Cisco Systems (CSCO) 15 May 242024 Q3 Earnings call transcript

Welcome to Cisco's Third 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.

Third 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

our by Steele, is joined now given are Splunk, company. Cisco CEO Gary recently Splunk, the of And we acquisition also a of former which closed

website Relations information, By webcast with corresponding following now, release. will available press be A you Investor should earnings have in on call. the our including section seen supplemental the our slides,

statements, cash full in our financial also GAAP balance Income of to non-GAAP website. found flow information information, reconciliation be the sheets, section Relations other Financial Information statements and Investor can

product call, referencing stated revenue will be of conference results non-GAAP and both geographic this and financial terms we unless in we'll orders results of product customer terms and Throughout discuss in otherwise. GAAP results. and

and most comparisons All we They and report filed with differ be materially are the we in forward-looking a quarter our on contained in the the XXXX. documents that uncertainties SEC, fourth the matters year-over-year year important the this of The statements. specifically including providing statements, for guidance basis. discussing Forms forward-looking fiscal actual discuss will that made the risk identify results and subject to throughout in detail XX-Q, XX-K factors cause full which include be recent risks will could we be on from will call to those today

comment financial during it through I for press turn public that guidance, an With will unless accompany also and its is over this please Chuck. call guidance not details. will explicit respect to further release quarter it done disclosure. see slides the now the Cisco to on

of solid Thanks, in expectations, performance end revenue, our good with Sami, at operating earnings our QX, revenue share performance a today. end revenue. to for delivered recurring the thank the subscription coming high guidance per again margins and leverage business drove us resulting across our range. exceed performance. in and organic remaining in joining . We obligations We high of Strong all annualized gross delivered in once better-than-anticipated you growth

accounting have with half before We Splunk. total than subscriptions our of the now model business even more revenue addition revenue for from transformed of our

success observability, the are With development and the well to I want across transformation, thank engine organization. security, powered of AI. collaboration long-term networking by dedicated been positioned our across research entire it growth, as we Cisco efforts silicon, and stronger the drive has and our through that team their to is innovation never

our In ongoing core in our shareholders strong we The a the returned $X.X with strength flows, consistent our value cash through of and year-to-date. business QX, capital delivering to cash returns. in billion value produce $X.X of quarter billion continues total repurchases returned in to dividends to share commitment reinforcing

was QX ways. significant important for X us in

be about our the excited of acquisition, couldn't I Cisco's largest First, more Splunk ever. successful close

in initially annualized world. midway position expands Our the X through of the software-based QX and billion over our contributing our to software acquisition March than solutions, portfolio Splunk recurring in companies as Splunk was earlier XX, significantly completed of on $X largest anticipated. revenue adds our of

deliver Splunk excited to and are we we Cisco thrilled what observability our about customers team security the to are capabilities. and complementary can as We welcome very our integrate for

ways and protect their their Our digital in footprint. unified using enhance platform will revolutionize to new organizations, entire how data customers connect

of security, a new Second, to first highly our we its significant AI-powered introduced with most Cisco innovation groundbreaking kind. distributed a Hypershield, approach security

in enterprise. connectivity network, about a bringing to our hyperscaler the innovation developments in the and these more Combining way of security and is will networking and of security talk only Cisco very I fabric the momentum can, in a Hypershield built few power moments. the

our partners to portfolio, in customers points base. turn of with But we're performance happening with in touch around differentiated of customer together breadth and I'd our many in like what customer and us our demand. our QX into what's to terms the The seeing now provides insight with world

the end expect majority by quarter. complete to well last as which of expectations as cloud, hand in conversations of with currently our we inventory to and installation on we the customers we are fiscal line steadily we the customers the Based their on products with that laid activations in Meaning, out of customers year being the July. track deployed have the partners, our believe

order center where largest as At customers in X our and growth order collaboration prioritizing portfolios, a product time switching ruthlessly of are product categories. and campus well growth data our we switching product in product saw investments, security IT their as

up were the and public U.S. were temporarily product and orders impacted markets, our In strong flat Splunk, in in continuing year-on-year. product orders EMEA sector Overall, but X%, was sector excluding resolution APJC, performance Americas. in customer the discussions public

subsequent legislation. U.S. the funding most of government has recent signing this believe We the federal cleared with since

and worldwide, of While demand remained we in signs and scale terms and performance to in early pipeline of encouraged our orders. see telco are web muted cable improved customer stabilization

we long Overall, strength execution win This gives in confidence and through saw quarter. strength our us our reflects rates we term. and moved the successful the are increased as competitive stable, and

be show that ever sell-side expected also that portfolio than research the which evidenced months. We large next within only is share IT is know recent spending surveys, as network greater our to gainer the over Cisco XX budgets net of by the value

digital to saw our QX double-digit Now Cisco's in enhance with Splunk, performance revenue excluding in let's growth in look We in growth their customers observability year-over-year, and security detail. resilience more at technologies. as look

accelerated and what of have teams pace security, year, our of In the achieved. proud innovation I'm our and past we've

month, distributed networking introduced earlier, AI-native Hypershield, first cybersecurity be which Cisco built last truly As solution will I fabric. we the mentioned our into

is most it platform Isovalent scheduled end-to-end to our today furthers easier threats the This which and unified year. is August Cloud, expected solutions, the facilitate protect to the shipment acquisition for Cisco customers making new the Security against innovation industry's our for closed this to and This deployment with and leverages recently first of the tomorrow. for deliver software launch vision comprehensive,

with Access and to Secure strong newest ramp quickly security solutions, continue feedback. XDR Our customer available

last we RSA, integration our insights. give announced also even will Cisco Enterprise value Splunk Just customers which Security, the and with at more of XDR week

and QX X,XXX potential enable are observability acquisition of The begin in closing us sales Splunk closing already meaningful customers the and Cisco will driving to Upon making to Splunk in security identified those markets. also the have teams revenue who deal, synergies we our become connections. customers, our the existing

significant presence. and opportunities for see Splunk in partner markets leveraging robust ecosystem Cisco's also customer We had where synergies revenue or no by limited

the that in Gartner's ranked for Quadrant as a strength Earlier which Magic the testament is offering delivered. and the event security the incident has continued this was leader Splunk momentum of week, business and management, Splunk to

processes on and Splunk our integration, We enablement in accelerating integration channel both sales product aligning combined cross-selling are a and working Cisco investing and starting upselling forces and solutions. go-to-market rapid resources, our for with

opportunity. Cisco also additional We XX.X multibillion-dollar Ethernet the Cisco-validated on continue continue X awards to In ASIC. capitalize infrastructure. top Silicon X past leveraging scale, has see the our AI fabric, In AI the X with web design based momentum been terabit GXXX designs One of infrastructure on to granted hyperscalers quarters, for AI we deploying our

'XX. $X year in sight orders and yield billion to in -- AI fiscal confidence awards our product line our reinforcing 'XX, of in fiscal orders these expect to We of

the adopters will those AI, and with partnership to Additionally, offer customers deploy seek leading-edge solutions for cloud-based on-prem easy enterprise early of our networking be inferencing. AI who to NVIDIA for

of the AI We breadth application beneficiary key believe our portfolio of positioned amounts see. vast of to well proliferation enterprise data we are with be and the the we

I'd Scott, Splunk's Cisco's announced to former and Gary it Customer Cisco, turn CEO share been that Sharritts today, President I to update. and over Partner X Earlier has our Steele, more like departing is Before of Officer, that go-to-market. named new Jeff Chief we

and this closely team he a known operational Gary excellence. continue our the with to strategic the process through Splunk to in goals He and role, into work against for And to the is integration well set Cisco. me his integration seamless will plans new for lead company. execute ensure will

working on and focus ability mindset, and new Gary's capacity. his well forward role, to this to proven his with in operational drive simplicity in I closely look position growth with combined him intense him

he's a to a I'd years list Cisco in also of like his moment accomplishments all to achieve, quite long XX helped is thank which that for Jeff here. take

Moving back to QX, let me briefly summarize.

the we security While as our product normalization equipment by continue acquisitions customer core Splunk continued are see enhanced Isovalent. of deployments observability and and grow and progress, trending our of shipped to have that to towards is portfolio are significantly pleased portfolios we

integrate As our customers and and can and deliver the it, it. they data security all to protect to infrastructure power need to Cisco we and deploy only it AI, X. develop believe the the adopt

hybrid support unified platform at the to and pace partner an organizations we vast and deliver environments scale global to approach, innovation will unprecedented globe. With multi-cloud ability and ecosystem around our

I'll more now on and to the our outlook. turn it detail provide to over Scott quarter

Thanks, Chuck.

results QX Splunk, range. solid at were QX reflect orders. above a margin high and margins revenue, execution with end of and excluding stabilization per our share strong including non-GAAP of our and or Both earnings Our gross the guidance

income quarter $XX.X billion, close. revenue net $XXX was down per earnings was contributed Non-GAAP million $X.X down in Total in the revenue share billion, was Non-GAAP XX% XX%. $X.XX, post partial down year-over-year. XX%. Splunk

share. impact The interest slightly of offset of a on the was positive financing earnings more net per operating acquisition than cost Splunk. of with Splunk negative impact non-GAAP $X.XX The effect

QX the category all X%. our $X.X Looking detail. up declines at implementation XX%. $X service in due down across billion, billion, continued our was revenue of more largest was was Networking, to down our inventory and revenue product by saw We Total customers. segments revenue geographic XX% product

shipments Bear benefit networking significant received in the revenues the Security XXXX XX%, our acquisition. from backlog. that Splunk from was excess including mind up benefited QX of

grew by our growth double-digit Security offering. Zero Splunk, in growth Excluding Trust in driven SASE X%, and

by devices. from ThousandEyes observability Collaboration in driven cloud offerings, our XX%, declines was by in meetings by growth and Services center and the and benefit up driven Splunk the growth was offset Network flat, contact calling in acquisition. And

Excluding for Splunk, quarter. XX% observability the grew

model. transformed As These Chuck from $XX.X product ARR and have also which business the ARR XX%. drove growth of at factors increased our continued successfully billion, Splunk. ended XX% strong to performance quarter we said, contribution our due

up increased -- X%, $X.X ARR revenue Splunk, of which total Total subscription now XX% was ARR $XX Cisco's up Without was total product billion, without Cisco's billion subscription Splunk, The XX% total revenue. X% XX% up representing was revenue to and of revenue. represents X%.

at Total and revenue revenue billion subscription software X% software revenue up of was with XX% was X%, up our was Splunk, software total Without revenue X% revenue up software subscription subscription-based. software $X.X down was XX%. total

up XX% was $XX.X RPO due $XX.X billion, $XX.X XX%. growing grew also Splunk strong Total billion, product RPO RPO and short-term XX%, Without to both up Total was at Splunk, RPO XX%. Product was RPO the acquisition. XX%. billion, performance up with

X%. up QX were -- We product orders

We year-over-year. expect largely progressing in flat were expectations these the to our orders deployments with see customer and product we fiscal our year. by product end Splunk, of Excluding implementations line be current complete

Americas our X% and was provider X%, APJC X%. customer and up geographic The public X%. was markets, was EMEA cloud was up X% up at Looking up In year-over-year. was sector service was our XX%. segments down enterprise up and

The gross XXX margin was up gross high basis -- year-over-year non-GAAP which basis XX the in margin of guidance end at of XX.X%, above up XXX points, XX.X%, Product came and basis our Splunk Total contributed points. points range.

disciplined our XX%. other was XX.X%, flow improvement at margin continued primarily XX operating XXX XX.X%, costs. up mix management. down up to billion, product basis and Non-GAAP and freight by in remaining driven $X was points. Service was commitment margin by gross Operating basis came cash points, lower The spend driven favorable

outflow in of Shifting during -- cash value billion line and returned of sheet. billion total strategy, QX billion with We of the quarter Splunk. and $XX.X cash dividend ended Year-to-date, in related share to billion And billion. shareholders, net to our cash, of $X.X we including for returned $XX.X our balance our we've capital repurchases. included shareholders. The our to our investments of $X.X acquisition quarterly billion with allocation cash $X.X in to capital a $X.X Uses the equivalents

leverage in summarize, the acquisition To margins increased quarter. non-GAAP our and drove the completed operating Splunk, successfully of strong we

guidance includes of to that Turning our financial our Splunk. integration

to guidance is $X.XX. to non-GAAP to earnings from revenue the the follows: expect to Non-GAAP be to share we is -- of in The to operating $XX.X anticipate range from to to XX.X% QX, range For XX.X% $XX.X in billion. XX.X%. margin as margin per of XX.X%. range billion is our $X.XX expected expected range gross We the be non-GAAP

approximately Our XX%. QX and operating non-GAAP $X assuming of tax of effective than to in guidance from includes the interest QX, $XXX a rate billion $X.XX EPS negative Splunk million benefit. non-GAAP In impact as offsets we're revenue more the

For non-GAAP million 'XX, approximately earnings guidance -- to expected to $XX.X we billion. be year is $XX.X per share a from assuming rate range fiscal $X.XX tax in our range to effective is revenue expect guidance Non-GAAP to the And follows: as we're XX%. $X.XX. of of

QX few points XXXX, to your addition fiscal beyond as Looking line a to there in build into the benefits models. our mind are the you Splunk from in and top acquisition, bear

First, revenue next to growth low we the year. expect to in range mid-single-digit be

the is acquisition, which sheet interest debt. Second we off million to including a interest on both of the from be from expect the foregone payments interest impact $XXX the approximately additional balance cash per headwind and the quarter,

expect in fiscal those working guidance. into our margins line to to revenue quickly we're Third, 'XX these I engine operating our given expect in in product with Splunk go-to-market synergies. -- and to invest be 'XX drive integrate to QX we offerings, OpEx points, fiscal

as get And next the you X thoughts earnings guidance to the be deal those want XXXX formal and call, in to to expect more we've stated, share beyond. sure earnings in mind. accretive give fiscal we make non-GAAP I have We'll we but as per

move let's now into the Sami, Q&A.

Scott. you, Thank

Thank you. Evercore. Amit with Daryanani

hear at them to nice both same some of Chuck, really done being in digestion to or X. order growth, verticals. of the time. inventory the back in about I'll Have getting ask growing flat it's

environment? you softer What from to tech that it's some that's as the understand about I'd if macro digestion macro the seeing guess, to talked a seems a from inventory of love companies, away that's in actually for folks? improve it And of you resulting Some kind positive happening. well starting have like are I environment spending.

of believe or coming And solution? then that Silicon 'XX. in do optical to wins you is just a can orders on side. if -- on you where different or Just One just fiscal be up the I could the of helpful. about you anything get get you other these $X switching from Can have billion follow AI side The that you kind there would expect more on wins talk

questions. you, Amit. the appreciate I Thank

is saw So from slight that ironically, say the a we macro perspective, through the would as move improvement quarter. showed what I quarter actually we

of a end the beginning. the stronger quarter the than little So actually was

on we believe track inventory obviously our the talked we we look, So and last -- with are about digestion that quarter. customers now that

X%. positive. But was saw Splunk the that's So we Americas, excluding up

flat. a sign. And was positive Europe that So was

good. was that So

by center And And in switching switching and the data was when center you see positive. campus data both the growth. switching mid-teens way,

didn't these it private single from being -- on seen. customers IT in centers. spend data collaboration spend prioritizing any in during investing the money but are different security any positive than see they our customers we this ruthlessly So quarter what projects was we and being digits high are the shift where their behavior macro. on, we've side, didn't see order dollars, fundamental they They but still

web-scale billion by On the the $X of driven is question, second on largely the it infrastructure. AI,

fabric, the X networks scale and or in X believe, I AI Ethernet design are As during that our of quarter, also had -- back-end the we I wins web X said, more got inside these we out X running players. we've had

predominantly So that. it's

we enterprise see last quarter. said beginning as materialize, However, are pipeline to I

it's as that's across made of. it both systems up So well as customers. And those really optics is what

Our is next Leopold caller Raymond Simon with James.

could just give dollars better wanted I opportunity some trying us give extrapolate us it? you I for the able or perspective penetrate from that help if to -- can customer mean to what Great. idea some see you're Splunk? of a to if X,XXX metrics a

investment this it. more pipeline lot is a AI little community in And of the there's I'm because debate bit to regarding trying billion my really speak clarification on -- $X follow-up a been

clarification applications. it's can of in get some about not some context want I to center I what's the talk back to So when that in front-end extrapolation we to the there, see explicitly if -- that we want end there's data

So would switching a One. some Chuck, end I you is explicitly mostly with that back and really clarify Silicon end because getting the were lot questions. it and think, this I to of in we're saying optics some like back

All right.

have $X Let that went year And said orders think X the calls, visibility Silicon enterprise some on that sight had said. but we are our in end FY have good second to one. next just was and And beginning primarily I 'XX. a first, I of some the roughly on to in One, billion that use see, of line but but back predominantly earlier combination potentially It's it is mind, we One, it's you back then don't to as we Silicon stand-alone $X in on me then in orders space. we there's that what I is see last I systems . That billion the fiscal optics systems if answer believe maybe call, one pipeline well. is -- and based cases, we're since hyperscaler of mostly Xx end,

customers, we basically And that we've has relationships comment you've those doesn't to Splunk teams. mapped strong a we because where customers, to of have on and of and Gary, have On now the deeply? the want a X,XXX X,XXX -- did presence involved super you been that analysis Cisco in an make do sales

Yes.

had the where the basically, these sellers Cisco to fact So traditionally about footprint. there no the has team. excited identified door the we're open And the X,XXX for have that customers goal is we've Splunk Splunk

tremendous really support financial incentive or spiff see where incent in a aspect X that's There's this the opportunity. to activity. Cisco of also place And that's sellers -- to we

base. of of have strategic relationships out right the helping to seeing we're and can overlap they in our assist our And footprint, our the may more that a Splunk Cisco within then gate. extend in extend where lot customers the that, second hired where activity obviously, there's existing footprint already team

encouraged by we've to like good super off feel collaboration and seen far. so level start, we're of the very a I'm we So

Our next Tal is of Bank America. Liani caller with

I'm ask they X going as questions my also linked. to together are

motions with to and channel have Internet. have of have great introduction Security lots you also you the You in products, Splunk opportunity for and new the

it give get us us about early Splunk? of in or sense you timing, to in we're in ex timing of give or If And a it all benefits going you X% does initiatives. 'XX? you're main take can sense 'XX or how meaning these to grew long security only these Can 'XX see of in X that general? areas just all a talking Is again how long later the something

is can you is Splunk I backlog Splunk second enough about growth us need year. remove to numbers, 'XX, the give remove to contribution and expectations 'XX core from for The this 'XX related consensus we it, can your remove the from for your if then because to initial part Cisco, meaning data X% completely take I also

So Cisco X%. should grow before. It's contribution ex higher than backlog

So growth? with Cisco are the comfortable next year take? X% question or this And component is is, the growing main you of what give

Tal, the for question. thanks

with I it on couple So -- say on of Security was question, it's the a was years our said, revenue Cisco high the in as the and front, digits. up let's demand go organic X%. was right, been the and probably But I'll first highest you're single

new by way, So They're we're customers new on implementing it these the ratable. the and of ramping, a lot seeing they're testing, They're just traction right? is products. are

close the -- take portfolio security then you is -- ratable. of our like don't to you XX% orders So you and

into the revenue. to for So it actually transition that time impacts

the side. on that's So security

I'll and Splunk comment little we side, last RSA. it about -- at on our some and the the a let first on I We've talk of week integration, think then but Gary security integration announced I'll But bit.

more at out. to announcements pushing just is intent Live. innovation Our Cisco We'll have continue

happen. front, new just see security has job. phenomenal brought that always XX X to, innovation. new new I from that and building to the Splunk, months, team. up team alluded last built the said continue a been had you'll even as So We've in solutions before products The a ground the think over that on we done I've you

still get the see stuff, 'XX, expected And I it then Cisco, to And improvement. Gary? to think second stands we said the an always where you would I of to need in you'll that want had integration I And it you really 'XX, that on see comment be. half

You bet.

the super an of X So is progress integration about excited things from made I'm standpoint. the we've

the So last solution we Solutions. Splunk's XDR Enterprise announced and integration the week example, at between RSA, Cisco for Security

but alerts customer that So security into elements is bringing we that of terms gives start high growth also value will Splunk for threat that this Enterprise integration Security a much in deliver Splunk can the the the just detection. ultimately of Splunk. telemetry broadly, of drive more And portfolio

really and a really to meaning a to move we've we're as at combined time, earlier, we strong going as strategy a the And innovate do rapid we like years X to ball demonstrate feel good a we're described integration a the to And we game, continue ground at pace want track our to on industry that. that business. can is

And then the AI in as through get of it will the beginning low at is start your ramp year. that, Thanks, Gary. my question timing going XX, that's on we and suspicion to year, the

So I would more be thinking half. back

a little to we'll But probably that. the go. on see pilots how -- we'll know more XX in know days about have We'll more next these

On going -- we're cleared fact is this I will of chain a and question, appreciate you still is end of we're whole that that comparisons inventory last coming of have -- because situation 'XX be issue still all, strange just because the and digestion tail this where everything. your a of this several shipments year and the that first year the to the second recognize we supply billion backlog out the

aren't into go And 'XX do anything detail real will really an we'll contribution, to that? June, -- Or be you Scott, that we Day a hopefully comparisons. Splunk apples-to-apples to where add there. is have today in of we'll FY 'XX good? get have or 'XX Cisco more obviously Analyst breakdown So to year-over-year and while over giving And you year will the the back I

No.

It Tal, year-on-year 'XX. clearly fiscal Cisco look you the right. And is growth backlog just that rate when think work at core into a on it you I said you fact off. the recognize headwind the

obviously, tough compare. Bear was in a too, mind, QX

growth that then If that now, in to revenue quarters had those year. the of X we consecutive this comparing upper teens. QX of 'XX remember to we're QX mid- of you QX and

in addition quarter so the and the tough need a doing compare QX both backlog in And it, this doing think you're the in growth the to rates again, growth of way 'XX. year-on-year impact rates next on to you of quarter, year-on-year

David Vogt UBS. with

contributed So maybe, Scott, follow is I I run on I I the they you questioning headwind you that in Splunk year, to But that like math? it to recognize looks just Cisco Is Tal. up on this from next what that 'XX. certainly down kind core going through backlog want numbers. should cause of said to to the have giving headwind hold if backlog what going be right know of line that be versus year. doing you're off

Splunk. all the margin walk -- can a you an business. this sort the comes single margin much you of maybe to framework, bigger given being Can gross gave the you mid-single-digit perspective, next basically, of Splunk bigger margin a the of of from profile And year of then but part through margin so part perspective do operating gross from expect versus us be year? business And what low from growth a obviously, stronger Splunk a

Yes. David. Thanks,

where lot built You had we right? of we during was quarter year, supply of last the backlog always current of There's fiscal backlog, call that really a backlog, QX up it, shipped a excess remember, fiscal a this constraints. excess an ambient lot I'll where of the level of, 'XX

also growth is was that in adding the year, think this bit you positive year. that on grew first on the from of to to obviously, this quarter mid-teens you a this about quarter Splunk first rate So 'XX have But in backlog fiscal 'XX of when it. we 'XX, excess to that, of nonrepeatable clearly, a the having shipped year, revenue. think Remember,

there's if moving math doing I in through, walk net 'XX. walk through in those can growing of you to the core we And lot the digits know mid-single parts that business out, Tal you can there. that that if fiscal David, say is actually and want. that's when a So we was

think had think the about think had I on We and in are some margins, is benefits longer some product in itself some quarter don't course. I benefit, savings we a gross the to On repeatable way Splunk cost the quarter. benefit of mix. term. that that, the

So XX.X% guide to QX gross for range. I QX. talked being margins in about the for the XX.X%

think as the about 'XX fiscal that's think well. I as right you range

Meta Stanley. Morgan Marshall with

question, kind Chuck, if of just products in of of with to kind to desire for customers your Cisco of you where either in budgets? or are on-premise Maybe preparedness could first security update conversations AI, impact just invest invest kind kind around or

for Scott. then And maybe second question

kind about Just as we we think original OpEx that to be kind you of of versus X should the year for have Splunk, think Splunk of how investment that guys of targets accretive noted kind close? post

scalers is understood. I Meta. Thanks, think pretty web would say the the well conversations, I

about talk enterprise. I'll the So

AI some are had that today. certainly enterprise that very, wins are very, we for running they're doing infrastructure very build-outs. handful early. there some a most are -- some work we space still have I of And And pilots that say think actually supporting I'd in the enterprises, had was

board advisory there, global cases week I And going play is are figure out. out in our we had about they're the think and still last had what XX exactly customers and to trying Canada. customer We their how to use all architecture

it's I the So still would enterprise early side. super on say

announced that want But spend driven the . There's the to is cost Splunk, fiscal no have we product comment acquisition much And integration 'XX did something, point we sorry, way organizational right, ensuring do question talked, -- to there will through more way channel through fiscal be in 'XX, you to this synergies. the enablement. we meta, that this. cost OpEx the we synergies will from our of get work right, both revenue as this When think integration we of made, we I then that synergies add about and by the And Gary? -- terms

We have team team train sales to Cisco, on sales train their the Cisco Splunk. on

accretive There's acquisition year in investment in earnings cash will, we year margin accretive would We that said gross that this do in accretive the we second will, fiscal 'XX share integration. year. Splunk, be in is the with per that. post the that along And will that from and and that first we'll be flow and in be goes we will

that's would of so that our We that this be So bit there's of as those fourth and our I little around early, this the of think I the months it -- accelerated. X closed middle end quarter. closed early, thought around third acquisition fiscal the times quarter, ought know 'XX. to it perception think closed close a

was it a numbers, round So more little quarter early. than a

about way is to accretive I fiscal in think EPS that the So think 'XX.

cash being margin as integration. and in the in invest flow gross accretive still fiscal 'XX we So

Piper James with Fish Sandler.

Meta's want question If Did math going a around again little on further really $X.XX is double-click a be share. because there's that earnings the why here my down to go you side much? a 'XX. ramp Can in OpEx to right, on somewhere elaborate get as going serious it's bit to to

in take 'XX another Do we -- with to too or is that synergies to time fiscal starting of be get? just expecting much so kind should to revenue Or rate? growth that year initial mid-single-digit really low going

comp of Cisco and OpEx some compensation. And have to because question ramp the X on layer of philosophies conversion just Splunk not Splunk totally the here, due on of different comp is to had stock-based cash the to but historically,

Jim. Thanks, Yes.

-- and OpEx layer put was OpEx out the but can haven't at had. you it's OpEx we mean, guidance look didn't we where fiscal year, into I On that -- for ramp, headed the this team I know that their Splunk the

Splunk the It's some ours. a investment There's on with year-on-year. a of team up, ramp pulling in not substantial investment. just growth some more question integration. It's is There the together though,

the cost of cost the much was deal revenue by in said, second half this wasn't motivated to more likely but come I As synergies, synergies. some will more motivated there It synergies. a that they're was year, be by

said, I will think what on. you -- is you I think, spot

Splunk on cycles up We those on second Splunk of revenue short ramped as will part see up we sales the to get how to are begin team 'XX sell we the fiscal how ramp ramped as synergies Cisco. in team sell our to as get not these

that. get And enabled as fully sell we channel our to

need you'll those to in them to think the second about yes, So see year. but half going the of synergies, you're more revenue

are think synergies earlier, cycles that accounts X really to months. on I focused we talked the the And X,XXX revenue those we're X about are around that sales on the driven Yes.

collaboration . And And to happening. work you're our immediately, not sales that teams going also so that seeing where broadly the are penetrated working together but across is to tremendous organization we're see more accounts.

think I it's in going but first layer start that to you in. to see half, the

to the to year. more of going get part we as the You're momentum middle see

JPMorgan. Samik Chatterjee with

being a couple a what end. know deployments may. you're you're well, that if enterprise that higher step your talking inventory and than with about terms to up customers, you'll have implies I customers I shipping I of as digestion take and the in revenue

you'll trends orders, of trends? the of fiscal in just was sort on sort sort how or seasonality quarterly of you mentioned to sequential normalize more seasonal to on maybe had curious you 'XX. trends But more return normal order I are seeing a back be a of basis close order

and terms to in compress. direction pointing you that gap starting in of any your that deployment are orders of sort between Is whether

$X sort And the second of for one, target follow-up order, the the here. billion quick on AI on just

understand wins with if land good of to ones million the more you target and you get customers enough be that should trying existing that like have. the terms feel you expand to big you to or or X Just $X X need in

take to one? the want you do sequential Scott,

Samik, to wireless given we deployments more has we see seasonality, we lot pushed on seeing the . Normal inventory the and normal data lap on that's product demand year-on-year about return. we're some progressed end a by right? been talked toward deployments, that out now talking if have Yes. seeing that you're are you through this enterprise our things headed got where it actually is moving WiFi to a it which the is was to growing, and enterprise about encouraging, business and growth then year. all quickly. the rates of get how where a quarter, we're is of tougher, you at a Well, quarter, quickly, of the point where We have one we've you more You've this and progress, this the of consumption get once

apples-to-apples to get an compare, a year-on-year that's compare. To

in second in rates standpoint, the much fiscal 'XX. year-on-year From happen normal think in sequential seasonality terms to that a half fiscal So of beginning start see more 'XX. the you'll of growth of .

the degree is our already target talked about. high of and This billion or wins a deals are behind on the and that confidence like that then actually will the that high win. won opportunities set $X degree -- AI, we Those find we we -- not there a that $X $X identified tell people either teams actual billion And to have we They're go confidence. a have billion. the deals. have of we didn't

between get that done. whenever execution to we we when certainly now -- There's get and has occur them

has We that on. There's the have testing There's power place. a of to get pilots. testing that goes to lot take consumption through

of lot that is a going on. So

based on believe our today. know, we this what is teams But what

that we feel So that opportunities these to this been is -- have some is our aspiration not find. about. that This have teams good go identified are

Deutsche with Niknam Matt Bank.

been I think theme One the call. question, this X small has and follow-up, of the

. main the for question, actually Scott. On

the just You've revenue, but to. under got that itself now visibility recurring a business sits greater leverage X that, turn, lends has now of mix more naturally that

So about from I'm leverage cash of you and business just how excess think uses wondering for optimal here? the

comp next And as follow-up, mid-singles low to in then the growth well the of the think fiscal year. year, we next on tougher that of about backlog and that, XQ aware creates just

been there next perspective? Or assuming embedded Just have and as we caution unpack are once purchasing that's the there inventories networking digested? returns a from incremental normal assumptions, demand any year you is macro cadence

first the one? take to want You

about with term some sheet, And rates. We there. with out commercial off that billion it this of obviously, Yes. cash come there. of lot first, of paper the as cash acquisition the And of a down, about I'll the raised lower And is talk reflection debt commercial those a but balance data funded yes, $XX.X Splunk. expectation real-time obviously, rates with also paper Matt. we more that's moved out is actually we with

net money first certainly position decades and first in way a the to time on that. probably the in time Cisco. the the first Cisco, in at here -- X for last So the time at here it's debt of a saving . Moved in my probably career,

talked we size, cash for first cash is highly year, use which in of transaction about will its unusual flow though, a being it very Splunk this accretive The be. of

not And to going so our cash is change. allocation process

and just if support the reiterate dividend, foremost, And you right that's that, continued first behind and it X, it XA support the on continuing is, to we've quarter. what growth, is, now to per at course, see been do to through last $X.XX grow billion return shareholders the quarters. buybacks. several basis, to that. continue share for We'll That's a year-on-year to cash dividend steady a of

And shareholders sense more that it to makes the X extent there makes or it excess those cash that return is still we've that take to and delever sense time. if to and to determine met that we'll cash, at whether

the And based we starting X hotspots in lot on world, the in there's most important see Matt, elections what the the we normalization, the United We've around demand are lot that a on today, all world would got happening. that we think and out expect of of there perhaps see . Obviously, a QX the caveat and normalize. with that should risks are potential there I over beyond, States.

decent But see plays so to think to all on a we I far, assumption this FY certainly how have of for out. that's see, what based we're going So 'XX.

George with Notter Jefferies.

wanted about ask inventory guess gross the digestion. impacts margin I to I from

we look around try channel. to rotation rebates inventory space, to use push the or seen the stock As companies we've tools through like

on now? you right seeing can margins. gross that margin Sometimes any in have certainly guys the results Are of that an impact

No, words, little our inside George. into that something In happens that it's sold inventory at that that very There's other the in we're channel, -- the that own. There's is point. we not, channel ship continue we little when to stocking very channel.

we the that increases is, place constraints, chain put What we of So higher and price coming seeing we've we're in help offset through to course, the costs those. are not we've lapped supply the saw seeing that benefit.

So some benefited out, but see our to of during that what the big a mix little back there's actually things been product Splunk bit, quarter. and the from of kind bit the one-off course, when a had of pricing with it of normal coming little you'll benefits, Q in comes pre-pandemic we headwind

Ittai Oppenheimer. Kidron with

the announced press, Exabeam Gary. guess, for off its this question the a Palo with acquisition just business Alto morning I from had LogRhythm. IBM. merger the of I SIM announced

you're seems the it a So consolidation. fast pace market at operating is at moving in very like

trying Maybe footprint. fight pressures going to why pricing should competitive you for the not significantly landscape rise this is as your are about can in business to environment and for we talk assume that everybody

in market. question. Yes. particular there this of activity a No, is great obviously lot

earlier where that his things the as Quadrant the out we market. position is and we Magic SIEM the very good in of Chuck remarks referenced prepared One feel our in stood about in leader Gartner's

a innovation changed have position market we established very of and so over our -- of the pace We has last fundamentally strong couple years.

innovative interesting that very we is very think deliver to continue We high capability value.

organizations self-discovery week at So and for what Splunk their we the Acid across to call a and with we assets is critical then risks things. of those understand last help This example, RSA, associated announced environment do capability Intelligence. Risk

benefit the broad we're the also that, getting integration Cisco can solution now like we we of that XDR in interesting bring the with Coupled capabilities the with line Security product announced. where

different broadly yes, very is think feel like broadly taking like that we competitors, also a to continue while position we've we're to do bring have important want you industry single across our it approach driving positioned innovation. feel the on we to competitive, customers way see drive how and together observability. So platform And And very we value. all anybody a difficult capabilities well through very we about the taken that security it's a incredibly and than the

ensuring in adoption we customer to match they're very change value have strategy. in the We're day. our and that are across hard With the they that pricing, pricing our offering like driving focused base every good fundamental and very much any getting feel we're to respect on don't industry. capabilities

of pricing So point view. we're from gears a not shifting

Melius Ben Reitzes Research. with

the real that from the do say, in I heard the growth if industry we to of question. ask in $X you want the just -- that X, prior from question. to XXXX and wanted you that it for underwrite I take, right I the to Thanks the about make I is sure $X inventory I would I software. billion billion we'll hear the growth hit I in of spirit that mean XXXX range case, could the mixing mid-single-digit at growth Splunk -- is and about question. overall? more Cisco one, towards in how higher a then guess for if does second single-digit mentioned business prior this mean that the then Analyst real . And a networking that's is you're Day, your be it was

to were basis after And hopefully, points if organic therefore, XXXX, muted accelerating growth of that's that. to the guys, therefore, true. by this, any would, higher normalized -- after several Be able is basis have follow but to you hundred on happy in the you digits math very XXXX, the a repeat single in

at asking Yes, now same The I the the fiscal time. the of You're underlying mostly Cisco that small we net of you're the the right. me . The shipped right it, the Ben. a benefits but in business, look out 'XX you impact acquisition guide the that at 'XX, fiscal about as for And net early Splunk fiscal core out also 'XX backlog excess got it QX amount Is 'XX, take? in when thinking well. QX, you when take of in business

growth we've mid-single-digit that I -- thinking core that about of business had the so you're right. you think And get that to

Investor will Day this Vegas. our at not to more I'm it June we 'XX in on do going fiscal call, but talk more. beyond in will We talk about and

So see hopefully, you there. I'll

with Malik Citi. Atif

AI Splunk Gary. event X.X Can how Gary, you about The will also been data with for talk for Cisco natural the last picture capabilities? years detection language assistant first response. has ML AI your X SCLA is big using improve and

You bet.

very billion early if -- me, million you with were that. we've the users X.XX capabilities on at XXXX, with had excuse Splunk, we package MLTK learning. so We launched and history And machine X.XX look the driving in

been broad there's adoption. So

able into that. be then being SPL the AI use our do We brought proprietary assistant, being able when Gen picture an delivering English extended to we to language, search that SPL to

directly workflow. AI the bringing into also We're

So an of you think picture from remediation about view. on point the drive -- into as AI outcomes think how can bring a better SOR example to

the investing across So we've line. been product

been Cisco a And get. investments getting, see hear set the at we at that which has data us follows Cisco in it those bringing to well to assets making is, conference, You're over into Live more as to and our we're the richness Cisco as from leverage Live. addition whole of going user announcements we Cisco get of that independently benefit

from from benefit sets is data lateral rich can a exist that job of Cisco the point we that where where how across networking broad think a we leverage data view. movement, better you detection So do to

And the frankly, entity, competitive have none are second the data I and of to insights think, in that we terms a as combined environment.

So really we of just important. to the as part be deliver basically our can accelerate and AI we outcomes efforts Cisco

with Sachs. Ng Michael Goldman

I just have X as well.

First, I year think margins. EBIT XX% that implies the guidance this

can like look fiscal that commented XQ. You the guide 'XX fiscal for

It's, $X billion about think, OpEx I of investment.

just if of was I wondering lie. OpEx about you So investments could of kind those qualitatively will talk most where

fiscal fiscal you Secondly, for outlook characterize believe. 'XX conservative, your then characterized I would financial quarter, initial the And you How guidance 'XX? as last

Okay. And you're spend straight spend. The look to on the rate think fiscal expectations is say if just 'XX thanks run the added things are expectations I'd struggling bear your to Splunk the for a in the added on where the again, Michael, -- run you the of of couple question. with Cisco of -- what what year-on-year, rate I mind.

we've tough the Splunk year, There's we that this pre plans some come acquisition. OpEx in short plan. onetime has in a up year our Core frankly, benefits Cisco had which for been our of comp variable our and

savings obviously, fiscal for in 'XX. that I year in repeating there's variable 'XX fiscal so plan comp don't this some those on And in

do a merit obviously, there well. is we'll increase as and -- So some

comp is some did. and small reset some quick merit. approaching is an but you it's number not that the even just well. plans the of investment that integration, of There the with in increase ongoing just math the the kind there's So as

think about to kind that that's So of the way piece.

say -- Now if right seeing now, the for year guide year, look for next kind of I'd back. let's go is with say of we're the lot I guide just about I tailwinds feel next how that at what so you a the would

with we that our shipped that of mostly Consumption a work end get quarter, expectation. this of line fourth quarter, very our working the headwind, by through our we to way were implemented hard the inventory for that's fiscal think is they year. of in all to customers going We that next tailwind

talked fiscal the as look -- full full more being Obviously, half, the ahead. that's year of half the that AI second year, we've for and But about opportunity 'XX. tailwind for but second we a

before are there launched Security getting going doing was even said. the right? I -- traction. of good is new business we've and acquisition those Splunk, It's to products what we products

look tailwind well. year next that's as at So we as a

feel to It's a So of view looks of and I of a I formal at like that this a all you kind like, guide. think what I point. sense just 'XX all, fiscal down-the-middle not in it's give wanted longer the Day we'll and guidance a we'll our do QX -- when Investor give call give you in you better June, August. like more then fulsome we get term for we'll a looks at our what to in feel

some now to remarks. to I want back hand closing over for Chuck

and the the Sami, we're that Thanks, Feel getting are track about of spending situation supply the for that consumption done. good you us the I'm we And several this enter we've get -- fact to environment customers 'XX. as digestion today. time issue behind I'd supports QX, chain navigating I'm end say demand -- FY last for in that overall on we saw this our to been pleased us years all which of thanks getting guess tail the with I to

infrastructure look we data perspective to a as As about we AI, optimistic an perspective. obviously a perspective, cybersecurity the as both future, well are from

believe to Splunk you. for Security the improve about we committed both continue obviously, we're excited to deliver super for and integration, our we're in general, will and and customers

to I all and on the and being today. Cisco they taking quickly with for role for want just everything at Also also Sharritts Gary you done new us excited thank very here, he's were to have Jeff thank

p.m. Live call, our p.m. Pacific at reminder, the Wednesday, XX, X:XX of results XXXX. And X:XX call. which Eastern year on quarterly Xth June hosting our -- Time, Investor will and . This Day today's be a Cisco part on August As we fiscal will year concludes as will next Time. XXXX full X, quarter XXXX is be Cisco reflect XXXX

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

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

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

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