Earnings call transcript Q3 2023

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Operator

Welcome to Cisco's Third 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

third 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

cash A information, By now, seen our statements be be with statements, have flow the you website will GAAP balance in including information, non-GAAP available Relations full the corresponding section Financial call. financial press supplemental following Investor other our slides, made information webcast in earnings website. found should sheet, Information release. reconciliation on the of to section and Investor Relations Income can the

of we a and made and customer revenue Throughout call, will on this product results referencing results in non-GAAP we terms both conference year-over-year unless comparisons product GAAP All basis. be of stated discuss otherwise. will made financial terms and and will orders throughout geographic be in call this results

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

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

over that, will Chuck. With to now it I turn

Chuck Robbins

strong QX, and This us, you doing delivered well. EPS quarter In our I our ever achieved. proud teams operating and all am we income, cash Marilyn, non-GAAP non-GAAP was hope you, what of for strongest revenue, Thank have and are another flow.

$XX billion growth driving in growth and successfully subscription nearly ARR on posting revenues. our and in to to continued also strategy, software double-digit execute solid We

raising our earnings which our strong on again and outlook are Scott XXXX once shortly. share, fiscal Based will cover for QX revenue performance, we per

year in As to XXXX. compare growth year revenue XXXX, we we tough growth, to of ahead with even modest fiscal double-digit the look see fiscal expect

before our like that key long-term will QX through I Now, discuss growth. go three I'd drive to performance, help areas our

First, we subscriptions In in more QX, movement in and delivered growth are with pleased XX% continued success recurring revenue. towards revenues. we software our

remaining momentum performance We see also we this obligations, expect in accelerate. have $XX to billion and

security be Second, to continues opportunity an us. for enormous

say, a world-class me and strategy, team for made a the place, we've our As revamped put you've in this heard top priority company.

quarters, next Live the strong progress space, are new you Over month. strategy, our Cisco this on Cloud our optimistic market. are opportunity in we making, innovations about the including coming this fast-growing Security we Based building in at on see will rapid Cisco

And third, extensively predictive AI across already our generative and AI cloud. use At we portfolio. Cisco,

models core In addition, is already AI technology world. the our some the by run leading hyperscalers of powering around networking

the in which moved about also our Cisco Live. few capabilities next hear in We to have AI and will rapidly at own generative products, you starting weeks beyond leverage more

me discuss let Now, performance. our quarterly

saw reflect As our exceeding non-GAAP mentioned, share our operating the per high-end our QX, non-GAAP and record highest range. earnings guidance income, which I ever net quarterly we revenue in We of margins delivered strong healthy discipline. and

cash operating flow record QX. to contributed this in of All

offset year to to realization have in actions the the supply off. mitigate As inflationary of continued a last pay as helped constraints we place took pressures. we we actions expected, put Price result

to drive long-term enabled as Our to strategic disciplined cost margins, management continue to prioritize our expand well us gross as growth. investments

shaped factors the entire impacting by it industry. to customer that we demand, is relates are As being believe few a it

placing new partners and in often prior to is shipments to these First, orders. product customers leading our shipments increase absorb

Second, in third, and the macroeconomic lead product conditions. reduces the for reduction advanced by extensive significant customers our need times ordering

ones They our overall that as core this in with such customers to had strategies. we key earlier discussions at month. continue this their our most are said, invest Advisory to recent in technologies With the Board global event Customer

As unprecedented more we our than the previously rates order believe rates. the year-over-year demand shared, we for are given technology during sequential far pandemic, informative

like in one historical sequentials with our the coming Just were the alignment ranges in prior QX, range. below two in quarters, point general historical

of portfolio. cancellation also order remain rates indicating our our below strength addition, and levels, well historical In the backlog

backlog. of will the terms to continue with we our backlog, fiscal our end product expect we In that double normal year roughly

some detail of Now, about share bit me innovations. our newest a let more

this technology customers. by implementing all enabled our other systems. consuming They our huge portfolio gain and space. a remains webscale silicon, are investments. and see share in AI growth to wins currently wins software, and already hardware, these see of infrastructure in design customers significant continued Regarding There across their to displacements and early prior leading We continue opportunity competitive

that such business, Cisco's industry's about helping of to and on XX% a feedback This up higher Terabit Optics. AI/ML Pluggable This continues and costs and Line enabling as solutions opportunity. use carbon networks to capability ASICs can well sustainability. introduced Silicon operational compared densification In XX.X to emissions March, the XXXX Cisco and cases One to this first powered focused IoT. investment excited with drive support remain platform on and our Card XXX-gig the drive we XX% savings building our In new XXX-gig networking we as platform reduce space deliver return to power positive are we as to savings and customer solutions, by

experience. across closed we with own security Valtix, seamless a aligned vision our protection innovations, our which multi-cloud To of compliment for cloud QX, environments is to providing the acquisition in

extend observability. capabilities announced We two that cloud, and our acquire to our intent companies further also full-stack in security

share again to U.S. around countries am the Before ranked that one XX year I number Work, destination row, for the close, a proud Cisco's other I we on in I premier in also talent also XXX top the reflecting in want world, a and position as Place For to we one Work ranked worldwide. as Great were how for to Companies once magazines third incredibly were Fortune the Best number

navigate uncertainty To was results. summarize, ability our by our record demonstrated to

Our performance the we've and solid our over last investments made years. benefits strategy remains the of reflects strength the from several and the

Our operational and record earnings, value. cash in driving are excellence execution flow, and discipline shareholder

we towards QX XXXX, As to share a look and fiscal year observations. I'd few like

earlier, strong As I in XXXX. on growth top fiscal as see year year performance mentioned of of modest XXXX revenue we now, our fiscal in

us to improving earnings XXXX year gross You in share at reflecting rate a fiscal than management. can strong and fiscal per expect year also and margins full-year QX revenue higher grow XXXX expense

the over the they like I'd you've teams and execution stock two seen focus our thank quarters. placed higher trust and levels and the at us. last continue to expect partners we Lastly, to our in customers their buybacks our for for

to As confidence continue give security ability in portfolio, AI our opportunities our me Cisco's the cloud, ahead. scale, long-established to leadership and of the breadth many networking, in the capture and

I'll now over to turn Scott. it

Scott Herren

and expectations execution, to last Thanks, business Chuck. by our We delivered the continued transformation, a supply we've focused our actions taken and record bottom We reported quarter quarters several both issues. line the that mitigate driven and top exceeded XX% a earnings income, quarter. and year-on-year. Total revenue, non-GAAP the billion up non-GAAP was ever operating XX%. up was per was for flow $X.X non-GAAP billion, $XX.X Non-GAAP revenue share share cash net $X, income per earnings strongest over

X%. XX%, more $X.X Switching in campus $XX.X Catalyst strength very both Meraki billion, our offerings. double-digit Secure had data Agile product up driven very by largest Total and our XX%. by routers, our Wi-Fi and service strength business was offerings. growth up products XXXX, driven Meraki was revenue was product SD-WAN QX in switching center growth Looking detail. strong, had in Nexus Series with by and X Enterprise was strong strong revenue growth billion, and at up routing revenue, Within and Networks, wireless our revenue Catalyst IoT our XXXX routing with driven double-digit and wireless primarily XXXX strength also revenue

Internet X% was including driven by offering. in up growth routing our very in Cisco core products, for growth future XXXX our strong the

collaboration and also growth contact declines was and in Collaboration meetings, center. growth driven offset down webscale. saw by XX%, by double-digit calling in We slightly in devices

driven portfolio, up double-digit in and unified optimized ThousandEyes. trust An was driven was up threat XX%, zero our security including End-to-End application by growth experiences the across by X% management offerings. growth

continue make as revenue-based we performance of software more X% of ARR our higher metrics $XX.X our XX%. levels offerings, increased progress growth with saw shift transformation recurring driven of our on of business which to by We billion, and solid to subscriptions. ARR product We

with revenues were Total software subscription revenue up XX% subscription-based. was increase billion, software revenue of of an XX%. $X.X XX% software

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

continue Chuck in The at were backlog improved gross by reflecting nature of cancellation have Total the our of aging the driven our and critical rates, product three earlier. of orders margin and Total down factors we came product very non-GAAP quality out year-over-year. primarily our year-over-year. product basis up The and was Product partially was component XX mix. increase driven to our low orders XX%, past has XX.X% pointed exceeding portfolio. significantly points and XX.X%, gross points up favorable by year-over-year is other offset of high-end basis and sequentially down higher and positive the guidance range costs. pricing by margin XXX XX points This basis

high-end improving continues in to points our hardware basis were to of operating basis meet level to decline accelerate resulted execution, both margin guidance was sequentially. products range down margin basis for at needs, Backlog at and significantly Due XX.X%, gross year-over-year. an points XX our aged levels. and we situation and our Services historical software year-over-year. customer exceed points in backlog was the sequentially XXX and XX.X%, to backlog Non-GAAP supply up XXX which year-over-year down shipments able a focused of our

to is product remaining included expect a our approach with to product year of just year exit fiscal $XX in reminder, great And billion double we obligations. visibility our normal Combined as backlog backlog significant part to and our topline continue provide XXXX. as backlog. performance We our roughly continued the to RPO not

cash, tax Shifting XX% This income of relief this federal payment collections to billion, IRS deadlines operating XXXX. current and earlier QX related QX flow our primarily growth the cash had investments positive operating postponed deferral our cash for and had to tax XX the year tax We by floods federal The record strong until impact $XX.X with of federal of of payment relief approximately our California deferral balance ended QX up IRS to payment fiscal year-over-year year. remaining sheet. on points tax driven $X.X a recent total the of equivalents the due of We billion. quarter the flow. QX cash year-over-year,

$X.X of strategy cash billion for disciplined return billion during we commitment stock purchase allocation share and with quarter, in We of line was our capital shareholders to $XX.X $X.X billion billion capital, to $X.X with repurchases. comprised authorization. quarterly the and our ended quarter In dividend remaining which returned the

total purchases. Year-to-date, of of via a $X.X reinforces our our we've billion stability confidence This strength and dividends and share and cash flows. cash the ongoing returned

inorganically to on continue innovation invest We our pipeline. organically and

closed portfolio. which acquisition announced with the our of M&A. of is investment and During and with we our Valtix, consistent innovation our This strengthens internal strategic QX, complementing security further R&D targeted strategy

we strong delivering and topline flow. had To profitability record cash summarize, a growth, quarter non-GAAP

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

guidance. our to now Turning

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

Chuck guidance are again our As as mentioned, we fiscal is raising XXXX, year fiscal which yet follows. for

to revenue a to share XX% In Non-GAAP to the from QX $X.XX. rate to of expect full-year year-on-year. XX%. range per expected $X.XX in earnings range be both non-GAAP guidance, We effective are our we of XX.X% growth is assuming and tax

RPO, reflect of and driven ARR, healthy improving ranges by availability Our supply. visibility backlog, significant guidance

XXXX fiscal mentioned earlier, see we strong in revenue Chuck of our As top XXXX. modest performance of on in fiscal now, as growth

margins expect per a last at two we revenue earnings and also deliver in And QX the our can to over management. at us higher you've in the growth level stock expense gross to and fiscal strong continue quarters. seen lastly, rate You expect buybacks higher improving XXXX, than share reflecting

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

Marilyn Mora

and tee ahead Thanks, let's Scott. questions. go for Michelle, the queue up

Operator

Samik you. Thank JPMorgan. Chatterjee with

ahead, sir. may You go

Samik Chatterjee

with Thanks I on orders. can if taking Hi. my for guess question. maybe I a start clarification the

a follow-up. maybe But and seasonality. sure point I whether I'm are assuming about year-over-year. for year you I were think, quarter-over-quarter a or well, can as that? Chuck, orders down, you. on what you a orders clarify gave And below basis, they think more as heard guide your if sequentially in up if not say you broadly, next I X Thank you for But you have were

Chuck Robbins

Samik. Thanks,

are As I really opening there that the first affecting in said demand, three factors of comments, all. are

ship of our are our ordered. what As more we they've customers digesting backlog,

come times and two on as basis, then really Secondly, our they down, last as quarters come which in down it order times conditions. have the over the macro a customers to for obviously, significantly been had our need lead so the eliminates lead XX% weighted advance

as momentum real to we're in just talk thing year-over-years looking I the sequentials, about whether seeing said to a as the the quarters slightly sequentials out so operating hard last are line. this relative When we've at of low-end the I've for said, the as below shift quarter figure that we're I've is, And said ranges. and well, the business the sequentials of our historical or are couple in were

to say in wouldn't we we've historically. the QX, our actually look I robust, at And sequentials line expect be we but So what below. it's with or it's as slightly seen still range within

in we So today is had growth we good see year. even based fiscal on still top this deliver our we can the that year growth what year on view of XXXX, positive

I'll make point. one other

to September If to conference, laid to of you long-term X% when we go of had back long-term growth our topline EPS analyst growth out X% X%, actually XXXX we X%.

we fiscal period. that see revenue move a an perspective during above CAGR we'll we will to perspective, what XXXX on on of be end you time from from in the a be today, based range that perspective If and that EPS same range

Samik Chatterjee

sort change faster follow-up, that it. think – sort about expense touch from wanted I growing Day, talked And that Is of Day of than and the the at control my I EPS about you talking thinking revenue. you were Okay. in think of to a on Got I for of Analyst Analyst if of outside sort terms that to you back a on be about that's right. line more if maybe It Thank in thinking expenses, and bit more you. of limited you're disciplined earnings but seems integrating how operating sort leverage – margin, growing that and confirm revenue. with the gross you being are pulling that of

Chuck Robbins

we've the EPS well and revenue. higher our that that as we are with actually implementing, you we fund we we after that the last is look and margin our look can still been at than to actually deliver pretty asking of as if areas two Yes. Samik, lot years, have the it's gross clear a QX rates EPS beyond, expense than investors expansion grown then investment And which what for. as fund growth to with need revenue, management

feasible for And now. that's quite so we us believe do to

Scott, do you on have any that? comments

Scott Herren

No.

touched you I think points. on the key

XXXX. grow than the the topline we also this, do you've growth. years, We us will last line as fiscal continue for as it's that bottom our invest we seen we ahead, in But in and prudent, – the XXXX two you've guide see of fiscal the so seen And be XXXX. in to fiscal to a faster midpoint look time again happening and in at

Samik Chatterjee

you. Thank Yes.

Marilyn Mora

Thank you.

question, please. Next

Operator

Thank you. Leopold with Raymond Simon James.

You go sir. may ahead,

Simon Leopold

haven't Thanks like talked Acceleration recent Thank for Capital. we This that as and a topic implementing announced Cisco on bit process rationale At Business to calls. the part about of Program a thought the better strategy, is understanding I'd taking a question. you. program? a for beginning May, of much just Cisco what's as the Capital little

Scott Herren

for interest up a us the reflection of It's to That's past. rates in seen question. jumping something thanks Simon, X%. do Yes. more you've that the

on strategies complicated their get to to It's a own needing that. their sheet and advance our just continue hands more us Our technology putting to to than work balance customers bit. not

Simon Leopold

assume And effect model, no real I on your financial then?

Scott Herren

No. going in or impact terms that's the profitability Not have. terms long-term in of to of

Simon Leopold

Great. Thank you very much.

Chuck Robbins

Thanks.

Marilyn Mora

Simon. Thanks,

please. question, Next

Operator

Thank you. David with Vogt UBS.

may ahead, sir. You go

David Vogt

qualitative you a certainly anticipated, and give folks kind macro April. like question. my question. into what and seeing from more just from that you're industry Maybe of March partners bit in to say, as for saw, perspective? than Because a bit follow-up people guys what let's and color didn't it other conversations a you our March with little a had today April Can taking Thanks more Great. in Simon's maybe improve it was and softer on sounds

Just love to perspective your get there.

And then I'll quick. give you my follow-up real

So X%, you're next what kind it the kind growth I EPS next kind from of range perspective about year range. if Thanks. headwinds? would the of Is macro take a in comment of revenue in plan, that your trying imply back-of-the-envelope kind and the the X% of to three-year year given communicate X% certainly

Chuck Robbins

could had catch them. that second David, there? repeat I you sorry, you numbers part, I'm the didn't

David Vogt

maybe If three-year kind EPS a X% next what take about X% you're the Yes. of back X% thinking imply growth and just on revenue you're to here? have I the sense X% X% of envelope in math how that we your Is to would macro. trying target, for so the kind the of to message year Just range range. to that Thanks. X%

Chuck Robbins

Thanks David. the questions. for right, All

me talk very the It our let was that on in quarter. the favorable So actually about the linearity saw from perspective orders. we

the we're at not did historical from the a that see basis, it we the low-end on sequential clearly deteriorate While end. the of beginning we ranges quarter of to see operating

maybe In the was actually is. normally what seen, first even better was titch than linearity a with fact, April it our was – And months. two of line in sort better it slightly than we've

see not that did we So particular outcome.

And to way and playing do to very see in a sort I'm we're suggesting way momentum. the range below. looking change. for And just slightly saying out for of not low-end to there's that change of as the do I'm momentum. they looking sequentials strong of best really we're underlying again, continue what And out is a now, understand, they're consistently the the we to? the supposed play or are is

FYXXXX want you do Scott, the take then, And number? to

Scott Herren

sure. Yes,

the to math want yet I from Just XXXX The trying David, XX.X% of growth our right call. fiscal since full-year too bounce we growth back crisis. get it's in fiscal time in fiscal had revenue ballpark. you're double-digit in back do, last fiscal guide of for What precise a into being XXXX mind, bear growth for the the I the our at was XXXX on on of financial to don't think – in that's XXXX. I'd say, you're obviously, top midpoint the QX on in But on the only global XXXX,

very a a strong it's growth on level top So year, year modest we see this and of of that.

David Vogt

Helpful Great. Thanks guys. a lot.

Chuck Robbins

Thank you.

Marilyn Mora

David. Thanks, Great.

Next question.

Operator

George Notter with you. Jefferies. Thank

may You sir. go ahead,

George Notter

I view. this I very Hi, of price? What How driving How much from this growth your the backlog I'm the that to factors that guess much. about year? bigger comes from curious Thanks. ask guys. wanted growth comes about expectation for Thanks growth year. are much consumption?

Scott Herren

Yes. that's for of is I growth the the the backlog guess worked where some supply sitting been demand is this way customers I'd issues. huge had biggest in the year from we've of our as driving through our start factor we've amount

driving what's demand. growth, the ask it's you If that, it's end-user

actually think When some to got based is engineering the year. you and team a on mechanics the it us together, we of not to end to work from finished. free our backlog. we've constraints. start lot team – supply ability of that There's a how lot allowed through chain that's peel that put to up the back supply We're of still both We the the to supply the issues hard work of had of some component

year been normal what still would but us. on strides that Just great we said positive a our Price like with quarter, front. the for has with made be, end double backlog roughly we've last we

backlog, took orders through a year – we as As the way actions our have those we now. last there's earlier, we we to been work that more said of price received prior the that delivered

benefit about seeing – price. when point we this publish we our so are from of And you'll see one Q,

George Notter

much. Thank you very Okay.

Marilyn Mora

the and to go question, ahead move Let's Michelle. next

Operator

Stanley. Thank you. Marshall Meta with Morgan

ahead. You may go

Meta Marshall

provider. if wondering was enterprise within speak you just I trends seeing could Thanks. commercial the of service you're to kind Great.

to of You digestion kind trends if some noted types. get that just the within kind you're any webscale, there's customer on wanted those of sense a seeing seeing but different

outcomes changes And of through ways from can then maybe customers your just on customers just efforts been going there kind of architectures. optimization kind kind Obviously, cloud as or a and in any help Is that Cisco long-term looking better question. on towards which distinguish of have customers journey? you follow-up Thanks. the

Chuck Robbins

Thanks, Meta. Yes.

large factors if times So one need customers the shipments order down I by most going described, trends the service as is significantly, you And the the webscale far and to have you needing most done that think that customers ordering, who come don't three And segment, as and have in the our enterprises that are the we're if secondly, providers. they it's think advance. advanced out. visibility I providers shipping to and about think digest lead to of about be

came And by from service year-over-year so SP contributed which, think a of our overall space, space, the predominant issue segment provider less XX% XX% decline, perspective, is the in the seeing to the which revenue. of total than we're the from I way,

our an it So outsized decline. impact overall year-over-year had on

far from seeing cycles. elongated signatures and more getting the things We're also the required. in ahead. digesting they're order I We're are but would equipment, are others. in They're taking are enterprises you've issues seeing a not general, there's facing the large as heard the the little with sales dealing same to seeing But signatures, – longer. needing the that we're and same enterprise, thing. are doing they We're and same say that

is all basically it key to. figure re-architecting that align as we actually are customer this hybrid re-architecting with important the spaces. And One all is They're those trends this to trying across very and areas, on about They're out their relates their the and technology and us we're on, very distributed our for world. our footprint they're our They're planet technology they're strategy multi-cloud of has they're hard because working sustainability. focused now, news to plays nature good what if on priorities is that entire of five all every rebuilding in and you application rebuilding then focused the what think of all those customers applications. of doing their for work. of And customers cyber

that's webscale the I mind final CAGR XXXX, the intelligence five from And say the by over in opportunity one, the $X.X opportunity market growing would artificial estimated space, everybody's – be then for on well, entire next to generative And about think, XX% at or years, infrastructure AI. market is AI is billion at I the where it was.

said already webscalers in running. comments, for my a I early these networking that As opening models of we're some installed infrastructure as AI are the

this that about say If were would of many ago, at you this massive see think for as prepared, where and out. a have this the we are decade time great we better position, job believe I into on and calls from build-out I us I a we left and got anybody infrastructure getting webscale we not said And were that times these else, AI positioned a beginning done the perspective, opportunity. than networking our we teams a

Meta Marshall

Thanks much. so Great.

Marilyn Mora

Great.

question, Next please.

Operator

Thank Badri Suisse. you. with Sami Credit

You ahead, may sir. go

Sami Badri

ship deliveries in or Do is My you. Anything of that pushouts kind any to led shipments Thank product of delivery. with of was receipts or any kind dynamics that the that see right. shifting All any any on the to providers or took guys shifted? delays kind longer quarter? kind or you request of of the deliveries of question cloud hyperscalers

Chuck Robbins

did not that. of see we No, any

our have fulfilling In but There the been working orders, that projects on have what's all delayed, fact, that teams are are request. certain those backlog. the in we've around new around they not been

out really happening, for and lots of think I see focus that much of a now and is building infrastructure so we them, that's had an we've it's that wins. AI there's lot each design on because the area what so of

continue it's continue share. wins, area believe We we and market to we'll design that to gain where an get

Sami Badri

it. margins. Thank then you. on one Got follow-up And gross

trajectory. – path the talked XXXX, gross about You outpacing on Should be should growth maybe modest and EPS in we is an that. you idea a there expansion could something far glide margin get thinking an But talked range? as about also as or we

Scott Herren

price gross you sequentially. gross said, the XXX we point of the basis We've I margin Sami, through where guide we're significant midpoint we're year. benefits on of see That QX. Yes, the the increases. some product for grew gross progress margin the think the gave the I of points mean margin about on to seen lapping

gross there had little average at room remember margin. impact may But in be first you sequentially. for So pretty in the year quarter if of course, year, gross the margin more we a if year, significant the next a look you this of

we definitely So we for it up, will say, full-year glide XXXX. go the the through average fiscal if right, as keep same this path

Sami Badri

Got you. it. Thank

Marilyn Mora

Sami. right. Thanks, All

Next question.

Operator

Niknam Thank Matt with you. Deutsche Bank.

You may go ahead, sir.

Matthew Niknam

questions. for you Thank guys. Hey, taking the

double then click security. modest assumptions First, if could XXXX. just on The on I growth, of And follow-up what fiscal embedding just just a sort the outlook? macro are you into secondly, preliminary that

and about Thanks. If what's additional trends forward? of the about X% terms some I decelerating looking past in maybe maybe whether quarter talk this softness was of and growth. believe some help or maybe you're those what can it can anticipating driving release that of you growth backlog

Chuck Robbins

take to want You first? the

Scott Herren

If fiscal on start XXXX. we Yes.

through the there's We're keep macro. rolling Matt, a few start the think into to a done. that's do should of mind why backlog. constraints improving, function in I see next a those you By this be quarter most the not and they're for guide that half the in of normalizing I our that's of second continuing things, talking kind And really double before shown backlog about but year definitely year, that be we of see what supply normal. that's the in quarter, are would midyear. and we've we sometime with just strength some of roughly the

to We through and The factor think next with working that times year the second work year. also gets midyear backlog, of probably factor. itself through lead the next is around the absorption by the absorption normalizing

opportunity billion for from So – almost year into are needs with ARR, takes $XX us with being a with roll we which off macro billion year backlog, you next but of drives of the where and pressure standpoint. of that lot $XX it today, billion renewal a of what is happen of current to when huge $XX RPO, which a

Chuck Robbins

talked we're say announcement think on The I've we first an platform – actually launched industry. announcements security competitors we've partners our leadership next been recently a I'd is and big ingests at XDR on some the a We Cisco this phenomenal around of that we've then the team a about doing wave in front, And our across team. of is weeks, and data going the at of RSA couple And job. from Live to new had one where innovation. I actually hired several new the that calls, make

And that's us. so next they're over to think acknowledged these Cisco. that and get And when out unique into you'll think with I we this that – look the out I differentiation be new we've of year, to think out, of see security coming half think technologies you I really next a accelerating for – second growth sort the fiscal driver I needed

Matthew Niknam

you. Thank

Marilyn Mora

Thank right. you. All

Next question.

Operator

ahead Michael Ng, from Thank Goldman may Sachs. you. you go

Michael Ng

you afternoon. question. very the for have much I just good Thank Hey, two.

quick share And talk if the commitments around well? levels inventory sheet purchase just then little how about forward? And with follow-up. balance could information you First, bit going have a any have on you a I could you as about you're us thinking

Scott Herren

Sure, Michael.

at two on you take collectively they're at commitments we've firm look you because that those – made are there, look If to purchase inventory. commitments have of really to sum the

purchase in about those purchase last inventory is great. what's the add and of three on you look back and together $X When between the our worth the two actually balance line commitments commitment. of the worked and down quarters, we've on pretty billion hand over what's So combination sheet

nice done has the and our I through continue have balancing, the team risk have backlog, at time, too the really supply the ensuring way to job So a to we work that think much same we inventory. minimizing

Michael Ng

provide the wondering just Great. largely just a that. that hear very And there easier around Thank Is sequentials texture sequential much. orders Excellent. thoughts starting done shipments to Thanks second, little comps? of would may to expectation more the product you bit have was it Is by return to next? about this for impacted I the expectations. if those it Any normal quarter. was in next going early could you absorption then quarter be be a helpful? seasonality encouraging to the

Chuck Robbins

we've see Michael. the to of I the QX, from means ranges that that in QX, said normal when historical from Thanks, seen sequentials we range low. Well, high they're that just

So think most fiscal be gets it's that lower not anomaly. time stuff significantly It's we now estimating washed issue year. right stuff, an like or going next the to We out not today. see significantly based on of the the higher by of that lead and we're what middle that digestion

and think get of So where fiscal normalized sort you XXXX. the backlog, we to going really that's of we ordering normalized be second half see patterns to to probably back think

Michael Ng

the for much very thoughts. you Thank

Marilyn Mora

Michael. Thanks, time I believe more have right. we All one for question.

Operator

you. from Evercore. Daryanani Thank Amit

sir. ahead, go may You

Amit Daryanani

where two gains sort here. in of I any about side. Perfect. guess I’m be AI or of touch something infrastructure seeing on of the sort Just are Can glad it color are And Is I One as first seeing I sneaked sort displacements? are you else? these data would helpful. have well. hyperscale deployed the on these net applications Chuck, talked wins? on new Silicon Maybe center side. then there getting switching you these you or

Chuck Robbins

Yes.

specific winning we've last for of or a many hyperscaler vendor and These becoming winning existing on of So And we're are some we're second been them AI then in new, as around. and a displacing new networks, franchises well. winning situation, couple brand cases, in the architectures years. actually

understand important think AI, it's technology. And I so underlying as you think the about to

just that the actually a that to we And And InfiniBand. move new this – they we we're used Scheduled our – networks something And see have and Scheduled called and Fabric. called to is to technology Ethernet Ethernet webscalers desire these in more efficiently. quickly, then further support what's both makes today, largely are and think And say, space. more Fabric, actually we and leading effectively increases out run the – I'd we have this it

a opportunity very years. the winning. five, next big over And the – it's we're so it's those are reasons some six, seven But just of

Amit Daryanani

order Got to then maybe discussion. I back And if could it. this go just

well. on about compared you despite to the that you sequential commentary down can think fairly talk being I get I be – quarters. easier, everyone really get seems orders few for next you and compares just But surprised your perhaps easy XX% the getting

be to like ease trajectory about it? Or feel half? sort the you the down of order magnitude few but quarters think do until trough you still how they the So of is up get you XX% the there declines and may next the back the do maybe over and the

Chuck Robbins

huge expected. level. and point, will I a running out as playing run it's than – revenue Yes, four, revenues bookings higher But there much said said six ago, lower bookings. see be we at will where I it's And quarters it's inflection an five, exactly Back interesting. much so this we

certainly is we're next to what if to Now watched helps based are we're said, on. this the on, our and expectations there And a year, again, having momentum RPO, Scott on thing it's one of the We for based of to made about. for we're it concerned now are when what's is just XX it's what dynamic have today. I their going sales over really see of a is commentary that orders based right watch. showing on growth uncertainty macro right we significant is visibility positive backlog, have at as on next, look year which going that teams on one from XX months. now What looking on the and about and telling we the what FYXXXX see, high growth we're out in the see we is and the the shift we there you – that sequential sort think people years, us added it to quarter for And

Scott Herren

Yes.

When be today, XXXX, three Just or opportunity plus in RPO contained you the those a but is for that. and in and what's revenue turn next plus XX% year renew ARR to sitting in in-house little out year. Amit, opportunities go fiscal that backlog that, between RPO bit and more current not sitting will renewal into be between are add orders or RPO sitting have add tailwind, in of we that that renewal round today, will a of to a backlog to during up chance little a revenue this in that somewhere is XX% number which lines, right? bit what either will It's normalizing, of the

of a position that much off of us. So takes either it's to strong or when as opportunities a it I be said in, of year pressure lot in-house it macro, rolling sitting next for renewal already with into

Chuck Robbins

any that we the think data ago, – case model quarter, to take in today, have And orders I eight really these try us point, helps And of so would as out a actually given much not or XX to back the That's we you good quarter. go certainly as years XX% in revenue if as Scott. for our that's model FYXXXX.

Amit Daryanani

helpful. Super Thank you. Perfect.

Chuck Robbins

Thank you.

Marilyn Mora

All And you. over right. I'll turn it Chuck, to Great.

Chuck Robbins

Thanks, everybody with spending I'm our us Marilyn. In first of results. of super today, for closing, I time want all. thank to proud

that that, double-digit very commitments, reports and calls switching, the forward teams revenue. we had expect our on time with per routing, which share proud about out strong growth I in you right have meaningful proud we share of teams to we FYXXXX. relevance executing our growing market of that also our gains you'll customers see that results at now. think, technology about. on seeing that We in we come we're think than asked growth spending faster to XX which delivering this be from to And the record still days see routing, a share our wireless branch soon, are are through talked of we on we LAN, SP campus year some gains are very SD is well. We've the reflect our that markets, look quarter. And committed absolute what also looking biggest really also I market we I'm earnings the proud had and to now. been I'm said, really several share. I'm coming our

being So for thanks us. with

Marilyn Mora

All reflect at earnings year this today's which p.m. be Cisco's August X:XX call. right. Thanks, will will Time. conference out, XXXX Chuck. And XXXX fiscal XX, Pacific X:XX p.m. results call, on quarter Wednesday, fourth concludes and quarterly Eastern next fiscal This XXXX close to our Time,

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

Operator

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

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

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

at disconnect may this You time.

Cisco Systems (CSCO) 17 May 232023 Q3 Earnings call transcript