Cisco Systems CSCO · USD

Segment Information and Major Customers (a)Revenue and Gross Margin by SegmentWe conduct business globally and are primarily managed on a geographic basis consisting of three segments: the Americas, EMEA, and APJC. Our chief executive officer is the chief operating decision maker (CODM). The CODM reviews certain financial information for each segment, to evaluate performance and allocate resources by comparing actual performance to our annual targets. Performance of each segment is measured based on segment revenue and segment gross margin.We do not allocate research and development, sales and marketing, or general and administrative expenses to our segments because the CODM does not include this information in our measurement of performance of the operating segments. In addition, we do not allocate amortization and impairment of acquisition-related intangible assets, share-based compensation expense, significant litigation settlements (which includes the supplier-related legal settlement as described in Note 21) and other contingencies, charges related to asset impairments and restructurings, and certain other charges to the cost of sales and gross margin for each segment because the CODM does not include this information in the measurement of the performance of our operating segments.The following summarizes our revenue and gross margin by segment and the significant expenses by each segment for fiscal 2025, 2024, and 2023 (in millions):Years EndedJuly 26, 2025July 27, 2024July 29, 2023Revenue:Americas$33,656 $31,971 $33,447 EMEA14,824 14,117 15,135 APJC8,174 7,716 8,417 Total$56,654 $53,803 $56,998 Gross margin:Americas$22,962 $21,372 $21,350 EMEA10,545 9,755 10,016 APJC5,431 5,187 5,424 Segment total38,938 36,312 36,788 Unallocated corporate items(2,148)(1,484)(1,035)Total$36,790 $34,828 $35,753 Supplemental information about our significant expenses:Americas:Cost of sales — product$8,206 $8,077 $9,479 Cost of sales — services2,487 2,523 2,619 Segment total$10,694 $10,600 $12,097 EMEA:Cost of sales — product$3,138 $3,264 $3,998 Cost of sales — services1,140 1,098 1,121 Segment total$4,279 $4,362 $5,119 APJC:Cost of sales — product$2,010 $1,838 $2,324 Cost of sales — services734 690 668 Segment total$2,743 $2,529 $2,992 Amounts may not sum due to rounding.Revenue in the United States was $30.4 billion, $28.7 billion, and $29.9 billion for fiscal 2025, 2024, and 2023, respectively.

Revenue(a)Disaggregation of RevenueWe disaggregate our revenue into groups of similar products and services that depict the nature, amount, and timing of revenue and cash flows for our various offerings. The sales cycle, contractual obligations, customer requirements, and go-to-market strategies differ for each of our product categories, resulting in different economic risk profiles for each category.The following table presents this disaggregation of revenue (in millions):Years EndedJuly 26, 2025July 27, 2024July 29, 2023Product revenue:Networking$28,304 $29,229 $34,570 Security8,094 5,075 3,859 Collaboration4,154 4,113 4,052 Observability1,055 837 661 Total Product41,608 39,253 43,142 Services15,046 14,550 13,856 Total revenue$56,654 $53,803 $56,998 Amounts may not sum due to rounding. Networking consists of our core networking technologies of switching, routing, wireless, and servers. These technologies consist of both hardware and software offerings, including software licenses and SaaS. Our hardware and perpetual software in this category are distinct performance obligations where revenue is recognized upfront upon transfer of control. Term software licenses are multiple performance obligations where the term license is recognized upfront upon transfer of control with the associated software maintenance revenue recognized ratably over the contract term. SaaS arrangements in this category have one distinct performance obligation which is satisfied over time with revenue recognized ratably over the contract term.Security consists of our Network Security, Identity and Access Management, SASE and Threat Intelligence, Detection, and Response offerings. These products consist of both hardware and software offerings, including software licenses and SaaS. Updates and upgrades for the term software licenses are critical for our software to perform its intended commercial purpose because of the continuous need for our software to secure our customers’ network environments against frequent threats. Therefore, security software licenses are generally represented by a single distinct performance obligation with revenue recognized ratably over the contract term. Our hardware and perpetual software in this category are distinct performance obligations where revenue is recognized upfront upon transfer of control.

Commitments and Contingencies (a)Purchase Commitments with Contract Manufacturers and Suppliers 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 establish the parameters defining our requirements. A significant portion of our reported purchase commitments arising from these agreements consists of firm, noncancelable, and unconditional commitments. Certain of these inventory purchase commitments are directly with suppliers, and relate to fixed-dollar commitments to secure supply and pricing for certain product components for multi-year periods. 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. The following table summarizes our inventory purchase commitments with contract manufacturers and suppliers by period (in millions):July 26, 2025July 27, 2024Less than 1 year$7,202 $3,952 1 to 3 years320 1,085 3 to 5 years77 121 Total$7,599 $5,158 The purchase commitments with contract manufacturers and suppliers as of July 26, 2025 has been reduced to give effect to the settlement of a legal dispute with a supplier over purchase obligations arising under certain long-term supply arrangements. See Note 21.We record a liability for firm, noncancelable, and unconditional purchase commitments for quantities in excess of our future demand forecasts consistent with the valuation of our excess and obsolete inventory. As of July 26, 2025 and July 27, 2024, the liability for these purchase commitments was $206 million and $498 million, respectively, and was included in other current liabilities. (b)Other CommitmentsWe have certain funding commitments, primarily related to our privately held investments. The funding commitments were $0.3 billion and $0.2 billion as of July 26, 2025 and July 27, 2024, respectively.

Income Taxes(a)Provision for Income TaxesThe provision for income taxes consists of the following (in millions):Years EndedJuly 26, 2025July 27, 2024July 29, 2023Federal:Current$956 $1,939 $3,754 Deferred(838)(883)(1,955)118 1,056 1,799 State:Current431 388 623 Deferred(250)11 (175)181 399 448 Foreign:Current665 559 412 Deferred(44)(100)46 621 459 458 Total$920 $1,914 $2,705 Income before provision for income taxes consists of the following (in millions):Years EndedJuly 26, 2025July 27, 2024July 29, 2023United States$9,500 $10,790 $14,074 International1,600 1,444 1,244 Total$11,100 $12,234 $15,318 The items accounting for the difference between income taxes computed at the federal statutory rate and the provision for income taxes consist of the following:Years EndedJuly 26, 2025July 27, 2024July 29, 2023Federal statutory rate21.0 %21.0 %21.0 %Effect of:State taxes, net of federal tax benefit1.3 2.8 2.4 Foreign income at other than U.S. rates0.7 (0.3)(0.1)Tax credits(2.7)(2.4)(0.3)Foreign-derived intangible income deduction(6.0)(5.5)(5.8)Stock-based compensation0.7 0.7 1.1 Impact of the Tax Act(6.5)— — Other, net(0.2)(0.7)(0.6)Total8.3 %15.6 %17.7 %On August 26, 2024, the U.S. Tax Court issued an opinion in Varian Medical Systems, Inc. v. Commissioner. The opinion related to the U.S. taxation of deemed foreign dividends in the transition year of the Tax Act (our fiscal 2018). While we were not a party to the case, the opinion resulted in a change to our tax position. As such, we recorded a tax benefit of $720 million as a reduction to the provision for income taxes in fiscal 2025 due to this U.S. Tax Court opinion.During fiscal 2023, we resolved certain items with the Internal Revenue Service (IRS) related to the audit of our federal income tax returns for the fiscal years ended July 26, 2014 through July 30, 2016. As a result of this resolution, we recognized a net benefit to the provision for income taxes of $145 million, which included a reduction of interest expense of $53 million. During fiscal 2024, we resolved all remaining items with the IRS related to the audit of our federal income tax returns for the fiscal years ended July 26, 2014 through July 30, 2016. As a result of this resolution, we recognized a net benefit to the provision for income taxes of $55 million, which included a reduction of interest expense of $18 million.During the fourth quarter of fiscal 2025, we changed our assertion regarding our intent to indefinitely reinvest $6.

Leases(a)Lessee ArrangementsThe following table presents our operating lease balances (in millions):Balance Sheet Line ItemJuly 26, 2025July 27, 2024Operating lease ROU assetsOther assets$1,301 $1,066 Operating lease liabilitiesOther current liabilities$375 $364 Operating lease liabilitiesOther long-term liabilities1,175 906 Total operating lease liabilities$1,550 $1,270 The components of our lease expenses were as follows (in millions):Years EndedJuly 26, 2025July 27, 2024July 29, 2023Operating lease expense$495 $420 $425 Short-term lease expense77 75 65 Variable lease expense191 194 242 Total lease expense$763 $689 $732 Supplemental information related to our operating leases is as follows (in millions):Years EndedJuly 26, 2025July 27, 2024Cash paid for amounts included in the measurement of lease liabilities — operating cash flows $457 $394 ROU assets obtained in exchange for operating leases liabilities$660 $459 The weighted-average lease term was 5.7 years and 4.9 years as of July 26, 2025 and July 27, 2024, respectively. The weighted-average discount rate was 4.1% and 4.0% as of July 26, 2025 and July 27, 2024, respectively.The maturities of our operating leases (undiscounted) as of July 26, 2025 are as follows (in millions): Fiscal YearAmount2026$429 2027322 2028247 2029200 2030181 Thereafter369 Total lease payments1,748 Less interest(198)Total$1,550 (b)Lessor ArrangementsOur leases primarily represent sales-type leases with terms of four years on average. We provide leasing of our equipment and complementary third-party products primarily through our channel partners and distributors, for which the income arising from these leases is recognized through interest income. Interest income for fiscal 2025, 2024, and 2023 was $66 million, $65 million and $51 million, respectively, and was included in interest income in the Consolidated Statement of Operations. The net investment of our lease receivables is measured at the commencement date as the gross lease receivable, residual value less unearned income and allowance for credit loss. For additional information, see Note 9. Future minimum lease payments on our lease receivables as of July 26, 2025 are summarized as follows (in millions):Fiscal YearAmount2026$342 2027163 2028234 2029177 203034 Thereafter32 Total982 Less: Present value of lease payments883 Unearned income$99 Actual cash collections may differ from the contractual maturities due to early customer buyouts, refinancings, or defaults.

Acquisitions (a) Fiscal 2025 Acquisitions SummaryAllocation of the total purchase consideration for acquisitions we completed during fiscal 2025 is summarized as follows (in millions): Fiscal 2025Purchase ConsiderationNet Tangible Assets Acquired (Liabilities Assumed)Purchased Intangible AssetsGoodwillTotal acquisitions$293 $(21)$121 $193 The total purchase consideration of $293 million related to our acquisitions completed during fiscal 2025 consisted primarily of cash consideration. The total cash and cash equivalents acquired from these acquisitions was approximately $15 million. The purchase price allocation for acquisitions completed during fiscal 2025 is preliminary and subject to revision as additional information about fair value of assets and liabilities become available. Additional information that existed as of the acquisition date but is currently unknown to us may become known during the remainder of the measurement period, a period not to exceed 12 months from the acquisition date.(b) Fiscal 2024 Acquisitions SummaryAllocation of the total purchase consideration for acquisitions we completed during fiscal 2024 is summarized as follows (in millions):Fiscal 2024Purchase ConsiderationNet Tangible Assets Acquired (Liabilities Assumed)Purchased Intangible AssetsGoodwillSplunk$27,090 $(2,761)$10,550 $19,301 Other acquisitions1,370 (47)500 917 Total acquisitions$28,460 $(2,808)$11,050 $20,218 Acquisition of Splunk Inc.On March 18, 2024, we completed the acquisition of Splunk Inc. (“Splunk”), a public cybersecurity and observability company. Under the terms of the agreement, we agreed to pay $157 per share in cash, representing approximately $27 billion in merger consideration.

We recognize the critical importance of maintaining the trust and confidence of our customers, employees, and other stakeholders. To help mitigate the cybersecurity risks that we face, we maintain processes for identifying, assessing, and managing such risks. Our incident response functions, which include our Security and Trust Organization (“S&TO”) under the leadership of our Chief Security and Trust Officer, have established internal policies, processes, and procedures to monitor, detect, investigate, respond to, and escalate management of internal and external cybersecurity threats and incidents. We maintain policies and procedures for the escalation of cybersecurity incidents, assessed as potentially being or becoming material, to designated members of our senior management for further assessment. We also, as necessary, inform our independent registered public accounting firm of significant cybersecurity matters and any relevant developments.To help identify, assess, and mitigate cybersecurity threats that we face to our business, S&TO, in addition to its own capabilities, partners with Cisco’s Talos Threat Intelligence Group and third parties, including governments and peer companies, to share and receive threat intelligence and other information. S&TO actively monitors for and evaluates cybersecurity vulnerabilities, threats, and incidents observable on the Internet and the dark web. In addition to monitoring risks from threats to our own business, we operate third-party risk management programs to help identify and manage risks from cybersecurity threats arising from third-party suppliers and service providers on which we rely. These programs leverage on-going security-focused risk assessments based on industry practices, audits, and contractual requirements.We strive to embed security into our products and services through the Cisco Secure Development Lifecycle (CSDL). The CSDL introduces security and privacy considerations throughout the lifecycle of our products and services. In addition, S&TO advises business units and functional areas on addressing cybersecurity risks and monitors initiatives to mitigate and manage such risks over time. Our business units or functional areas are responsible for managing risks and ensuring that security policies and standards are implemented within the respective business unit or function.

Borrowings (a)Short-Term DebtThe following table summarizes our short-term debt (in millions, except percentages): July 26, 2025July 27, 2024 AmountEffective RateAmountEffective RateCurrent portion of senior notes$1,749 4.15 %$488 6.66 %Commercial paper3,482 4.37 %10,853 5.43 %Current portion of other debt1 1.13 %— — Total$5,232 $11,341 We have a short-term debt financing program of up to $15.0 billion through the issuance of commercial paper notes. We use the proceeds from the issuance of commercial paper notes for general corporate purposes.The effective rates for the short- and long-term debt include the interest on the notes, the accretion of the discount, the issuance costs, and, if applicable, adjustments related to hedging.(b)Long-Term DebtThe following table summarizes our long-term debt (in millions, except percentages): July 26, 2025July 27, 2024 Maturity DateAmountEffective RateAmountEffective RateSenior notes:Fixed-rate notes:3.50%June 15, 2025$— —$500 6.66%4.90%February 26, 20261,000 5.00%1,000 5.00%2.95%February 28, 2026750 3.01%750 3.01%2.50%September 20, 20261,500 2.55%1,500 2.55%4.80%February 26, 20272,000 4.90%2,000 4.90%4.55%February 24, 20281,000 4.61%— —4.85%February 26, 20292,500 4.91%2,500 4.91%4.75%February 24, 20301,000 4.73%— —4.95%February 26, 20312,500 5.04%2,500 5.04%4.95%February 24, 20321,000 4.94%— —5.05%February 26, 20342,500 4.97%2,500 4.97%5.10%February 24, 20351,250 5.11%— —5.90%February 15, 20392,000 6.11%2,000 6.11%5.50%January 15, 20402,000 5.67%2,000 5.67%5.30%February 26, 20542,000 5.28%2,000 5.28%5.50%February 24, 2055750 5.49%— —5.35%February 26, 20641,000 5.42%1,000 5.42%Other debt3 1.13%3 1.13%Total24,753 20,253 Unaccreted discount/issuance costs(142)(133)Hedge accounting fair value adjustments— (11)Total$24,611 $20,109 Reported as:Current portion of long-term debt$1,750 $488 Long-term debt22,861 19,621 Total$24,611 $20,109 In February 2025, we issued senior notes for an aggregate principal amount of $5.0 billion.Interest is payable semiannually on each class of the senior fixed-rate notes. Each of the senior fixed-rate notes is redeemable by us at any time, subject to a make-whole premium. The senior notes rank at par with the commercial paper notes that have been issued pursuant to our short-term debt financing program, as discussed above under “(a) Short-Term Debt.” As of July 26, 2025, we were in compliance with all debt covenants.