time, call. Eastern conference Pacific quarterly today’s reflect Time. our XXXX Cisco, the XXXX which Wednesday,

And very Cisco free out If to much joining you you today’s to we the have for call. feel any reach Relations thank further Investor questions, group.

on participating you Thank for today’s conference call.

the may outside like If would you (XXX) today’s to dialing participants XXX-XXXX call concludes entirety, This U.S., please dial XXX-XXXX. (XXX) listen call from to its call. the in you for

this time. You at may disconnect