UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~April 29,~~October 28, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-39940

CISCO SYSTEMS, INC.

(Exact name of registrant as specified in its charter)


Delaware						77-0059951
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

170 West Tasman Drive

San Jose, California 95134

(Address of principal executive office and zip code)

(408) 526-4000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and formal fiscal year, if changed since last report.)

_____________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	CSCO	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of the registrant’s common stock outstanding as of ~~May 18,~~November 16, 2023: ~~4,075,058,155~~4,063,475,676

____________________________________

Table of Contents

Cisco Systems, Inc.

Form 10-Q for the Quarter Ended ~~April 29,~~October 28, 2023

INDEX

Page

Part I

Financial Information

Item 1.

Financial Statements (Unaudited)

Consolidated Balance Sheets at ~~April 29,~~October 28, 2023 and July ~~30, 2022~~29, 2023

Consolidated Statements of Operations for the Three ~~and Nine~~ Months Ended ~~April 29,~~October 28, 2023 and ~~April 30,~~October 29, 2022

Consolidated Statements of Comprehensive Income for the Three ~~and Nine~~ Months Ended ~~April 29,~~October 28, 2023 and ~~April 30,~~October 29, 2022

Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~April 29,~~October 28, 2023 and ~~April 30,~~October 29, 2022

Consolidated Statements of Equity for the Three ~~and Nine~~ Months Ended ~~April 29,~~October 28, 2023 and ~~April 30,~~October 29, 2022

Notes to Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

4138

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

6358

Item 4.

Controls and Procedures

Part II.

Item 1.

Item 1A.

Item 2.

Unregistered Sales of Equity Securities, ~~and~~ Use of Proceeds, and Issuer Purchases of Equity Securities

8075

Item 3.

Defaults Upon Senior Securities

8075

Item 4.

Mine Safety Disclosures

Item 5.

Item 6.

PART I. FINANCIAL INFORMATION


Item 1.			Financial Statements (Unaudited)

CISCO SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

(in millions, except par value)

(Unaudited)


		April 29, 2023		July 30, 2022			October 28, 2023		July 29, 2023
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	8,044	$	7,079	Cash and cash equivalents	$	9,602	$	10,123
Investments	Investments	15,244		12,188		Investments	13,921		16,023
Accounts receivable, net of allowance of $83 as of each of April 29, 2023 and July 30, 2022		5,104		6,622
Accounts receivable, net of allowance of $82 at October 28, 2023 and $85 at July 29, 2023						Accounts receivable, net of allowance of $82 at October 28, 2023 and $85 at July 29, 2023	4,833		5,854
Inventories	Inventories	3,474		2,568		Inventories	3,342		3,644
Financing receivables, net	Financing receivables, net	3,402		3,905		Financing receivables, net	3,414		3,352
Other current assets	Other current assets	4,682		4,355		Other current assets	4,547		4,352
Total current assets	Total current assets	39,950		36,717		Total current assets	39,659		43,348
Property and equipment, net	Property and equipment, net	2,047		1,997		Property and equipment, net	2,004		2,085
Financing receivables, net	Financing receivables, net	3,393		4,009		Financing receivables, net	3,324		3,483
Goodwill	Goodwill	38,369		38,304		Goodwill	38,900		38,535
Purchased intangible assets, net	Purchased intangible assets, net	1,966		2,569		Purchased intangible assets, net	1,914		1,818
Deferred tax assets	Deferred tax assets	5,817		4,449		Deferred tax assets	7,102		6,576
Other assets	Other assets	5,987		5,957		Other assets	5,879		6,007
TOTAL ASSETS	TOTAL ASSETS	$	97,529	$	94,002	TOTAL ASSETS	$	98,782	$	101,852
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Short-term debt	Short-term debt	$	1,731	$	1,099	Short-term debt	$	990	$	1,733
Accounts payable	Accounts payable	2,442		2,281		Accounts payable	2,084		2,313
Income taxes payable	Income taxes payable	3,132		961		Income taxes payable	2,380		4,235
Accrued compensation	Accrued compensation	3,352		3,316		Accrued compensation	3,039		3,984
Deferred revenue	Deferred revenue	13,249		12,784		Deferred revenue	13,812		13,908
Other current liabilities	Other current liabilities	4,813		5,199		Other current liabilities	4,730		5,136
Total current liabilities	Total current liabilities	28,719		25,640		Total current liabilities	27,035		31,309
Long-term debt	Long-term debt	6,663		8,416		Long-term debt	6,660		6,658
Income taxes payable	Income taxes payable	6,725		7,725		Income taxes payable	5,790		5,756
Deferred revenue	Deferred revenue	11,011		10,480		Deferred revenue	11,847		11,642
Other long-term liabilities	Other long-term liabilities	2,116		1,968		Other long-term liabilities	2,240		2,134
Total liabilities	Total liabilities	55,234		54,229		Total liabilities	53,572		57,499
Commitments and contingencies (Note 14)	Commitments and contingencies (Note 14)					Commitments and contingencies (Note 14)
Equity:	Equity:					Equity:
Cisco stockholders’ equity:	Cisco stockholders’ equity:					Cisco stockholders’ equity:
Preferred stock, $0.001 par value: 5 shares authorized; none issued and outstanding	Preferred stock, $0.001 par value: 5 shares authorized; none issued and outstanding	—		—		Preferred stock, $0.001 par value: 5 shares authorized; none issued and outstanding	—		—
Common stock and additional paid-in capital, $0.001 par value: 20,000 shares authorized; 4,075 and 4,110 shares issued and outstanding at April 29, 2023 and July 30, 2022, respectively		43,639		42,714
Retained earnings (Accumulated deficit)		262		(1,319)
Common stock and additional paid-in capital, $0.001 par value: 20,000 shares authorized; 4,049 and 4,066 shares issued and outstanding at October 28, 2023 and July 29, 2023, respectively						Common stock and additional paid-in capital, $0.001 par value: 20,000 shares authorized; 4,049 and 4,066 shares issued and outstanding at October 28, 2023 and July 29, 2023, respectively	44,546		44,289
Retained earnings						Retained earnings	2,689		1,639
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(1,606)		(1,622)		Accumulated other comprehensive loss	(2,025)		(1,575)
Total equity	Total equity	42,295		39,773		Total equity	45,210		44,353
TOTAL LIABILITIES AND EQUITY	TOTAL LIABILITIES AND EQUITY	$	97,529	$	94,002	TOTAL LIABILITIES AND EQUITY	$	98,782	$	101,852

See Notes to Consolidated Financial Statements.

Table of Contents

CISCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per-share amounts)

(Unaudited)


		Three Months Ended				Nine Months Ended					Three Months Ended
		April 29, 2023		April 30, 2022		April 29, 2023		April 30, 2022			October 28, 2023		October 29, 2022
REVENUE:	REVENUE:									REVENUE:
Product	Product	$	11,092	$	9,448	$	31,492	$	28,330	Product	$	11,139	$	10,245
Service	Service	3,479		3,387		10,303		10,125		Service	3,529		3,387
Total revenue	Total revenue	14,571		12,835		41,795		38,455		Total revenue	14,668		13,632
COST OF SALES:	COST OF SALES:									COST OF SALES:
Product	Product	4,136		3,606		12,353		10,848		Product	3,957		4,179
Service	Service	1,203		1,108		3,437		3,384		Service	1,154		1,107
Total cost of sales	Total cost of sales	5,339		4,714		15,790		14,232		Total cost of sales	5,111		5,286
GROSS MARGIN	GROSS MARGIN	9,232		8,121		26,005		24,223		GROSS MARGIN	9,557		8,346
OPERATING EXPENSES:	OPERATING EXPENSES:									OPERATING EXPENSES:
Research and development	Research and development	1,962		1,708		5,598		5,092		Research and development	1,913		1,781
Sales and marketing	Sales and marketing	2,526		2,209		7,301		6,736		Sales and marketing	2,506		2,391
General and administrative	General and administrative	641		517		1,788		1,612		General and administrative	672		565
Amortization of purchased intangible assets	Amortization of purchased intangible assets	70		77		212		240		Amortization of purchased intangible assets	67		71
Restructuring and other charges	Restructuring and other charges	87		—		328		8		Restructuring and other charges	123		(2)
Total operating expenses	Total operating expenses	5,286		4,511		15,227		13,688		Total operating expenses	5,281		4,806
OPERATING INCOME	OPERATING INCOME	3,946		3,610		10,778		10,535		OPERATING INCOME	4,276		3,540
Interest income	Interest income	262		115		650		347		Interest income	360		169
Interest expense	Interest expense	(109)		(90)		(316)		(267)		Interest expense	(111)		(100)
Other income (loss), net	Other income (loss), net	(142)		166		(265)		446		Other income (loss), net	(83)		(134)
Interest and other income (loss), net	Interest and other income (loss), net	11		191		69		526		Interest and other income (loss), net	166		(65)
INCOME BEFORE PROVISION FOR INCOME TAXES	INCOME BEFORE PROVISION FOR INCOME TAXES	3,957		3,801		10,847		11,061		INCOME BEFORE PROVISION FOR INCOME TAXES	4,442		3,475
Provision for income taxes	Provision for income taxes	745		757		2,192		2,064		Provision for income taxes	804		805
NET INCOME	NET INCOME	$	3,212	$	3,044	$	8,655	$	8,997	NET INCOME	$	3,638	$	2,670

Net income per share:	Net income per share:									Net income per share:
Basic	Basic	$	0.79	$	0.73	$	2.11	$	2.15	Basic	$	0.90	$	0.65
Diluted	Diluted	$	0.78	$	0.73	$	2.11	$	2.14	Diluted	$	0.89	$	0.65
Shares used in per-share calculation:	Shares used in per-share calculation:									Shares used in per-share calculation:
Basic	Basic	4,089		4,152		4,100		4,184		Basic	4,057		4,108
Diluted	Diluted	4,110		4,170		4,111		4,204		Diluted	4,087		4,116

See Notes to Consolidated Financial Statements.

Table of Contents

CISCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)

(Unaudited)


		Three Months Ended				Nine Months Ended					Three Months Ended
		April 29, 2023		April 30, 2022		April 29, 2023		April 30, 2022			October 28, 2023		October 29, 2022
Net income	Net income	$	3,212	$	3,044	$	8,655	$	8,997	Net income	$	3,638	$	2,670
Available-for-sale investments:	Available-for-sale investments:									Available-for-sale investments:
Change in net unrealized gains and losses, net of tax benefit (expense) of $(1) and $11 for the third quarter and first nine months of fiscal 2023, respectively, and $45 and $120 for the corresponding periods of fiscal 2022, respectively		36		(376)		(28)		(597)
Net (gains) losses reclassified into earnings, net of tax (benefit) expense of $(2) and $(3) for the third quarter and first nine months of fiscal 2023, respectively, and $2 and $7 for the corresponding periods of fiscal 2022, respectively		4		—		12		(11)
Change in net unrealized gains and losses, net of tax benefit (expense) of $40 and $78 for the first quarter of fiscal 2024 and 2023, respectively										Change in net unrealized gains and losses, net of tax benefit (expense) of $40 and $78 for the first quarter of fiscal 2024 and 2023, respectively	(130)		(251)
Net (gains) losses reclassified into earnings, net of tax (benefit) expense of $(4) and $(1) for the first quarter of fiscal 2024 and 2023, respectively										Net (gains) losses reclassified into earnings, net of tax (benefit) expense of $(4) and $(1) for the first quarter of fiscal 2024 and 2023, respectively	16		5
		40		(376)		(16)		(608)			(114)		(246)
Cash flow hedging instruments:	Cash flow hedging instruments:									Cash flow hedging instruments:
Change in unrealized gains and losses, net of tax benefit (expense) of $(4) and $(1) for the third quarter and first nine months of fiscal 2023, respectively, and $(10) and $(14) for the corresponding periods of fiscal 2022, respectively		13		35		4		49
Net (gains) losses reclassified into earnings, net of tax (benefit) expense of $3 and $12 for the third quarter and first nine months of fiscal 2023, respectively, and $2 and $3 for the corresponding periods of fiscal 2022, respectively		(10)		(10)		(38)		(12)
Change in unrealized gains and losses, net of tax benefit (expense) of $(9) and $(8) for the first quarter of fiscal 2024 and 2023, respectively										Change in unrealized gains and losses, net of tax benefit (expense) of $(9) and $(8) for the first quarter of fiscal 2024 and 2023, respectively	29		24
Net (gains) losses reclassified into earnings, net of tax (benefit) expense of $3 and $5 for the first quarter of fiscal 2024 and 2023, respectively										Net (gains) losses reclassified into earnings, net of tax (benefit) expense of $3 and $5 for the first quarter of fiscal 2024 and 2023, respectively	(9)		(14)
		3		25		(34)		37			20		10
Net change in cumulative translation adjustment and actuarial gains and losses net of tax benefit (expense) of $0 and $24 for the third quarter and first nine months of fiscal 2023, respectively, and $0 and $9 for the corresponding periods of fiscal 2022, respectively		(63)		(323)		66		(475)
Net change in cumulative translation adjustment and actuarial gains and losses net of tax benefit (expense) of $1 and $22 for the first quarter of fiscal 2024 and 2023, respectively										Net change in cumulative translation adjustment and actuarial gains and losses net of tax benefit (expense) of $1 and $22 for the first quarter of fiscal 2024 and 2023, respectively	(356)		(260)
Other comprehensive income (loss)	Other comprehensive income (loss)	(20)		(674)		16		(1,046)		Other comprehensive income (loss)	(450)		(496)
Comprehensive income	Comprehensive income	$	3,192	$	2,370	$	8,671	$	7,951	Comprehensive income	$	3,188	$	2,174

See Notes to Consolidated Financial Statements.

Table of Contents

CISCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(Unaudited)


		Nine Months Ended					Three Months Ended
		April 29, 2023		April 30, 2022			October 28, 2023		October 29, 2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	8,655	$	8,997	Net income	$	3,638	$	2,670
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and other	Depreciation, amortization, and other	1,304		1,527		Depreciation, amortization, and other	401		415
Share-based compensation expense	Share-based compensation expense	1,720		1,407		Share-based compensation expense	661		496
Provision (benefit) for receivables	Provision (benefit) for receivables	11		49		Provision (benefit) for receivables	4		7
Deferred income taxes	Deferred income taxes	(1,343)		(167)		Deferred income taxes	(513)		(366)
(Gains) losses on divestitures, investments and other, net	(Gains) losses on divestitures, investments and other, net	243		(470)		(Gains) losses on divestitures, investments and other, net	89		131
Change in operating assets and liabilities, net of effects of acquisitions and divestitures:	Change in operating assets and liabilities, net of effects of acquisitions and divestitures:					Change in operating assets and liabilities, net of effects of acquisitions and divestitures:
Accounts receivable	Accounts receivable	1,494		(134)		Accounts receivable	979		1,119
Inventories	Inventories	(894)		(683)		Inventories	307		(108)
Financing receivables	Financing receivables	1,126		1,431		Financing receivables	25		556
Other assets	Other assets	(428)		(1,295)		Other assets	(290)		(316)
Accounts payable	Accounts payable	156		(54)		Accounts payable	(235)		42
Income taxes, net	Income taxes, net	1,120		(730)		Income taxes, net	(1,773)		20
Accrued compensation	Accrued compensation	25		(730)		Accrued compensation	(908)		(384)
Deferred revenue	Deferred revenue	1,055		292		Deferred revenue	259		(78)
Other liabilities	Other liabilities	(324)		109		Other liabilities	(273)		(242)
Net cash provided by operating activities	Net cash provided by operating activities	13,920		9,549		Net cash provided by operating activities	2,371		3,962
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of investments	Purchases of investments	(7,652)		(5,383)		Purchases of investments	(1,850)		(1,943)
Proceeds from sales of investments	Proceeds from sales of investments	802		2,488		Proceeds from sales of investments	1,280		407
Proceeds from maturities of investments	Proceeds from maturities of investments	3,789		4,308		Proceeds from maturities of investments	2,497		971
Acquisitions, net of cash and cash equivalents acquired and divestitures	Acquisitions, net of cash and cash equivalents acquired and divestitures	(96)		(373)		Acquisitions, net of cash and cash equivalents acquired and divestitures	(876)		—
Purchases of investments in privately held companies	Purchases of investments in privately held companies	(162)		(158)		Purchases of investments in privately held companies	(13)		(48)
Return of investments in privately held companies	Return of investments in privately held companies	72		149		Return of investments in privately held companies	47		10
Acquisition of property and equipment	Acquisition of property and equipment	(616)		(338)		Acquisition of property and equipment	(134)		(176)
Proceeds from sales of property and equipment		2		6
Other	Other	(26)		(15)		Other	1		(20)
Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities	(3,887)		684		Net cash provided by (used in) investing activities	952		(799)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Issuances of common stock		316		306
Repurchases of common stock—repurchase program	Repurchases of common stock—repurchase program	(3,029)		(5,347)		Repurchases of common stock—repurchase program	(1,300)		(556)
Shares repurchased for tax withholdings on vesting of restricted stock units	Shares repurchased for tax withholdings on vesting of restricted stock units	(444)		(546)		Shares repurchased for tax withholdings on vesting of restricted stock units	(153)		(108)
Short-term borrowings, original maturities of 90 days or less, net	Short-term borrowings, original maturities of 90 days or less, net	(602)		9		Short-term borrowings, original maturities of 90 days or less, net	—		(602)
Issuances of debt		—		1,049
Repayments of debt	Repayments of debt	(500)		(3,050)		Repayments of debt	(750)		—
Dividends paid	Dividends paid	(4,713)		(4,657)		Dividends paid	(1,580)		(1,560)
Other	Other	(4)		(108)		Other	(17)		(29)
Net cash used in financing activities	Net cash used in financing activities	(8,976)		(12,344)		Net cash used in financing activities	(3,800)		(2,855)
Effect of foreign currency exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents	Effect of foreign currency exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents	(90)		(122)		Effect of foreign currency exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents	(45)		(95)
Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents	Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents	967		(2,233)		Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents	(522)		213
Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period	Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period	8,579		9,942		Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period	11,627		8,579
Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period	Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period	$	9,546	$	7,709	Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period	$	11,105	$	8,792

Supplemental cash flow information:	Supplemental cash flow information:					Supplemental cash flow information:
Cash paid for interest	Cash paid for interest	$	306	$	292	Cash paid for interest	$	128	$	114
Cash paid for income taxes, net	Cash paid for income taxes, net	$	2,414	$	2,960	Cash paid for income taxes, net	$	3,090	$	1,150

See Notes to Consolidated Financial Statements.

Table of Contents

CISCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(in millions, except per-share amounts)

(Unaudited)


Three Months Ended April 29, 2023		Shares of Common Stock	Common Stock and Additional Paid-In Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Loss		Total Equity
Balance at January 28, 2023		4,095	$	43,424	$	(364)	$	(1,586)	$	41,474
Three Months Ended October 28, 2023											Three Months Ended October 28, 2023	Shares of Common Stock	Common Stock and Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Equity
Balance at July 29, 2023											Balance at July 29, 2023	4,066	$	44,289	$	1,639	$	(1,575)	$	44,353
Net income	Net income				3,212				3,212		Net income				3,638				3,638
Other comprehensive loss	Other comprehensive loss						(20)		(20)		Other comprehensive loss						(450)		(450)
Issuance of common stock	Issuance of common stock	8							—		Issuance of common stock	9	—						—
Repurchase of common stock	Repurchase of common stock	(25)	(270)		(989)				(1,259)		Repurchase of common stock	(23)	(249)		(1,003)				(1,252)
Shares repurchased for tax withholdings on vesting of restricted stock units and other	Shares repurchased for tax withholdings on vesting of restricted stock units and other	(3)	(139)						(139)		Shares repurchased for tax withholdings on vesting of restricted stock units and other	(3)	(156)						(156)
Cash dividends declared ($0.39 per common share)	Cash dividends declared ($0.39 per common share)				(1,593)				(1,593)		Cash dividends declared ($0.39 per common share)				(1,580)				(1,580)
Share-based compensation	Share-based compensation		623						623		Share-based compensation		661						661
Other	Other		1		(4)				(3)		Other		1		(5)				(4)
Balance at April 29, 2023		4,075	$	43,639	$	262	$	(1,606)	$	42,295
Balance at October 28, 2023											Balance at October 28, 2023	4,049	$	44,546	$	2,689	$	(2,025)	$	45,210

Nine Months Ended April 29, 2023 Shares of
Common
Stock Common Stock
and
Additional
Paid-In Capital Retained Earnings (Accumulated Deficit) Accumulated
Other
Comprehensive Loss Total
Equity
Balance at July 30, 2022 4,110 $ 42,714 $ (1,319) $ (1,622) $ 39,773
Net income 8,655 8,655
Other comprehensive income 16 16
Issuance of common stock 38 316 316
Repurchase of common stock (63) (664) (2,353) (3,017)
Shares repurchased for tax withholdings on vesting of restricted stock units and other (10) (449) (449)
Cash dividends declared ($1.15 per common share) (4,713) (4,713)
Share-based compensation 1,720 1,720
Other 2 (8) (6)
Balance at April 29, 2023 4,075 $ 43,639 $ 262 $ (1,606) $ 42,295


Three Months Ended October 29, 2022	Shares of Common Stock	Common Stock and Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Equity
Balance at July 30, 2022	4,110	$	42,714	$	(1,319)	$	(1,622)	$	39,773
Net income				2,670				2,670
Other comprehensive loss						(496)		(496)
Issuance of common stock	7	—						—
Repurchase of common stock	(12)	(118)		(384)				(502)
Shares repurchased for tax withholdings on vesting of restricted stock units and other	(2)	(108)						(108)
Cash dividends declared ($0.38 per common share)				(1,560)				(1,560)
Share-based compensation		496						496
Other		—		(1)				(1)
Balance at October 29, 2022	4,103	$	42,984	$	(594)	$	(2,118)	$	40,272

~~Table of Contents~~

~~CISCO SYSTEMS, INC.~~

~~CONSOLIDATED STATEMENTS OF EQUITY~~

~~(in millions, except per-share amounts)~~

~~(Unaudited)~~

Three Months Ended April 30, 2022 Shares of
Common
Stock Common Stock
and
Additional
Paid-In Capital Accumulated Deficit Accumulated
Other
Comprehensive Loss Total
Equity
Balance at January 29, 2022 4,151 $ 42,291 $ (2,006) $ (789) $ 39,496
Net income 3,044 3,044
Other comprehensive loss (674) (674)
Issuance of common stock 7 —
Repurchase of common stock (5) (47) (205) (252)
Shares repurchased for tax withholdings on vesting of restricted stock units and other (2) (135) (135)
Cash dividends declared ($0.38 per common share) (1,555) (1,555)
Share-based compensation 477 477
Other (2) 1 (2) (1)
Balance at April 30, 2022 4,149 $ 42,587 $ (724) $ (1,463) $ 40,400

Nine Months Ended April 30, 2022 Shares of
Common
Stock Common Stock
and
Additional
Paid-In Capital Accumulated Deficit Accumulated
Other
Comprehensive Loss Total
Equity
Balance at July 31, 2021 4,217 $ 42,346 $ (654) $ (417) $ 41,275
Net income 8,997 8,997
Other comprehensive loss (1,046) (1,046)
Issuance of common stock 36 306 306
Repurchase of common stock (92) (929) (4,403) (5,332)
Shares repurchased for tax withholdings on vesting of restricted stock units and other (10) (546) (546)
Cash dividends declared ($1.12 per common share) (4,657) (4,657)
Share-based compensation 1,407 1,407
Other (2) 3 (7) (4)
Balance at April 30, 2022 4,149 $ 42,587 $ (724) $ (1,463) $ 40,400

Table of Contents

CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.Organization and Basis of Presentation

The fiscal year for Cisco Systems, Inc. (the “Company,” “Cisco,” “we,” “us,” or “our”) is the 52 or 53 weeks ending on the last Saturday in July. Fiscal ~~2023~~2024 and fiscal ~~2022~~2023 are each 52-week fiscal years. The Consolidated Financial Statements include our accounts and those of our subsidiaries. All intercompany accounts and transactions have been eliminated. We conduct business globally and are primarily managed on a geographic basis in the following three geographic segments: the Americas; Europe, Middle East, and Africa (EMEA); and Asia Pacific, Japan, and China (APJC).

We have prepared the accompanying financial data as of ~~April 29,~~October 28, 2023 and for the ~~third~~first quarter ~~and first nine months~~ of fiscal ~~2023~~2024 and ~~2022,~~2023, without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (GAAP) have been condensed or omitted pursuant to such rules and regulations. The July ~~30, 2022~~29, 2023 Consolidated Balance Sheet was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States. However, we believe that the disclosures are adequate to make the information presented not misleading. These Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended July ~~30, 2022.~~29, 2023.

In the opinion of management, all normal recurring adjustments necessary to state fairly the consolidated balance sheet as of ~~April 29,~~October 28, 2023, the results of operations, the statements of comprehensive income, the statements of cash flows and the statements of equity for the ~~third~~first quarter ~~and first nine months~~ of fiscal ~~2023~~2024 and ~~2022, and the statements of cash flows for the first nine months of fiscal~~ 2023, ~~and 2022,~~ as applicable, have been made. The results of operations for the ~~third~~first quarter ~~and first nine months~~ of fiscal ~~2023~~2024 are not necessarily indicative of the operating results for the full fiscal year or any future periods.

Our consolidated financial statements include our accounts and investments consolidated under the voting interest model. The noncontrolling interests attributed to these investments are not presented as a separate component in the equity section of the Consolidated Balance Sheets as these amounts are not material for any of the fiscal periods presented. The share of earnings attributable to the noncontrolling interests are not presented separately in the Consolidated Statements of Operations as these amounts are not material for any of the fiscal periods presented.

Certain reclassifications have been made to the amounts in prior periods in order to conform to the current period’s presentation. We have evaluated subsequent events through the date that the financial statements were issued.

2.Recent Accounting Pronouncements

~~(a)Recent Accounting Standards or Updates Not Yet Effective~~

~~Reference Rate Reform~~ ~~In March 2020, the Financial Accounting Standards Board~~There have been no recent accounting pronouncements issued ~~an accounting standard update and subsequent amendments~~ that provide optional expedients and exceptions to the current guidance on contract modification and hedging relationships to ease the financial reporting burden of the expected market transition from the London InterBank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. This accounting standard update was effective upon issuance and may be applied prospectively through December 31, 2024. We do not expect this accounting standard updatewe believe will have a material impact on our Consolidated Financial Statements.

3.Revenue

We enter into contracts with customers that can include various combinations of products and services which are generally distinct and accounted for as separate performance obligations. As a result, our contracts may contain multiple performance obligations. We determine whether arrangements are distinct based on whether the customer can benefit from the product or service on its own or together with other resources that are readily available and whether our commitment to transfer the product or service to the customer is separately identifiable from other obligations in the contract. We classify our hardware, perpetual software licenses, and software-as-a-service (SaaS) as distinct performance obligations. Term software licenses represent multiple obligations, which include software licenses and software maintenance. In transactions where we deliver hardware or software, we are typically the principal and we record revenue and costs of goods sold on a gross basis. We refer to our term software licenses, security software licenses, SaaS, and associated service arrangements as subscription offers.

~~Table of Contents~~

~~CISCO SYSTEMS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

Table of Contents

CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

upfront upon transfer of control, with the associated software maintenance revenue recognized ratably over the contract term as services and software updates are provided. SaaS arrangements do not include the right for the customer to take possession of the software during the term, and therefore have one distinct performance obligation which is satisfied over time with revenue recognized ratably over the contract term as the customer consumes the services. On our product sales, we record consideration from shipping and handling on a gross basis within net product sales. We record our revenue net of any associated sales taxes.

An allowance for future sales returns is established based on historical trends in product return rates. The allowance for future sales returns as of ~~April 29,~~October 28, 2023 and July ~~30, 2022~~29, 2023 was ~~$38~~$37 million and ~~$43~~$39 million, respectively, and was recorded as a reduction of our accounts receivable and revenue.

Significant Judgments

Revenue is allocated among these performance obligations in a manner that reflects the consideration that we expect to be entitled to for the promised goods or services based on standalone selling prices (SSP). SSP is estimated for each distinct performance obligation and judgment may be required in their determination. The best evidence of SSP is the observable price of a product or service when we sell the goods separately in similar circumstances and to similar customers. In instances where SSP is not directly observable, we determine SSP using information that may include market conditions and other observable inputs.

We assess relevant contractual terms in our customer contracts to determine the transaction price. We apply judgment in identifying contractual terms and determining the transaction price as we may be required to estimate variable consideration when determining the amount of revenue to recognize. Variable consideration includes potential contractual penalties and various rebate, cooperative marketing and other incentive programs that we offer to our distributors, channel partners and customers. When determining the amount of revenue to recognize, we estimate the expected usage of these programs, applying the expected value or most likely estimate and update the estimate at each reporting period as actual utilization becomes available. We also consider the customers’ right of return in determining the transaction price, where applicable.

We assess certain software licenses, such as for security software, that contain critical updates or upgrades which customers can download throughout the contract term. Without these updates or upgrades, the functionality of the software would diminish over a relatively short time period. These updates or upgrades provide the customer the full functionality of the purchased security software licenses and are required to maintain the security license’s utility as the risks and threats in the environment are rapidly changing. In these circumstances, the revenue from these software arrangements is recognized as a single performance obligation satisfied over the contract term.

~~Table of Contents~~

~~CISCO SYSTEMS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

(a)Disaggregation of Revenue

We disaggregate our revenue into groups of similar products and services that depict the nature, amount, and timing of revenue and cash flows for our various offerings. The sales cycle, contractual obligations, customer requirements, and go-to-market strategies differ for each of our product categories, resulting in different economic risk profiles for each category. Effective in the first quarter of fiscal 2024, we began reporting our product and service revenue in the following categories: Networking, Security, Collaboration, Observability, and Services and conformed our product revenue for prior periods to the current period presentation. The following table presents this disaggregation of revenue (in millions):


		Three Months Ended				Nine Months Ended					Three Months Ended
		April 29, 2023		April 30, 2022		April 29, 2023		April 30, 2022			October 28, 2023		October 29, 2022
Product revenue:	Product revenue:									Product revenue:
Secure, Agile Networks		$	7,550	$	5,870	$	20,980	$	17,737
Internet for the Future		1,392		1,324		4,007		4,019
Networking										Networking	$	8,822	$	8,031
Security										Security	1,010		971
Collaboration	Collaboration	985		1,132		3,029		3,308		Collaboration	1,117		1,086
End-to-End Security		958		938		2,872		2,716
Optimized Application Experiences		204		183		597		544
Other Products		3		2		7		7
Observability										Observability	190		157
Total Product	Total Product	11,092		9,448		31,492		28,330		Total Product	11,139		10,245
Services	Services	3,479		3,387		10,303		10,125		Services	3,529		3,387
Total	Total	$	14,571	$	12,835	$	41,795	$	38,455	Total	$	14,668	$	13,632

Amounts may not sum due to rounding. ~~We have made certain reclassifications to the product revenue amounts for prior periods to conform to the current year presentation.~~

~~Secure, Agile Networks~~

Table of Contents

CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Networking consists of our core networking technologies of switching, ~~enterprise~~ routing, wireless, 5G, silicon, optics solutions and compute products. These technologies consist of both hardware and software offerings, including software licenses and ~~SaaS, that help our customers build networks, automate, orchestrate, integrate, and digitize data.~~SaaS. Our hardware and perpetual software in this category are distinct performance obligations where revenue is recognized upfront upon transfer of control. Term software licenses are multiple performance obligations where the term license is recognized upfront upon transfer of control with the associated software maintenance revenue recognized ratably over the contract term. SaaS arrangements in this category have one distinct performance obligation which is satisfied over time with revenue recognized ratably over the contract term.

~~Internet for the Future~~Security consists of our ~~routed optical networking, 5G, silicon,~~Cloud and ~~optics solutions.~~Application Security, Industrial Security, Network Security, and User and Device Security offerings. These products consist ~~primarily~~ of both hardware and software offerings, including software licenses and SaaS. Updates and upgrades for the term software licenses are critical for our software to perform its intended commercial purpose because of the continuous need for our software to secure our customers’ network environments against frequent threats. Therefore, security software licenses are generally represented by a single distinct performance obligation with revenue recognized ratably over the contract term. Our hardware and perpetual software in this category are distinct performance obligations where revenue is recognized upfront upon transfer of control. Term software licenses are multiple performance obligations where the term license is recognized upfront upon transfer of control with the associated software maintenance revenue recognized ratably over the contract term. SaaS arrangements in this category have one distinct performance obligation which is satisfied over time with revenue recognized ratably over the contract term.

Collaboration consists of our Meetings, Collaboration Devices, Calling, Contact Center and Communication Platform as a Service (CPaaS) offerings. These products consist primarily of software offerings, including software licenses and SaaS, as well as hardware. Our perpetual software and hardware in this category are distinct performance obligations where revenue is recognized upfront upon transfer of control. Term software licenses are multiple performance obligations where the term license is recognized upfront upon transfer of control with the associated software maintenance revenue recognized ratably over the contract term. SaaS arrangements in this category have one distinct performance obligation which is satisfied over time with revenue recognized ratably over the contract term.

End-to-End Security consists of our Network Security, Cloud Security, Security Endpoints, Unified Threat Management and Zero Trust offerings. These products consist of both hardware and software offerings, including software licenses and SaaS. Updates and upgrades for the term software licenses are critical for our software to perform its intended commercial purpose because of the continuous need for our software to secure our customers’ network environments against frequent threats. Therefore, security software licenses are generally represented by a single distinct performance obligation with revenue recognized ratably over the contract term. Our hardware and perpetual software in this category are distinct performance obligations where revenue is recognized upfront upon transfer of control. SaaS arrangements in this category have one distinct performance obligation which is satisfied over time with revenue recognized ratably over the contract term.

~~Table of Contents~~

~~CISCO SYSTEMS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

~~Optimized Application Experiences~~Observability consists of our full stack observability ~~and cloud-native platform~~ offerings. These products consist primarily of software offerings, including software licenses and SaaS. Our perpetual software in this category are distinct performance obligations where revenue is recognized upfront upon transfer of control. Term software licenses are multiple performance obligations where the term license is recognized upfront upon transfer of control with the associated software maintenance revenue recognized ratably over the contract term. SaaS arrangements in this category have one distinct performance obligation which is satisfied over time with revenue recognized ratably over the contract term.

In addition to our product offerings, we provide a broad range of service and support options for our customers, including technical support services and advanced services. Technical support services represent the majority of these offerings which are distinct performance obligations that are satisfied over time with revenue recognized ratably over the contract term. Advanced services are distinct performance obligations that are satisfied over time with revenue recognized as services are delivered.

The sales arrangements as discussed above are typically made pursuant to customer purchase orders based on master purchase or partner agreements. Cash is received based on our standard payment terms which is typically 30 days. We provide financing arrangements to customers for all of our hardware, software and service offerings. Refer to Note 9 for additional information. For these arrangements, cash is typically received over time.

(b)Contract Balances

Accounts Receivable

Accounts receivable, net was ~~$5.1~~$4.8 billion as of ~~April 29,~~October 28, 2023 compared to ~~$6.6~~$5.9 billion as of July ~~30, 2022,~~29, 2023, as reported on the Consolidated Balance Sheets.

The allowances for credit loss for our accounts receivable are summarized as follows (in millions):


		Three Months Ended				Nine Months Ended					Three Months Ended
		April 29, 2023		April 30, 2022		April 29, 2023		April 30, 2022			October 28, 2023		October 29, 2022
Allowance for credit loss at beginning of period	Allowance for credit loss at beginning of period	$	86	$	70	$	83	$	109	Allowance for credit loss at beginning of period	$	85	$	83
Provisions (benefits)	Provisions (benefits)	9		17		23		53		Provisions (benefits)	2		11
Recoveries (write-offs), net	Recoveries (write-offs), net	(12)		(9)		(23)		(75)		Recoveries (write-offs), net	(5)		(6)
Foreign exchange and other		—		—		—		(9)
Allowance for credit loss at end of period	Allowance for credit loss at end of period	$	83	$	78	$	83	$	78	Allowance for credit loss at end of period	$	82	$	88

Table of Contents

CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Contract Assets and Liabilities

Gross contract assets by our internal risk ratings are summarized as follows (in millions):


		April 29, 2023		July 30, 2022			October 28, 2023		July 29, 2023
1 to 4	1 to 4	$	456	$	414	1 to 4	$	650	$	672
5 to 6	5 to 6	933		814		5 to 6	1,015		954
7 and Higher	7 and Higher	71		158		7 and Higher	68		60
Total	Total	$	1,460	$	1,386	Total	$	1,733	$	1,686

Contract assets consist of unbilled receivables and are recorded when revenue is recognized in advance of scheduled billings to our customers. These amounts are primarily related to software and service arrangements where transfer of control has occurred but we have not yet invoiced. ~~Our~~As of October 28, 2023 and July 29, 2023, our contract assets for these unbilled receivables, net of allowances, ~~was $1.4~~were $1.7 billion ~~as of April 29, 2023~~ and ~~$1.3~~$1.6 billion, ~~as of July 30, 2022,~~respectively, and were included in other current assets and other assets.

Contract liabilities consist of deferred revenue. Deferred revenue was ~~$24.3~~$25.7 billion as of ~~April 29,~~October 28, 2023 compared to ~~$23.3~~$25.6 billion as of July ~~30, 2022.~~29, 2023. We recognized approximately ~~$2.7 billion and $10.6~~$4.7 billion of revenue during the ~~third~~first quarter ~~and first nine months~~ of fiscal ~~2023, respectively,~~2024 that was included in the deferred revenue balance at July ~~30, 2022.~~

~~Table of Contents~~

~~CISCO SYSTEMS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

29, 2023.

(c)Capitalized Contract Acquisition Costs

We capitalize direct and incremental costs incurred to acquire contracts, primarily sales commissions, for which the associated revenue is expected to be recognized in future periods. We incur these costs in connection with both initial contracts and renewals. These costs are initially deferred and typically amortized over the term of the customer contract which corresponds to the period of benefit. ~~Deferred sales commissions~~Capitalized contract acquisition costs were ~~$1.0~~$1.2 billion and $1.1 billion as of ~~each of April 29,~~October 28, 2023 and July ~~30, 2022,~~29, 2023, respectively, and were included in other current assets and other assets. The amortization expense associated with these costs was ~~$172~~$158 million and ~~$549~~$176 million for the ~~third~~first quarter ~~and first nine months~~ of fiscal ~~2023, respectively,~~2024 and ~~$175 million and $492 million for the corresponding periods of fiscal 2022,~~2023, respectively, and was included in sales and marketing expenses.

4.Acquisitions and Divestitures

~~We completed two acquisitions during the first nine months of fiscal 2023.~~ A summary of the allocation of the total purchase consideration of our completed acquisitions during the first quarter of fiscal 2024 is presented as follows (in millions):

Purchase Consideration Net Tangible Assets Acquired (Liabilities Assumed) Purchased Intangible Assets Goodwill
Total acquisitions (two in total) $ 96 $ (7) $ 56 $ 47


	Purchase Consideration		Net Tangible Assets Acquired (Liabilities Assumed)		Purchased Intangible Assets		Goodwill
Total acquisitions	$	896	$	(73)	$	354	$	615

The total purchase consideration related to our acquisitions completed during the first ~~nine months~~quarter of fiscal ~~2023~~2024 consisted primarily of cash consideration. The total cash and cash equivalents acquired from these acquisitions was approximately $16 million. Total transaction costs related to acquisition and divestiture activities were $6$31 million and ~~$44~~$2 million for the first ~~nine months~~quarter of fiscal ~~2023~~2024 and ~~2022,~~2023, respectively. These transaction costs were expensed as incurred in general and administrative expenses (“G&A”) in the Consolidated Statements of Operations.

The purchase price allocation for acquisitions completed during recent periods is preliminary and subject to revision as additional information about fair value of assets and liabilities becomes available. Additional information that existed as of the acquisition date but at that time was unknown to us may become known during the remainder of the measurement period, a period not to exceed 12 months from the acquisition date.

The goodwill generated from acquisitions completed during the first ~~nine months~~quarter of fiscal ~~2023~~2024 is primarily related to expected synergies. The goodwill is generally not deductible for income tax purposes.

The Consolidated Financial Statements include the operating results of each acquisition from the date of acquisition. Pro forma results of operations and the revenue and net income subsequent to the acquisition date for the acquisitions completed during the first ~~nine months~~quarter of fiscal ~~2023~~2024 have not been presented because the effects of the ~~acquisition~~acquisitions were not material to our financial results.

Table of Contents

CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Intent to Acquire Splunk On September 21, 2023, we announced our intent to acquire Splunk Inc. (“Splunk”), a public cybersecurity and observability company. Under the terms of the agreement, we have agreed to pay $157 per share in cash, representing approximately $28 billion in equity value. The acquisition is expected to close by the end of the third quarter of calendar year 2024, subject to regulatory approval and other customary closing conditions, including approval by Splunk shareholders. We anticipate this transaction will be financed with a combination of cash and debt.

5.Goodwill and Purchased Intangible Assets

(a)Goodwill

The following table presents the goodwill allocated to our reportable segments as of ~~April 29,~~October 28, 2023 and during the first ~~nine months~~quarter of fiscal ~~2023~~2024 (in millions):

Balance at July 30, 2022 Acquisitions & Divestitures Foreign Currency Translation and Other Balance at April 29, 2023
Americas $ 23,882 $ 31 $ 11 $ 23,924
EMEA 9,062 11 4 9,077
APJC 5,360 5 3 5,368
Total $ 38,304 $ 47 $ 18 $ 38,369

~~Table of Contents~~

~~CISCO SYSTEMS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~



	Balance at July 29, 2023		Acquisitions		Foreign Currency Translation and Other		Balance at October 28, 2023
Americas	$	24,035	$	381	$	(156)	$	24,260
EMEA	9,118		126		(59)		9,185
APJC	5,382		108		(35)		5,455
Total	$	38,535	$	615	$	(250)	$	38,900

(b)Purchased Intangible Assets

The following table presents details of our intangible assets acquired through acquisitions completed during the first ~~nine months~~quarter of fiscal ~~2023~~2024 (in millions, except years):

FINITE LIVES INDEFINITE LIVES TOTAL
TECHNOLOGY CUSTOMER
RELATIONSHIPS OTHER IPR&D
Weighted-
Average Useful
Life (in Years) Amount Weighted-
Average Useful
Life (in Years) Amount Weighted-
Average Useful
Life (in Years) Amount Amount Amount
Total acquisitions (two in total) 4.0 $ 55 1.0 $ 1 — $ — $ — $ 56


	FINITE LIVES									INDEFINITE LIVES		TOTAL
	TECHNOLOGY			CUSTOMER RELATIONSHIPS			OTHER			IPR&D
	Weighted- Average Useful Life (in Years)	Amount		Weighted- Average Useful Life (in Years)	Amount		Weighted- Average Useful Life (in Years)	Amount		Amount		Amount
Total acquisitions	4.8	$	280	4.8	$	58	1.0	$	2	$	14	$	354

The following tables present details of our purchased intangible assets (in millions):


April 29, 2023		Gross		Accumulated Amortization		Net
October 28, 2023								October 28, 2023	Gross		Accumulated Amortization		Net
Purchased intangible assets with finite lives:	Purchased intangible assets with finite lives:							Purchased intangible assets with finite lives:
Technology	Technology	$	2,873	$	(1,541)	$	1,332	Technology	$	3,051	$	(1,654)	$	1,397
Customer relationships	Customer relationships	1,259		(880)		379		Customer relationships	1,186		(870)		316
Other	Other	40		(20)		20		Other	42		(25)		17
Total purchased intangible assets with finite lives	Total purchased intangible assets with finite lives	4,172		(2,441)		1,731		Total purchased intangible assets with finite lives	4,279		(2,549)		1,730
In-process research and development, with indefinite lives	In-process research and development, with indefinite lives	235		—		235		In-process research and development, with indefinite lives	184		—		184
Total	Total	$	4,407	$	(2,441)	$	1,966	Total	$	4,463	$	(2,549)	$	1,914


July 30, 2022		Gross		Accumulated Amortization		Net
July 29, 2023								July 29, 2023	Gross		Accumulated Amortization		Net
Purchased intangible assets with finite lives:	Purchased intangible assets with finite lives:							Purchased intangible assets with finite lives:
Technology	Technology	$	2,631	$	(1,102)	$	1,529	Technology	$	2,998	$	(1,691)	$	1,307
Customer relationships	Customer relationships	1,354		(769)		585		Customer relationships	1,228		(905)		323
Other	Other	41		(16)		25		Other	40		(22)		18
Total purchased intangible assets with finite lives	Total purchased intangible assets with finite lives	4,026		(1,887)		2,139		Total purchased intangible assets with finite lives	4,266		(2,618)		1,648
In-process research and development, with indefinite lives	In-process research and development, with indefinite lives	430		—		430		In-process research and development, with indefinite lives	170		—		170
Total	Total	$	4,456	$	(1,887)	$	2,569	Total	$	4,436	$	(2,618)	$	1,818

Table of Contents

CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Purchased intangible assets include intangible assets acquired through acquisitions as well as through direct purchases or licenses.

The following table presents the amortization of purchased intangible assets, including impairment charges (in millions):

Three Months Ended Nine Months Ended
April 29, 2023 April 30, 2022 April 29, 2023 April 30, 2022
Amortization of purchased intangible assets:
Cost of sales $ 160 $ 180 $ 476 $ 583
Operating expenses 70 92 212 255
Total $ 230 $ 272 $ 688 $ 838

~~Table of Contents~~

~~CISCO SYSTEMS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~


	Three Months Ended
	October 28, 2023		October 29, 2022
Amortization of purchased intangible assets:
Cost of sales	$	186	$	158
Operating expenses	67		71
Total	$	253	$	229

The estimated future amortization expense of purchased intangible assets with finite lives as of ~~April 29,~~October 28, 2023 is as follows (in millions):


Fiscal Year	Fiscal Year	Amount		Fiscal Year	Amount
2023 (remaining three months)		$	238
2024		$	832
2024 (remaining nine months)				2024 (remaining nine months)	$	684
2025	2025	$	460	2025	$	573
2026	2026	$	119	2026	$	225
2027	2027	$	55	2027	$	140
2028				2028	$	98
Thereafter	Thereafter	$	27	Thereafter	$	10

6.Restructuring and Other Charges

In the second quarter of fiscal 2023, we announced a restructuring plan (the “Fiscal 2023 Plan”), in order to rebalance the organization and enable further investment in key priority ~~areas.~~areas, of which approximately 5% of the global workforce would be impacted. This rebalancing includes talent movement options and restructuring. Additionally, we ~~have begun~~began optimizing our real estate portfolio, aligned to the broader hybrid work strategy. ~~The total pretax charges are estimated to be approximately $600 million and is expected to impact approximately 5% of our global workforce.~~ In connection with the Fiscal 2023 Plan, we incurred charges of ~~$87 million and $330~~$123 million for the ~~third~~first quarter ~~and first nine months~~ of fiscal ~~2023, respectively.~~2024 and have incurred cumulative charges of $658 million to date. These aggregate pretax charges ~~will be~~are primarily cash-based and ~~will~~ consist of severance and other one-time termination benefits, real estate-related charges, and other costs. We ~~expect the plan to be~~have substantially completed by the ~~end of~~Fiscal 2023 Plan in the first quarter of fiscal 2024.

The following ~~tables summarize~~table summarizes the activities related to the ~~restructuring and other charges~~Fiscal 2023 Plan (in millions):


		FISCAL 2021 AND PRIOR PLANS				FISCAL 2023 PLAN							FISCAL 2023 PLAN
		Employee Severance		Other		Employee Severance		Other		Total			Employee Severance		Other		Total
Liability as of July 30, 2022		$	2	$	7	$	—	$	—	$	9
Liability as of July 29, 2023												Liability as of July 29, 2023	$	166	$	44	$	210
Charges	Charges	—		(2)		300		30		328		Charges	103		20		123
Cash payments	Cash payments	(1)		(1)		(263)		(7)		(272)		Cash payments	(99)		(6)		(105)
Non-cash items	Non-cash items	—		—		1		(2)		(1)		Non-cash items	(2)		(11)		(13)
Liability as of April 29, 2023		$	1	$	4	$	38	$	21	$	64
Liability as of October 28, 2023												Liability as of October 28, 2023	$	168	$	47	$	215

FISCAL 2020 AND PRIOR PLANS FISCAL 2021 PLAN
Employee
Severance Other Employee Severance Other Total
Liability as of July 31, 2021 $ — $ 10 $ 16 $ 8 $ 34
Charges — (5) 10 3 8
Cash payments — (1) (21) (1) (23)
Non-cash items — — — (5) (5)
Liability as of April 30, 2022 $ — $ 4 $ 5 $ 5 $ 14

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

7.Balance Sheet and Other Details

The following tables provide details of selected balance sheet and other items (in millions, except percentages):

Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents


		April 29, 2023		July 30, 2022			October 28, 2023		July 29, 2023
Cash and cash equivalents	Cash and cash equivalents	$	8,044	$	7,079	Cash and cash equivalents	$	9,602	$	10,123
Restricted cash and restricted cash equivalents included in other current assets	Restricted cash and restricted cash equivalents included in other current assets	2		—		Restricted cash and restricted cash equivalents included in other current assets	378		191
Restricted cash and restricted cash equivalents included in other assets	Restricted cash and restricted cash equivalents included in other assets	1,500		1,500		Restricted cash and restricted cash equivalents included in other assets	1,125		1,313
Total	Total	$	9,546	$	8,579	Total	$	11,105	$	11,627

Our restricted cash and restricted cash equivalents are funds primarily related to contractual obligations with suppliers.

Inventories

April 29,
2023 July 30,
2022
Raw materials $ 1,502 $ 1,601
Work in process 310 150
Finished goods:
Deferred cost of sales 81 86
Manufactured finished goods 1,402 631
Total finished goods 1,483 717
Service-related spares 164 90
Demonstration systems 15 10
Total $ 3,474 $ 2,568


	October 28, 2023		July 29, 2023
Raw materials	$	1,854	$	1,685
Work in process	194		264
Finished goods	1,093		1,493
Service-related spares	188		186
Demonstration systems	13		16
Total	$	3,342	$	3,644

Property and Equipment, Net


		April 29, 2023		July 30, 2022			October 28, 2023		July 29, 2023
Gross property and equipment:	Gross property and equipment:					Gross property and equipment:
Land, buildings, and building and leasehold improvements	Land, buildings, and building and leasehold improvements	$	4,258	$	4,219	Land, buildings, and building and leasehold improvements	$	4,194	$	4,229
Computer equipment and related software	Computer equipment and related software	747		779		Computer equipment and related software	682		744
Production, engineering, and other equipment	Production, engineering, and other equipment	4,604		4,647		Production, engineering, and other equipment	4,465		4,611
Operating lease assets	Operating lease assets	135		185		Operating lease assets	123		135
Furniture, fixtures and other	Furniture, fixtures and other	340		335		Furniture, fixtures and other	338		339
Total gross property and equipment	Total gross property and equipment	10,084		10,165		Total gross property and equipment	9,802		10,058
Less: accumulated depreciation and amortization	Less: accumulated depreciation and amortization	(8,037)		(8,168)		Less: accumulated depreciation and amortization	(7,798)		(7,973)
Total	Total	$	2,047	$	1,997	Total	$	2,004	$	2,085

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Remaining Performance Obligations (RPO)


		April 29, 2023			July 30, 2022				October 28, 2023			July 29, 2023
Product	Product	$	14,681		$	14,090		Product	$	16,011		$	15,802
Service	Service	17,401			17,449			Service	18,742			19,066
Total	Total	$	32,082		$	31,539		Total	$	34,753		$	34,868

Short-term RPO	Short-term RPO	$	16,869		$	16,936		Short-term RPO	$	17,617		$	17,910
Long-term RPO	Long-term RPO	15,213			14,603			Long-term RPO	17,136			16,958
Total	Total	$	32,082		$	31,539		Total	$	34,753		$	34,868

Amount to be recognized as revenue over the next 12 months	Amount to be recognized as revenue over the next 12 months	53		%	54		%	Amount to be recognized as revenue over the next 12 months	51		%	51		%

Deferred revenue	Deferred revenue	$	24,260		$	23,264		Deferred revenue	$	25,659		$	25,550
Unbilled contract revenue	Unbilled contract revenue	7,822			8,275			Unbilled contract revenue	9,094			9,318
Total	Total	$	32,082		$	31,539		Total	$	34,753		$	34,868

Unbilled contract revenue represents noncancelable contracts for which we have not invoiced, have an obligation to perform, and revenue has not yet been recognized in the financial statements.

Deferred Revenue


		April 29, 2023		July 30, 2022			October 28, 2023		July 29, 2023
Product	Product	$	10,895	$	10,427	Product	$	11,689	$	11,505
Service	Service	13,365		12,837		Service	13,970		14,045
Total	Total	$	24,260	$	23,264	Total	$	25,659	$	25,550
Reported as:	Reported as:					Reported as:
Current	Current	$	13,249	$	12,784	Current	$	13,812	$	13,908
Noncurrent	Noncurrent	11,011		10,480		Noncurrent	11,847		11,642
Total	Total	$	24,260	$	23,264	Total	$	25,659	$	25,550

Transition Tax Payable

Our income tax payable associated with the one-time U.S. transition tax on accumulated earnings for foreign subsidiaries as a result of the Tax Cuts and Jobs Act is as follows (in millions):


		April 29, 2023		July 30, 2022			October 28, 2023		July 29, 2023
Current	Current	$	1,364	$	727	Current	$	1,364	$	1,364
Noncurrent	Noncurrent	4,092		5,456		Noncurrent	4,092		4,092
Total	Total	$	5,456	$	6,183	Total	$	5,456	$	5,456

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

8.Leases

(a)Lessee Arrangements

The following table presents our operating lease balances (in millions):


		Balance Sheet Line Item	April 29, 2023		July 30, 2022			Balance Sheet Line Item	October 28, 2023		July 29, 2023
Operating lease right-of-use assets	Operating lease right-of-use assets	Other assets	$	1,017	$	1,003	Operating lease right-of-use assets	Other assets	$	997	$	971

Operating lease liabilities	Operating lease liabilities	Other current liabilities	$	321	$	322	Operating lease liabilities	Other current liabilities	$	302	$	313
Operating lease liabilities	Operating lease liabilities	Other long-term liabilities	742		724		Operating lease liabilities	Other long-term liabilities	741		707
Total operating lease liabilities	Total operating lease liabilities		$	1,063	$	1,046	Total operating lease liabilities		$	1,043	$	1,020

The components of our lease expenses were as follows (in millions):


		Three Months Ended				Nine Months Ended					Three Months Ended
		April 29, 2023		April 30, 2022		April 29, 2023		April 30, 2022			October 28, 2023		October 29, 2022
Operating lease expense	Operating lease expense	$	106	$	99	$	300	$	292	Operating lease expense	$	100	$	96
Short-term lease expense	Short-term lease expense	16		17		50		49		Short-term lease expense	11		17
Variable lease expense	Variable lease expense	61		37		182		127		Variable lease expense	56		58
Total lease expense	Total lease expense	$	183	$	153	$	532	$	468	Total lease expense	$	167	$	171

Supplemental information related to our operating leases is as follows (in millions):


		Nine Months Ended					Three Months Ended
		April 29, 2023		April 30, 2022			October 28, 2023		October 29, 2022
Cash paid for amounts included in the measurement of lease liabilities — operating cash flows	Cash paid for amounts included in the measurement of lease liabilities — operating cash flows	$	290	$	306	Cash paid for amounts included in the measurement of lease liabilities — operating cash flows	$	88	$	96
Right-of-use assets obtained in exchange for operating leases liabilities	Right-of-use assets obtained in exchange for operating leases liabilities	$	278	$	237	Right-of-use assets obtained in exchange for operating leases liabilities	$	126	$	35

The weighted-average lease term was ~~4.7~~4.8 years and 4.6 years as of ~~each of April 29,~~October 28, 2023 and July ~~30, 2022.~~29, 2023, respectively. The weighted-average discount rate was ~~2.9%~~3.5% and ~~2.2%~~3.1% as of ~~April 29,~~October 28, 2023 and July ~~30, 2022,~~29, 2023, respectively.

The maturities of our operating leases (undiscounted) as of ~~April 29,~~October 28, 2023 are as follows (in millions):


Fiscal Year	Fiscal Year	Amount		Fiscal Year	Amount
2023 (remaining three months)		$	97
2024		327
2024 (remaining nine months)				2024 (remaining nine months)	$	258
2025	2025	245		2025	278
2026	2026	155		2026	189
2027	2027	92		2027	116
2028				2028	88
Thereafter	Thereafter	243		Thereafter	227
Total lease payments	Total lease payments	1,159		Total lease payments	1,156
Less interest	Less interest	(96)		Less interest	(113)
Total	Total	$	1,063	Total	$	1,043

(b)Lessor Arrangements

Our leases primarily represent sales-type leases with terms of four yearson average. We provide leasing of our equipment and complementary third-party products primarily through our channel partners and distributors, for which the income arising from these leases is recognized through interest income. Interest income was ~~$13~~$14 million and ~~$36~~$12 million for the ~~third~~first quarter ~~and first nine months~~ of fiscal ~~2023, respectively,~~2024 and ~~$13 million and $42 million for the corresponding periods of fiscal 2022,~~2023, respectively, and was included in interest income in the Consolidated Statement of Operations. The net investment of our lease receivables is measured at the commencement date as the gross lease receivable, residual value less unearned income and allowance for credit loss. For additional information, see Note 9.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Future minimum lease payments on our lease receivables as of ~~April 29,~~October 28, 2023 are summarized as follows (in millions):


Fiscal Year	Fiscal Year	Amount		Fiscal Year	Amount
2023 (remaining three months)		$	157
2024		326
2024 (remaining nine months)				2024 (remaining nine months)	$	433
2025	2025	198		2025	166
2026	2026	140		2026	182
2027	2027	107		2027	160
2028				2028	126
Thereafter	Thereafter	64		Thereafter	45
Total	Total	992		Total	1,112
Less: Present value of lease payments	Less: Present value of lease payments	920		Less: Present value of lease payments	(1,015)
Unearned income	Unearned income	$	72	Unearned income	$	97

Actual cash collections may differ from the contractual maturities due to early customer buyouts, refinancings, or defaults.

We provide financing of certain equipment through operating leases, and the amounts are included in property and equipment in the Consolidated Balance Sheets. Amounts relating to equipment on operating lease assets held by us and the associated accumulated depreciation are summarized as follows (in millions):


		April 29, 2023		July 30, 2022			October 28, 2023		July 29, 2023
Operating lease assets	Operating lease assets	$	135	$	185	Operating lease assets	$	123	$	135
Accumulated depreciation	Accumulated depreciation	(82)		(111)		Accumulated depreciation	(72)		(78)
Operating lease assets, net	Operating lease assets, net	$	53	$	74	Operating lease assets, net	$	51	$	57

Our operating lease income was ~~$18~~$16 million and ~~$56~~$21 million for the ~~third~~first quarter ~~and first nine months~~ of fiscal ~~2023, respectively,~~2024 and ~~$26 million and $87 million for the corresponding periods of fiscal 2022,~~2023, respectively, and was included in product revenue in the Consolidated ~~Statement~~Statements of Operations.

Minimum future rentals on noncancelable operating leases as of ~~April 29,~~October 28, 2023 are summarized as follows (in millions):


Fiscal Year	Fiscal Year	Amount		Fiscal Year	Amount
2023 (remaining three months)		$	8
2024		19
2024 (remaining nine months)				2024 (remaining nine months)	$	18
2025	2025	7		2025	12
2026	2026	2		2026	6
Total	Total	$	36	Total	$	36

9.Financing Receivables

(a)Financing Receivables

Financing receivables primarily consist of loan receivables and lease receivables. Loan receivables represent financing arrangements related to the sale of our hardware, software, and services (including technical support and advanced services), and also may include additional funding for other costs associated with network installation and integration of our products and services. Loan receivables have terms of one year to three years on average. Lease receivables represent sales-type leases resulting from the sale of Cisco’s and complementary third-party products and are typically collateralized by a security interest in the underlying assets. Lease receivables consist of arrangements with terms of four years on average.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

A summary of our financing receivables is presented as follows (in millions):


April 29, 2023		Loan Receivables		Lease Receivables		Total
October 28, 2023								October 28, 2023	Loan Receivables		Lease Receivables		Total
Gross	Gross	$	5,879	$	992	$	6,871	Gross	$	5,729	$	1,112	$	6,841
Residual value	Residual value	—		66		66		Residual value	—		68		68
Unearned income	Unearned income	—		(72)		(72)		Unearned income	—		(97)		(97)
Allowance for credit loss	Allowance for credit loss	(53)		(17)		(70)		Allowance for credit loss	(58)		(16)		(74)
Total, net	Total, net	$	5,826	$	969	$	6,795	Total, net	$	5,671	$	1,067	$	6,738
Reported as:	Reported as:							Reported as:
Current	Current	$	2,949	$	453	$	3,402	Current	$	2,986	$	428	$	3,414
Noncurrent	Noncurrent	2,877		516		3,393		Noncurrent	2,685		639		3,324
Total, net	Total, net	$	5,826	$	969	$	6,795	Total, net	$	5,671	$	1,067	$	6,738


July 30, 2022		Loan Receivables		Lease Receivables		Total
July 29, 2023								July 29, 2023	Loan Receivables		Lease Receivables		Total
Gross	Gross	$	6,842	$	1,176	$	8,018	Gross	$	5,910	$	1,015	$	6,925
Residual value	Residual value	—		76		76		Residual value	—		70		70
Unearned income	Unearned income	—		(54)		(54)		Unearned income	—		(88)		(88)
Allowance for credit loss	Allowance for credit loss	(103)		(23)		(126)		Allowance for credit loss	(53)		(19)		(72)
Total, net	Total, net	$	6,739	$	1,175	$	7,914	Total, net	$	5,857	$	978	$	6,835
Reported as:	Reported as:							Reported as:
Current	Current	$	3,327	$	578	$	3,905	Current	$	2,988	$	364	$	3,352
Noncurrent	Noncurrent	3,412		597		4,009		Noncurrent	2,869		614		3,483
Total, net	Total, net	$	6,739	$	1,175	$	7,914	Total, net	$	5,857	$	978	$	6,835

(b)Credit Quality of Financing Receivables

The tables below present our gross financing receivables, excluding residual value, less unearned income, categorized by our internal credit risk rating by period of origination (in millions):


April 29, 2023				Fiscal Year								Nine Months Ended
October 28, 2023																October 28, 2023			Fiscal Year								Three Months Ended
Internal Credit Risk Rating	Internal Credit Risk Rating	Prior		July 27, 2019		July 25, 2020		July 31, 2021		July 30, 2022		April 29, 2023		Total		Internal Credit Risk Rating	Prior		July 25, 2020		July 31, 2021		July 30, 2022		July 29, 2023		October 28, 2023		Total
Loan Receivables:	Loan Receivables:															Loan Receivables:
1 to 4	1 to 4	$	26	$	82	$	295	$	929	$	1,197	$	1,442	$	3,971	1 to 4	$	40	$	205	$	637	$	910	$	1,371	$	543	$	3,706
5 to 6	5 to 6	5		24		146		354		521		763		1,813		5 to 6	9		109		193		327		733		513		1,884
7 and Higher	7 and Higher	1		11		19		17		32		15		95		7 and Higher	7		10		15		91		15		1		139
Total Loan Receivables	Total Loan Receivables	$	32	$	117	$	460	$	1,300	$	1,750	$	2,220	$	5,879	Total Loan Receivables	$	56	$	324	$	845	$	1,328	$	2,119	$	1,057	$	5,729
Lease Receivables:	Lease Receivables:															Lease Receivables:
1 to 4	1 to 4	$	4	$	32	$	73	$	135	$	90	$	160	$	494	1 to 4	$	13	$	46	$	99	$	82	$	250	$	111	$	601
5 to 6	5 to 6	2		18		56		71		98		160		405		5 to 6	9		38		51		85		183		30		396
7 and Higher	7 and Higher	1		2		4		4		4		6		21		7 and Higher	1		2		3		5		5		2		18
Total Lease Receivables	Total Lease Receivables	$	7	$	52	$	133	$	210	$	192	$	326	$	920	Total Lease Receivables	$	23	$	86	$	153	$	172	$	438	$	143	$	1,015
Total	Total	$	39	$	169	$	593	$	1,510	$	1,942	$	2,546	$	6,799	Total	$	79	$	410	$	998	$	1,500	$	2,557	$	1,200	$	6,744

2018

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CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)


July 30, 2022				Fiscal Year
July 29, 2023																July 29, 2023			Fiscal Year
Internal Credit Risk Rating	Internal Credit Risk Rating	Prior		July 28, 2018		July 27, 2019		July 25, 2020		July 31, 2021		July 30, 2022		Total		Internal Credit Risk Rating	Prior		July 27, 2019		July 25, 2020		July 31, 2021		July 30, 2022		July 29, 2023		Total
Loan Receivables:	Loan Receivables:															Loan Receivables:
1 to 4	1 to 4	$	2	$	49	$	173	$	536	$	1,458	$	2,287	$	4,505	1 to 4	$	10	$	53	$	251	$	791	$	1,077	$	1,784	$	3,966
5 to 6	5 to 6	1		17		115		345		709		1,030		2,217		5 to 6	3		14		131		287		465		936		1,836
7 and Higher	7 and Higher	1		1		22		45		39		12		120		7 and Higher	1		7		15		17		29		39		108
Total Loan Receivables	Total Loan Receivables	$	4	$	67	$	310	$	926	$	2,206	$	3,329	$	6,842	Total Loan Receivables	$	14	$	74	$	397	$	1,095	$	1,571	$	2,759	$	5,910
Lease Receivables:	Lease Receivables:															Lease Receivables:
1 to 4	1 to 4	$	2	$	25	$	74	$	124	$	176	$	152	$	553	1 to 4	$	2	$	20	$	57	$	111	$	84	$	235	$	509
5 to 6	5 to 6	1		10		67		146		165		151		540		5 to 6	2		13		44		58		87		191		395
7 and Higher	7 and Higher	—		1		4		12		2		10		29		7 and Higher	—		1		2		4		5		11		23
Total Lease Receivables	Total Lease Receivables	$	3	$	36	$	145	$	282	$	343	$	313	$	1,122	Total Lease Receivables	$	4	$	34	$	103	$	173	$	176	$	437	$	927
Total	Total	$	7	$	103	$	455	$	1,208	$	2,549	$	3,642	$	7,964	Total	$	18	$	108	$	500	$	1,268	$	1,747	$	3,196	$	6,837

The following tables present the aging analysis of gross receivables as of ~~April 29,~~October 28, 2023 and July ~~30, 2022~~29, 2023 (in millions):


		DAYS PAST DUE (INCLUDES BILLED AND UNBILLED)																			DAYS PAST DUE (INCLUDES BILLED AND UNBILLED)
April 29, 2023		31-60		61-90		91+		Total Past Due		Current		Total		120+ Still Accruing		Nonaccrual Financing Receivables		Impaired Financing Receivables
October 28, 2023																				October 28, 2023	31-60		61-90		91+		Total Past Due		Current		Total		120+ Still Accruing		Nonaccrual Financing Receivables		Impaired Financing Receivables
Loan receivables	Loan receivables	$	94	$	39	$	79	$	212	$	5,667	$	5,879	$	15	$	15	$	15	Loan receivables	$	73	$	58	$	45	$	176	$	5,553	$	5,729	$	16	$	12	$	12
Lease receivables	Lease receivables	15		10		24		49		871		920		7		4		4		Lease receivables	18		12		15		45		970		1,015		5		2		2
Total	Total	$	109	$	49	$	103	$	261	$	6,538	$	6,799	$	22	$	19	$	19	Total	$	91	$	70	$	60	$	221	$	6,523	$	6,744	$	21	$	14	$	14


		DAYS PAST DUE (INCLUDES BILLED AND UNBILLED)																			DAYS PAST DUE (INCLUDES BILLED AND UNBILLED)
July 30, 2022		31-60		61-90		91+		Total Past Due		Current		Total		120+ Still Accruing		Nonaccrual Financing Receivables		Impaired Financing Receivables
July 29, 2023																				July 29, 2023	31-60		61-90		91+		Total Past Due		Current		Total		120+ Still Accruing		Nonaccrual Financing Receivables		Impaired Financing Receivables
Loan receivables	Loan receivables	$	98	$	62	$	129	$	289	$	6,553	$	6,842	$	14	$	60	$	60	Loan receivables	$	47	$	20	$	37	$	104	$	5,806	$	5,910	$	17	$	12	$	12
Lease receivables	Lease receivables	8		6		26		40		1,082		1,122		7		11		11		Lease receivables	16		4		23		43		884		927		6		3		3
Total	Total	$	106	$	68	$	155	$	329	$	7,635	$	7,964	$	21	$	71	$	71	Total	$	63	$	24	$	60	$	147	$	6,690	$	6,837	$	23	$	15	$	15

Past due financing receivables are those that are 31 days or more past due according to their contractual payment terms. The data in the preceding tables is presented by contract, and the aging classification of each contract is based on the oldest outstanding receivable, and therefore past due amounts also include unbilled and current receivables within the same contract.

~~Table of Contents~~

~~CISCO SYSTEMS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

(c)Allowance for Credit Loss Rollforward

The allowances for credit loss and the related financing receivables are summarized as follows (in millions):

Three Months Ended April 29, 2023 CREDIT LOSS ALLOWANCES
Loan Receivables Lease Receivables Total
Allowance for credit loss as of January 28, 2023 $ 94 $ 19 $ 113
Provisions (benefits) (3) (1) (4)
Recoveries (write-offs), net (38) (1) (39)
Allowance for credit loss as of April 29, 2023 $ 53 $ 17 $ 70

Three Months Ended April 30, 2022 CREDIT LOSS ALLOWANCES
Loan Receivables Lease Receivables Total
Allowance for credit loss as of January 29, 2022 $ 70 $ 27 $ 97
Provisions (benefits) 26 (2) 24
Other 3 — 3
Allowance for credit loss as of April 30, 2022 $ 99 $ 25 $ 124

Nine Months Ended April 29, 2023 CREDIT LOSS ALLOWANCES
Loan Receivables Lease Receivables Total
Allowance for credit loss as of July 30, 2022 $ 103 $ 23 $ 126
Provisions (benefits) (7) (5) (12)
Recoveries (write-offs), net (38) (1) (39)
Other (5) — (5)
Allowance for credit loss as of April 29, 2023 $ 53 $ 17 $ 70

Nine Months Ended April 30, 2022 CREDIT LOSS ALLOWANCES
Loan Receivables Lease Receivables Total
Allowance for credit loss as of July 31, 2021 $ 89 $ 38 $ 127
Provisions (benefits) 7 (11) (4)
Recoveries (write-offs), net — (2) (2)
Other 3 — 3
Allowance for credit loss as of April 30, 2022 $ 99 $ 25 $ 124


Three Months Ended October 28, 2023	CREDIT LOSS ALLOWANCES
	Loan Receivables		Lease Receivables		Total
Allowance for credit loss as of July 29, 2023	$	53	$	19	$	72
Provisions (benefits)	5		(3)		2
Allowance for credit loss as of October 28, 2023	$	58	$	16	$	74

2219

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CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)


Three Months Ended October 29, 2022	CREDIT LOSS ALLOWANCES
	Loan Receivables		Lease Receivables		Total
Allowance for credit loss as of July 30, 2022	$	103	$	23	$	126
Provisions (benefits)	(1)		(3)		(4)
Other	(1)		(1)		(2)
Allowance for credit loss as of October 29, 2022	$	101	$	19	$	120

10.~~Available-for-Sale Debt and Equity~~ Investments

(a)Summary of Available-for-Sale Debt Investments

The following tables summarize our available-for-sale debt investments (in millions):


April 29, 2023		Amortized Cost		Gross Unrealized Gains		Gross Unrealized and Credit Losses		Fair Value
October 28, 2023										October 28, 2023	Amortized Cost		Gross Unrealized Gains		Gross Unrealized and Credit Losses		Fair Value
U.S. government securities	U.S. government securities	$	2,833	$	9	$	(42)	$	2,800	U.S. government securities	$	2,596	$	—	$	(72)	$	2,524
U.S. government agency securities	U.S. government agency securities	365		1		(4)		362		U.S. government agency securities	421		—		(6)		415
Non-U.S. government and agency securities	Non-U.S. government and agency securities	352		—		—		352		Non-U.S. government and agency securities	351		—		—		351
Corporate debt securities	Corporate debt securities	7,587		8		(305)		7,290		Corporate debt securities	6,862		1		(363)		6,500
U.S. agency mortgage-backed securities	U.S. agency mortgage-backed securities	2,221		1		(208)		2,014		U.S. agency mortgage-backed securities	2,431		—		(318)		2,113
Commercial paper	Commercial paper	1,595		—		—		1,595		Commercial paper	943		—		—		943
Certificates of deposit	Certificates of deposit	485		—		—		485		Certificates of deposit	666		—		—		666
Total	Total	$	15,438	$	19	$	(559)	$	14,898	Total	$	14,270	$	1	$	(759)	$	13,512

July 30, 2022 Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized and Credit
Losses Fair
Value
U.S. government securities $ 1,287 $ — $ (49) $ 1,238
U.S. government agency securities 142 — (4) 138
Non-U.S. government and agency securities 272 — — 272
Corporate debt securities 8,127 2 (311) 7,818
U.S. agency mortgage-backed securities 2,134 — (158) 1,976
Commercial paper 255 — — 255
Certificates of deposit 250 — — 250
Total $ 12,467 $ 2 $ (522) $ 11,947

Net unsettled investment purchases were $9 million and net unsettled investment sales were $70 million as of April 29, 2023 and July 30, 2022, respectively, and were included in other current assets and other current liabilities.


July 29, 2023	Amortized Cost		Gross Unrealized Gains		Gross Unrealized and Credit Losses		Fair Value
U.S. government securities	$	3,587	$	1	$	(62)	$	3,526
U.S. government agency securities	428		—		(5)		423
Non-U.S. government and agency securities	364		—		(1)		363
Corporate debt securities	7,238		3		(327)		6,914
U.S. agency mortgage-backed securities	2,421		14		(230)		2,205
Commercial paper	1,484		—		—		1,484
Certificates of deposit	677		—		—		677
Total	$	16,199	$	18	$	(625)	$	15,592

The following table presents the gross realized gains and gross realized losses related to available-for-sale debt investments (in millions):


		Three Months Ended				Nine Months Ended					Three Months Ended
		April 29, 2023		April 30, 2022		April 29, 2023		April 30, 2022			October 28, 2023		October 29, 2022
Gross realized gains	Gross realized gains	$	1	$	8	$	4	$	27	Gross realized gains	$	—	$	—
Gross realized losses	Gross realized losses	(7)		(6)		(19)		(9)		Gross realized losses	(20)		(6)
Total	Total	$	(6)	$	2	$	(15)	$	18	Total	$	(20)	$	(6)

2320

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CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following tables present the breakdown of the available-for-sale debt investments with gross unrealized losses and the duration that those losses had been unrealized at ~~April 29,~~October 28, 2023 and July ~~30, 2022~~29, 2023 (in millions):


		UNREALIZED LOSSES LESS THAN 12 MONTHS				UNREALIZED LOSSES 12 MONTHS OR GREATER				TOTAL					UNREALIZED LOSSES LESS THAN 12 MONTHS				UNREALIZED LOSSES 12 MONTHS OR GREATER				TOTAL
April 29, 2023		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
October 28, 2023														October 28, 2023	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
U.S. government securities	U.S. government securities	$	360	$	(2)	$	1,125	$	(40)	$	1,485	$	(42)	U.S. government securities	$	1,844	$	(38)	$	680	$	(34)	$	2,524	$	(72)
U.S. government agency securities	U.S. government agency securities	148		(1)		110		(3)		258		(4)		U.S. government agency securities	377		(3)		38		(3)		415		(6)
Non-U.S. government and agency securities	Non-U.S. government and agency securities	291		—		—		—		291		—		Non-U.S. government and agency securities	324		—		—		—		324		—
Corporate debt securities	Corporate debt securities	1,387		(14)		4,869		(261)		6,256		(275)		Corporate debt securities	1,679		(29)		4,275		(304)		5,954		(333)
U.S. agency mortgage-backed securities	U.S. agency mortgage-backed securities	343		(5)		1,514		(203)		1,857		(208)		U.S. agency mortgage-backed securities	798		(45)		1,315		(273)		2,113		(318)
Commercial paper	Commercial paper	69		—		—		—		69		—		Commercial paper	10		—		—		—		10		—
Certificates of deposit	Certificates of deposit	5		—		—		—		5		—		Certificates of deposit	10		—		—		—		10		—
Total	Total	$	2,603	$	(22)	$	7,618	$	(507)	$	10,221	$	(529)	Total	$	5,042	$	(115)	$	6,308	$	(614)	$	11,350	$	(729)


		UNREALIZED LOSSES LESS THAN 12 MONTHS				UNREALIZED LOSSES 12 MONTHS OR GREATER				TOTAL					UNREALIZED LOSSES LESS THAN 12 MONTHS				UNREALIZED LOSSES 12 MONTHS OR GREATER				TOTAL
July 30, 2022		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
July 29, 2023														July 29, 2023	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
U.S. government securities	U.S. government securities	$	1,110	$	(44)	$	120	$	(5)	$	1,230	$	(49)	U.S. government securities	$	2,394	$	(26)	$	931	$	(36)	$	3,325	$	(62)
U.S. government agency securities	U.S. government agency securities	114		(2)		24		(2)		138		(4)		U.S. government agency securities	343		(2)		72		(3)		415		(5)
Non-U.S. government and agency securities	Non-U.S. government and agency securities	264		—		—		—		264		—		Non-U.S. government and agency securities	363		(1)		—		—		363		(1)
Corporate debt securities	Corporate debt securities	6,920		(240)		422		(37)		7,342		(277)		Corporate debt securities	1,736		(22)		4,315		(275)		6,051		(297)
U.S. agency mortgage-backed securities	U.S. agency mortgage-backed securities	1,305		(96)		615		(62)		1,920		(158)		U.S. agency mortgage-backed securities	658		(13)		1,438		(217)		2,096		(230)
Commercial paper														Commercial paper	97		—		—		—		97		—
Certificates of deposit														Certificates of deposit	2		—		—		—		2		—
Total	Total	$	9,713	$	(382)	$	1,181	$	(106)	$	10,894	$	(488)	Total	$	5,593	$	(64)	$	6,756	$	(531)	$	12,349	$	(595)

The following table summarizes the maturities of our available-for-sale debt investments as of ~~April 29,~~October 28, 2023 (in millions):


		Amortized Cost		Fair Value			Amortized Cost		Fair Value
Within 1 year	Within 1 year	$	5,821	$	5,762	Within 1 year	$	4,201	$	4,152
After 1 year through 5 years	After 1 year through 5 years	7,340		7,067		After 1 year through 5 years	7,627		7,236
After 5 years through 10 years	After 5 years through 10 years	54		53		After 5 years through 10 years	9		9
After 10 years	After 10 years	2		2		After 10 years	2		2
Mortgage-backed securities with no single maturity	Mortgage-backed securities with no single maturity	2,221		2,014		Mortgage-backed securities with no single maturity	2,431		2,113
Total	Total	$	15,438	$	14,898	Total	$	14,270	$	13,512

Actual maturities may differ from the contractual maturities because borrowers may have the right to call or prepay certain obligations.

2421

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CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(b)Summary of Equity Investments

We held marketable equity securities of ~~$346~~$409 million and ~~$241~~$431 million as of ~~April 29,~~October 28, 2023 and July ~~30, 2022,~~29, 2023, respectively. We recognized a net unrealized loss of $2$42 million and ~~$11~~$20 million during the ~~third~~first quarter ~~and first nine months~~ of fiscal ~~2023, respectively,~~2024 and ~~a net unrealized loss of $19 million and $32 million during the corresponding periods of fiscal 2022,~~2023, respectively, on our marketable securities still held as of the reporting date. Our net adjustments to non-marketable equity securities measured using the measurement alternative still held was a net ~~gain of $7 million and a net~~ loss of $2$12 million for the ~~third~~first quarter ~~and first nine months~~ of fiscal ~~2023, respectively, and a net gain of $11 million and $28 million~~2023. These adjustments were not material for the ~~corresponding periods~~first quarter of fiscal ~~2022, respectively.~~2024. We held equity interests in certain private equity funds of $0.9 billion ~~and $1.1 billion~~ as of ~~April 29,~~each of October 28, 2023 and July ~~30, 2022, respectively,~~29, 2023, which are accounted for under the NAV practical expedient.

In the ordinary course of business, we have investments in privately held companies and provide financing to certain customers. These privately held companies and customers are evaluated for consolidation under the variable interest or voting interest entity models. We evaluate on an ongoing basis our investments in these privately held companies and our customer financings, and have determined that as of ~~April 29,~~October 28, 2023, there were no additional significant variable interest or voting interest entities required to be consolidated in our Consolidated Financial Statements.

The carrying value of our investments in privately held companies was $1.8 billion ~~and $1.9 billion~~ as of ~~April 29,~~each of October 28, 2023 and July ~~30, 2022, respectively.~~29, 2023. Of the total carrying value of our investments in privately held companies as of ~~April 29,~~October 28, 2023, ~~$1.0~~$0.9 billion of such investments are considered to be in variable interest entities which are unconsolidated. As of ~~April 29,~~October 28, 2023, we have total funding commitments of $0.3 billion related to privately held investments, some of which may be based on the achievement of certain agreed-upon milestones or are required to be funded on demand. The carrying value of these investments and the additional funding commitments, collectively, represent our maximum exposure related to privately held investments.

2522

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CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

11. Fair Value

(a)Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis were as follows (in millions):


		APRIL 29, 2023						JULY 30, 2022							OCTOBER 28, 2023						JULY 29, 2023
		FAIR VALUE MEASUREMENTS						FAIR VALUE MEASUREMENTS							FAIR VALUE MEASUREMENTS						FAIR VALUE MEASUREMENTS
		Level 1		Level 2		Total Balance		Level 1		Level 2		Total Balance			Level 1		Level 2		Total Balance		Level 1		Level 2		Total Balance
Assets:	Assets:													Assets:
Cash equivalents:	Cash equivalents:													Cash equivalents:
Money market funds	Money market funds	$	4,650	$	—	$	4,650	$	3,930	$	—	$	3,930	Money market funds	$	6,650	$	—	$	6,650	$	6,496	$	—	$	6,496
Commercial paper	Commercial paper	—		812		812		—		72		72		Commercial paper	—		738		738		—		1,090		1,090
Certificates of deposit														Certificates of deposit	—		12		12		—		47		47
Corporate debt securities	Corporate debt securities	—		20		20		—		1		1		Corporate debt securities	—		16		16		—		25		25
U.S. government securities		—		—		—		—		12		12
Certificates of deposit		—		—		—		—		32		32
Available-for-sale debt investments:	Available-for-sale debt investments:													Available-for-sale debt investments:
U.S. government securities	U.S. government securities	—		2,800		2,800		—		1,238		1,238		U.S. government securities	—		2,524		2,524		—		3,526		3,526
U.S. government agency securities	U.S. government agency securities	—		362		362		—		138		138		U.S. government agency securities	—		415		415		—		423		423
Non-U.S. government and agency securities	Non-U.S. government and agency securities	—		352		352		—		272		272		Non-U.S. government and agency securities	—		351		351		—		363		363
Corporate debt securities	Corporate debt securities	—		7,290		7,290		—		7,818		7,818		Corporate debt securities	—		6,500		6,500		—		6,914		6,914
U.S. agency mortgage-backed securities	U.S. agency mortgage-backed securities	—		2,014		2,014		—		1,976		1,976		U.S. agency mortgage-backed securities	—		2,113		2,113		—		2,205		2,205
Commercial paper	Commercial paper	—		1,595		1,595		—		255		255		Commercial paper	—		943		943		—		1,484		1,484
Certificates of deposit	Certificates of deposit	—		485		485		—		250		250		Certificates of deposit	—		666		666		—		677		677
Equity investments:	Equity investments:													Equity investments:
Marketable equity securities	Marketable equity securities	346		—		346		241		—		241		Marketable equity securities	409		—		409		431		—		431
Other current assets:														Other current assets:
Money market funds														Money market funds	375		—		375		188		—		188
Other assets:	Other assets:													Other assets:
Money market funds	Money market funds	1,500		—		1,500		1,500		—		1,500		Money market funds	1,125		—		1,125		1,313		—		1,313
Derivative assets	Derivative assets	—		25		25		—		78		78		Derivative assets	—		58		58		—		32		32
Total	Total	$	6,496	$	15,755	$	22,251	$	5,671	$	12,142	$	17,813	Total	$	8,559	$	14,336	$	22,895	$	8,428	$	16,786	$	25,214
Liabilities:	Liabilities:													Liabilities:
Derivative liabilities	Derivative liabilities	$	—	$	61	$	61	$	—	$	89	$	89	Derivative liabilities	$	—	$	92	$	92	$	—	$	75	$	75
Total	Total	$	—	$	61	$	61	$	—	$	89	$	89	Total	$	—	$	92	$	92	$	—	$	75	$	75

Level 1 marketable equity securities are determined by using quoted prices in active markets for identical assets. Level 2 available-for-sale debt investments are priced using quoted market prices for similar instruments or nonbinding market prices that are corroborated by observable market data. We use inputs such as actual trade data, benchmark yields, broker/dealer quotes, and other similar data, which are obtained from quoted market prices, independent pricing vendors, or other sources, to determine the ultimate fair value of these assets and liabilities. We use such pricing data as the primary input to make our assessments and determinations as to the ultimate valuation of our investment portfolio and have not made, during the periods presented, any material adjustments to such inputs. We are ultimately responsible for the financial statements and underlying estimates. Our derivative instruments are primarily classified as Level 2, as they are not actively traded and are valued using pricing models that use observable market inputs. We did not have any transfers between Level 1 and Level 2 fair value measurements during the periods presented.

2623

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CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(b)Assets Measured at Fair Value on a Nonrecurring Basis

Our non-marketable equity securities using the measurement alternative are adjusted to fair value on a non-recurring basis. Adjustments are made when observable transactions for identical or similar investments of the same issuer occur, or due to impairment. These securities are classified as Level 3 in the fair value hierarchy because we estimate the value based on valuation methods using the observable transaction price at the transaction date and other unobservable inputs such as volatility, rights, and obligations of the securities we hold.

The fair value of our short-term loan receivables approximates their carrying value due to their short duration. The aggregate carrying value of our long-term loan receivables as of ~~April 29,~~October 28, 2023 and July ~~30, 2022~~29, 2023 was ~~$2.9~~$2.7 billion and ~~$3.4~~$2.9 billion, respectively. The estimated fair value of our long-term loan receivables approximates their carrying value. We use unobservable inputs in determining discounted cash flows to estimate the fair value of our long-term loan receivables, and therefore they are categorized as Level 3.

As of ~~April 29,~~October 28, 2023, the estimated fair value of our short-term debt approximates its carrying value due to the short maturities. As of ~~April 29,~~October 28, 2023, the fair value of our senior notes was ~~$8.8~~$7.5 billion with a carrying amount of ~~$8.4~~$7.7 billion. This compares to a fair value of ~~$9.7~~$8.7 billion and a carrying amount of ~~$8.9~~$8.4 billion as of July ~~30, 2022.~~29, 2023. The fair value of the senior notes was determined based on observable market prices in a less active market and was categorized as Level ~~2 in the fair value hierarchy.~~2.

12.Borrowings

(a)Short-Term Debt

The following table summarizes our short-term debt (in millions, except percentages):

April 29, 2023 July 30, 2022
Amount Effective Rate Amount Effective Rate
Current portion of long-term debt $ 1,731 4.26 % $ 499 2.68 %
Commercial paper — — 600 2.05 %
Total $ 1,731 $ 1,099


	October 28, 2023				July 29, 2023
	Amount		Effective Rate		Amount		Effective Rate
Current portion of long-term debt	$	990	6.33	%	$	1,733	4.45	%

We have a short-term debt financing program of up to $10.0 billion through the issuance of commercial paper notes. We use the proceeds from the issuance of commercial paper notes for general corporate purposes.

The effective rates for the short- and long-term debt include the interest on the notes, the accretion of the discount, the issuance costs, and, if applicable, adjustments related to hedging.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(b)Long-Term Debt

The following table summarizes our long-term debt (in millions, except percentages):


			April 29, 2023			July 30, 2022					October 28, 2023			July 29, 2023
		Maturity Date	Amount		Effective Rate	Amount		Effective Rate		Maturity Date	Amount		Effective Rate	Amount		Effective Rate
Senior notes:	Senior notes:								Senior notes:
Fixed-rate notes:	Fixed-rate notes:								Fixed-rate notes:
2.60%		February 28, 2023	$	—	—	$	500	2.68%
2.20%	2.20%	September 20, 2023	750		2.27%	750		2.27%	2.20%	September 20, 2023	$	—	—	$	750	2.27%
3.625%	3.625%	March 4, 2024	1,000		5.75%	1,000		2.69%	3.625%	March 4, 2024	1,000		6.33%	1,000		6.08%
3.50%	3.50%	June 15, 2025	500		6.15%	500		3.20%	3.50%	June 15, 2025	500		6.63%	500		6.38%
2.95%	2.95%	February 28, 2026	750		3.01%	750		3.01%	2.95%	February 28, 2026	750		3.01%	750		3.01%
2.50%	2.50%	September 20, 2026	1,500		2.55%	1,500		2.55%	2.50%	September 20, 2026	1,500		2.55%	1,500		2.55%
5.90%	5.90%	February 15, 2039	2,000		6.11%	2,000		6.11%	5.90%	February 15, 2039	2,000		6.11%	2,000		6.11%
5.50%	5.50%	January 15, 2040	2,000		5.67%	2,000		5.67%	5.50%	January 15, 2040	2,000		5.67%	2,000		5.67%
Total	Total		8,500			9,000			Total		7,750			8,500
Unaccreted discount/issuance costs	Unaccreted discount/issuance costs		(70)			(75)			Unaccreted discount/issuance costs		(68)			(68)
Hedge accounting fair value adjustments	Hedge accounting fair value adjustments		(36)			(10)			Hedge accounting fair value adjustments		(32)			(41)
Total	Total		$	8,394		$	8,915		Total		$	7,650		$	8,391

Reported as:	Reported as:								Reported as:
Current portion of long-term debt	Current portion of long-term debt		$	1,731		$	499		Current portion of long-term debt		$	990		$	1,733
Long-term debt	Long-term debt		6,663			8,416			Long-term debt		6,660			6,658
Total	Total		$	8,394		$	8,915		Total		$	7,650		$	8,391

We have entered into interest rate swaps in prior periods with an aggregate notional amount of $1.5 billion designated as fair value hedges of certain of our fixed-rate senior notes. These swaps convert the fixed interest rates of the fixed-rate notes to floating interest rates based on ~~the London InterBank Offered~~Secured Overnight Financing Rate ~~(LIBOR)~~(SOFR). The gains and losses related to changes in the fair value of the interest rate swaps substantially offset changes in the fair value of the hedged portion of the underlying debt that are attributable to the changes in market interest rates. For additional information, see Note 13.

Interest is payable semiannually on each class of the senior fixed-rate notes. Each of the senior fixed-rate notes is redeemable by us at any time, subject to a make-whole premium. The senior notes rank at par with the commercial paper notes that may be issued in the future pursuant to our short-term debt financing program, as discussed above under “(a) Short-Term Debt.” As of ~~April 29,~~October 28, 2023, we were in compliance with all debt covenants.

As of ~~April 29,~~October 28, 2023, future principal payments for long-term debt, including the current portion, are summarized as follows (in millions):


Fiscal Year	Fiscal Year	Amount		Fiscal Year	Amount
2023 (remaining three months)		$	—
2024		1,750
2024 (remaining nine months)				2024 (remaining nine months)	$	1,000
2025	2025	500		2025	500
2026	2026	750		2026	750
2027	2027	1,500		2027	1,500
Thereafter	Thereafter	4,000		Thereafter	4,000
Total	Total	$	8,500	Total	$	7,750

(c)Credit Facility

On May 13, 2021, we entered into a 5-year credit agreement with certain institutional lenders that provides for a $3.0 billion unsecured revolving credit facility that is scheduled to expire on May 13, 2026. As of ~~April 29,~~October 28, 2023, we were in compliance with the required interest coverage ratio and the other covenants, and we had not borrowed any funds under the credit agreement. On April 18, 2023, we entered into an amendment to the credit agreement to replace the LIBOR index with Term SOFR.

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~~agreement. On April 18, 2023, we entered into an amendment to the credit agreement to replace the LIBOR index with Term Secured Overnight Financing Rate (SOFR).~~

Any advances under the 5-year credit agreement will accrue interest at rates that are equal to, based on certain conditions, either (a) with respect to loans in U.S. dollars, (i) Term SOFR (plus a 0.10% credit spread adjustment) or (ii) the Base Rate (to be defined as the highest of (x) the Bank of America prime rate, (y) the Federal Funds rate plus 0.50% and (z) Term SOFR plus 1.0%), (b) with respect to loans in Euros, EURIBOR, (c) with respect to loans in Yen, TIBOR and (d) with respect to loans in Pounds Sterling, SONIA, plus a margin that is based on our senior debt credit ratings as published by Standard & Poor’s Financial Services, LLC and Moody’s Investors Service, Inc., provided that in no event will the interest rate be less than 0.0%. We will pay a quarterly commitment fee during the term of the 5-year credit agreement which may vary depending on our senior debt credit ratings. In addition, the 5-year credit agreement incorporates certain sustainability-linked metrics. Specifically, our applicable interest rate and commitment fee are subject to upward or downward adjustments if we achieve, or fail to achieve, certain specified targets based on two key performance indicator metrics: (i) social impact and (ii) foam reduction. We may also, upon the agreement of either the then-existing lenders or additional lenders not currently parties to the agreement, increase the commitments under the credit facility by up to an additional $2.0 billion and, at our option, extend the maturity of the facility for an additional year up to two times. The credit agreement requires that we comply with certain covenants, including that we maintain an interest coverage ratio as defined in the agreement.

13.Derivative Instruments

(a)Summary of Derivative Instruments

We use derivative instruments primarily to manage exposures to foreign currency exchange rate, interest rate, and equity price risks. Our primary objective in holding derivatives is to reduce the volatility of earnings and cash flows associated with changes in foreign currency exchange rates, interest rates, and equity prices. Our derivatives expose us to credit risk to the extent that the counterparties may be unable to meet the terms of the agreement. We do, however, seek to mitigate such risks by limiting our counterparties to major financial institutions and requiring collateral in certain cases. In addition, the potential risk of loss with any one counterparty resulting from this type of credit risk is monitored. Management does not expect material losses as a result of defaults by counterparties.

The fair values of our derivative instruments and the line items on the Consolidated Balance Sheets to which they were recorded are summarized as follows (in millions):


		DERIVATIVE ASSETS					DERIVATIVE LIABILITIES						DERIVATIVE ASSETS					DERIVATIVE LIABILITIES
		Balance Sheet Line Item	April 29, 2023		July 30, 2022		Balance Sheet Line Item	April 29, 2023		July 30, 2022			Balance Sheet Line Item	October 28, 2023		July 29, 2023		Balance Sheet Line Item	October 28, 2023		July 29, 2023
Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:											Derivatives designated as hedging instruments:
Foreign currency derivatives	Foreign currency derivatives	Other current assets	$	19	$	55	Other current liabilities	$	—	$	—	Foreign currency derivatives	Other current assets	$	38	$	22	Other current liabilities	$	—	$	—
Foreign currency derivatives	Foreign currency derivatives	Other assets	2		9		Other long-term liabilities	1		—		Foreign currency derivatives	Other assets	19		9		Other long-term liabilities	—		—
Interest rate derivatives	Interest rate derivatives	Other current assets	—		—		Other current liabilities	18		—		Interest rate derivatives	Other current assets	—		—		Other current liabilities	10		17
Interest rate derivatives	Interest rate derivatives	Other assets	—		—		Other long-term liabilities	18		10		Interest rate derivatives	Other assets	—		—		Other long-term liabilities	22		24
Total	Total		21		64			37		10		Total		57		31			32		41
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:											Derivatives not designated as hedging instruments:
Foreign currency derivatives	Foreign currency derivatives	Other current assets	3		14		Other current liabilities	21		69		Foreign currency derivatives	Other current assets	1		1		Other current liabilities	41		25
Foreign currency derivatives	Foreign currency derivatives	Other assets	1		—		Other long-term liabilities	2		9		Foreign currency derivatives	Other assets	—		—		Other long-term liabilities	19		9
Equity derivatives		Other current assets	—		—		Other current liabilities	1		1
Total	Total		4		14			24		79		Total		1		1			60		34
Total	Total		$	25	$	78		$	61	$	89	Total		$	58	$	32		$	92	$	75

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The following amounts were recorded on the Consolidated Balance Sheets related to cumulative basis adjustments for our fair value hedges (in millions):


		CARRYING AMOUNT OF THE HEDGED ASSETS/(LIABILITIES)				CUMULATIVE AMOUNT OF FAIR VALUE HEDGING ADJUSTMENT INCLUDED IN THE CARRYING AMOUNT OF THE HEDGED ASSETS/LIABILITIES					CARRYING AMOUNT OF THE HEDGED ASSETS/(LIABILITIES)				CUMULATIVE AMOUNT OF FAIR VALUE HEDGING ADJUSTMENT INCLUDED IN THE CARRYING AMOUNT OF THE HEDGED ASSETS/LIABILITIES
Balance Sheet Line Item of Hedged Item	Balance Sheet Line Item of Hedged Item	April 29, 2023		July 30, 2022		April 29, 2023		July 30, 2022		Balance Sheet Line Item of Hedged Item	October 28, 2023		July 29, 2023		October 28, 2023		July 29, 2023
Short-term debt	Short-term debt	$	(981)	$	—	$	18	$	—	Short-term debt	$	(990)	$	(983)	$	10	$	17
Long-term debt	Long-term debt	$	(482)	$	(1,487)	$	18	$	10	Long-term debt	$	(478)	$	(476)	$	22	$	24

The effect of derivative instruments designated as fair value hedges, recognized in interest and other income (loss), net is summarized as follows (in millions):


		Three Months Ended				Nine Months Ended					GAINS (LOSSES) FOR THE THREE MONTHS ENDED
		April 29, 2023		April 30, 2022		April 29, 2023		April 30, 2022			October 28, 2023		October 29, 2022
Interest rate derivatives:	Interest rate derivatives:									Interest rate derivatives:
Hedged items	Hedged items	$	(6)	$	54	$	26	$	112	Hedged items	$	(9)	$	39
Derivatives designated as hedging instruments	Derivatives designated as hedging instruments	6		(55)		(26)		(114)		Derivatives designated as hedging instruments	9		(39)
Total	Total	$	—	$	(1)	$	—	$	(2)	Total	$	—	$	—

The effect on the Consolidated Statements of Operations of derivative instruments not designated as hedges is summarized as follows (in millions):


			GAINS (LOSSES) FOR THE THREE MONTHS ENDED				GAINS (LOSSES) FOR THE NINE MONTHS ENDED						GAINS (LOSSES) FOR THE THREE MONTHS ENDED
Derivatives Not Designated as Hedging Instruments	Derivatives Not Designated as Hedging Instruments	Line Item in Statements of Operations	April 29, 2023		April 30, 2022		April 29, 2023		April 30, 2022		Derivatives Not Designated as Hedging Instruments	Line Item in Statements of Operations	October 28, 2023		October 29, 2022
Foreign currency derivatives	Foreign currency derivatives	Other income (loss), net	$	(46)	$	(99)	$	22	$	(155)	Foreign currency derivatives	Other income (loss), net	$	(130)	$	(72)
Total return swaps—deferred compensation	Total return swaps—deferred compensation	Operating expenses and other	(12)		(38)		7		(58)		Total return swaps—deferred compensation	Operating expenses and other	(77)		(25)
Equity derivatives	Equity derivatives	Other income (loss), net	4		5		8		6		Equity derivatives	Other income (loss), net	2		(1)
Total	Total		$	(54)	$	(132)	$	37	$	(207)	Total		$	(205)	$	(98)

The notional amounts of our outstanding derivatives are summarized as follows (in millions):


		April 29, 2023		July 30, 2022			October 28, 2023		July 29, 2023
Foreign currency derivatives	Foreign currency derivatives	$	4,880	$	4,521	Foreign currency derivatives	$	5,672	$	5,419
Interest rate derivatives	Interest rate derivatives	1,500		1,500		Interest rate derivatives	1,500		1,500
Total return swaps—deferred compensation	Total return swaps—deferred compensation	733		651		Total return swaps—deferred compensation	783		792
Total	Total	$	7,113	$	6,672	Total	$	7,955	$	7,711

(b)Offsetting of Derivative Instruments

We present our derivative instruments at gross fair values in the Consolidated Balance Sheets. However, our master netting and other similar arrangements with the respective counterparties allow for net settlement under certain conditions, which are designed to reduce credit risk by permitting net settlement with the same counterparty.

To further limit credit risk, we also enter into collateral security arrangements related to certain derivative instruments whereby cash is posted as collateral between the counterparties based on the fair market value of the derivative instrument. Under these collateral security arrangements, the net cash collateral provided for was ~~$34~~$9 million and ~~$14~~$40 million as of ~~April 29,~~October 28, 2023 and July ~~30, 2022,~~29, 2023, respectively.

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(c)Foreign Currency Exchange Risk

We conduct business globally in numerous currencies. Therefore, we are exposed to adverse movements in foreign currency exchange rates. To limit the exposure related to foreign currency changes, we enter into foreign currency contracts. We do not enter into such contracts for speculative purposes.

We hedge forecasted foreign currency transactions related to certain revenues, operating expenses and service cost of sales with currency options and forward contracts. These currency options and forward contracts, designated as cash flow hedges, generally have maturities of less than 24 months. The derivative instrument’s gain or loss is initially reported as a component of accumulated other comprehensive income (AOCI) and subsequently reclassified into earnings when the hedged exposure affects earnings.

We enter into foreign exchange forward and option contracts to reduce the short-term effects of foreign currency fluctuations on assets and liabilities such as foreign currency receivables, long-term customer financings and payables. These derivatives are not designated as hedging instruments. Gains and losses on the contracts are included in other income (loss), net, and substantially offset foreign exchange gains and losses from the remeasurement of intercompany balances, other current assets, or liabilities denominated in currencies other than the functional currency of the reporting entity.

We hedge certain net investments in our foreign operations with forward contracts to reduce the effects of foreign currency fluctuations on our net investment in those foreign subsidiaries. These derivative instruments generally have maturities of up to six months.

(d)Interest Rate Risk

We hold interest rate swaps designated as fair value hedges related to fixed-rate senior notes that are due in fiscal 2024 through 2025. Under these interest rate swaps, we receive fixed-rate interest payments and make interest payments based on ~~LIBOR~~SOFR plus a fixed number of basis points. The effect of such swaps is to convert the fixed interest rates of the senior fixed-rate notes to floating interest rates based on ~~LIBOR.~~SOFR. The gains and losses related to changes in the fair value of the interest rate swaps are included in interest expense and substantially offset changes in the fair value of the hedged portion of the underlying debt that are attributable to the changes in market interest rates.

(e)Equity Price Risk

We hold marketable equity securities in our portfolio that are subject to price risk. To diversify our overall portfolio, we also hold equity derivatives that are not designated as accounting hedges. The change in the fair value of each of these investment types are included in other income (loss), net.

We are also exposed to variability in compensation charges related to certain deferred compensation obligations to ~~employees.~~employees and directors. Although not designated as accounting hedges, we utilize derivatives such as total return swaps to economically hedge this exposure and offset the related compensation expense.

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14.Commitments and Contingencies

(a)Purchase Commitments with Contract Manufacturers and Suppliers

We purchase components from a variety of suppliers and use several contract manufacturers to provide manufacturing services for our products. During the normal course of business, in order to manage manufacturing lead times and help ensure adequate component supply, we enter into agreements with contract manufacturers and suppliers that allow them to procure inventory based upon criteria as defined by us or establish the parameters defining our requirements. A significant portion of our reported purchase commitments arising from these agreements consists of firm, noncancelable, and unconditional commitments. Certain of these inventory purchase commitments with contract manufacturers and suppliers relate to arrangements to secure supply and pricing for certain product components for multi-year periods. In certain instances, these agreements allow us the option to cancel, reschedule, and adjust our requirements based on our business needs prior to firm orders being placed.

The following table summarizes our inventory purchase commitments with contract manufacturers and suppliers by period (in millions):


		April 29, 2023		July 30, 2022			October 28, 2023		July 29, 2023
Less than 1 year	Less than 1 year	$	7,073	$	9,954	Less than 1 year	$	4,731	$	5,270
1 to 3 years	1 to 3 years	1,618		2,240		1 to 3 years	1,646		1,783
3 to 5 years	3 to 5 years	368		770		3 to 5 years	127		200
Total	Total	$	9,059	$	12,964	Total	$	6,504	$	7,253

We record a liability for firm, noncancelable, and unconditional purchase commitments for quantities in excess of our future demand forecasts consistent with the valuation of our excess and obsolete inventory. As of ~~April 29,~~October 28, 2023 and July ~~30, 2022,~~29, 2023, the liability for these purchase commitments was ~~$525~~$510 million and ~~$313~~$529 million, respectively, and was included in other current liabilities.

(b)Other Commitments

In connection with our acquisitions, we have agreed to pay certain additional amounts contingent upon the achievement of certain agreed-upon technology, development, product, or other milestones or upon the continued employment with Cisco of certain employees of the acquired entities.

The following table summarizes the compensation expense related to acquisitions (in millions):

Three Months Ended Nine Months Ended
April 29, 2023 April 30, 2022 April 29, 2023 April 30, 2022
Compensation expense related to acquisitions $ 53 $ 56 $ 176 $ 220


	Three Months Ended
	October 28, 2023		October 29, 2022
Compensation expense related to acquisitions	$	49	$	74

As of ~~April 29,~~October 28, 2023, we estimated that future cash compensation expense of up to ~~$310~~$437 million may be required to be recognized pursuant to the applicable business combination agreements.

We also have certain funding commitments, primarily related to our privately held investments, some of which are based on the achievement of certain agreed-upon milestones or are required to be funded on demand. The funding commitments were $0.3 billion ~~and $0.4 billion~~ as of ~~April 29,~~each of October 28, 2023 and July ~~30, 2022, respectively.~~29, 2023.

(c)Product Warranties

The following table summarizes the activity related to the product warranty liability (in millions):


		Nine Months Ended					Three Months Ended
		April 29, 2023		April 30, 2022			October 28, 2023		October 29, 2022
Balance at beginning of period	Balance at beginning of period	$	333	$	336	Balance at beginning of period	$	329	$	333
Provisions for warranties issued	Provisions for warranties issued	285		320		Provisions for warranties issued	98		97
Adjustments for pre-existing warranties	Adjustments for pre-existing warranties	15		1		Adjustments for pre-existing warranties	3		1
Settlements	Settlements	(321)		(322)		Settlements	(100)		(108)
Balance at end of period	Balance at end of period	$	312	$	335	Balance at end of period	$	330	$	323

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We accrue for warranty costs as part of our cost of sales based on associated material product costs, labor costs for technical support staff, and associated overhead. Our products are generally covered by a warranty for periods ranging from 90 days to five years, and for some products we provide a limited lifetime warranty.

(d)Financing and Other Guarantees

In the ordinary course of business, we provide financing guarantees for various third-party financing arrangements extended to channel partners customers. Payments under these financing guarantee arrangements were not material for the periods presented.

Channel Partner Financing Guarantees We facilitate arrangements for third-party financing extended to channel partners, consisting of revolving short-term financing, with payment terms generally ranging from 60 to 90 days. These financing arrangements facilitate the working capital requirements of the channel partners, and, in some cases, we guarantee a portion of these arrangements. The volume of channel partner financing was ~~$8.3~~$8.2 billion and ~~$6.9 billion for the third quarter of fiscal 2023 and 2022, respectively, and $23.4 billion and $20.3~~$7.6 billion for the first ~~nine months~~quarter of fiscal ~~2023~~2024 and ~~2022,~~2023, respectively. The balance of the channel partner financing subject to guarantees was ~~$1.8~~$1.5 billion and ~~$1.4~~$1.7 billion as of ~~April 29,~~October 28, 2023 and July ~~30, 2022,~~29, 2023, respectively.

Financing Guarantee Summary The aggregate amounts of channel partner financing guarantees outstanding at ~~April 29,~~October 28, 2023 and July ~~30, 2022,~~29, 2023, representing the total maximum potential future payments under financing arrangements with third parties along with the related deferred revenue, are summarized in the following table (in millions):


		April 29, 2023		July 30, 2022			October 28, 2023		July 29, 2023
Maximum potential future payments	Maximum potential future payments	$	177	$	188	Maximum potential future payments	$	142	$	159
Deferred revenue	Deferred revenue	(40)		(9)		Deferred revenue	(29)		(34)
Total	Total	$	137	$	179	Total	$	113	$	125

(e)Indemnifications

In the normal course of business, we have indemnification obligations to other parties, including customers, lessors, and parties to other transactions with us, with respect to certain matters. We have agreed to indemnify against losses arising from a breach of representations or covenants or out of intellectual property infringement or other claims made against certain parties. These agreements may limit the time or circumstances within which an indemnification claim can be made and the amount of the claim.

It is not possible to determine the maximum potential amount for claims made under the indemnification obligations due to uncertainties in the litigation process, coordination with and contributions by other parties and the defendants in these types of cases, and the unique facts and circumstances involved in each particular case and agreement. Historically, indemnity payments made by us have not had a material effect on our Consolidated Financial Statements.

In addition, we have entered into indemnification agreements with our officers and directors, and our Amended and Restated Bylaws contain similar indemnification obligations to our agents.

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(f)Legal Proceedings

Brazil Brazilian authorities have investigated our Brazilian subsidiary and certain of its former employees, as well as a Brazilian importer of our products, and its affiliates and employees, relating to alleged evasion of import taxes and alleged improper transactions involving the subsidiary and the importer. Brazilian tax authorities have assessed claims against our Brazilian subsidiary based on a theory of joint liability with the Brazilian importer for import taxes, interest, and penalties. In addition to claims asserted by the Brazilian federal tax authorities in prior fiscal years, tax authorities from the Brazilian state of Sao Paulo have asserted similar claims on the same legal basis in prior fiscal years. The asserted claims by Brazilian federal tax authorities are for calendar years 2003 through 2007, and the asserted claims by the tax authorities from the state of Sao Paulo are for calendar years 2005 through 2007. The total asserted claims by Brazilian state and federal tax authorities aggregate to $162 million for the alleged evasion of import and other taxes, ~~$908~~$943 million for interest, and ~~$401~~$402 million for various penalties, all determined using an exchange rate as of ~~April 29,~~October 28, 2023.

We have completed a thorough review of the matters and believe the asserted claims against our Brazilian subsidiary are without merit, and we are defending the claims vigorously. While we believe there is no legal basis for the alleged liability, due to the complexities and uncertainty surrounding the judicial process in Brazil and the nature of the claims asserting joint liability with the importer, we are unable to determine the likelihood of an unfavorable outcome against our Brazilian subsidiary and are unable to reasonably estimate a range of loss, if any. We do not expect a final judicial determination for several years.

Centripetal On February 13, 2018, Centripetal Networks, Inc. (“Centripetal”) asserted patent infringement claims against us in the U.S. District Court for the Eastern District of Virginia, alleging that several of our products and services infringe eleven Centripetal U.S. patents. The district court case went to trial on five asserted patents. Subsequently, on October 5, 2020, the district court issued a judgment finding validity and willful infringement of four of the asserted patents and non-infringement of the fifth patent and awarded $1.9 billion in damages and $14 million in pre-judgment interest, declined to issue an injunction but, instead, awarded Centripetal a royalty against future revenue for an initial three-year term at a 10% rate, with a minimum and maximum annual royalty of $168 million and $300 million, respectively, and for a second three-year term at a 5% rate, with a minimum and maximum annual royalty of $84 million and $150 million, respectively. We appealed and, on June 23, 2022, the U.S. Court of Appeals for the Federal Circuit (“Federal Circuit”) vacated the district court’s final judgment, remanded the case back to the district court to be assigned to a new judge and ordered the district court to conduct additional ~~proceedings and the~~proceedings. The district court ~~set~~held a hearing ~~to commence~~on these additional proceedings over three days beginning on June 22, ~~2023. On~~2023, and a decision is pending. Prior to the hearing, on May 24, 2023, the Patent Trial and Appeal Board cancelled all claims of one of the Centripetal patents that iswas the subject of the ~~hearing set for June 22, 2023.~~hearing. On August 9, 2022, Centripetal filed a petition for writ of certiorari in the U.S. Supreme Court challenging the Federal Circuit’s decision. The Supreme Court denied Centripetal’s petition on December 5, 2022.

Between April 2020 and February 2022, Centripetal filed complaints in the District Court of Dusseldorf in Germany (“German Court”), asserting a total of five patents and one utility model. Centripetal sought damages and injunctive relief in all cases. On December 10, 2021, the German Court rejected Centripetal’s complaints on two patents, and Centripetal has appealed. A hearing for a Cisco nullity action in the Federal Patent Court in Germany on one of those two patents occurred on August 1, 2022, and we are waiting for the Court’s opinion. On December 21, 2021, the German Court stayed its decision on infringement of the third patent pending a decision by the Federal Patent Court in a related nullity proceeding. On May 17, 2022, Centripetal withdrew its complaint for infringement of the German utility model. The German Court conducted a hearing on the remaining two Centripetal complaints on November 22, 2022. The German Court found no infringement on one patent and stayed the decision in the final case pending a decision by the European Patent Office in a related opposition proceeding.

On July 10, 2023, Centripetal filed a complaint in the Paris Judiciary Court asserting the French counterpart of a European Patent. Centripetal seeks damages and injunctive relief in the case. Centripetal previously asserted the German counterpart of the same European Patent in Germany and the German Court rejected Centripetal’s complaint finding no infringement.

Due to uncertainty surrounding patent litigation processes in the U.S. and Europe, we are unable to reasonably estimate the ultimate outcome of the litigations at this time. If we do not prevail in ~~either litigation,~~these litigations, we believe that any damages ultimately assessed would not have a material effect on our Consolidated Financial Statements.

Ramot On June 12, 2019, Ramot at Tel Aviv University Ltd. (“Ramot”) asserted patent infringement claims against us in the U.S. District Court for the Eastern District of Texas (“E.D. Tex.”), seeking damages, including enhanced damages, and a royalty on future sales. Ramot alleges that certain Cisco optical transceiver modules and line cards infringe three patents. ~~The~~We challenged the validity of all three patents in the U.S. Patent and Trademark Office (“PTO”) ~~preliminarily found all asserted claims unpatentable in~~by way of ex parte reexamination proceedings and the pending District Court case has been stayed. On July 6, 2023, the PTO issued a reexamination certificate for one of the three patents. On August 29, 2023, Cisco filed a second ex parte reexamination request against that same patent.

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(Unaudited)

On October 30, 2023, the PTO issued a reexamination certificate for a second of the three patents. The third asserted patent remains the subject of a pending reexamination proceeding.

On February 26, 2021, Ramot asserted patent infringement claims against Acacia Communications, Inc. (“Acacia”) in the District of Delaware (“D. Del.”), seeking damages, including enhanced damages, and a royalty on future sales. Ramot alleges that certain Acacia optical transceiver modules and integrated circuits infringe two of the three patents that Ramot asserted in the E.D. Tex. case and this case is also stayed pending the reexamination ~~proceedings.~~proceedings referenced above.

On September 28, 2021 and May 24, 2022, Cisco and Acacia filed two declaratory judgment actions of noninfringement against Ramot in D. Del on other Ramot patents in the same family as those involved in the pending cases above. Ramot is asserting

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~~(Unaudited)~~

counterclaims for infringement of the same patents and seeks damages, including enhanced damages, and a royalty on future sales. While we believe that we have strong non-infringement and invalidity arguments in these litigations, and that Ramot’s damages theories in such cases are not supported by prevailing law, we are unable to reasonably estimate the ultimate outcome of these litigations at this time due to uncertainties in the litigation processes. If we do not prevail in court in these litigations, we believe any damages ultimately assessed would not have a material effect on our Consolidated Financial Statements.

Viasat On November 6, 2019, Viasat, Inc. (“Viasat”) filed suit against Acacia in the California Superior Court for San Diego County (“SDSC”), alleging contract and trade secret claims for certain Acacia products sold from January 1, 2019 forward (“Viasat 2019”). In May 2023, a judgment was entered against Cisco in Viasat 2019 for an amount that did not have a material effect on our Consolidated Financial Statements. Acacia filed an appeal with the California Court of Appeal.

On June 9, 2020, Viasat filed ~~a third~~another suit in SDSC alleging contract and trade ~~secrets~~secret claims for sales of additional Acacia products (“Viasat 2020”). In October 2022, an amended complaint was filed in Viasat 2020 asserting the same claims but alleging additional information. ~~We are unable to reasonably estimate~~The parties have since resolved both the ~~ultimate outcome of~~Viasat 2019 appeal and Viasat 2020, ~~at this time due~~with dismissals entered in each matter in October 2023. The amounts paid by us to ~~uncertainties in the litigation processes. If we do not prevail, we believe that any relief ultimately assessed in Viasat 2020 will~~resolve these matters did not have a material effect on our Consolidated Financial Statements.

Egenera On August 8, 2016, Egenera, Inc. (“Egenera”) asserted infringement claims against us in the U.S. District Court for the District of Massachusetts, alleging that Cisco’s Unified Computing System Manager infringes three patents. Egenera sought damages, including enhanced damages, and an injunction. Two of the asserted patents were dismissed, leaving Egenera’s infringement claim based on one asserted patent. On March 25, 2022, the PTO preliminarily found all of the asserted claims of the remaining patent unpatentable in ex parte reexamination proceedings. On August 15, 2022, after a jury trial for the remaining patent, the jury returned a verdict in favor of Cisco. The District Court denied Egenera’s post-trial motions, and Egenera filed an appeal to the Federal Circuit on January 13, 2023 and those proceedings are ongoing.

In addition to the above matters, we are subject to other legal proceedings, claims, and litigation arising in the ordinary course of business, including intellectual property litigation. While the outcome of these matters is currently not determinable, we do not believe that the ultimate costs to resolve these matters will have a material effect on our Consolidated Financial Statements. For additional information regarding intellectual property litigation, see “Part II, Item 1A. Risk Factors—We may be found to infringe on intellectual property rights of others” herein.

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CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

15.Stockholders’ Equity

(a)Stock Repurchase Program

In September 2001, our Board of Directors authorized a stock repurchase program. As of ~~April 29,~~October 28, 2023, the remaining authorized amount for stock repurchases under this program was approximately ~~$12.2~~$9.7 billion with no termination date. A summary of the stock repurchase activity for fiscal ~~2023~~2024 and ~~2022~~2023 under the stock repurchase program, reported based on the trade date, is summarized as follows (in millions, except per-share amounts):


Quarter Ended	Quarter Ended	Shares	Weighted-Average Price per Share		Amount		Quarter Ended	Shares	Weighted-Average Price per Share		Amount
Fiscal 2024							Fiscal 2024
October 28, 2023							October 28, 2023	23	$	54.53	$	1,252

Fiscal 2023	Fiscal 2023						Fiscal 2023
July 29, 2023							July 29, 2023	25	$	50.49	$	1,254
April 29, 2023	April 29, 2023	25	$	49.45	$	1,259	April 29, 2023	25	$	49.45	$	1,259
January 28, 2023	January 28, 2023	26	$	47.72	$	1,256	January 28, 2023	26	$	47.72	$	1,256
October 29, 2022	October 29, 2022	12	$	43.76	$	502	October 29, 2022	12	$	43.76	$	502

Fiscal 2022
July 30, 2022		54	$	44.02	$	2,402
April 30, 2022		5	$	54.20	$	252
January 29, 2022		82	$	58.36	$	4,824
October 30, 2021		5	$	56.49	$	256

There were stock repurchases of ~~$58 million and $70~~$48 million that were pending settlement as of ~~April~~July 29, ~~2023 and July 30, 2022, respectively.~~

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~~CISCO SYSTEMS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

2023.

The purchase price for the shares of our stock repurchased is reflected as a reduction to stockholders’ equity. We are required to allocate the purchase price of the repurchased shares as (i) a reduction to retained earnings or an increase to accumulated deficit and (ii) a reduction of common stock and additional paid-in capital.

(b) Dividends Declared

On ~~May 17,~~November 15, 2023, our Board of Directors declared a quarterly dividend of $0.39 per common share to be paid on ~~July 26, 2023,~~January 24, 2024, to all stockholders of record as of the close of business on ~~July 6, 2023.~~January 4, 2024. Future dividends will be subject to the approval of our Board of Directors.

Under the terms of our Amended and Restated Certificate of Incorporation, the Board of Directors is authorized to issue preferred stock in one or more series and, in connection with the creation of such series, to fix by resolution the designation, powers (including voting powers (if any)), preferences and relative, participating, optional or other special rights, if any, of such series, and any qualifications, limitations or restrictions thereof, of the shares of such series. As of ~~April 29,~~October 28, 2023, we had not issued any shares of preferred stock.

16.Employee Benefit Plans

(a)Employee Stock Incentive Plans

We have one stock incentive plan: the 2005 Stock Incentive Plan (the “2005 Plan”). In addition, we have, in connection with our acquisitions of various companies, assumed the share-based awards granted under stock incentive plans of the acquired companies or issued share-based awards in replacement thereof. Share-based awards are designed to reward employees for their long-term contributions to us and provide incentives for them to remain with us. The number and frequency of share-based awards are based on competitive practices, our operating results, government regulations, and other factors. Our primary stock incentive plan is summarized as follows:

The 2005 Plan provides for the granting of stock options, stock grants, stock units and stock appreciation rights (SARs), the vesting of which may be time-based or upon satisfaction of performance goals, or both, and/or other conditions. Employees (including employee directors and executive officers) and consultants of Cisco and its subsidiaries and affiliates and non-employee directors of Cisco are eligible to participate in the 2005 Plan. The 2005 Plan may be terminated by our Board of Directors at any time and for any reason, and is currently set to terminate at the 2030 Annual Meeting unless re-adopted or extended by our stockholders prior to or on such date.

Under the 2005 Plan’s share reserve feature, a distinction is made between the number of shares in the reserve attributable to (i) stock options and SARs and (ii) “full value” awards (i.e., stock grants and stock units). Shares issued as stock grants, pursuant

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CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

to stock units or pursuant to the settlement of dividend equivalents are counted against shares available for issuance under the 2005 Plan on a 1.5-to-1 ratio. For each share awarded as restricted stock or a restricted stock unit award under the 2005 Plan, 1.5 shares was deducted from the available share-based award balance. If awards issued under the 2005 Plan are forfeited or terminated for any reason before being exercised or settled, then the shares underlying such awards, plus the number of additional shares, if any, that counted against shares available for issuance under the 2005 Plan at the time of grant as a result of the application of the share ratio described above, will become available again for issuance under the 2005 Plan. As of ~~April 29,~~October 28, 2023, ~~139~~114 million shares were authorized for future grant under the 2005 Plan.

(b)Employee Stock Purchase Plan

We have an Employee Stock Purchase Plan under which eligible employees are offered shares through a 24-month offering period, which consists of four consecutive 6-month purchase periods. Employees may purchase a limited amount of shares of our stock at a discount of up to 15% of the lesser of the fair market value at the beginning of the offering period or the end of each 6-month purchase period. The Employee Stock Purchase Plan is scheduled to terminate on the earlier of (i) January 3, 2030 and (ii) the date on which all shares available for issuance under the Employee Stock Purchase Plan are sold pursuant to exercised purchase rights. No shares were issued under the Employee Stock Purchase Plan during each of the ~~third~~first quarters of fiscal ~~2023~~2024 and ~~2022. We issued 9 million and 8 million shares during the first nine months of fiscal 2023 and 2022, respectively.~~2023. As of ~~April 29,~~October 28, 2023, 9888 million shares were available for issuance under the Employee Stock Purchase Plan.

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~~CISCO SYSTEMS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

(c)Summary of Share-Based Compensation Expense

Share-based compensation expense consists primarily of expenses for RSUs, stock purchase rights, and stock options, granted to employees or assumed from acquisitions. The following table summarizes share-based compensation expense (in millions):


		Three Months Ended				Nine Months Ended					Three Months Ended
		April 29, 2023		April 30, 2022		April 29, 2023		April 30, 2022			October 28, 2023		October 29, 2022
Cost of sales—product	Cost of sales—product	$	40	$	30	$	111	$	84	Cost of sales—product	$	42	$	31
Cost of sales—service	Cost of sales—service	66		53		182		149		Cost of sales—service	61		50
Share-based compensation expense in cost of sales	Share-based compensation expense in cost of sales	106		83		293		233		Share-based compensation expense in cost of sales	103		81
Research and development	Research and development	272		205		737		591		Research and development	274		204
Sales and marketing	Sales and marketing	175		139		494		421		Sales and marketing	186		153
General and administrative	General and administrative	71		50		200		161		General and administrative	90		58
Restructuring and other charges	Restructuring and other charges	(1)		—		(4)		1		Restructuring and other charges	8		—
Share-based compensation expense in operating expenses	Share-based compensation expense in operating expenses	517		394		1,427		1,174		Share-based compensation expense in operating expenses	558		415
Total share-based compensation expense	Total share-based compensation expense	$	623	$	477	$	1,720	$	1,407	Total share-based compensation expense	$	661	$	496
Income tax benefit for share-based compensation	Income tax benefit for share-based compensation	$	111	$	122	$	319	$	378	Income tax benefit for share-based compensation	$	143	$	99

As of ~~April 29,~~October 28, 2023, the total compensation cost related to unvested share-based awards not yet recognized was ~~$4.6~~$4.5 billion which is expected to be recognized over approximately ~~2.3~~2.1 years on a weighted-average basis.

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CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(d)Restricted Stock Unit Awards

A summary of the restricted stock and stock unit activity, which includes time-based and performance-based or market-based RSUs, is as follows (in millions, except per-share amounts):


		Restricted Stock/ Stock Units	Weighted-Average Grant Date Fair Value per Share		Aggregate Fair Value			Restricted Stock/ Stock Units	Weighted-Average Grant Date Fair Value per Share		Aggregate Fair Value
Unvested balance at July 31, 2021		94	$	42.93
Granted and assumed		52	50.06
Vested		(37)	42.27		$	1,979
Canceled/forfeited/other		(12)	45.63
Unvested balance at July 30, 2022	Unvested balance at July 30, 2022	97	$	46.67			Unvested balance at July 30, 2022	97	$	46.67
Granted and assumed	Granted and assumed	58	40.87				Granted and assumed	72	42.08
Vested	Vested	(29)	47.24		$	1,303	Vested	(39)	46.69		$	1,746
Canceled/forfeited/other	Canceled/forfeited/other	(8)	45.34				Canceled/forfeited/other	(8)	45.17
Unvested balance at April 29, 2023		118	$	43.76
Unvested balance at July 29, 2023							Unvested balance at July 29, 2023	122	$	44.04
Granted and assumed							Granted and assumed	11	51.70
Vested							Vested	(9)	44.86		$	460
Canceled/forfeited/other							Canceled/forfeited/other	(1)	41.31
Unvested balance at October 28, 2023							Unvested balance at October 28, 2023	123	$	44.69

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~~CISCO SYSTEMS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

17.Comprehensive Income (Loss)

The components of AOCI, net of tax, and the other comprehensive income (loss), for the first ~~nine months~~quarter of fiscal ~~2023~~2024 and ~~2022~~2023 are summarized as follows (in millions):


		Net Unrealized Gains (Losses) on Available-for-Sale Investments		Net Unrealized Gains (Losses) Cash Flow Hedging Instruments		Cumulative Translation Adjustment and Actuarial Gains (Losses)		Accumulated Other Comprehensive Income (Loss)			Net Unrealized Gains (Losses) on Available-for-Sale Investments		Net Unrealized Gains (Losses) Cash Flow Hedging Instruments		Cumulative Translation Adjustment and Actuarial Gains (Losses)		Accumulated Other Comprehensive Income (Loss)
Balance at July 30, 2022		$	(379)	$	44	$	(1,287)	$	(1,622)
Balance at July 29, 2023										Balance at July 29, 2023	$	(440)	$	18	$	(1,153)	$	(1,575)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	(39)		5		42		8		Other comprehensive income (loss) before reclassifications	(170)		38		(356)		(488)
(Gains) losses reclassified out of AOCI	(Gains) losses reclassified out of AOCI	15		(50)		—		(35)		(Gains) losses reclassified out of AOCI	20		(12)		(1)		7
Tax benefit (expense)	Tax benefit (expense)	8		11		24		43		Tax benefit (expense)	36		(6)		1		31
Balance at April 29, 2023		$	(395)	$	10	$	(1,221)	$	(1,606)
Balance at October 28, 2023										Balance at October 28, 2023	$	(554)	$	38	$	(1,509)	$	(2,025)


		Net Unrealized Gains (Losses) on Available-for-Sale Investments		Net Unrealized Gains (Losses) Cash Flow Hedging Instruments		Cumulative Translation Adjustment and Actuarial Gains (Losses)		Accumulated Other Comprehensive Income (Loss)			Net Unrealized Gains (Losses) on Available-for-Sale Investments		Net Unrealized Gains (Losses) Cash Flow Hedging Instruments		Cumulative Translation Adjustment and Actuarial Gains (Losses)		Accumulated Other Comprehensive Income (Loss)
Balance at July 31, 2021		$	182	$	(1)	$	(598)	$	(417)
Balance at July 30, 2022										Balance at July 30, 2022	$	(379)	$	44	$	(1,287)	$	(1,622)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	(717)		63		(485)		(1,139)		Other comprehensive income (loss) before reclassifications	(329)		32		(282)		(579)
(Gains) losses reclassified out of AOCI	(Gains) losses reclassified out of AOCI	(18)		(15)		1		(32)		(Gains) losses reclassified out of AOCI	6		(19)		—		(13)
Tax benefit (expense)	Tax benefit (expense)	127		(11)		9		125		Tax benefit (expense)	77		(3)		22		96
Balance at April 30, 2022		$	(426)	$	36	$	(1,073)	$	(1,463)
Balance at October 29, 2022										Balance at October 29, 2022	$	(625)	$	54	$	(1,547)	$	(2,118)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

18.Income Taxes

The following table provides details of income taxes (in millions, except percentages):


		Three Months Ended						Nine Months Ended							Three Months Ended
		April 29, 2023			April 30, 2022			April 29, 2023			April 30, 2022				October 28, 2023			October 29, 2022
Income before provision for income taxes	Income before provision for income taxes	$	3,957		$	3,801		$	10,847		$	11,061		Income before provision for income taxes	$	4,442		$	3,475
Provision for income taxes	Provision for income taxes	$	745		$	757		$	2,192		$	2,064		Provision for income taxes	$	804		$	805
Effective tax rate	Effective tax rate	18.8		%	19.9		%	20.2		%	18.7		%	Effective tax rate	18.1		%	23.2		%

As of ~~April 29,~~October 28, 2023, we had ~~$3.4~~$1.9 billion of unrecognized tax benefits, of which ~~$2.4~~$1.5 billion, if recognized, would favorably impact the effective tax rate. We regularly engage in discussions and negotiations with tax authorities regarding tax matters in various jurisdictions. We believe it is reasonably possible that certain federal, foreign, and state tax matters may be concluded in the next 12 months. Specific positions that may be resolved include issues involving transfer pricing and various other matters.

19.Segment Information and Major Customers

(a)Revenue and Gross Margin by Segment

We conduct business globally and are primarily managed on a geographic basis consisting of three segments: the Americas, EMEA, and APJC. Our management makes financial decisions and allocates resources based on the information it receives from our internal management system. Sales are attributed to a segment based on the ordering location of the customer. We do not allocate research and development, sales and marketing, or general and administrative expenses to our segments in this internal management system because management does not include the information in our measurement of the performance of the operating segments. In addition, we do not allocate amortization and impairment of acquisition-related intangible assets, share-based compensation expense, significant litigation settlements and other contingencies, charges related to asset impairments and restructurings, and certain other charges to the gross margin for each segment because management does not include this information in our measurement of the performance of the operating segments.

Summarized financial information by segment for the ~~third~~first quarter ~~and first nine months~~ of fiscal ~~2023~~2024 and ~~2022,~~2023, based on our internal management system and as utilized by our Chief Operating Decision Maker (“CODM”), is as follows (in millions):


		Three Months Ended				Nine Months Ended					Three Months Ended
		April 29, 2023		April 30, 2022		April 29, 2023		April 30, 2022			October 28, 2023		October 29, 2022
Revenue:	Revenue:									Revenue:
Americas	Americas	$	8,634	$	7,638	$	24,372	$	22,344	Americas	$	9,022	$	7,914
EMEA	EMEA	3,806		3,271		11,209		10,138		EMEA	3,664		3,675
APJC	APJC	2,131		1,926		6,214		5,972		APJC	1,982		2,043
Total	Total	$	14,571	$	12,835	$	41,795	$	38,455	Total	$	14,668	$	13,632
Gross margin:	Gross margin:									Gross margin:
Americas	Americas	$	5,545	$	4,952	$	15,449	$	14,438	Americas	$	5,968	$	4,984
EMEA	EMEA	2,536		2,154		7,330		6,664		EMEA	2,545		2,325
APJC	APJC	1,415		1,279		3,986		3,934		APJC	1,328		1,274
Segment total	Segment total	9,495		8,386		26,764		25,035		Segment total	9,841		8,582
Unallocated corporate items	Unallocated corporate items	(263)		(265)		(759)		(812)		Unallocated corporate items	(284)		(236)
Total	Total	$	9,232	$	8,121	$	26,005	$	24,223	Total	$	9,557	$	8,346

Amounts may not sum due to rounding.

Revenue in the United States was $~~7.7~~8.1 billion and $~~6.9 billion for the third quarter of fiscal 2023 and 2022, respectively, and $21.7 billion and $20.1~~7.1 billion for the first ~~nine months~~quarter of fiscal ~~2023~~2024 and ~~2022,~~2023, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(b)Revenue for Groups of Similar Products and Services

We design and sell Internet Protocol (IP)-based networking and other products related to the communications and IT industry and provide services associated with these products and their use. Effective in the first quarter of fiscal 2024, we began reporting our product and service revenue in the following categories: Networking, Security, Collaboration, Observability, and Services and conformed our product revenue for prior periods to the current period presentation.

The following table presents revenue for groups of similar products and services (in millions):


		Three Months Ended				Nine Months Ended					Three Months Ended
		April 29, 2023		April 30, 2022		April 29, 2023		April 30, 2022			October 28, 2023		October 29, 2022
Revenue:	Revenue:									Revenue:
Secure, Agile Networks		$	7,550	$	5,870	$	20,980	$	17,737
Internet for the Future		1,392		1,324		4,007		4,019
Networking										Networking	$	8,822	$	8,031
Security										Security	1,010		971
Collaboration	Collaboration	985		1,132		3,029		3,308		Collaboration	1,117		1,086
End-to-End Security		958		938		2,872		2,716
Optimized Application Experiences		204		183		597		544
Other Products		3		2		7		7
Observability										Observability	190		157
Total Product	Total Product	11,092		9,448		31,492		28,330		Total Product	11,139		10,245
Services	Services	3,479		3,387		10,303		10,125		Services	3,529		3,387
Total	Total	$	14,571	$	12,835	$	41,795	$	38,455	Total	$	14,668	$	13,632

Amounts may not sum due to rounding. ~~We have made certain reclassifications to the product revenue amounts for prior periods to conform to the current year presentation.~~

20.Net Income per Share

The following table presents the calculation of basic and diluted net income per share (in millions, except per-share amounts):

Three Months Ended Nine Months Ended
April 29,
2023 April 30,
2022 April 29,
2023 April 30,
2022
Net income $ 3,212 $ 3,044 $ 8,655 $ 8,997
Weighted-average shares—basic 4,089 4,152 4,100 4,184
Effect of dilutive potential common shares 21 18 11 20
Weighted-average shares—diluted 4,110 4,170 4,111 4,204
Net income per share—basic $ 0.79 $ 0.73 $ 2.11 $ 2.15
Net income per share—diluted $ 0.78 $ 0.73 $ 2.11 $ 2.14
Antidilutive employee share-based awards, excluded 24 11 75 46


	Three Months Ended
	October 28, 2023		October 29, 2022
Net income	$	3,638	$	2,670
Weighted-average shares—basic	4,057		4,108
Effect of dilutive potential common shares	30		8
Weighted-average shares—diluted	4,087		4,116
Net income per share—basic	$	0.90	$	0.65
Net income per share—diluted	$	0.89	$	0.65
Antidilutive employee share-based awards, excluded	16		38

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Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Quarterly Report on Form 10-Q, including this Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts are statements that could be deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “momentum,” “seeks,” “estimates,” “continues,” “endeavors,” “strives,” “may,” variations of such words, and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, ~~future responses to and effects of the COVID-19 pandemic,~~ and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict, including those under “Part II, Item 1A. Risk Factors,” and elsewhere herein. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason.

OVERVIEW

Cisco designs and sells a broad range of technologies that power the Internet. We are integrating our ~~platforms~~product portfolios across networking, security, collaboration, applications and the ~~cloud.~~cloud to create highly secure, intelligent platforms for our customers’ digital businesses. These platforms are designed to help our customers manage more users, devices and things connecting to their networks. This will enable us to provide customers with a highly secure, intelligent platform for their digital business.

A summary of our results is as follows (in millions, except percentages and per-share amounts):


		Three Months Ended									Nine Months Ended										Three Months Ended
		April 29, 2023			April 30, 2022			% Variance			April 29, 2023			April 30, 2022			% Variance				October 28, 2023			October 29, 2022			% Variance
Revenue	Revenue	$	14,571		$	12,835		14	%		$	41,795		$	38,455		9	%		Revenue	$	14,668		$	13,632		8	%
Gross margin percentage	Gross margin percentage	63.4		%	63.3		%	0.1		pts	62.2		%	63.0		%	(0.8)		pts	Gross margin percentage	65.2		%	61.2		%	4.0		pts
Research and development	Research and development	$	1,962		$	1,708		15	%		$	5,598		$	5,092		10	%		Research and development	$	1,913		$	1,781		7	%
Sales and marketing	Sales and marketing	$	2,526		$	2,209		14	%		$	7,301		$	6,736		8	%		Sales and marketing	$	2,506		$	2,391		5	%
General and administrative	General and administrative	$	641		$	517		24	%		$	1,788		$	1,612		11	%		General and administrative	$	672		$	565		19	%
Total research and development, sales and marketing, general and administrative	Total research and development, sales and marketing, general and administrative	$	5,129		$	4,434		16	%		$	14,687		$	13,440		9	%		Total research and development, sales and marketing, general and administrative	$	5,091		$	4,737		7	%
Total as a percentage of revenue	Total as a percentage of revenue	35.2		%	34.5		%	0.7		pts	35.1		%	34.9		%	0.2		pts	Total as a percentage of revenue	34.7		%	34.7		%	—		pts
Amortization of purchased intangible assets included in operating expenses		$	70		$	77		(9)	%		$	212		$	240		(12)	%
Restructuring and other charges included in operating expenses	Restructuring and other charges included in operating expenses	$	87		$	—		NM			$	328		$	8		NM			Restructuring and other charges included in operating expenses	$	123		$	(2)		NM
Operating income as a percentage of revenue	Operating income as a percentage of revenue	27.1		%	28.1		%	(1.0)		pts	25.8		%	27.4		%	(1.6)		pts	Operating income as a percentage of revenue	29.2		%	26.0		%	3.2		pts
Interest and other income (loss), net	Interest and other income (loss), net	$	11		$	191		(94)	%		$	69		$	526		(87)	%		Interest and other income (loss), net	$	166		$	(65)		NM
Income tax percentage	Income tax percentage	18.8		%	19.9		%	(1.1)		pts	20.2		%	18.7		%	1.5		pts	Income tax percentage	18.1		%	23.2		%	(5.1)		pts
Net income	Net income	$	3,212		$	3,044		6	%		$	8,655		$	8,997		(4)	%		Net income	$	3,638		$	2,670		36	%
Net income as a percentage of revenue	Net income as a percentage of revenue	22.0		%	23.7		%	(1.7)		pts	20.7		%	23.4		%	(2.7)		pts	Net income as a percentage of revenue	24.8		%	19.6		%	5.2		pts
Earnings per share—diluted	Earnings per share—diluted	$	0.78		$	0.73		7	%		$	2.11		$	2.14		(1)	%		Earnings per share—diluted	$	0.89		$	0.65		37	%

Percentages may not recalculate due to rounding.

NM — Not meaningful

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CISCO SYSTEMS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Three Months Ended ~~April 29,~~October 28, 2023 Compared with Three Months Ended ~~April 30,~~October 29, 2022

In the ~~third~~first quarter of fiscal ~~2023,~~2024, we delivered ~~strong~~solid results with growth in revenue, margins and profitability. The challenges we previously saw with supply constraints have now shifted downstream to implementation by our customers and third-party resellers. Our customer lead times have largely returned to normal levels. We were able to increase the delivery of products to our customers, which positively impacted product revenue during the first quarter of fiscal 2024. Although product revenue increased, we saw a decline in product demand in the first quarter of fiscal 2024. While we recognize that challenging macroeconomic factors continue to exist, we believe the decline in product demand is primarily due to customers needing additional time to implement elevated levels of product shipments from prior quarters. We believe these elevated levels represent one to two quarters of product shipments that our customers have not yet deployed. We saw this dynamic primarily with our larger enterprise, service provider and cloud customers.

Total revenue increased by 8% compared with the first quarter of fiscal 2023. Within total revenue, product revenue increased by 9% and service revenue increased by 4%. In the first quarter of fiscal 2024, total software revenue was $4.4 billion across all product areas and service, an increase of 13%. Within total software revenue, subscription revenue increased 13%.

Total gross margin increased by 4.0 percentage points. Product gross margin increased by 5.3 percentage points, largely driven by productivity improvements, favorable pricing and favorable product mix. As a percentage of revenue, research and development, sales and marketing, and general and administrative expenses, collectively, was flat. Operating income as a percentage of revenue increased by 3.2 percentage points driven by higher product gross margin partially offset by restructuring and other charges of $123 million in the first quarter of fiscal 2024. Diluted earnings per share increased 37%, driven by an increase of 36% in net income and a decrease in diluted share count of 29 million shares.

In terms of our geographic segments, revenue from the Americas increased $1.1 billion, EMEA revenue decreased by $11 million and APJC revenue decreased by $61 million. From a customer market standpoint, we experienced product revenue growth in the enterprise and public sector markets, partially offset by a decline in the service provider and cloud market. From a product category perspective, the product revenue increase of 9% was driven by growth in revenue for Networking of 10%, Security of 4%, Collaboration of 3% and Observability of 21%.

We remain focused on delivering innovation across our technologies to assist our customers in executing on their digital transformations. Over the last several quarters, we have taken multiple steps in order to mitigate the component shortages and address the supply constraints seen industry-wide. While supply constraints for certain components still remain, we continued to see an overall improvement of such constraints in the third quarter of fiscal 2023 and, as a result, we were able to increase the delivery of products to our customers, which positively impacted product revenue. Further, we ~~continued to make~~made progress in the transition of our business model delivering increased software and subscriptions. We remain focused on accelerating innovation across our portfolio, and we believe that we ~~have made continued~~are making progress on our strategic priorities. We continue to operate in a challenging macroeconomic and highly competitive environment. While the overall environment remains uncertain, we continue to aggressively invest in priority areas with the objective of driving profitable growth over the long term.

Total revenue increased by 14% compared with the third quarter of fiscal 2022. Within total revenue, product revenue increased by 17% and service revenue increased by 3%. In the third quarter of fiscal 2023, total software revenue was $4.3 billion across all product areas and service, an increase of 18%. Within total software revenue, subscription revenue increased 17%. Total gross margin increased by 0.1 percentage points. Product gross margin increased by 0.9 percentage points, largely driven by favorable pricing and product mix partially offset by increased component and other costs. As a percentage of revenue, research and development, sales and marketing, and general and administrative expenses, collectively, increased by 0.7 percentage points. Operating income as a percentage of revenue decreased by 1.0 percentage points. We incurred restructuring and other charges of $87 million in the third quarter of fiscal 2023. Diluted earnings per share increased 7%, driven by an increase of 6% in net income and a decrease in diluted share count of 60 million shares.

In terms of our geographic segments, revenue from the Americas increased $996 million, EMEA revenue increased by $535 million and APJC revenue increased by $205 million. From a customer market standpoint, we experienced product revenue growth in each of our customer markets. From a product category perspective, the product revenue increase of 17% was driven by growth in revenue for Secure, Agile Networks of 29%; Internet for the Future of 5%; End-to-End Security of 2%; and Optimized Application Experiences of 12%; partially offset by a product revenue decline in Collaboration of 13%.

We were able to increase the delivery of products to our customers as the overall supply constraints continued to improve during the third quarter of fiscal 2023. Although total revenue increased, we saw a decline in product demand compared to the third quarter of fiscal 2022. We believe this was due to customers absorbing recently shipped products prior to placing new orders, customers adjusting to significant reductions in product lead times reducing the need for extensive advanced ordering by our customers, and macroeconomic conditions.

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CISCO SYSTEMS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

~~Nine Months Ended April 29, 2023 Compared with Nine Months Ended April 30, 2022~~

Total revenue increased 9%, with product revenue increasing 11% and service revenue increasing 2%. Total gross margin decreased 0.8 percentage points due to increased costs related to supply constraints, partially offset by favorable pricing and favorable impacts from product mix. As a percentage of revenue, research, and development, sales and marketing, and general and administrative expenses collectively increased by 0.2 percentage points. Operating income as a percentage of revenue decreased by 1.6 percentage points. We incurred restructuring and other charges of $328 million in the first nine months of fiscal 2023. Diluted earnings per share decreased 1%, driven by a decrease of 4% in net income, partially offset by a decrease in diluted share count of 93 million shares.

Strategy and Priorities

As our customers add billions of new connections to their enterprises, and as more applications move to a multicloud environment, the network becomes even more critical. Our customers are navigating change at an unprecedented pace. In this dynamic environment, we believe their priorities are to ~~reimagine applications,~~transform infrastructure, secure the enterprise, power hybrid work, ~~transform infrastructure,~~reimagine applications, and ~~secure the enterprise.~~drive toward sustainability. Our strategy is to ~~help our customers~~securely connect ~~secure, and automate to accelerate their digital agility in a cloud-first world.~~everything. We are committed to driving a trusted customer experience, through our innovation, solutions, choice, and people.

For additional discussion of our strategy and priorities, see Item 1. Business in our Annual Report on Form 10-K for the fiscal year ended July ~~30, 2022.~~29, 2023.

Other Key Financial Measures

The following is a summary of our other key financial measures for the ~~third~~first quarter of fiscal ~~2023~~2024 (in millions):


		April 29, 2023		July 30, 2022			October 28, 2023		July 29, 2023
Cash and cash equivalents and investments	Cash and cash equivalents and investments	$	23,288	$	19,267	Cash and cash equivalents and investments	$	23,523	$	26,146
Remaining performance obligations	Remaining performance obligations	$	32,082	$	31,539	Remaining performance obligations	$	34,753	$	34,868
Inventories	Inventories	$	3,474	$	2,568	Inventories	$	3,342	$	3,644


		Nine Months Ended					Three Months Ended
		April 29, 2023		April 30, 2022			October 28, 2023		October 29, 2022
Cash provided by operating activities	Cash provided by operating activities	$	13,920	$	9,549	Cash provided by operating activities	$	2,371	$	3,962
Repurchases of common stock—stock repurchase program	Repurchases of common stock—stock repurchase program	$	3,017	$	5,332	Repurchases of common stock—stock repurchase program	$	1,252	$	502
Dividends paid	Dividends paid	$	4,713	$	4,657	Dividends paid	$	1,580	$	1,560

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CISCO SYSTEMS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires us to make judgments, assumptions, and estimates that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Note 2 to the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended July ~~30, 2022,~~29, 2023, as updated as applicable in Note 2 to the Consolidated Financial Statements herein, describes the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements. The accounting policies described below are significantly affected by critical accounting estimates. Such accounting policies require significant judgments, assumptions, and estimates used in the preparation of the Consolidated Financial Statements, and actual results could differ materially from the amounts reported based on these policies.

Revenue Recognition

We enter into contracts with customers that can include various combinations of products and services which are generally distinct and accounted for as separate performance obligations. As a result, our contracts may contain multiple performance obligations. We determine whether arrangements are distinct based on whether the customer can benefit from the product or service on its own or together with other resources that are readily available and whether our commitment to transfer the product or service to the customer is separately identifiable from other obligations in the contract. We classify our hardware, perpetual software licenses, and SaaS as distinct performance obligations. Term software licenses represent multiple obligations, which include software licenses and software maintenance. In transactions where we deliver hardware or software, we are typically the principal and we record revenue and costs of goods sold on a gross basis.

We recognize revenue upon transfer of control of promised goods or services in a contract with a customer in an amount that reflects the consideration we expect to receive in exchange for those products or services. Transfer of control occurs once the customer has the contractual right to use the product, generally upon shipment, electronic delivery (or when the software is available for download by the customer), or once title and risk of loss has transferred to the customer. Transfer of control can also occur over time for software maintenance and services as the customer receives the benefit over the contract term. Our hardware and perpetual software licenses are distinct performance obligations where revenue is recognized upfront upon transfer of control. Term software licenses include multiple performance obligations where the term licenses are recognized upfront upon transfer of control, with the associated software maintenance revenue recognized ratably over the contract term as services and software updates are provided. SaaS arrangements do not include the right for the customer to take possession of the software during the term, and therefore have one distinct performance obligation which is satisfied over time with revenue recognized ratably over the contract term as the customer consumes the services. On our product sales, we record consideration from shipping and handling on a gross basis within net product sales. We record our revenue net of any associated sales taxes.

See Note 3 to the Consolidated Financial Statements for more details.

Inventory Valuation and Liability for Purchase Commitments with Contract Manufacturers and Suppliers

Inventory is written down based on excess and obsolete inventories, determined primarily by future demand forecasts. Inventory write-downs are measured as the difference between the cost of the inventory and net realizable value, based upon assumptions about future demand, and are charged to the provision for inventory, which is a component of our cost of sales. At the point of the loss recognition, a new, lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

We record a liability for firm, noncancelable, and unconditional purchase commitments with contract manufacturers and suppliers for quantities in excess of our future demand forecasts consistent with the valuation of our excess and obsolete inventory.

Our provision for inventory was ~~$174~~$133 million and ~~$72~~$38 million for the first ~~nine months~~quarter of fiscal ~~2023~~2024 and ~~2022,~~2023, respectively. The provision for the liability related to purchase commitments with contract manufacturers and suppliers was ~~$333~~$43 million and ~~$130~~$83 million for the first ~~nine months~~quarter of fiscal ~~2023~~2024 and ~~2022,~~2023, respectively. If there were to be a sudden and significant decrease in demand for our products, if there were a higher incidence of inventory obsolescence because of rapidly changing technology and customer requirements, or if supply constraints were to continue, we could be required to increase our inventory write-downs, and our liability for purchase commitments with contract manufacturers and suppliers, and accordingly our profitability, could be adversely affected. We regularly evaluate our exposure for inventory write-downs and the adequacy of our liability for purchase commitments. While supply constraints for certain components still remain, we continued to see an overall improvement of such constraints in the third quarter of fiscal 2023. We continue to manage through remaining supply constraints seen industry-wide due to shortages of certain components. For further discussion around the Supply Constraints Impacts and Risks, see ~~“Result~~“—Results of Operations—~~Product~~ Gross Margin—Supply Constraints ~~Impact~~Impacts and Risks” and ~~“Liquidity~~“—Liquidity and Capital Resources—Inventory Supply Chain.”

Loss Contingencies

We are subject to the possibility of various losses arising in the ordinary course of business. We consider the likelihood of the incurrence of a liability, as well as our ability to reasonably estimate the amount of loss, in determining loss contingencies. An estimated loss contingency is accrued when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. We regularly evaluate information available to us to determine whether such accruals should be made or adjusted and whether new accruals are required.

Goodwill and Purchased Intangible Asset Impairments

Our methodology for allocating the purchase price relating to purchase acquisitions is determined through established valuation techniques. Goodwill represents a residual value as of the acquisition date, which in most cases results in measuring goodwill as an excess of the purchase consideration transferred plus the fair value of any noncontrolling interest in the acquired company over the fair value of net assets acquired, including contingent consideration. We perform goodwill impairment tests on an annual basis in the fourth fiscal quarter and between annual tests in certain circumstances for each reporting unit. The assessment of fair value for goodwill and purchased intangible assets is based on factors that market participants would use in an orderly transaction in accordance with the new accounting guidance for the fair value measurement of nonfinancial assets.

In response to changes in industry and market conditions, we could be required to strategically realign our resources and consider restructuring, disposing of, or otherwise exiting businesses, which could result in an impairment of goodwill. There was no impairment of goodwill in each of the first ~~nine months~~quarters of fiscal ~~2023~~2024 and ~~2022.~~2023.

The fair value of acquired technology and patents, as well as acquired technology under development, is determined at acquisition date primarily using the income approach, which discounts expected future cash flows to present value. The discount rates used in the present value calculations are typically derived from a weighted-average cost of capital analysis and then adjusted to reflect risks inherent in the development lifecycle as appropriate. We consider the pricing model for products related to these acquisitions to be standard within the high-technology communications industry, and the applicable discount rates represent the rates that market participants would use for valuation of such intangible assets.

We make judgments about the recoverability of purchased intangible assets with finite lives whenever events or changes in circumstances indicate that an impairment may exist. Recoverability of purchased intangible assets with finite lives is measured by comparing the carrying amount of the asset to the future undiscounted cash flows the asset is expected to generate. We review indefinite-lived intangible assets for impairment annually or whenever events or changes in circumstances indicate that the asset might be impaired. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. Assumptions and estimates about future values and remaining useful lives of our purchased intangible assets are complex and subjective. They can be affected by a variety of

~~Table of Contents~~

~~CISCO SYSTEMS, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)~~

factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and our internal forecasts. Our ongoing consideration of all the factors described previously could result in impairment charges in the future, which could adversely affect our net income.

Table of Contents

CISCO SYSTEMS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Income Taxes

We are subject to income taxes in the United States and numerous foreign jurisdictions. Our effective tax rates differ from the statutory rate, primarily due to the tax impact of state taxes, foreign operations, R&D tax credits, foreign-derived intangible income deductions, global intangible low-taxed income, tax audit settlements, nondeductible compensation, and international realignments. Our effective tax rate was ~~18.8%~~18.1% and ~~19.9%~~23.2% in the ~~third~~first quarter of fiscal ~~2023~~2024 and ~~2022, respectively, and 20.2% and 18.7% in the first nine months of fiscal~~ 2023, ~~and 2022,~~ respectively.

Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. Although we believe our reserves are reasonable, no assurance can be given that the final tax outcome of these matters will not be different from that which is reflected in our historical income tax provisions and accruals. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact the provision for income taxes in the period in which such determination is made. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate, as well as the related net interest and penalties.

Significant judgment is also required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, we consider all available evidence, including past operating results, estimates of future taxable income, and the feasibility of tax planning strategies. In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.

Our provision for income taxes is subject to volatility and could be adversely impacted by earnings being lower than anticipated in countries that have lower tax rates and higher than anticipated in countries that have higher tax rates; by changes in the valuation of our deferred tax assets and liabilities; by changes to foreign-derived intangible income deduction, global intangible low-tax income and base erosion and anti-abuse tax, research and development capitalization and amortization, and corporate alternative minimum tax laws, regulations, or interpretations thereof; by expiration of or lapses in tax incentives; by transfer pricing adjustments, including the effect of acquisitions on our legal structure; by tax effects of nondeductible compensation; by tax costs related to intercompany realignments; by changes in accounting principles; or by changes in tax laws and regulations, treaties, or interpretations thereof, including changes to the taxation of earnings of our foreign subsidiaries, the deductibility of expenses attributable to foreign income, and the foreign tax credit rules. Significant judgment is required to determine the recognition and measurement attributes prescribed in the accounting guidance for uncertainty in income taxes. The Organisation for Economic Co-operation and Development (OECD), an international association comprised of 38 countries, including the United States, has made changes and is contemplating additional changes to numerous long-standing tax principles. There can be no assurance that these changes and any contemplated changes if finalized, once adopted by countries, will not have an adverse impact on our provision for income taxes. As a result of certain of our ongoing employment and capital investment actions and commitments, our income in certain countries was subject to reduced tax rates. Our failure to meet these commitments could adversely impact our provision for income taxes. In addition, we are subject to the continuous examination of our income tax returns by the Internal Revenue Service (IRS) and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. There can be no assurance that the outcomes from these continuous examinations will not have an adverse impact on our operating results and financial condition.

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CISCO SYSTEMS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

RESULTS OF OPERATIONS

Revenue

The following table presents the breakdown of revenue between product and service (in millions, except percentages):


		Three Months Ended										Nine Months Ended											Three Months Ended
		April 29, 2023			April 30, 2022			Variance in Dollars		Variance in Percent		April 29, 2023			April 30, 2022			Variance in Dollars		Variance in Percent			October 28, 2023			October 29, 2022			Variance in Dollars		Variance in Percent
Revenue:	Revenue:																					Revenue:
Product	Product	$	11,092		$	9,448		$	1,644	17	%	$	31,492		$	28,330		$	3,162	11	%	Product	$	11,139		$	10,245		$	894	9	%
Percentage of revenue	Percentage of revenue	76.1		%	73.6		%					75.3		%	73.7		%					Percentage of revenue	75.9		%	75.2		%
Service	Service	3,479			3,387			92		3	%	10,303			10,125			178		2	%	Service	3,529			3,387			142		4	%
Percentage of revenue	Percentage of revenue	23.9		%	26.4		%					24.7		%	26.3		%					Percentage of revenue	24.1		%	24.8		%
Total	Total	$	14,571		$	12,835		$	1,736	14	%	$	41,795		$	38,455		$	3,340	9	%	Total	$	14,668		$	13,632		$	1,036	8	%

We manage our business primarily on a geographic basis, organized into three geographic segments. Our revenue, which includes product and service for each segment, is summarized in the following table (in millions, except percentages):


		Three Months Ended										Nine Months Ended											Three Months Ended
		April 29, 2023			April 30, 2022			Variance in Dollars		Variance in Percent		April 29, 2023			April 30, 2022			Variance in Dollars		Variance in Percent			October 28, 2023			October 29, 2022			Variance in Dollars		Variance in Percent
Revenue:	Revenue:																					Revenue:
Americas	Americas	$	8,634		$	7,638		$	996	13	%	$	24,372		$	22,344		$	2,028	9	%	Americas	$	9,022		$	7,914		$	1,108	14	%
Percentage of revenue	Percentage of revenue	59.3		%	59.5		%					58.3		%	58.1		%					Percentage of revenue	61.5		%	58.0		%
EMEA	EMEA	3,806			3,271			535		16	%	11,209			10,138			1,071		11	%	EMEA	3,664			3,675			(11)		—	%
Percentage of revenue	Percentage of revenue	26.1		%	25.5		%					26.8		%	26.4		%					Percentage of revenue	25.0		%	27.0		%
APJC	APJC	2,131			1,926			205		11	%	6,214			5,972			242		4	%	APJC	1,982			2,043			(61)		(3)	%
Percentage of revenue	Percentage of revenue	14.6		%	15.0		%					14.9		%	15.5		%					Percentage of revenue	13.5		%	15.0		%
Total	Total	$	14,571		$	12,835		$	1,736	14	%	$	41,795		$	38,455		$	3,340	9	%	Total	$	14,668		$	13,632		$	1,036	8	%

Amounts may not sum and percentages may not recalculate due to rounding.

Three Months Ended ~~April 29,~~October 28, 2023 Compared with Three Months Ended ~~April 30,~~October 29, 2022

Total revenue increased by ~~14%~~8%. Product revenue increased by ~~17%~~9% and service revenue increased by 3%4%. Our total revenue reflected growth ~~across each of our geographic segments.~~

In the third quarter of fiscal 2022, in connection with the Russian invasion of Ukraine, Cisco announced its intention to stop business operations in Russia and Belarus. The negative impact to total revenue was approximately $200 million in the ~~third quarter of fiscal 2022, which included committed~~Americas segment partially offset by a decline in the APJC segment. Total revenue ~~we would have otherwise recognized, charges for uncollectible receivables, and other items.~~in the EMEA segment was flat.

In addition to the impact of macroeconomic factors, including the IT spending environment and the level of spending by government entities, revenue by segment in a particular period may be significantly impacted by ~~several factors related to~~the timing of revenue recognition ~~including the complexity of~~for complex transactions ~~such as~~with multiple performance ~~obligations; the mix of financing arrangements provided to channel partners and customers; and final acceptance of the product, system, or solution, among other factors.~~obligations. In addition, certain customers tend to make large and sporadic purchases, and the revenue related to these transactions may also be affected by the timing of revenue recognition, which in turn would impact the revenue of the relevant segment.

~~Nine Months Ended April 29, 2023 Compared with Nine Months Ended April 30, 2022~~

~~Total revenue increased by 9%. Product revenue increased by 11% and service revenue increased by 2%. Our total revenue reflected growth across each of our geographic segments.~~

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Product Revenue by Segment

The following table presents the breakdown of product revenue by segment (in millions, except percentages):


		Three Months Ended										Nine Months Ended											Three Months Ended
		April 29, 2023			April 30, 2022			Variance in Dollars		Variance in Percent		April 29, 2023			April 30, 2022			Variance in Dollars		Variance in Dollars			October 28, 2023			October 29, 2022			Variance in Dollars		Variance in Percent
Product revenue:	Product revenue:																					Product revenue:
Americas	Americas	$	6,519		$	5,573		$	946	17	%	$	18,093		$	16,223		$	1,870	12	%	Americas	$	6,852		$	5,846		$	1,006	17	%
Percentage of product revenue	Percentage of product revenue	58.8		%	59.0		%					57.5		%	57.3		%					Percentage of product revenue	61.5		%	57.0		%
EMEA	EMEA	2,989			2,492			497		20	%	8,791			7,765			1,026		13	%	EMEA	2,840			2,886			(46)		(2)	%
Percentage of product revenue	Percentage of product revenue	26.9		%	26.4		%					27.9		%	27.4		%					Percentage of product revenue	25.5		%	28.2		%
APJC	APJC	1,584			1,383			201		15	%	4,607			4,343			264		6	%	APJC	1,448			1,513			(65)		(4)	%
Percentage of product revenue	Percentage of product revenue	14.3		%	14.6		%					14.6		%	15.3		%					Percentage of product revenue	13.0		%	14.8		%
Total	Total	$	11,092		$	9,448		$	1,644	17	%	$	31,492		$	28,330		$	3,162	11	%	Total	$	11,139		$	10,245		$	894	9	%

Amounts may not sum and percentages may not recalculate due to rounding.

~~Americas~~

Three Months Ended ~~April 29,~~October 28, 2023 Compared with Three Months Ended ~~April 30,~~October 29, 2022

Americas

Product revenue in the Americas segment increased by 17%, with growth across all customer ~~markets.~~markets, led by the public sector market. From a country perspective, product revenue increased in the United States, ~~Canada,~~ Mexico and Brazil by ~~16%~~19%, 7%4% and 8%, ~~55% and 30%, respectively.~~

~~Nine Months Ended April 29, 2023 Compared with Nine Months Ended April 30, 2022~~

~~Product~~respectively, partially offset by a decline in product revenue in ~~the Americas segment increased by 12%, with growth across all customer markets. From a country perspective, product revenue increased in the United States,~~ Canada ~~Mexico and Brazil by 11%, 10%, 29% and 29%, respectively.~~of 1%.

EMEA

~~Three Months Ended April 29, 2023 Compared with Three Months Ended April 30, 2022~~

Product revenue in the EMEA segment ~~increased~~decreased by ~~20%~~2%, driven by declines in the service provider and cloud and the enterprise markets, partially offset by growth in the public sector ~~enterprise and commercial markets, partially offset by a decline in the service provider~~ market. From a country perspective, product revenue increased in Germany by 2%, partially offset by product revenue declines in the United Kingdom and France by ~~20%, 17%~~5% and ~~12%~~20%, respectively.

~~Nine Months Ended April 29, 2023 Compared with Nine Months Ended April 30, 2022~~APJC

Product revenue in the ~~EMEA~~APJC segment ~~increased~~decreased by ~~13%~~4%, driven ~~by growth in the public sector, enterprise and commercial markets, partially offset~~ by a decline in the service provider ~~market. From a country perspective, product revenue increased in Germany, the United Kingdom~~ and ~~France by 21%, 8% and 23%, respectively.~~

~~APJC~~

~~Three Months Ended April 29, 2023 Compared with Three Months Ended April 30, 2022~~

Product revenue in the APJC segment increased by 15%, driven by growth across all customer markets. From a country perspective, product revenue increased in Japan, India, and Australia by 11%, 78%, and 25%, respectively. Product revenue for China was flat.

~~Nine Months Ended April 29, 2023 Compared with Nine Months Ended April 30, 2022~~

~~Product revenue in the APJC segment increased by 6%, driven~~cloud market, partially offset by growth in the ~~commercial and~~ public sector ~~markets, partially offset by a decline in the enterprise~~ market. Product revenue in the ~~service provider~~enterprise market was flat. From a country perspective, product revenue increased in India ~~Australia and China~~ by ~~59%~~14%, ~~7% and 17%, respectively,~~ partially offset by a decline of 13% in Japan, ~~of 4%.~~5% in Australia and 39% in China.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Product Revenue by Category

In addition to the primary view on a geographic basis, we also prepare financial information related to product categories and customer markets for various purposes. Effective in the first quarter of fiscal 2024, we began reporting our product revenue in the following categories: Networking, Security, Collaboration, and Observability and conformed our product revenue for prior periods to the current period presentation.

The following table presents product revenue by category (in millions, except percentages):

Three Months Ended Nine Months Ended
April 29,
2023 April 30,
2022 Variance
in Dollars Variance
in Percent April 29,
2023 April 30,
2022 Variance
in Dollars Variance
in Percent
Product revenue:
Secure, Agile Networks $ 7,550 $ 5,870 $ 1,680 29 % $ 20,980 $ 17,737 $ 3,243 18 %
Internet for the Future 1,392 1,324 68 5 % 4,007 4,019 (12) — %
Collaboration 985 1,132 (147) (13) % 3,029 3,308 (279) (8) %
End-to-End Security 958 938 20 2 % 2,872 2,716 156 6 %
Optimized Application Experiences 204 183 21 12 % 597 544 53 10 %
Other Products 3 2 1 19 % 7 7 — (7) %
Total $ 11,092 $ 9,448 $ 1,644 17 % $ 31,492 $ 28,330 $ 3,162 11 %


	Three Months Ended
	October 28, 2023		October 29, 2022		Variance in Dollars		Variance in Percent
Product Revenue
Networking	$	8,822	$	8,031	$	791	10	%
Security	1,010		971		39		4	%
Collaboration	1,117		1,086		31		3	%
Observability	190		157		33		21	%
Total	$	11,139	$	10,245	$	894	9	%

Amounts may not sum and percentages may not recalculate due to rounding.

~~Secure, Agile Networks~~

Three Months Ended ~~April 29,~~October 28, 2023 Compared with Three Months Ended ~~April 30,~~October 29, 2022

Networking

The ~~Secure, Agile Networks~~Networking product category represents our core networking ~~offerings related to~~technologies of switching, ~~enterprise~~ routing, wireless, 5G, silicon, optics solutions and ~~compute. Secure, Agile Networks~~compute products. Networking revenue increased by ~~29%~~10%, or $1.7 billion, with growth across the portfolio except servers. Revenue grew in both campus switching and data center switching. This was primarily driven by strong growth in our Catalyst 9000 series, Nexus 9000 series and Meraki switching offerings. The increase in enterprise routing was primarily driven by growth in our Catalyst 8000 routers, SD-WAN and IoT routing offerings. Wireless had strong double-digit growth driven by our WiFi-6 products and Meraki offerings.

~~Nine Months Ended April 29, 2023 Compared with Nine Months Ended April 30, 2022~~

~~Revenue from the Secure, Agile Networks product category increased by 18%, or $3.2 billion, with growth across the portfolio except servers.~~$791 million. Revenue grew in both campus switching and data center switching primarily driven by strong growth in our Catalyst 9000 ~~series,~~and Nexus 9000 series ~~and Meraki switching~~ offerings. ~~Enterprise routing increased primarily driven~~The increase was partially offset by ~~growth~~a decline in ~~our Catalyst 8000 series, SD-WAN and IoT routing offerings. Wireless had strong double-digit growth driven by our WiFi-6 products and Meraki offerings.~~wireless.

~~Internet for the Future~~

~~Three Months Ended April 29, 2023 Compared with Three Months Ended April 30, 2022~~Security

The ~~Internet for the Future~~Security product category ~~includes~~consists of our ~~routed optical networking, public 5G, silicon~~Cloud and ~~optics~~Application Security, Industrial Security, Network Security, and User and Device Security offerings. Revenue in our ~~Internet for the Future~~Security product category increased by 5%4%, or ~~$68~~$39 million, primarily driven by growth in our ~~Core routing portfolio, including our Cisco 8000 series~~Zero Trust and Threat Intelligence and Detection and Response offerings. ~~We also saw double-digit growth in the webscale provider market.~~

~~Nine Months Ended April 29, 2023 Compared with Nine Months Ended April 30, 2022~~

Revenue in our Internet for the Future product category was flat, primarily driven by growth in our Cisco 8000 series offerings offset by declines in our Optical, Cable, and Edge portfolio. We also saw growth in the webscale provider market.

Collaboration

~~Three Months Ended April 29, 2023 Compared with Three Months Ended April 30, 2022~~

The Collaboration product category consists of our Meetings, Collaboration Devices, ~~Meetings,~~ Calling, ~~and~~ Contact Center and CPaaS offerings. Revenue in our Collaboration product category ~~decreased~~increased by ~~13%~~3%, or ~~$147 million, primarily driven by declines in Collaboration Devices and Meetings, partially offset by growth in Calling and our Contact Center offerings.~~

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~~CISCO SYSTEMS, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)~~

~~Nine Months Ended April 29, 2023 Compared with Nine Months Ended April 30, 2022~~

~~Revenue in our Collaboration product category decreased by 8%, or $279 million, primarily driven by declines in Meetings and Collaboration Devices.~~

~~End-to-End Security~~

~~Three Months Ended April 29, 2023 Compared with Three Months Ended April 30, 2022~~

~~Revenue in our End-to-End Security product category increased 2%, or $20~~$31 million, primarily driven by growth in our ~~Unified Threat Management~~Calling and ~~Zero Trust offerings.~~Contact Center offerings and partially offset by a decline in Meetings.

~~Nine Months Ended April 29, 2023 Compared with Nine Months Ended April 30, 2022~~Observability

~~Revenue in our End-to-End Security~~The Observability product category ~~increased 6%, or $156 million primarily driven by growth in our Unified Threat Management offerings.~~

~~Optimized Application Experiences~~

~~Three Months Ended April 29, 2023 Compared with Three Months Ended April 30, 2022~~

~~The Optimized Application Experiences product category includes~~consists of our full stack observability ~~and cloud-native platforms~~ offerings. Revenue in our ~~Optimized Application Experiences~~Observability product category increased ~~12%~~21%, or ~~$21~~$33 million, driven by growth across the portfolio, including double-digit growth in our ThousandEyes ~~offerings.~~

~~Nine Months Ended April 29, 2023 Compared with Nine Months Ended April 30, 2022~~

~~Revenue in our Optimized Application Experiences product category increased 10%, or $53 million, driven by growth in our ThousandEyes~~and AppDynamics offerings.

~~Service Revenue by Segment~~

~~The following table presents the breakdown of service revenue by segment (in millions, except percentages):~~

Three Months Ended Nine Months Ended
April 29,
2023 April 30,
2022 Variance
in Dollars Variance
in Percent April 29,
2023 April 30,
2022 Variance
in Dollars Variance
in Percent
Service revenue:
Americas $ 2,115 $ 2,064 $ 51 2 % $ 6,279 $ 6,122 $ 157 3 %
Percentage of service revenue 60.8 % 60.9 % 60.9 % 60.5 %
EMEA 817 778 39 5 % 2,417 2,373 44 2 %
Percentage of service revenue 23.5 % 23.0 % 23.5 % 23.4 %
APJC 547 544 3 1 % 1,606 1,629 (23) (1) %
Percentage of service revenue 15.7 % 16.1 % 15.6 % 16.1 %
Total $ 3,479 $ 3,387 $ 92 3 % $ 10,303 $ 10,125 $ 178 2 %

~~Amounts may not sum and percentages may not recalculate due to rounding.~~

Service revenue increased 3% in the third quarter of fiscal 2023 compared with the third quarter of fiscal 2022, primarily driven by revenue growth in our solution support offerings and maintenance business, partially offset by declines in our advisory services. Service revenue increased across each of our geographic segments for the third quarter of fiscal 2023.

Service revenue increased 2% in the first nine months of fiscal 2023 compared to the first nine months of fiscal 2022, primarily driven by revenue growth in our solution support offerings and maintenance business, partially offset by declines in our advisory services and software support offerings. Service revenue increased in the Americas and EMEA segments, partially offset by a decline in the APJC segment for the first nine months of fiscal 2023.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Service Revenue by Segment

The following table presents the breakdown of service revenue by segment (in millions, except percentages):


	Three Months Ended
	October 28, 2023			October 29, 2022			Variance in Dollars		Variance in Percent
Service revenue:
Americas	$	2,171		$	2,067		$	104	5	%
Percentage of service revenue	61.5		%	61.0		%
EMEA	824			789			35		4	%
Percentage of service revenue	23.3		%	23.3		%
APJC	534			530			4		1	%
Percentage of service revenue	15.2		%	15.7		%
Total	$	3,529		$	3,387		$	142	4	%

Amounts may not sum and percentages may not recalculate due to rounding.

Service revenue increased 4% in the first quarter of fiscal 2024 compared with the first quarter of fiscal 2023, primarily driven by revenue growth in our solution support, maintenance business offerings and advisory services. Service revenue increased across each of our geographic segments for the first quarter of fiscal 2024.

Gross Margin

The following table presents the gross margin for products and services (in millions, except percentages):


		Three Months Ended								Nine Months Ended									Three Months Ended
		AMOUNT				PERCENTAGE				AMOUNT				PERCENTAGE					AMOUNT				PERCENTAGE
		April 29, 2023		April 30, 2022		April 29, 2023		April 30, 2022		April 29, 2023		April 30, 2022		April 29, 2023		April 30, 2022			October 28, 2023		October 29, 2022		October 28, 2023		October 29, 2022
Gross margin:	Gross margin:																	Gross margin:
Product	Product	$	6,956	$	5,842	62.7	%	61.8	%	$	19,139	$	17,482	60.8	%	61.7	%	Product	$	7,182	$	6,066	64.5	%	59.2	%
Service	Service	2,276		2,279		65.4	%	67.3	%	6,866		6,741		66.6	%	66.6	%	Service	2,375		2,280		67.3	%	67.3	%
Total	Total	$	9,232	$	8,121	63.4	%	63.3	%	$	26,005	$	24,223	62.2	%	63.0	%	Total	$	9,557	$	8,346	65.2	%	61.2	%

Product Gross Margin

The following table summarizes the key factors that contributed to the change in product gross margin percentage for the ~~third~~first quarter ~~and first nine months~~ of fiscal ~~2023,~~2024, as compared with the corresponding prior year periods:

Product Gross Margin Percentage
Three Months Ended Nine Months Ended
Fiscal 2022 61.8 % 61.7 %
Productivity (1)
(1.4) % (3.5) %
Product pricing 1.1 % 1.4 %
Mix of products sold 0.8 % 0.7 %
Others 0.4 % 0.5 %
Fiscal 2023 62.7 % 60.8 %


	Product Gross Margin Percentage
Fiscal 2023	59.2	%
Productivity (1)	3.1	%
Product pricing	1.2	%
Mix of products sold	1.2	%
Others	(0.2)	%
Fiscal 2024	64.5	%

(1) Productivity includes overall manufacturing-related costs, such as component costs, warranty expense, provision for inventory, freight, logistics, shipment volume, and other items not categorized elsewhere.

Three Months Ended ~~April 29,~~October 28, 2023 Compared with Three Months Ended ~~April 30,~~October 29, 2022

Product gross margin increased by ~~0.9~~5.3 percentage points primarily driven by productivity improvements, largely driven by lower freight, logistics and components costs. We also saw favorable pricing and ~~product mix, partially offset by negative~~favorable impacts from productivity, largely driven by increased costs from component and other costs. The favorable pricing was primarily driven by price increases implemented during fiscal 2022 as we ship our products. We implemented the price increases to partially offset increases in commodity and other costs.

~~Nine Months Ended April 29, 2023 Compared with Nine Months Ended April 30, 2022~~

Product gross margin decreased by 0.9 percentage points primarily driven by negative impacts from productivity, largely driven by increased costs from component, freight, logistics and other costs. These impacts were partially offset by favorable pricing. The benefit we saw from favorable pricing was primarily driven by price increases implemented during fiscal 2022. We also saw benefits from product mix.

~~Supply Constraints Impacts and Risks~~

While supply constraints for certain components still remain, we continued to see an overall improvement of such constraints in the third quarter of fiscal 2023. We continue to manage through remaining supply constraints seen industry-wide due to shortages of certain components. In recent past periods, these shortages have resulted in increased costs (i.e., component and other commodity costs, freight, expedite fees, etc.) which have had a negative impact on our product gross margin and have resulted in extended lead times for us and our customers. We have taken a number of steps in order to mitigate the supply constraint related impacts including: partnering with several of our key suppliers utilizing our volume purchasing ability and extending supply coverage, including, in certain cases, revising supplier arrangements; paying significantly higher component and logistics costs to secure supply; modifying our product designs in order to leverage alternate suppliers, where possible; and continually optimizing our inventory build and customer delivery plans, among others. We believe these actions are helping us to optimize our access to critical components and meet customer demand for our products. As a result of these past actions, in order to secure supply to meet customer demand, we increased our inventory balances, inventory purchase commitments, and

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Supply Constraints Impacts and Risks

In past periods, we took multiple actions in order to mitigate component shortages and address significant supply constraints. These supply constraints resulted in significant increased costs (i.e., component and other commodity costs, expedite fees, etc.) which had, and may continue to have, a negative impact on our product gross margin and resulted in extended lead times for us and our customers. The mitigating actions we took included: partnering with several of our key suppliers utilizing our volume purchasing ability and extending supply coverage, including, in certain cases, revising supplier arrangements; paying and committing to pay in the future significantly higher costs for certain components; modifying our product designs in order to leverage alternate suppliers, where possible; and continually optimizing our inventory build and customer delivery plans, among others. These mitigating actions have resulted in increased inventory balances, inventory purchase commitments, and inventory deposits and prepayments compared to prior fiscal years, which, in turn, has increased our supply chain ~~exposure. Additionally,~~exposure, which could result in ~~certain situations, we have prepaid or made deposits with suppliers~~negative impacts to ~~secure~~our product gross margin in future supply. We have seen supply constraints improve in the current quarter and recent past quarters. As the overall supply constraints continue to improve, we have taken and are continuing to take operational measures to work with contract manufacturers and suppliers to optimize our combined inventory and purchase commitment levels. However, our higher level of supply chain balances increases the risk ofperiods, including material excess and obsolete ~~inventory and related losses~~charges, if ~~customer~~product demand ~~were to suddenly and~~ significantly ~~decrease in future periods and~~decreases for a sustained duration or we are unable to ~~further~~continue to mitigate ~~our~~the remaining supply chain exposures. We believe these mitigating actions have helped us to optimize our access to critical components and meet customer demand for our products as a result of the component shortages and significant supply constraints we saw in past periods. While these mitigating actions have resulted in a decrease of our overall supply chain balances, these balances continue to be higher as compared to prior fiscal years.

Service Gross Margin

~~Three Months Ended April 29, 2023 Compared with Three Months Ended April 30, 2022~~

Our service gross margin percentage ~~decreased by 1.9 percentage points~~was flat compared to the first quarter of fiscal 2023 primarily due to higher sales volume offset by higher headcount-related and delivery ~~costs, partially offset by higher sales volume and favorable mix of service offerings.~~costs.

Our service gross margin normally experiences some fluctuations due to various factors such as the timing of contract initiations in our renewals, our strategic investments in headcount, and the resources we deploy to support the overall service business. Other factors include the mix of service offerings, as the gross margin from our advanced services is typically lower than the gross margin from technical support services.

~~Nine Months Ended April 29, 2023 Compared with Nine Months Ended April 30, 2022~~

~~Service gross margin was flat primarily due to higher sales volume and favorable mix of service offerings offset by higher headcount-related and delivery costs.~~

Gross Margin by Segment

The following table presents the total gross margin for each segment (in millions, except percentages):


		Three Months Ended								Nine Months Ended									Three Months Ended
		AMOUNT				PERCENTAGE				AMOUNT				PERCENTAGE					AMOUNT				PERCENTAGE
		April 29, 2023		April 30, 2022		April 29, 2023		April 30, 2022		April 29, 2023		April 30, 2022		April 29, 2023		April 30, 2022			October 28, 2023		October 29, 2022		October 28, 2023		October 29, 2022
Gross margin:	Gross margin:																	Gross margin:
Americas	Americas	$	5,545	$	4,952	64.2	%	64.8	%	$	15,449	$	14,438	63.4	%	64.6	%	Americas	$	5,968	$	4,984	66.2	%	63.0	%
EMEA	EMEA	2,536		2,154		66.6	%	65.9	%	7,330		6,664		65.4	%	65.7	%	EMEA	2,545		2,325		69.5	%	63.3	%
APJC	APJC	1,415		1,279		66.4	%	66.4	%	3,986		3,934		64.2	%	65.9	%	APJC	1,328		1,274		67.0	%	62.3	%
Segment total	Segment total	9,495		8,386		65.2	%	65.3	%	26,764		25,035		64.0	%	65.1	%	Segment total	9,841		8,582		67.1	%	63.0	%
Unallocated corporate items (1)	Unallocated corporate items (1)	(263)		(265)						(759)		(812)						Unallocated corporate items (1)	(284)		(236)
Total	Total	$	9,232	$	8,121	63.4	%	63.3	%	$	26,005	$	24,223	62.2	%	63.0	%	Total	$	9,557	$	8,346	65.2	%	61.2	%

(1) The unallocated corporate items include the effects of amortization and impairments of acquisition-related intangible assets, share-based compensation expense, significant litigation settlements and other contingencies, charges related to asset impairments and restructurings, and certain other charges. We do not allocate these items to the gross margin for each segment because management does not include such information in measuring the performance of the operating segments.

Amounts may not sum and percentages may not recalculate due to rounding.

Three Months Ended ~~April 29,~~October 28, 2023 Compared with Three Months Ended ~~April 30,~~October 29, 2022

We experienced a gross margin percentage ~~decrease~~increase in our Americas segment due to ~~negative~~positive impacts from productivity ~~partially~~improvements and favorable pricing, slightly offset by ~~favorable pricing and favorable~~unfavorable product mix.

Gross margin percentage in our EMEA segment increased primarily due to ~~favorable pricing,~~ positive impacts from productivity improvements, ~~and favorable product mix, partially offset by lower service gross margin.~~

~~The APJC segment gross margin percentage was flat primarily due to negative impacts from productivity offset by~~ favorable product mix, and favorable pricing.

~~The gross margin percentage for a particular segment may fluctuate, and period-to-period changes in such percentages may or may not be indicative of a trend for that segment.~~

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~~Nine Months Ended April 29, 2023 Compared with Nine Months Ended April 30, 2022~~

~~The Americas segment had a gross margin percentage decrease driven by negative impacts from productivity, partially offset by favorable pricing and favorable product mix.~~

~~The gross margin percentage decrease in our EMEA segment was primarily due to negative impacts from productivity, partially offset by favorable pricing.~~

The APJC segment gross margin percentage ~~decrease~~increase was ~~driven by negative~~primarily due to positive impacts from productivity improvements, favorable product mix and ~~to a lesser extent, unfavorable impacts from~~favorable pricing, partially offset by ~~favorable product mix.~~lower service gross margin.

Research and Development (“R&D”), Sales and Marketing, and General and Administrative (“G&A”) Expenses

R&D, sales and marketing, and G&A expenses are summarized in the following table (in millions, except percentages):

Three Months Ended Nine Months Ended
April 29,
2023 April 30,
2022 Variance
in Dollars Variance
in Percent April 29,
2023 April 30,
2022 Variance
in Dollars Variance
in Percent
Research and development $ 1,962 $ 1,708 $ 254 15 % $ 5,598 $ 5,092 $ 506 10 %
Percentage of revenue 13.5 % 13.3 % 13.4 % 13.2 %
Sales and marketing 2,526 2,209 317 14 % 7,301 6,736 565 8 %
Percentage of revenue 17.3 % 17.2 % 17.5 % 17.5 %
General and administrative 641 517 124 24 % 1,788 1,612 176 11 %
Percentage of revenue 4.4 % 4.0 % 4.3 % 4.2 %
Total $ 5,129 $ 4,434 $ 695 16 % $ 14,687 $ 13,440 $ 1,247 9 %
Percentage of revenue 35.2 % 34.5 % 35.1 % 34.9 %

~~R&D Expenses~~


	Three Months Ended
	October 28, 2023			October 29, 2022			Variance in Dollars		Variance in Percent
Research and development	$	1,913		$	1,781		$	132	7	%
Percentage of revenue	13.0		%	13.1		%
Sales and marketing	2,506			2,391			115		5	%
Percentage of revenue	17.1		%	17.5		%
General and administrative	672			565			107		19	%
Percentage of revenue	4.6		%	4.1		%
Total	$	5,091		$	4,737		$	354	7	%
Percentage of revenue	34.7		%	34.7		%

Three Months Ended ~~April 29,~~October 28, 2023 Compared with Three Months Ended ~~April 30,~~October 29, 2022

R&D Expenses

R&D expenses increased due to higher headcount-related expenses, higher share-based compensation expense and higher discretionary spending, partially offset by lower ~~contracted services spending.~~acquisition and divestitures related costs.

We continue to invest in R&D in order to bring a broad range of products to market in a timely fashion. If we believe that we are unable to enter a particular market in a timely manner with internally developed products, we may purchase or license technology from other businesses, or we may partner with or acquire businesses as an alternative to internal R&D.

~~Nine Months Ended April 29, 2023 Compared with Nine Months Ended April 30, 2022~~

R&D expenses increased due to higher headcount-related expenses, higher share-based compensation expense and higher discretionary spending, partially offset by lower contracted services spending and lower acquisition and divestitures related costs.

Sales and Marketing Expenses

~~Three Months Ended April 29, 2023 Compared with Three Months Ended April 30, 2022~~

Sales and marketing expenses increased primarily due to higher headcount-related expenses, driven by higher variable compensation expense, higher share-based compensation expense and higher discretionary spending, partially offset by lower contracted services spending.

~~Nine Months Ended April 29, 2023 Compared with Nine Months Ended April 30, 2022~~

Sales and marketing expenses increased primarily due to higher headcount-related expenses, higher discretionary spending and higher share-based compensation ~~expense, partially offset by lower contracted services spending.~~expense.

G&A Expenses

~~Three Months Ended April 29, 2023 Compared with Three Months Ended April 30, 2022~~

G&A expenses increased due to higher headcount-related expenses, higher share-based compensation expense, higher discretionary spending, higher ~~share-based~~acquisition and divestitures related costs and higher contracted services spending.

Effect of Foreign Currency

In the first quarter of fiscal 2024, foreign currency fluctuations, net of hedging, increased the combined R&D, sales and marketing, and G&A expenses by approximately $26 million, or 0.6%, compared with the first quarter of fiscal 2023.

Amortization of Purchased Intangible Assets

The following table presents the amortization of purchased intangible assets including impairment charges (in millions):


	Three Months Ended
	October 28, 2023		October 29, 2022
Amortization of purchased intangible assets:
Cost of sales	$	186	$	158
Operating expenses	67		71
Total	$	253	$	229

For the first quarter of fiscal 2024, the increase in amortization of purchased intangible assets was primarily due to amortization of purchased intangibles from our recent acquisitions, partially offset by certain purchased intangible assets that became fully amortized.

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compensation expense, higher acquisition and divestitures related costs and higher contracted services spending. The increase was partially offset by the impact from certain non-recurring charges recognized due to the Russia and Ukraine war in the third quarter of fiscal 2022.

~~Nine Months Ended April 29, 2023 Compared with Nine Months Ended April 30, 2022~~

G&A expenses increased due to higher headcount-related expenses, higher discretionary spending and higher share-based compensation expense, partially offset by lower acquisition and divestitures related costs, lower contracted services spending and the impact from certain non-recurring charges recognized due to the Russia and Ukraine war in the first nine months of fiscal 2022.

~~Effect of Foreign Currency~~

In the third quarter of fiscal 2023, foreign currency fluctuations, net of hedging, decreased the combined R&D, sales and marketing, and G&A expenses by approximately $86 million, or 1.9%, compared with the third quarter of fiscal 2022.

In the first nine months of fiscal 2023, foreign currency fluctuations, net of hedging, decreased the combined R&D, sales and marketing, and G&A expenses by approximately $349 million, or 2.6%, compared with the first nine months of fiscal 2022.

~~Amortization of Purchased Intangible Assets~~

~~The following table presents the amortization of purchased intangible assets including impairment charges (in millions):~~

Three Months Ended Nine Months Ended
April 29,
2023 April 30,
2022 April 29,
2023 April 30,
2022
Amortization of purchased intangible assets:
Cost of sales $ 160 $ 180 $ 476 $ 583
Operating expenses 70 92 212 255
Total $ 230 $ 272 $ 688 $ 838

For each of the third quarter and first nine months of fiscal 2023, the decrease in amortization of purchased intangible assets was primarily due to certain purchased intangible assets that became fully amortized, partially offset by amortization of purchased intangibles from our recent acquisitions.

Restructuring and Other Charges

In the second quarter of fiscal 2023, we announced a restructuring plan in order to rebalance the organization and enable further investment in key priority areas. This rebalancing includes talent movement options and restructuring. Additionally, we have begun optimizing our real estate portfolio, aligned to the broader hybrid work strategy. The total pretax charges are estimated to be approximately $600 million and is expected to impactareas, of which approximately 5% of ~~our~~the global ~~workforce.~~workforce would be impacted. In connection with this restructuring plan, we incurred charges of ~~$87~~$123 million ~~and $330 million~~ in the ~~third~~first quarter ~~and the first nine months~~ of fiscal ~~2023, respectively.~~2024 and have incurred cumulative charges of $658 million to date. We ~~expect the plan to be~~have substantially completed ~~by the end of~~this restructuring plan in the first quarter of fiscal 2024. We expect to reinvest substantially all of the cost savings from this restructuring plan in our key priority areas. As a result, the overall cost savings from this restructuring plan are not expected to be material for future periods.

Operating Income

The following table presents our operating income and our operating income as a percentage of revenue (in millions, except percentages):


		Three Months Ended						Nine Months Ended							Three Months Ended
		April 29, 2023			April 30, 2022			April 29, 2023			April 30, 2022				October 28, 2023			October 29, 2022
Operating income	Operating income	$	3,946		$	3,610		$	10,778		$	10,535		Operating income	$	4,276		$	3,540
Operating income as a percentage of revenue	Operating income as a percentage of revenue	27.1		%	28.1		%	25.8		%	27.4		%	Operating income as a percentage of revenue	29.2		%	26.0		%

Three Months Ended ~~April 29,~~October 28, 2023 Compared with Three Months Ended ~~April 30,~~October 29, 2022

Operating income increased by 9%21%, and operating income as a percentage of revenue ~~decreased~~increased by ~~1.0~~3.2 percentage points. ~~The increase in operating income was~~These changes resulted primarily ~~due to~~from a revenue increase ~~partially offset by higher operating expenses. The decrease in operating income as a percentage of revenue was primarily due to an operating expenses percentage increase.~~

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~~CISCO SYSTEMS, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)~~

~~Nine Months Ended April 29, 2023 Compared with Nine Months Ended April 30, 2022~~

~~Operating income increased by 2%,~~ and ~~operating income as a percentage of revenue decreased by 1.6 percentage points. The increase in operating income was primarily due to a revenue increase, partially offset by~~ a gross margin percentage ~~decrease~~increase (driven by ~~negative impacts from~~ productivity ~~partially offset by~~improvements, favorable pricing and favorable product mix), partially offset by higher restructuring and ~~higher operating expenses. The decrease in operating income as a percentage of revenue was primarily due to a gross margin percentage decrease and operating expenses percentage increase.~~other charges.

Interest and Other Income (Loss), Net

Interest Income (Expense), Net The following table summarizes interest income and interest expense (in millions):


		Three Months Ended						Nine Months Ended							Three Months Ended
		April 29, 2023		April 30, 2022		Variance in Dollars		April 29, 2023		April 30, 2022		Variance in Dollars			October 28, 2023		October 29, 2022		Variance in Dollars
Interest income	Interest income	$	262	$	115	$	147	$	650	$	347	$	303	Interest income	$	360	$	169	$	191
Interest expense	Interest expense	(109)		(90)		(19)		(316)		(267)		(49)		Interest expense	(111)		(100)		(11)
Interest income (expense), net	Interest income (expense), net	$	153	$	25	$	128	$	334	$	80	$	254	Interest income (expense), net	$	249	$	69	$	180

For the ~~each of the third~~first quarter ~~and first nine months~~ of fiscal ~~2023,~~2024, the increase in interest income was driven by higher average balance of cash and available-for-sale debt investments and higher interest rates. The increase in interest expense was primarily driven by higher interest rates, partially offset by a lower average debt balance.

Other Income (Loss), Net The components of other income (loss), net, are summarized as follows (in millions):


		Three Months Ended						Nine Months Ended							Three Months Ended
		April 29, 2023		April 30, 2022		Variance in Dollars		April 29, 2023		April 30, 2022		Variance in Dollars			October 28, 2023		October 29, 2022		Variance in Dollars
Gains (losses) on investments, net:	Gains (losses) on investments, net:													Gains (losses) on investments, net:
Available-for-sale debt investments	Available-for-sale debt investments	$	(6)	$	2	$	(8)	$	(15)	$	18	$	(33)	Available-for-sale debt investments	$	(20)	$	(6)	$	(14)
Marketable equity investments	Marketable equity investments	(8)		(19)		11		(10)		(32)		22		Marketable equity investments	(46)		(21)		(25)
Privately held investments	Privately held investments	(120)		166		(286)		(193)		492		(685)		Privately held investments	(5)		(92)		87
Net gains (losses) on investments	Net gains (losses) on investments	(134)		149		(283)		(218)		478		(696)		Net gains (losses) on investments	(71)		(119)		48
Other gains (losses), net	Other gains (losses), net	(8)		17		(25)		(47)		(32)		(15)		Other gains (losses), net	(12)		(15)		3
Other income (loss), net	Other income (loss), net	$	(142)	$	166	$	(308)	$	(265)	$	446	$	(711)	Other income (loss), net	$	(83)	$	(134)	$	51

~~Three Months Ended April 29, 2023 Compared with Three Months Ended April 30, 2022~~

The decrease in our other income (loss), net was primarily driven by impairment charges and higher unrealized losses on our privately held investments, changes in net gains (losses) on available-for-sale debt investments and marketable equity investments and unfavorable impacts from foreign exchange.

~~Nine Months Ended April 29, 2023 Compared with Nine Months Ended April 30, 2022~~

~~The decrease in our other income (loss), net was primarily driven by realized and unrealized losses and impairment charges on our privately held investments.~~

~~Provision for Income Taxes~~

~~Three Months Ended April 29, 2023 Compared with Three Months Ended April 30, 2022~~

The provision for income taxes resulted in an effective tax rate of 18.8% for the third quarter of fiscal 2023 compared with 19.9% for the third quarter of fiscal 2022. The decrease in the effective tax rate was primarily due to an increase in a U.S. foreign-derived intangible income deduction benefit driven by the capitalization and amortization of R&D expenses effective for fiscal 2023 as required by the Tax Cuts and Jobs Act, partially offset by a decrease in federal research credit benefit.

~~Nine Months Ended April 29, 2023 Compared with Nine Months Ended April 30, 2022~~

The provision for income taxes resulted in an effective tax rate of 20.2% for the first nine months of fiscal 2023 compared with 18.7% for the first nine months of fiscal 2022. The increase in the effective tax rate was primarily due to an increase in net

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

~~discrete~~Three Months Ended October 28, 2023 Compared with Three Months Ended October 29, 2022

The increase in our other income (loss), net was primarily driven by lower realized losses and impairment charges on our privately held investments and changes in net gains (losses) on available-for-sale debt investments and marketable equity investments.

Provision for Income Taxes

Three Months Ended October 28, 2023 Compared with Three Months Ended October 29, 2022

The provision for income taxes resulted in an effective tax ~~expenses,~~rate of 18.1% for the first quarter of fiscal 2024 compared with 23.2% for the first quarter of fiscal 2023. The decrease in the effective tax rate was primarily due to a decrease in ~~stock based compensation windfall, and the impact of new U.S. foreign~~net discrete tax credit regulations effective for fiscal 2023. The increase was partially offset by a U.S. foreign-derived intangible income deduction benefit driven by the capitalization and amortization of R&D expenses effective for fiscal 2023 as required by the Tax Cuts and Jobs Act.expenses.

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LIQUIDITY AND CAPITAL RESOURCES

The following sections discuss the effects of changes in our balance sheet, our capital allocation strategy including stock repurchase program and dividends, our contractual obligations, and certain other commitments and activities on our liquidity and capital resources.

Balance Sheet and Cash Flows

Cash and Cash Equivalents and Investments The following table summarizes our cash and cash equivalents and investments (in millions):


		April 29, 2023		July 30, 2022		Increase (Decrease)			October 28, 2023		July 29, 2023		Increase (Decrease)
Cash and cash equivalents	Cash and cash equivalents	$	8,044	$	7,079	$	965	Cash and cash equivalents	$	9,602	$	10,123	$	(521)
Available-for-sale debt investments	Available-for-sale debt investments	14,898		11,947		2,951		Available-for-sale debt investments	13,512		15,592		(2,080)
Marketable equity securities	Marketable equity securities	346		241		105		Marketable equity securities	409		431		(22)
Total	Total	$	23,288	$	19,267	$	4,021	Total	$	23,523	$	26,146	$	(2,623)

The net ~~increase~~decrease in cash and cash equivalents and investments in the first ~~nine months~~quarter of fiscal ~~2023~~2024 was primarily driven ~~by cash provided by operating activities of $13.9 billion. This source of cash was partially offset~~ by cash returned to stockholders in the form of cash dividends of $1.6 billion and repurchases of common stock of ~~$3.0~~$1.3 billion, net cash paid for acquisitions and ~~cash dividends~~divestitures of ~~$4.7~~$0.9 billion, a net decrease of debt of ~~$1.1~~$0.8 billion and capital expenditures of ~~$0.6~~$0.1 billion.

~~Beginning in fiscal 2023, we~~ These uses of cash were ~~required to capitalize and amortize R&D expenses as required~~partially offset by ~~the Tax Cuts and Jobs Act. This change will result in significantly higher~~net cash paid for income taxes. In February 2023, an IRS announcement related to the California floods (IR-2023-33) postponed our remaining fiscal 2023 U.S. federal income tax payment deadlines until October 2023. Asprovided by operating activities of ~~April 29, 2023, we have deferred approximately $1.7 billion of federal tax payments. We expect to defer an additional federal tax payment in the fourth quarter of fiscal 2023. Our~~$2.4 billion. The net cash ~~paid for income taxes~~provided by operating activities for the first quarter of fiscal 2024 ~~will significantly increase~~includes a fiscal 2023 federal tax payment of $2.8 billion that was deferred by the IRS as a result of ~~these deferred federal tax payments.~~the California floods.

In addition to cash requirements in the normal course of business, on September 21, 2023, we announced our intent to acquire Splunk. Under the terms of the agreement, we have agreed to pay $157 per share in cash, representing approximately $28 billion in equity value. See further discussion of liquidity and future payments under “Liquidity and Capital Resource Requirements” below.

We maintain an investment portfolio of various holdings, types, and maturities. We classify our investments as short-term investments based on their nature and their availability for use in current operations. We believe the overall credit quality of our portfolio is strong, with our cash equivalents and our available-for-sale debt investment portfolio consisting primarily of high quality investment-grade securities. We believe that our strong cash and cash equivalents and investments position allows us to use our cash resources for strategic investments to gain access to new technologies, for acquisitions, for customer financing activities, for working capital needs, and for the repurchase of shares of common stock and payment of dividends as discussed below.

Securities Lending We periodically engage in securities lending activities with certain of our available-for-sale debt investments. These transactions are accounted for as a secured lending of the securities, and the securities are typically loaned only on an overnight basis. We require collateral equal to at least 102% of the fair market value of the loaned security and that the collateral be in the form of cash or liquid, high-quality assets. We engage in these secured lending transactions only with highly creditworthy counterparties, and the associated portfolio custodian has agreed to indemnify us against collateral losses. We did not experience any losses in connection with the secured lending of securities during the periods presented. As of ~~April 29,~~October 28, 2023 and July ~~30, 2022,~~29, 2023, we had no outstanding securities lending transactions.

Free Cash Flow and Capital Allocation As part of our capital allocation strategy, we target to return a minimum of 50% of our free cash flow annually to our stockholders through cash dividends and repurchases of common stock.

We define free cash flow as net cash provided by operating activities less cash used to acquire property and equipment. The following table reconciles our net cash provided by operating activities to free cash flow (in millions):


		Nine Months Ended					Three Months Ended
		April 29, 2023		April 30, 2022			October 28, 2023		October 29, 2022
Net cash provided by operating activities	Net cash provided by operating activities	$	13,920	$	9,549	Net cash provided by operating activities	$	2,371	$	3,962
Acquisition of property and equipment	Acquisition of property and equipment	(616)		(338)		Acquisition of property and equipment	(134)		(176)
Free cash flow	Free cash flow	$	13,304	$	9,211	Free cash flow	$	2,237	$	3,786

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We expect that cash provided by operating activities may fluctuate in future periods as a result of a number of factors, including fluctuations in our operating results, the rate at which products are shipped during the quarter (which we refer to as shipment linearity), the timing and collection of accounts receivable and financing receivables, inventory and supply chain management, deferred revenue, and the timing and amount of tax and other payments. We will pay approximately $1.4 billion of the U.S. transition tax in the second quarter of fiscal 2024. For additional discussion, see “Part II, Item 1A. Risk Factors” in this report.

We consider free cash flow to be a liquidity measure that provides useful information to management and investors because of our intent to return a stated percentage of free cash flow to stockholders in the form of dividends and stock repurchases. We further regard free cash flow as a useful measure because it reflects cash that can be used to, among other things, invest in our business, make strategic acquisitions, repurchase common stock, and pay dividends on our common stock, after deducting capital investments. A limitation of the utility of free cash flow as a measure of financial performance and liquidity is that the free cash flow does not represent the total increase or decrease in our cash balance for the period. In addition, we have other required uses of cash, including repaying the principal of our outstanding indebtedness. Free cash flow is not a measure calculated in accordance with U.S. generally accepted accounting principles and should not be regarded in isolation or as an alternative for net cash provided by operating activities or any other measure calculated in accordance with such principles, and other companies may calculate free cash flow in a different manner than we do.

The following table summarizes the dividends paid and stock repurchases (in millions, except per-share amounts):


		DIVIDENDS				STOCK REPURCHASE PROGRAM								DIVIDENDS				STOCK REPURCHASE PROGRAM
Quarter Ended	Quarter Ended	Per Share		Amount		Shares	Weighted-Average Price per Share		Amount		TOTAL		Quarter Ended	Per Share		Amount		Shares	Weighted-Average Price per Share		Amount		TOTAL
Fiscal 2024													Fiscal 2024
October 28, 2023													October 28, 2023	$	0.39	$	1,580	23	$	54.53	$	1,252	$	2,832

Fiscal 2023	Fiscal 2023												Fiscal 2023
July 29, 2023													July 29, 2023	$	0.39	$	1,589	25	$	50.49	$	1,254	$	2,843
April 29, 2023	April 29, 2023	$	0.39	$	1,593	25	$	49.45	$	1,259	$	2,852	April 29, 2023	$	0.39	$	1,593	25	$	49.45	$	1,259	$	2,852
January 28, 2023	January 28, 2023	$	0.38	$	1,560	26	$	47.72	$	1,256	$	2,816	January 28, 2023	$	0.38	$	1,560	26	$	47.72	$	1,256	$	2,816
October 29, 2022	October 29, 2022	$	0.38	$	1,560	12	$	43.76	$	502	$	2,062	October 29, 2022	$	0.38	$	1,560	12	$	43.76	$	502	$	2,062

Fiscal 2022
July 30, 2022		$	0.38	$	1,567	54	$	44.02	$	2,402	$	3,969
April 30, 2022		$	0.38	$	1,555	5	$	54.20	$	252	$	1,807
January 29, 2022		$	0.37	$	1,541	82	$	58.36	$	4,824	$	6,365
October 30, 2021		$	0.37	$	1,561	5	$	56.49	$	256	$	1,817

The remaining authorized amount for stock repurchases under this program is approximately ~~$12.2~~$9.7 billion, with no termination date.

Accounts Receivable, Net The following table summarizes our accounts receivable, net (in millions):

April 29,
2023 July 30,
2022 Increase (Decrease)
Accounts receivable, net $ 5,104 $ 6,622 $ (1,518)


	October 28, 2023		July 29, 2023		Increase (Decrease)
Accounts receivable, net	$	4,833	$	5,854	$	(1,021)

Our accounts receivable net, as of ~~April 29,~~October 28, 2023 decreased by approximately ~~23%~~17%, as compared with the end of fiscal ~~2022,~~2023, primarily due to timing and amount of product and service billings in the ~~third~~first quarter of fiscal ~~2023~~2024 compared with the fourth quarter of fiscal ~~2022.~~2023.

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Inventory Supply Chain The following table summarizes our inventories and inventory purchase commitments with contract manufacturers and suppliers (in millions):


		April 29, 2023		July 30, 2022		July 31, 2021		Variance vs. July 30, 2022		Variance vs. July 31, 2021			October 28, 2023		July 29, 2023		July 30, 2022		Variance vs. July 29, 2023		Variance vs. July 30, 2022
Inventories	Inventories	$	3,474	$	2,568	$	1,559	$	906	$	1,915	Inventories	$	3,342	$	3,644	$	2,568	$	(302)	$	774
Inventory purchase commitments	Inventory purchase commitments	$	9,059	$	12,964	$	10,254	$	(3,905)	$	(1,195)	Inventory purchase commitments	$	6,504	$	7,253	$	12,964	$	(749)	$	(6,460)
Inventory deposits and prepayments	Inventory deposits and prepayments	$	1,642	$	1,484	$	162	$	158	$	1,480	Inventory deposits and prepayments	$	1,032	$	1,109	$	1,484	$	(77)	$	(452)

The following table summarizes our inventory purchase commitments with contract manufacturers and suppliers by period (in millions):


		April 29, 2023		July 30, 2022		July 31, 2021		Variance vs. July 30, 2022		Variance vs. July 31, 2021			October 28, 2023		July 29, 2023		July 30, 2022		Variance vs. July 29, 2023		Variance vs. July 30, 2022
Less than 1 year	Less than 1 year	$	7,073	$	9,954	$	6,903	$	(2,881)	$	170	Less than 1 year	$	4,731	$	5,270	$	9,954	$	(539)	$	(5,223)
1 to 3 years	1 to 3 years	1,618		2,240		1,806		(622)		(188)		1 to 3 years	1,646		1,783		2,240		(137)		(594)
3 to 5 years	3 to 5 years	368		770		1,545		(402)		(1,177)		3 to 5 years	127		200		770		(73)		(643)
Total	Total	$	9,059	$	12,964	$	10,254	$	(3,905)	$	(1,195)	Total	$	6,504	$	7,253	$	12,964	$	(749)	$	(6,460)

Inventory as of ~~April 29,~~October 28, 2023 ~~increased~~decreased by ~~35%~~8% and inventory purchase commitments with contract manufacturers and suppliers decreased by ~~30%~~10% from our balances at the end of fiscal ~~2022.~~2023. The combined decrease of ~~19%~~10% in our inventory and inventory purchase commitments as compared with the end of fiscal ~~2022~~2023 was primarily due to fulfillment of customer demand as overall supply constraints ~~continued to improve~~improved and our continued efforts to work with contract manufacturers and suppliers to optimize our inventory and purchase commitment levels.

We increased our balances in prior fiscal years in order to address significant supply constraints seen industry-wide. The increases were primarily due to arrangements to secure supply and pricing for certain product components and commitments with contract manufacturers to meet customer demand and to address extended lead times, as well as advance payments with suppliers to secure future supply, as a result of the supply constraints. ~~We have partnered with several of our key suppliers utilizing our volume purchasing and extending supply coverage, including revising supplier arrangements.~~ As discussed, our risks of future material excess and obsolete inventory and related losses are further outlined in the Result of Operations—Product Gross Margin section.

Our inventory purchase commitments are for short-term product manufacturing requirements as well as for commitments to suppliers to secure manufacturing capacity. Certain of our inventory purchase commitments with contract manufacturers and suppliers relate to arrangements to secure supply and pricing for certain product components for multi-year periods. A significant portion of our reported purchase commitments arising from these agreements are firm, noncancelable, and unconditional commitments. In certain instances, these agreements allow us the option to cancel, reschedule, and adjust our requirements based on our business needs prior to firm orders being placed.

Inventory and supply chain management remain areas of focus as we balance the need to maintain supply chain flexibility to help ensure competitive lead times with the risk of inventory obsolescence because of supply constraints, rapidly changing technology and customer requirements. We believe the amount of our inventory and inventory purchase commitments is appropriate for our current and expected customer demand and revenue levels.

Financing Receivables and Guarantees The following table summarizes our financing receivables (in millions):

April 29,
2023 July 30,
2022 Increase (Decrease)
Loan receivables, net $ 5,826 $ 6,739 $ (913)
Lease receivables, net 969 1,175 (206)
Total, net $ 6,795 $ 7,914 $ (1,119)

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~~CISCO SYSTEMS, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)~~


	October 28, 2023		July 29, 2023		Increase (Decrease)
Loan receivables, net	$	5,671	$	5,857	$	(186)
Lease receivables, net	1,067		978		89
Total, net	$	6,738	$	6,835	$	(97)

Financing Receivables Our financing arrangements include loans and leases. Our loan receivables include customer financing for purchases of our hardware, software and services (including technical support and advanced services), and also may include

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

additional funds for other costs associated with network installation and integration of our products and services. Lease receivables include sales-type leases. Arrangements related to leases are generally collateralized by a security interest in the underlying assets. Financing receivables decreased by ~~14%~~1%, as compared with the end of fiscal ~~2022.~~2023.

Financing Guarantees In the normal course of business, third parties may provide financing arrangements to our customers and channel partners under financing programs. The financing arrangements provided by third parties are related to leases and loans and typically have terms of up to three years. In some cases, we provide guarantees to third parties for these lease and loan arrangements. The financing arrangements to channel partners consist of revolving short-term financing provided by third parties, with payment terms generally ranging from 60 to 90 days. In certain instances, these financing arrangements result in a transfer of our receivables to the third party. The receivables are derecognized upon transfer, as these transfers qualify as true sales, and we receive payments for the receivables from the third party based on our standard payment terms.

The volume of channel partner financing was ~~$23.4~~$8.2 billion and $~~20.3~~7.6 billion for the first ~~nine months~~quarter of fiscal ~~2023~~2024 and ~~2022,~~2023, respectively. These financing arrangements facilitate the working capital requirements of the channel partners, and in some cases, we guarantee a portion of these arrangements. The balance of the channel partner financing subject to guarantees was ~~$1.8~~$1.5 billion and ~~$1.4~~$1.7 billion as of ~~April 29,~~October 28, 2023 and July ~~30, 2022,~~29, 2023, respectively. We could be called upon to make payments under these guarantees in the event of nonpayment by the channel partners. Historically, our payments under these arrangements have been immaterial. Where we provide a guarantee, we defer the revenue associated with the channel partner financing arrangement in accordance with revenue recognition policies, or we record a liability for the fair value of the guarantees. In either case, the deferred revenue is recognized as revenue when the guarantee is removed. As of ~~April 29,~~October 28, 2023, the total maximum potential future payments related to these guarantees was approximately ~~$177~~$142 million, of which approximately ~~$40~~$29 million was recorded as deferred revenue.

Borrowings

Senior Notes The following table summarizes the principal amount of our senior notes (in millions):


		Maturity Date	April 29, 2023		July 30, 2022			Maturity Date	October 28, 2023		July 29, 2023
Senior notes:	Senior notes:						Senior notes:
Fixed-rate notes:	Fixed-rate notes:						Fixed-rate notes:
2.60%		February 28, 2023	$	—	$	500
2.20%	2.20%	September 20, 2023	750		750		2.20%	September 20, 2023	$	—	$	750
3.625%	3.625%	March 4, 2024	1,000		1,000		3.625%	March 4, 2024	1,000		1,000
3.50%	3.50%	June 15, 2025	500		500		3.50%	June 15, 2025	500		500
2.95%	2.95%	February 28, 2026	750		750		2.95%	February 28, 2026	750		750
2.50%	2.50%	September 20, 2026	1,500		1,500		2.50%	September 20, 2026	1,500		1,500
5.90%	5.90%	February 15, 2039	2,000		2,000		5.90%	February 15, 2039	2,000		2,000
5.50%	5.50%	January 15, 2040	2,000		2,000		5.50%	January 15, 2040	2,000		2,000
Total	Total		$	8,500	$	9,000	Total		$	7,750	$	8,500

Interest is payable semiannually on each class of the senior fixed-rate notes, each of which is redeemable by us at any time, subject to a make-whole premium. We were in compliance with all debt covenants as of ~~April 29,~~October 28, 2023.

Commercial Paper We have a short-term debt financing program in which up to $10.0 billion is available through the issuance of commercial paper notes. We use the proceeds from the issuance of commercial paper notes for general corporate purposes. We had no commercial paper notes outstanding as of ~~April 29,~~October 28, 2023 and ~~$0.6 billion in commercial paper outstanding as of~~ July ~~30, 2022.~~29, 2023.

Credit Facility On May 13, 2021, we entered into a 5-year credit agreement with certain institutional lenders that provides for a $3.0 billion unsecured revolving credit facility that is scheduled to expire on May 13, 2026. As of ~~April 29,~~October 28, 2023, we were in compliance with the required interest coverage ratio and the other covenants, and we had not borrowed any funds under the credit agreement. On April 18, 2023, we entered into an amendment to the credit agreement to replace the LIBOR index with Term SOFR.

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~~CISCO SYSTEMS, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)~~

defined as the highest of (x) the Bank of America prime rate, (y) the Federal Funds rate plus 0.50% and (z) Term SOFR plus 1.0%), (b) with respect to loans in Euros, EURIBOR, (c) with respect to loans in Yen, TIBOR and (d) with respect to loans in Pounds Sterling, SONIA, plus a margin that is based on our senior debt credit ratings as published by Standard & Poor’s Financial Services, LLC and Moody’s Investors Service, Inc., provided that in no event will the interest rate be less than 0.0%.

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CISCO SYSTEMS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

We will pay a quarterly commitment fee during the term of the 5-year credit agreement which may vary depending on our senior debt credit ratings. In addition, the 5-year credit agreement incorporates certain sustainability-linked metrics. Specifically, our applicable interest rate and commitment fee are subject to upward or downward adjustments if we achieve, or fail to achieve, certain specified targets based on two key performance indicator metrics: (i) social impact and (ii) foam reduction. We may also, upon the agreement of either the then-existing lenders or additional lenders not currently parties to the agreement, increase the commitments under the credit facility by up to an additional $2.0 billion and, at our option, extend the maturity of the facility for an additional year up to two times. The credit agreement requires that we comply with certain covenants, including that we maintain an interest coverage ratio as defined in the agreement.

Remaining Performance Obligations The following table presents the breakdown of remaining performance obligations (in millions):


		April 29, 2023		July 30, 2022		Increase (Decrease)			October 28, 2023		July 29, 2023		Increase (Decrease)
Product	Product	$	14,681	$	14,090	$	591	Product	$	16,011	$	15,802	$	209
Service	Service	17,401		17,449		(48)		Service	18,742		19,066		(324)
Total	Total	$	32,082	$	31,539	$	543	Total	$	34,753	$	34,868	$	(115)

Short-term RPO	Short-term RPO	$	16,869	$	16,936	$	(67)	Short-term RPO	$	17,617	$	17,910	$	(293)
Long-term RPO	Long-term RPO	15,213		14,603		610		Long-term RPO	17,136		16,958		178
Total	Total	$	32,082	$	31,539	$	543	Total	$	34,753	$	34,868	$	(115)

Total remaining performance obligations as of ~~April 29,~~October 28, 2023 ~~increased 2%~~were flat compared to the end of fiscal ~~2022.~~2023. Remaining performance obligations for product increased by 4%1% compared to the end of fiscal ~~2022.~~2023. Remaining performance obligations for service ~~was flat.~~decreased by 2%. We expect approximately ~~53%~~51% of total remaining performance obligations to be recognized as revenue over the next 12 months.

Deferred Revenue The following table presents the breakdown of deferred revenue (in millions):


		April 29, 2023		July 30, 2022		Increase (Decrease)			October 28, 2023		July 29, 2023		Increase (Decrease)
Product	Product	$	10,895	$	10,427	$	468	Product	$	11,689	$	11,505	$	184
Service	Service	13,365		12,837		528		Service	13,970		14,045		(75)
Total	Total	$	24,260	$	23,264	$	996	Total	$	25,659	$	25,550	$	109
Reported as:	Reported as:							Reported as:
Current	Current	$	13,249	$	12,784	$	465	Current	$	13,812	$	13,908	$	(96)
Noncurrent	Noncurrent	11,011		10,480		531		Noncurrent	11,847		11,642		205
Total	Total	$	24,260	$	23,264	$	996	Total	$	25,659	$	25,550	$	109

Total deferred revenue ~~increased 4%~~was flat compared to the end of fiscal ~~2022.~~2023. The increase in deferred product revenue of 2% was primarily due to increased deferrals related to our recurring software offerings. The ~~increase~~decrease in deferred service revenue of 4%1% was driven by the impact of ~~contract renewals, partially offset by~~ongoing amortization of deferred service revenue.

Contractual Obligations

Transition Tax Payable

The income tax payable outstanding as of ~~April 29,~~October 28, 2023 for the U.S. transition tax on accumulated earnings for foreign subsidiaries was $5.5 billion. Approximately $1.4 billion is payable in less than one year and $4.1 billion is payable between 1 to 3 years.

For our Contractual Obligations see our Annual Report on Form 10-K for the fiscal year ended July ~~30, 2022.~~29, 2023.

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CISCO SYSTEMS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Other Commitments

In connection with our acquisitions, we have agreed to pay certain additional amounts contingent upon the achievement of certain agreed-upon technology, development, product, or other milestones or the continued employment with us of certain employees of the acquired entities. See Note 14 to the Consolidated Financial Statements.

We also have certain funding commitments primarily related to our privately held investments, some of which may be based on the achievement of certain agreed-upon milestones or are required to be funded on demand. The funding commitments were $0.3 billion ~~and $0.4 billion~~ as of ~~April 29,~~each of October 28, 2023 and July ~~30, 2022, respectively.~~29, 2023.

In the ordinary course of business, we have privately held investments and provide financing to certain customers. Certain of these investments are considered to be variable interest entities. We evaluate on an ongoing basis our privately held investments and customer financings, and we have determined that as of ~~April 29,~~October 28, 2023 there were no material unconsolidated variable interest entities.

On an ongoing basis, we reassess our privately held investments and customer financings to determine if they are variable interest entities and if we would be regarded as the primary beneficiary pursuant to the applicable accounting guidance. As a result of this ongoing assessment, we may be required to make additional disclosures or consolidate these entities. Because we may not control these entities, we may not have the ability to influence these events.

We provide financing guarantees, which are generally for various third-party financing arrangements extended to our channel partners. We could be called upon to make payments under these guarantees in the event of nonpayment by the channel partners. See the previous discussion of these financing guarantees under “Financing Receivables and Guarantees.”

Liquidity and Capital Resource Requirements

Based on past performance and current expectations, we believe our cash and cash equivalents, investments, cash generated from operations, and ability to access capital markets and committed credit lines will satisfy, through at least the next 12 months, our liquidity requirements, both in total and domestically, including the following: working capital needs (including inventory and other supply related payments), capital expenditures, investment requirements, stock repurchases, cash dividends, contractual obligations, commitments, principal and interest payments on debt, pending acquisitions, future customer financings, and other liquidity requirements associated with our operations. We ~~expect increased payments related~~recently announced our intent to ~~inventory~~acquire Splunk. Under the terms of the agreement, we have agreed to pay $157 per share in cash, representing approximately $28 billion in equity value. We anticipate this transaction will be financed with a combination of cash and debt. The acquisition is expected to close by the end of the third quarter of calendar year 2024, subject to regulatory approval and other ~~supply related payments through at least the next 12 months.~~customary closing conditions, including approval by Splunk shareholders. There are no other transactions, arrangements, or relationships with unconsolidated entities or other persons that are reasonably likely to materially affect the liquidity and the availability of, as well as our requirements for, capital resources.

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Item 3.			Quantitative and Qualitative Disclosures About Market Risk

Our financial position is exposed to a variety of risks, including interest rate risk, equity price risk, and foreign currency exchange risk.

Interest Rate Risk

Available-for-Sale Debt Investments We maintain an investment portfolio of various holdings, types, and maturities. Our primary objective for holding available-for-sale debt investments is to achieve an appropriate investment return consistent with preserving principal and managing risk. At any time, a sharp rise in market interest rates could have a material adverse impact on the fair value of our available-for-sale debt investment portfolio. Conversely, declines in interest rates, including the impact from lower credit spreads, could have a material adverse impact on interest income for our investment portfolio. We may utilize derivative instruments designated as hedging instruments to achieve our investment objectives. We had no outstanding hedging instruments for our available-for-sale debt investments as of ~~April 29,~~October 28, 2023. Our available-for-sale debt investments are held for purposes other than trading. Our available-for-sale debt investments are not leveraged as of ~~April 29,~~October 28, 2023. We monitor our interest rate and credit risks, including our credit exposures to specific rating categories and to individual issuers. We believe the overall credit quality of our portfolio is strong.

Financing Receivables As of ~~April 29,~~October 28, 2023, our financing receivables had a carrying value of ~~$6.8~~$6.7 billion, compared with ~~$7.9~~$6.8 billion as of July ~~30, 2022.~~29, 2023. As of ~~April 29,~~October 28, 2023, a hypothetical 50 basis points (“BPS”) increase or decrease in market interest rates would change the fair value of our financing receivables by a decrease or increase of approximately $0.1 billion, respectively.

Debt As of ~~April 29,~~October 28, 2023, we had ~~$8.5~~$7.8 billion in principal amount of senior fixed-rate notes outstanding. The carrying amount of the senior notes was ~~$8.4~~$7.7 billion, and the related fair value based on market prices was ~~$8.8~~$7.5 billion. As of ~~April 29,~~October 28, 2023, a hypothetical 50 BPS increase or decrease in market interest rates would change the fair value of the fixed-rate debt, excluding the $1.5 billion of hedged debt, by a decrease or increase of approximately ~~$0.3~~$0.2 billion, respectively. However, this hypothetical change in interest rates would not impact the interest expense on the fixed-rate debt that is not hedged.

Equity Price Risk

Marketable Equity Investments The fair value of our marketable equity investments is subject to market price volatility. We hold equity securities for strategic purposes or to diversify our overall investment portfolio. These equity securities are held for purposes other than trading. The total fair value of our marketable equity securities was ~~$346~~$409 million and ~~$241~~$431 million as of ~~April 29,~~October 28, 2023 and July ~~30, 2022,~~29, 2023, respectively.

Privately Held Investments These investments are recorded in other assets in our Consolidated Balance Sheets. The total carrying amount of our investments in privately held investments was $1.8 billion ~~and $1.9 billion~~ as of ~~April 29,~~each of October 28, 2023 and July ~~30, 2022, respectively.~~29, 2023. Some of these companies in which we invested are in the startup or development stages. These investments are inherently risky because the markets for the technologies or products these companies are developing are typically in the early stages and may never materialize. We could lose our entire investment in these companies. Our evaluation of privately held investments is based on the fundamentals of the businesses invested in, including, among other factors, the nature of their technologies and potential for financial return.

Foreign Currency Exchange Risk

Our foreign exchange forward contracts outstanding as of the respective period-ends are summarized in U.S. dollar equivalents as follows (in millions):


		April 29, 2023				July 30, 2022					October 28, 2023				July 29, 2023
		Notional Amount		Fair Value		Notional Amount		Fair Value			Notional Amount		Fair Value		Notional Amount		Fair Value
Forward contracts:	Forward contracts:									Forward contracts:
Purchased	Purchased	$	2,761	$	(19)	$	2,578	$	(50)	Purchased	$	3,083	$	(60)	$	3,014	$	(33)
Sold	Sold	$	2,119	$	20	$	1,943	$	50	Sold	$	2,589	$	58	$	2,406	$	31

We conduct business globally in numerous currencies. The direct effect of foreign currency fluctuations on revenue has not been material because our revenue is primarily denominated in U.S. dollars. However, if the U.S. dollar strengthens relative to other currencies, such strengthening could have an indirect effect on our revenue to the extent it raises the cost of our products to non-U.S. customers and thereby reduces demand. A weaker U.S. dollar could have the opposite effect. However, the precise indirect effect of currency fluctuations is difficult to measure or predict because our revenue is influenced by many factors in addition to the impact of such currency fluctuations.

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Approximately 70% of our operating expenses are U.S.-dollar denominated. In the first ~~nine months~~quarter of fiscal ~~2023,~~2024, foreign currency fluctuations, net of hedging, ~~decreased~~increased our combined R&D, sales and marketing, and G&A expenses by approximately ~~$349~~$26 million, or ~~2.6%~~0.6%, compared with the first ~~nine months~~quarter of fiscal ~~2022.~~2023. To reduce variability in operating expenses and service cost of sales caused by non-U.S.-dollar denominated operating expenses and costs, we may hedge certain forecasted foreign currency transactions with currency options and forward contracts. These hedging programs are not designed to provide foreign currency protection over long time horizons. In designing a specific hedging approach, we consider several factors, including offsetting exposures, significance of exposures, costs associated with entering into a particular hedge instrument, and potential effectiveness of the hedge. The gains and losses on foreign exchange contracts mitigate the effect of currency movements on our operating expenses and service cost of sales.

We also enter into foreign exchange forward and option contracts to reduce the short-term effects of foreign currency fluctuations on receivables and payables that are denominated in currencies other than the functional currencies of the entities. The market risks associated with these foreign currency receivables and payables relate primarily to variances from our forecasted foreign currency transactions and balances. We do not enter into foreign exchange forward or option contracts for speculative purposes.


Item 4.			Controls and Procedures

Evaluation of disclosure controls and procedures. Based on our management’s evaluation (with the participation of our principal executive officer and principal financial officer), as of the end of the period covered by this report, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”)) are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting. There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our ~~third~~first quarter of fiscal ~~2023~~2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION


Item 1.			Legal Proceedings

For a description of our pending legal proceedings, see Note 14, “Commitments and Contingencies—(f) Legal Proceedings” in the Notes to Consolidated Financial Statements.

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Item 1A.			Risk Factors

Set forth below and elsewhere in this report and in other documents we file with the SEC are descriptions of the risks and uncertainties that could cause our actual results to differ materially from the results contemplated by the forward-looking statements contained in this report. The descriptions below include any material changes to and supersede the description of the risk factors affecting our business previously disclosed in “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended July ~~30, 2022.~~29, 2023.

Risks Related to our Business and Industry

~~Our business, results of operations and financial condition have been adversely affected and could in the future be materially adversely affected by the COVID-19 pandemic.~~

The COVID-19 pandemic and the resulting containment measures have caused economic and financial disruptions globally, including in most of the regions in which we sell our products and services and conduct our business operations. Beginning in the second half of fiscal 2020, the COVID-19 pandemic impacted our financial results and business operations. While we saw further improvements in the third quarter of fiscal 2023, we continue to manage through supply constraints seen industry-wide due to component shortages which have resulted in extended lead times and higher supply chain costs. The magnitude and duration of the disruption of the pandemic, its continuing impact on us, and resulting decline in global business activity is uncertain.

The COVID-19 pandemic and the responsive measures taken in many countries have adversely affected and could in the future materially adversely affect our business, results of operations and financial condition. Shelter-in-place and/or lockdown orders globally and other measures have and could in the future impact our supply chain. In addition, current and future restrictions or disruptions of transportation, such as reduced availability of air transport, port closures, and increased border controls or closures, can also impact our ability to meet customer demand and could materially adversely affect us. Our customers have also experienced, and may continue to experience, disruptions in their operations, which can result in delayed, reduced, or canceled orders, and increased collection risks, and which may adversely affect our results of operations.

The COVID-19 pandemic has also led to increased disruption and volatility in capital markets and credit markets. The pandemic and resulting economic uncertainty could adversely affect our liquidity and capital resources in the future. The inputs into certain of our judgments, assumptions, and estimates considered the economic implications of the COVID-19 pandemic on our critical and significant accounting estimates. The actual results that we experience may differ materially from our estimates. As the COVID-19 pandemic continues to develop, many of our estimates could require increased judgment and carry a higher degree of variability and volatility. As events continue to evolve our estimates may change materially in future periods.

The extent of the impact of the COVID-19 pandemic on our operational and financial performance is currently uncertain and will depend on many factors outside our control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the efficacy of available vaccines, the imposition of protective public safety measures, and the impact of the pandemic on the global economy. Potential negative impacts of these external factors include, but are not limited to, material adverse effects on demand for our products and services; our supply chain and sales and distribution channels; collectability of customer accounts; our ability to execute strategic plans; impairments; and our profitability and cost structure. To the extent the COVID-19 pandemic adversely affects our business, results of operations and financial condition, it may also have the effect of exacerbating the other risks discussed in this “Risk Factors” section.

Our operating results may fluctuate in future periods, which may adversely affect our stock price.

Our operating results have been in the past, and will continue to be, subject to quarterly and annual fluctuations as a result of numerous factors, some of which may contribute to more pronounced fluctuations in an uncertain global economic environment. These factors include:

•Fluctuations in demand for our products and services, especially with respect to service providers and Internet businesses, in part due to changes in the global economic environment

•Changes in sales and implementation cycles for our products and reduced visibility into our customers’ spending plans and associated revenue

•Our ability to maintain appropriate inventory levels and purchase commitments

•Price and product competition in the communications and networking industries, which can change rapidly due to technological innovation and different business models from various geographic regions

•The overall movement toward industry consolidation among both our competitors and our customers

•The introduction and market acceptance of new technologies and products, and our success in new and evolving markets, and in emerging technologies, as well as the adoption of new standards

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•The transformation of our business to deliver more software and subscription offerings where revenue is recognized over time

•Variations in sales channels, product costs, mix of products sold, or mix of direct sales and indirect sales

•The timing, size, and mix of orders from customers

•Manufacturing and customer lead times

•Fluctuations in our gross margins, and the factors that contribute to such fluctuations

•The ability of our customers, channel partners, contract manufacturers and suppliers to obtain financing or to fund capital expenditures, especially during a period of global credit market disruption or in the event of customer, channel partner, contract manufacturer or supplier financial problems

•Actual events, circumstances, outcomes, and amounts differing from judgments, assumptions, and estimates used in determining the values of certain assets (including the amounts of related valuation allowances), liabilities, and other items reflected in our Consolidated Financial Statements

•How well we execute on our strategy and operating plans and the impact of changes in our business model that could result in significant restructuring charges

•Our ability to achieve targeted cost reductions

•Benefits anticipated from our investments

•Changes in tax laws or accounting rules, or interpretations thereof

As a consequence, operating results for a particular future period are difficult to predict, and, therefore, prior results are not necessarily indicative of results to be expected in future periods. Any of the foregoing factors, or any other factors discussed elsewhere herein, could have a material adverse effect on our business, results of operations, and financial condition that could adversely affect our stock price.

Our operating results may be adversely affected by unfavorable economic and market conditions and the uncertain geopolitical environment.

Challenging economic conditions, including rising inflation, or other changes, worldwide have from time to time contributed, and may continue to contribute, to slowdowns in the communications and networking industries at large, as well as in specific segments and markets in which we operate, resulting in: reduced demand for our products as a result of continued constraints on IT-related capital spending by our customers, particularly service providers, and other customer markets as well; increased price competition for our products, not only from our competitors but also as a consequence of customers disposing of

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unutilized products; risk of excess and obsolete inventories; risk of supply constraints; risk of excess facilities and manufacturing capacity; and higher overhead costs as a percentage of revenue and higher interest expense.

The global macroeconomic environment continues to be challenging and inconsistent. In certain prior periods, we have seen a broad-based weakening in the global macroeconomic environment which has impacted and could impact in the future certain of our markets. Additionally, instability in the global credit markets, the impact of uncertainty regarding global central bank monetary policy, the instability in the geopolitical environment in many parts of the world (including as a result of the on-going Russia and Ukraine war, the Israel-Hamas war, and China-Taiwan relations), the current economic challenges in China, including global economic ramifications of Chinese economic difficulties, and other disruptions may continue to put pressure on global economic conditions. If global economic and market conditions, or economic conditions in key markets, remain uncertain or deteriorate further, we may experience material impacts on our business, operating results, and financial condition.

Our operating results in one or more segments may also be affected by uncertain or changing economic conditions particularly germane to that segment or to particular customer markets within that segment. In addition, reports of certain intelligence gathering methods of the U.S. government could affect customers’ perception of the products of IT companies which design and manufacture products in the United States. Trust and confidence in us as an IT supplier are critical to the development and growth of our markets. Impairment of that trust, or foreign regulatory actions taken in response to reports of certain intelligence gathering methods of the U.S. government, could affect the demand for our products from customers outside of the United States and could have an adverse effect on our operating results.

Our revenue for a particular period is difficult to predict, and a shortfall in revenue may harm our operating results.

As a result of a variety of factors discussed in this report, our revenue for a particular quarter is difficult to predict, especially in light of a challenging and inconsistent global macroeconomic environment (including as a result of the on-going Russia and Ukraine war and the Israel-Hamas war), and related market uncertainty. Our revenue may grow at a slower rate than in past periods, or decline as it did in certain prior periods. Our ability to meet financial expectations could also be adversely affected if the nonlinear sales pattern seen in some of our past quarters recurs in future periods. For example, we are currently seeing some slowing in orders from customers, particularly larger enterprise, service provider and cloud customers, as they implement elevated levels of product shipments from prior quarters, as discussed above. We have experienced periods of time during which shipments have exceeded net bookings or manufacturing issues have delayed shipments, leading to nonlinearity in shipping patterns. In addition to making it

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difficult to predict revenue for a particular period, nonlinearity in shipping can increase costs, because irregular shipment patterns result in periods of underutilized capacity and periods in which overtime expenses may be incurred, as well as in potential additional inventory management-related costs. In addition, to the extent that manufacturing issues and any related component shortages result in delayed shipments in the future, and particularly in periods in which our contract manufacturers are operating at higher levels of capacity, it is possible that revenue for a quarter could be adversely affected if such matters occur and are not remediated within the same quarter.

The timing of large orders can also have a significant effect on our business and operating results from quarter to quarter. From time to time, we receive large orders that have a significant effect on our operating results in the period in which the order is recognized as revenue. The timing of such orders is difficult to predict, and the timing of revenue recognition from such orders may affect period to period changes in revenue. As a result, our operating results could vary materially from quarter to quarter based on the receipt of such orders and their ultimate recognition as revenue. Longer than normal manufacturing lead times in the past have caused, and in the future could cause, some customers to place the same or a similar order multiple times within our various sales channels and to cancel the duplicative orders upon shipment or receipt of the product, or to also place orders with other vendors with shorter manufacturing lead times. Such multiple ordering (along with other factors) or risk of order cancellation may cause difficulty in predicting our revenue. Further, our efforts to improve manufacturing lead-time performance may result in more variability and less predictability in our revenue and operating results. In addition, when facing component supply-related challenges, we have increased our efforts in procuring components in order to meet customer expectations, which in turn contribute to an increase in inventory and purchase commitments. In ~~recent~~prior periods, we increased our inventory and purchase commitments in light of the significant supply constraints seen industry-wide due to component shortages. These increases in our inventory and purchase commitments to shorten lead times could also lead to material excess and obsolete inventory charges or other negative impacts to our product gross margin in future periods if ~~the~~product demand significantly weakens for ~~our products is less than our expectations.~~a sustained duration. We plan our operating expense levels based primarily on forecasted revenue levels. These expenses and the impact of long-term commitments are relatively fixed in the short term. A shortfall in revenue could lead to operating results being below expectations because we may not be able to quickly reduce these fixed expenses in response to short-term business changes. Any of the above factors could have a material adverse impact on our operations and financial results. For additional information and a further discussion of ~~current~~ impacts and risks related to our supply constraints, inventory commitments and our purchase commitments with contract manufacturers and suppliers, see “Results of Operations—Product Gross Margin—Supply Constraints Impacts and Risks”, “Liquidity and Capital Resources—Inventory Supply Chain” and Note 14 to the Consolidated Financial Statements.

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Supply chain issues, including financial problems of contract manufacturers or component suppliers, or a shortage of adequate component supply or manufacturing capacity that increase our costs or cause a delay in our ability to fulfill orders, could have an adverse impact on our business and operating results, and our failure to estimate customer demand properly may result in excess or obsolete component supply, which could adversely affect our gross margins.

The fact that we do not own or operate the bulk of our manufacturing facilities and that we are reliant on our extended supply chain could have an adverse impact on the supply of our products and on our business and operating results. Financial problems of either contract manufacturers or component suppliers, reservation of manufacturing capacity at our contract manufacturers by other companies, and industry consolidation occurring within one or more component supplier markets, such as the semiconductor market, in each case, could either limit supply or increase costs.

A reduction or interruption in supply, including disruptions on our global supply chain, caused in part by public health emergencies, geopolitical tensions (including as a result of China-Taiwan relations) or a significant natural disaster (including as a result of climate change); a significant increase in the price of one or more components (including as a result of inflation); a failure to adequately authorize procurement of inventory by our contract manufacturers; a failure to appropriately cancel, reschedule, or adjust our requirements based on our business needs; or a decrease in demand for our products could materially adversely affect our business, operating results, and financial condition and could materially damage customer relationships. Furthermore, as a result of binding price or purchase commitments with suppliers, we may be obligated to purchase components at prices that are higher than those available in the current market. In the event that we become committed to purchase components at prices in excess of the current market price when the components are actually used, our gross margins could decrease. In addition, vendors may be under pressure to allocate product to certain customers for business, regulatory or political reasons, and/or demand changes in agreed pricing as a condition of supply. Although we have generally secured additional supply or taken other mitigation actions when significant disruptions have occurred, if similar situations occur in the future, they could have a material adverse effect on our business, results of operations, and financial condition.

Our growth and ability to meet customer demands depend in part on our ability to obtain timely deliveries of parts from our suppliers and contract manufacturers. We have experienced component shortages in the past, including shortages caused by manufacturing process issues, that have affected our operations, including longer than normal lead times. ~~There is currently~~For example, in recent periods, there was a market shortage of semiconductor and other component supply which ~~has~~ affected ~~and could further affect,~~ lead times, the cost

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of that supply, and our ability to meet customer demand for our products if we cannot secure sufficient supply in a timely manner. We continue to manage through supply constraints seen industry-wide due to component shortages. For example, we saw an additional unanticipated supply challenge with COVID-19 related lockdowns in certain parts of China in the second half of fiscal 2022 that resulted in a severe shortage of certain critical components.products. Additionally, we may in the future experience a shortage of certain component parts as a result of our own manufacturing issues, manufacturing issues at our suppliers or contract manufacturers, capacity problems experienced by our suppliers or contract manufacturers including capacity or cost problems resulting from industry consolidation, or strong demand for those parts. Growth in the economy is likely to create greater pressures on us and our suppliers to accurately project overall component demand and component demands within specific product categories and to establish optimal component levels and manufacturing capacity, especially for labor-intensive components, components for which we purchase a substantial portion of the supply, or the re-ramping of manufacturing capacity for highly complex products. During periods of shortages or delays the price of components may increase, or the components may not be available at all, and we may also encounter shortages if we do not accurately anticipate our needs. We may not be able to secure enough components at reasonable prices or of acceptable quality to build new products in a timely manner in the quantities or configurations needed. Accordingly, our revenue and gross margins could suffer until other sources can be developed.

Our operating results would also be adversely affected if, anticipating greater demand than actually develops, we commit to the purchase of more components than we need, which is more likely to occur ~~in a period~~during periods of demand uncertainties such as we have experienced in recent periods and expect to continue to experience over the short- and medium-term, such as those we are ~~currently experiencing. There can be no assurance that we will not encounter these problems in the future.~~experiencing with customers, particularly larger enterprise, service provider and cloud customers, as they implement elevated levels of product shipments from prior quarters, as discussed above. Although in many cases we use standard parts and components for our products, certain components are presently available only from a single source or limited sources, and a global economic downturn and related market uncertainty could negatively impact the availability of components from one or more of these sources, especially during times such as we have recently seen when there are supplier constraints based on labor and other actions taken during economic downturns. We may not be able to diversify sources in a timely manner, which could harm our ability to deliver products to customers and seriously impact present and future sales.

We believe that we may be faced with the following challenges in the future: new markets in which we participate may grow quickly, which may make it difficult to quickly obtain significant component capacity; as we acquire companies and new technologies, we may be dependent on unfamiliar supply chains or relatively small supply partners; and we face competition for certain components that are supply-constrained, from existing competitors, and companies in other markets.

Manufacturing capacity and component supply constraints could continue to be significant issues for us. We purchase components from a variety of suppliers and use several contract manufacturers to provide manufacturing services for our products. During the normal course of business, in order to improve manufacturing lead-time performance and to help ensure

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adequate component supply, we enter into agreements with contract manufacturers and suppliers that either allow them to procure inventory based upon criteria as defined by us or that establish the parameters defining our requirements. In certain instances, these agreements allow us the option to cancel, reschedule, and adjust our requirements based on our business needs prior to firm orders being placed. When facing component supply-related challenges we have increased our efforts in procuring components in order to meet customer expectations, which in turn contributes to an increase in inventory and purchase commitments. In ~~recent~~past periods, we increased our inventory and purchase commitments in light of the supply constraints seen industry-wide due to component shortages. These increases in our inventory and purchase commitments to shorten lead times could also lead to material excess and obsolete inventory charges or other negative impacts to our product gross margin in future periods if ~~the demand for our products is less than our expectations. If~~ we fail to anticipate customer demand properly ~~an oversupply of parts could result in excess or obsolete components that could adversely affect our gross margins.~~and product demand significantly weakens for a sustained duration. For additional information and a further discussion of ~~current~~ impacts and risks related to our supply constraints, inventory commitments and our purchase commitments with contract manufacturers and suppliers, see “Results of Operations—Product Gross Margin—Supply Constraints Impacts and Risks”, “Liquidity and Capital Resources—Inventory Supply Chain” and Note 14 to the Consolidated Financial Statements.

We expect gross margin to vary over time, and our level of product gross margin may not be sustainable.

~~Our~~Although our product gross margin increased in the first quarter of fiscal 2024 and in fiscal 2023, our level of product gross margins declined in fiscal 2022 and have declined in certain prior periods on a year-over-year basis, and could decline in future periods due to adverse impacts from various factors, including:

•Changes in customer, geographic, or product mix, including mix of configurations within each product group

•Introduction of new products, including products with price-performance advantages, and new business models including the transformation of our business to deliver more software and subscription offerings

•Our ability to reduce production costs

•Entry into new markets or growth in lower margin markets, including markets with different pricing and cost structures, through acquisitions or internal development

•Sales discounts

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•Increases in material, labor or other manufacturing-related costs (i.e. component costs, broker fees, expedited freight and overtime) or higher supply chain logistics costs, any of which could be significant, especially during periods of supply constraints for certain costs, such as those ~~currently impacting~~that have impacted the market for components, including semiconductors and memory in past periods, and which costs have in the past and may continue to be exacerbated by inflation

•Excess inventory, inventory holding charges, and obsolescence charges

•Changes in shipment volume

•The timing of revenue recognition and revenue deferrals

•Increased costs (including those caused by tariffs or economic conditions, including inflation), loss of cost savings or dilution of savings due to changes in component pricing or charges incurred due to inventory holding periods if parts ordering does not correctly anticipate product demand or if the financial health of either contract manufacturers or suppliers deteriorates

•Lower than expected benefits from value engineering

•Increased price competition, including competitors from Asia, especially from China

•Changes in distribution channels

•Increased warranty or royalty costs

•Increased amortization of purchased intangible assets, especially from acquisitions

•How well we execute on our strategy and operating plans

Changes in service gross margin may result from various factors such as changes in the mix between technical support services and advanced services, as well as the timing of technical support service contract initiations and renewals and the addition of personnel and other resources to support higher levels of service business in future periods.

Sales to the service provider and cloud market are especially volatile, and weakness in orders from this industry may harm our operating results and financial condition.

Sales to the service provider and cloud market have been characterized by large and sporadic purchases, especially relating to our router sales and sales of certain other ~~Secure, Agile Networks~~Networking and Collaboration products, in addition to longer sales cycles. Service provider and cloud product orders significantly decreased during the first ~~nine months~~quarter of fiscal 2024 and fiscal 2023 and we have experienced similar weakness in certain prior periods, and at various times in the past, including in recent quarters as was seen in the third quarter of fiscal 2023, we have experienced significant weakness in product orders from service providers.periods. Product orders from the service provider and cloud market could

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continue to decline and, as has been the case in the past, such weakness could persist over extended periods of time given fluctuating market conditions. Sales activity in this industry depends upon the stage of completion of expanding network infrastructures; the availability of funding; and the extent to which service providers and cloud customers are affected by regulatory, economic, and business conditions in the country of operations. Weakness in orders from this industry, including as a result of any slowdown in capital expenditures by service providers (which may be more prevalent during a global economic downturn, or periods of economic, political or regulatory uncertainty), could have a material adverse effect on our business, operating results, and financial condition. Such slowdowns may continue or recur in future periods. Orders from this industry could decline for many reasons other than the competitiveness of our products and services within their respective markets. For example, in the past, many of our service provider and cloud customers have been materially and adversely affected by slowdowns in the general economy, by overcapacity, by changes in the service provider and cloud market, by regulatory developments, and by constraints on capital availability, resulting in business failures and substantial reductions in spending and expansion plans. These conditions have materially harmed our business and operating results in the past, and could affect our business and operating results in any future period. Finally, service provider and cloud customers typically have longer implementation cycles; require a broader range of services, including design services; demand that vendors take on a larger share of risks; often require acceptance provisions, which can lead to a delay in revenue recognition; and expect financing from vendors. All these factors can add further risk to business conducted with service providers.

Disruption of or changes in our distribution model could harm our sales and margins.

If we fail to manage distribution of our products and services properly, or if our distributors’ financial condition or operations weaken, our revenue and gross margins could be adversely affected. A substantial portion of our products and services is sold through our channel partners, and the remainder is sold through direct sales. Our channel partners include systems integrators, service providers, other third-party resellers, and distributors. Systems integrators and service providers typically sell directly to end users and often provide system installation, technical support, professional services, and other support services in addition to network equipment sales. Systems integrators also typically integrate our products into an overall solution, and a number of service providers are also systems integrators. Distributors stock inventory and typically sell to systems integrators, service providers, and other third-party resellers. We refer to sales through distributors as our two-tier system of sales to the end customer. If sales through

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indirect channels increase, this may lead to greater difficulty in forecasting the mix of our products and, to a degree, the timing of orders from our customers.

Historically, we have seen fluctuations in our gross margins based on changes in the balance of our distribution channels. There can be no assurance that changes in the balance of our distribution model in future periods would not have an adverse effect on our gross margins and profitability. Some factors could result in disruption of or changes in our distribution model, which could harm our sales and margins, including the following: competition with some of our channel partners, including through our direct sales, which may lead these channel partners to use other suppliers that do not directly sell their own products or otherwise compete with them; some of our channel partners may demand that we absorb a greater share of the risks that their customers may ask them to bear; some of our channel partners may have insufficient financial resources and may not be able to withstand changes and challenges in business conditions; and revenue from indirect sales could suffer if our distributors’ financial condition or operations weaken. In addition, we depend on our channel partners globally to comply with applicable regulatory requirements. To the extent that they fail to do so, that could have a material adverse effect on our business, operating results, and financial condition. Further, sales of our products outside of agreed territories can result in disruption to our distribution channels.

The markets in which we compete are intensely competitive, which could adversely affect our achievement of revenue growth.

The markets in which we compete are characterized by rapid change, converging technologies, and a migration to networking and communications solutions that offer relative advantages. These market factors represent a competitive threat to us. We compete with numerous vendors in each product category. The overall number of our competitors providing niche product solutions may increase. Also, the identity and composition of competitors may change as we increase our activity in newer product areas, and in key priority and growth areas. For example, as products related to network programmability, such as software defined networking (SDN) products, have become more prevalent, we ~~expect to face~~have faced increased competition from companies that develop networking products based on commoditized hardware, referred to as “white box” hardware, to the extent customers decide to purchase those product offerings instead of ours. In addition, the growth in demand for technology delivered as a service enables new competitors to enter the market. As we continue to expand globally, we may see new competition in different geographic regions. In particular, we have experienced price-focused competition from competitors in Asia, especially from China, and we anticipate this will continue.

Some of our competitors compete across many of our product lines, while others are primarily focused in a specific product area. Barriers to entry are relatively low, and new ventures to create products that do or could compete with our products are regularly formed. In addition, some of our competitors may have greater resources, including technical and engineering

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resources, than we do. As we expand into new markets, we will face competition not only from our existing competitors but also from other competitors, including existing companies with strong technological, marketing, and sales positions in those markets. We also sometimes face competition from resellers and distributors of our products. Companies with which we have strategic alliances in some areas may be competitors in other areas, and this trend may increase. For example, the enterprise data center is undergoing a fundamental transformation arising from the convergence of technologies, including computing, networking, storage, and software, that previously were segregated. Due to several factors, including the availability of highly scalable and general purpose microprocessors, application specific integrated circuits offering advanced services, standards based protocols, cloud computing and virtualization, the convergence of technologies within the enterprise data center is spanning multiple, previously independent, technology segments. Also, some of our current and potential competitors for enterprise data center business have made acquisitions, or announced new strategic alliances, designed to position them to provide end-to-end technology solutions for the enterprise data center. As a result of all of these developments, we face greater competition in the development and sale of enterprise data center technologies, including competition from entities that are among our long-term strategic alliance partners. Companies that are strategic alliance partners in some areas of our business may acquire or form alliances with our competitors, thereby reducing their business with us.

The principal competitive factors in the markets in which we presently compete and may compete in the future include the ability to sell successful business outcomes; the ability to provide a broad range of networking and communications products and services; product performance; price; the ability to introduce new products, including providing continuous new customer value and products with price-performance advantages; the ability to reduce production costs; the ability to provide value-added features such as security, reliability, and investment protection; conformance to standards; market presence; the ability to provide financing; and disruptive technology shifts and new business models.

We also face competition from customers to which we license or supply technology and suppliers from which we transfer technology. The inherent nature of networking requires interoperability. As such, we must cooperate and at the same time compete with many companies. Any inability to effectively manage these complicated relationships with customers, suppliers, and strategic alliance partners could have a material adverse effect on our business, operating results, and financial condition and accordingly affect our chances of success.

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If we do not successfully manage our strategic alliances, we may not realize the expected benefits from such alliances, and we may experience increased competition or delays in product development.

We have several strategic alliances with large and complex organizations and other companies with which we work to offer complementary products and services. These arrangements are generally limited to specific projects, the goal of which is generally to facilitate product compatibility and adoption of industry standards. There can be no assurance we will realize the expected benefits from these strategic alliances or from joint ventures. If successful, these relationships may be mutually beneficial and result in industry growth. However, alliances carry an element of risk because, in most cases, we must compete in some business areas with a company with which we have a strategic alliance and, at the same time, cooperate with that company in other business areas. Also, if these companies fail to perform or if these relationships fail to materialize as expected, we could suffer delays in product development or other operational difficulties. Joint ventures can be difficult to manage, given the potentially different interests of joint venture partners.

Inventory management relating to our sales to our two-tier distribution channel is complex, and excess inventory may harm our gross margins.

We must manage inventory relating to sales to our distributors effectively, because inventory held by them could affect our results of operations. Our distributors may increase orders during periods of product shortages, cancel orders if their inventory is too high, or delay orders in anticipation of new products. They also may adjust their orders in response to the supply of our products and the products of our competitors that are available to them, and in response to seasonal fluctuations in end-user demand. Our distributors are generally given business terms that allow them to return a portion of inventory, receive credits for changes in selling price, and participate in various cooperative marketing programs. Inventory management remains an area of focus as we balance the need to maintain strategic inventory levels to ensure competitive lead times against the risk of inventory obsolescence because of rapidly changing technology and customer requirements. When facing component supply-related challenges, we have increased our efforts in procuring components in order to meet customer expectations. If we ultimately determine that we have excess inventory, we may have to reduce our prices and write down inventory, which in turn could result in lower gross margins.

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We depend upon the development of new products and services, and enhancements to existing products and services, and if we fail to predict and respond to emerging technological trends and customers’ changing needs, our operating results and market share may suffer.

The markets for our products and services are characterized by rapidly changing technology, evolving industry standards, new product and service introductions, and evolving methods of building and operating networks. Our operating results depend on our ability to develop and introduce new products and services into existing and emerging markets and to reduce the production costs of existing products. If customers do not purchase and/or renew our offerings our business could be harmed. The effects resulting from the COVID-19 pandemic may also result in long-term changes in customer needs for our products and services in various sectors, along with IT-related capital spending reductions, or shifts in spending focus, that could materially adversely affect us if we are unable to adjust our product and service offerings to match customer needs.

The process of developing new technology, including more programmable, flexible and virtual networks, and technology related to other market transitions— such as security, digital transformation and Internet of Things, and cloud— is complex and uncertain, and if we fail to accurately predict customers’ changing needs and emerging technological trends our business could be harmed. We must commit significant resources, including the investments we have been making in our strategic priorities to developing new products and services before knowing whether our investments will result in products and services the market will accept. In particular, if our model of the evolution of networking does not emerge as we believe it will, or if the industry does not evolve as we believe it will, or if our strategy for addressing this evolution is not successful, many of our strategic initiatives and investments may be of no or limited value. For example, if we do not introduce products related to network programmability, such as software-defined-networking products, in a timely fashion, or if product offerings in this market that ultimately succeed are based on technology, or an approach to technology, that differs from ours, such as, for example, networking products based on “white box” hardware, our business could be harmed. Similarly, our business could be harmed if we fail to develop, or fail to develop in a timely fashion, offerings to address other transitions, or if the offerings addressing these other transitions that ultimately succeed are based on technology, or an approach to technology, different from ours. In addition, our business could be adversely affected in periods surrounding our new product introductions if customers delay purchasing decisions to qualify or otherwise evaluate the new product offerings. We have also been transforming our business to move from selling individual products and services to selling products and services integrated into architectures and solutions, and we are seeking to meet the evolving needs of customers which include offering our products and solutions in the manner in which customers wish to consume them. As a part of this transformation, we continue to make changes to how we are organized and how we build and deliver our technology, including changes in our business models with customers. If our strategy for addressing our customer needs, or the architectures and solutions we develop do not meet those needs, or the

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changes we are making in how we are organized and how we build and deliver or technology is incorrect or ineffective, our business could be harmed.

Furthermore, we may not execute successfully on our vision or strategy because of challenges with regard to product planning and timing, technical hurdles that we fail to overcome in a timely fashion, or a lack of appropriate resources. This could result in competitors, some of which may also be our strategic alliance partners, providing those solutions before we do and loss of market share, revenue, and earnings. In addition, the growth in demand for technology delivered as a service enables new competitors to enter the market. The success of new products and services depends on several factors, including proper new product and service definition, component costs, timely completion and introduction of these products and services, differentiation of new products and services from those of our competitors, and market acceptance of these products and services. There can be no assurance that we will successfully identify new product and services opportunities, develop and bring new products and services to market in a timely manner, or achieve market acceptance of our products and services or that products, services and technologies developed by others will not render our products, services or technologies obsolete or noncompetitive. The products and technologies in our other product categories and key priority and growth areas may not prove to have the market success we anticipate, and we may not successfully identify and invest in other emerging or new products and services.

Changes in industry structure and market conditions could lead to charges related to discontinuances of certain of our products or businesses, asset impairments and workforce reductions or restructurings.

In response to changes in industry and market conditions, we may be required to strategically realign our resources and to consider restructuring, disposing of, or otherwise exiting businesses. Any resource realignment, or decision to limit investment in or dispose of or otherwise exit businesses, may result in the recording of special charges, such as inventory and technology-related write-offs, workforce reduction or restructuring costs, charges relating to consolidation of excess facilities, or claims from third parties who were resellers or users of discontinued products. Our estimates with respect to the useful life or ultimate recoverability of our carrying basis of assets, including purchased intangible assets, could change as a result of such assessments and decisions. Although in certain instances our supply agreements allow us the option to cancel, reschedule, and adjust our requirements based on our business needs prior to firm orders being placed, our loss contingencies may include liabilities for contracts that we cannot cancel with contract manufacturers and suppliers. Further, our estimates relating to the liabilities for excess facilities are affected by changes in real estate market conditions. Additionally, we are required to perform goodwill impairment tests on an annual basis and between annual tests in certain circumstances, and future goodwill

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impairment tests may result in a charge to earnings. ~~We initiated a~~From time to time we initiate restructuring ~~plan in the second quarter of fiscal 2023, for which we expect such plan to be substantially completed by the end of the first quarter of fiscal 2024.~~plans. Our business may not be more efficient or effective than prior to implementation of ~~the plan.~~such plans. Our restructuring activities, including any related charges and the impact of the related headcount restructurings, could have a material adverse effect on our business, operating results, and financial condition.

Over the long term we intend to invest in engineering, sales, service and marketing activities, and in key priority and growth areas, and these investments may achieve delayed, or lower than expected, benefits which could harm our operating results.

While we intend to focus on managing our costs and expenses, over the long term, we also intend to invest in personnel and other resources related to our engineering, sales, service and marketing functions as we realign and dedicate resources on key priority and growth ~~areas, such as End-to-End Security and Internet for the Future, and we~~areas. We also intend to focus on maintaining leadership in ~~Secure, Agile Networks~~core networking and ~~in Services.~~services. We are likely to recognize the costs associated with these investments earlier than some of the anticipated benefits, and the return on these investments may be lower, or may develop more slowly, than we expect. If we do not achieve the benefits anticipated from these investments (including if our selection of areas for investment does not play out as we expect), or if the achievement of these benefits is delayed, our operating results may be adversely affected.

A delay in the anticipated timing of, or the failure to complete, our acquisition of Splunk may cause us not to realize some or all of the anticipated benefits of the acquisition.

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the acquisition of Splunk is subject to the satisfaction or waiver of customary closing conditions, including (i) the adoption of the merger agreement by a majority of the holders of the outstanding shares of Splunk common stock, (ii) the approval of the merger under applicable antitrust and foreign investment regimes, (iii) the absence of any order, injunction or law prohibiting the merger, (iv) the accuracy of the other party’s representations and warranties, subject to certain standards set forth in the merger agreement, (v) compliance in all material respects with the other party’s obligations under the merger agreement, and (vi) no material adverse effect to Splunk having occurred since the date of the merger agreement. There can be no assurance that these or other closing conditions will be satisfied on the timeline anticipated or at all. Any delay in completing the acquisition could cause us not to realize some or all of the anticipated benefits when expected, if at all. If the acquisition of Splunk is not completed, our stock price could decline to the extent it reflects an assumption that we will complete the acquisition. Furthermore, if the acquisition of Splunk is not completed, we may suffer other consequences that could adversely affect our business, results of operations and stock price, including incurring significant transaction costs that we would be unable to recover, negative publicity and damage to our reputation. Additionally, if the merger agreement is terminated under certain specified circumstances, including termination following an injunction arising in connection with certain antitrust laws, we would be required to pay Splunk a termination fee of approximately $1.5 billion. Furthermore, we anticipate this transaction will be financed with a combination of cash and debt. There can be no assurance that we will obtain financing on terms we find acceptable, and we may be required to finance a portion of the purchase price at interest rates higher than currently expected. Limitations on our ability to obtain financing, a reduction in our liquidity or an increase in our borrowing costs may adversely affect our business, operating results, and financial condition.

We have made and expect to continue to make acquisitions that could disrupt our operations and harm our operating results.

Our growth depends upon market growth, our ability to enhance our existing products, and our ability to introduce new products on a timely basis. We intend to continue to address the need to develop new products and enhance existing products through acquisitions of other companies, product lines, technologies, and personnel. Acquisitions involve numerous risks, including the following:

•Difficulties or delays in integrating the operations (including IT security), systems, technologies, products, and personnel of the acquired companies, particularly with companies ~~with~~that have large and widespread operations and/or complex products, such as Splunk

•Diversion of management’s attention from normal daily operations of the business and the challenges of managing larger and more widespread operations resulting from acquisitions

•Potential difficulties in completing projects associated with in-process research and development intangibles

•Difficulties in entering markets in which we have no or limited direct prior experience and where competitors in such markets have stronger market positions

•Initial dependence on unfamiliar supply chains or relatively small supply partners

•Insufficient revenue to offset increased expenses associated with acquisitions

•The potential loss of key employees, customers, distributors, vendors and other business partners of the companies we acquire following and continuing after announcement of acquisition plans

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Acquisitions have in the past and may in the future also cause us to:

•Issue common stock that would dilute our current stockholders’ percentage ownership

•Use a substantial portion of our cash resources, or incur debt as we expect to do in connection with the acquisition of Splunk

•Significantly increase our interest expense, leverage and debt service requirements if we incur additional debt to pay for an acquisition

•Assume liabilities

•Record goodwill and intangible assets that are subject to impairment testing on a regular basis and potential periodic impairment charges

•Incur amortization expenses related to certain intangible assets

•Incur tax expenses related to the effect of acquisitions on our legal structure

•Incur large write-offs and restructuring and other related expenses

•Become subject to intellectual property or other litigation

Mergers and acquisitions of high-technology companies are inherently risky and subject to many factors outside of our control, and no assurance can be given that our previous or future acquisitions will be successful and will not materially adversely affect our business, operating results, or financial condition. Failure to manage and successfully integrate acquisitions could materially harm our business and operating results. Prior acquisitions have resulted in a wide range of outcomes, from successful introduction of new products and technologies to a failure to do so. Even when an acquired company has already developed and marketed products, there can be no assurance that product enhancements will be made in a timely fashion or that pre-acquisition due diligence will have identified all possible issues that might arise with respect to such products. In addition, our effective tax rate for future periods is uncertain and could be impacted by mergers and acquisitions. Risks ~~related~~described with respect to new product development also apply to acquisitions.

Entrance into new or developing markets exposes us to additional competition and will likely increase demands on our service and support operations.

As we focus on new market opportunities and key priority and growth areas, we ~~will increasingly~~ compete with large telecommunications and other equipment suppliers as well as startup companies. Several of our competitors may have greater resources, including technical and engineering resources, than we do. Additionally, as customers in these markets complete infrastructure deployments, they may require greater levels of service, support, and financing than we have provided in the past, especially in emerging countries. Demand for these types of service, support, or financing contracts may increase in the future. There can be no assurance that we can provide products, service, support, and financing to effectively compete for these market opportunities. Further, entry into other markets has subjected and will subject us to additional risks, particularly to those markets, including the effects of general market conditions and reduced consumer confidence. For example, as we add direct selling capabilities globally to meet changing customer demands, we will face increased legal and regulatory requirements.

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~~Industry consolidation may lead to increased competition and may harm our operating results.~~

There is a continuing trend toward industry consolidation in our markets. We expect this trend to continue as companies attempt to strengthen or hold their market positions in an evolving industry and as companies are acquired or are unable to continue operations. For example, some of our current and potential competitors for enterprise data center business have made acquisitions, or announced new strategic alliances, designed to position them with the ability to provide end-to-end technology solutions for the enterprise data center. Companies that are strategic alliance partners in some areas of our business may acquire or form alliances with our competitors, thereby reducing their business with us. We believe that industry consolidation may result in stronger competitors that are better able to compete as sole-source vendors for customers. This could lead to more variability in our operating results and could have a material adverse effect on our business, operating results, and financial condition. Furthermore, particularly in the service provider market, rapid consolidation will lead to fewer customers, with the effect that loss of a major customer could have a material impact on results not anticipated in a customer marketplace composed of more numerous participants.

Product quality problems could lead to reduced revenue, gross margins, and net income.

We produce highly complex products that incorporate leading-edge technology, including both hardware and software. Software typically contains bugs that can unexpectedly interfere with expected operations. There can be no assurance that our pre-shipment testing programs will be adequate to detect all defects, either ones in individual products or ones that could affect numerous shipments, which might interfere with customer satisfaction, reduce sales opportunities, or affect gross margins. From time to time, we have had to replace certain components and provide remediation in response to the discovery of defects or bugs in products that we had shipped. There can be no assurance that such remediation, depending on the product involved, would not have a material impact. An inability to cure a product defect could result in the failure of a product line, temporary or permanent withdrawal from a product or market, damage to our reputation, inventory costs, or product reengineering expenses, any of which could have a material impact on our revenue, margins, and net income.

Due to the global nature of our operations, political or economic changes or other factors in a specific country or region could harm our operating results and financial condition.

We conduct significant sales and customer support operations in countries around the world. As such, our growth depends in part on our increasing sales into emerging countries. We also depend on non-U.S. operations of our contract manufacturers, component suppliers and distribution partners. Our business in emerging countries in the aggregate experienced a decline in orders in certain prior periods. We continue to assess the sustainability of any improvements in our business in these countries and there can be no assurance that our investments in these countries will be successful. Our future results could be materially adversely affected by a variety of political, economic or other factors relating to our operations inside and outside the United States, any or all of which could have a material adverse effect on our operating results and financial condition, including the

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following: impacts from global central bank monetary policy; issues related to the political relationship between the United States and other countries that can affect regulatory matters, affect the willingness of customers in those countries to purchase products from companies headquartered in the United States or affect our ability to procure components if a government body were to deny us access to those components; government-related disruptions or shutdowns; the challenging and inconsistent global macroeconomic environment; foreign currency exchange rates; geopolitical tensions (including China-Taiwan relations); political or social unrest; economic instability or weakness or natural disasters in a specific country or region, including economic challenges in China and global economic ramifications of Chinese economic difficulties; environmental protection regulations (including new laws and regulations related to climate change); trade protection measures such as tariffs, and other legal and regulatory requirements, some of which may affect our ability to import our products to, export our products from, or sell our products in various countries or affect our ability to procure components; political considerations that affect service provider and government spending patterns; health or similar issues, including pandemics or epidemics; difficulties in staffing and managing international operations; and adverse tax consequences, including imposition of withholding or other taxes on our global operations.

Issues related to the development and use of artificial intelligence (AI) could give rise to legal and/or regulatory action, damage our reputation or otherwise materially harm of our business.

We currently incorporate AI technology in certain of our products and services and in our business operations. Our research and development of such technology remains ongoing. AI presents risks, challenges, and unintended consequences that could affect our and our customers’ adoption and use of this technology. AI algorithms and training methodologies may be flawed. Additionally, AI technologies are complex and rapidly evolving, and we face significant competition in the market and from other companies regarding such technologies. While we aim to develop and use AI responsibly and attempt to identify and mitigate ethical and legal issues presented by its use, we may be unsuccessful in identifying or resolving issues before they arise. AI-related issues, deficiencies and/or failures could (i) give rise to legal and/or regulatory action, including with respect to proposed legislation regulating AI in jurisdictions such as the European Union, and others, and as a result of new applications of existing data protection, privacy, intellectual property, and other laws; (ii) damage our reputation; or (iii) otherwise materially harm our business.

We are exposed to the credit risk of some of our customers and to credit exposures in weakened markets, which could result in material losses.

Most of our sales are on an open credit basis, with typical payment terms of 30 days in the United States, and, because of local customs or conditions, longer in some markets outside the United States. Beyond our open credit arrangements, we have also experienced demands for customer financing and facilitation of leasing arrangements. Our loan financing arrangements may include not only financing the acquisition of our products and services but also providing additional funds for other costs associated with network installation and integration of our products and services. Our exposure to the credit risks relating to our financing activities may increase if our customers are adversely affected by a global economic downturn or periods of economic uncertainty. There can be no assurance that programs we have in place to monitor and mitigate credit risks will be effective. In the past, there have been significant bankruptcies among customers both on open credit and with loan or lease financing

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arrangements, particularly among Internet businesses and service providers, causing us to incur economic or financial losses. There can be no assurance that additional losses will not be incurred. Although these losses have not been material to date, future losses, if incurred, could harm our business and have a material adverse effect on our operating results and financial condition. Additionally, to the degree that turmoil in the credit markets makes it more difficult for some customers to obtain financing, those customers’ ability to pay could be adversely impacted, which in turn could have a material adverse impact on our business, operating results, and financial condition.

We are exposed to fluctuations in the market values of our portfolio investments and in interest rates; impairment of our investments could harm our earnings.

We maintain an investment portfolio of various holdings, types, and maturities. Our portfolio includes available-for-sale debt investments and equity investments, the values of which are subject to market price volatility. If such investments suffer market price declines, as we experienced with some of our investments in the past, we may recognize in earnings the decline in the fair value of our investments below their cost basis. Our privately held investments are subject to risk of loss of investment capital. These investments are inherently risky because the markets for the technologies or products they have under development are typically in the early stages and may never materialize. We could lose our entire investment in these companies. For information regarding the market risks associated with the fair value of portfolio investments and interest rates, refer to the section titled “Quantitative and Qualitative Disclosures About Market Risk.”

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We are exposed to fluctuations in currency exchange rates that could negatively impact our financial results and cash flows.

Because a significant portion of our business is conducted outside the United States, we face exposure to adverse movements in foreign currency exchange rates, including emerging market currencies which can have extreme currency volatility. An increase in the value of the dollar could increase the real cost to our customers of our products in those markets outside the United States where we sell in dollars and a weakened dollar could increase the cost of local operating expenses and procurement of raw materials to the extent that we must purchase components in foreign currencies. These exposures may change over time as business practices evolve, and they could have a material adverse impact on our financial results and cash flows.

Failure to retain and recruit key personnel would harm our ability to meet key objectives.

Our success has always depended in large part on our ability to attract and retain highly skilled technical, managerial, sales, and marketing personnel. Competition for such personnel is intense, especially in the Silicon Valley area of Northern ~~California.~~California and other major United States locations. Stock incentive plans are designed to reward employees for their long-term contributions and provide incentives for them to remain with us. Volatility or lack of positive performance in our stock price or equity incentive awards, or changes to our overall compensation program, including our stock incentive program, resulting from the management of share dilution and share-based compensation expense or otherwise, may also adversely affect our ability to retain key employees. As a result of one or more of these factors, we may increase our hiring in geographic areas outside the United States, which could subject us to additional geopolitical and exchange rate risk. The loss of services of any of our key personnel; the inability to retain and attract qualified personnel in the future; or delays in hiring required personnel, particularly in engineering and sales ~~personnel,~~fields, could make it difficult to meet key objectives, such as timely and effective product introductions. In addition, companies in our industry whose employees accept positions with competitors frequently claim that competitors have engaged in improper hiring practices. We have received these claims in the past and may receive additional claims to this effect in the future.

Adverse resolution of litigation or governmental investigations may harm our operating results or financial condition.

We are a party to lawsuits in the normal course of our business. Additionally, in connection with the Russia and Ukraine war and our decision to stop business operations and orderly wind down our business in Russia, there are existing claims and lawsuits in Russia, and the potential for future claims and lawsuits in Russia and/or Belarus, related to ~~the Russia~~such decisions and ~~Ukraine war and related trade restrictions and sanctions.~~regulatory requirements. In the event of an unfavorable resolution of any of these lawsuits, the potential outcome could include the seizure of our assets in Russia and/or Belarus, which, collectively, represents less than 0.1% of our total assets at the end of the ~~third~~first quarter of fiscal ~~2023. Litigation~~2024. Any litigation can be costly, lengthy, and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict. An unfavorable resolution of lawsuits or governmental investigations could have a material adverse effect on our business, operating results, or financial condition. For additional information regarding certain of the matters in which we are involved, see Note 14 to the Consolidated Financial Statements, subsection (f) “Legal Proceedings.”

Our operating results may be adversely affected and damage to our reputation may occur due to production and sale of counterfeit versions of our products.

As is the case with leading products around the world, our products are subject to efforts by third parties to produce counterfeit versions of our products. While we work diligently with law enforcement authorities in various countries to block the manufacture of counterfeit goods and to interdict their sale, and to detect counterfeit products in customer networks, and have succeeded in prosecuting counterfeiters and their distributors, resulting in fines, imprisonment and restitution to us, there can be no guarantee that such efforts will succeed. While counterfeiters often aim their sales at customers who might not have

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otherwise purchased our products due to lack of verifiability of origin and service, such counterfeit sales, to the extent they replace otherwise legitimate sales, could adversely affect our operating results.

Changes in our provision for income taxes or adverse outcomes resulting from examination of our income tax returns could adversely affect our results.

Our provision for income taxes is subject to volatility and could be adversely affected by earnings being lower than anticipated in countries that have lower tax rates and higher than anticipated in countries that have higher tax rates; by changes in the valuation of our deferred tax assets and liabilities; by changes to foreign-derived intangible income, global intangible low-tax income and base erosion and anti-abuse tax, research and development capitalization and amortization, and corporate alternative minimum tax laws, regulations, or interpretations thereof; by expiration of or lapses in tax incentives; by transfer pricing adjustments, including the effect of acquisitions on our legal structure; by tax effects of nondeductible compensation; by tax costs related to intercompany realignments; by changes in accounting principles; or by changes in tax laws and regulations, treaties, or interpretations thereof, including changes to the taxation of earnings of our foreign subsidiaries, the deductibility of expenses attributable to foreign income, and the foreign tax credit rules. Significant judgment is required to determine the recognition and measurement attribute prescribed in the accounting guidance for uncertainty in income taxes. The Organisation

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for Economic Co-operation and Development (OECD), an international association comprised of 38 countries, including the United States, has made changes and is contemplating additional changes to numerous long-standing tax principles. There can be no assurance that these changes and any contemplated changes if finalized, once adopted by countries, will not have an adverse impact on our provision for income taxes. Further, as a result of certain of our ongoing employment and capital investment actions and commitments, our income in certain countries was subject to reduced tax rates. Our failure to meet these commitments could adversely impact our provision for income taxes. In addition, we are subject to the continuous examination of our income tax returns by the Internal Revenue Service and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. There can be no assurance that the outcomes from these continuous examinations will not have an adverse effect on our operating results and financial condition.

Our business and operations are especially subject to the risks of earthquakes, floods, and other natural catastrophic events (including as a result of global climate change).

Our corporate headquarters, including certain of our research and development operations are located in the Silicon Valley area of Northern California, a region known for seismic activity. Additionally, a certain number of our facilities are located near rivers that have experienced flooding in the past. Also certain of our customers, suppliers and logistics centers are located in regions that have been or may be affected by earthquake, tsunami and flooding or other weather-related activity which in the past has disrupted, and in the future could disrupt, the flow of supply chain components and delivery of products. In addition, global climate change may result in significant natural disasters occurring more frequently and/or with greater intensity, such as drought, wildfires, storms, sea-level rise, changing precipitation, and flooding. We have not to date experienced a material event toas a result of these ~~matters;~~kinds of natural disasters; however, the occurrence of any such event in the future could have a material adverse impact on our business, operating results, and financial condition.

Terrorism, war, and other events may harm our business, operating results and financial condition.

The continued threat of terrorism and heightened security and military action in response thereto, or any other current or future acts of terrorism, war (such as the on-going Russia and Ukraine war and the Israel-Hamas war), and other events (such as economic sanctions and trade restrictions, including those related to the on-going Russia and Ukraine war) may cause further disruptions to the economies of the United States and other countries and create further uncertainties or could otherwise negatively impact our business, operating results, and financial condition. Likewise, events such as loss of infrastructure and utilities services such as energy, transportation, or telecommunications could have similar negative impacts. To the extent that such disruptions or uncertainties result in delays or cancellations of customer orders or the manufacture or shipment of our products, our business, operating results, and financial condition could be materially and adversely affected.

There can be no assurance that our operating results and financial condition will not be adversely affected by our incurrence of debt.

As of the end of the ~~third~~first quarter of fiscal ~~2023,~~2024, we have senior unsecured notes outstanding in an aggregate principal amount of ~~$8.5~~$7.8 billion that mature at specific dates from calendar year ~~2023~~2024 through 2040. We have also established a commercial paper program under which we may issue short-term, unsecured commercial paper notes on a private placement basis up to a maximum aggregate amount outstanding at any time of $10.0 billion, and we had no commercial paper notes outstanding under this program as of ~~April 29,~~October 28, 2023. There can be no assurance that our incurrence of this debt or any future debt, including any additional debt incurred to finance the acquisition of Splunk, will be a better means of providing liquidity to us than would our use of our existing cash resources. Further, we cannot be assured that our maintenance of this indebtedness or incurrence of future indebtedness will not adversely affect our operating results or financial condition. In addition, changes by any rating agency to our credit rating can negatively impact the value and liquidity of both our debt and equity securities, as well as the terms upon which we may borrow under our commercial paper program or future debt issuances.

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Our reputation and/or business could be negatively impacted by ESG matters and/or our reporting of such matters.

There is an increasing focus from regulators, certain investors, and other stakeholders concerning environmental, social, and governance (“ESG”) matters, both in the United States and internationally. We communicate certain ESG-related initiatives, goals, and/or commitments regarding environmental matters, diversity and inclusion, responsible sourcing and social investments, and other matters, in our annual Purpose Report, on our website, in our filings with the SEC, and elsewhere. These initiatives, goals, or commitments could be difficult to achieve and costly to implement. For example, in September 2021, we announced our ~~commitment~~goal to achieve net zero across all scopes of greenhouse gas emissions by 2040, the achievement of which relies, in large part, on the accuracy of our estimates and assumptions around the enhanced power efficiency of our products, the adoption of renewable energy at customer and supplier sites, and the adoption of certain of our products and services by our customers. We could fail to achieve, or be perceived to fail to achieve, our 2040 net zero ~~commitment~~goal or other ESG-related initiatives, goals, or commitments. In addition, we could be criticized for the timing, scope or nature of these initiatives, goals, or commitments, or for any revisions to them. To the extent that our required and voluntary disclosures about ESG matters

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increase, we could be criticized for the accuracy, adequacy, or completeness of such disclosures. Our actual or perceived failure to achieve our ESG-related initiatives, goals, or commitments could negatively impact our reputation or otherwise materially harm our business.

Risks Related to Intellectual Property

Our proprietary rights may prove difficult to enforce.

We generally rely on patents, copyrights, trademarks, and trade secret laws to establish and maintain proprietary rights in our technology and products. Although we have been issued numerous patents and other patent applications are currently pending, there can be no assurance that any of these patents or other proprietary rights will not be challenged, invalidated, or circumvented or that our rights will, in fact, provide competitive advantages to us. Furthermore, many key aspects of networking technology are governed by industrywide standards, which are usable by all market entrants. In addition, there can be no assurance that patents will be issued from pending applications or that claims allowed on any patents will be sufficiently broad to protect our technology. In addition, the laws of some foreign countries may not protect our proprietary rights to the same extent as do the laws of the United States. The outcome of any actions taken in these foreign countries may be different than if such actions were determined under the laws of the United States. Although we are not dependent on any individual patents or group of patents for particular segments of the business for which we compete, if we are unable to protect our proprietary rights to the totality of the features (including aspects of products protected other than by patent rights) in a market, we may find ourselves at a competitive disadvantage to others who need not incur the substantial expense, time, and effort required to create innovative products that have enabled us to be successful.

We may be found to infringe on intellectual property rights of others.

Third parties, including customers, have in the past and may in the future assert claims or initiate litigation related to exclusive patent, copyright, trademark, and other intellectual property rights to technologies and related standards that are relevant to us. These assertions have increased over time as a result of our growth and the general increase in the pace of patent claims assertions, particularly in the United States. Because of the existence of a large number of patents in the networking field, the secrecy of some pending patents, and the rapid rate of issuance of new patents, it is not economically practical or even possible to determine in advance whether a product or any of its components infringes or will infringe on the patent rights of others. The asserted claims and/or initiated litigation can include claims against us or our manufacturers, suppliers, or customers, alleging infringement of their proprietary rights with respect to our existing or future products or components of those products. Regardless of the merit of these claims, they can be time-consuming, result in costly litigation and diversion of technical and management personnel, or require us to develop a non-infringing technology or enter into license agreements. Where claims are made by customers, resistance even to unmeritorious claims could damage customer relationships. There can be no assurance that licenses will be available on acceptable terms and conditions, if at all, or that our indemnification by our suppliers will be adequate to cover our costs if a claim were brought directly against us or our customers. Furthermore, because of the potential for high court awards that are not necessarily predictable, it is not unusual to find even arguably unmeritorious claims settled for significant amounts. If any infringement or other intellectual property claim made against us by any third party is successful, if we are required to indemnify a customer with respect to a claim against the customer, or if we fail to develop non-infringing technology or license the proprietary rights on commercially reasonable terms and conditions, our business, operating results, and financial condition could be materially and adversely affected. For additional information regarding our indemnification obligations, see Note 14(e) to the Consolidated Financial Statements contained in this report. Our exposure to risks associated with the use of intellectual property may be increased as a result of acquisitions, as we have a lower level of visibility into the development process with respect to such technology or the care taken to safeguard against infringement risks. Further, in the past, third parties have made infringement and similar claims after we have acquired technology that had not been asserted prior to our acquisition.

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We rely on the availability of third-party licenses.

Many of our products are designed to include software or other intellectual property licensed from third parties. It may be necessary in the future to seek or renew licenses relating to various aspects of these products. There can be no assurance that the necessary licenses would be available on acceptable terms, if at all. The inability to obtain certain licenses or other rights or to obtain such licenses or rights on favorable terms, or the need to engage in litigation regarding these matters, could have a material adverse effect on our business, operating results, and financial condition. Moreover, the inclusion in our products of software or other intellectual property licensed from third parties on a nonexclusive basis could limit our ability to protect our proprietary rights in our products.

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Risks Related to Cybersecurity, Privacy, and Regulatory Requirements

Cyber attacks, data breaches or ~~malware~~other incidents may disrupt our operations, harm our operating results and financial condition, and damage our reputation or otherwise materially harm our business; and cyber attacks, or data breaches or other incidents on our customers’ or third-party providers’ networks, in third-party products we use, or in cloud-based services provided to, by, or enabled by us, could result in claims of liability against us, give rise to legal and/or regulatory action, damage our reputation or otherwise materially harm our business.

We experience cyber attacks and other attempts to gain unauthorized access to our products, services, and IT environment (as defined below) on a regular basis, and we anticipate continuing to be subject to such attempts as cyber attacks become increasingly sophisticated and more difficult to predict and protect against. Despite our implementation of security measures, (i) our products and services, and (ii) the servers, data centers, and cloud-based solutions on which our and third-party data is stored or processed (including servers, data centers and cloud-based solutions operated by third parties on which we rely) (collectively, our “IT environment”), are vulnerable to cyber attacks, data breaches, malware, inadvertent error, disruptions, ~~from unauthorized access,~~failures, tampering or other theft or misuse, including by employees, contingent workers, malicious actors, or nation-states or their agents (which cyber attack or related activity may intensify during periods of diplomatic or armed ~~conflict, such as the Russia~~conflict). Further, a cyber attack or other incident could go undetected and ~~Ukraine war). Such~~persist in our environments for extended periods. Cyber-related events have caused, and in the future could result in, compromise to, or the disruption of access to, the operation of our products, services, and IT environment or those of our customers or third-party providers we rely on, or result in confidential information stored on our systems, our customers’ systems, or other third-party systems being improperly accessed, processed, disclosed now or in the future, or be lost or stolen. For example, in December 2021, multiple vulnerabilities were reported for the widely used Java logging library, Apache Log4j. We reviewed the use of this library within our products and services, its use in our enterprise IT environment, and its use by our third-party providers, and have taken steps to mitigate these vulnerabilities, including by providing security updates for affected products to our customers. We have not to date experienced a material event related to a cybersecurity matter; however, the occurrence of any such event in the future could subject us to liability to our customers, data subjects, suppliers, business partners, employees, and others, give rise to legal and/or regulatory action, could damage our reputation or could otherwise materially harm our business, any of which could have a material adverse effect on our business, operating results, and financial condition. Efforts to limit the ability of malicious actors to disrupt the operations of the Internet or undermine our own security efforts are costly to implement and may not be successful. Breaches of security in our customers’ or third-party providers’ networks, in third-party products we use, or in cloud-based services provided to, by, or enabled by us, regardless of whether the breach is attributable to a vulnerability in our products or services, a failure by us to timely mitigate or apply a security fix for third-party products we use that are found vulnerable, or a failure to maintain the digital security infrastructure or security tools that protect the integrity of our products, services, and IT environment, could, in each case, result in claims of liability against us, damage our reputation or otherwise materially harm our business.

Vulnerabilities and critical security defects, prioritization decisions regarding remedying vulnerabilities or security defects, failure of third-party providers to remedy vulnerabilities or security defects, or customers not deploying security updates in a timely manner or deciding not to upgrade products, services or solutions could result in claims of liability against us, damage our reputation, or otherwise materially harm our business.

The products and services we sell to customers, and our cloud-based solutions, inevitably contain vulnerabilities or security defects, despite our efforts to prevent and detect them, which have not been remedied and cannot be disclosed without compromising security. We also make prioritization decisions in determining which vulnerabilities or security defects to fix and the timing of these fixes. ~~Customers~~Even when we prioritize a vulnerability or security defect, in certain instances it has taken, and in the future could take, time for us to develop a remedy. In addition, workarounds or other mitigation efforts in certain instances have not been, and in the future may not be, available or sufficient to protect customers prior to a security update being made available. Vulnerabilities can persist even after we have issued security updates if customers have not installed the most recent updates, or if the attackers exploited the vulnerabilities before a security update is applied to install additional malware to further compromise customers’ systems. Additionally, customers may also need to test security updates before they can be deployed which can delay implementation. When customers do not deploy security updates in a timely manner, or decide not to upgrade to the latest versions of our products, services or cloud-based solutions containing the security update, they may be left vulnerable. In addition, we rely on third-party providers of software and cloud-based services on which our and third-party data is stored or processed, and we cannot control the timing at which third-party providers remedy vulnerabilities, which could leave us vulnerable. Vulnerabilities and security defects, prioritization errors in remedying vulnerabilities or security defects, failure of third-party providers to remedy vulnerabilities or security defects, or customers not deploying security updates in a timely manner or deciding not to upgrade products, services or solutions could result in claims of liability against us, damage our reputation or otherwise materially harm our business.

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Our actual or perceived failure to adequately protect personal data could result in claims of liability against us, damage our reputation or otherwise materially harm our business.

Global privacy and data protection-related laws and regulations are evolving, extensive, and complex. Compliance with these laws and regulations is difficult and costly. In addition, evolving legal requirements restricting or controlling the collection, processing, or cross-border transmission of data, including for regulation of cloud-based services, could materially affect our

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customers’ ability to use, and our ability to sell, our products and services. The interpretation and application of these laws in some instances is uncertain, and our legal and regulatory obligations are subject to frequent changes. For example, the European Union’s (“EU”) General Data Protection Regulation (“GDPR”) applies to our activities conducted from an establishment in the EU or related to products and services offered in the EU and imposes a range of compliance obligations regarding the handling of personal data. Additionally, we are subject to California’s Consumer Privacy Act and other laws, regulations and obligations that relate to the handling of personal data. Our actual or perceived failure to comply with applicable laws and regulations or other obligations relating to personal data, or to protect personal data from unauthorized access, use, or other processing, could subject us to liability to our customers, data subjects, suppliers, business partners, employees, and others, give rise to legal and/or regulatory action, could damage our reputation or could otherwise materially harm our business, any of which could have a material adverse effect on our business, operating results, and financial condition.

Our business, operating results and financial condition could be materially harmed by evolving regulatory uncertainty or obligations applicable to our products and services.

Changes in regulatory requirements applicable to the industries and sectors in which we operate, in the United States and in other countries, could materially affect the sales and use of our products and services. In particular, economic sanctions and changes to export and import control requirements have impacted and may continue to impact our ability to sell and support our products and services in certain jurisdictions. In addition, changes in telecommunications regulations could impact our service provider customers’ purchase of our products and services, and they could also impact sales of our own regulated offerings. Additional areas of uncertainty that could impact sales of our products and services include laws, regulations, or customer procurement requirements related to encryption technology, data, artificial intelligence, privacy, cybersecurity, environmental sustainability (including climate change), human rights, product certification, product accessibility, country of origin, and national security controls applicable to our supply chain. ~~For example, new laws and regulations in response to climate change could result in increased energy efficiency requirements for our products and increased compliance and energy costs.~~ Changes in regulatory requirements in any of these areas or our actual or perceived failure to comply with applicable laws and regulations or other obligations relating to these areas could have a material adverse effect on our business, operating results, and financial condition.

Risks Related to Ownership of Our Stock

Our stock price may be volatile.

Historically, our common stock has experienced substantial price volatility, particularly as a result of variations between our actual financial results and the published expectations of analysts and as a result of announcements by our competitors and us. Furthermore, speculation in the press or investment community about our strategic position, financial condition, results of operations, business, security of our products, or significant transactions can cause changes in our stock price. In addition, the stock market has experienced extreme price and volume fluctuations that have affected the market price of many technology companies, in particular, and that have often been unrelated to the operating performance of these companies. These factors, as well as general economic and political conditions and the announcement of proposed and completed acquisitions or other significant transactions, or any difficulties associated with such transactions, by us or our current or potential competitors, may materially adversely affect the market price of our common stock in the future. Additionally, volatility, lack of positive performance in our stock price or changes to our overall compensation program, including our stock incentive program, may adversely affect our ability to retain key employees, virtually all of whom are compensated, in part, based on the performance of our stock price.

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Item 2.			Unregistered Sales of Equity Securities, ~~and~~ Use of Proceeds, and Issuer Purchases of Equity Securities

(a)None.

(b)None.

(c)Issuer Purchases of Equity Securities (in millions, except per-share amounts):

Period Total
Number of
Shares
Purchased Average Price Paid
per Share
Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs
Approximate Dollar Value of Shares
That May Yet Be Purchased
Under the Plans or Programs
January 29, 2023 to February 25, 2023 3 $ 48.46 3 $ 13,296
February 26, 2023 to March 25, 2023 8 $ 49.51 8 $ 12,884
March 26, 2023 to April 29, 2023 14 $ 49.64 14 $ 12,188
Total 25 $ 49.45 25


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
July 30, 2023 to August 26, 2023	11	$	54.21	11	$	10,358
August 27, 2023 to September 23, 2023	4	$	56.98	4	$	10,096
September 24, 2023 to October 28, 2023	8	$	53.53	8	$	9,682
Total	23	$	54.53	23

On September 13, 2001, we announced that our Board of Directors had authorized a stock repurchase program. The remaining authorized amount for stock repurchases under this program is approximately ~~$12.2~~$9.7 billion with no termination date.

For the majority of restricted stock units granted, the number of shares issued on the date the restricted stock units vest is net of shares withheld to meet applicable tax withholding requirements. Although these withheld shares are not issued or considered common stock repurchases under our stock repurchase program, and therefore are not included in the preceding table, they are treated as common stock repurchases in our financial statements as they reduce the number of shares that would have been issued upon vesting.


Item 3.			Defaults Upon Senior Securities

None.


Item 4.			Mine Safety Disclosures

Not applicable.


Item 5.			Other Information

~~None.~~Rule 10b5-1 Trading Arrangements

During the first quarter of fiscal 2024, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) informed us of the adoption or termination of a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” each as defined in Item 408 of Regulation S-K.

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Item 6.			Exhibits

The following documents are filed as exhibits to this report:

Exhibit Number Exhibit Description Incorporated by Reference Filed Herewith
Form File No. Exhibit Filing Date
3.1
Amended and Restated Bylaws of Cisco Systems, Inc., as currently in effect
8-K 001-39940 3.2 3/10/2023
10.1
First Amendment to Second Amended and Restated Credit Agreement, dated as of April 18, 2023, by and among Cisco Systems, Inc., certain lenders party thereto, and Bank of America, N.A., as administration agent, swing line lender, and L/C issuer
X
31.1
Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer
X
31.2
Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer
X
32.1
Section 1350 Certification of Principal Executive Officer
X
32.2
Section 1350 Certification of Principal Financial Officer
X
101.INS Inline XBRL Instance - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. X
101.SCH Inline XBRL Taxonomy Extension Schema Document X
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document X
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document X
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document X
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document X
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) X

Exhibit Number

Exhibit Description

Incorporated by Reference

Filed Herewith

Form

File No.

Exhibit

Filing Date

2.1

Agreement and Plan of Merger, dated as of September 20, 2023, by and among Cisco Systems, Inc., Spirit Merger Corp., and Splunk Inc.

8-K

001-39940

2.1

9/21/2023

31.1

Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer

31.2

Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer

32.1

Section 1350 Certification of Principal Executive Officer

32.2

Section 1350 Certification of Principal Financial Officer

101.INS

Inline XBRL Instance - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


*			Indicates a management contract or compensatory plan or arrangement.

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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Cisco Systems, Inc.

Date:

~~May 24,~~November 21, 2023

/S/ R. Scott Herren

R. Scott Herren
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer and duly authorized signatory)

8277


Nine Months Ended April 29, 2023	Shares of Common Stock	Common Stock and Additional Paid-In Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Loss		Total Equity
Balance at July 30, 2022	4,110	$	42,714	$	(1,319)	$	(1,622)	$	39,773
Net income				8,655				8,655
Other comprehensive income						16		16
Issuance of common stock	38	316						316
Repurchase of common stock	(63)	(664)		(2,353)				(3,017)
Shares repurchased for tax withholdings on vesting of restricted stock units and other	(10)	(449)						(449)
Cash dividends declared ($1.15 per common share)				(4,713)				(4,713)
Share-based compensation		1,720						1,720
Other		2		(8)				(6)
Balance at April 29, 2023	4,075	$	43,639	$	262	$	(1,606)	$	42,295


Three Months Ended April 30, 2022	Shares of Common Stock	Common Stock and Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Equity
Balance at January 29, 2022	4,151	$	42,291	$	(2,006)	$	(789)	$	39,496
Net income				3,044				3,044
Other comprehensive loss						(674)		(674)
Issuance of common stock	7							—
Repurchase of common stock	(5)	(47)		(205)				(252)
Shares repurchased for tax withholdings on vesting of restricted stock units and other	(2)	(135)						(135)
Cash dividends declared ($0.38 per common share)				(1,555)				(1,555)
Share-based compensation		477						477
Other	(2)	1		(2)				(1)
Balance at April 30, 2022	4,149	$	42,587	$	(724)	$	(1,463)	$	40,400


Nine Months Ended April 30, 2022	Shares of Common Stock	Common Stock and Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Equity
Balance at July 31, 2021	4,217	$	42,346	$	(654)	$	(417)	$	41,275
Net income				8,997				8,997
Other comprehensive loss						(1,046)		(1,046)
Issuance of common stock	36	306						306
Repurchase of common stock	(92)	(929)		(4,403)				(5,332)
Shares repurchased for tax withholdings on vesting of restricted stock units and other	(10)	(546)						(546)
Cash dividends declared ($1.12 per common share)				(4,657)				(4,657)
Share-based compensation		1,407						1,407
Other	(2)	3		(7)				(4)
Balance at April 30, 2022	4,149	$	42,587	$	(724)	$	(1,463)	$	40,400



	Balance at July 30, 2022		Acquisitions & Divestitures		Foreign Currency Translation and Other		Balance at April 29, 2023
Americas	$	23,882	$	31	$	11	$	23,924
EMEA	9,062		11		4		9,077
APJC	5,360		5		3		5,368
Total	$	38,304	$	47	$	18	$	38,369


	FISCAL 2020 AND PRIOR PLANS				FISCAL 2021 PLAN
	Employee Severance		Other		Employee Severance		Other		Total
Liability as of July 31, 2021	$	—	$	10	$	16	$	8	$	34
Charges	—		(5)		10		3		8
Cash payments	—		(1)		(21)		(1)		(23)
Non-cash items	—		—		—		(5)		(5)
Liability as of April 30, 2022	$	—	$	4	$	5	$	5	$	14