CISCO REPORTS FIRST QUARTER EARNINGS
SAN JOSE, Calif., Nov. 13, 2024 /PRNewswire/ --
News Summary:
-- Broad-based acceleration in product orders reflecting normalizing demand
-- Product orders up 20% year over year; up 9% year over year excluding
Splunk
-- Revenue of $13.8 billion in Q1, at the high end of our guidance range
-- Strong profitability:
-- GAAP gross margin of 65.9% and non-GAAP gross margin of 69.3%, above
our guidance range
-- GAAP EPS of $0.68 and non-GAAP EPS of $0.91, above our guidance
range
-- Q1 FY 2025 Results:
-- Revenue: $13.8 billion
-- Decrease of 6% year over year
-- Earnings per Share: GAAP: $0.68; Non-GAAP: $0.91
-- GAAP EPS decreased 24% year over year
-- Non-GAAP EPS decreased 18% year over year
-- Q2 FY 2025 Guidance:
-- Revenue: $13.75 billion to $13.95 billion
-- Earnings per Share: GAAP: $0.51 to $0.56; Non-GAAP: $0.89 to $0.91
-- FY 2025 Guidance:
-- Revenue: $55.3 billion to $56.3 billion
-- Earnings per Share: GAAP: $2.26 to $2.38; Non-GAAP: $3.60 to $3.66
Cisco today reported first quarter results for the period ended October 26, 2024. Cisco reported first quarter revenue of $13.8 billion, net income on a generally accepted accounting principles (GAAP) basis of $2.7 billion or $0.68 per share, and non-GAAP net income of $3.7 billion or $0.91 per share.
"Cisco is off to a strong start to fiscal 2025," said Chuck Robbins, chair and CEO of Cisco. "Our customers are investing in critical infrastructure to prepare for AI, and with the breadth of our portfolio, we are uniquely positioned to capitalize on this opportunity."
"Revenue, gross margin and EPS in Q1 were at the high end or above our guidance range, generating strong operating leverage," said Scott Herren, CFO of Cisco. "We are focused on solid execution and operating discipline while making strategic investments to drive innovation and growth."
GAAP Results
Q1 FY 2025 Q1 FY 2024 Vs. Q1 FY 2024
Revenue
$ 13.8 billion
$ 14.7 billion (6) %
Net Income
$ 2.7 billion
$ 3.6 billion (25) %
Diluted Earnings per Share (EPS) $0.68 $0.89 (24) %
Q1 FY 2025 GAAP results include a tax benefit of $720 million due to a recent U.S. Tax Court decision regarding the U.S. taxation of deemed foreign dividends in the transition year of the Tax Cuts and Jobs Act.
Non-GAAP Results
Q1 FY 2025 Q1 FY 2024 Vs. Q1 FY 2024
Net Income
$ 3.7 billion
$ 4.5 billion (19) %
EPS $0.91 $1.11 (18) %
Reconciliations between net income, EPS, and other measures on a GAAP and non-GAAP basis are provided in the tables located in the section entitled "Reconciliations of GAAP to non-GAAP Measures."
Cisco Declares Quarterly Dividend
Cisco has declared a quarterly dividend of $0.40 per common share to be paid on January 22, 2025, to all stockholders of record as of the close of business on January 3, 2025. Future dividends will be subject to Board approval.
Financial Summary
All comparative percentages are on a year-over-year basis unless otherwise noted.
Q1 FY 2025 Highlights
Revenue -- Total revenue was $13.8 billion, down 6%, with product revenue down 9% and services revenue up 6%. Excluding the contribution from Splunk, total revenue was down 14%.
Revenue by geographic segment was: Americas down 9%, EMEA down 2%, and APJC up 1%. Product revenue performance reflected growth in Security up 100% and Observability up 36%. Networking was down 23% and Collaboration was down 3%. Excluding Splunk, Security and Observability grew 2% and 1%, respectively, in the first quarter of fiscal 2025.
Gross Margin -- On a GAAP basis, total gross margin, product gross margin, and services gross margin were 65.9%, 65.1%, and 68.0%, respectively, as compared with 65.2%, 64.5%, and 67.3%, respectively, in the first quarter of fiscal 2024.
On a non-GAAP basis, total gross margin, product gross margin, and services gross margin were 69.3%, 68.9%, and 70.3%, respectively, as compared with 67.1%, 66.5%, and 69.0%, respectively, in the first quarter of fiscal 2024.
Total gross margins by geographic segment were: 69.6% for the Americas, 70.3% for EMEA and 66.4% for APJC.
Operating Expenses -- On a GAAP basis, operating expenses were $6.8 billion, up 28%, and were 48.9% of revenue. Non-GAAP operating expenses were $4.9 billion, up 9%, and were 35.2% of revenue.
Operating Income -- GAAP operating income was $2.4 billion, down 45%, with GAAP operating margin of 17.0%. Non-GAAP operating income was $4.7 billion, down 12%, with non-GAAP operating margin at 34.1%.
Provision for (benefit from) Income Taxes -- The GAAP tax provision rate was a benefit of 19.6%, which includes the $720 million benefit on deemed foreign dividends as discussed above. The non-GAAP tax provision rate was 19.0%.
Net Income and EPS -- On a GAAP basis, net income was $2.7 billion, a decrease of 25%, and EPS was $0.68, a decrease of 24%. On a non-GAAP basis, net income was $3.7 billion, a decrease of 19%, and EPS was $0.91, a decrease of 18%.
Cash Flow from Operating Activities -- $3.7 billion for the first quarter of fiscal 2025, an increase of 54%, compared with $2.4 billion for the first quarter of fiscal 2024.
Balance Sheet and Other Financial Highlights
Cash and Cash Equivalents and Investments -- $18.7 billion at the end of the first quarter of fiscal 2025, compared with $17.9 billion at the end of fiscal 2024.
Remaining Performance Obligations (RPO) -- $40.0 billion, up 15% in total, with 51% of this amount to be recognized as revenue over the next 12 months. Product RPO were up 24% and services RPO were up 7%.
Deferred Revenue -- $27.5 billion, up 7% in total, with deferred product revenue up 11%. Deferred services revenue was up 4%.
Capital Allocation -- In the first quarter of fiscal 2025, we returned $3.6 billion to stockholders through share buybacks and dividends. We declared and paid a cash dividend of $0.40 per common share, or $1.6 billion, and repurchased approximately 40 million shares of common stock under our stock repurchase program at an average price of $49.56 per share for an aggregate purchase price of $2.0 billion. The remaining authorized amount for stock repurchases under the program is $3.2 billion with no termination date.
Acquisitions
In the first quarter of fiscal 2025, we closed the following acquisitions:
-- DeepFactor, Inc., a privately held cloud-native application security
company
-- Robust Intelligence, Inc., a privately held AI security solutions
company
Guidance
Cisco estimates the following results for the second quarter of fiscal 2025:
Q2 FY 2025
---
Revenue
$13.75 billion - $13.95 billion
Non-GAAP gross margin 68% - 69%
Non-GAAP operating margin 33.5% - 34.5%
Non-GAAP EPS
$0.89 - $0.91
Cisco estimates that GAAP EPS will be $0.51 to $0.56 for the second quarter of fiscal 2025.
Cisco estimates the following results for fiscal 2025:
FY 2025
---
Revenue
$55.3 billion - $56.3 billion
Non-GAAP EPS
$3.60 - $3.66
Cisco estimates that GAAP EPS will be $2.26 to $2.38 for fiscal 2025.
Our Q2 FY 2025 guidance assumes an effective tax provision rate of approximately 17% for GAAP and approximately 19% for non-GAAP results. Our FY 2025 guidance assumes an effective tax provision rate of approximately 9% for GAAP and approximately 19% for non-GAAP results.
A reconciliation between the guidance on a GAAP and non-GAAP basis is provided in the tables entitled "GAAP to non-GAAP Guidance" located in the section entitled "Reconciliations of GAAP to non-GAAP Measures."
Editor's Notes:
-- Q1 fiscal year 2025 conference call to discuss Cisco's results along
with its guidance will be held on Wednesday, November 13, 2024 at 1:30
p.m. Pacific Time. Conference call number is 1-888-848-6507 (United
States) or 1-212-519-0847 (international).
-- Conference call replay will be available from 4:00 p.m. Pacific Time,
November 13, 2024 to 4:00 p.m. Pacific Time, November 19, 2024 at
1-866-360-7722 (United States) or 1-203-369-0174 (international). The
replay will also be available via webcast on the Cisco Investor
Relations website at https://investor.cisco.com.
-- Additional information regarding Cisco's financials, as well as a
webcast of the conference call with visuals designed to guide
participants through the call, will be available at 1:30 p.m. Pacific
Time, November 13, 2024. Text of the conference call's prepared remarks
will be available within 24 hours of completion of the call. The webcast
will include both the prepared remarks and the question-and-answer
session. This information, along with the GAAP to non-GAAP
reconciliation information, will be available on the Cisco Investor
Relations website at https://investor.cisco.com.
CISCO SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per-share amounts)
(Unaudited)
Three Months Ended
October 26, October 28,
2024 2023
REVENUE:
Product $10,114 $11,139
Services 3,727 3,529
Total revenue 13,841 14,668
COST OF SALES:
Product 3,526 3,957
Services 1,194 1,154
Total cost of sales 4,720 5,111
GROSS MARGIN 9,121 9,557
OPERATING EXPENSES:
Research and development 2,286 1,913
Sales and marketing 2,752 2,506
General and administrative 795 672
Amortization of purchased intangible assets 265 67
Restructuring and other charges 665 123
Total operating expenses 6,763 5,281
OPERATING INCOME 2,358 4,276
Interest income 286 360
Interest expense (418) (111)
Other income (loss), net 41 (83)
Interest and other income (loss), net (91) 166
INCOME BEFORE PROVISION FOR INCOME TAXES 2,267 4,442
Provision for (benefit from) income taxes (444) 804
NET INCOME $2,711 $3,638
Net income per share:
Basic $0.68 $0.90
Diluted $0.68 $0.89
Shares used in per-share calculation:
Basic 3,990 4,057
Diluted 4,013 4,087
CISCO SYSTEMS, INC.
REVENUE BY SEGMENT
(In millions, except percentages)
Three Months Ended
October 26, 2024
Amount Y/Y %
Revenue
:
---
Americas $8,252 (9) %
EMEA 3,588 (2) %
APJC 2,001 1 %
Total $13,841 (6) %
Amounts may not sum and percentages may not recalculate due to rounding.
CISCO SYSTEMS, INC.
GROSS MARGIN PERCENTAGE BY SEGMENT
(In percentages)
Three Months
Ended
October 26, 2024
Gross Margin Percentage
:
---
Americas 69.6 %
EMEA 70.3 %
APJC 66.4 %
CISCO SYSTEMS, INC.
REVENUE FOR GROUPS OF SIMILAR PRODUCTS AND SERVICES
(In millions, except percentages)
Three Months Ended
October 26, 2024
Amount Y/Y %
Revenue
:
---
Networking $6,753 (23) %
Security 2,017 100 %
Collaboration 1,085 (3) %
Observability 258 36 %
Total Product 10,114 (9) %
Services 3,727 6 %
Total $13,841 (6) %
Excluding Splunk, Security and Observability grew 2% and 1%, respectively, in the first quarter of fiscal 2025.
Amounts may not sum and percentages may not recalculate due to rounding.
CISCO SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
October 26,
2024 July 27, 2024
ASSETS
Current assets:
Cash and cash equivalents $9,065 $7,508
Investments 9,606 10,346
Accounts receivable, net of allowance of $78 at October 26, 2024 and $87 4,457 6,685
at July 27, 2024
Inventories 3,143 3,373
Financing receivables, net 3,123 3,338
Other current assets 6,358 5,612
Total current assets 35,752 36,862
Property and equipment, net 2,082 2,090
Financing receivables, net 3,411 3,376
Goodwill 58,774 58,660
Purchased intangible assets, net 10,744 11,219
Deferred tax assets 6,514 6,262
Other assets 6,056 5,944
TOTAL ASSETS $123,333 $124,413
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt $12,364 $11,341
Accounts payable 1,996 2,304
Income taxes payable 2,096 1,439
Accrued compensation 2,861 3,608
Deferred revenue 15,615 16,249
Other current liabilities 5,610 5,643
Total current liabilities 40,542 40,584
Long-term debt 19,623 19,621
Income taxes payable 3,367 3,985
Deferred revenue 11,887 12,226
Other long-term liabilities 2,637 2,540
Total liabilities 78,056 78,956
Total equity 45,277 45,457
TOTAL LIABILITIES AND EQUITY $123,333 $124,413
CISCO SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended
October 26, October 28,
2024 2023
Cash flows from operating activities:
Net income $2,711 $3,638
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and other 789 401
Share-based compensation expense 827 661
Provision (benefit) for receivables (1) 4
Deferred income taxes (281) (513)
(Gains) losses on divestitures, investments and other, net (60) 89
Change in operating assets and liabilities, net of effects of acquisitions and divestitures:
Accounts receivable 2,227 979
Inventories 229 307
Financing receivables 173 25
Other assets (190) (290)
Accounts payable (269) (235)
Income taxes, net (806) (1,773)
Accrued compensation (754) (908)
Deferred revenue (971) 259
Other liabilities 37 (273)
Net cash provided by operating activities 3,661 2,371
Cash flows from investing activities:
Purchases of investments (1,775) (1,850)
Proceeds from sales of investments 1,490 1,280
Proceeds from maturities of investments 1,164 2,497
Acquisitions, net of cash and cash equivalents acquired and divestitures (217) (876)
Purchases of investments in privately held companies (42) (13)
Return of investments in privately held companies 77 47
Acquisition of property and equipment (217) (134)
Other (1) 1
Net cash provided by investing activities 479 952
Cash flows from financing activities:
Repurchases of common stock - repurchase program (2,003) (1,300)
Shares repurchased for tax withholdings on vesting of restricted stock units (165) (153)
Short-term borrowings, original maturities of 90 days or less, net 68
Issuances of debt 5,732
Repayments of debt (4,821) (750)
Dividends paid (1,592) (1,580)
Other (3) (17)
Net cash used in financing activities (2,784) (3,800)
Effect of foreign currency exchange rate changes on cash, cash equivalents, restricted cash and 10 (45)
restricted cash equivalents
Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents 1,366 (522)
Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period 8,842 11,627
Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period $10,208 $11,105
Supplemental cash flow information:
Cash paid for interest $545 $128
Cash paid for income taxes, net $643 $3,090
CISCO SYSTEMS, INC.
REMAINING PERFORMANCE OBLIGATIONS
(In millions, except percentages)
October 26, 2024 July 27, 2024 October 28, 2023
Amount Y/Y% Amount Y/Y% Amount Y/Y%
Product $19,882 24 % $20,055 27 % $16,011 14 %
Services 20,108 7 % 20,993 10 % 18,742 11 %
Total $39,990 15 % $41,048 18 % $34,753 12 %
We expect 51% of total RPO at October 26, 2024 will be recognized as revenue over the next 12 months.
CISCO SYSTEMS, INC.
DEFERRED REVENUE
(In millions)
October 26, July 27, October 28,
2024 2024
2023
Deferred revenue:
Product $12,941 $13,219 $11,689
Services 14,561 15,256 13,970
Total $27,502 $28,475 $25,659
Reported as:
Current $15,615 $16,249 $13,812
Noncurrent 11,887 12,226 11,847
Total $27,502 $28,475 $25,659
CISCO SYSTEMS, INC.
DIVIDENDS PAID AND REPURCHASES OF COMMON STOCK
(In millions, except per-share amounts)
DIVIDENDS
STOCK REPURCHASE PROGRAM TOTAL
Quarter Ended Per Share Amount Shares Weighted-
Average Amount Amount
Price per Share
---
Fiscal 2025
October 26, 2024 $0.40 $1,592 40 $49.56 $2,003 $3,595
Fiscal 2024
July 27, 2024 $0.40 $1,606 43 $46.80 $2,002 $3,608
April 27, 2024 $0.40 $1,615 26 $49.22 $1,256 $2,871
January 27, 2024 $0.39 $1,583 25 $49.54 $1,254 $2,837
October 28, 2023 $0.39 $1,580 23 $54.53 $1,252 $2,832
CISCO SYSTEMS, INC.
RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES
GAAP TO NON-GAAP NET INCOME
(In millions)
Three Months Ended
October 26, October 28,
2024 2023
GAAP net income $2,711 $3,638
Adjustments to cost of sales:
Share-based compensation expense 131 103
Amortization of acquisition-related intangible assets 319 181
Acquisition/divestiture-related costs 19
Total adjustments to GAAP cost of sales 469 284
Adjustments to operating expenses:
Share-based compensation expense 679 550
Amortization of acquisition-related intangible assets 265 67
Acquisition/divestiture-related costs 285 75
Russia-Ukraine war costs - (2)
Significant asset impairments and restructurings 665 123
Total adjustments to GAAP operating expenses 1,894 813
Adjustments to interest and other income (loss), net:
(Gains) and losses on investments (98) 51
Total adjustments to GAAP interest and other income (loss), net (98) 51
Total adjustments to GAAP income before provision for income taxes 2,265 1,148
Income tax effect of non-GAAP adjustments (476) (258)
Significant tax matters (1) (829)
Total adjustments to GAAP provision for income taxes (1,305) (258)
Non-GAAP net income $3,671 $4,528
(1) The three months ended October 26, 2024 include a $720 million benefit due to a recent U.S. Tax Court decision regarding the U.S. taxation of deemed foreign dividends in the transition year of the Tax Cuts and Jobs Act.
CISCO SYSTEMS, INC.
RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES
GAAP TO NON-GAAP EPS
Three Months Ended
October 26, October 28,
2024 2023
GAAP EPS $0.68 $0.89
Adjustments to GAAP:
Share-based compensation expense 0.20 0.16
Amortization of acquisition-related intangible assets 0.15 0.06
Acquisition/divestiture-related costs 0.08 0.02
Significant asset impairments and restructurings 0.17 0.03
(Gains) and losses on investments (0.02) 0.01
Income tax effect of non-GAAP adjustments (0.12) (0.06)
Significant tax matters (0.21)
Non-GAAP EPS $0.91 $1.11
Amounts may not sum due to rounding.
CISCO SYSTEMS, INC.
RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES
GROSS MARGINS, OPERATING EXPENSES, OPERATING MARGINS, INTEREST AND OTHER INCOME (LOSS), NET, AND NET INCOME
(In millions, except percentages)
Three Months Ended
October 26, 2024
Product Services Total Operating Y/Y Operating Y/Y Interest
and Net Y/Y
Gross Gross Income
Margin Gross Expenses other
income Income
Margin
Margin (loss), net
GAAP amount $6,588 $2,533 $9,121 $6,763 28 % $2,358 (45) % $(91) $2,711 (25) %
% of revenue 65.1 % 68.0 % 65.9 % 48.9 % 17.0 % (0.7) % 19.6 %
Adjustments to GAAP amounts:
Share-based compensation expense 57 74 131 679 810 810
Amortization of acquisition-related intangible assets 319 319 265 584 584
Acquisition/divestiture-related costs 5 14 19 285 304 304
Significant asset impairments and restructurings - 665 665 665
(Gains) and losses on investments - (98) (98)
Income tax effect/significant tax matters - (1,305)
Non-GAAP amount $6,969 $2,621 $9,590 $4,869 9 % $4,721 (12) % $(189) $3,671 (19) %
% of revenue 68.9 % 70.3 % 69.3 % 35.2 % 34.1 % (1.4) % 26.5 %
Three Months Ended
October 28, 2023
Product Services Total Operating Operating Interest
and Net
Gross
Margin Gross Gross Expenses Income other
income Income
Margin Margin (loss), net
GAAP amount $7,182 $2,375 $9,557 $5,281 $4,276 $166 $3,638
% of revenue 64.5 % 67.3 % 65.2 % 36.0 % 29.2 % 1.1 % 24.8 %
Adjustments to GAAP amounts:
Share-based compensation expense 42 61 103 550 653 653
Amortization of acquisition-related intangible assets 181 181 67 248 248
Acquisition/divestiture-related costs 75 75 75
Significant asset impairments and restructurings 123 123 123
Russia-Ukraine war costs (2) (2) (2)
(Gains) and losses on investments 51 51
Income tax effect/significant tax matters (258)
Non-GAAP amount $7,405 $2,436 $9,841 $4,468 $5,373 $217 $4,528
% of revenue 66.5 % 69.0 % 67.1 % 30.5 % 36.6 % 1.5 % 30.9 %
Amounts may not sum and percentages may not recalculate due to rounding.
CISCO SYSTEMS, INC.
RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES
EFFECTIVE TAX RATE
(In percentages)
Three Months Ended
October 26, October 28,
2024 2023
GAAP effective tax rate (19.6) % 18.1 %
Total adjustments to GAAP provision for income taxes 38.6 % 0.9 %
Non-GAAP effective tax rate 19.0 % 19.0 %
GAAP TO NON-GAAP GUIDANCE
Q2 FY 2025 Gross Margin Operating
Margin Earnings per
Rate Share (1)
Rate
---
GAAP 64.5% - 65.5% 20% - 21%
$0.51 - $0.56
Estimated adjustments for:
Share-based compensation expense 1.0 % 7.0 %
$0.18 - $0.19
Amortization of acquisition-related intangible assets and acquisition/divestiture-related costs 2.5 % 6.0 %
$0.16 - $0.17
Significant asset impairments and restructurings 0.5 %
$0.01 - $0.02
Non-GAAP 68% - 69% 33.5% - 34.5%
$0.89 - $0.91
FY 2025 Earnings per
Share (1)
---
GAAP
$2.26 - $2.38
Estimated adjustments for:
Share-based compensation expense
$0.73 - $0.75
Amortization of acquisition-related intangible assets and acquisition/divestiture-related costs
$0.60 - $0.62
Significant asset impairments and restructurings
$0.18 - $0.20
(Gains) and losses on investments ($0.02)
Significant tax matters ($0.21)
Non-GAAP
$3.60- $3.66
(1) Estimated adjustments to GAAP earnings per share are shown after income tax effects.
Except as noted above, this guidance does not include the effects of any future acquisitions/divestitures, significant asset impairments and restructurings, significant litigation settlements and other contingencies, gains and losses on investments, significant tax matters, or other items, which may or may not be significant.
Forward Looking Statements, Non-GAAP Information and Additional Information
This release may be deemed to contain forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among other things, statements regarding future events (such as our customers' investments in critical infrastructure to prepare for AI, our position to capitalize on that opportunity given the breadth of our portfolio, and our focus on solid execution and operating discipline while making strategic investments to drive innovation and growth) and the future financial performance of Cisco (including the guidance for Q2 FY 2025 and full year FY 2025) that involve risks and uncertainties. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results due to a variety of factors, including: business and economic conditions and growth trends in the networking industry, our customer markets and various geographic regions; global economic conditions and uncertainties in the geopolitical environment; our development and use of artificial intelligence; overall information technology spending; the growth and evolution of the Internet and levels of capital spending on Internet-based systems; variations in customer demand for products and services, including sales to the service provider market, cloud, enterprise and other customer markets; the return on our investments in certain key priority areas, and in certain geographical locations, as well as maintaining leadership in Networking and services; the timing of orders and manufacturing and customer lead times; supply constraints; changes in customer order patterns or customer mix; insufficient, excess or obsolete inventory; variability of component costs; variations in sales channels, product costs or mix of products sold; our ability to successfully acquire businesses and technologies and to successfully integrate and operate these acquired businesses and technologies; our ability to achieve expected benefits of our partnerships; increased competition in our product and services markets, including the data center market; dependence on the introduction and market acceptance of new product offerings and standards; rapid technological and market change; manufacturing and sourcing risks; product defects and returns; litigation involving patents, other intellectual property, antitrust, stockholder and other matters, and governmental investigations; our ability to achieve the benefits of restructurings and possible changes in the size and timing of related charges; cyber attacks, data breaches or other incidents; vulnerabilities and critical security defects; our ability to protect personal data; evolving regulatory uncertainty; terrorism; natural catastrophic events (including as a result of global climate change); any pandemic or epidemic; our ability to achieve the benefits anticipated from our investments in sales, engineering, service, marketing and manufacturing activities; our ability to recruit and retain key personnel; our ability to manage financial risk, and to manage expenses during economic downturns; risks related to the global nature of our operations, including our operations in emerging markets; currency fluctuations and other international factors; changes in provision for income taxes, including changes in tax laws and regulations or adverse outcomes resulting from examinations of our income tax returns; potential volatility in operating results; and other factors listed in Cisco's most recent report on Form 10-K filed on September 5, 2024. The financial information contained in this release should be read in conjunction with the consolidated financial statements and notes thereto included in Cisco's most recent report on Form 10-K as it may be amended from time to time. Cisco's results of operations for the three months ended October 26, 2024 are not necessarily indicative of Cisco's operating results for any future periods. Any projections in this release are based on limited information currently available to Cisco, which is subject to change. Although any such projections and the factors influencing them will likely change, Cisco will not necessarily update the information, since Cisco will only provide guidance at certain points during the year. Such information speaks only as of the date of this release.
This release includes non-GAAP net income, non-GAAP gross margins, non-GAAP operating expenses, non-GAAP operating income and margin, non-GAAP effective tax rates, non-GAAP interest and other income (loss), net, and non-GAAP net income per share data for the periods presented. It also includes future estimated ranges for gross margin, operating margin, tax provision rate and EPS on a non-GAAP basis.
These non-GAAP measures are not in accordance with, or an alternative for, measures prepared in accordance with generally accepted accounting principles (GAAP) and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Cisco believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with Cisco's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Cisco's results of operations in conjunction with the corresponding GAAP measures.
Cisco believes that the presentation of non-GAAP measures when shown in conjunction with the corresponding GAAP measures, provides useful information to investors and management regarding financial and business trends relating to its financial condition and its historical and projected results of operations.
For its internal budgeting process, Cisco's management uses financial statements that do not include, when applicable, share-based compensation expense, amortization of acquisition-related intangible assets, acquisition/divestiture-related costs, significant asset impairments and restructurings, significant litigation settlements and other contingencies, Russia-Ukraine war costs, gains and losses on investments, the income tax effects of the foregoing and significant tax matters. Cisco's management also uses the foregoing non-GAAP measures, in addition to the corresponding GAAP measures, in reviewing the financial results of Cisco. In prior periods, Cisco has excluded other items that it no longer excludes for purposes of its non-GAAP financial measures. From time to time in the future there may be other items that Cisco may exclude for purposes of its internal budgeting process and in reviewing its financial results. For additional information on the items excluded by Cisco from one or more of its non-GAAP financial measures, refer to the Form 8-K regarding this release furnished today to the Securities and Exchange Commission.
Annualized recurring revenue represents the annualized revenue run-rate of active subscriptions, term licenses, operating leases and maintenance contracts at the end of a reporting period, net of rebates to customers and partners as well as certain other revenue adjustments. Includes both revenue recognized ratably as well as upfront on an annualized basis.
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SOURCE Cisco Systems, Inc.
