CISCO REPORTS SECOND QUARTER EARNINGS

SAN JOSE, Calif., Feb. 12, 2025 /PRNewswire/ --

News Summary:

    --  Broad-based strength in product orders demonstrating growing demand for
        Cisco technologies
        --  Product orders up 29% year over year; up 11% excluding Splunk
        --  AI Infrastructure orders of more than $350 million, bringing the
            total for 1HFY25 to approximately $700 million
    --  Revenue of $14.0 billion, above the high end of our guidance range
    --  Strong profitability:
        --  GAAP gross margin of 65.1% and non-GAAP gross margin of 68.7%
        --  GAAP EPS of $0.61 and non-GAAP EPS of $0.94, above the high end of
            our guidance range
    --  Quarterly dividend increased to $0.41 per share, up 3%, and additional
        $15 billion authorized for stock repurchases
    --  Q2 FY 2025 Results:
        --  Revenue: $14.0 billion
            --  Increase of 9% year over year
        --  Earnings per Share: GAAP: $0.61; Non-GAAP: $0.94
            --  GAAP EPS decreased 6% year over year
            --  Non-GAAP EPS increased 8% year over year
    --  Q3 FY 2025 Guidance:
        --  Revenue: $13.9 billion to $14.1 billion
        --  Earnings per Share: GAAP: $0.57 to $0.61; Non-GAAP: $0.90 to $0.92
    --  FY 2025 Guidance:
        --  Revenue: $56.0 billion to $56.5 billion
        --  Earnings per Share: GAAP: $2.40 to $2.52; Non-GAAP: $3.68 to $3.74

Cisco today reported second quarter results for the period ended January 25, 2025. Cisco reported second quarter revenue of $14.0 billion, net income on a generally accepted accounting principles (GAAP) basis of $2.4 billion or $0.61 per share, and non-GAAP net income of $3.8 billion or $0.94 per share.

"Cisco's strong quarterly results were driven by accelerating customer demand for our technology," said Chuck Robbins, chair and CEO of Cisco. "As AI becomes more pervasive, we are well positioned to help our customers scale their network infrastructure, increase their data capacity requirements, and adopt best-in-class AI security."

"Q2 was another quarter of solid execution which drove revenue and EPS above our guidance ranges. Splunk continues to perform in line with our expectations on the top line, and was accretive to Q2 non-GAAP EPS, earlier than we had planned," said Scott Herren, CFO of Cisco. "Our strong cash flows have led us to increase our annual dividend again this year, as well as our overall share repurchase authorization."


                                       
     
        GAAP Results




                                                             Q2 FY 2025         Q2 FY 2024  Vs. Q2 FY 2024



     Revenue                               
        $         14.0 billion  
      $ 12.8 billion             9 %



     Net Income                           
        $          2.4  billion 
      $  2.6  billion           (8) %



     Diluted Earnings per Share (EPS)                            $0.61               $0.65            (6) %


                   
       
        Non-GAAP Results




                            Q2 FY 2025              Q2 FY 2024  Vs. Q2 FY 2024



     Net Income 
       $   3.8   billion       
     $ 3.5   billion             6 %



     EPS                        $0.94                    $0.87              8 %

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 Increases Quarterly Dividend; Stock Repurchase Program Authorization Increased

Cisco has declared a quarterly dividend of $0.41 per common share, a 1-cent increase or up 3% over the previous quarter's dividend, to be paid on April 23, 2025, to all stockholders of record as of the close of business on April 3, 2025. Future dividends will be subject to Board approval.

Cisco's board of directors has also approved a $15 billion increase to the authorization of the stock repurchase program. There is no fixed termination date for the repurchase program. The remaining authorized fixed amount for stock repurchases including the additional authorization is approximately $17 billion.

Financial Summary

All comparative percentages are on a year-over-year basis unless otherwise noted.

Q2 FY 2025 Highlights

Revenue -- Total revenue was $14.0 billion, up 9%, with product revenue up 11% and services revenue up 6%. Excluding the contribution from Splunk, total revenue was down 1%.

Revenue by geographic segment was: Americas up 9%, EMEA up 11%, and APJC up 8%. Product revenue performance reflected growth in Security up 117%, Observability up 47%, and Collaboration up 1%. Networking was down 3%. Excluding Splunk, Security and Observability grew 4% and 3%, respectively, in the second quarter of fiscal 2025.

Gross Margin -- On a GAAP basis, total gross margin, product gross margin, and services gross margin were 65.1%, 63.7%, and 68.9%, respectively, as compared with 64.2%, 62.7%, and 68.2%, respectively, in the second quarter of fiscal 2024.

On a non-GAAP basis, total gross margin, product gross margin, and services gross margin were 68.7%, 67.7%, and 71.6%, respectively, as compared with 66.7%, 65.2%, and 70.5%, respectively, in the second quarter of fiscal 2024.

Total gross margins by geographic segment were: 67.6% for the Americas, 71.3% for EMEA and 68.3% for APJC.

Operating Expenses -- On a GAAP basis, operating expenses were $6.0 billion, up 17%, and were 42.9% of revenue. Non-GAAP operating expenses were $4.8 billion, up 10%, and were 34.0% of revenue.

Operating Income -- GAAP operating income was $3.1 billion, up 1%, with GAAP operating margin of 22.3%. Non-GAAP operating income was $4.9 billion, up 15%, with non-GAAP operating margin at 34.7%.

Provision for Income Taxes -- The GAAP tax provision rate was 15.9%. The non-GAAP tax provision rate was 19.0%.

Net Income and EPS -- On a GAAP basis, net income was $2.4 billion, a decrease of 8%, and EPS was $0.61, a decrease of 6%. On a non-GAAP basis, net income was $3.8 billion, an increase of 6%, and EPS was $0.94, an increase of 8%.

Cash Flow from Operating Activities -- $2.2 billion for the second quarter of fiscal 2025, an increase of 177%, compared with $0.8 billion for the second quarter of fiscal 2024.

Balance Sheet and Other Financial Highlights

Cash and Cash Equivalents and Investments -- $16.9 billion at the end of the second quarter of fiscal 2025, compared with $17.9 billion at the end of fiscal 2024.

Remaining Performance Obligations (RPO) -- $41.3 billion, up 16% in total, with 51% of this amount to be recognized as revenue over the next 12 months. Product RPO up 25% and services RPO up 8%.

Deferred Revenue -- $27.8 billion, up 8% in total, with deferred product revenue up 12%. Deferred services revenue up 4%.

Capital Allocation -- In the second quarter of fiscal 2025, we returned $2.8 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 21 million shares of common stock under our stock repurchase program at an average price of $58.58 per share for an aggregate purchase price of $1.2 billion.

Acquisitions

In the second quarter of fiscal 2025, we closed the acquisition of Deeper Insights AI Ltd., a privately held AI services company.

Guidance

Cisco estimates the following results for the third quarter of fiscal 2025:


                                  Q3 FY 2025

    ---


       Revenue                              
     $13.9 billion - $14.1 billion



       Non-GAAP gross margin                                      67% - 68%



       Non-GAAP operating margin                                  33% - 34%



       Non-GAAP EPS                                
              $0.90 - $0.92

Gross margin guidance includes the estimated impact of proposed tariffs on Mexico, Canada, and China.

Cisco estimates that GAAP EPS will be $0.57 to $0.61 for the third quarter of fiscal 2025.

Cisco estimates the following results for fiscal 2025:


                     FY 2025

    ---


       Revenue              
     $56.0 billion - $56.5 billion



       Non-GAAP EPS                
              $3.68 - $3.74

Gross margin guidance includes the estimated impact of proposed tariffs on Mexico, Canada, and China.

Cisco estimates that GAAP EPS will be $2.40 to $2.52 for fiscal 2025.

Our Q3 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:

    --  Q2 fiscal year 2025 conference call to discuss Cisco's results along
        with its guidance will be held on Wednesday, February 12, 2025 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,
        February 12, 2025 to 4:00 p.m. Pacific Time, February 18, 2025 at
        1-800-395-6236 (United States) or 1-203-369-3270 (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, February 12, 2025. 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              
     Six Months Ended


                                                                                                                     January 25,        January 27,        January 25,   January 27,
                                                                                                                      2025                2024                2025           2024



     
                
                  REVENUE:



     Product                                                                                                            $10,234              $9,232             $20,348        $20,371



     Services                                                                                                             3,757               3,559               7,484          7,088



     Total revenue                                                                                                       13,991              12,791              27,832         27,459



     
                
                  COST OF SALES:



     Product                                                                                                              3,713               3,443               7,239          7,400



     Services                                                                                                             1,167               1,131               2,361          2,285



     Total cost of sales                                                                                                  4,880               4,574               9,600          9,685



     
                
                  GROSS MARGIN                                                                             9,111               8,217              18,232         17,774



     
                
                  OPERATING EXPENSES:



     Research and development                                                                                             2,299               1,943               4,585          3,856



     Sales and marketing                                                                                                  2,672               2,458               5,424          4,964



     General and administrative                                                                                             752                 642               1,547          1,314



     Amortization of purchased intangible assets                                                                            265                  66                 530            133



     Restructuring and other charges                                                                                         10                  12                 675            135



     Total operating expenses                                                                                             5,998               5,121              12,761         10,402



     
                
                  OPERATING INCOME                                                                         3,113               3,096               5,471          7,372



     Interest income                                                                                                        238                 324                 524            684



     Interest expense                                                                                                     (404)              (120)              (822)         (231)



     Other income (loss), net                                                                                              (60)              (139)               (19)         (222)



     Interest and other income (loss), net                                                                                (226)                 65               (317)           231



     
                
                  INCOME BEFORE PROVISION FOR INCOME TAXES                                                 2,887               3,161               5,154          7,603



     Provision for income taxes                                                                                             459                 527                  15          1,331



     
                
                  NET INCOME                                                                              $2,428              $2,634              $5,139         $6,272





     Net income per share:



     Basic                                                                                                                $0.61               $0.65               $1.29          $1.55



     Diluted                                                                                                              $0.61               $0.65               $1.28          $1.54



     Shares used in per-share calculation:



     Basic                                                                                                                3,981               4,055               3,986          4,056



     Diluted                                                                                                              4,005               4,073               4,008          4,079


                   
       
                CISCO SYSTEMS, INC.

                   
       
                REVENUE BY SEGMENT

                 
       
           (In millions, except percentages)




                                                  
              January 25, 2025


                                             Three Months Ended               Six Months Ended


                                             Amount         Y/Y %              Amount         Y/Y %


                       Revenue
                          :

    ---

        Americas                             $8,202            9 %              $16,454            - %



       EMEA                                  3,855           11 %                7,444            4 %



       APJC                                  1,934            8 %                3,934            4 %



       Total                               $13,991            9 %              $27,832            1 %




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


                 
        
               CISCO SYSTEMS, INC.

             
          
         GROSS MARGIN PERCENTAGE BY SEGMENT

                  
        
               (In percentages)




                                                             
              January 25, 2025


                                                             Three Months                Six Months
                                                                 Ended                      Ended


                         Gross Margin Percentage
                                    :

    ---


       Americas                                                   67.6 %                    68.6 %



       EMEA                                                       71.3 %                    70.8 %



       APJC                                                       68.3 %                    67.3 %


                          
            
                CISCO SYSTEMS, INC.

                
           
           REVENUE FOR GROUPS OF SIMILAR PRODUCTS AND SERVICES

                      
         
                (In millions, except percentages)




                                                                     
              January 25, 2025


                                                                Three Months Ended               Six Months Ended


                                                                Amount         Y/Y %              Amount         Y/Y %


                            Revenue
                :

    ---


       Networking                                              $6,850          (3) %              $13,603         (14) %



       Security                                                 2,111          117 %                4,129          108 %



       Collaboration                                              996            1 %                2,081          (1) %



       Observability                                              277           47 %                  535           42 %



       Total Product                                           10,234           11 %               20,348            - %



       Services                                                 3,757            6 %                7,484            6 %



       Total                                                  $13,991            9 %              $27,832            1 %




     Excluding Splunk, Security and Observability grew 4% and 3% year over year, respectively, in the second 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)




                                                                                                                                 January 25,
                                                                                                                                  2025       July 27, 2024



     
                
                  ASSETS



     Current assets:



     Cash and cash equivalents                                                                                                       $8,556        $7,508



     Investments                                                                                                                      8,297        10,346



     Accounts receivable, net of allowance of $80 at January 25, 2025 and $87 at July 27, 2024                                        5,669         6,685



     Inventories                                                                                                                      2,927         3,373



     Financing receivables, net                                                                                                       3,074         3,338



     Other current assets                                                                                                             6,158         5,612



     Total current assets                                                                                                            34,681        36,862



     Property and equipment, net                                                                                                      1,992         2,090



     Financing receivables, net                                                                                                       3,240         3,376



     Goodwill                                                                                                                        58,719        58,660



     Purchased intangible assets, net                                                                                                10,139        11,219



     Deferred tax assets                                                                                                              6,591         6,262



     Other assets                                                                                                                     6,013         5,944



     
                
                  TOTAL ASSETS                                                                                      $121,375      $124,413



     
                
                  LIABILITIES AND EQUITY



     Current liabilities:



     Short-term debt                                                                                                                $11,413       $11,341



     Accounts payable                                                                                                                 1,902         2,304



     Income taxes payable                                                                                                             1,884         1,439



     Accrued compensation                                                                                                             3,299         3,608



     Deferred revenue                                                                                                                15,999        16,249



     Other current liabilities                                                                                                        5,522         5,643



     Total current liabilities                                                                                                       40,019        40,584



     Long-term debt                                                                                                                  19,625        19,621



     Income taxes payable                                                                                                             1,756         3,985



     Deferred revenue                                                                                                                11,796        12,226



     Other long-term liabilities                                                                                                      2,649         2,540



     Total liabilities                                                                                                               75,845        78,956



     Total equity                                                                                                                    45,530        45,457



     
                
                  TOTAL LIABILITIES AND EQUITY                                                                      $121,375      $124,413


                                                                                                                                      
          
                CISCO SYSTEMS, INC.

                                                                                                                                  
     
       CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                                                                        
              
                (In millions)

                                                                                                                                          
              
                (Unaudited)




                                                                                                                                                        
              Six Months Ended


                                                                                                                                                                   January 25,      January 27,
                                                                                                                                                                          2025              2024



     Cash flows from operating activities:



     Net income                                                                                                                                                        $5,139            $6,272



     Adjustments to reconcile net income to net cash provided by operating activities:



     Depreciation, amortization, and other                                                                                                                              1,550               823



     Share-based compensation expense                                                                                                                                   1,748             1,463



     Provision for receivables                                                                                                                                              7                12



     Deferred income taxes                                                                                                                                              (382)            (816)



     (Gains) losses on divestitures, investments and other, net                                                                                                           (5)              205



     Change in operating assets and liabilities, net of effects of acquisitions and divestitures:



     Accounts receivable                                                                                                                                                  969               941



     Inventories                                                                                                                                                          441               442



     Financing receivables                                                                                                                                                330              (33)



     Other assets                                                                                                                                                       (427)            (403)



     Accounts payable                                                                                                                                                   (359)            (476)



     Income taxes, net                                                                                                                                                (2,285)          (4,656)



     Accrued compensation                                                                                                                                               (293)            (763)



     Deferred revenue                                                                                                                                                   (555)              293



     Other liabilities                                                                                                                                                     24             (125)



     Net cash provided by operating activities                                                                                                                          5,902             3,179



     Cash flows from investing activities:



     Purchases of investments                                                                                                                                         (2,261)          (2,253)



     Proceeds from sales of investments                                                                                                                                 1,791             2,484



     Proceeds from maturities of investments                                                                                                                            2,703             4,044



     Acquisitions, net of cash and cash equivalents acquired and divestitures                                                                                           (257)            (878)



     Purchases of investments in privately held companies                                                                                                               (137)             (50)



     Return of investments in privately held companies                                                                                                                     94               123



     Acquisition of property and equipment                                                                                                                              (427)            (304)



     Other                                                                                                                                                                (5)              (1)



     Net cash provided by investing activities                                                                                                                          1,501             3,165



     Cash flows from financing activities:



     Issuances of common stock                                                                                                                                            320               349



     Repurchases of common stock - repurchase program                                                                                                                 (3,243)          (2,504)



     Shares repurchased for tax withholdings on vesting of restricted stock units                                                                                       (655)            (581)



     Short-term borrowings, original maturities of 90 days or less, net                                                                                                 1,012             1,398



     Issuances of debt                                                                                                                                                 10,406             2,537



     Repayments of debt                                                                                                                                              (11,382)            (750)



     Dividends paid                                                                                                                                                   (3,185)          (3,163)



     Other                                                                                                                                                                (2)              (7)



     Net cash used in financing activities                                                                                                                            (6,729)          (2,721)



     Effect of foreign currency exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents                                          (8)             (32)



     Net increase in cash, cash equivalents, restricted cash and restricted cash equivalents                                                                              666             3,591



     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                                                                            $9,508           $15,218



     Supplemental cash flow information:



     Cash paid for interest                                                                                                                                              $769              $203



     Cash paid for income taxes, net                                                                                                                                   $2,682            $6,804


                
         
                CISCO SYSTEMS, INC.

              
       
             REMAINING PERFORMANCE OBLIGATIONS

              
       
             (In millions, except percentages)




                     January 25, 2025                   October 26, 2024         January 27, 2024


                     Amount         Y/Y%                  Amount         Y/Y%        Amount       Y/Y%


     Product        $20,321          25 %                  $19,882          24 %        $16,249        12 %


     Services        20,947           8 %                   20,108           7 %         19,407        12 %


     Total          $41,268          16 %                  $39,990          15 %        $35,656        12 %




     We expect 51% of total RPO at January 25, 2025 will be recognized as revenue over the next 12 months.


                        
            
            CISCO SYSTEMS, INC.

                          
             
            DEFERRED REVENUE

                            
              
            (In millions)




                              January 25,              October 26,  January 27,
                               2025                      2024          2024



     Deferred revenue:



     Product                     $13,033                   $12,941       $11,640



     Services                     14,762                    14,561        14,131



     Total                       $27,795                   $27,502       $25,771



     Reported as:



     Current                     $15,999                   $15,615       $14,011



     Noncurrent                   11,796                    11,887        11,760



     Total                       $27,795                   $27,502       $25,771


                                                                    
              
                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


        January 25, 2025                     $0.40    $1,593                 21                      $58.58         $1,236            $2,829


        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                                    Six Months Ended


                                                                           January 25,                  January 27,                  January 25,   January 27,
                                                                                  2025                          2024                          2025           2024



     GAAP net income                                                           $2,428                        $2,634                        $5,139         $6,272



     Adjustments to cost of sales:



     Share-based compensation expense                                             151                           139                           282            242



     Amortization of acquisition-related intangible assets                        335                           175                           654            356



     Acquisition/divestiture-related costs                                         17                             1                            36              1



     Total adjustments to GAAP cost of sales                                      503                           315                           972            599



     Adjustments to operating expenses:



     Share-based compensation expense                                             765                           662                         1,444          1,212



     Amortization of acquisition-related intangible assets                        265                            66                           530            133



     Acquisition/divestiture-related costs                                        205                            64                           490            139



     Russia-Ukraine war costs                                                       -                                                                     (2)



     Significant asset impairments and restructurings                              10                            12                           675            135



     Total adjustments to GAAP operating expenses                               1,245                           804                         3,139          1,617



     Adjustments to interest and other income (loss), net:



     (Gains) and losses on investments                                              7                            88                          (91)           139



     Total adjustments to GAAP interest and other income (loss), net                7                            88                          (91)           139



     Total adjustments to GAAP income before provision for income taxes         1,755                         1,207                         4,020          2,355



     Income tax effect of non-GAAP adjustments                                  (423)                        (303)                        (899)         (561)



     Significant tax matters (1)                                                    -                                                     (829)



     Total adjustments to GAAP provision for income taxes                       (423)                        (303)                      (1,728)         (561)



     Non-GAAP net income                                                       $3,760                        $3,538                        $7,431         $8,066




     
     (1) The six months ended January 25, 2025 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                                    Six Months Ended


                                                              January 25,                  January 27,                  January 25,   January 27,
                                                                     2025                          2024                          2025           2024



     GAAP EPS                                                      $0.61                         $0.65                         $1.28          $1.54



     Adjustments to GAAP:



     Share-based compensation expense                               0.23                          0.20                          0.43           0.36



     Amortization of acquisition-related intangible assets          0.15                          0.06                          0.30           0.12



     Acquisition/divestiture-related costs                          0.06                          0.02                          0.13           0.03



     Significant asset impairments and restructurings                  -                                                      0.17           0.03



     (Gains) and losses on investments                                 -                         0.02                        (0.02)          0.03



     Income tax effect of non-GAAP adjustments                    (0.11)                       (0.07)                       (0.22)        (0.14)



     Significant tax matters                                           -                                                    (0.21)



     Non-GAAP EPS                                                  $0.94                         $0.87                         $1.85          $1.98




              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


                                                            
          January 25, 2025


                                                                   Product               Services          Total          Operating                   Y/Y                   Operating                   Y/Y                   Interest
                                                                    Gross                 Gross             Gross                                                                                                              and                       Net      Y/Y
                                                            Margin                Margin           Margin                                                        Income                                                                        Income
                                                                                                                         Expenses                                                                                           other
                                                                                                                                                                                                                               income

                                                                                                                                                                                                                            (loss), net



     GAAP amount                                                   $6,521                  $2,590           $9,111             $5,998                   17 %                      $3,113                    1 %                        $(226)             $2,428     (8) %



     
                
                  % of revenue                      63.7 %                 68.9 %          65.1 %            42.9 %                                            22.3 %                                             (1.6) %             17.4 %



     Adjustments to GAAP amounts:



     Share-based compensation expense                                  65                      86              151                765                                                916                                                                     916



     Amortization of acquisition-related intangible assets            335                                     335                265                                                600                                                                     600



     Acquisition/divestiture-related costs                              3                      14               17                205                                                222                                                                     222



     Significant asset impairments and restructurings                   -                                                       10                                                 10                                                                      10



     (Gains) and losses on investments                                  -                                                                                                                                                              7                   7



     Income tax effect/significant tax matters                          -                                                                                                                                                                             (423)



     Non-GAAP amount                                               $6,924                  $2,690           $9,614             $4,753                   10 %                      $4,861                   15 %                        $(219)             $3,760       6 %



     
                
                  % of revenue                      67.7 %                 71.6 %          68.7 %            34.0 %                                            34.7 %                                             (1.6) %             26.9 %


                                                            
          Three Months Ended


                                                            
          January 27, 2024


                                                                   Product            Services         Total    Operating    Operating                Interest
                                                                    Gross              Gross            Gross                                          and          Net
                                                            Margin                              Margin
                                                                                       Margin                   Expenses     Income                   other
                                                                                                                                                       income       Income
                                                                                                                                           (loss), net



     GAAP amount                                                   $5,789               $2,428          $8,217       $5,121        $3,096                      $65       $2,634



     
                
                  % of revenue                      62.7 %              68.2 %         64.2 %      40.0 %       24.2 %                   0.5 %      20.6 %



     Adjustments to GAAP amounts:



     Share-based compensation expense                                  58                   81             139          662           801                                  801



     Amortization of acquisition-related intangible assets            175                                 175           66           241                                  241



     Acquisition/divestiture-related costs                              1                                   1           64            65                                   65



     Significant asset impairments and restructurings                                                                 12            12                                   12



     (Gains) and losses on investments                                                                                                                     88           88



     Income tax effect/significant tax matters                                                                                                                      (303)



     Non-GAAP amount                                               $6,023               $2,509          $8,532       $4,317        $4,215                     $153       $3,538



     
                
                  % of revenue                      65.2 %              70.5 %         66.7 %      33.8 %       33.0 %                   1.2 %      27.7 %




     Amounts may not sum and percentages may not recalculate 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)




                                                            
     Six Months Ended


                                                            
     January 25, 2025


                                                              Product          Services         Total
                                                               Gross            Gross            Gross            Operating                   Y/Y                   Operating                   Y/Y                   Interest and       Net          Y/Y
                                                                                         Margin          Expenses                                      Income
                                                              Margin           Margin                                                                                                                                  other income       Income
                                                                                                                                                                                                         (loss), net



     GAAP amount                                             $13,109             $5,123         $18,232               $12,761                   23 %                      $5,471                 (26) %                          $(317)       $5,139    (18) %



     
                
                  % of revenue                 64.4 %            68.5 %         65.5 %               45.9 %                                            19.7 %                                               (1.1) %       18.5 %



     Adjustments to GAAP amounts:



     Share-based compensation expense                            122                160             282                 1,444                                              1,726                                                               1,726



     Amortization of acquisition-related intangible assets       654                               654                   530                                              1,184                                                               1,184



     Acquisition/divestiture-related costs                         8                 28              36                   490                                                526                                                                 526



     Significant asset impairments and restructurings              -                                                   675                                                675                                                                 675



     (Gains) and losses on investments                             -                                                                                                                                                          (91)         (91)



     Income tax effect/significant tax matters                     -                                                                                                                                                                    (1,728)



     Non-GAAP amount                                         $13,893             $5,311         $19,204                $9,622                   10 %                      $9,582                    - %                         $(408)       $7,431     (8) %



     
                
                  % of revenue                 68.3 %            71.0 %         69.0 %               34.6 %                                            34.4 %                                               (1.5) %       26.7 %


                                                            
          Six Months Ended


                                                            
          January 27, 2024


                                                                   Product               Services         Total    Operating    Operating                Interest
                                                                    Gross                 Gross            Gross                                          and          Net
                                                            Margin                Margin           Margin                                      other
                                                                                                                                               income
                                                                                                                   Expenses     Income        (loss), net              Income



     GAAP amount                                                  $12,971                  $4,803         $17,774      $10,402        $7,372                     $231       $6,272



     
                
                  % of revenue                      63.7 %                 67.8 %         64.7 %      37.9 %       26.8 %                   0.8 %      22.8 %



     Adjustments to GAAP amounts:



     Share-based compensation expense                                 100                     142             242        1,212         1,454                                1,454



     Amortization of acquisition-related intangible assets            356                                    356          133           489                                  489



     Acquisition/divestiture-related costs                              1                                      1          139           140                                  140



     Significant asset impairments and restructurings                                                                   135           135                                  135



     Russia-Ukraine war costs                                                                                           (2)          (2)                                 (2)



     (Gains) and losses on investments                                                                                                                       139          139



     Income tax effect/significant tax matters                                                                                                                         (561)



     Non-GAAP amount                                              $13,428                  $4,945         $18,373       $8,785        $9,588                     $370       $8,066



     
                
                  % of revenue                      65.9 %                 69.8 %         66.9 %      32.0 %       34.9 %                   1.3 %      29.4 %




     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                              Six Months Ended


                                                               January                   January                   January      January
                                                                25,                        27,                        25,           27,
                                                                  2025                       2024                       2025          2024



     GAAP effective tax rate                                   15.9 %                    16.7 %                     0.3 %       17.5 %



     Total adjustments to GAAP provision for income taxes       3.1 %                     2.3 %                    18.7 %        1.5 %



     Non-GAAP effective tax rate                               19.0 %                    19.0 %                    19.0 %       19.0 %


                                                                                                
           
     GAAP TO NON-GAAP GUIDANCE





       
                
                  Q3 FY 2025                                                                                      Gross Margin Operating Margin     Earnings per Share
                                                                                                                                         Rate           Rate                   (1)

    ---


       GAAP                                                                                                                           64% - 65%       21% - 22%  
          $0.57 - $0.61



       Estimated adjustments for:



       Share-based compensation expense                                                                                                   1.0 %            7.0 %   
          $0.17 - $0.18



       Amortization of acquisition-related intangible assets and acquisition/divestiture-related costs                                    2.0 %            5.0 %   
          $0.14 - $0.15



       Non-GAAP                                                                                                                       67% - 68%       33% - 34%  
          $0.90 - $0.92



       
                
                  FY 2025                                                               Earnings per Share
                                                                                                                   (1)

    ---


       GAAP                                                                                            
          $2.40 - $2.52



       Estimated adjustments for:



       Share-based compensation expense                                                                
          $0.69 - $0.71



       Amortization of acquisition-related intangible assets and acquisition/divestiture-related costs 
          $0.60 - $0.62



       Significant asset impairments and restructurings                                                
          $0.16 - $0.18



       (Gains) and losses on investments                                                                            ($0.02)



       Significant tax matters                                                                                      ($0.21)



       Non-GAAP                                                                                        
          $3.68 - $3.74




     
                (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 customer demand and our position to help our customers scale their network infrastructure, increase their data capacity requirements, and adopt best-in-class AI security) and the future financial performance of Cisco (including the guidance for Q3 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 reports on Forms 10-Q and 10-K filed on November 19, 2024 and September 5, 2024, respectively. 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 reports on Forms 10-Q and 10-K as each may be amended from time to time. Cisco's results of operations for the three and six months ended January 25, 2025 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.

About Cisco

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