10-K – 2025-09-03 – csco-20250726.htm

accessed (collectively, our “IT environment”). We anticipate continuing to be increasingly subject to such attempts as cyber attacks become more sophisticated and difficult to predict and protect against. Furthermore, the emergence and maturation of AI capabilities has led to new and/or more effective methods of cyber attacks. Despite our active implementation of security and other measures, our solutions and IT environment have been, and continue to be, vulnerable to cyber attacks, incidents, data breaches, malware, inadvertent error, disruptions, failures, physical security breaches, tampering or other theft or misuse, including by employees, contingent workers, and malicious actors. Additionally, nation-state actors or their agents have in the past successfully attacked our IT environment and have also exploited vulnerabilities in our solutions to carry out attacks, and we anticipate that these attacks and the exploitation of vulnerabilities in our solutions will continue and may intensify during periods of diplomatic or armed conflict or other geopolitical tensions. Further, a cyber attack, vulnerability exploitation, or other incident could go undetected and persist in our environments, or those of our customers or third-party providers upon which we rely, for extended periods. Cyber-related events have caused, and in the future could result in, compromise to, or the disruption of access to, the operation of our solutions and IT environment or those of our customers or third-party providers upon which we rely, or result in confidential information stored on our systems or our customers’ or other third-party systems being improperly accessed, processed, disclosed now (or in the future), or being lost or stolen. Efforts to limit the ability of malicious actors to disrupt the operations of the Internet or undermine our security efforts are costly to implement and may not be successful. Breaches of security in our IT environment, our customers’ or third-party providers’ networks, or in third-party products we use, regardless of whether the breach is attributable to a vulnerability in our solutions, a failure by us to timely mitigate or apply a security fix for products we use that are found vulnerable, or a failure to maintain the digital security infrastructure or security tools that protect the integrity of our solutions and IT environment, could, in each case, result in claims of legal and/or regulatory action against us, damage our reputation or otherwise materially harm our business. The occurrence of a cyber attack, data breach or other incident could subject us to direct or indirect liability to our customers, data subjects, suppliers, business partners, employees, and others, give rise to legal and/or regulatory action, could damage our reputation or could otherwise negatively impact our business, any of which could materially harm our business, operating results, and financial condition.
Vulnerabilities and critical security defects, prioritization decisions regarding remedying vulnerabilities or security defects, failure of third-party providers to remedy vulnerabilities or security defects, or customers not deploying security updates in a timely manner or deciding not to upgrade our solutions to those with security updates or security enhancements applied could result in claims of liability against us, damage our reputation, or otherwise materially harm our business.
The products and services (together, our “solutions”) we sell to customers, and the cloud-based services operated or enabled by us, or by third parties upon which we rely, inevitably contain vulnerabilities or security defects (despite our efforts to prevent and detect them through secure development lifecycle practices, testing, or other means), which have not been remedied or cannot be disclosed without compromising security. We also make prioritization decisions in determining which vulnerabilities or security defects to fix and the timing of these fixes. Even when we prioritize a vulnerability or security defect, in certain instances it has taken, and in the future could take, time for us to develop and test a remedy and the remedy may ultimately be insufficient to fully fix the issue or may be found to create other issues. In addition, workarounds or other mitigation efforts in certain instances have not been, and in the future may not be, available or sufficient to protect customers prior to a security update being made available. Vulnerabilities can persist even after we have issued security updates if we have not identified and addressed the root cause of a particular vulnerability, if customers have not installed the most recent updates, if the attackers exploited the vulnerabilities before a security update is applied (such as to install additional malware to further compromise customers’ systems), or if a previously patched vulnerability is inadvertently reintroduced due to a security regression during future development or a changed deployment. Additionally, customers may also desire to test security updates before they can be deployed which can delay implementation. When customers do not deploy security updates in a timely manner, use solutions that are end of life and no longer receive security updates, decide not to upgrade to the latest versions of our solutions containing security updates or security enhancements, configure our solutions in insecure ways, or fail to sufficiently monitor activity on those solutions, they are left vulnerable. In addition, we rely on third-party providers of software (including open source) and cloud-based services on which our and third-party data is stored or processed, and we cannot control the timing at which third-party providers remedy vulnerabilities, which could leave us vulnerable. Failure to comply with internal security policies and standards, including secure development lifecycle practices, failure to prevent or promptly mitigate vulnerabilities and security defects, prioritization errors in remedying vulnerabilities or security defects, failure of third-party providers to remedy vulnerabilities or security defects, or customers not deploying security updates in a timely manner, deciding not to upgrade solutions, or configuring our solutions in insecure ways could, in each case, result in claims of legal and/or regulatory action against us, damage our reputation, or otherwise materially harm our business.
Our actual or perceived failure to adequately protect and appropriately use data could result in claims of legal and/or regulatory action against us, damage our reputation, or otherwise materially harm our business.
Global privacy and data protection-related laws and regulations, including cybersecurity laws, are evolving, extensive, and complex. Compliance with these laws and regulations is difficult and costly. In addition, evolving legal requirements restricting
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or controlling the collection, processing, use or cross-border transmission of data, including regulation of cloud-based services, could materially affect our customers’ ability to use, and our ability to sell, our products and services. The interpretation and application of these laws in some instances is uncertain, and our legal and regulatory obligations are subject to frequent changes. For example, the European Union’s (“EU”) General Data Protection Regulation (“GDPR”) applies to our activities conducted from an establishment in the EU or related to products and services offered in the EU and imposes a range of compliance obligations regarding the handling of personal data for both ourselves and our customers. Additionally, we are subject to California’s Consumer Privacy Act, Singapore’s Personal Data Protection Act, and other laws, regulations, and obligations around the world that govern the handling of personal data. Our actual or perceived failure to comply with applicable laws and regulations or other obligations relating to the use of data and protecting data from unauthorized access, use, or other processing, could subject us to claims of liability, or give rise to legal and/or regulatory action, damage our reputation, and/ or otherwise negatively impact our business, any of which could materially harm our operating results and financial condition.
Our business, operating results, and financial condition could be materially harmed by evolving regulatory uncertainty or obligations applicable to our products and services.
Changes in regulatory requirements applicable to the industries and sectors in which we operate, in the United States and in other countries, could materially affect the sales and use of our products and services. In particular, economic sanctions and changes to export and import control requirements have impacted and may continue to impact our ability to sell and support our products and services in certain jurisdictions. In addition, changes in telecommunications regulations could impact our service provider customers’ purchase of our products and services, and they could also impact sales of our own regulated offerings. Government and other customers' procurement policies, priorities, regulations, technology initiatives and/or other obligations often give rise to evolving privacy, cybersecurity, operational resilience, data governance, or other requirements; the failure or delay in meeting and maintaining compliance with such requirements could negatively impact our business, including by limiting our ability to sell products and services, directly or indirectly, to public sector, critical infrastructure, and other customers. Additional areas of uncertainty that could impact sales of our products and services include laws, regulations, or customer procurement requirements related to encryption technology, data, AI, privacy, cybersecurity, operational resilience, environmental sustainability (including climate change), human rights, product certification, product and digital accessibility, country of origin, and national security and other security controls applicable to our offerings and supply chain. Changes in regulatory requirements or our actual or perceived failure to comply (or to enable our customers to comply when using our offerings) with applicable laws, regulations, or other obligations could materially harm our business, operating results, and financial condition.
Risks Related to Ownership of Our Stock
Our stock price may be volatile.
Historically, our common stock has experienced substantial price volatility, particularly as a result of variations between our actual financial results and the published expectations of analysts and as a result of announcements by our competitors and us. Furthermore, speculation in the press or investment community about our strategic position, financial condition, results of operations, business, security of our products, or significant transactions can cause changes in our stock price. In addition, the stock market has experienced extreme price and volume fluctuations that have affected the market price of many technology companies, in particular, and that have often been unrelated to the operating performance of these companies. These factors, as well as general economic and political conditions and the announcement of proposed and completed acquisitions or other significant transactions, or any difficulties associated with such transactions, by us or our current or potential competitors, may materially harm the market price of our common stock in the future. Additionally, volatility, lack of positive performance in our stock price or changes to our overall compensation program, including our stock incentive program, may negatively impact our ability to retain key employees, virtually all of whom are compensated, in part, based on the performance of our stock price.

Item 1B. Unresolved Staff Comments

None.
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Item 1C. Cybersecurity

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. S&TO also conducts mandatory cybersecurity training for our employees and provides employees with tools to report suspected incidents.
S&TO engages third parties in connection with our cybersecurity risk management processes, including cybersecurity consultants and auditors, to conduct evaluations of our IT security controls and provide certifications for industry-standard security frameworks. In addition, we maintain a global privacy program to assess and manage privacy risks related to how we are collecting, using, sharing, and storing personal data, which is subject to assessment by an independent, third-party privacy assessor.
Our Chief Security and Trust Officer , who reports to our Executive Vice President, Operations, works collaboratively across our business to implement policies and procedures designed to protect our IT environment and our products and services from cybersecurity threats, and to promptly respond to cybersecurity incidents in accordance with our incident response policies and procedures. Our Chief Security and Trust Officer has extensive cybersecurity experience and has served in various roles in information technology and information security for over 25 years.
The Chief Security and Trust Officer provides regular reports on the status of cybersecurity risks, priorities, and focus areas to our executive leadership team. In addition, information on cybersecurity risks is further integrated into our broader enterprise risk management program through our internal audit function, which incorporates such information in regular audits of our cybersecurity and data protection controls and processes.
Our Board of Directors oversees risks related to cybersecurity threats to our business directly and through its Audit Committee. The Audit Committee receives regular reports on cybersecurity risks, priorities, and focus areas from our Chief Security and Trust Officer at least four times a year and receives a live presentation at least twice a year. Our Board of Directors also regularly receives updates from the Audit Committee on its oversight activities and, on occasion, receives updates directly from our Chief Security and Trust Officer. Additionally, the Chief Security and Trust Officer provides more frequent updates to the Board of Directors and Audit Committee if necessary due to a cybersecurity threat, incident, or other development.
As of the date of this Annual Report on Form 10-K, we do not believe our business, operating results, or financial condition have been materially affected by cybersecurity risks, including as a result of previously identified cybersecurity incidents . For more information on our cybersecurity related risks, see “Item 1A. Risk Factors” of this Annual Report on Form 10-K.

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Item 2. Properties

Our corporate headquarters are located at an owned site in San Jose, California, in the United States of America. The locations of our headquarters by geographic segment are as follows:

Americas EMEA APJC
San Jose, California, USA Amsterdam, Netherlands Singapore

In addition to our headquarters site, we own additional sites in the United States, which include facilities in the surrounding areas of San Jose, California; Research Triangle Park, North Carolina; and Richardson, Texas. In addition, we lease office space in many U.S. locations.
Outside the United States our operations are conducted primarily in leased sites. Other significant sites (in addition to the two non-U.S. headquarters locations) are located in Australia, Belgium, Canada, China, Germany, India, Israel, Norway, Poland, and the United Kingdom.
We believe that our existing facilities, including both owned and leased, are in good condition and suitable for the conduct of our business.

Item 3. Legal Proceedings

For a description of pending legal proceedings in which we are involved, see Note 14 “Commitments and Contingencies - (f) Legal Proceedings” of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K, which is incorporated herein by reference.

Item 4. Mine Safety Disclosures

Not applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities

(a) Cisco common stock is traded on the Nasdaq Global Select Market under the symbol CSCO. There were 30,790 registered stockholders as of August 28, 2025.
(b) None.
(c) Issuer purchases of equity securities (in millions, except per-share amounts):

Period Total
Number of
Shares
Purchased Average Price Paid
per Share  Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs
Approximate Dollar Value of Shares
That May Yet Be Purchased
Under the Plans or Programs
April 27, 2025 to May 24, 2025 7  $ 60.71  7  $ 15,023 
May 25, 2025 to June 21, 2025 5  $ 64.63  5  $ 14,659 
June 22, 2025 to July 26, 2025 7  $ 68.36  7  $ 14,174 
Total 19  $ 64.65  19 

On September 13, 2001, we announced that our Board of Directors had authorized a stock repurchase program. As of July 26, 2025, the remaining authorized amount for stock repurchases under this program is approximately $14.2 billion with no termination date.
For the majority of restricted stock units granted, the number of shares issued on the date the restricted stock units vest is net of shares withheld to meet applicable tax withholding requirements. Although these withheld shares are not issued or considered common stock repurchases under our stock repurchase program and therefore are not included in the preceding table, they are treated as common stock repurchases in our financial statements as they reduce the number of shares that would have been issued upon vesting (see Note 15 to the Consolidated Financial Statements).
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Stock Performance Graph
The information contained in this Stock Performance Graph section shall not be deemed to be “soliciting material” or “filed” or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), except to the extent that Cisco specifically incorporates it by reference into a document filed under the Securities Act of 1933, as amended, or the Exchange Act.
The following graph shows a five-year comparison of the cumulative total stockholder return on Cisco common stock with the cumulative total returns of the S&P 500 Index, and the S&P Information Technology Index. The graph tracks the performance of a $100 investment in the Company’s common stock and in each of the indexes (with the reinvestment of all dividends) on the date specified. Stockholder returns over the indicated period are based on historical data and should not be considered indicative of future stockholder returns.
Comparison of 5-Year Cumulative Total Return Among Cisco Systems, Inc.,
the S&P 500 Index, and the S&P Information Technology Index

July 2020 July 2021 July 2022 July 2023 July 2024 July 2025
Cisco Systems, Inc. $ 100.00  $ 123.13  $ 103.83  $ 123.09  $ 116.78  $ 172.19 
S&P 500 $ 100.00  $ 108.39  $ 150.48  $ 143.50  $ 161.94  $ 232.22 
S&P Information Technology $ 100.00  $ 147.03  $ 138.92  $ 176.00  $ 235.11  $ 292.59 

Item 6. [Reserved]

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements
This Annual Report on Form 10-K, 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 under “Part I, 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 Years Ended
July 26, 2025 July 27, 2024 Variance July 26, 2025 July 27, 2024 Variance
Revenue $ 14,673   $ 13,642  8  % $ 56,654   $ 53,803  5  %
Gross margin percentage 63.2   % 64.4  % (1.2) pts 64.9   % 64.7  % 0.2  pts
Research and development $ 2,380   $ 2,179  9  % $ 9,300   $ 7,983  16  %
Sales and marketing $ 2,818   $ 2,841  (1) % $ 10,966   $ 10,364  6  %
General and administrative $ 706   $ 763  (8) % $ 2,992   $ 2,813  6  %
Total R&D, sales and marketing, general and administrative $ 5,904   $ 5,783  2  % $ 23,258   $ 21,160  10  %
Total as a percentage of revenue 40.2   % 42.4  % (2.2) pts 41.1   % 39.3  % 1.8  pts 
Restructuring and other charges included in operating expenses $ 35   $ 112  (69) % $ 744   $ 789  (6) %
Operating income as a percentage of revenue 21.0   % 19.2  % 1.8  pts 20.8   % 22.6  % (1.8) pts
Interest and other income (loss), net $ (88) $ (222) (60) % $ (660) $ 53  NM
Income tax percentage 15.0   % 9.8  % 5.2  pts 8.3   % 15.6  % (7.3) pts
Net income $ 2,550   $ 2,162  18  % $ 10,180   $ 10,320  (1) %
Net income as a percentage of revenue 17.4   % 15.8  % 1.6  pts 18.0   % 19.2  % (1.2) pts
Earnings per share—diluted $ 0.64   $ 0.54  19  % $ 2.55   $ 2.54  —  %

Percentages may not recalculate due to rounding.
NM — Not meaningful

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CISCO SYSTEMS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Fiscal 2025 Compared with Fiscal 2024
In fiscal 2025, we delivered strong revenue growth across all geographies and solid margins as we saw a positive demand environment. Total revenue increased by 5% compared with fiscal 2024. Our results for fiscal 2025 include a full year of Splunk's results compared to approximately four months for fiscal 2024. Within total revenue, product revenue increased by 6% and services revenue increased by 3%. In fiscal 2025, total software revenue was $22.3 billion, an increase of 21%, driven by the contribution of Splunk. Total subscription revenue increased 15%, driven by the contribution of Splunk.
Total gross margin increased by 0.2 percentage points. Product gross margin increased by 0.2 percentage points, driven by benefits from Splunk and productivity improvements, partially offset by negative impacts from pricing, a charge as a result of a legal dispute with a supplier, and the amortization of purchased intangible assets primarily related to Splunk. As a percentage of revenue, research and development, sales and marketing, and general and administrative expenses, collectively, increased by 1.8 percentage points. Operating income as a percentage of revenue decreased by 1.8 percentage points primarily due to increases in amortization of purchased intangible assets and share-based compensation expense in fiscal 2025, and a charge in the fourth quarter of fiscal 2025 as a result of a legal dispute with a supplier. Diluted earnings per share was flat compared with fiscal 2024.
In terms of our geographic segments, revenue from the Americas increased by $1.7 billion, EMEA revenue increased by $0.7 billion and revenue in our APJC segment increased by $0.5 billion. From a customer market perspective, product revenue growth was led by the enterprise market and the service provider and cloud market. The revenue increase in our service provider and cloud market was driven by AI infrastructure revenue from webscale customers. From a product category perspective, the product revenue increased 6% year over year, driven by a growth in revenue in Security of 59%, Observability of 26%, and Collaboration of 1%, partially offset by a decline in Networking of 3%. The product revenue growth in Security and Observability were each driven in large part by the contribution of Splunk.
We continue to operate in a highly competitive environment, and one that is complex especially with respect to tariffs and trade policy. We plan to 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. We believe that we are making progress on our strategic priorities.
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CISCO SYSTEMS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Fourth Quarter Snapshot
For the fourth quarter of fiscal 2025, as compared with the fourth quarter of fiscal 2024, total revenue increased by 8%. Within total revenue, product revenue increased by 10% and services revenue was flat. With regard to our geographic segment performance, on a year-over-year basis, revenue in Americas increased by 9%, EMEA increased by 4% and APJC increased by 7%. From a product category perspective, we experienced product revenue growth in Networking, Security, Observability, and Collaboration . Total gross margin decreased by 1.2 percentage point s, driven primarily by a charge as a result of a legal dispute with a supplier. As a percentage of revenue, research and development, sales and marketing, and general and administrative expenses, collectively, decreased by 2.2 percentage points. Operating income as a percentage of revenue increased by 1.8 percentage points primarily driven by lower amortization of purchased intangible assets, lower restructuring and other charges, and a decrease in cash compensation expenses from acquisitions, partially offset by a charge as a result of a legal dispute with a supplier. Diluted earnings per share increased by 19%, primarily driven by the revenue increase and the increase in our operating margin percentage.
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 a full discussion of our strategy and priorities, see “Item 1. Business.”
Other Key Financial Measures
The following is a summary of our other key financial measures for fiscal 2025 compared with fiscal 2024 (in millions):

Fiscal 2025 Fiscal 2024
Cash and cash equivalents and investments $16,110 $17,854
Cash provided by operating activities $14,193 $10,880
Remaining performance obligations $43,533 $41,048
Repurchases of common stock—stock repurchase program $5,995 $5,764
Dividends paid $6,437 $6,384
Inventories $3,164 $3,373
Total debt $28,093 $30,962

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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 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.
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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 $493 million, $819 million, and $730 million in fiscal 2025, 2024, and 2023, 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” under Item 7 of this report.
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 fiscal 2025, 2024, and 2023. For the annual impairment testing in fiscal 2025, the excess of the fair value over the carrying value for each of our reporting units was $56.5 billion for the Americas, $80.1 billion for EMEA, and $32.9 billion for APJC.
During the fourth quarter of fiscal 2025, we performed a sensitivity analysis for goodwill impairment with respect to each of our respective reporting units and determined that a hypothetical 10% decline in the fair value of each reporting unit would not result in an impairment of goodwill for any reporting unit.
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
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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 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 8.3%, 15.6%, and 17.7% in fiscal 2025, 2024, and 2023, 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 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 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.

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RESULTS OF OPERATIONS
Subsequent to the issuance of our earnings release on August 13, 2025, we settled a legal dispute with a supplier, resulting in a GAAP charge to product cost of sales, which is described in Note 21 to the Consolidated Financial Statements. The information in this Annual Report on Form 10-K supersedes the information contained in our earnings release.
A discussion regarding our financial condition and results of operations for fiscal 2025 compared to fiscal 2024 is presented below. A discussion regarding our financial condition and results of operations for fiscal 2024 compared to fiscal 2023 can be found under Item 7 in our Annual Report on Form 10-K for the fiscal year ended July 27, 2024, filed with the SEC on September 5, 2024.
Revenue
The following table presents the breakdown of revenue between product and services (in millions, except percentages):

Years Ended 2025 vs. 2024
July 26, 2025 July 27, 2024 July 29, 2023 Variance in Dollars Variance in Percent
Revenue:
Product $ 41,608   $ 39,253  $ 43,142  $ 2,355  6  %
Percentage of revenue 73.4   % 73.0  % 75.7  %    
Services 15,046   14,550  13,856  496  3  %
Percentage of revenue 26.6   % 27.0  % 24.3  %    
Total $ 56,654   $ 53,803  $ 56,998  $ 2,851  5  %

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):

Years Ended 2025 vs. 2024
July 26, 2025 July 27, 2024 July 29, 2023 Variance in Dollars Variance in Percent
Revenue:        
Americas $ 33,656   $ 31,971  $ 33,447  $ 1,685  5  %
Percentage of revenue 59.4   % 59.4  % 58.7  %    
EMEA 14,824   14,117  15,135  707  5  %
Percentage of revenue 26.2   % 26.2  % 26.6  %    
APJC 8,174   7,716  8,417  458  6  %
Percentage of revenue 14.4   % 14.3  % 14.8  %    
Total $ 56,654   $ 53,803  $ 56,998  $ 2,851  5  %

Amounts may not sum and percentages may not recalculate due to rounding.
Total revenue in fiscal 2025 increased by 5% compared with fiscal 2024. Product revenue increased by 6% and services revenue increased by 3%. 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.

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Product Revenue by Segment
The following table presents the breakdown of product revenue by segment (in millions, except percentages):

Years Ended 2025 vs. 2024
July 26, 2025 July 27, 2024 July 29, 2023 Variance in Dollars Variance in Percent
Product revenue:          
Americas $ 24,637   $ 23,142  $ 25,019  $ 1,495  6  %
Percentage of product revenue 59.2   % 59.0  % 58.0  %    
EMEA 11,122   10,645  11,866  477  4  %
Percentage of product revenue 26.7   % 27.1  % 27.5  %    
APJC 5,849   5,466  6,257  383  7  %
Percentage of product revenue 14.1   % 13.9  % 14.5  %    
Total $ 41,608   $ 39,253  $ 43,142  $ 2,355  6  %

Amounts may not sum and percentages may not recalculate due to rounding.
Americas
Product revenue in the Americas segment increased by 6%, with growth in the enterprise market and the service provider and cloud market. The growth in the service provider and cloud market was driven by AI infrastructure revenue from webscale customers. These increases were partially offset by a decline in the public sector market. From a country perspective, product revenue increased in the United States, Canada, and Brazil by 7%, 4%, and 8%, respectively.
EMEA
Product revenue in the EMEA segment increased by 4%, driven by growth in the public sector and enterprise markets, partially offset by a slight decline in the service provider and cloud market. From a country perspective, product revenue increased in the United Kingdom, Germany, and France by 9%, 4%, and 6%, respectively.
APJC
Product revenue in the APJC segment increased by 7%, with growth across each of our customer markets. From a country perspective, product revenue increased in Japan, Australia, India, and China by 7%, 11%, 11%, and 10% respectively .

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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):

Years Ended 2025 vs. 2024
July 26, 2025 July 27, 2024 July 29, 2023 Variance in Dollars Variance in Percent
Product revenue:          
Networking $ 28,304   $ 29,229  $ 34,570  $ (925) (3) %
Security 8,094   5,075  3,859  3,019  59  %
Collaboration 4,154   4,113  4,052  41  1  %
Observability 1,055   837  661  218  26  %
Total $ 41,608   $ 39,253  $ 43,142  $ 2,355  6  %

Amounts may not sum and percentages may not recalculate due to rounding.
Networking
The Networking product category consists of our core networking technologies of switching, routing, wireless, and servers. Revenue from the Networking product category decreased by 3%, or $0.9 billion. Revenue declined across the portfolio as a result of product shipments returning to normalized levels during the first half of fiscal 2025 from the elevated levels of product shipments we experienced in the first half of fiscal 2024. Within the portfolio, the revenue decline was primarily driven by servers. We also experienced a revenue decline in switching as a result of a decline in campus switching.
Security
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 increased by 59%, or $3.0 billion, primarily driven by Threat Intelligence, Detection, and Response offerings, which includes the offerings from Splunk, and to a lesser extent, growth in our SASE and Network Security offerings.
Collaboration
The Collaboration product category consists of our Webex Suite, Collaboration Devices, Contact Center and CPaaS offerings. Revenue in our Collaboration product category increased 1%, or $41 million, primarily driven by revenue growth in our Collaboration Devices, CPaaS and Contact Center offerings, partially offset by a decline in our Webex Suite offerings.
Observability
The Observability product category consists of our network assurance, monitoring and analytics and observability suite offerings. Revenue in our Observability product category increased by 26%, or $218 million, primarily driven by our Observability Suite offerings from Splunk and growth in our ThousandEyes network services offerings, partially offset by a decline in monitoring and analytics.

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Services Revenue by Segment
The following table presents the breakdown of services revenue by segment (in millions, except percentages):

Years Ended 2025 vs. 2024
July 26, 2025 July 27, 2024 July 29, 2023 Variance in Dollars Variance in Percent
Services revenue:          
Americas $ 9,019   $ 8,829  $ 8,427  $ 190  2  %
Percentage of service revenue 59.9   % 60.7  % 60.8  %
EMEA 3,702   3,472  3,269  230  7  %
Percentage of service revenue 24.6   % 23.9  % 23.6  %
APJC 2,325   2,249  2,160  76  3  %
Percentage of service revenue 15.5   % 15.5  % 15.6  %
Total $ 15,046   $ 14,550  $ 13,856  $ 496  3  %

Amounts may not sum and percentages may not recalculate due to rounding.
Services revenue increased 3%, primarily driven by software, cloud and virtualization support from Splunk and product offering support services. Services revenue increased across each of our geographic segments.

Gross Margin
The following table presents the gross margin for products and services (in millions, except percentages):

AMOUNT PERCENTAGE
Years Ended July 26, 2025 July 27, 2024 July 29, 2023 July 26, 2025 July 27, 2024 July 29, 2023
Gross margin:
Product $ 26,487   $ 24,914  $ 26,552  63.7   % 63.5  % 61.5  %
Services 10,303   9,914  9,201  68.5   % 68.1  % 66.4  %
Total $ 36,790   $ 34,828  $ 35,753  64.9   % 64.7  % 62.7  %

Product Gross Margin
The following table summarizes the key factors that contributed to the change in product gross margin percentage from fiscal 2024 to fiscal 2025:

Product Gross Margin Percentage
Fiscal 2024 63.5  %
Productivity (1)
2.0  %
Product pricing (1.6) %
Mix of products sold 1.1  %
Legal dispute with supplier (0.8) %
Amortization of purchased intangible assets (0.4) %
Others (0.1) %
Fiscal 2025 63.7  %

(1) Productivity includes overall manufacturing-related costs, such as component costs, warranty expense, provisions for inventory and the liability related to purchase commitments with contract manufacturers and suppliers, freight, logistics, shipment volume, and other items not categorized elsewhere.
Product gross margin increased by 0.2 percentage points primarily driven by benefits from Splunk and productivity improvements, partially offset by negative impacts from pricing, a charge as a result of a legal dispute with a supplier, and amortization of purchased intangible assets primarily related to Splunk. The productivity improvements were primarily driven
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by the effects of higher shipment volume and lower total provisions for inventory and the liability related to purchase commitments with contract manufacturers and suppliers.
Supply Chain Impacts and Risks
In past periods, we took multiple actions in order to mitigate component shortages and address significant supply constraints, which resulted in the need to secure long-term supply and increased our inventory supply chain balances compared to historical levels. In fiscal 2025, we entered into additional purchase commitments with contract manufacturers and suppliers related to manufacturing Cisco Silicon One and other products to meet demand from webscale and other customers. We expect to continue entering into these additional purchase commitments in fiscal 2026. These actions and additional purchase commitments have in turn significantly increased our supply chain exposure, which has resulted in negative impacts to our product gross margin in recent periods and may result in further negative impacts in future periods. In addition, on August 26, 2025, we settled a legal dispute with a supplier relating to purchase obligations arising under long-term supply arrangements, which resulted in a charge to product cost of sales, which is described in Note 21 to the Consolidated Financial Statements. The remaining and new supply chain exposures include 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 planned for development, or we are otherwise unable to mitigate these supply chain exposures. 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.
Services Gross Margin
Our services gross margin percentage increased by 0.4 percentage points primarily due to higher sales volume and lower delivery costs, partially offset by higher headcount-related costs.
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.
Gross Margin by Segment
The following table presents the total gross margin for each segment (in millions, except percentages):

AMOUNT PERCENTAGE
Years Ended July 26, 2025 July 27, 2024 July 29, 2023 July 26, 2025 July 27, 2024 July 29, 2023
Gross margin:
Americas $ 22,962   $ 21,372  $ 21,350  68.2   % 66.8  % 63.8  %
EMEA 10,545   9,755  10,016  71.1   % 69.1  % 66.2  %
APJC 5,431   5,187  5,424  66.4   % 67.2  % 64.4  %
Segment total 38,938   36,312  36,788  68.7   % 67.5  % 64.5  %
Unallocated corporate items (1)
(2,148) (1,484) (1,035)
Total $ 36,790   $ 34,828  $ 35,753  64.9   % 64.7  % 62.7  %

(1) The unallocated corporate items include the effects of amortization and impairments of acquisition-related intangible assets, share-based compensation expense, significant litigation settlements (which includes the supplier-related legal settlement as described in Note 21 to the Consolidated Financial Statements) 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.
The Americas segment had a gross margin percentage increase driven by positive impacts from productivity improvements and favorable product mix, partially offset by pricing erosion.
The gross margin percentage increase in our EMEA segment was primarily due to positive impacts from productivity improvements and favorable product mix, partially offset by pricing erosion.
The APJC segment had a gross margin percentage decrease driven primarily by pricing erosion and lower services gross margin, partially offset by positive impacts from productivity improvements and favorable product mix.

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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):

Years Ended 2025 vs. 2024
July 26, 2025 July 27, 2024 July 29, 2023 Variance in Dollars Variance in Percent
Research and development $ 9,300   $ 7,983  $ 7,551  $ 1,317  16  %
Percentage of revenue 16.4   % 14.8  % 13.2  %
Sales and marketing 10,966   10,364  9,880  602  6  %
Percentage of revenue 19.4   % 19.3  % 17.3  %
General and administrative 2,992   2,813  2,478  179  6  %
Percentage of revenue 5.3   % 5.2  % 4.3  %
Total $ 23,258   $ 21,160  $ 19,909  $ 2,098  10  %
Percentage of revenue 41.1   % 39.3   % 34.9   %

R&D Expenses
R&D expenses increased primarily due to higher headcount-related expenses reflecting our investments in AI, share-based compensation expense, cash compensation expenses from acquisitions, and discretionary spending.
Sales and Marketing Expenses
Sales and marketing expenses increased primarily due to higher headcount-related expenses, cash compensation expenses from acquisitions, share-based compensation expense, and discretionary spending, partially offset by lower contracted services spending.
G&A Expenses
G&A expenses increased primarily due to higher headcount-related expenses, share-based compensation expense, and discretionary spending, partially offset by lower acquisition-related costs and lower contracted services spending.
Effect of Foreign Currency
In fiscal 2025, foreign currency fluctuations, net of hedging, decreased the combined R&D, sales and marketing, and G&A expenses by approximately $16 million, or 0.1%, compared with fiscal 2024.
Amortization of Purchased Intangible Assets
The following table presents the amortization of purchased intangible assets including impairment charges (in millions):

Years Ended July 26, 2025 July 27, 2024 July 29, 2023
Amortization of purchased intangible assets:
Cost of sales $ 1,174   $ 955  $ 649 
Operating expenses 1,028   698  282 
Total $ 2,202   $ 1,653  $ 931 

The increase in amortization of purchased intangible assets was primarily due to the acquisition of Splunk and other recent acquisitions, partially offset by certain purchased intangible assets that became fully amortized in larger part from our fiscal 2021 acquisition of Acacia, and lower impairment charges in fiscal 2025. Impairment charges related to purchased intangible assets were $40 million and $145 million for fiscal 2025 and fiscal 2024, respectively. The impairment charges were a result of declines in estimated fair values resulting from the reductions in or the elimination of expected future cash flows associated with certain in-process research and development and technology intangible assets.
Restructuring and Other Charges
We recognized total restructuring and other charges, which are included in operating expenses, of $744 million and $789 million in fiscal 2025 and 2024, respectively.
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In the first quarter of fiscal 2025, we announced a restructuring plan in order to allow us to invest in key growth opportunities and drive more efficiencies in our business. This restructuring plan is expected to impact approximately 7% of our global workforce with estimated pre-tax charges of approximately $1 billion. In connection with this restructuring plan, we incurred charges of $744 million during fiscal 2025. We expect this plan to be substantially completed by the end of the second quarter of fiscal 2026.
In the third quarter of fiscal 2024, we initiated a restructuring plan in order to realign the organization and enable further investment in key priority areas. In connection with this plan, we incurred charges of $654 million for fiscal 2024 and the plan is complete.
Operating Income
The following table presents our operating income and our operating income as a percentage of revenue (in millions, except percentages):
Years Ended July 26, 2025 July 27, 2024 July 29, 2023
Operating income $ 11,760   $ 12,181  $ 15,031 
Operating income as a percentage of revenue 20.8   % 22.6  % 26.4  %

Operating income decreased by 3%, and as a percentage of revenue operating income decreased by 1.8 percentage points. These changes resulted primarily from higher share-based compensation expense, higher amortization of purchased intangible assets, a charge as a result of a legal dispute with a supplier, and higher cash compensation expenses from acquisitions.

Interest and Other Income (Loss), Net
Interest Income (Expense), Net   The following table summarizes interest income and interest expense (in millions):

Years Ended 2025 vs. 2024
July 26, 2025 July 27, 2024 July 29, 2023 Variance in Dollars
Interest income $ 1,001   $ 1,365  $ 962  $ (364)
Interest expense (1,593) (1,006) (427) (587)
Interest income (expense), net $ (592) $ 359  $ 535  $ (951)

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 increase in interest expense was primarily driven by a higher average balance of debt outstanding during the period.
Other Income (Loss), Net The components of other income (loss), net, are summarized as follows (in millions):

Years Ended 2025 vs. 2024
July 26, 2025 July 27, 2024 July 29, 2023 Variance in Dollars
Gains (losses) on investments, net:
Available-for-sale debt investments $ (100) $ (67) $ (21) $ (33)
Marketable equity investments 126   65  37  61 
Privately held investments 56   (164) (193) 220 
Net gains (losses) on investments 82   (166) (177) 248 
Other gains (losses), net (150) (140) (71) (10)
Other income (loss), net $ (68) $ (306) $ (248) $ 238 

The change in our other income (loss), net was primarily driven by lower impairment charges, higher unrealized gains on our privately held investments, and higher gains on our marketable equity investments.
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Provision for Income Taxes
The provision for income taxes resulted in an effective tax rate of 8.3% for fiscal 2025, compared with 15.6% for fiscal 2024. The net 7.3 percentage points decrease 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 ("Tax Act") (our fiscal 2018) and an increase in stock-based compensation windfall.
For a full reconciliation of our effective tax rate to the U.S. federal statutory rate of 21% and for further explanation of our provision for income taxes, see Note 18 to the Consolidated Financial Statements.
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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):

    July 26, 2025 July 27, 2024 Increase (Decrease)
Cash and cash equivalents $ 8,346   $ 7,508  $ 838 
Available-for-sale debt investments 7,381   9,865  (2,484)
Marketable equity securities 383   481  (98)
Total $ 16,110   $ 17,854  $ (1,744)

The net decrease in cash and cash equivalents and investments from fiscal 2024 to fiscal 2025 was primarily driven by cash returned to stockholders in the form of cash dividends of $6.4 billion and repurchases of common stock of $6.0 billion, net repayments of debt and short-term borrowing of $2.8 billion, and capital expenditures of $0.9 billion. These uses of cash were partially offset by net cash provided by operating activities of $14.2 billion. The net cash provided by operating activities during fiscal 2025 benefited from lower tax payments.
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 July 26, 2025 and July 27, 2024, 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):

Years Ended July 26, 2025 July 27, 2024 July 29, 2023
Net cash provided by operating activities $ 14,193   $ 10,880  $ 19,886 
Acquisition of property and equipment (905) (670) (849)
Free cash flow $ 13,288   $ 10,210  $ 19,037 

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, deferred revenue and the timing and amount of tax and other payments. For additional discussion, see “Part I, 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
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

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 TOTAL
Years Ended Per Share Amount Shares Weighted-Average Price per Share Amount Amount
July 26, 2025 $ 1.62   $ 6,437   105   $ 56.53   $ 5,995   $ 12,432  
July 27, 2024 $ 1.58  $ 6,384  117  $ 49.45  $ 5,764  $ 12,148 
July 29, 2023 1.54  6,302  88  48.49  $ 4,271  $ 10,573 

On August 13, 2025, our Board of Directors declared a quarterly dividend of $0.41 per common share to be paid on October 22, 2025, to all stockholders of record as of the close of business on October 3, 2025. Future dividends will be subject to the approval of our Board of Directors.
The remaining authorized amount for stock repurchases under this program is approximately $14.2 billion, with no termination date.
Accounts Receivable, Net   The following table summarizes our accounts receivable, net (in millions):

    July 26, 2025 July 27, 2024 Increase (Decrease)
Accounts receivable, net $ 6,701   $ 6,685  $ 16 

Our accounts receivable net, as of July 26, 2025 was flat year over year as the increase in the amount of product and service billings was substantially offset by improved shipment linearity in the fourth quarter of fiscal 2025.

Inventory Supply Chain  The following table summarizes our inventories and inventory purchase commitments with contract manufacturers and suppliers (in millions):

    July 26, 2025 July 27, 2024 July 29, 2023 Variance vs. July 27, 2024 Variance vs. July 29, 2023
Inventories $ 3,164   $ 3,373  $ 3,644  $ (209) $ (480)
Inventory purchase commitments $ 7,599   $ 5,158  $ 7,253  $ 2,441  $ 346 
Inventory deposits and prepayments $ 825   $ 973  $ 1,109  $ (148) $ (284)

The following table summarizes our inventory purchase commitments with contract manufacturers and suppliers by period (in millions):

    July 26, 2025 July 27, 2024 July 29, 2023 Variance vs. July 27, 2024 Variance vs. July 29, 2023
Less than 1 year $ 7,202   $ 3,952  $ 5,270  $ 3,250  $ 1,932 
1 to 3 years 320   1,085  1,783  (765) (1,463)
3 to 5 years 77   121  200  (44) (123)
Total (1)
$ 7,599   $ 5,158  $ 7,253  $ 2,441  $ 346 

( 1) 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 to the Consolidated Financial Statements.
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CISCO SYSTEMS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Inventory as of July 26, 2025 decreased by 6% and inventory purchase commitments with contract manufacturers and suppliers increased by 47% from our balances at the end of fiscal 2024. The combined increase of 26% in our inventory and inventory purchase commitments as compared with the end of fiscal 2024 was primarily related to commitments with contract manufacturers and suppliers related to manufacturing Cisco Silicon One and other products to meet the demand from webscale and other customers. We expect our inventory balances may increase in future quarters as we work to fulfill this demand.
In addition, we have increased our levels of inventory in recent years in order to help mitigate risks in our supply chain, and began increasing our inventory supply chain balances starting in fiscal 2021 in order to address significant supply constraints seen industry-wide at the time. The increases were primarily due to arrangements to secure supply and pricing for certain product components and commitments with contract manufacturers to meet customer demand and to address extended lead times, as well as advance payments with suppliers to secure future supply, as a result of the supply constraints. 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. 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):

    July 26, 2025 July 27, 2024 Increase (Decrease)
Loan receivables, net $ 5,591   $ 5,808  $ (217)
Lease receivables, net 936   906  30 
Total, net $ 6,527   $ 6,714  $ (187)

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 decreased by 3% as compared with the end of fiscal 2024.
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 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 $24.9 billion, $27.1 billion, and $32.1 billion in fiscal 2025, 2024, and 2023, 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 $1.3 billion and $1.2 billion as of July 26, 2025 and July 27, 2024, 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
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CISCO SYSTEMS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

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 July 26, 2025, the total maximum potential future payments related to these guarantees was approximately $123 million, of which approximately $13 million was recorded as deferred revenue.
Borrowings
Senior Notes   The following table summarizes the principal amount of our senior notes (in millions):

  Maturity Date July 26, 2025 July 27, 2024
Senior notes:
Fixed-rate notes:
3.50% June 15, 2025 $ —   $ 500 
4.90% February 26, 2026 1,000   1,000 
2.95% February 28, 2026 750   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   — 
4.85% February 26, 2029 2,500   2,500 
4.75% February 24, 2030 1,000   — 
4.95% February 26, 2031 2,500   2,500 
4.95% February 24, 2032 1,000   — 
5.05% February 26, 2034 2,500   2,500 
5.10% February 24, 2035 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   — 
5.35% February 26, 2064 1,000   1,000 
Total $ 24,750   $ 20,250 

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 which is redeemable by us at any time, subject to a make-whole premium. We were in compliance with all debt covenants as of July 26, 2025.
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 $3.5 billion and $10.9 billion in commercial paper notes outstanding as of July 26, 2025, and July 27, 2024, 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 July 26, 2025, we were in compliance with all associated covenants and we had not borrowed any funds under our credit agreement.

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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):

    July 26, 2025 July 27, 2024 Increase (Decrease)
Product $ 21,572   $ 20,055  $ 1,517 
Services 21,961   20,993  968 
    Total $ 43,533   $ 41,048  $ 2,485 

Short-term RPO $ 21,723   $ 20,882  $ 841 
Long-term RPO 21,810   20,166  1,644 
Total $ 43,533   $ 41,048  $ 2,485 

Total remaining performance obligations increased 6% in fiscal 2025. Remaining performance obligations for product increased 8% and remaining performance obligations for services increased 5%, compared to fiscal 2024. We expect approximately 50% of total remaining performance obligations to be recognized as revenue over the next 12 months.
Deferred Revenue   The following table presents the breakdown of deferred revenue (in millions):

    July 26, 2025 July 27, 2024 Increase (Decrease)
Product $ 13,490   $ 13,219  $ 271 
Services 15,289   15,256  33 
    Total $ 28,779   $ 28,475  $ 304 
Reported as:
Current $ 16,416   $ 16,249  $ 167 
Noncurrent 12,363   12,226  137 
    Total $ 28,779   $ 28,475  $ 304 

Total deferred revenue increased 1% in fiscal 2025. The increase in deferred product revenue of 2% was primarily due to increased deferrals related to our recurring software offerings. Deferred service revenue was flat year over year.
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 previously. In addition, we plan for and measure our liquidity and capital resources through an annual budgeting process. The following table summarizes our contractual obligations at July 26, 2025 (in millions):

  PAYMENTS DUE BY PERIOD
July 26, 2025 Total Less than 1 Year 1 to 3 Years 3 to 5 Years More than 5 Years
Operating leases $ 1,748  $ 429  $ 569  $ 381  $ 369 
Purchase commitments with contract manufacturers and suppliers 7,599  7,202  320  77  — 
Other purchase obligations 8,136  2,399  3,247  2,383  107 
Long-term debt
24,753  1,751  4,502  3,500  15,000 
Transition tax payable 1,595  1,595  —  —  — 
Other long-term liabilities 1,745  —  298  221  1,226 
Total by period $ 45,576  $ 13,376  $ 8,936  $ 6,562  $ 16,702 
Other long-term liabilities (uncertainty in the timing of future payments) 2,240 
Total $ 47,816 

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CISCO SYSTEMS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Operating Leases  For more information on our operating leases, see Note 8 to the Consolidated Financial Statements.
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. 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 directly with suppliers and relate to fixed-dollar commitments to secure supply and pricing for certain product components for multi-year periods. A significant portion of our reported purchase commitments arising from these agreements are firm, noncancelable, and unconditional commitments. 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 to the Consolidated Financial Statements. 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. See further discussion in “Inventory Supply Chain.”
Other Purchase Obligations  Other purchase obligations represent an estimate of all contractual obligations in the ordinary course of business, other than operating leases and commitments with contract manufacturers and suppliers, for which we have not received the goods or services. Purchase orders are not included in the preceding table as they typically represent our authorization to purchase rather than binding contractual purchase obligations.
Long-Term Debt  The amount of long-term debt in the preceding table represents the principal amount of the respective debt instruments. See Note 12 to the Consolidated Financial Statements.
Transition Tax Payable Transition tax payable represents future cash tax payments associated with the one-time U.S. transition tax on accumulated earnings for foreign subsidiaries as a result of the Tax Act.
Other Long-Term Liabilities  Other long-term liabilities primarily include noncurrent income taxes payable, accrued liabilities for deferred compensation, deferred tax liabilities, and certain other long-term liabilities. Due to the uncertainty in the timing of future payments, our noncurrent income taxes payable of approximately $2.2 billion and deferred tax liabilities of $75 million were presented as one aggregated amount in the total column on a separate line in the preceding table. Noncurrent income taxes payable include uncertain tax positions. See Note 18 to the Consolidated Financial Statements.
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 investments in privately held companies as of July 26, 2025, $0.8 billion of such investments are considered to be in variable interest entities which are unconsolidated. We have total funding commitments of $0.3 billion related to privately held investments. The carrying value of these investments and the additional funding commitments, collectively, represent our maximum exposure related to privately held investments. 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.”
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.  
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Our financial position is exposed to a variety of risks, including interest rate risk, equity price risk, and foreign currency exchange risk.
Interest Rate Risk
Available-for-Sale Debt Investments We maintain an investment portfolio of various holdings, types, and maturities. Our primary objective for holding available-for-sale debt investments is to achieve an appropriate investment return consistent with preserving principal and managing risk. At any time, a sharp rise in market interest rates could have a material adverse impact on the fair value of our available-for-sale debt investment portfolio. Conversely, declines in interest rates, including the impact from lower credit spreads, could have a material adverse impact on interest income for our investment portfolio. Our available-for-sale debt investments are held for purposes other than trading. Our available-for-sale debt investments are not leveraged as of July 26, 2025. We monitor our interest rate and credit risks, including our credit exposures to specific rating categories and to individual issuers. We believe the overall credit quality of our portfolio is strong.
The following tables present the hypothetical fair values of our available-for-sale debt investments, including the hedging effects when applicable, as a result of selected potential market decreases and increases in interest rates. The market changes reflect immediate hypothetical parallel shifts in the yield curve of plus or minus 50 basis points (BPS), plus 100 BPS, and plus 150 BPS. The hypothetical fair values as of July 26, 2025 and July 27, 2024 are as follows (in millions):

  VALUATION OF SECURITIES
GIVEN AN INTEREST RATE
DECREASE OF X BASIS POINTS FAIR VALUE
AS OF JULY 26, 2025 VALUATION OF SECURITIES
GIVEN AN INTEREST RATE
INCREASE OF X BASIS POINTS
  (150 BPS) (100 BPS) (50 BPS) 50 BPS 100 BPS 150 BPS
Available-for-sale debt investments $7,454 $7,430 $7,405 $7,381 $7,356 $7,332 $7,307

  VALUATION OF SECURITIES
GIVEN AN INTEREST RATE
DECREASE OF X BASIS POINTS FAIR VALUE
AS OF JULY 27, 2024 VALUATION OF SECURITIES
GIVEN AN INTEREST RATE
INCREASE OF X BASIS POINTS
  (150 BPS) (100 BPS) (50 BPS) 50 BPS 100 BPS 150 BPS
Available-for-sale debt investments $10,057 $9,993 $9,929 $9,865 $9,800 $9,736 $9,672

Financing Receivables As of July 26, 2025, our financing receivables had a carrying value of $6.5 billion, compared with $6.7 billion as of July 27, 2024. As of July 26, 2025, a hypothetical 50 BPS increase or decrease in market interest rates would change the fair value of our financing receivables by a decrease or increase of approximately $0.1 billion, respectively.
Debt As of July 26, 2025, we had $24.8 billion in principal amount of senior fixed-rate notes outstanding. The carrying amount of the senior notes was $24.6 billion, and the related fair value based on market prices was $25.0 billion. As of July 26, 2025, a hypothetical 50 BPS increase or decrease in market interest rates would change the fair value of the fixed-rate debt, by a decrease or increase of approximately $0.8 billion, respectively. However, this hypothetical change in interest rates would not impact the interest expense on the fixed-rate debt.
At any time, a sharp rise in market interest rates could cause us to incur additional interest expense to the extent we issue additional commercial paper or other debt.
Equity Price Risk
Marketable Equity Investments The fair value of our marketable equity investments is subject to market price volatility. We hold equity securities for strategic purposes or to diversify our overall investment portfolio. These equity securities are held for purposes other than trading. The total fair value of our marketable equity securities was $383 million and $481 million as of July 26, 2025 and July 27, 2024, respectively.
Privately Held Investments These investments are recorded in other assets in our Consolidated Balance Sheets. As of July 26, 2025, the total carrying amount of our investments in privately held investments was $1.9 billion and $1.8 billion as of July 26, 2025 and July 27, 2024, respectively. Some of these companies in which we invested are in the startup or development stages. These investments are inherently risky because the markets for the technologies or products these companies are developing are typically in the early stages and may never materialize. We could lose our entire investment in these companies. Our evaluation of privately held investments is based on the fundamentals of the businesses invested in, including, among other factors, the nature of their technologies and potential for financial return.
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Foreign Currency Exchange Risk
Our foreign exchange forward contracts outstanding at fiscal year-end are summarized in U.S. dollar equivalents as follows (in millions):

  July 26, 2025 July 27, 2024
  Notional Amount Fair Value Notional Amount Fair Value
Forward contracts:
Purchased $ 4,498   $ (21) $ 3,586  $ (59)
Sold $ 4,480   $ 22   $ 3,848  $ 60 

We conduct business globally in numerous currencies. The direct effect of foreign currency fluctuations on revenue has not been material because our revenue is primarily denominated in U.S. dollars. However, if the U.S. dollar strengthens relative to other currencies, such strengthening could have an indirect effect on our revenue to the extent it raises the cost of our products to non-U.S. customers and thereby reduces demand. A weaker U.S. dollar could have the opposite effect. However, the precise indirect effect of currency fluctuations is difficult to measure or predict because our revenue is influenced by many factors in addition to the impact of such currency fluctuations.
Approximately 75% of our operating expenses are U.S.-dollar denominated. In fiscal 2025, foreign currency fluctuations, net of hedging, decreased our combined R&D, sales and marketing, and G&A expenses by approximately $16 million, or 0.1%, as compared with fiscal 2024. To reduce variability in operating expenses and service cost of sales caused by non-U.S.-dollar denominated operating expenses and costs, we may hedge certain forecasted foreign currency transactions with currency options and forward contracts. These hedging programs are not designed to provide foreign currency protection over long time horizons. In designing a specific hedging approach, we consider several factors, including offsetting exposures, significance of exposures, costs associated with entering into a particular hedge instrument, and potential effectiveness of the hedge. The gains and losses on foreign exchange contracts mitigate the effect of currency movements on our operating expenses and service cost of sales.
We also enter into foreign exchange forward and option contracts to reduce the short-term effects of foreign currency fluctuations on receivables and payables that are denominated in currencies other than the functional currencies of the entities. The market risks associated with these foreign currency receivables and payables relate primarily to variances from our forecasted foreign currency transactions and balances. We do not enter into foreign exchange forward or option contracts for speculative purposes.
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Item 8. Financial Statements and Supplementary Data

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm (PCAOB ID 238 )
53

Reports of Management
55

Consolidated Balance Sheets
56

Consolidated Statements of Operations
57

Consolidated Statements of Comprehensive Income
58

Consolidated Statements of Cash Flows
59

Consolidated Statements of Equity
60

Notes to Consolidated Financial Statements
61

Note 1: Basis of Presentation
61

Note 2: Summary of Significant Accounting Policies
61

Note 3: Revenue
67

Note 4: Acquisitions
69

Note 5: Goodwill and Purchased Intangible Assets
72

Note 6: Restructuring and Other Charges
74

Note 7: Balance Sheet and Other Details
74

Note 8: Leases
76

Note 9: Financing Receivables
78

Note 10: Investments
81

Note 11: Fair Value
83

Note 12: Borrowings
84

Note 13: Derivative Instruments
86

Note 14: Commitments and Contingencies
88

Note 15: Stockholders’ Equity
91

Note 16: Employee Benefit Plans
92

Note 17: Accumulated Other Comprehensive Income (Loss)
95

Note 18: Income Taxes
96

Note 19: Segment Information and Major Customers
99

Note 20: Net Income per Share
100

Note 21: Subsequent Event
101

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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Cisco Systems, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Cisco Systems, Inc. and its subsidiaries (the “Company”) as of July 26, 2025 and July 27, 2024, and the related consolidated statements of operations, of comprehensive income, of stockholders' equity and of cash flows for each of the three years in the period ended July 26, 2025, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of July 26, 2025, based on criteria established in  Internal Control - Integrated Framework  (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of July 26, 2025 and July 27, 2024, and the results of its operations and its cash flows for each of the three years in the period ended July 26, 2025 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of July 26, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition for Certain Products and Services
As described in Note 2 to the consolidated financial statements, the Company derives revenue from contracts with customers that can include various combinations of products and services which are generally distinct and accounted for as separate performance obligations. The Company recognizes revenue upon transfer of control of promised goods or services in a contract with a customer in an amount that reflects the consideration the Company expects 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. For the year ended July 26, 2025, the Company’s total revenue was $56.7 billion, of which the majority relates to certain product and services revenue.
The principal consideration for our determination that performing procedures relating to revenue recognition for certain products and services is a critical audit matter is a high degree of auditor effort in performing procedures related to the Company's revenue recognition.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process. These procedures also included, among others (i) testing revenue recognized for a sample of revenue transactions by obtaining and inspecting source documents, such as executed contracts, purchase orders, invoices, and proof of delivery; (ii) testing the appropriate amount and timing of revenue recognition based on the contractual terms identified in certain customer arrangements; and (iii) confirming a sample of outstanding customer invoice balances as of July 26, 2025 and, for confirmations not returned, obtaining and inspecting source documents, such as purchase orders, invoices, proof of delivery, and subsequent cash receipts.

/s/ PricewaterhouseCoopers LLP
San Jose, California
September 3, 2025
We have served as the Company’s auditor since 1988.

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Reports of Management 
Statement of Management’s Responsibility 
Cisco’s management has always assumed full accountability for maintaining compliance with our established financial accounting policies and for reporting our results with objectivity and the highest degree of integrity. It is critical for investors and other users of the Consolidated Financial Statements to have confidence that the financial information that we provide is timely, complete, relevant, and accurate. Management is responsible for the fair presentation of Cisco’s Consolidated Financial Statements, prepared in accordance with accounting principles generally accepted in the United States of America, and has full responsibility for their integrity and accuracy.
Management, with oversight by Cisco’s Board of Directors, has established and maintains a strong ethical climate so that our affairs are conducted to the highest standards of personal and corporate conduct. Management also has established an effective system of internal controls. Cisco’s policies and practices reflect corporate governance initiatives that are compliant with the listing requirements of Nasdaq and the corporate governance requirements of the Sarbanes-Oxley Act of 2002.
We are committed to enhancing stockholder value and fully understand and embrace our fiduciary oversight responsibilities. We are dedicated to ensuring that our high standards of financial accounting and reporting, as well as our underlying system of internal controls, are maintained. Our culture demands integrity, and we have the highest confidence in our processes, our internal controls and our people, who are objective in their responsibilities and who operate under the highest level of ethical standards.
Management’s Report on Internal Control over Financial Reporting 
Management is responsible for establishing and maintaining adequate internal control over financial reporting for Cisco. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Management (with the participation of the principal executive officer and principal financial officer) conducted an evaluation of the effectiveness of Cisco’s internal control over financial reporting based on the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that Cisco’s internal control over financial reporting was effective as of July 26, 2025. PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited the effectiveness of Cisco’s internal control over financial reporting and has issued a report on Cisco’s internal control over financial reporting, which is included in their report on the preceding pages.

/S/ C HARLES H . R OBBINS
  /S/ MARK PATTERSON

Charles H. Robbins   Mark Patterson
Chair and Chief Executive Officer   Executive Vice President and Chief Financial Officer
September 3, 2025   September 3, 2025

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CISCO SYSTEMS, INC.
Consolidated Balance Sheets
(in millions, except par value)  

July 26, 2025 July 27, 2024
ASSETS
Current assets:
Cash and cash equivalents $ 8,346   $ 7,508  
Investments 7,764   10,346  
Accounts receivable, net of allowance
of $ 69 at July 26, 2025 and $ 87 at July 27, 2024
6,701   6,685  
Inventories 3,164   3,373  
Financing receivables, net 3,061   3,338  
Other current assets 5,950   5,612  
Total current assets 34,986   36,862  
Property and equipment, net 2,113   2,090  
Financing receivables, net 3,466   3,376  
Goodwill 59,136   58,660  
Purchased intangible assets, net 9,175   11,219  
Deferred tax assets 7,356   6,262  
Other assets 6,059   5,944  
TOTAL ASSETS $ 122,291   $ 124,413  
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt $ 5,232   $ 11,341  
Accounts payable 2,528   2,304  
Income taxes payable 1,857   1,439  
Accrued compensation 3,611   3,608  
Deferred revenue 16,416   16,249  
Other current liabilities 5,420   5,643  
Total current liabilities 35,064   40,584  
Long-term debt 22,861   19,621  
Income taxes payable 2,165   3,985  
Deferred revenue 12,363   12,226  
Other long-term liabilities 2,995   2,540  
Total liabilities 75,448   78,956  
Commitments and contingencies (Note 14)
Equity:
Cisco stockholders’ equity:
Preferred stock, $ 0.001 par value: 5 shares authorized; none issued and outstanding
—   —  
Common stock and additional paid-in capital, $ 0.001 par value: 20,000  shares authorized; 3,960 and 4,007 shares issued and outstanding at July 26, 2025 and July 27, 2024, respectively
47,747   45,800  
Retained earnings 50   1,087  
Accumulated other comprehensive loss ( 954 ) ( 1,430 )
Total equity 46,843   45,457  
TOTAL LIABILITIES AND EQUITY $ 122,291   $ 124,413  

See Notes to Consolidated Financial Statements.
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CISCO SYSTEMS, INC.
Consolidated Statements of Operations
(in millions, except per-share amounts)  

Years Ended July 26, 2025 July 27, 2024 July 29, 2023
REVENUE:
Product $ 41,608   $ 39,253   $ 43,142  
Services 15,046   14,550   13,856  
Total revenue 56,654   53,803   56,998  
COST OF SALES:
Product 15,121   14,339   16,590  
Services 4,743   4,636   4,655  
Total cost of sales 19,864   18,975   21,245  
GROSS MARGIN 36,790   34,828   35,753  
OPERATING EXPENSES:
Research and development 9,300   7,983   7,551  
Sales and marketing 10,966   10,364   9,880  
General and administrative 2,992   2,813   2,478  
Amortization of purchased intangible assets 1,028   698   282  
Restructuring and other charges 744   789   531  
Total operating expenses 25,030   22,647   20,722  
OPERATING INCOME 11,760   12,181   15,031  
Interest income 1,001   1,365   962  
Interest expense ( 1,593 ) ( 1,006 ) ( 427 )
Other income (loss), net ( 68 ) ( 306 ) ( 248 )
Interest and other income (loss), net ( 660 ) 53   287  
INCOME BEFORE PROVISION FOR INCOME TAXES 11,100   12,234   15,318  
Provision for income taxes 920   1,914   2,705  
NET INCOME $ 10,180   $ 10,320   $ 12,613  

Net income per share:
Basic $ 2.56   $ 2.55   $ 3.08  
Diluted $ 2.55   $ 2.54   $ 3.07  
Shares used in per-share calculation:
Basic 3,976   4,043   4,093  
Diluted 3,998   4,062   4,105  

See Notes to Consolidated Financial Statements.
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CISCO SYSTEMS, INC.
Consolidated Statements of Comprehensive Income
(in millions)

Years Ended July 26, 2025 July 27, 2024 July 29, 2023
Net income $ 10,180   $ 10,320   $ 12,613  
Available-for-sale investments:
Change in net unrealized gains and losses, net of tax benefit (expense) of $( 31 ), $( 47 ), and $ 35 for fiscal 2025, 2024, and 2023, respectively
121   146   ( 78 )
Net (gains) losses reclassified into earnings, net of tax expense (benefit) of $( 37 ), $( 14 ), and $( 4 ) for fiscal 2025, 2024, and 2023, respectively
63   53   17  
184   199   ( 61 )
Cash flow hedging instruments:
Change in unrealized gains and losses, net of tax benefit (expense) of $( 7 ), $( 30 ), and $( 7 ) for fiscal 2025, 2024, and 2023, respectively
22   98   22  
Net (gains) losses reclassified into earnings, net of tax (benefit) expense of $ 11 , $ 12 , and $ 15 for fiscal 2025, 2024, and 2023, respectively
( 36 ) ( 37 ) ( 48 )
( 14 ) 61   ( 26 )
Net change in cumulative translation adjustment and actuarial gains and losses, net of tax benefit (expense) of $ 2 , $ 2 , and $ 19 for fiscal 2025, 2024, and 2023, respectively
306   ( 115 ) 134  
Other comprehensive income (loss) 476   145   47  
Comprehensive income $ 10,656   $ 10,465   $ 12,660  

See Notes to Consolidated Financial Statements.

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CISCO SYSTEMS, INC.
Consolidated Statements of Cash Flows
(in millions)

Years Ended July 26, 2025 July 27, 2024 July 29, 2023
Cash flows from operating activities:
Net income $ 10,180   $ 10,320   $ 12,613  
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and other 2,811   2,507   1,726  
Share-based compensation expense 3,641   3,074   2,353  
Provision for receivables 24   34   31  
Deferred income taxes ( 1,133 ) ( 972 ) ( 2,085 )
(Gains) losses on divestitures, investments and other, net ( 38 ) 215   206  
Change in operating assets and liabilities, net of effects of acquisitions and divestitures:
Accounts receivable ( 22 ) ( 289 ) 734  
Inventories 209   275   ( 1,069 )
Financing receivables 214   76   1,102  
Other assets ( 499 ) ( 671 ) 5  
Accounts payable 257   ( 90 ) 27  
Income taxes, net ( 1,839 ) ( 4,539 ) 1,218  
Accrued compensation ( 53 ) ( 696 ) 651  
Deferred revenue 248   1,220   2,326  
Other liabilities 193   416   48  
Net cash provided by operating activities 14,193   10,880   19,886  
Cash flows from investing activities:
Purchases of investments ( 4,589 ) ( 4,230 ) ( 10,871 )
Proceeds from sales of investments 2,643   4,136   1,054  
Proceeds from maturities of investments 4,943   6,367   5,978  
Acquisitions, net of cash and cash equivalents acquired ( 291 ) ( 25,994 ) ( 301 )
Purchases of investments in privately held companies ( 383 ) ( 284 ) ( 185 )
Return of investments in privately held companies 306   202   90  
Acquisition of property and equipment ( 905 ) ( 670 ) ( 849 )
Other 9   ( 5 ) ( 23 )
Net cash provided by (used in) investing activities 1,733   ( 20,478 ) ( 5,107 )
Cash flows from financing activities:
Issuances of common stock 736   714   700  
Repurchases of common stock - repurchase program ( 6,000 ) ( 5,787 ) ( 4,293 )
Shares repurchased for tax withholdings on vesting of restricted stock units ( 1,222 ) ( 992 ) ( 597 )
Short-term borrowings, original maturities of 90 days or less, net ( 31 ) 478   ( 602 )
Issuances of debt 19,292   31,818   —  
Repayments of debt ( 22,073 ) ( 9,826 ) ( 500 )
Repayments of Splunk convertible debt, net of capped call proceeds —   ( 3,140 ) —  
Dividends paid ( 6,437 ) ( 6,384 ) ( 6,302 )
Other ( 80 ) ( 37 ) ( 32 )
Net cash provided by (used in) financing activities ( 15,815 ) 6,844   ( 11,626 )
Effect of foreign currency exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents ( 43 ) ( 31 ) ( 105 )
Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents 68   ( 2,785 ) 3,048  
Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of fiscal year 8,842   11,627   8,579  
Cash, cash equivalents, restricted cash and restricted cash equivalents, end of fiscal year $ 8,910   $ 8,842   $ 11,627  

Supplemental cash flow information:
Cash paid for interest $ 1,500   $ 583   $ 376  
Cash paid for income taxes, net $ 3,892   $ 7,426   $ 3,571  

See Notes to Consolidated Financial Statements.
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CISCO SYSTEMS, INC.
Consolidated Statements of Equity
(in millions, except per-share amounts)

Shares of
Common
Stock Common Stock
and
Additional
Paid-In Capital Retained Earnings Accumulated
Other
Comprehensive
Loss Total Equity
BALANCE AT JULY 30, 2022 4,110   $ 42,714   $ ( 1,319 ) $ ( 1,622 ) $ 39,773  
Net income 12,613   12,613  
Other comprehensive income (loss) 47   47  
Issuance of common stock 57   700   700  
Repurchase of common stock ( 88 ) ( 930 ) ( 3,341 ) ( 4,271 )
Shares repurchased for tax withholdings on vesting of restricted stock units and other ( 13 ) ( 551 ) ( 551 )
Cash dividends declared ($ 1.54 per common share)
( 6,302 ) ( 6,302 )
Share-based compensation 2,353   2,353  
Other —  3   ( 12 ) ( 9 )
BALANCE AT JULY 29, 2023 4,066   $ 44,289   $ 1,639   $ ( 1,575 ) $ 44,353  
Net income 10,320   10,320  
Other comprehensive income (loss) 145   145  
Issuance of common stock 78   714   714  
Repurchase of common stock ( 117 ) ( 1,292 ) ( 4,472 ) ( 5,764 )
Shares repurchased for tax withholdings on vesting of restricted stock units and other ( 20 ) ( 997 ) ( 997 )
Cash dividends declared ($ 1.58 per common share)
( 6,384 ) ( 6,384 )
Share-based compensation 3,074   3,074  
Other 12   ( 16 ) ( 4 )
BALANCE AT JULY 27, 2024 4,007   $ 45,800   $ 1,087   $ ( 1,430 ) $ 45,457  
Net income 10,180   10,180  
Other comprehensive income (loss) 476   476  
Issuance of common stock 80   736   736  
Repurchase of common stock ( 105 ) ( 1,230 ) ( 4,765 ) ( 5,995 )
Shares repurchased for tax withholdings on vesting of restricted stock units and other ( 22 ) ( 1,209 ) ( 1,209 )
Cash dividends declared ($ 1.62 per common share)
( 6,437 ) ( 6,437 )
Share-based compensation 3,641   3,641  
Other 9   ( 15 ) ( 6 )
BALANCE AT JULY 26, 2025 3,960   $ 47,747   $ 50   $ ( 954 ) $ 46,843  

See Notes to Consolidated Financial Statements.

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CISCO SYSTEMS, INC.
Notes to Consolidated Financial Statements

1. Basis of Presentation
The fiscal year for Cisco Systems, Inc. (the “Company,” “Cisco,” “we,” “us,” or “our”) is the 52 or 53 weeks ending on the last Saturday in July. Fiscal 2025, fiscal 2024 and fiscal 2023 were each 52-week fiscal years. The Consolidated Financial Statements include our accounts and those of our subsidiaries and those of our investments consolidated under the voting interest method. All intercompany accounts and transactions have been eliminated. We conduct business globally and are primarily managed on a geographic basis in the following three geographic segments: the Americas; Europe, Middle East, and Africa (EMEA); and Asia Pacific, Japan, and China (APJC).
Certain reclassifications have been made to the amounts for prior years in order to conform to the current year’s presentation. We have evaluated subsequent events through the date that the financial statements were issued.

2. Summary of Significant Accounting Policies
(a) Cash and Cash Equivalents   We consider all highly liquid investments purchased with an original or remaining maturity of three months or less at the date of purchase to be cash equivalents.
(b) Available-for-Sale Debt Investments   We classify our investments in fixed income securities as available-for-sale debt investments. Our available-for-sale debt investments primarily consist of U.S. government, U.S. government agency, non-U.S. government and agency, corporate debt, U.S. agency mortgage-backed securities, commercial paper and certificates of deposit. These available-for-sale debt investments are primarily held in the custody of a major financial institution. A specific identification method is used to determine the cost basis of available-for-sale debt investments sold. These investments are recorded in the Consolidated Balance Sheets at fair value and unrealized gains and losses on these investments are included as a separate component of accumulated other comprehensive income (loss) (AOCI), net of tax. We classify our investments as current based on the nature of the investments and their availability for use in current operations.
(c) Equity Instruments Our equity investments are accounted for as follows:
• Marketable equity securities have readily determinable fair value (RDFV) that are measured and recorded at fair value through income.
• Non-marketable equity securities do not have RDFV and are measured using a measurement alternative recorded at cost less any impairment, plus or minus changes resulting from qualifying observable price changes. For certain of these securities, we have elected to apply the net asset value (NAV) practical expedient. The NAV is the estimated fair value of these investments.
• Equity method investments are securities we do not control, but are able to exert significant influence over the investee. These investments are measured at cost less any impairment, plus or minus our share of equity method investee income or loss.
(d) Impairments of Investments  For our available-for-sale debt securities in an unrealized loss position, we determine whether a credit loss exists. In this assessment, among other factors, we consider the extent to which the fair value is less than the amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security. If factors indicate a credit loss exists, an allowance for credit loss is recorded to other income (loss), net, limited by the amount that the fair value is less than the amortized cost basis. The amount of fair value change relating to all other factors is recognized in other comprehensive income (OCI).
We hold non-marketable equity and other investments (“privately held investments”) which are included in other assets in the Consolidated Balance Sheets. We monitor these investments for impairments and make reductions in carrying values if we determine that an impairment charge is required based primarily on the financial condition and near-term prospects of these companies.
(e) Inventories  Inventories are stated at the lower of cost or net realizable value. Cost is computed using standard cost, which approximates actual cost, on a first-in, first-out basis. We provide inventory write-downs based on excess and obsolete inventories determined primarily by future demand forecasts. The write-down is measured as the difference between the cost of the inventory and net realizable value based upon assumptions about future demand and charged to the provision for inventory, which is a component of cost of sales. At the point of 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
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CISCO SYSTEMS, INC.
Notes to Consolidated Financial Statements (Continued)

basis. In addition, we record a liability for firm, noncancelable, and unconditional purchase commitments with contract manufacturers and suppliers for quantities in excess of our future demand forecasts consistent with our valuation of excess and obsolete inventory.
(f) Allowance for Accounts Receivable, Contract Assets and Financing Receivables  We estimate our allowances for credit losses using relevant available information from internal and external sources, related to past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. When assessing for credit losses, we determine collectibility by pooling our assets with similar characteristics.
The allowances for credit losses are each measured on a collective basis when similar risk characteristics exist. Our internal credit risk ratings are categorized as 1 through 10, with the lowest credit risk rating representing the highest quality. Assets that do not share risk characteristics are evaluated on an individual basis. The allowances for credit losses are each measured by multiplying the exposure probability of default, the probability the asset will default within a given time frame, by the loss given default rate, the percentage of the asset not expected to be collected due to default, based on the pool of assets.
Probability of default rates are published quarterly by third-party credit agencies. Adjustments to our internal credit risk ratings may take into account including, but not limited to, various customer-specific factors, the potential sovereign risk of the geographic locations in which the customer is operating and macroeconomic conditions. These factors are updated regularly or when facts and circumstances indicate that an update is deemed necessary.
(g) Financing Receivables and Guarantees  We provide financing arrangements, including loan receivables and lease receivables, for certain qualified channel partners and end-users to build, maintain, and upgrade their networks, and we record accrued interest on the portfolio. Loan receivables represent financing arrangements related to the sale of our hardware, software, and services (including technical support and advanced services), and also may include additional funding for other costs associated with network installation and integration of our products and services. Loan receivables have terms of one year to three years on average. Lease receivables represent sales-type leases resulting from the sale of Cisco’s and complementary third-party products and are typically collateralized by a security interest in the underlying assets. Lease receivables consist of arrangements with terms of four years on average.
Outstanding financing receivables that are aged 31 days or more from the contractual payment date are considered past due. We do not accrue interest on financing receivables that are considered impaired and more than 120 days past due unless either the receivable has not been collected due to administrative reasons or the receivable is well secured and in the process of collection. Financing receivables may be placed on nonaccrual status earlier if, in management’s opinion, a timely collection of the full principal and interest becomes uncertain. After a financing receivable has been categorized as nonaccrual, interest will be recognized when cash is received. A financing receivable may be returned to accrual status after all of the customer’s delinquent balances of principal and interest have been settled, and the customer remains current for an appropriate period.
We facilitate arrangements for third-party financing extended to channel partners, consisting of revolving short-term financing, generally with payment terms 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 a sale, and we receive a payment for the receivables from the third party based on our standard payment terms. These financing arrangements facilitate the working capital requirements of the channel partners, and, in some cases, we guarantee a portion of these arrangements. We could be called upon to make payments under these guarantees if the channel partners do not pay. Deferred revenue relating to these financing arrangements is recorded in accordance with revenue recognition policies or for the fair value of the financing guarantees.
(h) Leases We lease real estate, information technology (IT) and other equipment and vehicles. We also have arrangements with certain suppliers and contract manufacturers which includes the leasing of dedicated space and equipment costs. Our leases have the option to extend or terminate the lease when it is reasonably certain that we will exercise that option.
As a lessee, we determine if an arrangement is a lease at commencement. Our right-of-use (ROU) lease assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments related to the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. We use incremental borrowing rates based on information available at the commencement date to determine the present value of our lease payments. Certain of our lease agreements contain variable lease payments. Our variable lease payments can fluctuate depending on the level of activity or the cost of certain services where we have elected to combine lease and non-lease components. While these payments are not included as part of our lease liabilities, they are recognized as variable lease expense in the period they are incurred.
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CISCO SYSTEMS, INC.
Notes to Consolidated Financial Statements (Continued)

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. As a lessor, we determine if an arrangement is a lease at inception. We provide leasing arrangements for our equipment to certain qualified customers. Our lease portfolio primarily consists of sales-type leases. We allocate the consideration in a bundled contract with our customers based on relative standalone selling prices of our lease and non-lease components. The residual value on our leased equipment is determined at the inception of the lease based on an analysis of estimates of the value of equipment, market factors and historical customer behavior. Residual value estimates are reviewed on a periodic basis and other-than-temporary declines are expensed in the period they occur. Our leases generally provide an end-of-term option for the customer to extend the lease under mutually-agreed terms, return the leased equipment, or purchase the equipment for either the then-market value of the equipment or a pre-determined purchase price. If a customer chooses to terminate their lease prior to the original end of termination date, the customer is required to pay all remaining lease payments in full.
(i) Depreciation and Amortization  Property and equipment are stated at cost, less accumulated depreciation or amortization, whenever applicable. Depreciation and amortization expenses for property and equipment were approximately $ 0.7 billion for each of fiscal 2025, 2024, and 2023. Depreciation and amortization are computed using the straight-line method, generally over the following periods:

Asset Category Period
Buildings 25 years

Building improvements Up to 15 years

Leasehold improvements Shorter of remaining lease term or up to 15 years

Production, engineering, computer and other equipment and related software Up to 5 years

Operating lease assets Based on lease term
Furniture and fixtures 5 years

(j) Business Combinations We allocate the fair value of the purchase consideration of our acquisitions to the tangible assets, liabilities, and intangible assets acquired, including in-process research and development (IPR&D), based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. IPR&D is initially capitalized at fair value as an intangible asset with an indefinite life and assessed for impairment thereafter. When an IPR&D project is completed, the IPR&D is reclassified as an amortizable purchased intangible asset and amortized over the asset’s estimated useful life. Acquisition-related expenses and related restructuring costs are recognized separately from the business combination and are expensed as incurred.
(k) Goodwill and Purchased Intangible Assets   Goodwill is tested for impairment on an annual basis in the fourth fiscal quarter and, when specific circumstances dictate, between annual tests. When impaired, the carrying value of goodwill is written down to fair value. Identifying a potential impairment consists of comparing the fair value of a reporting unit with its carrying amount, including goodwill. Purchased intangible assets with finite lives are carried at cost, less accumulated amortization. Amortization is computed over the estimated useful lives of the respective assets. See “Long-Lived Assets” for our policy regarding impairment testing of purchased intangible assets with finite lives. Purchased intangible assets with indefinite lives are assessed for potential impairment annually or when events or circumstances indicate that their carrying amounts might be impaired.
(l) Long-Lived Assets  Long-lived assets that are held and used by us are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability of long-lived assets is based on an estimate of the undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss for long-lived assets that management expects to hold and use is based on the difference between the fair value of the asset and its carrying value. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.
(m) Fair Value  Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be either recorded or disclosed at fair value, we consider the principal or most advantageous market in which we would transact, and we also consider assumptions that market participants would use when pricing the asset or liability.
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CISCO SYSTEMS, INC.
Notes to Consolidated Financial Statements (Continued)

The accounting guidance for fair value measurement requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The fair value hierarchy is as follows:
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. We use inputs such as actual trade data, benchmark yields, broker/dealer quotes, and other similar data, which are obtained from quoted market prices, independent pricing vendors, or other sources, to determine the ultimate fair value of assets or liabilities.
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. The fair values are determined based on model-based techniques such as discounted cash flow models using inputs that we could not corroborate with market data.
(n) Derivative Instruments  We recognize derivative instruments as either assets or liabilities and measure those instruments at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. For a derivative instrument designated as a fair value hedge, the gain or loss is recognized in earnings in the period of change together with the offsetting loss or gain on the hedged item attributed to the risk being hedged. For a derivative instrument designated as a cash flow hedge, the gain or loss is initially reported as a component of AOCI and subsequently reclassified into earnings when the hedged exposure affects earnings. For a derivative instrument designated as a net investment hedge of our foreign operations, the gain or loss is recorded in the cumulative translation adjustment within AOCI together with the offsetting loss or gain of the hedged exposure of the underlying foreign operations. For derivative instruments that are not designated as accounting hedges, changes in fair value are recognized in earnings in the period of change. We record derivative instruments in the statements of cash flows to operating, investing, or financing activities consistent with the cash flows of the hedged item.
Hedge effectiveness for foreign exchange forward contracts used as cash flow hedges is assessed by comparing the change in the fair value of the hedge contract with the change in the fair value of the forecasted cash flows of the hedged item. Hedge effectiveness for equity forward contracts and foreign exchange net investment hedge forward contracts is assessed by comparing changes in fair value due to changes in spot rates for both the derivative and the hedged item. For foreign exchange option contracts, hedge effectiveness is assessed based on the hedging instrument’s entire change in fair value. Hedge effectiveness for interest rate swaps is assessed by comparing the change in fair value of the swap with the change in the fair value of the hedged item due to changes in the benchmark interest rate.
(o) Foreign Currency Translation  Assets and liabilities of non-U.S. subsidiaries that operate in a local currency environment, where that local currency is the functional currency, are translated to U.S. dollars at exchange rates in effect at the balance sheet date, with the resulting translation adjustments directly recorded to a separate component of AOCI. Income and expense accounts are translated at average exchange rates during the year. Remeasurement adjustments are recorded in other income (loss), net.
(p) Concentrations of Risk  Cash and cash equivalents are maintained with several financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and are maintained with financial institutions with reputable credit and therefore bear minimal credit risk. We seek to mitigate our credit risks by spreading such risks across multiple counterparties and monitoring the risk profiles of these counterparties.
We perform ongoing credit evaluations of our customers and, with the exception of certain financing transactions, do not require collateral from our customers. We receive certain of our components from sole suppliers. Additionally, we rely on a limited number of contract manufacturers and suppliers to provide manufacturing services for our products. The inability of a contract manufacturer or supplier to fulfill our supply requirements could materially impact future operating results.
(q) 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
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Notes to Consolidated Financial Statements (Continued)

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 refer to our term software licenses, security software licenses, SaaS, and associated service arrangements as subscription offers. Revenue from subscription offers includes revenue recognized over time as well as upfront.
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. An allowance for future sales returns is established based on historical trends in product return rates and the related provision is recorded as a reduction to revenue.
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 direct sale customers. 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.
We assess certain software licenses, such as for security software, that contain critical updates or upgrades which customers can download throughout the contract term. Without these updates or upgrades, the functionality of the software would diminish over a relatively short time period. These updates or upgrades provide the customer the full functionality of the purchased security software licenses and are required to maintain the security license’s utility as the risks and threats in the environment are rapidly changing. In these circumstances, the revenue from these software arrangements is recognized as a single performance obligation satisfied over the contract term.
(r) Advertising Costs  We expense advertising costs as incurred. Advertising costs included within sales and marketing expenses were approximately $ 186 million, $ 210 million, and $ 205 million for fiscal 2025, 2024, and 2023, respectively.
(s) Share-Based Compensation Expense  We measure and recognize the compensation expense for all share-based awards made to employees and directors, including restricted stock units (RSUs), performance-based restricted stock units (PRSUs), employee stock purchases related to the Employee Stock Purchase Plan (Employee Stock Purchase Rights) and employee stock options based on estimated fair values. Share-based compensation expense is reduced for forfeitures as they occur.
(t) Software Development Costs  Software development costs, including costs to develop software sold, leased, or otherwise marketed, that are incurred subsequent to the establishment of technological feasibility are capitalized. Costs incurred during the application development stage for internal-use software and cloud-based applications are capitalized. Such software development costs capitalized during the periods presented were not material.
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Notes to Consolidated Financial Statements (Continued)

(u) Income Taxes  Income tax expense is based on pretax financial accounting income. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized.
We account for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. We classify the liability for unrecognized tax benefits as current to the extent that we anticipate payment (or receipt) of cash within one year. Interest and penalties related to uncertain tax positions are recognized in the provision for income taxes.
(v) Computation of Net Income per Share  Basic net income per share is computed using the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted-average number of common shares and dilutive potential common shares outstanding during the period. Diluted shares outstanding includes the dilutive effect of in-the-money options, unvested restricted stock, and restricted stock units. The dilutive effect of such equity awards is calculated based on the average share price for each fiscal period using the treasury stock method. Under the treasury stock method, the amount the employee must pay for exercising stock options and the amount of compensation cost for future service that we have not yet recognized are collectively assumed to be used to repurchase shares.
(w) Consolidation of Variable Interest Entities   Our approach in assessing the consolidation requirement for variable interest entities focuses on identifying which enterprise has the power to direct the activities that most significantly impact the variable interest entity’s economic performance and which enterprise has the obligation to absorb losses or the right to receive benefits from the variable interest entity. Should we conclude that we are the primary beneficiary of a variable interest entity, the assets, liabilities, and results of operations of the variable interest entity will be included in our Consolidated Financial Statements.
(x) Use of Estimates  The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make estimates and judgments that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Estimates are used for the following, among others:
• Revenue recognition
• Allowances for accounts receivable, sales returns, and financing receivables
• Inventory valuation and liability for purchase commitments with contract manufacturers and suppliers
• Loss contingencies and product warranties
• Fair value measurements
• Valuation of goodwill and purchased intangible assets
• Income taxes
The actual results that we experience may differ materially from our estimates.
(y) Recent Accounting Updates Recently Adopted
Segment Reporting In November 2023, the Financial Accounting Standards Board (FASB) issued an accounting standard update that expands the disclosure requirements for reportable segments, primarily through enhanced disclosures around significant segment expenses. We adopted this accounting standard update for our fiscal 2025 Form 10-K with comparative periods updated to reflect additional disclosures. See Note 19.
(z) Recent Accounting Standards or Updates Not Yet Effective as of Fiscal Year End
Improvements on Income Tax Disclosures In December 2023, the FASB issued an accounting standard update expanding the requirements for disclosure of disaggregated information about the effective tax rate reconciliation and income taxes paid. The accounting standard update will be effective for our fiscal 2026 Form 10-K. We are currently evaluating the impact of this accounting standard update on our income tax disclosures.
Disaggregation of Income Statement Expenses In November 2024, the FASB issued an accounting standard update expanding the disclosure requirements about specific expense categories, primarily through disaggregated information on income statement line items. The accounting standard update will be effective for our fiscal 2028 Form 10-K, and early adoption is permitted. We are currently evaluating the impact of this accounting standard update on our Consolidated Financial Statements.
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Notes to Consolidated Financial Statements (Continued)

3. Revenue
(a) Disaggregation of Revenue
We 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 Ended July 26, 2025 July 27, 2024 July 29, 2023
Product revenue:
Networking $ 28,304   $ 29,229   $ 34,570  
Security 8,094   5,075   3,859  
Collaboration 4,154   4,113   4,052  
Observability 1,055   837   661  
Total Product 41,608   39,253   43,142  
Services 15,046   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. SaaS arrangements in this category have one distinct performance obligation which is satisfied over time with revenue recognized ratably over the contract term.
Collaboration consists of our Webex Suite, Collaboration Devices, Contact Center and CPaaS offerings. These products consist primarily of software offerings, including software licenses and SaaS, as well as hardware. Our perpetual software and hardware 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.
Observability consists of our network assurance, monitoring and analytics and observability suite offerings. These products consist primarily of software offerings, including software licenses and SaaS. Our 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.
In addition to our product offerings, we provide a broad range of service and support options for our customers, including technical support services and advanced services. Technical support services represent the majority of these offerings which are distinct performance obligations that are satisfied over time with revenue recognized ratably over the contract term. Advanced services are distinct performance obligations that are satisfied over time with revenue recognized as services are delivered.
The sales arrangements as discussed above are typically made pursuant to customer purchase orders based on master purchase or partner agreements. Cash is received based on our standard payment terms which is typically 30 days. We provide financing
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Notes to Consolidated Financial Statements (Continued)

arrangements to customers for our hardware, software and service offerings. Refer to Note 9 for additional information. For these arrangements, cash is typically received over time.
Subscription revenue includes revenue recognized from our term software licenses, security software licenses, SaaS, and associated service arrangements. Our subscription revenue is recorded in product and services revenue in our Consolidated Statements of Operations as follows (in millions):

Years Ended July 26, 2025 July 27, 2024 July 29, 2023
Product $ 17,783   $ 14,078   $ 11,931  
Services 13,743   13,302   12,709  
Total $ 31,526   $ 27,380   $ 24,640  

The majority of our product subscription revenue is recognized over time and the remainder is recognized upfront. Substantially all of our services subscription revenue is recognized over time based on the contract term.
(b) Contract Balances
Accounts Receivable
Accounts receivable, net was $ 6.7 billion as of each of July 26, 2025 and July 27, 2024, as reported on the Consolidated Balance Sheets.
The allowances for credit loss for our accounts receivable are summarized as follows (in millions):

July 26, 2025 July 27, 2024 July 29, 2023
Allowance for credit loss at beginning of fiscal year $ 87   $ 85   $ 83  
Provisions 33   36   39  
Recoveries (write-offs), net ( 51 ) ( 34 ) ( 37 )
Allowance for credit loss at end of fiscal year $ 69   $ 87   $ 85  

Contract Assets and Liabilities
Gross contract assets by our internal risk ratings are summarized as follows (in millions):

July 26, 2025 July 27, 2024
1 to 4 $ 1,358   $ 1,266  
5 to 6 1,868   1,456  
7 and Higher 73   72  
Total $ 3,299   $ 2,794  

Contract assets consist of unbilled receivables and are recorded when revenue is recognized in advance of scheduled billings to our customers. These amounts are primarily related to software and service arrangements where transfer of control has occurred but we have not yet invoiced. As of July 26, 2025 and July 27, 2024, our contract assets for these unbilled receivables, net of allowances, were $ 3.2  billion and $ 2.7  billion, respectively, of which $ 1.7 billion and $ 1.4 billion, respectively, were included in other current assets, with remaining balances included in other assets.
Contract liabilities consist of deferred revenue. Deferred revenue was $ 28.8 billion as of July 26, 2025 compared to $ 28.5 billion as of July 27, 2024. We recognized approximately $ 16.1 billion of revenue during fiscal 2025 that was included in the deferred revenue balance at July 27, 2024.
(c) Capitalized Contract Acquisition Costs
We capitalize direct and incremental costs incurred to acquire contracts, primarily sales commissions, for which the associated revenue is expected to be recognized in future periods. We incur these costs in connection with both initial contracts and renewals. These costs are initially deferred and typically amortized over the term of the customer contract which corresponds to the period of benefit. Capitalized contract acquisition costs were $ 1.5  billion and $ 1.3  billion as of July 26, 2025 and July 27, 2024, respectively, and were included in other current assets and other assets. The amortization expense associated with these costs was $ 957 million, $ 742 million, and $ 723  million for fiscal 2025, 2024, and 2023, respectively, and was included in sales and marketing expenses.

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CISCO SYSTEMS, INC.
Notes to Consolidated Financial Statements (Continued)

4. Acquisitions
(a) Fiscal 2025 Acquisitions Summary
Allocation of the total purchase consideration for acquisitions we completed during fiscal 2025 is summarized as follows (in millions):

Fiscal 2025 Purchase Consideration Net Tangible Assets Acquired (Liabilities Assumed) Purchased Intangible Assets Goodwill
Total 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 Summary
Allocation of the total purchase consideration for acquisitions we completed during fiscal 2024 is summarized as follows (in millions):

Fiscal 2024 Purchase Consideration Net Tangible Assets Acquired (Liabilities Assumed) Purchased Intangible Assets Goodwill
Splunk $ 27,090   $ ( 2,761 ) $ 10,550   $ 19,301  
Other acquisitions 1,370   ( 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.
Purchase Consideration
The following table summarizes the purchase consideration for the Splunk acquisition (in millions):

Amount
Cash paid for outstanding Splunk common stock $ 26,950  
Fair value of converted Splunk equity awards attributable to pre-acquisition services 137  
Settlement of pre-existing relationships 3  
Total purchase consideration $ 27,090  

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CISCO SYSTEMS, INC.
Notes to Consolidated Financial Statements (Continued)

Allocation of the total purchase consideration for Splunk is presented as follows (in millions):

Amount
Cash and cash equivalents $ 2,422  
Investments 285  
Accounts receivable, net 623  
Goodwill 19,301  
Purchased intangible assets 10,550  
Deferred tax assets 1,308  
Other current and noncurrent assets 1,176  
Accounts payable ( 39 )
Accrued compensation ( 337 )
Current portion of deferred revenue ( 1,768 )
Splunk convertible notes ( 3,344 )
Deferred tax liabilities ( 2,523 )
Noncurrent portion of deferred revenue ( 86 )
Other current and other noncurrent liabilities ( 478 )
Total $ 27,090  

Our Consolidated Statements of Operations for fiscal 2024 includes revenue of approximately $ 1.4  billion and a net loss of $ 557  million attributable to Splunk since the date of acquisition.
We incurred $ 82  million of transaction costs related to the Splunk acquisition and these costs were expensed as incurred in G&A in the Consolidated Statements of Operations. We incurred $ 79  million of these transaction costs in fiscal 2024.
The goodwill generated from Splunk is primarily related to expected synergies. Goodwill is not deductible for income tax purposes. Refer to Note 5. Goodwill and Purchased Intangible Assets for details about our intangible assets acquired through the Splunk acquisition.
Pro forma Financial Information
The unaudited pro forma financial information in the table below summarizes the combined results of our operations and Splunk’s operations, as though the acquisition of Splunk had been completed as of the beginning of fiscal 2023. The pro forma financial information for fiscal 2024 combines our results for this period with the results of Splunk for the period beginning August 1, 2023, through July 27, 2024. The pro forma financial information for fiscal 2023 combines our historical results for that period with the historical results of Splunk for the year ended July 31, 2023.
The following table summarizes the pro forma financial information (in millions):

Years Ended July 27, 2024 July 29, 2023
Total revenue $ 56,761   $ 60,841  
Net income $ 9,280   $ 10,078  

The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition and the cost of financing the acquisition had taken place at the beginning of fiscal 2023. The financial information for the periods presented above includes pro forma adjustments for amortization of purchased intangible assets, costs related to financing the acquisition and transaction costs.
Other 2024 Acquisitions
The total purchase consideration of $ 1.4 billion related to the other acquisitions we completed during fiscal 2024 consisted primarily of cash consideration. The total cash and cash equivalents acquired from these other acquisitions was approximately $ 24  million.
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Notes to Consolidated Financial Statements (Continued)

(c) Fiscal 2023 Acquisitions
Allocation of the total purchase consideration for acquisitions completed during fiscal 2023 is summarized as follows (in millions):

Fiscal 2023 Purchase Consideration Net Tangible Assets Acquired (Liabilities Assumed) Purchased Intangible Assets Goodwill
Total acquisitions $ 315   $ ( 18 ) $ 150   $ 183  

The total purchase consideration related to our acquisitions completed during fiscal 2023 consisted of cash consideration and vested share-based awards assumed. The total cash and cash equivalents acquired from these acquisitions was approximately $ 7  million.
(d) Compensation Expense Related to Acquisitions
In connection with our acquisitions, we have agreed to pay certain additional amounts contingent upon the continued employment with Cisco of certain employees of the acquired entities.
The following table summarizes the compensation expense related to acquisitions (in millions):

July 26, 2025 July 27, 2024 July 29, 2023
Compensation expense related to acquisitions $ 876   $ 618   $ 222  

As of July 26, 2025, we estimated that future cash compensation expense of up to $ 618  million may be required to be recognized pursuant to these applicable acquisition agreements.
(e) Other Acquisition and Divestiture Information
Total transaction costs related to acquisition and divestiture activities during fiscal 2025, 2024, and 2023, inclusive of Splunk, were $ 12  million, $ 104  million and $ 26  million, respectively. These transaction costs were expensed as incurred in G&A in the Consolidated Statements of Operations.
The goodwill generated from acquisitions completed during fiscal 2025, 2024, and 2023 is primarily related to expected synergies. The goodwill is generally not deductible for income tax purposes.
The Consolidated Financial Statements include the operating results of each acquisition from the date of acquisition. Pro forma results of operations and the revenue and net income subsequent to the acquisition date for the acquisitions completed during fiscal 2025, 2024, and 2023, with the exception of Splunk, have not been presented because the effects of the acquisitions were not material to our financial results.

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Notes to Consolidated Financial Statements (Continued)

5. Goodwill and Purchased Intangible Assets
(a) Goodwill
The following tables present the goodwill allocated to our reportable segments as of July 26, 2025 and July 27, 2024, as well as the changes to goodwill during fiscal 2025 and 2024 (in millions):

Balance at July 27, 2024 Acquisitions, net of Divestitures Foreign Currency Translation and Other Balance at July 26, 2025
Americas $ 36,169   $ 121   $ 178   $ 36,468  
EMEA 14,283   47   67   14,397  
APJC 8,208   23   40   8,271  
Total $ 58,660   $ 191   $ 285   $ 59,136  

  Balance at July 29, 2023 Splunk Other Acquisitions Foreign Currency Translation
and Other Balance at July 27, 2024
Americas $ 24,035   $ 11,619   $ 573   $ ( 58 ) $ 36,169  
EMEA 9,118   4,980   207   ( 22 ) 14,283  
APJC 5,382   2,702   137   ( 13 ) 8,208  
Total $ 38,535   $ 19,301   $ 917   $ ( 93 ) $ 58,660  

(b) Purchased Intangible Assets     
The following tables present details of our intangible assets acquired through acquisitions completed during fiscal 2025 and 2024 (in millions, except years):

  FINITE LIVES INDEFINITE
LIVES TOTAL
  CUSTOMER
RELATED TECHNOLOGY TRADE NAME IPR&D
Fiscal 2025 Weighted-
Average Useful
Life (in Years) Amount Weighted-
Average Useful
Life (in Years) Amount Weighted-
Average Useful
Life (in Years) Amount Amount Amount
Total acquisitions 3.5 $ 16   3.8 $ 105   —   $ —   $ —   $ 121  

  FINITE LIVES INDEFINITE
LIVES TOTAL
  CUSTOMER
RELATED TECHNOLOGY TRADE NAME IPR&D
Fiscal 2024 Weighted-
Average Useful
Life (in Years) Amount Weighted-
Average Useful
Life (in Years) Amount Weighted-
Average Useful
Life (in Years) Amount Amount Amount
Splunk 9.1 $ 6,140   6.0 $ 3,900   12.0 $ 510   $ —   $ 10,550  
Others 4.9 83   4.8 400   1.3 3   14   500  
Total acquisitions $ 6,223   $ 4,300   $ 513   $ 14   $ 11,050  

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CISCO SYSTEMS, INC.
Notes to Consolidated Financial Statements (Continued)

The following tables present details of our purchased intangible assets (in millions):  

July 26, 2025 Gross Accumulated Amortization Net
Purchased intangible assets with finite lives:
Customer related $ 6,341   $ ( 1,268 ) $ 5,073  
Technology 5,254   ( 1,606 ) 3,648  
Trade name 526   ( 72 ) 454  
Total purchased intangible assets with finite lives 12,121   ( 2,946 ) 9,175  
In-process research and development, with indefinite lives —   —   —  
Total $ 12,121   $ ( 2,946 ) $ 9,175  

July 27, 2024 Gross Accumulated Amortization Net
Purchased intangible assets with finite lives:
Customer related $ 6,844   $ ( 829 ) $ 6,015  
Technology 6,680   ( 2,006 ) 4,674  
Trade name 553   ( 49 ) 504  
Total purchased intangible assets with finite lives 14,077   ( 2,884 ) 11,193  
In-process research and development, with indefinite lives 26   —  26  
Total $ 14,103   $ ( 2,884 ) $ 11,219  

Purchased intangible assets include intangible assets acquired through acquisitions as well as through direct purchases or licenses.
Impairment charges related to purchased intangible assets were $ 40  million for fiscal 2025 and $ 145  million for fiscal 2024. 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 in-process research and development and technology intangible assets.
The following table presents the amortization of purchased intangible assets, including impairment charges (in millions):

Years Ended July 26, 2025 July 27, 2024 July 29, 2023
Amortization of purchased intangible assets:
Cost of sales $ 1,174   $ 955   $ 649  
Operating expenses 1,028   698   282  
Total $ 2,202   $ 1,653   $ 931  

The estimated future amortization expense of purchased intangible assets with finite lives as of July 26, 2025 is as follows (in millions):

Fiscal Year Amount
2026 $ 1,828  
2027 1,480  
2028 1,401  
2029 1,275  
2030 991  
Thereafter 2,200  
Total $ 9,175  

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Notes to Consolidated Financial Statements (Continued)

6. Restructuring and Other Charges
In the first quarter of fiscal 2025, we announced a restructuring plan (the “Fiscal 2025 Plan”), in order to allow us to invest in key growth opportunities and drive more efficiencies in our business. The Fiscal 2025 Plan is expected to impact approximately 7 % of our global workforce, with estimated pre-tax charges of up to $ 1  billion consisting of severance and other one-time termination benefits, and other costs. In connection with the Fiscal 2025 Plan, we incurred charges of $ 744  million in fiscal 2025 and the plan is expected to be substantially completed in the second quarter of fiscal 2026. The aggregate pre-tax charges are primarily cash-based and consist of severance and other one-time termination benefits, and other costs.
We initiated a restructuring plan in fiscal 2024 (the “Fiscal 2024 Plan”), in order to realign the organization and enable further investment in key priority areas. In connection with the Fiscal 2024 Plan, we incurred cumulative charges of $ 654  million and the plan is complete. The aggregate pretax charges related to this plan were primarily cash-based and consist of severance and other one-time termination benefits and other costs.
We initiated a restructuring plan in fiscal 2023 (the “Fiscal 2023 Plan”), which was completed in fiscal 2024. In connection with the Fiscal 2023 Plan, we incurred cumulative charges of $ 670  million and the plan is complete. The aggregate pretax charges related to this plan were primarily cash-based and consist of severance and other one-time termination benefits, real estate-related charges, and other costs.
The following table summarizes the activities related to our restructuring liability, which is included in other current liabilities on our Consolidated Balance Sheets (in millions):