Cisco Systems (CSCO) 14 Feb 242024 Q2 Earnings call transcript

Welcome to Cisco's Second Quarter Fiscal Year 2024 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 Sami Badri, Head of Investor Relations. Sir, you may begin.

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

in share. of our billion margins, which us total through per repurchases. to once and the our expectations across with deliver dividends QX, the of Strong share we delivered again for revenue today. our our guidance leverage performance range. a $X.X earnings QX thank business high and a value and Thanks, of better-than-anticipated you high We all us drove end Sami, returned In coming in at operating allowed solid exceeded joining end

significant our Cisco's our today through to or both to driving QX performance gains recurring capital subscriptions value the strategic around annualized of consistent payout We also business transformation continue to rate, to our another revenue reaffirming levels increase software shareholders quarter. and ARR, of results announced our in advance Overall, dividend which returning ongoing showed commitment higher returns.

supports of Our pending companies also solutions of acquisition expected in software-based will our of strategy billion software fueling the ARR additional generating and levels of $X expanding the higher Splunk stronger largest transformation further growth, upon by our with closing us world. one and roughly in make ARR portfolio

performance on Before in like to turning to our start the environment. demand commenting quarter, I'd the by

in we given terms deals seeing the of the caution a scrutiny uncertainty. of are environment, and high macro of of degree level greater First,

more hearing us our expectations. cautious and be we're our forecast leading it's to this customers, As from with

expectations. last discussed levels and saw in since we our technology been our subsequently of elevated have products them as quarter the longer and fiscal this taking initial time recent than in the taking to deploy Second, other XXXX to is customers quarters, provider shipped of results, start

industry see which customers. on our weighing significant to telco is deployment are weak continue demand also outlook. our cable service phasing, provider we adjusting has Third, This with business and they and pressure, seen

inventory in cloud, to expenses steady to we we product factors, which are absorption progress. adjusting That seeing investments these connections said, current are Given categories can the our through we and the reflect the for customer environment. measure

which, of their still However, from inventory, full X with as based quarters we believe X is we customers, to longer on than mentioned, I implementation we expected. are away conversations

by shipped and as we products the slower Using networking implementation slightly complete for which our of current portfolio, We the faster fiscal continue expect slightly to business switching. track XXXX. Meraki broadly enterprise our end Meraki moving are proxy of wireless a activations, wider to in be in

wireless which finished number more, customers sequentially the deployments preparing approximately coming million of Looking orders shipped and we've or in of XX% as example, absorbing at what larger them $X by wireless our that an many have increased are to months. encouraged are in QX. for we business the This indicates

Our team that is and grew worth It's on year-over-year. Collaboration Cisco and also revenue revenue customers as our Security focus areas to nonhardware-centric Observability double on offerings deployments this digits with partnering heightened assist of increase closely year-over-year. with equipment services contributing hand, such in also to increased, our noting

largest in near-term X win the rates rolling are despite X-quarter of remained and challenges, basis, a X our on share stable steady Finally, markets. our market our

in to moving QX. Now our performance on

in I our in than earlier, our better or with As line expectations. performance broadly mentioned the was quarter QX

the our next-generation the manner. opportunities. With highly applications trust our a us and to and of deploy in am customers customers the confident our the portfolio outcomes criticality foundational secure growth are our customers place we seeking, strength technologies our in about of and future our enable to I deliver our Given innovation,

this, of that part customers grow our products help services so we growth alongside As our we their technologies, them. facilitate and when new adopt through

innovation announced networking, Last vision our for furthering our capabilities Live week the Cisco new accelerate across Cisco high-growth Cloud. in to areas. continue Networking at We EMEA, we

throughout. capabilities We also announced Collaboration and our Observability several new portfolios, Security, AI across leveraging

capitalize the also to opportunity. We infrastructure AI continue on multibillion-dollar

hardware AI next to both and workloads. AI on-prem phase announced offer infrastructure. This includes to software partnership in NVIDIA the our enterprises simplified, support with networking and This cloud-based advanced quarter, we

partnership We technology play overall central demonstrates in and are and this AI beneficiaries adoption, role clear the the we ecosystem. AI further of

who to the for Cisco-validated will top webscale, our via customers X continue Ethernet with extensive to hyperscale see sold clusters infrastructure. In deploy AI key businesses X Ethernet of our committed AI Our through deploying GPU combined their solution we leveraging with infrastructure. and momentum services channel global helping professional partners from fabric, be support are designs

comprehensive the stages opportunity are product platform continue to early workloads. In most of we adoption solutions. our there ahead, is industry's we in unified still tremendous AI map end-to-end execute Security, with While the against to road of deliver

that we pervasive threats help pulls is Security forefront becoming quarter, analytics to and performs also This the Identity from Cloud. infrastructure Cisco identity across the assessments AI an are which attacks, against behavior-based more today. identity-based introduced data Cisco protect of layer Intelligence, at cyber

For policies by Secure customers using access example, reducing and and policy administration prompts, errors XX%. new AI natural language Access lets our up create Assistant speeding security

like new Secure Our solutions being ramping XXX XDR Access Cisco customers. are with security over and fall now quickly this after XDR launched

you organic the X can accelerated more the investments. across portfolio our months, Over and next meaningful announcements expect innovation inorganic through

Monitoring applications now extended daily to AI-powered our Catalyst understand of of providing public well Internet of experiences deep issues. performance In Observability, with things enterprise of measurements of into and billions the digital through into Cisco and Cisco applications customers as joining insights Secure ThousandEyes application, for session-level SaaS users. In past the users, as mobile and addition, experience digital the Webex, resolution ThousandEyes thousands have allows best-in-class we Meraki customers, the introduced browser platforms. AppDynamics, Digital integrations Access, our and Experience efficient and we creating of

teams delivering upon capabilities, overall minimizing experiences. matters for Our enabling our on AI highly operations platform existing focus to continued most: what secure performance generative build improving further and digital innovations tools all,

platform and with of Splunk acquisition, create the end-to-end ours resiliency. to to data enhance will AI, complementary capabilities Splunk's Observability customers' combination our pending back and Security an digital the Going

innovative help that innovation on provide would bring technology together, a our outcomes an and achieve and brief with we to go-to-market also their products excited outstanding that trusted customers timing. leadership, like world-class engine will a solutions. I are will We culture update

approvals, approvals closing now early the or to in the late first expect the on While customary regulatory given date Splunk quarter the is XXXX, the we quarter of third subject the progress remains regulatory closing required calendar of acquisition to close and conditions, transaction to fiscal second of the year in other our which quarter. positive in

over key Scott, takeaways. X summarize let turn to me I Before it

ongoing have levels we environment, weakness customers reset half our of cautious given year the the inventory the second of in service provider. First, high expectations our absorbing for macro and

on take of count disciplined a environment. management. capital to can leverage, operating you Second, and committed approach We us remain expense to allocation regardless the

our stronger get and to every stronger portfolio day. continues Lastly,

strategy. we we in front the and While work environment, us in current confident have our of remain long-term despite

commitment driving and provide over Scott relentlessly long-term for for on and turn outlook. detail are our to on industry-leading quarter shareholders focused We it value innovation more to our now our customers. I'll the our to

Chuck. Thanks,

solid again with strong margins and results operating leverage. increasing execution reflect QX Our

of was $X.X income total the quarter, high guidance earnings the range was the revenue net down X% non-GAAP per above $X.XX, at down and at end guidance at our X%, $XX.X high For billion, Non-GAAP X%. billion, end our year-over-year. range was share of down

double enterprise optical provider up and $X.X offset growth and more X%. X% We down meetings. total the decline up in offering with driven detail, XX% X% by cloud wireless product and in Observability partially was revenue with saw revenue by network ThousandEyes across digits. in Zero service down was networking our portfolio product billion, QX calling services. primarily up in was X%, was growth markets. Security Trust collaboration XX%. at continued switching, was weakness Collaboration in our by by the was routed a category, $X.X up largest driven devices and billion, strength driven Looking service across and Networking, declines our revenue growing

the digital cloud. assure Internet on-premise, mentioned, monitor and helps Chuck ThousandEyes everywhere, experience As and

subscription flat X%. revenue-based last revenue which growth a We Product represents X%. up work both revenue from $XX.X and of product product Cisco's continue billion, In software total, XX%, ARR XX% now of up to to XX% at performance XX%. QX from increased our to increased to our shipments increase progress significant with was X%. offerings. service percentage with RPO in up revenue on an saw X%, declined revenue, was total RPO We of prior billion, short-term billion, points X% $XX.X more subscription-based. Total improvement recurring over billion, as RPO revenue continue software QX orders of $X.X make product transformation $X.X down subscription billion, software year-over-year. quarters. X customers increased $XX.X strong which our of was ARR was Total XX% year.

APJC XX%. geographic at returned of Backlog in end year-over-year levels. Total the our of non-GAAP points. was above at public the normal gross XX%, and high sector Looking down and QX product guidance our shareholders. our mix XXX provider points gross and margin The up XX.X%, In Product came has end came enterprise at investments down now was our was up to and we margin basis cloud markets, and down impact service Service basis negative pricing. realigning XX%, year-over-year, and points. Non-GAAP improvement down down and component gross cost EMEA XX.X% lower X%. expenses up range. by basis customer was of basis XX drove management XX.X%, XXX up primarily to maximize X%, XX%, was and points our X%, at by range. the was segments are down long-term offset reflect margin value was help on gross margin exceeding driven in guidance for favorable was operating freight leverage. Further, current and partially costs margin continued non-GAAP to end environment our the Strong high the XXX the Americas

As investments the of by $XXX million. Shifting global approximately billion. part large part estimated of ended transition impact expectations, Consistent flow payments $XXX restructuring operating tax to our approximately with of announced and was we with plan, TCJA expect cash the sheet. payment of federal cash, in pretax the higher $XX.X the annual workforce cash X% with timing total of and of driven tax. million our charges QX our to balance We equivalents

returned share dividend This current repurchases. for and repurchases operating level shareholder continue plan our cash dividend shareholders a of billion Increasing $X.X with billion Year-to-date, annual to to at share leverage, maintaining quarter, consistent billion $X.X to have and quarterly our of $X.X comprised share our and returned our capital level quarterly in is we XXXX. higher value shareholders, we of growing repurchases allocation billion fiscal $X.X strategy. greater throughout the through we returns

operating we our confidence returning commitment announced free minimum dividend per our dividend by confidence $X.XX and ongoing leverage strong to as deployments to cash summarize, and cash raising implementations. increase our executed the we in we have $X.XX of Given today, of continued shareholders help and well demonstrates strength complete record flow our with our increased customers flows. To a business margins quarter. are our we our to the This in of annually we XX%

recurring more We continue to to shift progress our business model revenue.

mentioned, to are value. With long-term we're continue innovation capitalize work strategically to our approvals in of Chuck delivering and through regard of we will growth acquisition ahead regulatory investing conditions and proposed are closing to what it and on to close anticipated. We had originally that shareholder Splunk, committed our we opportunities optimistic as

guidance. We in have Splunk not impact included from any the our acquisition forward-looking

Turning to our guidance.

account to they service expectations the for have previously weakness and the the uncertainty, for the our of As shipments customers half record of absorption reset of the of product our received from we second levels continued caution mentioned, year provider market. us macro around by our

guidance as QX, For is our follows.

range $XX.X range XX% of expect share the XX%. is to be to expected to revenue to $XX.X the the be earnings to XX.X%. margin expected from billion margin anticipate $X.XX. of range We be gross to to in billion. range $X.XX is non-GAAP Non-GAAP in We Non-GAAP of in to XX.X% per the operating

'XX, For guidance as fiscal is our follows. year

now expect We range the range and from guidance, a both non-GAAP let's tax to move into billion. year QX In the per be is rate guidance full expected of in $X.XX. effective assuming revenue Q&A. of Non-GAAP billion our to earnings $XX.X $X.XX to Sami, $XX.X to share XX%. we're

the in first you, Operator, queue? Thank [Operator Scott. to we move analyst the Instructions] can

Amit Daryanani Evercore. with

had, Chuck, for positive days upfront. think about just that to less it's by points XXX versus to extended then love about back more that the just you year just folks digestion to weakness? can that networking. And follow-up, is organically? And as in a think ago, what macro when of perception think flesh full there's do a sort media announcement a understand this, revenue the love much about would about to you I'd out, bit my servers, about of how getting a that I I'll for how revenue questions you ask you means then versus Cisco. of telco the cadence lower you I getting touch on the XX guide do the basis both versus

Amit, very you thank much.

obviously talked So the obviously, We uncertainty. their And forecast. materially, told XX guide, feeling of they previously they we more some means submitted teams they pushing lower macro them. relative our customers second we to the that in days preparation about with us this, which saw there's ago weeks what versus was a the a talked for really what little ago things to out scrutiny couple what on told changed us putting are half had and and

seen. So that's we've difference that the

trying telco pretty it's as well piece, digestion difficult break think X, percentage those the as the to each -- issue and what far honestly. to As SP as of down I comes from including the do,

the the half we're no all year. think so investing and second we think to the SP through and again. year. telcos that one the say telco the of inventory is SP have that to of the consumption of end And the we will -- and it, half telco to year. think thing consumption that our wait of had anticipated be the think true. And and the that in we're the elevated I the originally of However, we that these 'XX, macro that I of cable should end -- reset to that should consumption fiscal levels led The second similarly. be longer that begin or the year, be obviously We probably they side through SP us that would will I We of going is see hopeful they to begin things the SP invest this in issue -- issue believe the -- and temporary by thing

and we partnership, creating as well, will their On he this be Ethernet. that multiple with the we was There the of it with over also agreed the Jensen, Ethernet is I GPUs time. meeting first be our and technology include NVIDIA there'll versions about talked would servers this stack. in definitely and when

multiple but clusters. our So technology it will they're Ethernet connecting include -- when

Meta Marshall with Morgan Stanley.

coming as any not there. commentary AI how X one a priorities it of enterprises edge center kind noted guess more a any about I from? helpful that if or are whether prioritized but getting for couple budgets seeing quarters you think getting comes of about had provider, second versus the seeing those Are significantly? or of just enterprises areas think still to investment AI maybe And Just service significantly mentioned on prioritized that ago. had just of are question, where getting weakness sense would -- then you you've the be a data you're Maybe and

Meta. Thanks, Yes.

do phases this you this rate. would with various a quarter businesses. We at sign. like strong very see what XX% I see experience cybersecurity. dealing work hybrid is our situation. customer still the of saw in our are in saw had with contact device video investing customers investing growth Collaboration quarter, which was center. technologies that We devices, say We see So as Observability their through positive good They a customers even clearly we We

as invest opportunities And so see traffic flows re-architecture which networks both customers the as rearchitecture, been deal that we leads about their years. to the to a that. application of see talking Observability with of well a of lot their We for couple we've continuing to in

the that think our to so that right the much that I we core business now. in get all networking ship that, trying is, where is now issue real that's right implemented just challenge they're

As see to from arise. there were I to we been that comments, opportunities on translate back get they have to think ready be baked. once there me are not expend their seeing trend, budget just a some to through, what enterprise it in I days, AI see thinking tell enterprise say think cases in began for AI, to early the what emerge. last there's that I over in you financial the how on heavy would going some customers trying massive they fully about they're to would teams And field work they're the this pipeline of our holding enough but and XX to to some we AI began strategy is services. for use it's it the comments And but relates that

point. what So that's at I you about could this tell

David Vogt UBS. with

Chuck, for look your also. this back revenue step 'XX fiscal mean, we're want levels. back maybe and basically If I year, for at for So maybe guide Scott I a second, to just to I

as more of core X% So networking portfolio, out sort product. Obviously, going X% you share maybe of of about the given I'm in of longer-term laid the that some business suggest the just context years to would grown. guide the trying customers model your a loss that at there's on briefing works of in that has number think the it parts how ago to some digest investor other

to cutting try thinking would fiscal we're I obviously, just I job, and from keep the opportunity to goes But of potential along cost strategic is then how take going marketplace get kind price given And done forward to back margin those back kind want lines higher. of you've if there in imagine you're to today? a market a portfolio the by 'XX. maybe sense in to tremendous there's of disruption a So a an transaction and margins the profitability a some about the standpoint, to share of today, use the

to I'll volatility you caused start then, we which when to on building of chain pre X%, the X% back chime seen. the spike can actually up a about David, course, set think go Chuck, chain in, we've that since Yes. orders way that share. gave remember, supply our supply XXXX, you seen in of of a we've and then the was then all and it The big And to if in backlog. in subsequent product you metric,

backlog, As in we a spike we the cleared revenue. saw

the we've downstream. and backlog, been as very chain has cleared we're on. What so quickly, all team, look supply to that as And dynamics of going strength our is cleared year-on-year it's moved now we those difficult seeing the were given just bottleneck at compares it

that's somehow underneath to covers. So this the and underpinned moving year's you X% X% look I all parts that revenue so it historical headed. still the was that aggregated when don't of at because try you the can to the TAM in, of we And longer we we point, markets the to What we're the compare it term to as think see that at right? this growth of play gave where

need in to see biggest year-on-year those looking is going one can go until then And regular think quarters at more to now, compare to that's right? to I growth think we out that, then right point. able we've the don't to got, need it normalized rates ordering which normalize rates, back the headwinds get you begin to You I of you're the lap work right? to we be inventory through field growth to and X a

you we as But term. point. way company. think the give the and the that's model can combined that longer like insight need you a this think acquisition after change I of better into there's So we update We'll to longer-term about what finish Splunk no at look

Yes. out I share David, at look loss, that last reports the on after the Q... at published think you if look -- came the just

X, calendar.

QX, you in you so -- X Calendar we share. take take markets routing, if and you campus gained actually our largest wireless take SP switching,

center you where share you I the don't sales coming webscale switching, our we and that switching, SP to reports data a into is see one to But there we major routing. up -- as of it their report know thesis at When center loss. So webscale share show our be into loss have will from. look data sales understand competitors

turn and at those that X quarter last sort others, years. the put we X you share the were So based out, But the actually oranges of if even last look gained have into categories. rolling over a reports apples on

Raymond James. Simon with Leopold

getting I'll with better. ask and then your start one looks and little is easy harder just one. I've like order bit the one an trajectory the a got easy It somewhat other.

expect this the can could I the you orders, down you So and trend. about don't orders given turn XX%, too positive bad. orders forecast talk And you when if know again, not quarter, the maybe comparison but

we're starts And more and more really not How the playing do hyperscale when longer taking designate different question this I terms if different maybe mix Or suppliers? mean how 'XX, out, opportunity? centers the you other when you a term, to will of will multiple discuss single the data webscale Ethernet cluster operators choose in the in but they or split see The currently match? to see you clusters I vendors AI share. will could particularly by they in dominated 'XX, envision InfiniBand, wanted

Yes. Thanks, Simon.

would what half more you order clearly trajectory, the their don't the what outlook, guide -- tell be still modified than as even we our think I on But second will that half So favorable first bookings. teams is half. I the second

So your that. it leave at the is of sort trajectory, think, valid, and of assessment I I'll

clusters, a webscale competitors good talking question On think players of technology about technology are hear the our I number AI underneath that using because and what a it's us you'll underneath GPUs, Ethernet GPUs. is our

think a I remember always always vendor important so strategy. sources. have want And it's to X they to They tend dual

changes there's the can't actually both don't And significantly us that. is, unless be this -- we're technology for reason to them mixed. at that underlying actually say whether mixed, And will network so X think I mix I'd clusters. are too something the speak to of I them GPUs I think do benefit I be to any And will playing point, which there's of there sense today, to there's benefit some it's to in for today. My early those. this space for think homogenous completely be over tell don't sort some or just time they're

Tal Liani America. of with Bank

have X I questions.

it's to and and first And years to only And there? what market met What you is then one about The follow-up. years market and spoke ago great. maybe still Security happening fix going this is I'll ask market, X X%. my new is do from you The growth? we ago growing benefit strategy Security. when X can And but

Tal. Thanks, Okay.

been start of can where acceleration year, this I've an we would highlights some we half quarters, thought the consistent that are some you few give to see -- last that Security, we the fiscal green of over and think pretty early. some shoots seeing second I I of So

important have with the customers is cycle. we're today. innovation we a on Secure that sales XXX actually we big we of like a and are X- X-month typically And remember And technologies. XDR, that good XXX-plus play. the customers, the Defense it it's thing last -- that to now -- platform we year, as see to of seeing shipped pipeline announced and in August, build platform suites XDR Multicloud April new Access, Some those we in

Splunk, are that have to already, on So real think, point our to value customers is seeing. a going with XXX I customers a integration statement the way. be That's important the by

-- almost see. we perspective, insight, which quarter, demand highest some a We is see digits you in give Americas, double to seen good that So just the a feel the demand we while. the was the about we've this past pipeline. From

of the see to So a over comes that time months, just indicators. And going think and X to believe next results watch same out. good if see you I think begin I lot And frame. and you're more more around we're X the you'll seeing that innovation to

JPMorgan. Chatterjee Samik with

sort how partnership, about go still share you rebound ends most into in call time the a 'XX, terms my to, for here. drivers Chuck, expectations your you I'm We from you as that back even away digestion can we target of macro sort go first on sharp really NVIDIA rebound fiscal of seeing you more on customers should $X what my if that of there? And of that you customer impact time demand. think And about the target fiscal optimism going are of intact when your beyond realizes walked sort partnership as ask sense But AI sensing window, Or thinking today of billion? seeing see that complete. seeing frame? that question, sharp of your a for the a you're target you're the inventory I'm 'XX, about follow-up, from hearing to bit demand a you're inventory it digestion impact to I the that of of a from in more guess is is of order what last

quarter saw just is caution saw it's changed we our -- more, leaders more. Thanks. our definitely shift, sales and we last pushout the the that's the they we same that or to caution I caution. want on And say prior we indicate We massive would I a heard from see And caution don't ahead little say with talked we more customers. point-blank, but call, quarter? a the a bit and the them thing with -- of then the over-rotate little do more forecast. from that asked there the of more was

So the system. us that that little is a bit more just tells there in

couple think So to what's happen a need to therefore, declare going 'XX. of see I quarters fiscal out before in we it we play can

discussion, number of going about now opportunities of say in NVIDIA at I is time, that Xx our Xx that, is pipeline AI total NVIDIA the that. now to pipeline would The billion which is orders none couple days, the I independent the And orders, partnership about $X last we On gave The someone what virtually And of that. about were we ask with say would yet. see talked which pipeline is roughly It's point. comments. know We that I is that Xx particular the of all more some grow. associated anything me of that that 'XX. XX almost last continue in a to that

Ben Melius Reitzes with Research.

term? the you you you so calendar ask year, how obviously, you Do competitors, your $X timing just last that Scott, you expecting term? or any up pick next to what's pipeline next deal. wanted don't helps comment, that? billion next your about -- AI is of Chuck, year. HPE-Juniper Chuck, feel your in on next like quite one seeing big in a to Or I -- in year, long Are kicks year? that market mind, if calendar And do regard you AI that if the And think near uncertainty with

Ben. Thanks,

in the deals a know overlap I area where that HPE-Juniper on deal, have in fact would is they million-plus XX% wireless, if and one say to increase don't meaningful the I there's had $X wireless we sequentially. connection any So the

lot do there So can't I say. that to me they a mean the system to noise is say have it, talked But in or be of in industry there, to customers what about any but I the specifically hard honest. about it's

talking directly, So them I to -- the little think early -- that expressing us. it's be they're asking customers concern. think for be but a may to They not for to we're them I

second the is most that would of the year. August And you play we I fiscal 'XX, but in starts things this of half, On we'll said I out. in probably should timing, I how think yes, assume see guess, think which probably

as certain we're and stages that think are now working place actually use the on pipeline of can, just are strategy through the as we're with customers, opportunities. early The are most already it. to and stuff going right cases fast customers I they in in but still possibly well-defined move planning

Yes. But $X 'XX, Ben, of our turn expectation is that our in the fiscal be revenue into just majority in clear. to orders billion will

Matt Deutsche Niknam Bank. with

one one I'll keep to it follow-up. and

visibility dynamic then customers? towards So around you digestion. Is resolving this And primarily year-end? enterprise about a fiscal little commercial the got on can follow-up just bit inventory by affecting that a talk itself And gross you've actually and main question, just margins.

same. were I implies stable the and sequentially, think more of You the guide fairly

wondering, are headwinds? or a changed anything we So supply dynamics now past has largely Or I'm of on the chain just lot supply the front? chain

Yes.

take Scott, second. I'll the So and then can first, you the take

we issue, the times excess think particularly service inventory it's were say of On up I lead an cloud when and weeks they're working the so as right of got I they've built now a providers, it's And in -- digestion provider the issue. they would that through XX-plus inventory think probably largely long. enterprise

products have perspectives. the to enterprise of lot We a management for our are that cloud tethered

when the in lag connected. prepared gave between customer we so the the ship Meraki see and And it they when I my to example we remarks.

and end the to which would, it's as the it connectivity of aspects we fast see we believe can frame thought the time how have on visibility, do some through to portfolio is shrinking, going of is And shrinking leads as and us 'XX. actually shipments and not between this so extend we

Scott, we where that's margins? gross So are.

slightly, obviously, what's the settles trend, some happening have services a question to as in the the -- flat, to services there. The you revenue. continue in the quarters up There's to of Yes. product standpoint, strong improving said, dynamics. component range that you better trails in ramp-up, margins right since benefit Red we're in bit scale XX% year-on-year Sea sections, pressure, in, a the gone commodity through growth. we of now, of couple and from sequentially. revenue X although of get see growth. the to delivery really year. roughly are that little What it our in But a product seeing quarter revenue continue range the fixed, lot things I as those gross our services with the We leverage a happening saw And when in services of We're in had and now your revenue the you cost think on end freight of both tail underneath happens. seeing There's in, the freight show are this XX% of course, does is, the costs that you we're the where of a settle

settle the point. So us in felt we behind XX% not are those And I of, think in, should all majority you range. add if that of the this to at XX% we supply constraints the chain all when together,

Michael Ng Sachs. Goldman with

X. have just I

on the guidance. just revenue First,

think I X% guidance XQ midpoint the of implies the it, only quarter-on-quarter. about on revenue implied based plus fiscal

what's understand question level Given just that the clarify. be a And both well NVIDIA to it of on assumption? that more but as deal, NVIDIA's together, back that's a that will correct Spectrum-X we're earlier to will be from to I backlog, normal if seasonality? back Ethernet, then preventing And normal Ethernet? Cisco's Amit's sold going it's to I a the how wanted follow-up as that AI as

the guide, lead midpoint the the of to on math Michael, just you would you what revenue said.

I at that ever expect caution coming various twice. less we caution. much we from field, one there's in you factors as think I to just point. to the all it have no do as see the this guidance, -- our to And Chuck reset think guide said, look in at have wants should We

go-to sales when the Ethernet. is -- channels ecosystem key benefits enterprise teams are Cisco look, therefore, flowing And and our think, I and are our solutions leveraging community. these our see will and we our when front, our that of NVIDIA the it through they global partner market partners, one On and be

Jefferies. Notter with George

using rebating, any accelerate of rotation? active I from How stock discounting, just here? -- Any I'm activities price guys inventory about you an or there any channel? help curious the the clearance to mechanisms are approach are guess taking are you

I'll comment. one quick -- make comment I'll

I looking to have said sales teams to on of you them talking for some well. this services at that partner were just transaction help I more customers of some you week, larger our remarks as know prepared Scott, deployed And our maybe this a do that. We've think help? my incentives in I detail some remember lot or

get cases, Yes. at partner lot the We down absolutely much you are done. working In our of lack with of the at that. on customer both it skilled level so only -- level, a There's resources to sometimes do sometimes boils required it. accelerate at the that to to can a field

we're prepandemic. We have make put accelerate. in cancellations to below other those well or stock continuing to your rotation, place were they To that incentives seeing point be where on

-- we're on front. not that any that of pressure So seeing any

Woo Jin Intelligence. Ho Bloomberg with

curious that that's most forward. bit the going up to is to little future X%, subscriptions just of is be this networking you subscription where I'm You good the heading be talk Given a a rates? did side, on software poised renewal that going weakness given software more about with job down, networking but could quarter going the

Yes.

the for question, thanks -- think I Jin. Woo

at respond last in seeing renewal both -- in revenue have, of but success XX% turning customer about of categories. collab, driving adoption level posted I you saw, a growth revenue in outside of imagine, that annualized it reported fairly when both and as both amount recurring of revenue invested you we and we've way think We've is focus Observability and security software, accordingly. When the is we're of we're the think exclusively heavily as renewals. a the observability. put put to space huge in you that then almost and -- built on look where we those more we can into up rates growth software-heavy years, and networking, adoption over we that growth couple you

the are in we that direction. actually seeing right So trend

Barclays. Long Tim with

one question, follow-up. One

or us first, system So a of where or then the follow-up the growth growth do with standpoint, trade-off that seen? protecting from little but the are comments, software are just If seeing Chuck, you full pipeline AI on kind -- products? with growing? we've Obviously color reduction? given head a bit give could we here, Silicon just Chuck, with kind maybe, One us trade-off count just seeing of about product how kind on you you you a of remind the where all margin talk can you're little more that about you the for challenging traction And of a margin think could

Yes. Thanks, Tim.

commodity. mean, you share we real market competitors I at disciplined, though. think if that to gross that value the you technology some customers of and that that our look considering of think of what look I the And on And the reflection a what the -- So and margins deliver we your we're margins they trade-off, that as a are And growth margin see we're at gross you that always tells very they're that, some value have, deliver. and viewed in of more lot our see and you a clearly customers your them.

disciplined across So we're both. we also look always just margins versus are -- while we growth, at

On the use into X the right the cloud the big silicon data same Ethernet ones. got center AI enterprise We've front, running next-generation several got GPUs in of We've platforms. the now. big the Silicon delivered UCS X silicon time. We've of our One a over we'll in providers play, clearly. is in And

think and get to time. in the over cloud that this into but play evolving, not I our it's world, call AI. it transition in the tell we I are a on we well us so to succeed have absolutely unlike were the will And for times -- ready for we tailwind original infrastructure about this talked we we prepared transition be equipped teams, several cloud It as how

Wells with comes Rakers question next from Our Aaron Fargo.

Can on to stick a of time, last opportunities size the little a us that bit of is. maybe you growth of know the you've just what remind just over periods webscale talked large building AI I'll now? seeing, business question. -- webscale about webscale one, customers I your how presence particularly you in kind discussion, right and either from have the you're those with rates some ex again

identify into that for however areas our within specific the me use we're we their keep of think to And team you the cases or... webscale franchises XX are to say about -- infrastructure honest, Scott, it, what players. So want designed each I there measures want or or

XX.

those. of XX

numbers, think what's right And don't now. so if they you wouldn't it. they're would looked right inventory because of be the about going how that I reflective at I now, digesting that's just growth think on

where normalized not a so in lead a have position So they order need because they're times lot to much.

So not I that's it's don't -- even relevant. think

want cloud, the think they case, cases that wanting the case understanding use silicon. X source, They're X want all -- XX components. vendors provide way level. very at wanted would on traditional look those also dual they make silicon have at be that to to may dual they integrated with they resiliency look carriers, as said optionality. down They In the In they earlier, I who source days but deep I this and with systems. and different sure the and

and from there's a for the thing complete over standpoint, given a time, said term. we add we're and no that longer AI is, box, the white I'd Aaron, it both positioned, that no box us question only is silicon earlier, there's question way tailwind a a

Piper Fish Sandler. James with

you on made gross comments a couple around margins. of based Scott,

are areas about to supply starting think cost to and are reduce the Could past what there it's readily the people and other if a in savings those increases on price to be understanding go way more the net filled you the basis elsewhere available? now to we any some on see these terms of down guys count? reductions given enacted And how Just we wondering, back? annualized have of was kind difficulty supply should chain and and here reductions, in of like head expect sense

Yes.

from higher this, wake pretty seeing this have we prices why the haven't begin was that really providers with example. coming offset is that declines, our seen with. at to commodities, of everyone haven't cost On cost point. price constraints, from of our down. to was broadly come and supply/demand in back you is And as the remember, go the What put straightforward. What were of in we seen in some dealing decreases a is good Memory the we to suppliers price to got many the increases the we

are XX% -- returned still sitting gross in margins, so XX% and have that And range. range, more you that with see our normal to a reflected to in which that but

anticipating us. cost price not coming this point I'm declines, So declines into significant pending at

On you up. you are today, operating down. a they'll expenses we the see if modestly for look for working through the just can And modestly savings, where cost at restructuring year-to-date. are We've expenses year-to-date, our discussed that think got -- minute, be a the after year, operating we way full we

to think about So think your it probably I right that's you're to way the model. as looking build

Pacific Thank call, third p.m. our will you, XX, reflect Jim. X:XX Eastern at quarter results, Cisco's fiscal 'XX Time, call. Time. This which May next X:XX conference will be year XXXX, quarterly on Wednesday, concludes today's p.m.

any have for free you joining the today. further Cisco thank If call questions, you please feel and much we to very contact Relations, Investor

for participating conference you call. on Thank today's

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

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

time. this at disconnect may You