Cisco Systems Inc.

05/19/2026 | Press release | Distributed by Public on 05/19/2026 14:37

Quarterly Report for Quarter Ending April 25, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Quarterly Report on Form 10-Q, including this Management's Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933, as amended (the "Securities Act"), and the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than statements of historical facts are statements that could be deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as "expects," "anticipates," "targets," "goals," "projects," "intends," "plans," "believes," "momentum," "seeks," "estimates," "continues," "endeavors," "strives," "may," variations of such words, and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified below under "Part II, Item 1A. Risk Factors," and elsewhere herein. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason.
OVERVIEW
Cisco designs and sells a broad range of technologies that help to power, secure, and draw insights from the Internet. We are incorporating artificial intelligence (AI) into our product portfolios across networking, security, collaboration and observability as well as integrating our products more tightly together. We are simplifying how our technology is delivered, managed and optimized and helping customers maximize the business value of their technology investments.
A summary of our results is as follows (in millions, except percentages and per-share amounts):
Three Months Ended Nine Months Ended
April 25,
2026 		April 26,
2025 		% Variance April 25,
2026 		April 26,
2025 		% Variance
Revenue $ 15,841 $ 14,149 12 % $ 46,073 $ 41,981 10 %
Gross margin percentage 63.6 % 65.6 % (2.0) pts 64.7 % 65.5 % (0.8) pts
Research and development $ 2,377 $ 2,335 2 % $ 7,132 $ 6,920 3 %
Sales and marketing $ 2,855 $ 2,724 5 % $ 8,607 $ 8,148 6 %
General and administrative $ 661 $ 739 (11) % $ 2,082 $ 2,286 (9) %
Total research and development, sales and marketing, general and administrative $ 5,893 $ 5,798 2 % $ 17,821 $ 17,354 3 %
Total as a percentage of revenue 37.2 % 41.0 % (3.8) pts 38.7 % 41.3 % (2.6) pts
Operating income as a percentage of revenue 25.0 % 22.6 % 2.4 pts 24.1 % 20.7 % 3.4 pts
Income tax percentage 16.5 % 15.5 % 1.0 pts 15.1 % 5.8 % 9.3 pts
Net income $ 3,373 $ 2,491 35 % $ 9,408 $ 7,630 23 %
Net income as a percentage of revenue 21.3 % 17.6 % 3.7 pts 20.4 % 18.2 % 2.2 pts
Earnings per share-diluted $ 0.85 $ 0.62 37 % $ 2.36 $ 1.91 24 %
Percentages may not recalculate due to rounding.
CISCO SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Three Months Ended April 25, 2026 Compared with Three Months Ended April 26, 2025
In the third quarter of fiscal 2026, we delivered strong revenue growth and profitability as we saw a continued positive demand environment. Total revenue increased by 12% compared with the third quarter of fiscal 2025. Within total revenue, product revenue increased by 17% and services revenue decreased by 1%. In the third quarter of fiscal 2026, total software revenue was $5.7 billion across all product areas and services, an increase of 1%. Total subscription revenue decreased 2%.
Total gross margin decreased by 2.0 percentage points. Product gross margin decreased by 2.5 percentage points, primarily driven by negative impacts from product mix and higher memory costs, partially offset by productivity improvements and lower amortization of purchased intangible assets. As a percentage of revenue, research and development, sales and marketing, and general and administrative expenses, collectively, decreased by 3.8 percentage points. Operating income as a percentage of revenue increased by 2.4 percentage points, primarily driven by revenue growth, partially offset by lower gross margin in the third quarter of fiscal 2026. Diluted earnings per share increased 37%, driven by revenue growth and operating margin improvement.
In terms of our geographic segments, revenue from the Americas increased by $1.2 billion, EMEA revenue increased by $0.3 billion and APJC revenue increased by $0.2 billion. From a customer market standpoint, we experienced product revenue growth across all of our customer markets.
From a product category perspective, the product revenue increase of 17% was driven by growth in Networking of 25%, particularly within our AI Infrastructure and Campus Networking solutions. We also saw product revenue growth in Observability of 3%. This growth was partially offset by a product revenue decline in Collaboration of 1%. Product revenue in Security was flat.
We continue to operate in a highly competitive and complex environment, especially as it relates to memory constraints and costs, and trade policy. Notwithstanding these challenges, we believe that we are making progress on our strategic priorities. We continue to invest in key priority areas with the objective of driving profitable growth over the long term. We remain focused on delivering innovation across our technologies to assist our customers in executing on their digital transformations and on accelerating innovation across our portfolio.
CISCO SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Nine Months Ended April 25, 2026 Compared with Nine Months Ended April 26, 2025
Total revenue increased 10%, with product revenue increasing 13% and services revenue was flat. Total gross margin decreased 0.8 percentage points, primarily driven by negative impacts from product mix and to a lesser extent pricing, partially offset by productivity improvements and lower amortization of purchased intangible assets. As a percentage of revenue, research and development, sales and marketing, and general and administrative expenses, collectively, decreased by 2.6 percentage points. Operating income as a percentage of revenue increased by 3.4 percentage points, primarily driven by higher revenue, lower restructuring and other charges and lower amortization of purchased intangible assets, partially offset by lower gross margin in the first nine months of fiscal 2026. Diluted earnings per share increased 24%, driven by revenue growth and operating margin improvement, partially offset by the income tax benefit of $720 million we had in the first nine months of fiscal 2025.
Strategy and Priorities
In today's digital-first world, businesses and organizations globally are deploying technology to pursue their strategic objectives, from accelerating growth to enhancing operational efficiency and fostering innovation. Our strategy is to securely connect everything to make those desired outcomes possible.
For additional discussion of our strategy and priorities, see Item 1. Business in our Annual Report on Form 10-K for the fiscal year ended July 26, 2025.
Other Key Financial Measures
The following is a summary of our other key financial measures for the third quarter of fiscal 2026 (in millions):
April 25,
2026 		July 26,
2025
Cash and cash equivalents and investments $ 16,640 $ 16,110
Remaining performance obligations $ 43,462 $ 43,533
Inventories $ 4,708 $ 3,164
Total debt $ 31,303 $ 28,093
Nine Months Ended
April 25,
2026 		April 26,
2025
Cash provided by operating activities $ 8,791 $ 9,959
Repurchases of common stock-stock repurchase program $ 4,604 $ 4,743
Dividends paid $ 4,894 $ 4,812
CISCO SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires us to make judgments, assumptions, and estimates that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Note 2 to the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended July 26, 2025, as updated as applicable in Note 2 to the Consolidated Financial Statements herein, describes the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements. The accounting policies described below are significantly affected by critical accounting estimates. Such accounting policies require significant judgments, assumptions, and estimates used in the preparation of the Consolidated Financial Statements, and actual results could differ materially from the amounts reported based on these policies.
Revenue Recognition
We enter into contracts with customers that can include various combinations of products and services which are generally distinct and accounted for as separate performance obligations, resulting in contracts that may contain multiple performance obligations. We determine whether arrangements are distinct based on whether the customer can benefit from the product or service on its own or together with other resources that are readily available and whether our commitment to transfer the product or service to the customer is separately identifiable from other obligations in the contract. We classify our hardware, perpetual software licenses, and SaaS as distinct performance obligations. Term software licenses represent multiple obligations, which include software licenses and software maintenance. In transactions where we deliver hardware or software, we are typically the principal and we record revenue and costs of goods sold on a gross basis.
We recognize revenue upon transfer of control of promised goods or services in a contract with a customer in an amount that reflects the consideration we expect to receive in exchange for those products or services. Transfer of control occurs once the customer has the contractual right to use the product, generally upon shipment, electronic delivery (or when the software is available for download by the customer), or once title and risk of loss has transferred to the customer. Transfer of control can also occur over time for software maintenance and services as the customer receives the benefit over the contract term. Our hardware and perpetual software licenses are distinct performance obligations where revenue is recognized upfront upon transfer of control. Term software licenses include multiple performance obligations where the term licenses are recognized upfront upon transfer of control, with the associated software maintenance revenue recognized ratably over the contract term as services and software updates are provided. SaaS arrangements do not include the right for the customer to take possession of the software during the term, and therefore have one distinct performance obligation which is satisfied over time with revenue recognized ratably over the contract term as the customer consumes the services. On our product sales, we record consideration from shipping and handling on a gross basis within net product sales. We record our revenue net of any associated sales taxes.
Revenue is allocated among these performance obligations in a manner that reflects the consideration that we expect to be entitled to for the promised goods or services based on standalone selling prices (SSP). SSP is estimated for each distinct performance obligation and judgment may be required in their determination. The best evidence of SSP is the observable price of a product or service when we sell the goods separately in similar circumstances and to similar customers. In instances where SSP is not directly observable, we determine SSP using information that may include market conditions and other observable inputs.
We assess relevant contractual terms in our customer contracts to determine the transaction price. We apply judgment in identifying contractual terms and determining the transaction price as we may be required to estimate variable consideration when determining the amount of revenue to recognize. Variable consideration includes potential contractual penalties and various rebate, cooperative marketing and other incentive programs that we offer to our distributors, channel partners and customers that we sell to directly. When determining the amount of revenue to recognize, we estimate the expected usage of these programs, applying the expected value or most likely estimate and update the estimate at each reporting period as actual utilization becomes available. We also consider the customers' right of return in determining the transaction price, where applicable. If actual credits received by customers under these programs were to deviate significantly from our estimates, which are based on historical experience, our revenue could be adversely affected.
See Note 3 to the Consolidated Financial Statements for more details.
Inventory Valuation and Liability for Purchase Commitments with Contract Manufacturers and Suppliers
Inventory is written down based on excess and obsolete inventories, determined primarily by future demand forecasts. Inventory write-downs are measured as the difference between the cost of the inventory and net realizable value, based upon assumptions about future demand, and are charged to the provision for inventory. At the point of the loss recognition, a new, lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.
CISCO SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
We record a provision for firm, noncancelable, and unconditional purchase commitments with contract manufacturers and suppliers for quantities in excess of our future demand forecasts consistent with the valuation of our excess and obsolete inventory. Both provisions are a component of cost of sales.
Our total provisions for inventory and the liability related to purchase commitments with contract manufacturers and suppliers were $187 million and $459 million for the first nine months of fiscal 2026 and 2025, respectively. If there were to be a sudden and significant decrease in demand for our products, or a higher incidence of inventory obsolescence because of rapidly changing technology or customer requirements, then we could be required to increase our inventory write-downs, and our liability for purchase commitments with contract manufacturers and suppliers, and accordingly our profitability, could be adversely affected. We regularly evaluate our exposure for inventory write-downs and the adequacy of our liability for purchase commitments. For further discussion around the supply chain impacts and risks, see "-Results of Operations-Gross Margin-Supply Chain Impacts and Risks" and "-Liquidity and Capital Resources-Inventory Supply Chain."
Loss Contingencies
We are subject to the possibility of various losses arising in the ordinary course of business. We consider the likelihood of the incurrence of a liability, as well as our ability to reasonably estimate the amount of loss, in determining loss contingencies. An estimated loss contingency is accrued when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. We regularly evaluate information available to us to determine whether such accruals should be made or adjusted and whether new accruals are required.
Third parties, including customers, have in the past and may in the future assert claims or initiate litigation related to exclusive patent, copyright, trademark, and other intellectual property rights to technologies and related standards that are relevant to us. These assertions have increased over time as a result of our growth and the general increase in the pace of patent claims assertions, particularly in the United States. If any infringement or other intellectual property claim made against us by any third party is successful, or if we fail to develop non-infringing technology or license the proprietary rights on commercially reasonable terms and conditions, our business, operating results, and financial condition could be materially and adversely affected.
Valuation of Goodwill and Purchased Intangible Assets
Goodwill
Our methodology for allocating the purchase price relating to purchase acquisitions is determined through established valuation techniques. Goodwill represents a residual value as of the acquisition date, which in most cases results in measuring goodwill as an excess of the purchase consideration transferred plus the fair value of any noncontrolling interest in the acquired company over the fair value of net assets acquired, including contingent consideration. We perform goodwill impairment tests on an annual basis in the fourth fiscal quarter and between annual tests in certain circumstances for each reporting unit. The assessment of fair value for goodwill and purchased intangible assets is based on factors that market participants would use in an orderly transaction in accordance with the guidance for the fair value measurement of nonfinancial assets.
In response to changes in industry and market conditions, we could be required to strategically realign our resources and consider restructuring, disposing of, or otherwise exiting businesses, which could result in an impairment of goodwill. There was no impairment of goodwill in each of the first nine months of fiscal 2026 and 2025.
Purchased Intangible Assets
The accounting for acquisitions requires significant estimates and judgments in the valuation of purchased intangible assets. Critical estimates used in the valuation of purchased intangible assets include, but are not limited to, the amount and timing of expected future cash flows, useful lives and discount rates. While our estimates of fair value are based on assumptions that are believed to be reasonable, these assumptions are inherently uncertain and unpredictable and would not reflect unanticipated events and circumstances that may occur.
We make judgments about the recoverability of purchased intangible assets with finite lives whenever events or changes in circumstances indicate that an impairment may exist. Recoverability of purchased intangible assets with finite lives is measured by comparing the carrying amount of the asset group to the future undiscounted cash flows the asset group is expected to generate. We review indefinite-lived intangible assets for impairment annually or whenever events or changes in circumstances indicate that the asset might be impaired. If the asset is considered impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. Assumptions and estimates about future values and remaining useful lives of our purchased intangible assets are complex and subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business
CISCO SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
strategy and our internal forecasts. Our ongoing consideration of all the factors described previously could result in impairment charges in the future, which could adversely affect our net income.
Income Taxes
We are subject to income taxes in the United States and numerous foreign jurisdictions. Our effective tax rates differ from the statutory rate, primarily due to the tax impact of state taxes, foreign operations, R&D tax credits, foreign-derived intangible income deductions, global intangible low-taxed income, tax audit settlements, nondeductible compensation, and international realignments. Our effective tax rate was 16.5% and 15.5% in the third quarter of fiscal 2026 and 2025, respectively and 15.1% and 5.8% in the first nine months of fiscal 2026 and 2025, respectively.
Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. Although we believe our reserves are reasonable, no assurance can be given that the final tax outcome of these matters will not be different from that which is reflected in our historical income tax provisions and accruals. We adjust these reserves due to changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact the provision for income taxes in the period in which such determination is made. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate, and the related net interest and penalties.
Significant judgment is also required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, we consider all available evidence, including past operating results, estimates of future taxable income, and the feasibility of tax planning strategies. If we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.
Our provision for income taxes is subject to volatility and could be adversely impacted by earnings being lower than anticipated in countries that have lower tax rates and higher than anticipated in countries that have higher tax rates; by changes in the valuation of our deferred tax assets and liabilities; by changes to foreign-derived intangible income deduction, global intangible low-tax income and base erosion and anti-abuse tax, research and development capitalization and amortization, and corporate alternative minimum tax laws, regulations, or interpretations thereof; by expiration of or lapses in tax incentives; by transfer pricing adjustments, including the effect of acquisitions on our legal structure; by tax effects of nondeductible compensation; by tax costs related to intercompany realignments; by changes in accounting principles; or by changes in tax laws and regulations, treaties, or interpretations thereof, including changes to the taxation of earnings of our foreign subsidiaries, the deductibility of expenses attributable to foreign income, and the foreign tax credit rules. Significant judgment is required to determine the recognition and measurement attributes prescribed in the accounting guidance for uncertainty in income taxes. The Organisation for Economic Co-operation and Development (OECD), an international association comprised of 38 countries, including the United States, has made changes, including a Pillar Two framework that imposes a minimum tax rate of 15% in each taxing jurisdiction, and is contemplating additional changes to numerous long-standing tax principles. There can be no assurance that these changes and any contemplated changes if finalized, once adopted by countries, will not have an adverse impact on our provision for income taxes. As a result of certain of our ongoing employment and capital investment actions and commitments, our income in certain countries was subject to reduced tax rates. Our failure to meet these commitments could adversely impact our provision for income taxes. In addition, we are subject to the continuous examination of our income tax returns by the Internal Revenue Service (IRS) and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. There can be no assurance that the outcomes from these continuous examinations will not have an adverse impact on our operating results and financial condition.
CISCO SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS
Revenue
The following table presents the breakdown of revenue between product and services (in millions, except percentages):
Three Months Ended Nine Months Ended
April 25,
2026 		April 26,
2025 		Variance
in Dollars 		Variance
in Percent 		April 25,
2026 		April 26,
2025 		Variance
in Dollars 		Variance
in Percent
Revenue:
Product $ 12,117 $ 10,374 $ 1,743 17 % $ 34,836 $ 30,722 $ 4,114 13 %
Percentage of revenue 76.5 % 73.3 % 75.6 % 73.2 %
Services 3,724 3,775 (51) (1) % 11,237 11,259 (22) - %
Percentage of revenue 23.5 % 26.7 % 24.4 % 26.8 %
Total $ 15,841 $ 14,149 $ 1,692 12 % $ 46,073 $ 41,981 $ 4,092 10 %
Amounts may not sum and percentages may not recalculate due to rounding.
We manage our business primarily on a geographic basis, organized into three geographic segments. Our revenue, which includes product and services for each segment, is summarized in the following table (in millions, except percentages):
Three Months Ended Nine Months Ended
April 25,
2026 		April 26,
2025 		Variance
in Dollars 		Variance
in Percent 		April 25,
2026 		April 26,
2025 		Variance
in Dollars 		Variance
in Percent
Revenue:
Americas $ 9,569 $ 8,380 $ 1,189 14 % $ 27,403 $ 24,834 $ 2,569 10 %
Percentage of revenue 60.4 % 59.2 % 59.5 % 59.2 %
EMEA 4,054 3,736 318 9 % 12,262 11,179 1,083 10 %
Percentage of revenue 25.6 % 26.4 % 26.6 % 26.6 %
APJC 2,218 2,034 184 9 % 6,409 5,968 441 7 %
Percentage of revenue 14.0 % 14.4 % 13.9 % 14.2 %
Total $ 15,841 $ 14,149 $ 1,692 12 % $ 46,073 $ 41,981 $ 4,092 10 %
Amounts may not sum and percentages may not recalculate due to rounding.
Three Months Ended April 25, 2026 Compared with Three Months Ended April 26, 2025
Total revenue increased by 12%. Product revenue increased by 17% and services revenue decreased by 1%. Our total revenue reflected growth across each of our geographic segments.
In addition to the impact of macroeconomic factors, including the IT spending environment and the level of spending by government entities, revenue by segment in a particular period may be significantly impacted by the timing of revenue recognition for complex transactions with multiple performance obligations. In addition, certain customers tend to make large and sporadic purchases, and the revenue related to these transactions may also be affected by the timing of revenue recognition, which in turn would impact the revenue of the relevant segment.
Nine Months Ended April 25, 2026 Compared with Nine Months Ended April 26, 2025
Total revenue increased by 10%. Product revenue increased by 13% and services revenue was flat. Our total revenue reflected growth across each of our geographic segments.
CISCO SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Product Revenue by Segment
The following table presents the breakdown of product revenue by segment (in millions, except percentages):
Three Months Ended Nine Months Ended
April 25,
2026 		April 26,
2025 		Variance
in Dollars 		Variance
in Percent 		April 25,
2026 		April 26,
2025 		Variance
in Dollars 		Variance
in Percent
Product revenue:
Americas $ 7,375 $ 6,125 $ 1,250 20 % $ 20,731 $ 18,075 $ 2,656 15 %
Percentage of product revenue 60.9 % 59.1 % 59.5 % 58.8 %
EMEA 3,101 2,805 296 11 % 9,434 8,417 1,017 12 %
Percentage of product revenue 25.6 % 27.0 % 27.1 % 27.4 %
APJC 1,640 1,444 196 14 % 4,671 4,230 441 10 %
Percentage of product revenue 13.5 % 13.9 % 13.4 % 13.8 %
Total $ 12,117 $ 10,374 $ 1,743 17 % $ 34,836 $ 30,722 $ 4,114 13 %
Amounts may not sum and percentages may not recalculate due to rounding.
Americas
Three Months Ended April 25, 2026 Compared with Three Months Ended April 26, 2025
Product revenue in the Americas segment increased by 20%, with growth across each of our customer markets, led by the Service Provider and Cloud customer market which was largely driven by revenue from our AI Infrastructure solutions. From a country perspective, product revenue increased in the United States, Canada and Mexico by 22%, 9% and 32%, respectively, partially offset by a decline in Brazil of 10%.
Nine Months Ended April 25, 2026 Compared with Nine Months Ended April 26, 2025
Product revenue in the Americas segment increased by 15%, with growth across each of our customer markets, led by the Service Provider and Cloud customer market which was largely driven by revenue from our AI Infrastructure solutions. From a country perspective, product revenue increased in the United States, Canada and Mexico by 16%, 4%, and 31%, respectively, partially offset by a decline in Brazil of 13%.
EMEA
Three Months Ended April 25, 2026 Compared with Three Months Ended April 26, 2025
Product revenue in the EMEA segment increased by 11%, with growth across each of our customer markets. From a country perspective, product revenue increased in the United Kingdom and Germany by 26% and 7%, respectively.
Nine Months Ended April 25, 2026 Compared with Nine Months Ended April 26, 2025
Product revenue in the EMEA segment increased by 12%, with growth across each of our customer markets. From a country perspective, product revenue increased in the United Kingdom and Germany by 24% and 11%, respectively.
APJC
Three Months Ended April 25, 2026 Compared with Three Months Ended April 26, 2025
Product revenue in the APJC segment increased by 14%, with growth across each of our customer markets. From a country perspective, product revenue increased in Japan, India, Australia and China by 12%, 22%, 19% and 42%, respectively.
Nine Months Ended April 25, 2026 Compared with Nine Months Ended April 26, 2025
Product revenue in the APJC segment increased by 10%, with growth across each of our customer markets. From a country perspective, product revenue increased in Japan, India, Australia and China by 17%, 8%, 2% and 17%, respectively.
CISCO SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Product Revenue by Category
In addition to the primary view on a geographic basis, we also prepare financial information related to product categories and customer markets for various purposes.
The following table presents product revenue by category (in millions, except percentages):
Three Months Ended Nine Months Ended
April 25,
2026 		April 26,
2025 		Variance
in Dollars 		Variance
in Percent 		April 25,
2026 		April 26,
2025 		Variance
in Dollars 		Variance
in Percent
Product revenue
Networking $ 8,815 $ 7,068 $ 1,747 25 % $ 24,877 $ 20,671 $ 4,206 20 %
Security 2,008 2,013 (5) - % 6,006 6,142 (136) (2) %
Collaboration 1,024 1,031 (7) (1) % 3,133 3,112 21 1 %
Observability 269 261 8 3 % 820 796 24 3 %
Total $ 12,117 $ 10,374 $ 1,743 17 % $ 34,836 $ 30,722 $ 4,114 13 %
Amounts may not sum and percentages may not recalculate due to rounding.
Networking
Three Months Ended April 25, 2026 Compared with Three Months Ended April 26, 2025
The Networking product category consists of our core networking technologies of switching, routing, wireless, and servers. Revenue from the Networking product category increased by 25%, or $1.7 billion primarily driven by our AI Infrastructure and Campus Networking solutions. The increase was primarily driven by growth across the portfolio led by double digit revenue growth in Campus Switching, Data Center Switching, Wireless and Service Provider Routing.
Nine Months Ended April 25, 2026 Compared with Nine Months Ended April 26, 2025
Revenue from the Networking product category increased by 20%, or $4.2 billion. The increase was primarily driven by double digit revenue growth in Service Provider Routing, particularly within our AI Infrastructure solutions, Data Center Switching, Campus Switching, Wireless and Enterprise Routing.
Security
Three Months Ended April 25, 2026 Compared with Three Months Ended April 26, 2025
The Security product category consists of our Network Security, Identity and Access Management, SASE and Threat Intelligence, Detection, and Response offerings. Revenue in our Security product category was flat, primarily driven by declines in our prior generation products and Splunk offerings. We continued to see a change in how our customers consumed Splunk offerings, shifting from fewer on-premise deals to more cloud subscriptions. These declines were offset by growth in new and refreshed products.
Nine Months Ended April 25, 2026 Compared with Nine Months Ended April 26, 2025
Revenue from the Security product category decreased by 2%, or $136 million, primarily driven by Threat Intelligence, Detection, and Response offerings and our prior generation products, partially offset by growth in SASE offerings.
Collaboration
Three Months Ended April 25, 2026 Compared with Three Months Ended April 26, 2025
The Collaboration product category consists of our Webex Suite, Collaboration Devices, Contact Center and CPaaS offerings. Revenue in our Collaboration product category decreased by 1%, or $7 million, primarily driven by declines in Webex Suite offerings partially offset by growth in Collaboration Devices, Cloud Contact Center and CPaaS offerings.
Nine Months Ended April 25, 2026 Compared with Nine Months Ended April 26, 2025
Revenue from the Collaboration product category increased by 1%, or $21 million, primarily driven by revenue growth in our Collaboration Devices and CPaaS offerings, partially offset by declines in Webex Suite offerings.
CISCO SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Observability
Three Months Ended April 25, 2026 Compared with Three Months Ended April 26, 2025
The Observability product category consists of our network assurance, monitoring and analytics and observability suite offerings. Revenue in our Observability product category increased by 3%, primarily due to growth in ThousandEyes, partially offset by a decline in Splunk offerings.
Nine Months Ended April 25, 2026 Compared with Nine Months Ended April 26, 2025
Revenue from Observability product category increased by 3%, or $24 million, primarily driven by growth in ThousandEyes, partially offset by a decline in Splunk offerings.
Services Revenue by Segment
The following table presents the breakdown of services revenue by segment (in millions, except percentages):
Three Months Ended Nine Months Ended
April 25,
2026 		April 26,
2025 		Variance
in Dollars 		Variance
in Percent 		April 25,
2026 		April 26,
2025 		Variance
in Dollars 		Variance
in Percent
Services revenue:
Americas $ 2,194 $ 2,254 $ (60) (3) % $ 6,672 $ 6,759 $ (87) (1) %
Percentage of service revenue 58.9 % 59.7 % 59.4 % 60.0 %
EMEA 953 931 22 2 % 2,829 2,762 67 2 %
Percentage of service revenue 25.6 % 24.7 % 25.2 % 24.5 %
APJC 578 590 (12) (2) % 1,738 1,738 - - %
Percentage of service revenue 15.5 % 15.6 % 15.4 % 15.5 %
Total $ 3,724 $ 3,775 $ (51) (1) % $ 11,237 $ 11,259 $ (22) - %
Amounts may not sum and percentages may not recalculate due to rounding.
Services revenue decreased by 1% in the third quarter of fiscal 2026 compared with the third quarter of fiscal 2025, with the decline primarily driven by lower revenue from support services, partially offset by higher professional services. Services revenue declined in the Americas and APJC segments, partially offset by an increase in the EMEA segment for the third quarter of fiscal 2026.
Services revenue was flat in the first nine months of fiscal 2026 compared to the first nine months of fiscal 2025. Services revenue increased in the EMEA segment, offset by a decline in the Americas segment. Services revenue in the APJC segment was flat.
Gross Margin
The following table presents the gross margin for products and services (in millions, except percentages):
Three Months Ended Nine Months Ended
AMOUNT PERCENTAGE AMOUNT PERCENTAGE
April 25,
2026 		April 26,
2025 		April 25,
2026 		April 26,
2025 		April 25,
2026 		April 26,
2025 		April 25,
2026 		April 26,
2025
Gross margin:
Product $ 7,504 $ 6,686 61.9 % 64.4 % $ 22,084 $ 19,795 63.4 % 64.4 %
Services 2,576 2,592 69.2 % 68.7 % 7,713 7,715 68.6 % 68.5 %
Total $ 10,080 $ 9,278 63.6 % 65.6 % $ 29,797 $ 27,510 64.7 % 65.5 %
CISCO SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Product Gross Margin
The following table summarizes the key factors that contributed to the change in product gross margin percentage for the third quarter and first nine months of fiscal 2026, as compared with the corresponding prior year periods:
Product Gross Margin Percentage
Three Months Ended Nine Months Ended
Fiscal 2025 64.4 % 64.4 %
Productivity (1)
1.2 % 1.7 %
Product pricing (0.1) % (0.5) %
Mix of products sold (4.4) % (3.3) %
Amortization of purchased intangible assets 0.7 % 1.0 %
Others 0.1 % 0.1 %
Fiscal 2026 61.9 % 63.4 %
(1) Productivity includes overall manufacturing-related costs, such as component costs (including memory), warranty expense, provisions for inventory and the liability related to the purchase commitments with contract manufacturers and suppliers, freight, logistics, shipment volume, and other items not categorized elsewhere.
Three Months Ended April 25, 2026 Compared with Three Months Ended April 26, 2025
Product gross margin decreased by 2.5 percentage points primarily driven by negative impacts from product mix and to a lesser extent, pricing, partially offset by productivity improvements. The negative impacts from product mix were primarily due to higher Networking revenue. Productivity benefits were adversely impacted by higher memory costs.
Nine Months Ended April 25, 2026 Compared with Nine Months Ended April 26, 2025
Product gross margin decreased by 1.0 percentage points primarily driven by negative impacts from product mix and pricing, partially offset by productivity improvements and lower amortization of purchased intangible assets. Productivity benefits were adversely impacted by higher memory costs.
Supply Chain Impacts and Risks
We regularly enter into purchase commitments with contract manufacturers and suppliers and in recent periods have increased such commitments related to manufacturing Cisco Silicon One and other products to meet demand from hyperscalers and other customers. We expect to continue entering into these additional purchase commitments in fiscal 2026, including purchase commitments to help secure memory. These purchase commitments have in turn significantly increased our supply chain exposure. This exposure includes potential material excess and obsolete or other charges if product demand significantly decreases for a sustained duration, we are unable to generate demand for certain products, or we are otherwise unable to mitigate this exposure. Additionally, while we are exposed to new and proposed tariffs and other trade policies, the extent of such exposure is uncertain but could be significant if the exposure remains and we are unable to mitigate it.
U.S. Tariffs
On February 20, 2026, the U.S. Supreme Court ruled that the tariffs previously imposed under the International Emergency Economic Powers Act ("IEEPA") were unauthorized. As a result of this ruling, we may be eligible for a refund of tariffs previously paid on imported goods. As the recoverability and timing of any such refund remains uncertain, we have not recorded a benefit for any potential refund and will not until such amounts are realizable. We will continue to monitor these developments and believe that any potential refund will not have a material impact on our business and Consolidated Financial Statements.
Services Gross Margin
Our services gross margin percentage increased by 0.5 percentage points in the third quarter of fiscal 2026 and increased by 0.1 percentage points in the first nine months of fiscal 2026. For each of the third quarter and first nine months of fiscal 2026, the increase in services gross margin was primarily due to cost efficiencies.
Our services gross margin normally experiences some fluctuations due to various factors such as the timing of contract initiations in our renewals, our strategic investments in headcount, and the resources we deploy to support the overall service business. Other factors include the mix of service offerings, as the gross margin from our advanced services is typically lower than the gross margin from technical support services.
CISCO SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Gross Margin by Segment
The following table presents the total gross margin for each segment (in millions, except percentages):
Three Months Ended Nine Months Ended
AMOUNT PERCENTAGE AMOUNT PERCENTAGE
April 25,
2026 		April 26,
2025 		April 25,
2026 		April 26,
2025 		April 25,
2026 		April 26,
2025 		April 25,
2026 		April 26,
2025
Gross margin:
Americas $ 6,100 $ 5,676 63.7 % 67.7 % $ 17,917 $ 16,960 65.4 % 68.3 %
EMEA 2,892 2,659 71.3 % 71.2 % 8,787 7,931 71.7 % 70.9 %
APJC 1,466 1,367 66.1 % 67.2 % 4,247 4,016 66.3 % 67.3 %
Segment total 10,458 9,703 66.0 % 68.6 % 30,951 28,907 67.2 % 68.9 %
Unallocated corporate items (1)
(378) (425) (1,154) (1,397)
Total $ 10,080 $ 9,278 63.6 % 65.6 % $ 29,797 $ 27,510 64.7 % 65.5 %
(1) The unallocated corporate items include the effects of amortization and impairments of acquisition-related intangible assets, share-based compensation expense, significant litigation settlements and other contingencies, charges related to asset impairments and restructurings, and certain other charges. We do not allocate these items to the gross margin for each segment because management does not include such information in measuring the performance of the operating segments.
Amounts may not sum and percentages may not recalculate due to rounding.
Three Months Ended April 25, 2026 Compared with Three Months Ended April 26, 2025
We experienced a gross margin percentage decrease in our Americas segment due to negative impacts from product mix and to a lesser extent pricing, partially offset by positive impacts from productivity improvements.
Gross margin percentage in our EMEA segment increased slightly primarily due to productivity improvements and to a lesser extent pricing, partially offset by negative impacts from product mix.
The decrease in the APJC segment gross margin percentage was primarily due to product mix, pricing and negative impacts from productivity.
Nine Months Ended April 25, 2026 Compared with Nine Months Ended April 26, 2025
We experienced a gross margin percentage decrease in our Americas segment due to negative impacts from product mix and pricing, partially offset by positive impacts from productivity improvements.
Gross margin percentage in our EMEA segment increased primarily due to productivity improvements, partially offset by negative impacts from product mix and pricing.
The decrease in the APJC segment gross margin percentage was primarily due to negative impacts from product mix and pricing, partially offset by productivity improvements.
Research and Development ("R&D"), Sales and Marketing, and General and Administrative ("G&A") Expenses
R&D, sales and marketing, and G&A expenses are summarized in the following table (in millions, except percentages):
Three Months Ended Nine Months Ended
April 25,
2026 		April 26,
2025 		Variance
in Dollars 		Variance
in Percent 		April 25,
2026 		April 26,
2025 		Variance
in Dollars 		Variance
in Percent
Research and development $ 2,377 $ 2,335 $ 42 2 % $ 7,132 $ 6,920 $ 212 3 %
Percentage of revenue 15.0 % 16.5 % 15.5 % 16.5 %
Sales and marketing 2,855 2,724 131 5 % 8,607 8,148 459 6 %
Percentage of revenue 18.0 % 19.3 % 18.7 % 19.4 %
General and administrative 661 739 (78) (11) % 2,082 2,286 (204) (9) %
Percentage of revenue 4.2 % 5.2 % 4.5 % 5.4 %
Total $ 5,893 $ 5,798 $ 95 2 % $ 17,821 $ 17,354 $ 467 3 %
Percentage of revenue 37.2 % 41.0 % 38.7 % 41.3 %
CISCO SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
R&D Expenses
Three Months Ended April 25, 2026 Compared with Three Months Ended April 26, 2025
R&D expenses increased primarily due to higher discretionary spending and higher headcount-related expenses reflecting our investments in AI, partially offset by lower acquisition-related costs and lower contracted services spending.
Nine Months Ended April 25, 2026 Compared with Nine Months Ended April 26, 2025
R&D expenses increased primarily due to higher share-based compensation expense, higher discretionary spending and higher headcount-related expenses reflecting our investments in AI, partially offset by lower acquisition-related costs and lower contracted services spending.
Sales and Marketing Expenses
Three Months Ended April 25, 2026 Compared with Three Months Ended April 26, 2025
Sales and marketing expenses increased primarily due to higher headcount-related expenses and higher contracted services, partially offset by lower acquisition-related costs and lower discretionary spending.
Nine Months Ended April 25, 2026 Compared with Nine Months Ended April 26, 2025
Sales and marketing expenses increased primarily due to higher headcount-related expenses, higher share-based compensation expense and higher contracted services spending, partially offset by lower acquisition-related costs.
G&A Expenses
Three Months Ended April 25, 2026 Compared with Three Months Ended April 26, 2025
G&A expenses decreased primarily due to lower headcount-related expenses, lower acquisition-related costs and lower discretionary spending.
Nine Months Ended April 25, 2026 Compared with Nine Months Ended April 26, 2025
G&A expenses decreased primarily due to lower acquisition-related costs and lower headcount-related expenses, partially offset by higher discretionary spending.
Effect of Foreign Currency
In the third quarter of fiscal 2026, foreign currency fluctuations, net of hedging, increased the combined R&D, sales and marketing, and G&A expenses by approximately $90 million, or 1.6%, compared with the third quarter of fiscal 2025.
In the first nine months of fiscal 2026, foreign currency fluctuations, net of hedging, increased the combined R&D, sales and marketing, and G&A expenses by approximately $181 million, or 1.0%, compared with the first nine months of fiscal 2025.
Amortization of Purchased Intangible Assets
The following table presents the amortization of purchased intangible assets including impairment charges (in millions):
Three Months Ended Nine Months Ended
April 25,
2026 		April 26,
2025 		April 25,
2026 		April 26,
2025
Amortization of purchased intangible assets:
Cost of sales $ 229 $ 269 $ 704 $ 934
Operating expenses 228 244 690 774
Total $ 457 $ 513 $ 1,394 $ 1,708
For each of the third quarter and first nine months of fiscal 2026, the decrease in amortization of purchased intangible assets was primarily due to certain purchased intangible assets that became fully amortized and impairment charges of $19 million recognized in the first nine months of fiscal 2025. Impairment charges were as a result of declines in estimated fair value resulting from the reductions in or the elimination of expected future cash flows associated with certain technology intangible assets.
CISCO SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Restructuring and Other Charges
In the fourth quarter of fiscal 2026, we announced a restructuring plan to allow us to invest in key growth opportunities including silicon, optics, security and AI. We expect to recognize approximately $450 million in pre-tax charges in the fourth quarter of fiscal 2026. The total pre-tax charges are estimated to be up to $1 billion, with the plan expected to be substantially completed by the end of fiscal 2027. We expect to reinvest substantially all of the cost savings from this restructuring plan in our key growth opportunities. As a result, the overall cost savings from this restructuring plan are not expected to be material.
We initiated a restructuring plan in fiscal 2025 in order to allow us to invest in key growth opportunities and drive more efficiencies in our business. In connection with this restructuring plan, we incurred cumulative charges of $926 million and substantially completed this plan in the second quarter of fiscal 2026.
Operating Income
The following table presents our operating income and our operating income as a percentage of revenue (in millions, except percentages):
Three Months Ended Nine Months Ended
April 25,
2026 		April 26,
2025 		April 25,
2026 		April 26,
2025
Operating income $ 3,960 $ 3,202 $ 11,104 $ 8,673
Operating income as a percentage of revenue 25.0 % 22.6 % 24.1 % 20.7 %
Three Months Ended April 25, 2026 Compared with Three Months Ended April 26, 2025
Operating income increased by 24%, and operating income as a percentage of revenue increased by 2.4 percentage points. These changes primarily resulted from revenue growth, partially offset by lower gross margin in the third quarter of fiscal 2026.
Nine Months Ended April 25, 2026 Compared with Nine Months Ended April 26, 2025
Operating income increased by 28%, and operating income as a percentage of revenue increased by 3.4 percentage points. These changes primarily resulted from revenue growth, lower restructuring and other charges and lower amortization of purchased intangible assets in the first nine months of fiscal 2026.
Interest and Other Income (Loss), Net
Interest Income (Expense), Net The following table summarizes interest income and interest expense (in millions):
Three Months Ended Nine Months Ended
April 25,
2026 		April 26,
2025 		Variance
in Dollars 		April 25,
2026 		April 26,
2025 		Variance
in Dollars
Interest income $ 214 $ 250 $ (36) $ 646 $ 774 $ (128)
Interest expense (377) (403) 26 (1,097) (1,225) 128
Interest income (expense), net $ (163) $ (153) $ (10) $ (451) $ (451) $ -
For the third quarter and first nine months of fiscal 2026, the decrease in interest income was driven by a lower average balance of cash and available-for-sale debt investments and lower interest rates. The decrease in interest expense was driven by a lower average balance of debt outstanding and lower effective interest rate on commercial paper during the respective periods.
CISCO SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Other Income (Loss), Net The components of other income (loss), net, are summarized as follows (in millions):
Three Months Ended Nine Months Ended
April 25,
2026 		April 26,
2025 		Variance
in Dollars 		April 25,
2026 		April 26,
2025 		Variance
in Dollars
Gains (losses) on investments, net:
Available-for-sale debt investments $ - $ (30) $ 30 $ (8) $ (75) $ 67
Marketable equity securities 26 (36) 62 23 9 14
Non-marketable equity securities 242 10 232 502 57 445
Net gains (losses) on investments 268 (56) 324 517 (9) 526
Other gains (losses), net (26) (46) 20 (94) (112) 18
Other income (loss), net $ 242 $ (102) $ 344 $ 423 $ (121) $ 544
For the third quarter of fiscal 2026, the change in our other income (loss), net was primarily driven by higher gains on our marketable and non-marketable equity securities. For the first nine months of fiscal 2026, the change in our other income (loss), net was primarily driven by higher gains on non-marketable equity securities and lower losses on our available-for-sale debt investments.
Provision for Income Taxes
Three Months Ended April 25, 2026 Compared with Three Months Ended April 26, 2025
The provision for income taxes resulted in an effective tax rate of 16.5% for the third quarter of fiscal 2026, compared with an effective tax rate of 15.5% for the third quarter of fiscal 2025. The increase in the effective tax rate was primarily due to a decrease in foreign derived intangible income deduction partially offset by an increase in research tax credit benefit.
Nine Months Ended April 25, 2026 Compared with Nine Months Ended April 26, 2025
The provision for income taxes resulted in an effective tax rate of 15.1% for the first nine months of fiscal 2026, compared with an effective tax rate of 5.8% for the first nine months of fiscal 2025. The increase in the effective tax rate was primarily due to a $720 million tax benefit related to the U.S. Tax Court opinion issued during the first quarter of fiscal 2025 regarding the U.S. taxation of deemed foreign dividends in the transition year of the Tax Cut and Job Act (our fiscal 2018).
CISCO SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
LIQUIDITY AND CAPITAL RESOURCES
The following sections discuss the effects of changes in our balance sheet, our capital allocation strategy including stock repurchase program and dividends, our contractual obligations, and certain other commitments and activities on our liquidity and capital resources.
Balance Sheet and Cash Flows
Cash and Cash Equivalents and Investments The following table summarizes our cash and cash equivalents and investments (in millions):
April 25,
2026 		July 26,
2025 		Increase (Decrease)
Cash and cash equivalents $ 7,083 $ 8,346 $ (1,263)
Available-for-sale debt investments 9,180 7,381 1,799
Marketable equity securities 377 383 (6)
Total $ 16,640 $ 16,110 $ 530
The net increase in cash and cash equivalents and investments in the first nine months of fiscal 2026 was primarily driven by net cash provided by operating activities of $8.8 billion, $4.9 billion net issuance of commercial paper, and the release to us of approximately $0.6 billion of restricted cash previously held in escrow. These sources of cash were partially offset by cash returned to stockholders in the form of cash dividends of $4.9 billion and repurchases of common stock of $4.6 billion, repayment of debt of $1.8 billion, shares repurchased for tax withholdings on vesting of restricted stock units of $1.4 billion and capital expenditures of $1.0 billion.
We maintain an investment portfolio of various holdings, types, and maturities. We classify our investments as short-term investments based on their nature and their availability for use in current operations. We believe the overall credit quality of our portfolio is strong, with our cash equivalents and our available-for-sale debt investment portfolio consisting primarily of high quality investment-grade securities. We believe that our strong cash and cash equivalents and investments position allows us to use our cash resources for strategic investments to gain access to new technologies, for acquisitions, for customer financing activities, for working capital needs, and for the repurchase of shares of common stock and payment of dividends as discussed below.
Securities Lending We periodically engage in securities lending activities with certain of our available-for-sale debt investments. These transactions are accounted for as a secured lending of the securities, and the securities are typically loaned only on an overnight basis. We require collateral equal to at least 102% of the fair market value of the loaned security and that the collateral be in the form of cash or liquid, high-quality assets. We engage in these secured lending transactions only with highly creditworthy counterparties, and the associated portfolio custodian has agreed to indemnify us against collateral losses. We did not experience any losses in connection with the secured lending of securities during the periods presented. As of April 25, 2026 and July 26, 2025, we had no outstanding securities lending transactions.
Free Cash Flow and Capital Allocation As part of our capital allocation strategy, we target to return a minimum of 50% of our free cash flow annually to our stockholders through cash dividends and repurchases of common stock.
We define free cash flow as net cash provided by operating activities less cash used to acquire property and equipment. The following table reconciles our net cash provided by operating activities to free cash flow (in millions):
Nine Months Ended
April 25,
2026 		April 26,
2025
Net cash provided by operating activities $ 8,791 $ 9,959
Acquisition of property and equipment (1,020) (688)
Free cash flow $ 7,771 $ 9,271
The net cash provided by operating activities in the first nine months of fiscal 2026 includes our final U.S. transition tax payment of $2.3 billion.
We expect that cash provided by operating activities may fluctuate in future periods as a result of a number of factors, including fluctuations in our operating results, the rate at which products are shipped during the quarter (which we refer to as shipment linearity), the timing and collection of accounts receivable and financing receivables, inventory and supply chain management,
CISCO SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
deferred revenue, and the timing and amount of tax and other payments. For additional discussion, see "Part II, Item 1A. Risk Factors" in this report.
We consider free cash flow to be a liquidity measure that provides useful information to management and investors because of our intent to return a stated percentage of free cash flow to stockholders in the form of dividends and stock repurchases. We further regard free cash flow as a useful measure because it reflects cash that can be used to, among other things, invest in our business, make strategic acquisitions, repurchase common stock, and pay dividends on our common stock, after deducting capital investments. A limitation of the utility of free cash flow as a measure of financial performance and liquidity is that the free cash flow does not represent the total increase or decrease in our cash balance for the period. In addition, we have other required uses of cash, including repaying the principal of our outstanding indebtedness. Free cash flow is not a measure calculated in accordance with U.S. generally accepted accounting principles and should not be regarded in isolation or as an alternative for net cash provided by operating activities or any other measure calculated in accordance with such principles, and other companies may calculate free cash flow in a different manner than we do.
The following table summarizes the dividends paid and stock repurchases (in millions, except per-share amounts):
DIVIDENDS STOCK REPURCHASE PROGRAM
Quarter Ended Per Share Amount Shares Weighted-Average Price per Share Amount TOTAL
Fiscal 2026
April 25, 2026 $ 0.42 $ 1,660 16 $ 80.28 $ 1,252 $ 2,912
January 24, 2026 $ 0.41 $ 1,617 18 $ 76.29 $ 1,351 $ 2,968
October 25, 2025 $ 0.41 $ 1,617 29 $ 68.28 $ 2,001 $ 3,618
Fiscal 2025
July 26, 2025 $ 0.41 $ 1,625 19 $ 64.65 $ 1,252 $ 2,877
April 26, 2025 $ 0.41 $ 1,627 25 $ 59.78 $ 1,504 $ 3,131
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
On May 13, 2026, our Board of Directors declared a quarterly dividend of $0.42 per common share to be paid on July 22, 2026, to all stockholders of record as of the close of business on July 6, 2026. Future dividends will be subject to the approval of our Board of Directors.
As of April 25, 2026, the remaining authorized amount for stock repurchases under this program is approximately $9.6 billion, with no termination date.
Accounts Receivable, Net The following table summarizes our accounts receivable, net (in millions):
April 25,
2026 		July 26,
2025 		Increase (Decrease)
Accounts receivable, net $ 6,480 $ 6,701 $ (221)
Our accounts receivable net, as of April 25, 2026 decreased by approximately 3%, as compared with the end of fiscal 2025, primarily due to timing and amount of product and service billings in the third quarter of fiscal 2026 compared with the fourth quarter of fiscal 2025.
Inventory Supply Chain The following table summarizes our inventories and balances with contract manufacturers and suppliers (in millions):
April 25,
2026 		July 26,
2025 		Increase (Decrease)
Inventories $ 4,708 $ 3,164 $ 1,544
Inventory purchase commitments $ 16,033 $ 7,599 $ 8,434
Inventory deposits and prepayments $ 1,072 $ 825 $ 247
CISCO SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
The following table summarizes our inventory purchase commitments with contract manufacturers and suppliers by period (in millions):
April 25,
2026 		July 26,
2025 		Increase (Decrease)
Less than 1 year $ 14,149 $ 7,202 $ 6,947
1 to 3 years 1,556 320 1,236
3 to 5 years 328 77 251
Total $ 16,033 $ 7,599 $ 8,434
Inventory as of April 25, 2026 increased by 49% and inventory purchase commitments with contract manufacturers and suppliers increased by 111% from our balances at the end of fiscal 2025. The combined increase of 93% in our inventory and inventory purchase commitments as compared with the end of fiscal 2025 was primarily related to commitments with contract manufacturers and suppliers related to manufacturing Cisco Silicon One and other products to meet the demand from hyperscalers and other customers. In the third quarter of fiscal 2026, we increased our purchase commitments with a certain supplier to help secure memory components. We expect our inventory balances may increase in future quarters as we work to fulfill this demand.
In recent periods, we have increased our levels of inventory and purchase commitments with contract manufacturers and suppliers primarily related to Cisco Silicon One. The increases during the first nine months of fiscal 2026 were primarily due to arrangements to secure supply and pricing for certain product components, including memory, and commitments with contract manufacturers to meet customer demand and help manage lead times. Our risks of future material excess and obsolete inventory and related losses are further outlined in the Result of Operations-Product Gross Margin section.
We purchase components from a variety of suppliers and use several contract manufacturers to provide manufacturing services for our products. During the normal course of business, in order to manage manufacturing lead times and help ensure adequate component supply, we enter into agreements with contract manufacturers and suppliers that allow them to procure inventory based upon criteria as defined by us or that establish the parameters defining our requirements and our commitment to securing manufacturing capacity.
Our inventory purchase commitments are for short-term product manufacturing requirements as well as for commitments to suppliers to secure manufacturing capacity. Certain of our inventory purchase commitments are entered into directly with suppliers and relate to fixed-dollar commitments to secure supply and pricing for certain product components for multi-year periods. In addition, certain of these inventory purchase commitments are related to long-term supply agreements for fixed quantities of certain memory components for which pricing is variable. A significant portion of our reported purchase commitments arising from these agreements are firm, noncancelable, and unconditional commitments. In certain instances, these agreements allow us the option to cancel, reschedule, and adjust our requirements based on our business needs prior to firm orders being placed.
Inventory and supply chain management remain areas of focus as we balance the need to maintain supply chain flexibility to help ensure competitive lead times with the risk of inventory obsolescence because of supply constraints, rapidly changing technology and customer requirements. We believe the amount of our inventory and inventory purchase commitments is appropriate for our current and expected customer demand and revenue levels.
Financing Receivables and Guarantees The following table summarizes our financing receivables (in millions):
April 25,
2026 		July 26,
2025 		Increase (Decrease)
Loan receivables, net $ 5,708 $ 5,591 $ 117
Lease receivables, net 870 936 (66)
Total, net $ 6,578 $ 6,527 $ 51
Financing Receivables Our financing arrangements include loans and leases. Our loan receivables include customer financing for purchases of our hardware, software and services (including technical support and advanced services), and also may include additional funds for other costs associated with network installation and integration of our products and services. Lease receivables include sales-type leases. Arrangements related to leases are generally collateralized by a security interest in the underlying assets. Financing receivables increased by 1% as compared with the end of fiscal 2025.
Financing Guarantees In the normal course of business, third parties may provide financing arrangements to our customers and channel partners under financing programs. The financing arrangements provided by third parties are related to leases and
CISCO SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
loans and typically have terms of up to three years. In some cases, we provide guarantees to third parties for these lease and loan arrangements. The financing arrangements to channel partners consist of revolving short-term financing provided by third parties, with payment terms generally ranging from 60 to 90 days. In certain instances, these financing arrangements result in a transfer of our receivables to the third party. The receivables are derecognized upon transfer, as these transfers qualify as true sales, and we receive payments for the receivables from the third party based on our standard payment terms.
The volume of channel partner financing was $21.7 billion and $18.1 billion for the first nine months of fiscal 2026 and 2025, respectively. These financing arrangements facilitate the working capital requirements of the channel partners, and in some cases, we guarantee a portion of these arrangements. The balance of the channel partner financing subject to guarantees was $1.2 billion and $1.3 billion as of April 25, 2026 and July 26, 2025, respectively. We could be called upon to make payments under these guarantees in the event of nonpayment by the channel partners. Historically, our payments under these arrangements have been immaterial. Where we provide a guarantee, we defer the revenue associated with the channel partner financing arrangement in accordance with revenue recognition policies, or we record a liability for the fair value of the guarantees. In either case, the deferred revenue is recognized as revenue when the guarantee is removed. As of April 25, 2026, the total maximum potential future payments related to these guarantees was approximately $127 million, of which approximately $12 million was recorded as deferred revenue.
Borrowings
Senior Fixed-Rate Notes The following table summarizes the principal amount of our senior fixed-rate notes (in millions):
Maturity Date April 25,
2026 		July 26,
2025
Senior fixed-rate notes:
4.90% February 26, 2026 $ - $ 1,000
2.95% February 28, 2026 - 750
2.50% September 20, 2026 1,500 1,500
4.80% February 26, 2027 2,000 2,000
4.55% February 24, 2028 1,000 1,000
4.85% February 26, 2029 2,500 2,500
4.75% February 24, 2030 1,000 1,000
4.95% February 26, 2031 2,500 2,500
4.95% February 24, 2032 1,000 1,000
5.05% February 26, 2034 2,500 2,500
5.10% February 24, 2035 1,250 1,250
5.90% February 15, 2039 2,000 2,000
5.50% January 15, 2040 2,000 2,000
5.30% February 26, 2054 2,000 2,000
5.50% February 24, 2055 750 750
5.35% February 26, 2064 1,000 1,000
Total $ 23,000 $ 24,750
Interest is payable semiannually on each class of the senior fixed-rate notes, each of which is redeemable by us at any time, subject to a make-whole premium. We were in compliance with all debt covenants as of April 25, 2026.
Commercial Paper We have a short-term debt financing program in which up to $15.0 billion is available through the issuance of commercial paper notes. We use the proceeds from the issuance of commercial paper notes for general corporate purposes. We had $8.4 billion and $3.5 billion in commercial paper notes outstanding as of April 25, 2026 and July 26, 2025, respectively.
Credit Facility On February 2, 2024, we entered into an amended and restated 5-year $5.0 billion unsecured revolving credit agreement. The interest rate for the credit agreement is determined based on a formula using certain market rates. The credit agreement requires that we comply with certain covenants, including that we maintain an interest coverage ratio (defined in the agreement as the ratio of consolidated EBITDA to consolidated interest expense) of not less than 3.0 to 1.0. As of April 25, 2026, we were in compliance with all associated covenants and we had not borrowed any funds under our credit agreement.
CISCO SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Remaining Performance Obligations The following table presents the breakdown of remaining performance obligations (in millions):
April 25,
2026 		July 26,
2025 		Increase (Decrease)
Product $ 22,058 $ 21,572 $ 486
Services 21,404 21,961 (557)
Total $ 43,462 $ 43,533 $ (71)
Short-term RPO $ 21,818 $ 21,723 $ 95
Long-term RPO 21,644 21,810 (166)
Total $ 43,462 $ 43,533 $ (71)
Total remaining performance obligations as of April 25, 2026 were flat compared to the end of fiscal 2025. Remaining performance obligations for product increased by 2% compared to the end of fiscal 2025, of which long-term product RPO was $11.7 billion, up 2%. Remaining performance obligations for services decreased 3%.
Deferred Revenue The following table presents the breakdown of deferred revenue (in millions):
April 25,
2026 		July 26,
2025 		Increase (Decrease)
Product $ 13,461 $ 13,490 $ (29)
Services 15,138 15,289 (151)
Total $ 28,599 $ 28,779 $ (180)
Reported as:
Current $ 16,446 $ 16,416 $ 30
Noncurrent 12,153 12,363 (210)
Total $ 28,599 $ 28,779 $ (180)
Total deferred revenue decreased 1% compared to the end of fiscal 2025. Deferred product revenue was flat compared to the end of fiscal 2025. The decrease in deferred services revenue of 1% was driven by lower business volume and ongoing amortization of deferred services revenue.
Contractual Obligations
The impact of contractual obligations on our liquidity and capital resources in future periods should be analyzed in conjunction with the factors that impact our cash flows from operations discussed herein. In addition, we plan for and measure our liquidity and capital resources through an annual budgeting process. Our contractual obligations consist of operating leases, purchase commitments with contract manufacturers and suppliers, other purchase obligations, long-term debt, and other long-term liabilities. For additional information on our contractual obligations see our Annual Report on Form 10-K for the fiscal year ended July 26, 2025.
Other Commitments
In connection with our acquisitions, we have agreed to pay certain additional amounts contingent upon the continued employment with us of certain employees of the acquired entities. See Note 4 to the Consolidated Financial Statements.
Of the total carrying value of our non-marketable equity securities as of April 25, 2026, $0.9 billion of such investments are considered to be in variable interest entities which are unconsolidated. We have total funding commitments of $0.6 billion related to non-marketable equity securities. The carrying value of these investments and the additional funding commitments, collectively, represent our maximum exposure related to non-marketable equity securities. See Note 10 to the Consolidated Financial Statements.
We provide financing guarantees, which are generally for various third-party financing arrangements extended to our channel partners. We could be called upon to make payments under these guarantees in the event of nonpayment by the channel partners. See the previous discussion of these financing guarantees under "Financing Receivables and Guarantees."
CISCO SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Liquidity and Capital Resource Requirements
Based on past performance and current expectations, we believe our cash and cash equivalents, investments, cash generated from operations, and ability to access capital markets and committed credit lines will satisfy, through at least the next 12 months, our liquidity requirements, both in total and domestically, including the following: working capital needs (including inventory and other supply related payments), capital expenditures, investment requirements, stock repurchases, cash dividends, contractual obligations, commitments, principal and interest payments on debt, pending acquisitions, future customer financings, and other liquidity requirements associated with our operations. There are no other transactions, arrangements, or relationships with unconsolidated entities or other persons that are reasonably likely to materially affect the liquidity and the availability of, as well as our requirements for, capital resources.
Available Information
We intend to announce material information to the public through our Investor Relations website at https://investor.cisco.com, SEC filings, press releases, public conference calls, and public webcasts, including those made available or broadcast on our Investor Relations website and through third-party websites, such as our LinkedIn page and YouTube channel. We use these channels, as well as social media (including certain X and LinkedIn accounts held and/or managed by us or our executive officers) and our blog, to communicate with our investors, customers, and the public about us, our products and services, and other matters. It is possible that the information we post on social media and our blog could be deemed to be material information. As such, we encourage investors, the media, and others to follow the channels listed above, including the social media channels listed at the bottom of our Investor Relations website, and to review the information disclosed through such channels.
Cisco Systems Inc. published this content on May 19, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 19, 2026 at 20:39 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]