Cisco (CSCO) Q1 FY2026 Earnings Call Transcript

Date: November 12, 2025 | Source: Motley Fool (Motley Fool Transcribing)

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Charles Robbins (Chair and Chief Executive Officer, Cisco): We had a strong start to fiscal 2026 with Q1 revenue and earnings per share both coming in above the high end of our guidance ranges. Delivered record Q1 revenue putting Cisco on track to deliver our strongest year yet as indicated in our guidance for the full year. In Q1, total revenue increased 8% year over year with product revenue up 10% driven by robust demand for our AI infrastructure and campus networking solutions. Our strong top-line performance combined with operating efficiencies and solid execution by our teams contributed to non-GAAP EPS growth of 10% as we continue to grow earnings faster than revenue.

We delivered solid margins and cash flows allowing us to return $3 billion in capital to our shareholders through dividends and share repurchases representing 125% of free cash flow in Q1. Additionally, we generated solid growth in annualized recurring revenue and remaining performance obligations, both of which continue to provide a strong foundation for our future performance in FY 2026 and beyond.

That said, we know many customers still have a lot of work to do to ensure they have the modern, scalable, secure networking infrastructure to support their AI goals. According to our 2025 Global AI Readiness Index, only one-third of organizations feel their IT infrastructure can accommodate the needs of their planned AI projects, which creates a massive opportunity for Cisco.

Now let me comment on the strong demand we saw in Q1. Overall, total product orders grew 13% year over year with growth across all geographies and customer markets. Enterprise product orders were up 4% year over year in Q1 on top of mid-teens growth excluding Splunk a year ago with strength in our campus switching and wireless solutions. Public sector orders were up 12% year over year with growth across all geographies and cohorts, including U.S. Federal. Product orders from service provider and cloud customers continue to be very strong, up 45% year over year driven by high double-digit order growth in hyperscalers even on a tough triple-digit growth comparison from 2025. Demand from telco customers was also strong in Q1 with orders growing more than 25% year over year.

Networking product orders accelerated to high teens growth in Q1 marking the fifth consecutive quarter of double-digit growth driven by hyperscale infrastructure, enterprise routing, campus switching, wireless, industrial IoT, servers. Within our campus networking portfolio, we are seeing very strong demand for switch routing and wireless products, indicating that enterprise customers are investing in the connectivity needed for AI deployments. As early catalyst switching generations like the 4Ks and 6Ks near end of support, we see growing demand for our Cat 9Ks series. Additionally, all of our next-generation solutions, including smart switches, secure routers, and Wi-Fi 7 wireless products, are ramping faster than in prior product launches. This marks the beginning of a multi-year multibillion-dollar refresh opportunity.

We are also seeing consistent progress across our industrial IoT portfolio, including new ruggedized equipment with orders growing more than 25% year over year in Q1. We expect this demand to increase. Driven by onshoring of manufacturing to The United States, the increase of AI workloads at the network edge, and the emergence of physical AI.

AI infrastructure orders taken from in Q1 totaled $1.3 billion, balanced between Silicon One systems and optics. Marking a significant acceleration in growth demonstrating our strength for advanced AI use cases. Expect to recognize roughly $3 billion in AI infrastructure revenue from hyperscalers in fiscal year 2026. As these hyperscale customers look to extend AI clusters across their infrastructure, we see robust demand for Acacia's market-leading coherent pluggable optics offering significant cost and power savings. All hyperscalers are now customers of these products. In Q1, we also announced our latest Cisco 8223 router powered by our Silicon One P200 chip. This first-to-market 51.2 terabits per second fixed Ethernet routing system is designed for the intense AI workload traffic between data centers.

Demand for Silicon One continues to grow and we expect to ship our one millionth chip in 2026. Product orders for AI use cases beyond hyperscaler training are also gaining traction. We see a growing pipeline in excess of $2 billion for our high-performance networking products across sovereign neo cloud and enterprise customers. We recently announced an expansion of our partnership with G42 in The UAE to power, connect and secure G42's large-scale AI clusters, featuring AMD GPUs. In addition, Cisco announced an expansion of our NVIDIA partnership and our new N9100 switch based on Spectrum X silicon. We are now the first NVIDIA partner to offer networking with their cloud reference architecture. The N9100 available in 2026 will provide the operational consistency and flexibility needed for sovereign and neo cloud providers to build and manage AI at scale.

Now shifting to security. We continue to see order growth for our new and refreshed products, which comprise around one-third of our security portfolio and include secure access, XDR, HyperShield, AI Defense, and our refreshed firewalls. Nearly 3,000 customers have purchased a new product since launch. And we saw mid-teens growth in demand for our next-generation firewalls in Q1. This growth was partially offset by a decline in our prior generation platforms.

We continue to see strong performance from Splunk, closing one of our largest Splunk deals to date in Q1 enabled by joint Cisco and Splunk sales engagement. Splunk's ARR and product RPO grew double digits as we saw a notable change in how customers consume Splunk offerings in Q1. With a shift to more cloud subscriptions and fewer on-premise deals. Revenue for cloud subscriptions is recognized ratably whereas product revenue for on-prem deals is recognized on delivery. This shift negatively impacted security revenue growth in Q1, it is purely a timing issue.

Now let me comment on some of our recent innovations. As mentioned last quarter, agents are transforming network traffic from predictable bursts to persistent high-intensity loads with Agentic AI queries generating up to 25 times more network traffic than chatbots. Instead of pulling data to and from the data center, AI workloads require models and infrastructure to be closer to where data is created and decisions are made. This is why we introduced Cisco Unified Edge last week. An industry-first converged platform for the network edge integrating compute, networking, and storage into a single system. Unified Edge enables real-time inferencing for agentic and physical AI workloads so enterprises can confidently deploy and manage AI at scale. We also announced Cisco Data Fabric in September. A Splunk-powered architecture to unify and manage machine data across various sources allowing enterprises to build AI models with their previously unused proprietary data.

To summarize, we are seeing strong demand across all customer markets and geographies for their AI use cases from the data center to the edge. And our strong performance is fueling our capital allocation model returning significant value to our shareholders while positioning our business for Cisco's strongest year yet in fiscal 2026 as indicated in our guidance.

Mark Patterson (Chief Financial Officer, Cisco): Thanks, Chuck. Delivered a strong quarter to launch our new fiscal year. With revenue, operating margin, and earnings per share all above the high end of our guidance. For the quarter, total revenue was $14.9 billion, up 8% year over year. Non-GAAP net income was $4 billion, up 9%. And non-GAAP earnings per share was $1, up 10%. Demonstrating continuing operating leverage with non-GAAP earnings growing faster than revenue. Looking at our Q1 revenue in more detail, total product revenue was $11.1 billion, up 10%, and service revenue was $3.8 billion, up 2% year over year.

Networking was a standout with growth of 15% with strength across the portfolio led by high double-digit growth in service provider routing largely driven by revenue from AI infrastructure. Data center switching and enterprise routing also contributed double-digit growth and campus switching had growth in the high single digits. Security was down 2%, reflecting declines in prior generation products, and a shift to cloud subscriptions in our Splunk business that Chuck referenced. Partially offset by growth in secure firewall, Duo, and SASE. Collaboration was down 3% reflecting declines in devices and WebEx. Observability was up 6%. 13%. Primarily driven by growth in ThousandEyes.

Looking at our recurring metrics, total RPO was $42.9 billion, up 7%. Product RPO grew 10% of which the long-term portion was $11.8 billion. Total ARR ended the quarter at $31.4 billion, an increase of 5% with product ARR growth of 7%. Total subscription revenue was $8 billion and represented 54% of Cisco's total revenue. Total software revenue was up 3% to $5.7 billion. Q1 product orders were up 13% year over year. Product orders were up across all geographic segments, with The Americas up 16%, EMEA up 8%, and APJC up 13%. Product orders were also up across all customer markets. With service provider and cloud up 45%. Public sector up 12% and enterprise up 4%.

Total non-GAAP gross margin came in at 68.1%, up one hundred and twenty basis points year over year coming in slightly above the midpoint of our guidance range. Non-GAAP product gross margin was 67.2%, down 170 basis points. Driven by negative impacts from mix and pricing. Partially offset by productivity improvements. Non-GAAP services gross margin was 70.7%, up 40 basis points. We continue our focus on enhancing profitability and driving financial discipline. With non-GAAP operating margin at 34.4%. Above the high end of our guidance range. Our non-GAAP tax rate was 19% for the quarter.

We ended Q1 with total cash, cash equivalents, and investments of $15.7 billion. Operating cash flow was $3.2 billion, down 12% due to investments to meet growing customer demand for AI infrastructure. From a capital allocation perspective, we returned $3.6 billion to our shareholders during the quarter. Comprised of $1.6 billion for a quarterly cash dividend and $2 billion of share repurchases. With $12.2 billion remaining under our share repurchase program.

Turning to guidance. Please note our Q2 and fiscal year 2026 guide assumes current tariffs and exemptions remain in place through 2026. These assumptions remain unchanged from our prior guidance with the exception of the China fentanyl tariff being reduced from 20% to 10%. For fiscal Q2, our guidance is as follows. We expect revenue to be in the range of $15 billion to $15.2 billion. Anticipate non-GAAP gross margin to be in the range of 67.5% to 68.5%. Non-GAAP operating margin is expected to be in the range of 33.5% to 34.5%. Non-GAAP earnings per share is expected to range from $1.10 to $1.13. We are assuming a non-GAAP effective tax rate of approximately 19%. For fiscal year 2026, our guidance is as follows. We expect revenue to be in the range of $60.2 billion to $61 billion. Non-GAAP earnings per share is expected to range from $4.08 to $4.14. Sammy? Let's now move into the Q&A.

Questions & Answers

Aaron Rakers (Wells Fargo): Yes. Thanks for taking the question and congrats on the quarter. I guess I want to dive a little bit deeper into the AI orders. Obviously, I think that was a $3 billion number in fiscal 2026 from the web scale vertical. So maybe start there. As we think about the diversity that Cisco is seeing in the web scale opportunity, how has that evolved? And have you guys been engaged in deepening kind of super spine or even scale across opportunities in the web scale vertical? And then as a follow-up on the enterprise side, I think the number was a $2 billion pipeline. I think the slide deck says $200 million on orders this last quarter. How do we expect that to progress through this fiscal year?

Charles Robbins (Chief Executive Officer, Cisco): Thanks, Aaron. So let me just clarify the $3 billion number that we gave out was a revenue number from the hyperscale AI infrastructure in the fiscal year. The $1.3 billion were new orders that we took during the quarter from the same customers that we measured last year and it's the same products that we measured last year. So it's clear it is definitely apples to apples first and foremost. What we expect from an orders perspective this year is that we're expecting at least two times the orders that we received in fiscal year 2025 from that same set of customers. So we see a lot of solid pipeline throughout the rest of the year. We launched the P200 base router that will begin to address some of the scale across opportunities. We clearly have seen great success with our pluggable optics. All of the hyperscalers now are officially customers of our pluggable optics. We've also begun to see inferencing use cases where we're also winning there. We had four of the major hyperscalers who grew triple digits during the quarter and we had four meaningful use case wins during the quarter. One from each of those four. On the enterprise side, what we said was that the Neo Cloud Sovereign Cloud enterprise pipeline basically for the rest of our fiscal year exceeds $2 billion. We booked $200 million in Q1 and so that provides incremental opportunity for us as we look to the future.

Meta Marshall (Morgan Stanley): Great, thanks. Maybe just following up on Erin's question. Just in terms of kind of some of that strength that you're seeing, is the kind of upside that you're seeing to some of these AI orders coming from kind of scale across strength or is it just coming from deepening engagement? And then just as a follow-up question, just any commentary around DRAM pricing has certainly become more elevated, just how you guys are thinking about that in terms of the gross margin?

Charles Robbins (Chief Executive Officer, Cisco): Thanks, Meta. I would say that the scale across opportunity is emerging. And we obviously announced the 51.2 terabit router that will help us go after that opportunity. I'd say in general, most of what we saw in Q1 was just a deepening of existing use cases. We won the four new ones, but candidly, there wasn't a ton of new orders from them during the quarter. On the DRAM question, Mark, I'll pass that one to you.

Mark Patterson (Chief Financial Officer, Cisco): Yes. So I would just say across memory as well as PCB and optics, we've noticed a bit of tightening of supply. On the memory side, we've seen what you all have all seen as well and that's pretty significant price increases as well. Both of those in terms of the supply as well as the pricing though are both included and considered in our updated guide for the Q2 as well as the year.

Tal Liani (Bank of America): Hello. Great quarter. If I remove $1 billion from last year's revenues, which were the AI backend, and I removed $3 billion from the guidance for next year. The rest of the business, which is the majority, $55 billion base for last year, is only growing 3.6%. Why don't we see greater growth with what we have Wi-Fi and campus and security, why don't we see more than 3.5% growth for the rest of the business?

Charles Robbins (Chief Executive Officer, Cisco): Tal, it's a good question and you're always allowed to ask tough ones. So I'm just going to point out on the orders front for Q1 if you normalize out the hyper growth in Q1, the rest of the business grew nine from an orders perspective. So, I just that's not a data point we've given you. I want you to have it.

Mark Patterson (Chief Financial Officer, Cisco): Yes, Tal. I would say, we're ninety days into the year. We've got a very good start as you've seen in the order growth rates and the momentum that we're building. But as we get into the second half of the year, we're seeing much more difficult comps. The comps in Q1, Q2 a year ago were minus 6% and plus nine. The comps as you get into Q3 and Q4 are plus 11 and plus eight on the top line. So, much tougher comps there, but I do follow your math and that sounds about right.

Ben Reitzes (Melius Research): Hey, how are you guys doing? Hey, Chuck, I wanted to talk about one of your comments around the multiyear nature of the cycle. I know you guided for the year. So I mean, we're good with that. But can you just elaborate a little bit more on what you're seeing that gives you the confidence to talk about multiyear cycles?

Charles Robbins (Chief Executive Officer, Cisco): Yes. Thank you, Ben. I think when we look at the refresh opportunity, if you recall, we announced a new suite of products in our enterprise routing space. We announced a new WiFi seven portfolio and we announced a new suite of campus switches. And what we saw is if you think about the Cat 4Ks and the Cat 6Ks installed base that's coming to end of support, that's one factor that's driving it. We saw in as we ramp this launch of these new products, all three of those product families are ramping faster than they have in historical launches. So that leads us to believe that customers are actually aggressively moving on this. And I think the other is that it indicates that customers are still very focused on modernizing their network infrastructure in the enterprise in preparation for inferencing and AI workloads. And so but these things are always multi-year, Ben. When we launched the Catalyst 9Ks in 2017 and I mean, it that transition just kept going for five, six, seven years.

James Fish (Piper Sandler): Hey, good stuff on the networking side. I guess, how far along or what's the penetration of Silicon One into the product portfolio now? And as a standalone product, what are you guys seeing as why Silicon One is starting to gain some of that traction with the hyperscalers and what it can do the custom solutions that are being talked about as well as Broadcom's latest chips and just as a follow-up, why is it now that Splunk is starting to see some of those greater shifts to cloud at this point? And any sense of the impact it had on the security number this quarter?

Charles Robbins (Chief Executive Officer, Cisco): Yes, Jim. So on the silicon, we are we think by the fiscal '29, so we think in another two point five years, we'll have that fully rolled we'll have Silicon One fully rolled across the entire portfolio. So that's the intent. It's in some of our data center switching products going to enterprise. It's obviously in the hyperscaler products. And I think it's a combination of performance, programmability, and low power consumption. And they really enjoy and I think the other thing is that they just they enjoy having multiple sources and custom engagements that we have with them to really look at their unique requirements for each. On the Splunk side, we just saw a pretty meaningful mix shift during the quarter to cloud. I think the prior quarter it was somewhere roughly fifty-fifty and I think it was down to the on-prem was only about a third of the revenue. So we expected more of a fifty-fifty kind of mix because that's what we had seen. And at the end of the day, it's actually quite positive, as I said, because it allows us to drive adoption with our customers expansion as well as deliver innovation real time because it's cloud tethered.

David Vogt (UBS): Great. Thanks, guys, for taking my questions. One, maybe Chuck to start, just to pivot to campus, I think in the deck in your prepared remarks, talked about the next-gen solutions ramping faster than prior product launches. You kind of give us a sense for like what's driving that? Is it a competitive is it just better for competitive products? Are you seeing disruption from some of the smaller players? And then along those lines, maybe when you think about sort of the campus market, I do know you mentioned in the prepared remarks, there's a lot of end-of-life product out there. How do you think about that as it relates to sort of some of those customers, I think, government customers, if not public sector customers?

Charles Robbins (Chief Executive Officer, Cisco): Yes. Thank you, David. I'd say on the campus, it's a lot of what I said before. I think it's the end of the Cat 4K, Cat 6K, older Wi-Fi. And so we see in this early days of it, we see slightly faster adoption than we've seen historically with these launches. As it relates to number two and number three, there's clearly been some confusion in the marketplace, particularly around Wi-Fi. We've been talking about that for several quarters. And so I think that's been positive for us. As it relates to the government, we were pleased last quarter that our U.S. Federal business despite the shutdown grew high single digits. As it relates to the end of support stuff that happens to be particularly in the federal government, there is a lot of discussion and a lot of pressure beginning to build on ensuring that equipment gets updated just from a cyber risk perspective and a hygiene perspective.

Samik Chatterjee (JPMorgan): Hi. Thanks for taking my questions. Chuck, maybe both questions on the AI front itself. Firstly, Optical, you talked about the strong growth you're seeing in Acacia. Could you just talk about Optical more broadly in terms of the demand you're seeing inside the data center versus outside the data center in terms of pull through from scale across, etcetera? And then for the follow-up, I heard you say twice the number of orders in terms of AI orders from the same customer group in fiscal 2026. And the sovereign customers, it looks like you are progressing on the engagement, but haven't seen orders as much yet. I just want to clarify that the sovereigns aren't included as those orders come through in that sort of number that you're highlighting for orders?

Charles Robbins (Chief Executive Officer, Cisco): Yes, Samik, thank you. On the optics side of AI, we're participating in both. We're blessed to have great solutions in both inside the data center and then outside the data center DCI scale across. As I said, we now are selling our pluggable optics to all of the hyperscalers, all the major hyperscalers. On the order front, yes, what my comment was is that we expect this year that we would be at least 2x the orders that we saw from the hyperscale customers last year and that's the same products that we measured last year and the same customers that we measured last year. On the Neo Cloud, Sovereign Cloud enterprise, there's that upside where I said we had $2 billion plus of pipeline for the balance of the year, none of that is included in that 2x number that I quoted. So you had that exactly right.

Michael Ng (Goldman Sachs): Hey, good afternoon. Thanks for the question. I just have two. First, the G42 partnership, looked like it was a full rack solution using AMD chips. I was just wondering if you have some sort of kind of preferred partnership with AMD. Should we see more of that as we head out through the year? And how important is that combination of compute and networking as rack solutions potentially get more important? And then second, I wanted to ask about some of the channel partner program changes that are supposed to kick off next year. Any feedback or comments just on the drivers of that change?

Charles Robbins (Chief Executive Officer, Cisco): Yes. Thanks, Michael. On the G42 partnership, we're really pleased. You're right, the first announcement is with AMD. And I would say what we believe is that there are going to be multiple GPU providers particularly in the world of inferencing. What we want to do is participate as a connectivity layer across as many of those as we possibly can. We've been very close with them on the G42 opportunity and we continue to talk to them about other opportunities that are occurring around the world. On the partner program, I think what this really is, is it's a recognition of growth opportunities ahead of us and how do we align our programs so that our teams are incented and our partner teams are incented in the same way to go after these growth opportunities that we see in the future.

Amit Daryanani (Evercore ISI): Thanks a lot for taking my question. I have two as well. I guess, first, on the $3 billion of AI sales in fiscal 2026 that you folks talked about, there way to think about how much of that do you think is optics versus systems? And do you see the overall margin of AI really being comparable to the corporate averages? That's the first one. The second one, Chuck, security revenue was down 2%. I thought I'd hold you on the legacy pressure and the mix shift that you've also had on the cloud side. You just talk about what do you think normalized security growth could look like once this mix stabilizes? I'm sort of square that against the prior guide of mid-teens you've had on the security side.

Charles Robbins (Chief Executive Officer, Cisco): Yes. I'm going to let Mark take the revenue and the margin one then I'll come back to security one. On the security front at negative 2%, we still are committed to the mid-teens long-term guide on revenue for security. We think that it will continue to accelerate through the year. And it will come out of the year at a much higher rate. And then I think the normalization of this sort of mix shift is probably going take us four quarters to get to where the year over year comparisons are sort of apples to apples on the mix side. The other thing I would tell you is that we don't need security to materially improve from here. To hit the guide for Q2 or the year that we've given you. We sort of baked that in.

Karl Ackerman (BNP Paribas): Yes, thank you. I have two as well. For my first question, I guess, Chuck, how much of the incremental $1 billion in revenue in fiscal 2026 is coming from an earlier than expected enterprise campus refresh? Versus AI growth? And then separately for my follow-up, maybe for Mark, have you been able to secure enough capacity are you constrained in any way from fulfilling a doubling of AI orders among hyperscale customers this year?

Charles Robbins (Chief Executive Officer, Cisco): On the first one, I think you're referring to the incremental $1 billion being the increase in our guide from last time on the year. And I'd say it's a combination of those two things. I mean, you look at the hyperscale growth in of orders is certainly going to be meaningful. But when you look at the larger business that we're talking about that was orders were up 9% in Q1, I think it'd be a mix.

Mark Patterson (Chief Financial Officer, Cisco): Yes. As far as whether we've been able to secure sort of the capacity and the supply, if you just look at, we always think the best measure is to look at sort of inventory plus advanced purchase commitments on a combined basis. If you look at that for the quarter, just in the last ninety days we're up almost $1 billion and year over year we're up 38% about $3 billion plus. So we are making those advanced purchase commitments and making sure that we can secure the supply and the inventory that we need meet the accelerating demand that we're seeing in hyperscale.

Antoine Chkaiban (New Street Research): Hi, thank you very much for taking my question. I'd love to follow-up about the Cisco Unified Edge. How large do you think that opportunity can be relative to the large scale multi-gigawatt cloud data centers. And you mentioned use cases in retail, healthcare, manufacturing, if you can double click on each of them. And what's the preferred deployment strategy for Edge AI compute? And maybe as follow-up, is Cisco planning to participate to the scale-up opportunity? And will that be material? And what partnerships would you be forming to do that?

Charles Robbins (Chief Executive Officer, Cisco): Antoine. So yes, the Unified Edge product is something we're really excited about. When you're really trying to do real-time inferencing in a retail environment when a customer is there and you're trying to gain very critical information at that moment in time, you're gonna have to push that inferencing to the edge and you can't send the data back and forth to a data center. So we think this unified edge over time is going to have huge applicability retail, restaurant chains, healthcare, and it's a unique thing that we can put together because we own all of those technologies. From a deployment strategy perspective, I'd say it's all of the above. You could see CDN players, I think it is something that hopefully the carriers and the telcos who have these distributed POPs that are very close to these customers can offer this as a consumption service. I think customers will also choose to put it on-prem. On the scale-up opportunity, if you look at the slide that we had in our prepared notes on our Silicon One roadmaps, we did have a scale-up silicon offering on the right side of that slide. So we have talked a bit about our future ability to participate in a scale-up. We do believe that's going to a version of Ethernet. And it's our intent to play in that market. So you should expect to see something from us over time. For sure.

Simon Leopold (Raymond James): Thanks for taking the question. I've got the two as well. One is I want to understand what's sort of motivating the customers in campus refresh and where I'm coming from is we had the sort of backlog flush after the pandemic, so 2023 was a phenomenal year for your campus business. And so I assume the embedded base is relatively young. So help me understand sort of the motivation or why you're succeeding here. And the second question is, we've heard that other governments, international governments, state and local governments have picked up more of the slack with the federal challenges you saw earlier this year. Could you unpack what you're seeing particularly on the international governments?

Charles Robbins (Chief Executive Officer, Cisco): Yes, Simon. So on the campus side, I think the reality is that I think the size of that installed base and how much of it was actually flushed in 2023 is probably over I mean, was a big move granted. But if you look at the amount of end-of-support equipment that teams have identified, it's billions and billions and billions of dollars of installed base that is pre-Cat 9Ks. So, not only it didn't get upgraded to Cat 9Ks, didn't get upgraded into 2023 push. So all of that is still out there and I think that's part of what we're seeing. On the other government's front, we see dynamics in Europe where from a defense perspective and from a geopolitical perspective, we see lots of happening in public sector in Europe. We see it in The U.K., in Germany. We obviously saw U.S. Federal growing strongly even though it was closed. But public sector globally has been strong for several quarters in a row.

Ben Bohlen (Cleveland Research): Afternoon, everyone. Thanks for getting me in. Bigger picture question for you. Chuck. When you look at the current AI build-out, how do you think about this relative to the late 90s with respect to the Internet build-out? And interested in your thoughts and durability, sustainability, integrity, just how you're contemplating and thinking about all these orders and the optionality going forward?

Charles Robbins (Chief Executive Officer, Cisco): Yes. Thanks, Ben. I think this is a common question that we get particularly since we lived through it. I think there's a few differences. I think that the speed at which this transition is moving is even faster than what it was I think, at the turn of the century. And in the .com days. I also think that the companies that are investing in this are massive strong balance sheet, strong cash flow profitable companies. And a lot of the spend is coming from companies that are incredibly strong. Who view this as existential. There's clearly gonna be winners and losers, but I think there's such a concentration of spend from highly profitable strong balance sheet, strong cash flow companies. I think that's a big difference. And I think the pace at which this is moving is meaningfully different. So it's an area we're really excited about.

Charles Robbins (Chief Executive Officer, Cisco): Yeah. Let me just start by saying how proud I am of our team. How hard they've worked to get to these results. I think the innovation that our teams are delivering is at an all-time high. I think the last twelve to eighteen months, the real emergence of the importance of the network in this AI wave is very clear. And that's what we do best. We have momentum with a high. We see the growing opportunity across enterprise, sovereign and neo cloud. Got this multi-year multibillion-dollar network refresh opportunity. And again, with what I think is an unmatched innovation pipeline, as well as an acceleration of our global partnerships and it really does position us for the strongest fiscal year we've ever had. So, have a lot of confidence. Have a lot of excitement. And I want to just once more thank the teams for everything that they do.

Sami Badri (VP, Head of Investor Relations, Cisco): Thank you, Chuck. Cisco's next quarterly calls, which will outline second quarter fiscal year 2026 results will be on Wednesday, 02/11/2026 at 01:30 PM Pacific Time, 04:30 PM Eastern Time. This concludes today's call.