Cisco Systems, Inc.
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| Item 1. | Business |
General
Cisco designs and sells a broad range of technologies including hardware, software, and artificial intelligence (AI) powered digital infrastructure to power, help secure, and draw insights from the Internet. We are incorporating AI into our product portfolios across networking, security, collaboration and observability, as well as integrating our products more tightly together into a platform. We are simplifying how our technology is delivered, managed and optimized and helping customers maximize the business value of their technology investments.
We conduct our business globally and manage our business by geography. Our business is organized into the following three geographic segments: Americas; Europe, Middle East, and Africa (EMEA); and Asia Pacific, Japan, and China (APJC).
Our products and technologies are grouped into the following categories: Networking, Security, Collaboration and Observability. In addition to our product offerings, we provide a broad range of services over the lifecycle of our products, including technical support services and professional services. Our customers include businesses of all sizes, public institutions, governments, and service providers, including hyperscalers. These customers often look to us as a strategic partner to help them use technology to differentiate themselves and drive positive business outcomes.
Cisco was incorporated in California in 1984 and reincorporated in Delaware in 2021. Our headquarters are in San Jose, California. The mailing address of our headquarters is 170 West Tasman Drive, San Jose, California 95134-1706, and our telephone number at that location is (408) 526-4000. Our website is www.cisco.com. Through a link on the Investor Relations section of our website, we make available the following filings as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission (SEC) at sec.gov: our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. All such filings are available free of charge. The information published on our website, or any other website referenced herein, is not incorporated into this report.
Available Information
We intend to announce material information to the public through our Investor Relations website at https://investor.cisco.com, SEC filings, press releases, public conference calls, and public webcasts, including those made available or broadcast on our Investor Relations website and through third-party websites, such as our LinkedIn page and YouTube channel. We use these channels, as well as social media (including certain X and LinkedIn accounts held and/or managed by us or our executive officers) and our blog, to communicate with our investors, customers, and the public about us, our products and services, and other matters. It is possible that the information we post on social media and our blog could be deemed to be material information. As such, we encourage investors, the media, and others to follow the channels listed above, including the social media channels listed at the bottom of our Investor Relations website, and to review the information disclosed through such channels.
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Strategy and Priorities
In today’s fast-paced world shaped by AI, businesses and organizations globally are deploying technology to pursue their strategic objectives, from accelerating growth to enhancing operational efficiency and fostering innovation. Our strategy is to securely connect everything to make those desired outcomes possible.
Our customers have three key priorities in this dynamic environment: i) to build modern infrastructure; ii) to protect against the cyber threats of today and tomorrow; and iii) to harness the power of AI and data. Cisco is at the forefront of this evolution, developing innovative solutions that leverage advanced AI to deliver more valuable outcomes for our customers.
Modern Infrastructure
As agentic AI and inference workloads fundamentally alter network traffic patterns, our customers are investing in resilient, adaptable infrastructure to quickly respond to market changes and the demands of their own customers. Now more than ever it is crucial for businesses to remain competitive while managing resource constraints. Our customers continue to focus on modernizing their infrastructure with a focus on speed, agility, productivity, innovation and energy efficiency.
Cybersecurity
With the rapid growth in AI, modern applications, hyper-distributed architecture and increasingly sophisticated cyberattacks, cybersecurity is a top priority for customers. Our differentiated security strategy is based on three pillars: moving from point solutions to a platform comprehensively integrated with the infrastructure; infusing security into the fabric of the network; and harnessing the depth and breadth of telemetry data to prevent, detect, and respond to sophisticated attacks at machine speed.
AI and Data
AI represents a generational shift in technology. The rise of AI agents is generating a huge increase in network traffic and driving the need for far greater network connectivity. We provide network infrastructure to power AI training and inference workloads for both hyperscalers and enterprises. We help to scale our customers’ network infrastructure with high-density routers and switches, improved network management, and high-performance optics. We are reinventing data center operations for our customers by simplifying the configuration, monitoring, and maintenance of fabrics, compute, networking and storage.
We can help give customers visibility across the network as well as across their security solutions, applications and business data. With this breadth and scale of data, we can help deliver differentiated insights and context to customers, which in turn drives more informed, proactive decision making and better business results.
These three customer priorities drive our innovation and technology, making them our priorities as well. To help deliver on them, we are bringing together the power of our portfolio, which we refer to as One Cisco, which provides three key outcomes to our customers: i) AI-ready data centers, ii) future-proofed workplaces, and iii) digital resilience.
AI-Ready Data Centers
Cisco is transforming data centers to power AI workloads anywhere. Whether customers need to modernize parts of their existing infrastructure or power new, massive AI workloads, we bring together the networking, silicon, compute, security and observability to power the performance, reliability and security of data centers. Our robust, flexible infrastructure is offered as individual building blocks or in pre-validated, full-stack systems for all workloads. Our high-performance systems are predominantly powered by Cisco Silicon One, a scalable and programmable architecture, covering all AI networking roles and capable of adapting to a wide range of use cases and network infrastructure designs. We fuse security into every layer to protect distributed workloads. We also deliver unified management across both traditional and AI workloads and provide tailored solutions and support through Cisco Services.
Future-Proofed Workplaces
Cisco helps deliver “future-proofed” workplaces, combining networking, security, smart spaces and collaboration to power how people work and serve their customers. This includes environments ranging from factory floors with plant workers and robots, to hospitals with healthcare workers, as well as to social workers and salespeople on the move. For secure campus and branch networking, we connect users and devices securely with a broad, scalable portfolio of solutions with embedded security, assurance and intelligence. No matter how people connect to the network, we have workforce protection that delivers frictionless zero-trust access and layered security, and we provide collaboration devices and software to enable effective collaboration to support productivity. Our smart spaces technology turns network devices into sensors for better intelligence and control of physical spaces, including lights and power. In addition, Cisco Services support customers with workplace planning and modernization.
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Digital Resilience
Cisco is a leader in delivering digital resilience across customers’ data centers, workplaces and entire IT environments. By bringing together the power of the network with assurance, observability and security, we help our customers prevent issues and remediate them quickly when they occur. We also provide the visibility and insights our customers need to adapt to new opportunities. Our assurance capabilities, powered by ThousandEyes, are deeply embedded across the Cisco portfolio and help enable seamless connectivity and optimal digital experiences across cloud, Internet, and enterprise networks, for the delivery of applications and services. Our observability solution, Splunk combined with AppDynamics, monitors the entire enterprise to help prevent downtime and improve experiences across networks, infrastructures, and applications. Through our security operations capabilities we deliver threat prevention, detection, investigation, and response for organizations of any size and security maturity. Additionally, Cisco Services deliver AI-powered support and issue resolution and help customers shift from reactive break-fix to proactive and predictive operations for higher uptime and greater resilience.
Cisco enables enterprises and service providers to deliver highly secure connectivity from workplaces to data centers worldwide. Our strength lies in our decades of expertise in helping customers of all sizes and across all industries throughout their technology lifecycle, and in the way we embed and enable AI across our products and services. We deliver the foundational hardware, software and services that every other technology capability is built on, making Cisco the critical infrastructure for the AI era.
For a discussion of the risks associated with our Strategy and Priorities, see “Item 1A. Risk Factors,” including the risk factor entitled “We depend upon the development of new products and services, and enhancements to existing products and services, and if we fail to predict and respond to emerging technological trends and customers’ changing needs, our results of operations and market share may suffer.” For information regarding sales of our major products and services, see Note 18 to the Consolidated Financial Statements.
Products and Services
Our products and services are grouped into the following categories:
Networking
Our networking business is built on a foundation of industry-leading technologies, including switching, routing, wireless, and servers, offered through a comprehensive suite of both hardware and software solutions. This portfolio, which features integrated systems built on Cisco Silicon along with software licenses and software-as-a-service (SaaS) offerings, empowers customers to build, secure, automate, modernize, and transform their network infrastructure to meet the demands of a rapidly evolving digital landscape. The portfolio also includes Acacia Optics, whose high-speed coherent optical interconnect technologies enhance Cisco’s networking solutions by enabling scalable, energy-efficient, and simplified optical connectivity that supports the shift from chassis-based systems to pluggable coherent optics. A central pillar of our networking strategy is the convergence of our on-premises solutions with our cloud-managed offerings. By integrating these capabilities across our networking portfolio, we aim to deliver continuous value to our customers through enhanced flexibility, scalability, and operational efficiency. This unified approach positions us to address the diverse needs of businesses as they transition to hybrid and cloud-first environments.
Our switching portfolio encompasses campus switching as well as data center switching. Our switches offer enhanced security and reliability and are designed to scale efficiently as our customers grow. Our campus switching offerings provide the foundation for converged data, voice, video, and Internet of Things (IoT) services, while also supporting new requirements from the rise of AI agents in customer networks. Within campus switching, our Cisco 9000 family of switches includes hardware with embedded software, along with a Unified Networking Experience (UNX) software subscription. Cisco software provides automation, analytics and security features which can be centrally monitored, managed, and configured. Our Campus Switches can also be managed from the cloud through Cisco Cloud Control, offering a powerful combination of rich enterprise features with ease of management. Our switching portfolio includes next-generation Cisco Smart Switches — Cisco 9350, Cisco 9610, and the new Cisco 9550 — built on Silicon One, our single, unified, scalable networking silicon architecture. These switches are AI-ready with advanced telemetry and assurance capabilities, equipped with quantum-resistant security and post-quantum cryptography to protect against future threats.
Our data center switching offerings, led by the Nexus 9000 series, provide the foundation for mission-critical data centers, delivering high availability, scalability, and security across hybrid environments. Central to this portfolio is the integration of Cisco Silicon One architecture, establishing a unified silicon foundation that delivers high performance and energy efficiency. Under our Nexus One strategy, we deliver a unified on-premises and cloud-managed operational experience. This unification, enabled by common underlying hardware and a single, simplified business model, gives customers broad flexibility in how they deploy and manage their networks. Our Cisco N9300 Series Smart Switches offers intelligent networking silicon alongside
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embedded Data Processing Units (DPUs), representing our new vision for AI data center designs. Complex data processing tasks can be offloaded to the DPUs on the switch to improve both network architecture and security posture. We integrated these switches with Cisco Hypershield, our cloud-native and AI-powered solution for highly distributed security built into the fabric of the network, converging networking and security into a single offering. We also introduced our Cisco 800G optics, designed to support high-density switch ports to deliver scalable, high-performance networking optimized for AI workloads across data centers and edge environments.
Our service provider routing portfolio includes AI Infrastructure solutions for service provider customers, including our hyperscaler customers. We are focused on transforming connectivity to the Internet and the cloud environment by efficiently meeting the growing demand for low-latency and higher speeds. Our routed optical networking systems and our pluggable optic solutions allow us to transform the economics of building and operating networks for our service provider customers. Our Cisco 8000 series routers, which are based on Cisco Silicon One, provide broad capacity in high-density designs, allowing our customers to reduce operational footprints, lower carbon emissions, and transition to more efficient network architectures.
We also have enterprise routing solutions which interconnect public and private wireline and mobile networks, delivering highly secure and reliable connectivity to campus, data center and branch networks. These offerings are designed to meet the scale, reliability, and security needs of customers of any size.
Our wireless solutions deliver robust indoor and outdoor coverage, supporting seamless roaming for voice, video, and data applications. With a product portfolio that includes both on-premises and cloud-managed wireless access points and controllers, we provide customers with a powerful and intuitive converged access solution when paired with our switching portfolio.
Our networking portfolio also extends to Industrial IoT, providing ruggedized switching and routing solutions designed to maintain connectivity and security in harsh, mission-critical industrial environments. These solutions help to ensure that operational technology (OT) is as secure and manageable as traditional IT infrastructure.
Security
Security is at the core of our business strategy, reflecting our commitment to address the evolving needs of organizations of every size across every industry. Our security portfolio spans Network Security, Identity and Access Management, Secure Access Service Edge (SASE), and Identity and Agentic Security solutions. We are dedicated to continuous innovation, with significant investments in cloud-based security, AI-driven threat detection, and end-to-end security architectures designed to help customers proactively safeguard their most critical assets. Our Extended Detection and Response (XDR) offering is a unified and highly effective solution to help prevent, detect, and respond to sophisticated cyber threats. Our SASE architecture delivers a seamless combination of network and security functionality through a single, cloud-native platform. Our security offerings also include Cisco Hypershield and AI Defense. Cisco Hypershield is our cloud-native and AI-powered solution for highly distributed security built into the fabric of the network, converging networking and security into a single offering. AI Defense leverages machine learning and advanced analytics to proactively identify, analyze, and neutralize cyber threats in real-time, thereby strengthening the security posture of digital networks and data. Our security strategy positions us well to capture growing market demand for comprehensive, scalable, and integrated security solutions.
Collaboration
Our Collaboration portfolio consists of our Webex Suite, Collaboration Devices, Contact Center and Communication Platform as a Service (CPaaS) offerings. These offerings consist of software, including perpetual licenses and subscription arrangements, as well as hardware. Our objective is to create more inclusive and engaging employee and customer experiences by providing technology that enables distributed teams to collaborate effortlessly. We offer end-to-end collaboration solutions that can be delivered on-premises, from the cloud, or within hybrid cloud environments. AI and machine learning capabilities are embedded across the Webex portfolio to help improve productivity. Our CPaaS offering is a cloud communications platform that integrates communication channels and existing back-end business systems to help enable the orchestration and automation of all customer and employee interactions.
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Financial statements
data from SEC XBRL filings. Values are as-reported; restatements supersede originals. Values reported in .
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| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Forward-Looking Statements
This Annual Report on Form 10-K, including this Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts are statements that could be deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “momentum,” “seeks,” “estimates,” “continues,” “endeavors,” “strives,” “may,” variations of such words, and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict, including those under “Part I, Item 1A. Risk Factors,” and elsewhere herein. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason.
OVERVIEW
Cisco designs and sells a broad range of technologies including hardware, software, and artificial intelligence (AI) powered digital infrastructure to power, help secure, and draw insights from the Internet. We are incorporating AI into our product portfolios across networking, security, collaboration and observability, as well as integrating our products more tightly together into a platform. We are simplifying how our technology is delivered, managed and optimized and helping customers maximize the business value of their technology investments.
A summary of our results is as follows (in millions, except percentages and per-share amounts):
| Three Months Ended | Years Ended | |||||||||||||||||||||||||||||||||||||
| July 25, 2026 | July 26, 2025 | Variance | July 25, 2026 | July 26, 2025 | Variance | |||||||||||||||||||||||||||||||||
| Revenue | $ | 17,252 | $ | 14,673 | 18 | % | $ | 63,325 | $ | 56,654 | 12 | % | ||||||||||||||||||||||||||
| Gross margin percentage | 64.1 | % | 63.2 | % | 0.9 | pts | 64.5 | % | 64.9 | % | (0.4) | pts | ||||||||||||||||||||||||||
| Research and development | $ | 2,431 | $ | 2,380 | 2 | % | $ | 9,563 | $ | 9,300 | 3 | % | ||||||||||||||||||||||||||
| Sales and marketing | $ | 2,952 | $ | 2,818 | 5 | % | $ | 11,559 | $ | 10,966 | 5 | % | ||||||||||||||||||||||||||
| General and administrative | $ | 679 | $ | 706 | (4) | % | $ | 2,761 | $ | 2,992 | (8) | % | ||||||||||||||||||||||||||
| Total R&D, sales and marketing, general and administrative | $ | 6,062 | $ | 5,904 | 3 | % | $ | 23,883 | $ | 23,258 | 3 | % | ||||||||||||||||||||||||||
| Total as a percentage of revenue | 35.1 | % | 40.2 | % | (5.1) | pts | 37.7 | % | 41.1 | % | (3.4) | pts | ||||||||||||||||||||||||||
| Restructuring and other charges included in operating expenses | $ | 511 | $ | 35 | NM | $ | 693 | $ | 744 | (7) | % | |||||||||||||||||||||||||||
| Operating income as a percentage of revenue | 24.7 | % | 21.0 | % | 3.7 | pts | 24.3 | % | 20.8 | % | 3.5 | pts | ||||||||||||||||||||||||||
| Income tax percentage | 21.8 | % | 15.0 | % | 6.8 | pts | 17.1 | % | 8.3 | % | 8.8 | pts | ||||||||||||||||||||||||||
| Net income | $ | 3,859 | $ | 2,550 | 51 | % | $ | 13,267 | $ | 10,180 | 30 | % | ||||||||||||||||||||||||||
| Net income as a percentage of revenue | 22.4 | % | 17.4 | % | 5.0 | pts | 21.0 | % | 18.0 | % | 3.0 | pts | ||||||||||||||||||||||||||
| Earnings per share—diluted | $ | 0.97 | $ | 0.64 | 52 | % | $ | 3.33 | $ | 2.55 | 31 | % | ||||||||||||||||||||||||||
Percentages may not recalculate due to rounding.
NM — Not meaningful
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CISCO SYSTEMS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Fiscal 2026 Compared with Fiscal 2025
In fiscal 2026, we delivered strong revenue growth and profitability in a continued positive demand environment. Total revenue was $63.3 billion, an increase of 12% compared with fiscal 2025. Within total revenue, product revenue increased by 16% and services revenue was flat. Total software revenue was $23.2 billion across all product areas and services, an increase of 4%, and total subscription revenue increased 1%.
We saw demand in fiscal 2026 for AI infrastructure from our hyperscaler customers, which represented approximately 6% of total revenue in fiscal 2026 compared with less than 2% in fiscal 2025. We expect this demand to remain a significant driver of our results in fiscal 2027, and we discuss the associated customer concentration and supply considerations in Part I, Item 1A. Risk Factors.
Total gross margin decreased by 0.4 percentage points, primarily driven by a decline in product gross margin, partially offset by an increase in services gross margin. Product gross margin decreased by 0.5 percentage points, primarily driven by negative impacts from product mix and higher memory costs, partially offset by productivity improvements, pricing actions, lower amortization of purchased intangible assets and a charge in fiscal 2025 as a result of a legal dispute with a supplier, which did not recur in fiscal 2026. As a percentage of revenue, research and development, sales and marketing, and general and administrative expenses, collectively, decreased by 3.4 percentage points. Operating income as a percentage of revenue increased by 3.5 percentage points primarily driven by revenue growth, partially offset by lower gross margin and higher operating expenses in fiscal 2026. Diluted earnings per share increased 31%, driven by revenue growth and operating margin improvement.
In terms of our geographic segments, revenue from the Americas increased by $4.1 billion, EMEA revenue increased by $1.8 billion and APJC revenue increased by $0.7 billion. From a customer market standpoint, we experienced product revenue growth across all of our customer markets.
From a product category perspective, the product revenue increase of 16% was driven by growth in Networking of 22%, particularly within our AI Infrastructure and Campus Networking solutions. We also saw product revenue growth in Collaboration of 4%, Observability of 4%, and Security of 2%.
We continue to operate in a highly competitive and complex environment, especially as it relates to memory constraints and costs, and trade policy. Notwithstanding these challenges, we believe that we are making progress on our strategic priorities. We continue to invest in key priority areas with the objective of driving profitable growth over the long term, and we remain focused on delivering innovation across our technologies to assist our customers in executing on their digital transformations.
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CISCO SYSTEMS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Fourth Quarter Snapshot
For the fourth quarter of fiscal 2026, as compared with the fourth quarter of fiscal 2025, total revenue increased by 18% to $17.3 billion. Within total revenue, product revenue increased by 24% to $13.5 billion and services revenue was flat at $3.8 billion. With regard to our geographic segment performance, on a year-over-year basis, revenue from the Americas increased by 18%, EMEA increased by 19% and APJC increased by 14%. From a product category perspective, on a year-over-year basis, product revenue increased in Networking by 28%, Security by 14%, Collaboration by 12% and Observability by 6%. The increase in Networking reflected growth in AI infrastructure and data center switching.
Total gross margin increased by 0.9 percentage points, primarily driven by the absence in the fourth quarter of fiscal 2026 of a charge recorded in the fourth quarter of fiscal 2025 as a result of a legal dispute with a supplier, and by favorable pricing. These impacts were partially offset by negative impacts from product mix and higher memory costs. As a percentage of revenue, research and development, sales and marketing, and general and administrative expenses, collectively, decreased by 5.1 percentage points driven by the revenue growth and disciplined expense management. Operating income as a percentage of revenue increased by 3.7 percentage points, primarily driven by revenue growth and higher gross margin as discussed above, partially offset by higher restructuring and other charges. Diluted earnings per share increased by 52%, primarily driven by a revenue increase and the increase in our operating margin percentage.
Strategy and Priorities
In today’s fast-paced world shaped by AI, businesses and organizations globally are deploying technology to pursue their strategic objectives, from accelerating growth to enhancing operational efficiency and fostering innovation. Our strategy is to securely connect everything to make those desired outcomes possible.
For a full discussion of our strategy and priorities, see “Item 1. Business.”
Other Key Financial Measures
The following is a summary of our other key financial measures for fiscal 2026 compared with fiscal 2025 (in millions):
| Fiscal 2026 | Fiscal 2025 | |||||||||||
| Cash and cash equivalents and investments | $15,918 | $16,110 | ||||||||||
| Cash provided by operating activities | $14,177 | $14,193 | ||||||||||
| Remaining performance obligations | $46,734 | $43,533 | ||||||||||
| Repurchases of common stock—stock repurchase program | $6,106 | $5,995 | ||||||||||
| Dividends paid | $6,553 | $6,437 | ||||||||||
| Inventories | $5,694 | $3,164 | ||||||||||
| Total debt | $29,533 | $28,093 | ||||||||||
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CISCO SYSTEMS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires us to make judgments, assumptions, and estimates that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Note 2 to the Consolidated Financial Statements describes the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements. The accounting policies described below are significantly affected by critical accounting estimates. Such accounting policies require significant judgments, assumptions, and estimates used in the preparation of the Consolidated Financial Statements, and actual results could differ materially from the amounts reported based on these policies.
Revenue Recognition
We enter into contracts with customers that can include various combinations of products and services which are generally distinct and accounted for as separate performance obligations, resulting in contracts that may contain multiple performance obligations. We determine whether arrangements are distinct based on whether the customer can benefit from the product or service on its own or together with other resources that are readily available and whether our commitment to transfer the product or service to the customer is separately identifiable from other obligations in the contract. We classify our hardware, perpetual software licenses, and SaaS as distinct performance obligations. Term software licenses represent multiple obligations, which include software licenses and software maintenance. In transactions where we deliver hardware or software, we are typically the principal and we record revenue and costs of goods sold on a gross basis.
We recognize revenue upon transfer of control of promised goods or services in a contract with a customer in an amount that reflects the consideration we expect to receive in exchange for those products or services. Transfer of control occurs once the customer has the contractual right to use the product, generally upon shipment, electronic delivery (or when the software is available for download by the customer), or once title and risk of loss has transferred to the customer. Transfer of control can also occur over time for software maintenance and services as the customer receives the benefit over the contract term. Our hardware and perpetual software licenses are distinct performance obligations where revenue is recognized upfront upon transfer of control. Term software licenses include multiple performance obligations where the term licenses are recognized upfront upon transfer of control, with the associated software maintenance revenue recognized ratably over the contract term as services and software updates are provided. SaaS arrangements do not include the right for the customer to take possession of the software during the term, and therefore have one distinct performance obligation which is satisfied over time with revenue recognized ratably over the contract term as the customer consumes the services. On our product sales, we record consideration from shipping and handling on a gross basis within net product sales. We record our revenue net of any associated sales taxes.
Revenue is allocated among these performance obligations in a manner that reflects the consideration that we expect to be entitled to for the promised goods or services based on standalone selling prices (SSP). SSP is estimated for each distinct performance obligation and judgment may be required in their determination. The best evidence of SSP is the observable price of a product or service when we sell the goods separately in similar circumstances and to similar customers. In instances where SSP is not directly observable, we determine SSP using information that may include market conditions and other observable inputs.
We assess relevant contractual terms in our customer contracts to determine the transaction price. We apply judgment in identifying contractual terms and determining the transaction price as we may be required to estimate variable consideration when determining the amount of revenue to recognize. Variable consideration includes potential contractual penalties and various rebate, cooperative marketing and other incentive programs that we offer to our distributors, channel partners and direct sale customers. When determining the amount of revenue to recognize, we estimate the expected usage of these programs, applying the expected value or most likely estimate and update the estimate at each reporting period as actual utilization becomes available. We also consider the customers’ right of return in determining the transaction price, where applicable. If actual credits received by customers under these programs were to deviate significantly from our estimates, which are based on historical experience, our revenue could be adversely affected.
See Note 3 to the Consolidated Financial Statements for more details.
Inventory Valuation and Liability for Purchase Commitments with Contract Manufacturers and Suppliers
Inventory is written down based on excess and obsolete inventories, determined primarily by future demand forecasts. Inventory write-downs are measured as the difference between the cost of the inventory and net realizable value, based upon assumptions about future demand, and are charged to the provision for inventory. At the point of the loss recognition, a new, lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.
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CISCO SYSTEMS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
We record a provision for firm, noncancelable, and unconditional purchase commitments with contract manufacturers and suppliers for quantities in excess of our future demand forecasts consistent with the valuation of our excess and obsolete inventory. Both provisions are a component of cost of sales.
Our total provisions for inventory and the liability related to purchase commitments with contract manufacturers and suppliers were $387 million, $493 million, and $819 million in fiscal 2026, 2025, and 2024, respectively. Inventories were $5.7 billion as of July 25, 2026 compared with $3.2 billion as of July 26, 2025, reflecting increased demand for our Cisco Silicon One and the impact of higher memory prices. If there were to be a sudden and significant decrease in demand for our products, or a higher incidence of inventory obsolescence because of rapidly changing technology or customer requirements, then we could be required to increase our inventory write-downs and our liability for purchase commitments with contract manufacturers and suppliers, and accordingly our profitability could be adversely affected. We regularly evaluate our exposure for inventory write-downs, and the adequacy of our liability for purchase commitments. For further discussion around the supply chain impacts and risks, see “—Results of Operations—Gross Margin—Supply Chain Impacts and Risks” and “—Liquidity and Capital Resources—Inventory Supply Chain” under Item 7 of this report.
Loss Contingencies
We are subject to the possibility of various losses arising in the ordinary course of business. We consider the likelihood of the incurrence of a liability, as well as our ability to reasonably estimate the amount of loss, in determining loss contingencies. An estimated loss contingency is accrued when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. We regularly evaluate information available to us to determine whether such accruals should be made or adjusted and whether new accruals are required. See Note 13 to the Consolidated Financial Statements for further discussion.
Valuation of Goodwill and Purchased Intangible Assets
Goodwill
Our methodology for allocating the purchase price relating to purchase acquisitions is determined through established valuation techniques. Goodwill represents a residual value as of the acquisition date, which in most cases results in measuring goodwill as an excess of the purchase consideration transferred plus the fair value of any noncontrolling interest in the acquired company over the fair value of net assets acquired, including contingent consideration. We perform goodwill impairment tests on an annual basis in the fourth fiscal quarter and between annual tests in certain circumstances for each reporting unit. The assessment of fair value for goodwill and purchased intangible assets is based on factors that market participants would use in an orderly transaction in accordance with the guidance for the fair value measurement of nonfinancial assets.
Goodwill as of July 25, 2026 was $59.5 billion. There was no impairment of goodwill in fiscal 2026, 2025 or 2024. For the annual impairment testing in fiscal 2026, the excess of the fair value over the carrying value for each of our reporting units was $64.7 billion for the Americas, $88.6 billion for EMEA, and $33.7 billion for APJC.
During the fourth quarter of fiscal 2026, we performed a sensitivity analysis for goodwill impairment with respect to each of our respective reporting units and determined that a hypothetical 10% decline in the fair value of each reporting unit would not result in an impairment of goodwill for any reporting unit.
Purchased Intangible Assets
The accounting for acquisitions requires significant estimates and judgments in the valuation of purchased intangible assets. Critical estimates used in the valuation of purchased intangible assets include, but are not limited to, the amount and timing of expected future cash flows, useful lives and discount rates. While our estimates of fair value are based on assumptions that are believed to be reasonable, these assumptions are inherently uncertain and unpredictable and may not reflect unanticipated events and circumstances that may occur.
We make judgments about the recoverability of purchased intangible assets with finite lives whenever events or changes in circumstances indicate that an impairment may exist. Recoverability of purchased intangible assets with finite lives is measured by comparing the carrying amount of the asset group to the future undiscounted cash flows the asset group is expected to generate. We review indefinite-lived intangible assets for impairment annually or whenever events or changes in circumstances indicate that the asset might be impaired. If the asset is considered impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. Assumptions and estimates about future values and remaining useful lives of our purchased intangible assets are complex and subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and our internal forecasts. Our ongoing consideration of all the factors described previously could result in impairment charges in the future, which could adversely affect our net income.
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CISCO SYSTEMS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Income Taxes
We are subject to income taxes in the United States and numerous foreign jurisdictions. Our effective tax rates differ from the statutory rate, primarily due to the tax impact of state taxes, foreign operations, R&D tax credits, foreign-derived intangible income deductions, global intangible low-taxed income, tax audit settlements, nondeductible compensation, and international realignments. Our effective tax rate was 17.1%, 8.3%, and 15.6% in fiscal 2026, 2025, and 2024, respectively.
Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. Although we believe our reserves are reasonable, no assurance can be given that the final tax outcome of these matters will not be different from that which is reflected in our historical income tax provisions and accruals. We adjust these reserves due to changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact the provision for income taxes in the period in which such determination is made. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate, and the related net interest and penalties.
Significant judgment is also required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, we consider all available evidence, including past operating results, estimates of future taxable income, and the feasibility of tax planning strategies. If we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.
Our provision for income taxes is subject to volatility and could be negatively impacted by earnings being lower than anticipated in countries that have lower tax rates and higher than anticipated in countries that have higher tax rates; changes in the valuation of deferred tax assets and liabilities; changes to foreign-derived intangible income, global intangible low-taxed income, base erosion and anti-abuse tax, research and development capitalization and amortization, and corporate alternative minimum tax laws, regulations, or interpretations thereof; expiration of or lapses in tax incentives; transfer pricing adjustments, including those resulting from acquisitions or changes to our legal structure; tax effects of nondeductible compensation; tax costs related to intercompany realignments; by changes in accounting principles; or by changes in tax laws and regulations, treaties, or interpretations thereof, including changes to the taxation of earnings of our foreign subsidiaries, the deductibility of expenses attributable to foreign income, and the foreign tax credit rules. Significant judgment is used in determining our provision for income taxes and evaluating tax positions. In certain countries, our income has benefited from reduced tax rates associated with employment and capital investment actions and commitments. If we do not meet the requirements for these reduced rates, our provision for income taxes could be adversely affected. In addition, we are subject to the continuous examination of our income tax returns by the IRS and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. There can be no assurance that the outcomes from these continuous examinations will not have an adverse impact on our results of operations and financial condition.
As of July 25, 2026, our gross unrecognized tax benefits were $2.5 billion, reflecting a $0.2 billion increase during fiscal 2026. Of this amount, $1.7 billion would impact our effective tax rate if recognized. Our accrual for related interest and penalties was $539 million as of July 25, 2026. As of the same date, we had gross deferred tax assets of $11.2 billion. The valuation allowance against these deferred tax assets was $1.4 billion, representing a $0.5 billion increase during fiscal 2026, primarily due to the expectation that our future California taxable income will be insufficient to fully utilize our accumulated California tax credits and net operating loss carryforwards.
35
CISCO SYSTEMS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS
A discussion regarding our financial condition and results of operations for fiscal 2026 compared to fiscal 2025 is presented below. A discussion regarding our financial condition and results of operations for fiscal 2025 compared to fiscal 2024 can be found under Item 7 in our Annual Report on Form 10-K for the fiscal year ended July 26, 2025, filed with the SEC on September 3, 2025.
Revenue
The following table presents the breakdown of revenue between product and services (in millions, except percentages):
| Years Ended | 2026 vs. 2025 | |||||||||||||||||||||||||||||
| July 25, 2026 | July 26, 2025 | July 27, 2024 | Variance in Dollars | Variance in Percent | ||||||||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||||||||
| Product | $ | 48,295 | $ | 41,608 | $ | 39,253 | $ | 6,687 | 16 | % | ||||||||||||||||||||
| Percentage of revenue | 76.3 | % | 73.4 | % | 73.0 | % | ||||||||||||||||||||||||
| Services | 15,030 | 15,046 | 14,550 | (16) | — | % | ||||||||||||||||||||||||
| Percentage of revenue | 23.7 | % | 26.6 | % | 27.0 | % | ||||||||||||||||||||||||
| Total | $ | 63,325 | $ | 56,654 | $ | 53,803 | $ | 6,671 | 12 | % | ||||||||||||||||||||
Amounts may not sum and percentages may not recalculate due to rounding.
We manage our business primarily on a geographic basis, organized into three geographic segments. Our revenue, which includes product and services for each segment, is summarized in the following table (in millions, except percentages):
| Years Ended | 2026 vs. 2025 | |||||||||||||||||||||||||||||
| July 25, 2026 | July 26, 2025 | July 27, 2024 | Variance in Dollars | Variance in Percent | ||||||||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||||||||
| Americas | $ | 37,799 | $ | 33,656 | $ | 31,971 | $ | 4,143 | 12 | % | ||||||||||||||||||||
| Percentage of revenue | 59.7 | % | 59.4 | % | 59.4 | % | ||||||||||||||||||||||||
| EMEA | 16,613 | 14,824 | 14,117 | 1,789 | 12 | % | ||||||||||||||||||||||||
| Percentage of revenue | 26.2 | % | 26.2 | % | 26.2 | % | ||||||||||||||||||||||||
| APJC | 8,914 | 8,174 | 7,716 | 740 | 9 | % | ||||||||||||||||||||||||
| Percentage of revenue | 14.1 | % | 14.4 | % | 14.3 | % | ||||||||||||||||||||||||
| Total | $ | 63,325 | $ | 56,654 | $ | 53,803 | $ | 6,671 | 12 | % | ||||||||||||||||||||
Amounts may not sum and percentages may not recalculate due to rounding.
Total revenue in fiscal 2026 increased by 12% compared with fiscal 2025. Product revenue increased by 16% and services revenue was flat. Our total revenue reflected growth across each of our geographic segments.
In addition to the impact of macroeconomic factors, including the IT spending environment and the level of spending by government entities, revenue by segment in a particular period may be significantly impacted by the timing of revenue recognition for complex transactions with multiple performance obligations. In addition, certain customers tend to make large and sporadic purchases, and the revenue related to these transactions may also be affected by the timing of revenue recognition, which in turn would impact the revenue of the relevant segment.
36
CISCO SYSTEMS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Product Revenue by Segment
The following table presents the breakdown of product revenue by segment (in millions, except percentages):
| Years Ended | 2026 vs. 2025 | |||||||||||||||||||||||||||||
| July 25, 2026 | July 26, 2025 | July 27, 2024 | Variance in Dollars | Variance in Percent | ||||||||||||||||||||||||||
| Product revenue: | ||||||||||||||||||||||||||||||
| Americas | $ | 28,900 | $ | 24,637 | $ | 23,142 | $ | 4,263 | 17 | % | ||||||||||||||||||||
| Percentage of product revenue | 59.9 | % | 59.2 | % | 59.0 | % | ||||||||||||||||||||||||
| EMEA | 12,806 | 11,122 | 10,645 | 1,684 | 15 | % | ||||||||||||||||||||||||
| Percentage of product revenue | 26.5 | % | 26.7 | % | 27.1 | % | ||||||||||||||||||||||||
| APJC | 6,588 | 5,849 | 5,466 | 739 | 13 | % | ||||||||||||||||||||||||
| Percentage of product revenue | 13.6 | % | 14.1 | % | 13.9 | % | ||||||||||||||||||||||||
| Total | $ | 48,295 | $ | 41,608 | $ | 39,253 | $ | 6,687 | 16 | % | ||||||||||||||||||||
Amounts may not sum and percentages may not recalculate due to rounding.
Americas
Product revenue in the Americas segment increased by 17%, with growth across each of our customer markets, led by the Service Provider and Cloud customer market which was largely driven by revenue from our AI Infrastructure solutions. From a country perspective, product revenue increased in the United States, Canada and Mexico by 18%, 8% and 25%, respectively, partially offset by a decline in Brazil of 10%.
EMEA
Product revenue in the EMEA segment increased by 15%, driven by growth across each of our customer markets. From a country perspective, product revenue increased in the United Kingdom, Germany, and France by 31%, 16% and 11%, respectively.
APJC
Product revenue in the APJC segment increased by 13%, with growth across each of our customer markets. From a country perspective, product revenue increased in Australia, Japan, India, and China by 13%, 16%, 2% and 23%, respectively.
37
CISCO SYSTEMS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Product Revenue by Category
In addition to the primary view on a geographic basis, we also prepare financial information related to product categories and customer markets for various purposes.
The following table presents product revenue by category (in millions, except percentages):
| Years Ended | 2026 vs. 2025 | |||||||||||||||||||||||||||||
| July 25, 2026 | July 26, 2025 | July 27, 2024 | Variance in Dollars | Variance in Percent | ||||||||||||||||||||||||||
| Product revenue: | ||||||||||||||||||||||||||||||
| Networking | $ | 34,668 | $ | 28,304 | $ | 29,229 | $ | 6,364 | 22 | % | ||||||||||||||||||||
| Security | 8,232 | 8,094 | 5,075 | 138 | 2 | % | ||||||||||||||||||||||||
| Collaboration | 4,300 | 4,154 | 4,113 | 146 | 4 | % | ||||||||||||||||||||||||
| Observability | 1,095 | 1,055 | 837 | |||||||||||||||||||||||||||
Recent insider activity
| Date | Insider | Role | Action | Shares | Price | Value |
|---|---|---|---|---|---|---|
| 2026-09-08 | Fink Nichlas A | SVP, Chief Accounting Officer | Sell | -2,274 | $109.36 | -$248,685 |
| 2026-08-19 | Subaiya Thimaya K. | EVP, Operations | Sell | -5,832 ×2 | $111.47 | -$650,074 |
| 2026-08-14 | Tuszik Oliver | EVP, Global Sales | Sell | -2,760 | $112.46 | -$310,390 |
| 2026-08-14 | Patel Jeetendra I | President and CPO | Sell | -7,170 ×4 | $111.57 | -$799,928 |
| 2026-08-14 | Stahlkopf Deborah L | EVP and Chief Legal Officer | Sell | -6,487 ×3 | $111.53 | -$723,494 |
| 2026-08-14 | Patterson Mark | EVP and CFO | Sell | -5,192 ×3 | $111.51 | -$578,979 |
| 2026-08-14 | Robbins Charles | Chair and CEO | Sell | -21,628 ×4 | $111.54 | -$2,412,346 |
| 2026-06-16 | Subaiya Thimaya K. | EVP, Operations | Sell | -7,127 ×2 | $119.91 | -$854,599 |
Source: SEC Form 4 filings.
Next expected filings
- ~2026-11-17 10-Q expected by 2026-12-03 (in 65 days)
- ~2027-02-16 10-Q expected by 2027-03-04 (in 156 days)
- ~2027-05-18 10-Q expected by 2027-06-03 (in 247 days)
- ~2027-09-01 10-K expected by 2027-09-22 (in 353 days)
Predicted from historical filing cadence; not an SEC commitment.
Recent SEC filings
- 2026-09-02 10-K Annual Report
- 2026-08-20 S-8 Employee Benefit Plan Registration
- 2026-08-12 8-K Earnings Release; Financial Statements and Exhibits
- 2026-07-09 S-8 Employee Benefit Plan Registration
- 2026-05-26 S-8 Employee Benefit Plan Registration
- 2026-05-19 10-Q Quarterly Report
- 2026-05-13 8-K Earnings Release; Costs Associated with Exit; Financial Statements and Exhibits
- 2026-05-01 8-K Officer/Director Change
- 2026-04-06 8-K Officer/Director Change
- 2026-02-17 10-Q Quarterly Report
- 2026-02-11 8-K Earnings Release; Financial Statements and Exhibits
- 2025-12-17 8-K Officer/Director Change; Shareholder Vote Results; Financial Statements and Exhibits
- 2025-11-18 10-Q Quarterly Report
- 2025-11-12 8-K Earnings Release; Financial Statements and Exhibits
- 2025-10-17 8-K Officer/Director Change