Earnings call transcript Q2 2023

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Operator

Welcome to Cisco’s Second Quarter Fiscal Year 2023 Financial Results Conference Call. At the request of Cisco, today’s conference is being recorded.

If you have any objections, you may disconnect.

Now I would like to introduce Marilyn Mora, Head of Investor Relations. Ma’am, you may begin.

Marilyn Mora

second XXXX Cisco’s call. earnings to everyone quarter quarterly fiscal conference Welcome and CFO. is Investor Robbins, by CEO; of Mora, our Herren, and and This Head joined Relations Marilyn I am Chair Scott our Chuck By now, seen have you press our earnings should release. including slides, Investor available the information, will section following the with on webcast be website our corresponding supplemental A in Relations made call.

risk XX-K the XX-Q, in on the in matters we and fiscal documents statements, are reports of GAAP information, we and can the discussing Income statements, year-over-year Financial which our we actual Forms to could we year financial this be done flow information in also customer that of statements this results detail we most from our identify found financial cash recent All to orders specifically, Relations conference Information and geographic today terms call XXXX. SEC, basis. providing full terms will those in be GAAP otherwise. both in will Investor quarter non-GAAP throughout product section balance contained to discuss Throughout full of that cause forward-looking website. third risks be the and results sheets, be non-GAAP the will the discuss be will with subject include will reconciliation and made filed The important results a in guidance factors uncertainties materially results and and differ They the forward-looking call, on other unless and including of revenue stated product for statements. referencing comparisons

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

Chuck Robbins

Marilyn. Thanks, is doing hope everyone I well.

shaping up the team’s half success business thanks fueled strong, transformation to actions. cloud-driven tremendous by is and fiscal in be our the our continued demand situation, year, we improving ‘XX delivered With our first to aggressive for very part an results of the portfolio, networking large in supply

into how moment I the dive Cisco. proud details quarter, am take say team to I additional I on a incredibly here to of wanted Before at the

environment the remains While years dynamic, is became CEO time operating X I than we positioned at Cisco are ago. today in since better almost any

both in We and have the that financially operationally. reshaped while company gives great our we This the disciplined long-term. remaining and succeed to transformed continue portfolio me confidence highly and will

on detail. quarter touch I more will in the Now

as revenue ranges. Our results the $XX.X QX EPS strong second at financial were high-end of of we highest our delivered X% and quarterly record guidance non-GAAP up again $X.XX. billion, exceeded We our

net We record also margin growth, expansion and sequential delivered non-GAAP non-GAAP income. ARR solid

with model business revenue continue our subscription of terms Recurring progress great In growth to shift, XX%. represents up now in and of revenue. make our XX% software XX% revenue total also we software with revenue

obligations we $XX remaining have up robust. and performance in remains our nearly addition, In billion backlog built

metrics, These sequentially, moment. down by full led still our to year-over-year. us increasing total which raise drew we outlook, as X% will with along backlog Even grew backlog a in Scott our address our visibility, year

over cash buyback increase record the we operating achieved $X and flow, quarter, today’s This enabling also of dividend billion.

to to continue our commitment We on shareholders. deliver to returns drive our

an provide the also supply me update Let on situation.

an increased products, deliveries few aggressive teams hundreds we we took the Combined did areas see improvement. saw lead significant actions product and highly our a overall While remain of to reductions product our engineering chain supply with components times. and redesign in for constrained, customer

projects. were able declined also complete to product deliveries our as As inventories partners customer increased, channel our

patterns. as customers supply orders I previously typical Like buying would normalize from times elevated to last as ease we shorten, expect constraints shared levels quarter, more lead and return

our sequential result, our order again And across customer quarter-over-quarter markets. a line a order growth geographies in lead with of and indicator improving was ranges is quarterly in times, year-over-year than QX, better historical growth despite growth. most As our

better what our improved double-digit environments. are Within sequential we than customer markets, their seeing as customer touch that, experienced we With and historically. of order rate our both delivery service normal In while sector we demand. performed with into have absorbing are recent markets, seen me provider growth production enterprise below products some our public our let sequentials business, was customers on our commercial in the

with another infrastructure. consecutive XXX-gig to making optimized ongoing first Within Cisco due solutions our of are the times, largest the adoption product platforms. AI grew lead in XXXX reflects customers our of Silicon saw web-scale, innovative quarter our while us slowing We investments This and half orders of and rapid customers over their ‘XX. in fiscal we normalizing of saw XX% two our overall One

into more this share overall the have And from zero pleased We years, in space. over incredibly we’ve and grown as continuing use a I am run-rate continue dollar win about we cases infrastructure. infrastructure within their multibillion to to take business. effectively past made web-scale cloud the more progress few we are

We what are we going massive also opportunity still forward. at be a growth believe the to beginning of

we While par overall the stable. and remains pipeline rates QX global and continue conditions, closely demand on remains macroeconomic with environment steady win monitor to the our and

which vital in while transformation Many digital portfolio. slowing hybrid at as our of areas essential cloud and maybe told is it competitive growth spend have top their some business their overall spend, customers areas technology Looking across fueling levels remains me broader is to differentiation and the resilience, remain landscape, that success.

that spend growing increase high single-digits surveys mid In to the make are in forecast to in clear fact, XXXX. budgets technology IT IDC’s and as they recent Gartner most it

to and they moving on order in look to ML power many industrial QX also with optimize their hybrid has in building automation modern customers investments deliver AI and IoT We We consumption, work, also ahead record objectives. are their their been revenue to seeing saw as infrastructure accelerating. while the growth connect systems need customers efficiency.

invest and ThousandEyes, are priorities to a reflecting revenue organizations. strategic their digitize continue routing, to stack their growth and we From product modernize the DUO Lastly, Meraki, rapidly ongoing for enterprise observability and strong secure XXXX, and our cybersecurity making infrastructure investments customers perspective, Catalyst Wireless, saw innovate. double-digit full where to we remains

We the that need. are simplicity our management increasing platforms cloud investments deliver customers our in our

You will see AI into continue to are bring further us and to networks ML how simplify platforms those managed.

enable new offer our For in their several and that we simplify example, customers connectivity, AI-driven announced security give the secure QX, portfolios ability managed networking visibility cloud across and innovations insights, greater with to operations. IT our

SASE platform ThousandEyes for and open our platform, the unmatched user correlation observability cloud-native unified fabric. Cisco+ application supports Secure Cisco our network. and existing Last AppDynamics the to together now SD-WAN and stack well using week, insights first Viptela fabrics Connect, solution the telemetry. to network brings integration Meraki simplify policy management, data network preview into security as our capabilities This introduced the technology, visibility SD-WAN full we To to a solution, from our as support

lower for powerful which increasingly meet customers. our sustainability We only and also new most help servers, energy-efficient but cost, also customers help of critical introduced more an not area our flexible, their goals,

great across a this of what and am to strong progress I make on portfolio performance, We delivered quarter. our business achieved our proud close, financial innovated continue transformation. we To

outlook. healthy the confidence billion full almost we have give pipeline increased raise from a addition, the to our visibility RPO, in year us $XX and backlog and In supply improving

‘XX, us on those in to ability fiscal same our factors into expect to commitments. We giving conviction our year continue deliver

our backbone experiences. The hardware our investment allow benefit sustainability modern, software Together, as secure differentiated multiyear resilient customers’ the Cisco from are rapidly, is their and services. market-leading these we while serve to to building with technology cycles their and networks as as of strategy. innovative well all digitize secure our environments customers our goals, achieve delivering well-positioned and

Scott. it to I over turn will Now,

Scott Herren

and Thanks, as We top our our chain actions improved our several bearing of expectations quarter both our have execution, quarters last success over strong line business delivered another Chuck. availability focused supply of fruit. taken supply the bottom continued are and the driven team exceeded by and transformation

X%. $X.XX. net per was billion, a a income revenue earnings also record Non-GAAP up record, $XX.X Total share, was and $X.X non-GAAP billion, was

more total XX%. grew Agile Within double-digits campus in XXXX our revenue, switching the strength QX product by was revenue driven our up up revenue performed revenue in product very in X%. up billion, Catalyst at Looking X%. revenue with Service Networks detail, was billion, Switching $X.X and well, offerings. $XX.X secure Meraki

growth and While strong data saw Enterprise declined XXXX double-digit growth in slightly, Nexus Series in our had routers, center by primarily our Catalyst strength we IoT routing. routing offerings. switching driven XXXX SD-WAN

trust the across web-scale. entire Edge. XX%, the double-digit had for by Internet driven Collaboration was center. by growth growth contact our meetings portfolio. optical End-to-end XXXX threat driven was and very offerings. experiences, driven unified devices, growth collaboration and offering down and up declines Wireless by management and double-digit down Cisco Future was our by in declines offset double-digit our ThousandEyes. in Optimized We up driven X%, with slightly XX%, in saw growth growth zero in offering application SaaS-based was strength X% by strong security in in

of software percentage growth which of revenue up XX%, up X shift product progress revenue billion, billion, by in increase levels XX% to more Total transformation subscription-based, we metrics of performance our offerings, which ARR solid of with our software an our was was saw year-over-year. X% with subscriptions. increased the higher as and XX%. revenue software revenue-based business XX%. made software $XX.X driven We recurring on subscription of ARR is $X.X points, We strong

We $X X% in Total and an grew Product continue billion. RPO total to And subscription have software X%. $XX.X short-term billion, XX% and represented billion, service increased to $X $XX.X was X%, increase RPO was of orders RPO product our Total of revenue RPO billion total increased up of revenue backlog. X%. subscription revenue.

both growth ‘XX, line customer total product which they we and in growth customer were product across against saw in markets. sequential double-digit enterprise rates. quarters for product our orders Within sector was historical our Sequentially, XX% history. growth XX%, than have order of total public markets, in with geographies compared one commercial seen our orders We QX was down better historically. While is experienced year-over-year growth the largest and declines fiscal our we and in

We order remain which continue low levels. very below rates, pre-pandemic cancellation to have

Total year-over-year sequentially. XXX at down points. gross XX end our XX.X%, and margin the guidance was Product points Service basis of sequentially. XX.X% gross points XX.X%, basis was non-GAAP margin points basis came points basis up up XX basis margin high in up and gross XXX at down XXX range

higher backlog. in gross costs. This product our pricing by through as was primarily prior other the fiscal the the we our mix actions positive and margin, product and took our shift offset strong of partially decrease driven flowed we year-over-year as In year by benefits was component the

higher the XX year-over-year that component and basis year-over-year sequentially. XXX far in down at at Non-GAAP up continue for decline of operating our the margin exceed The driven high-end was to Backlog and primarily historical both mentioned. XX.X%, points guidance costs hardware range just other levels. came products and by I our basis software

we navigated to sequentially, still X% a environment, total drawdown able by we As backlog grew supply were although year-over-year. complex it

reminder, and RPO part backlog as remaining a of Combined, our not line. continued our to visibility performance billion obligations. backlog to product top Just in is great our significant included $XX.X provide

the IRS and balance tax the cash floods. investments QX to operating the the and billion. of with to $XX.X federal $X.X we of cash equivalents cash, sheet, our Shifting collections ended due deferred up relief driven to record by quarter payments QX XX% California total year-over-year related strong flow had billion, tax for we We

shareholders We quarterly federal returned and of share by of We comprised year. cash the fiscal billion pay quarter, dividend billion during to which for $X.X these expect to our the taxes $X.X was $X.X billion end of repurchases. the

strength quarter $X.XX We by quarterly in also our ended Today, $XX.X which commitment consecutive confidence to of free repurchase to increase. we and authorization. our our raising represents stock to XXth stability flow minimum reinforces with that billion XX% ongoing announced the are a shareholders $X.XX share, per of and dividend This our cash we annually of cash flows. remaining returning the in our

bottom top To summarize, great and delivering better-than-expected performance. quarter, line a had we

growth capitalize on business our shift recurring to revenue in on more make significant strategic to We opportunities. making our continue progress while investments model innovation to

benefit our significant and pipeline last actions by now from taken team guidance guidance, Turning the ARR, quarters. the backlog, over ranges driven chain and improving to availability to several have reflect healthy supply supply RPO of strong continue our as our our visibility we

continue will factors XXXX our and us goals. same visibility confidence in those fiscal term expect longer into We greater giving

range earnings be the margin QX, XX%; expect share to non-GAAP to fiscal to $X.XX. of non-GAAP guidance factors. significant driven For of our growth in fiscal margin XX% is: change also our non-GAAP the share operating earnings we per from XX%; to expected is to in revenue the year and full of range to non-GAAP range in our gross per be be these by the we $X.XX to is and XX% range XX.X%; is to same anticipate ‘XX revenue our expected a to guidance XX.X% There

For are raising both of we range expectations Non-GAAP the fiscal non-GAAP in full to and revenue In year XX%. of is XX.X% $X.XX year our rate ‘XX, our a year-over-year. be guidance, earnings from per tax to we effective QX share are $X.XX. X% for growth expected to assuming to range

will Marilyn turn now to so move Q&A. I into it back can we the

Marilyn Mora

going it comments for just Chuck turn before Thanks, to to the Scott. Q&A. a over am start few I we

Chuck Robbins

Yes.

and region the watch wanted give the know are Turkey Q&A, about with to impacted and earthquake I Syria. toll we can. want to been here in them has devastating the support we into them just as climbed as on and It’s much to in get our thinking by we we we are closely just help. and Before those teams let send them help to to death as are ground working We our condolences all the absolutely that to

Marilyn Mora

go let’s ahead the up questions queue for Michelle, Chuck. open answers. and Thanks, and

Operator

Ittai you may Company. ahead, Marilyn. & you, go Kidron, with Oppenheimer Thank

Ittai Kidron

can look keep – how continued this from guide. is backlog rates more guidance fulfill Thanks long quantify your versus the ability coming guys I the or much question when normalization the you quarter I to have about outlook to take itself guidance, the going long demand? gauge for going true the you you at And quarter, you nice you to supply process think the above would underlying and at can kind that for trying in nice for view? is order yourself? when in on how of the that improvement, perhaps just your of maybe normal is chain big am how guess growth

Chuck Robbins

I enough, Yes, expected. the Ittai, thanks for question first that the was And shockingly question.

stable. So out let give QX fact line is saw, with forecast, first. start and of current in of wouldn’t our you fact, let’s detail. can are me Based we on what we that just And sequentials I But the we sequentials. QX demand then and summarize one, stable demand also the in with if more at which forecast you, seeing give you sort our number that’s the that look ranges is remained in normally historical

piece. first the that’s So

fiscal down thing we with second with. while end X% It we gave roughly Scott we and – The what said, you we up that’s guidance as sequentially. a even the year-over-year, backlog expect normally was came is, we year the that would backlog today will end year the double with

transformation $XX the to other really can consideration And XX% recurring now helps take of revenue which with ARR, is The of the have XX great we months. business thing into billion deal. in renew a our actually we next

in now recurring coming any we have sheet or X revenue our the of for you revenue revenue. orders of X to quarter. from go years given our balance back might XX% if we and take So have XX% had ago, And

believe still be So all said, will we that deliver. able actually to that we

in We’re we confident guidance on will pretty that that we the ‘XX, with growth gave today. comps deliver significant fiscal positive obviously, based

Ittai Kidron

that I unless for years, – a that still misinterpreting into unusual happens. Is anything sounds while can it comments? kind Okay. always your And I say when you is couple fair backlog you above think of at I mean here historical least of given about eating is the it something X think run plus/minus that run to before Am guess range X that from the normal, at. ranges kind above I like, order of normal pandemic, ranges your to on your backlog? is double, can

Chuck Robbins

take do Scott, that? want you to

Scott Herren

to billion both we backlog in backlog No, at would – that’s in to the you Ittai. all, double past, that’s at for better to roll from it’s the But What guide the we’re wanted have revenue fiscal I – of But it not normally next current, going what $XX end the the to ever months that’s what than us billion turn is too early give would is the be in we into confidence the almost say we’ve in obviously year. $XX visibility ARR. and going roughly RPO XX and of had ‘XX.

‘XX. we So headed confidence fiscal good we’re have in in where

a precise too on I in think the little a where it’s bit early more we given are us end second the at of be just our year for that. to quarter

Ittai Kidron

Thanks. luck. Good Appreciate. Okay.

Chuck Robbins

Thanks.

Marilyn Mora

you, Ittai. Thank

please. question, Next

Operator

you may ahead, sir. Evercore, Daryanani Amit from go

Amit Daryanani

Congrats good a And maybe think nearly close growing for that’s the Thanks. on notable. XX%, pace. is to I at about really think secure the I segment mine as really industry if networking guess I growing agile that don’t quarter well.

you So see especially the to to that talk supply you’re year? think you see understand, some the with how start That could and to of rest to share be that I’d perhaps chain talk within about love segment? would tailwind that about did campus and improve? I starting that back also do Is come continues for maybe Cisco, gains that helpful. Maybe the you mean, a just

Chuck Robbins

Amit. Thanks,

put come these Let that and digested example question be revenue because of is I market inexact. that’s to QX, that suspect share me thing up we with to web as reports that of example, in quarter, take many tell market think an certainly our the I that you gainer other and out you’ll and competitors gainer. keep switching. when infrastructure mind share goes it be our see ship in into for data that is market share, certain last share into we is, expect routing I’ve One space, began several I wireless that, products a reflective was when new numbers share of products center And said be would that case. our would are XX% a to it to we the the the revenue reports during we that scale the obviously, on as is going year-over-year. backlog our And and ship calls that,

to that will want about we some little as complete difficult backlog continue So you switching? but bit believe it’s apples-to-apples, gaining very talk campus to a Do ship get in we I do share. be cases the to our that

Scott Herren

Yes.

missed I the part of Sorry, question. that

Chuck Robbins

your can part? question the the repeat you campus second Amit, switching, about

Amit Daryanani

campus the in you is alleviated that I XX% was specifically? within view? Yes. of supply kind chain And of growth is very No over wondering, this that how just how for like saw segment, you context that performing

Scott Herren

Yes. us. I don’t Campus supply is chain just that perception supply got to doing well the – chain the for while leave And better. want

us to see well for share deliver Our continue is to just the supply several last that frankly, we And this get chain in quite qualifying standpoint. with – we have free The our sure out result with a yes, answer. teams puts in a team the a our so by share with the to of the short relentlessly But we’re could we’re redesign, about of our peers that the and as this is, talking our a lot of laid position quarters company. us. supply that’s their from pretty space. gains answer the half up industry than to worked gain year, suppliers second grow continue subcomponents of some with many to think increase in of engineering over right of you’ll I components, And inside people I hard alternative better chain it think, work for supply make now doing product the product what lot in working that guidance as leading we’ve to longer the

Amit Daryanani

on think do look half of Thank structural? just think just down April chain chain is is for That’s in on logistics talk quarter. you the be quick fairly if can is impressive. you. And what gross margin versus it. normalized company basis could your like gross Can quarter, about think, April ask I the back Got supply how supply you points you and much like obviously truly sort you normalized? I of downtick guidance and XXX things implying so the will really you’re a cyclical, helpful. year-over-year, for margins But really And

Scott Herren

we guide midpoint about is Yes. from quarter The just of quarter the point the announced. improvement XX for April the a basis

– improving, do margins we driven see and largely cost. So gross driven less it’s by it’s by

reflects some driven where are component but they around the we that the seeing It’s increases ship what in place in and particular, backlog in reduction fact put we more year. most last We’re more that more costs price ship, the costs kind staying logistics, cases. in by of are as of we

I as in points potentially much So maybe gross are, where from see continue margins as expand QX. to think you’ll XX they basis

Amit Daryanani

Thank Perfect. you.

Marilyn Mora

Great. Thank you.

Next question, please.

Operator

sir. Thank Cowen, ahead, you. with Paul Silverstein may go you

Paul Silverstein

the I’d that demand so what a business, have trend to validity in served. and you the visibility apologies, ask Thanks. terms I’m your enterprise and team into. Chuck color your prepared give translating government But visibility competitors federal, you remarks I of that’s addressed trends all Scott, are – of issue. including and issue. sure in addressed your the appreciate your I the demand U.S. you in can you revisit, aware but especially But just know, of share bit and market you Chuck, more my

Chuck Robbins

our in better digits is line the sector sequentially, that was with – our I was of double enterprise, quarter. than up historical enterprise And our which performed it – as said, public Well, ranges how and is peers actually our during reflective of commercial represent above business, the which historical. most

linearity we had actually we to other and into quarter. And our QX. perspective what’s January we started month had a clearly we quite had stronger questions in that was the our finished thing the we’re out that a than happen was itself ‘XX. we going as unique of to the the So quarter budget And calendar – enter one I from actually would – we point we is in normal, that

mean They just They rearchitecture a with think to their some if be their to customers running look complete in So think public of infrastructure actually our cloud you. native points products. their at rearchitect now, deal I which are And scale, patterns clouds. both private They cybersecurity focused few a sustainability, applications to and a are what top having for They our hybrid to leading on I to traffic have those and/or business industrial changing about are IT data for threats on infrastructure significantly are I of also focused and is do dealing got you right on them. as our with work we how the with dealing are transform that systems our brings IoT all they multi-cloud growing for customers. are that. massive connect

So if you think about those big our five trends, of we’re all actually in the customers. middle of those with

So the and and we for lot thing week time, talking one feel now. to in seems technology about it. good spending the that about Europe, no is leadership where and is in cutting Amsterdam we was very my our right last team – say last committed Live Cisco were Everybody I’ll are. And I Singapore A of Tokyo at same

the it organization right strong think our underlying strategy I power now. just of relates is technology all as too of to

Paul Silverstein

you on for appreciate before recovery, both any now walk question. initial back roughly and in points of thoughts got of terms margin semis to I X you’re Scott, time to increases run, or of the to And but bridge respect far? X gross? you or too Can of operating price XX get get on a percentage operating you the XX the to a just you peak just other gross it’s things, much Can and with percentage that’s how Right. back visually points? function back because the below

Scott Herren

come our the to there gross number as for price necessarily fiscal our margin, will backlog Yes. the that a guide I into going longer increases. several of so a you One tailwind there. reflect tailwinds long-term, there through things mean but ‘XX, and talking that way work term, continuing are is is about are talk to be not

I mix both how think reduction and what ocean. will in leverage has in we cost shift but between see also the and per what we logistics of kilo costs, supply airfreight in continue will the the freight to go from a

component think that outside lot like leverage of So I we be up it areas some a us, that will I lining leverage So right? our cost beneficial there of as and of don’t combination to that providers non-component some us will areas will cost mix see be drive see reduce think to commodity north. the well. the to in I memory will

Paul Silverstein

you XX? think can XX, to you back So get

Scott Herren

Yes.

are So margin, going? where asking me is Paul, that you on X-year for gross a forecast you’re

Paul Silverstein

can Long-term, you to model? long-term. that get back Yes,

Scott Herren

sure, push Long-term, if it for been back historically, beyond. leverage it’s where there and not to to is definitely

Paul Silverstein

Scott. Thanks,

Scott Herren

you. Thank

Marilyn Mora

Paul. Thanks,

Next question, please.

Operator

Stanley, Thank may Marshall ahead. Morgan with you you. Meta go

Meta Marshall

are Thanks. some right and of Great. about then currently? customers, model you get some you’re of how seeing or looking subscription to you flexible the more as subscriptionization of whether I’m kind and just ELA see I assuming that commentary of kind they environment just And kind sense have subscription with methods maybe having the you subscription of M&A been a now your wanted where the you of products of think of to has some just your and conversations on of evolving for part the transition model impact are guys you Thanks. are a big had. kind

Chuck Robbins

you. thank Meta,

we portfolio updated. hardware The And We but team in able to on So But now. is subscription to early hard models. we are I’d think we’re speak the several having just you probably, transitioning quarters anything about And keep right of working innings really last that that. will traditional customers software size years the the and away to say, or to silicon. key to we X I have of and still to we’re run software That’s disaggregated from to the over xXX deliver what is being relative virtualized flexibility. – appliances. working hard on so, on the that give business, continue

to want would give like. customers they whatever flexibility that we our So of kinds

part. first the So that’s

as changed. On the M&A side, would expect, I would say not strategy, you has our

market that the their peaks. somewhat muted and the valuations have think dynamics from I longer I remain changed, think

real long how of of valuations first these more probably place. and prior were I exist realistic think may – even what a the to the some position coming companies on are valuations in

So going on. we of aware to stay continue what’s

same. to remains but strategy our marketplace, scan continue We the the

Meta Marshall

Great. Thanks.

Marilyn Mora

Meta. Thanks,

Next question, please.

Operator

Leopold you with Thank sir. you. James, may Raymond Simon ahead, go

Simon Leopold

I mentioned remarks, the to not a question. is could And the bit In switching of in the you. part I I trends broader good, that you’re much unpack for see of just the taking about trends? to think data weak. data your Thank And Thanks a looking you I’m wanted was bit? guess centers. maybe are slowing seeing was if for center what broader prepared talk market, just reflective hyperscale but trying the versus the we UCS little it, that but How of business. Campus

Chuck Robbins

give But and detail. comments, Yes, Scott, private I’ll of around thinking are our they customers a cloud. public make I want versus couple don’t would you increasingly say any I are about to balanced that cloud know how if

web point would I business. so on data we’ve to routing comments center as said share, Simon, we UCS, sell continued in about the revitalizing into routing let if infrastructure earlier want thing everything But the out, the our the infrastructure. speak not I’ll within and on share flows you side that – to And scale or I And seen sure that. market infrastructure I’m Scott my share in numbers focus other private our market

we So actually center data our boost report it doesn’t switching way it. the

to that. want of sure bit little I you understood make an just apples-and-oranges a it’s So issue.

Scott Herren

UCS root And the based in that’s there on of we as point. Simon, And we’re No, growth well. like calculations, on UCS, question, a good feel are that’s well. least nice we share seeing really our gaining your if as at

Simon Leopold

I it surprised bit hardware. basically I shipping as is maybe of same a Thanks. billion, the attached just backlog quarter. – it guessed down have little associated prior in that quick software $X would of the the the come with a have metric And was would hard hardware in follow-up, was improvement then

you a little to related the didn’t $X extra value billion shipments don’t with hardware? So come maybe down or the talk why understand that of I could Thanks. that bit

Scott Herren

great And if see a to It’s actually double-digit you question, XX% quarter, so overall we back Simon. grew did this revenue – growth. noticed, software our

that’s And the software back shipping in the and is some growth that hardware both of backlog out, had some the of of the on backlog.

remains shipping the as out. seeing same benefit the we So are demand said Chuck time, earlier, that of steady. At

stock in that it is overall amount it still down backlog, significant attached our so hardware. of And sequentially, some a backlog, came X% about software there only of while to

Simon Leopold

revenue that a of as that revenue, metric, total is product where now? software And or percent

Scott Herren

Yes.

the XX% software, for XX% the Just range. in it’s range. Overall, we’re in

Simon Leopold

Thank you very much.

Marilyn Mora

Alright. Thanks, Simon.

question? Next

Operator

sir. Sami you Credit from ahead, may you. Badri go Suisse, Thank

Sami Badri

thank Hi, one I quick had and one follow-up. you. a

center redesign. the one switching first is on just The data

the You better actually redesign mentions first to that and center get year? So through. and for regarding But drive now that the that’s redesign my supply guys question. of hard the with does revenue did really data guidance team completed working several kind the portfolio is made part switching mean

get get and cycles hit elongated that The seen are these the and elements. ask speed guys we’ve appreciate, of cycles I far other of But sales take extra kind appreciate you companies as sales this impacting regarding for comment I is wanted you business. have times it did one slowdown your of spend some you any to resistance to Chuck, other signatures kind the linearity. cut. several done And at also question tech kind as on seeing I all report lead aren’t fact which seeing or I you through. And into historically just account But

Chuck Robbins

and one general, is takes data getting extra seeing you cycles. bit our the teams then about just cases, me be there We them. many talk a little are Scott, seem some are told We the take to, me can signatures absolutely second longer. have required. What It center that, switching sales in just elongated first, Let redesign. in

a a you or that the want world redesign? falling consider So do haven’t bit at of to look sort of a complex I’ve – now. seen it’s a but you look, world about we talk experienced current But situation. a cliff, the Scott, what would crisis right environment, obviously and off in if demand historical back complex we

Scott Herren

good. that Just strong, pipeline to still up close rates look looks finish on

we’re So seeing a not in a There huge slight difference cases, is, elongation. there. some

On product, the in the redesign, we’re that less seeing, secure we’re to as of absolutely we successor being to releasing work redesign. growth the particularly talking around we talk so we from about And design terms components agile the in redesigns get our product about to networks, that what problematic more able that’s when those supply can – build contributed that’s components, around we get hands next on, of. the couldn’t

driven in quarter question, the we some you of saw there so that And growth the no is announced. just that’s

quantify a guidance growth our out are we in too see continue in you that the we’ve put you continue the ‘XX. just trends half. uptick fiscal see that there. we about continue into the for to little the of We will second to to growth to a growth nice start I continue those this that clear, significant we ‘XX, drive give year, early to And the have to and trends half that guide. All second will think talked be into fiscal expect driving it’s and

Sami Badri

you. it. Thank Got

Marilyn Mora

Next question please.

Operator

go Thank from Jefferies, you. you George may Notter sir. ahead

George Notter

impressions were kind guys. guys I than the $X And backlog were And three product would be ago. cards I About product I Thanks about I for order you product orders the and feel wanted think about was ask down XX% didn’t Hi orders think Xx have decline at three if a months much. it were XX% $X that guess your to in fiscal year-end of your months you you. billion correct. of to this I or to backlog then for relative to year, normal Chuck, ago, like talking range. very quick higher Xx the say billion

thoughts more Thanks. And it than now thinking previously So, going orders and your there? am like bit feels that are be to you I correctly? are what perceiving burn a you previous, than were will worse backlog

Scott Herren

backlog. that, news They don’t Yes. down of components. George, clearly have can I to it we and is will good are news able They for more I are That’s backlog. take jump We is are think the you the got waiting that ship our these for – burning in. projects then good customers. Chuck, that good go in working to a the their need they some and capital. on, case, channel and own so on pressure are for holding box, up done. out our need sitting relieve shipments. news the last that they partial get that It’s they is of channel can implement They in some that sense

am So, or good there ability the sorry, – backlog. the to responding see the in the guide the ship and it’s backlog, news, the that’s not second have half we in year. reflected This up what of guide down burning down in our – you is that I to

revenue projection see for We than the you year have we before. what – the of is had second now half significantly a higher

that ability has clearly team is our some the And free great supply. to our up job to done of ship backlog because of

Chuck Robbins

there there would And say risk, like risk. when was there more there I at I talk in And my was to I side, more days, felt customers, demand think more general, I on would the talk XX go when if colleagues, seeing back And uncertainty. I major without my say, least I go is our customers even then Davos, were longer – talk listen hear and – you in feels like to some news to are shift, the better it the we we feeling. the we

So and moving and here to week, are obviously, to was we will week, traveling last saw forward. are being York have monitor customers immune after to it. But anything, this New customers not actually team I Europe, we in Asia in I continue our while in

George Notter

Okay. That’s helpful. you very Thank much.

Marilyn Mora

Thanks George.

question. Next

Operator

UBS, with you may Vogt David you. go ahead. Thank

David Vogt

trying bit the a am versus I apologize Thank out Scott, little I to comment. it. covered if Great. you guys My the clarify just backlog you, line more. order and cut

your backlog you not I roughly $X mistaken, rate of think I run fiscal as am been billion year. if exited had sort

are you suggesting just is sort your next the that business we the ex case, ‘XX? drawdown a kind of flat $X.X back over exit And ‘XX into follow-up. imply out quick year-over-year us several of comes I that quarters? the that’s billion guidance, the And to have about So, backlog that if of that backlog the as down I if then effectively would by

Scott Herren

Yes.

a as we is question. the between year It’s end some end would we the moving said same between normal What with previously to now roughly what What walk still range. at somewhere the last try that So, it’s let backlog, billion of said thought $X and and me is we through we we normal and Xx parts year. see great quarter, the Xx backlog. there, double $X David. be going billion And that of is

our of customers definitely which as So, remember, ability one and lot our ship piece billion to we ship than that the is $X for our out is software there backlog, The again, software is in is of news that’s ratable. is, there. partners. in great said there equation of A some more your the we missing backlog,

and drop it, dropping over as time. recognized doesn’t ends So, the being soon all it revenue It as we into ship revenue up deferred stream. into

to much going reduction is but that the you what’s revenue. deferred That uptick of the contribute a the backlog, is So, revenue not in missing. consider have growth how just you also there in this – be in to the piece to may are guide,

David Vogt

I and done a follow-up, And given your work let’s it. phenomenal maybe excellent fiscal a as say, enter, then we just the chain, Got as quick has so on year, next the team mean supply job, a two backlog trends would reasonable scenario where today. that basically, Is – at back within hold quarter, maybe normalized a at worst-case are quarters mean that could I imply the we we if be expectation? consistent

Scott Herren

fiscal two Rather to normalize it’s it in than I try quarters, expect a ‘XX. do or quarter it’s say to

David Vogt

guys. Great. Thanks

Marilyn Mora

please. question Next

Operator

Thank you. may sir. ahead go Bank with Liani you Tal America, of

Tal Liani

with He question. exactly Great. was previous my thunder my the stole That question.

a answered. understand just just I what want clarification to So, I to want you something – on

$XXX year just million you Am what goes some minimum million the minimum, X% that the minimum million. correct product end year answered? out that the the so the $XXX was million means that at backlog should Take we and backlog $XX So, it is at of revenue. going decline of of that backlog million. And is with of means the the higher, to because growth, deferred to I take that $X some declined now into in because be $XXX

Scott Herren

you Well, are close. Yes.

Let we to can me QX from QX, and still backlog if in decline the not The it’s in run was it catch Tal, X% through clear, right. follow-up. again, the

of is, normal about backlog. our full at that Xx have end we we said you Xx that the we into in time off somewhere we guide, X% So, the able guide to the and that between backlog the with. we the What the year QX with were work year expected to came year, previous full quarter gave

the normal double be to roughly backlog. not it’s going We are saying

second that, revenue. a the will you half in significant obviously, will have up ship given of of part Some and be that out we the guide

Some deferred over go of will immediate into be revenue, recognized ratably turning and it, instead into of time. revenue

Chuck Robbins

RPO. And show up in

Scott Herren

in it follow-up. show clear, I yes, I RPO. up we that’s hope will can if revenue not, deferred and that’s – hope Tal,

Tal Liani

clear. Very Yes.

environment down. saying spending go quarter, – all with So, be concerned so the and provider what trends want And customers, big Did didn’t us through or hear or the more I at deterioration to would down. from Arista sequential previous basis, that least far, saying last do make to situation your my you to think some didn’t quarter, saying providers commercial does normal that Can basics and we of enterprise take We it. service customers, a did continue the the We hear weak. We us hear the environment you were further the deteriorate on back environment year you customers? forward? stabilize? slow is slowing account going service understand, expect you tell it to don’t continues customer question the were about it you

Chuck Robbins

Yes, Tal.

strong which is during we line sector in from a enterprise seen what as I said, have a perspective. on higher double-digit space, was demand and – was quarter saw than the extremely with actually commercial sequential historical was U.S. public have we we And ranges and – So, historically. the Federal growth, Federal

think are our some you seeing data. On them I the anyway, and peers, of don’t give provider service competitors of order side, many

think us, most the for I ones ordering. so And for the long-term are those planning customers who did

got So, as months’ lined consumption change backlog. up already expect to their worth lead months they down, would to to of come in the ordering patterns have begin and XX them times we X

we got are And we confident had win got continue use today largest get to players, over will So, say a space, in. see or XX designed we we the few that XX into that new very actually the today. franchises have I scale just cases and web quarters. will about those within at point. design in next been of there normalize that the this roughly a are note will noticed designed we I

short-term very so normalization our for just think service a are long-term, optimistic And it’s still we space. we provider

Tal Liani

stabilized the on your or Got and an question economic these whether impact on was business it. factors you from my previous orders slowdown, see they quarter? Layoffs

Chuck Robbins

layoffs you in – customers? Well, our mean in like

Tal Liani

industry? across the Yes,

Chuck Robbins

surge Yes. occurred, we growth in think companies was and there we seeing end. Well, in lower is employment, line a and the sequential that I didn’t. a of had seen the right think massive about the that now be you was it But are towards what have if – that lot thing we some like

end, which guys highest it’s to at ranges, you if just We shared we sequentially So, our but that historical line normally the in have also QX, I I current forecast not performing that with and give. think in And is it’s – range. in that wanted you don’t also visibility.

And – that want customer picture see it to with able to moving projects. as our me don’t really strong ‘XX the maintain around to a – So to a January budgets. to look, given and as immune. want forward uncertainty spending one the paint and encouraging that that every we it’s customers thing is been was, time, we our was not was for certainly And continue see I picture paint don’t am have I are everything. But everywhere an uncertain on I

Tal Liani

it. Got Thank you.

Marilyn Mora

Thanks Tal.

question. Next

Operator

you. Tim Thank Long may sir. go with you Barclays, ahead

Tim Long

Thank you.

think I of can well. little still is traditionally, hoping could get you that GDP-ish strong like been bit in is And talk campus confidence kind has pretty next it very obviously, year that. a your Just running about, But type One, for as I here. sounds two the above a business of enterprise strong. that’s

So starting GDP that be obviously, great. Any to any thoughts stuff. what’s decouple different AI, fees? for like kind macro like And a then of we there networking campus that ChatGPT, there? Are of maybe, from second, all insights there out lot excitement about would Chuck,

of your what an and guys? you Thank more data for with big impact switching Just for kind center around curious what mean is for what if arms you of race AI, routing customers there would business businesses, kind of you. think that cloud and

Chuck Robbins

Tim. Thanks

into obvious had was the many it need not had great a our campus, sweating So think pandemic, customers updating, moving maintain about became and that been a because do first of infrastructure longer. that pandemic little I enterprise the the one, think our assets to – quite they to I modernized were on they educator customers for they

shifted. thing that’s that’s one So,

The of trends second is multi-cloud, – the the their and really work re-architecture these we hybrid of trend of networks. are overall seeing

networks how very you center, branches flows have on private a If have it all premise traffic really – the XX a and we we we think are years, we data about what built that for understood. built and

my I work, infrastructure with to upgrade cloud, supporting etcetera. deal in, Now, live to that supporting this brand-new have I hybrid world hybrid entire

creating driving to of So, well this I as a office, the think work, lot employees to safety get experiences IoT, back been as our etcetera. that’s new in

of lot campus So, think the I stuff. enterprise been that’s what driving has a

which – question historically relates play, are that core that AI it networks these space, the when have AI are Xx was customers think AI these look, I whether second And bigger your to are or being around needed. built, whether are than network have I scale is they building As are they the it’s that. required scale like running, like web training networks learned infrastructure the and that AI Xx largest astonishing what they web me performance to some to in the in algorithms, enterprise networks that our we of

of with we around massive customers And us lots and it. a is active so opportunity in this for discussions are

shift this opportunity create to going in And a so us the future. that do we think is good for

Tim Long

much. Okay. Thank you very

Marilyn Mora

Tim. Thanks

question. Next

Operator

Chatterjee you. with go ahead may JPMorgan, you sir. Samik Thank

Samik Chatterjee

areas Yes. the my benefits in if what just – some terms on security, broad consolidation of on And – supply Thank supply seeing seems broader the of your what on question growth? And looking hit segment firewall there? constrained strong you. expect on you similar question. portfolio side, two segments. sort the maybe like could side you we other security to does benefit sort position of more sort guide. just what customers of of are Maybe Hi. your given taking supply on as the I more there mostly a seeing should Thanks quickly Future given portfolio of bit Congrats supplier. eases, a the level what than you revenue for are product for are maybe Internet But a

Chuck Robbins

will you side. the take I take supply can security Okay. and

They So, XX – of look, enough threats want and infrastructure. their customers you to different very vendors, got it’s all difficult these and add I security definitely trying that have people. think to just – our can’t XX, correlate is consolidate

are consolidate that heads and of teams threats next working be down new effectively. time our on create do So, on do correlate out much capabilities are ability bringing how focused the to going the some to we real in right XX over and now exactly XX that that, to how we we months months, some more is

we think seeing four start or that probably to you are out. benefit quarters going the so three of And quarters that

So, the to team work has got do.

amount talent. of We a outside have significant hired

We have this in invested heavily space.

And ‘XX. So, not will see FY the while I the see – you you begin we to may in to see we but may accelerate see in – drive we growth consolidation that can a and near-term, long want will playing think game that we believe that that Scott? there next the years. lot we of are here over is this really few a

Scott Herren

the for spaces. Internet it Future, Yes. one the is of Samik,

portfolio. so have worked our hard We done so entire much product across and

have that some demand. peers orders times say just normal there, still who have made though, Future lead where still So, orders the also selling in already space I we to we we instead. times picked Internet spaces What are of the that more last several – improved of space. we cases. the is meet back one but into our from up progress that would those us And great to would many not in lead are same say I is have in also weeks we are came couldn’t for

on. we – like we it’s on where Internet continue we we And want improvement, to not be, the are space to while pretty it’s well supply feel the while work So, performing side for a are seeing and it Future. I

Samik Chatterjee

Thank you.

Marilyn Mora

it am Chuck our up Q&A. turn to wraps That going over for some to I remarks. closing Alright.

Chuck Robbins

the want to thank for thank delivered to on want and our redesigns, today quarter-after-quarter-after-quarter engineering us spending strong and get very I teams. thank for product and to the off, XXX supply with our work time They teams actions remained And leave I we transformation chain those of our really entire are also confidence over first significantly, just redesigns, results. us just backlog, everybody feeling business have aggressive hard for with and Well, future. to all you our demand that today, visibility the the of will I contributing position our us in stable. progress the on transformation. company the we The in has made business our give is

the I of relevance most think what our proud pressing high as very I accomplished. the given am teams super long is as of a it’s have needs time, portfolio, of been our customers, our in and

So, and in look to future you forward for thanks talking today. to joining the us

Marilyn Mora

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

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

Operator

participating call. for on Thank you conference today’s

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

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

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Cisco Systems (CSCO) 15 Feb 232023 Q2 Earnings call transcript