FULLTEXT DEL 1 AV 2
10-Q – 2025-11-18 – csco-20251025.htm
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2024-10-26 0000858877 us-gaap:OperatingSegmentsMember us-gaap:ProductMember csco:AsiaPacificJapanAndChinaSegmentMember 2025-07-27 2025-10-25 0000858877 us-gaap:OperatingSegmentsMember us-gaap:ProductMember csco:AsiaPacificJapanAndChinaSegmentMember 2024-07-28 2024-10-26 0000858877 us-gaap:OperatingSegmentsMember us-gaap:ServiceMember csco:AsiaPacificJapanAndChinaSegmentMember 2025-07-27 2025-10-25 0000858877 us-gaap:OperatingSegmentsMember us-gaap:ServiceMember csco:AsiaPacificJapanAndChinaSegmentMember 2024-07-28 2024-10-26 0000858877 country:US 2025-07-27 2025-10-25 0000858877 country:US 2024-07-28 2024-10-26 Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _____________________________________ FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 25, 2025 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-39940 _____________________________________ CISCO SYSTEMS, INC. (Exact name of registrant as specified in its charter) Delaware 77-0059951 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number) 170 West Tasman Drive San Jose , California 95134 (Address of principal executive office and zip code) ( 408 ) 526-4000 (Registrant’s telephone number, including area code) Not Applicable (Former name, former address and formal fiscal year, if changed since last report.) _____________________________________ Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, par value $0.001 per share CSCO The Nasdaq Stock Market LLC Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ Number of shares of the registrant’s common stock outstanding as of November 13, 2025: 3,951,094,563 ____________________________________ 1 Table of Contents Cisco Systems, Inc. Form 10-Q for the Quarter Ended October 25, 2025 INDEX Page Part I Financial Information 3 Item 1. Financial Statements (Unaudited) 3 Consolidated Balance Sheets at October 25, 2025 and July 26, 2025 3 Consolidated Statements of Operations for the Three Months Ended October 2 5 , 2025 and October 26 , 2024 4 Consolidated Statements of Comprehensive Income for the Three Months Ended October 25 , 2025 and October 26 , 2024 5 Consolidated Statements of Cash Flows for the Three Months Ended October 25 , 2025 and October 26 , 2024 6 Consolidated Statements of Equity for the Three Months Ended October 2 5 , 2025 and October 26 , 2024 7 Notes to Consolidated Financial Statements 8 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 35 Item 3. Quantitative and Qualitative Disclosures About Market Risk 53 Item 4. Controls and Procedures 54 Part II. Other Information 54 Item 1. Legal Proceedings 54 Item 1A. Risk Factors 55 Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities 70 Item 3. Defaults Upon Senior Securities 70 Item 4. Mine Safety Disclosures 70 Item 5. Other Information 70 Item 6. Exhibits 72 Signature 73 2 Table of Contents PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) CISCO SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS (in millions, except par value) (Unaudited) October 25, 2025 July 26, 2025 ASSETS Current assets: Cash and cash equivalents $ 8,400 $ 8,346 Investments 7,336 7,764 Accounts receivable, net of allowance of $ 62 at October 25, 2025 and $ 69 at July 26, 2025 4,827 6,701 Inventories 3,395 3,164 Financing receivables, net 3,085 3,061 Other current assets 5,833 5,950 Total current assets 32,876 34,986 Property and equipment, net 2,248 2,113 Financing receivables, net 3,719 3,466 Goodwill 59,119 59,136 Purchased intangible assets, net 8,713 9,175 Deferred tax assets 7,314 7,356 Other assets 7,113 6,059 TOTAL ASSETS $ 121,102 $ 122,291 LIABILITIES AND EQUITY Current liabilities: Short-term debt $ 6,725 $ 5,232 Accounts payable 2,418 2,528 Income taxes payable 2,471 1,857 Accrued compensation 3,064 3,611 Deferred revenue 15,801 16,416 Other current liabilities 4,972 5,420 Total current liabilities 35,451 35,064 Long-term debt 21,364 22,861 Income taxes payable 2,172 2,165 Deferred revenue 12,168 12,363 Other long-term liabilities 3,074 2,995 Total liabilities 74,229 75,448 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; 3,938 and 3,960 shares issued and outstanding at October 25, 2025 and July 26, 2025, respectively 48,167 47,747 Retained earnings (Accumulated deficit) ( 364 ) 50 Accumulated other comprehensive loss ( 930 ) ( 954 ) Total equity 46,873 46,843 TOTAL LIABILITIES AND EQUITY $ 121,102 $ 122,291 See Notes to Consolidated Financial Statements. 3 Table of Contents CISCO SYSTEMS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per-share amounts) (Unaudited) Three Months Ended October 25, 2025 October 26, 2024 REVENUE: Product $ 11,077 $ 10,114 Services 3,806 3,727 Total revenue 14,883 13,841 COST OF SALES: Product 3,934 3,526 Services 1,204 1,194 Total cost of sales 5,138 4,720 GROSS MARGIN 9,745 9,121 OPERATING EXPENSES: Research and development 2,400 2,286 Sales and marketing 2,871 2,752 General and administrative 733 795 Amortization of purchased intangible assets 231 265 Restructuring and other charges 147 665 Total operating expenses 6,382 6,763 OPERATING INCOME 3,363 2,358 Interest income 222 286 Interest expense ( 350 ) ( 418 ) Other income (loss), net 156 41 Interest and other income (loss), net 28 ( 91 ) INCOME BEFORE PROVISION FOR INCOME TAXES 3,391 2,267 Provision for (benefit from) income taxes 531 ( 444 ) NET INCOME $ 2,860 $ 2,711 Net income per share: Basic $ 0.72 $ 0.68 Diluted $ 0.72 $ 0.68 Shares used in per-share calculation: Basic 3,956 3,990 Diluted 3,993 4,013 See Notes to Consolidated Financial Statements. 4 Table of Contents CISCO SYSTEMS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions) (Unaudited) Three Months Ended October 25, 2025 October 26, 2024 Net income $ 2,860 $ 2,711 Available-for-sale investments: Change in net unrealized gains and losses, net of tax benefit (expense) of $( 10 ) and $( 17 ) for the first quarter of fiscal 2026 and 2025, respectively 38 54 Net (gains) losses reclassified into earnings, net of tax (benefit) expense of $( 1 ) and $( 6 ) for the first quarter of fiscal 2026 and 2025, respectively 3 19 41 73 Cash flow hedging instruments: Change in unrealized gains and losses, net of tax benefit (expense) of $( 10 ) and $( 2 ) for the first quarter of fiscal 2026 and 2025, respectively 32 7 Net (gains) losses reclassified into earnings, net of tax (benefit) expense of $ 2 for each of the first quarter of fiscal 2026 and 2025 ( 7 ) ( 7 ) 25 — Net change in cumulative translation adjustment and actuarial gains and losses, net of tax benefit (expense) of $( 1 ) and $ 0 for the first quarter of fiscal 2026 and 2025, respectively ( 42 ) ( 19 ) Other comprehensive income 24 54 Comprehensive income $ 2,884 $ 2,765 See Notes to Consolidated Financial Statements. 5 Table of Contents CISCO SYSTEMS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) (Unaudited) Three Months Ended October 25, 2025 October 26, 2024 Cash flows from operating activities: Net income $ 2,860 $ 2,711 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization, and other 606 789 Share-based compensation expense 1,055 827 Benefit from receivables ( 3 ) ( 1 ) Deferred income taxes 25 ( 281 ) (Gains) losses on divestitures, investments and other, net ( 178 ) ( 60 ) Change in operating assets and liabilities, net of effects of acquisitions and divestitures: Accounts receivable 1,857 2,227 Inventories ( 234 ) 229 Financing receivables ( 312 ) 173 Other assets ( 592 ) ( 190 ) Accounts payable ( 108 ) ( 269 ) Income taxes, net ( 128 ) ( 806 ) Accrued compensation ( 539 ) ( 754 ) Deferred revenue ( 723 ) ( 971 ) Other liabilities ( 374 ) 37 Net cash provided by operating activities 3,212 3,661 Cash flows from investing activities: Purchases of investments ( 1,984 ) ( 1,775 ) Proceeds from sales of investments 1,269 1,490 Proceeds from maturities of investments 1,222 1,164 Acquisitions, net of cash and cash equivalents acquired and divestitures ( 7 ) ( 217 ) Purchases of investments in privately held companies ( 18 ) ( 42 ) Return of investments in privately held companies 19 77 Acquisition of property and equipment ( 323 ) ( 217 ) Other ( 22 ) ( 1 ) Net cash provided by investing activities 156 479 Cash flows from financing activities: Repurchases of common stock — repurchase program ( 1,992 ) ( 2,003 ) Shares repurchased for tax withholdings on vesting of restricted stock units ( 284 ) ( 165 ) Short-term borrowings, original maturities of 90 days or less, net 1,260 68 Issuances of debt 1,559 5,732 Repayments of debt ( 2,788 ) ( 4,821 ) Dividends paid ( 1,617 ) ( 1,592 ) Other ( 1 ) ( 3 ) Net cash used in financing activities ( 3,863 ) ( 2,784 ) Effect of foreign currency exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents ( 14 ) 10 Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents ( 509 ) 1,366 Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period 8,910 8,842 Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period $ 8,401 $ 10,208 Supplemental cash flow information: Cash paid for interest $ 616 $ 545 Cash paid for income taxes, net $ 634 $ 643 See Notes to Consolidated Financial Statements. 6 Table of Contents CISCO SYSTEMS, INC. CONSOLIDATED STATEMENTS OF EQUITY (in millions, except per-share amounts) (Unaudited) Three Months Ended October 25, 2025 Shares of Common Stock Common Stock and Additional Paid-In Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Loss Total Equity Balance at July 26, 2025 3,960 $ 47,747 $ 50 $ ( 954 ) $ 46,843 Net income 2,860 2,860 Other comprehensive income (loss) 24 24 Issuance of common stock 12 — — Repurchase of common stock ( 29 ) ( 354 ) ( 1,647 ) ( 2,001 ) Shares repurchased for tax withholdings on vesting of restricted stock units and other ( 5 ) ( 282 ) ( 282 ) Cash dividends declared ($ 0.41 per common share) ( 1,617 ) ( 1,617 ) Share-based compensation 1,055 1,055 Other 1 ( 10 ) ( 9 ) Balance at October 25, 2025 3,938 $ 48,167 $ ( 364 ) $ ( 930 ) $ 46,873 Three Months Ended October 26, 2024 Shares of Common Stock Common Stock and Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total Equity Balance at July 27, 2024 4,007 $ 45,800 $ 1,087 $ ( 1,430 ) $ 45,457 Net income 2,711 2,711 Other comprehensive income (loss) 54 54 Issuance of common stock 11 — — Repurchase of common stock ( 40 ) ( 462 ) ( 1,541 ) ( 2,003 ) Shares repurchased for tax withholdings on vesting of restricted stock units and other ( 4 ) ( 174 ) ( 174 ) Cash dividends declared ($ 0.40 per common share) ( 1,592 ) ( 1,592 ) Share-based compensation 827 827 Other — ( 3 ) ( 3 ) Balance at October 26, 2024 3,974 $ 45,991 $ 662 $ ( 1,376 ) $ 45,277 See Notes to Consolidated Financial Statements. 7 Table of Contents CISCO SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Organization and 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 2026 and fiscal 2025 are 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). We have prepared the accompanying financial data as of October 25, 2025 and for the first quarter of fiscal 2026 and 2025, without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (GAAP) have been condensed or omitted pursuant to such rules and regulations. The July 26, 2025 Consolidated Balance Sheet was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States. However, we believe that the disclosures are adequate to make the information presented not misleading. These Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended July 26, 2025. In the opinion of management, all normal recurring adjustments necessary to state fairly the consolidated balance sheet as of October 25, 2025, the results of operations, the statements of comprehensive income, the statements of cash flows and the statements of equity for the first quarter of fiscal 2026 and 2025, as applicable, have been made. The results of operations for the first quarter of fiscal 2026 are not necessarily indicative of the operating results for the full fiscal year or any future periods. 2. Recent Accounting Pronouncements (a) Recent Accounting Standards or Updates Not Yet Effective 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. Targeted Improvements to the Accounting for Internal-Use Software In September 2025, the FASB issued an accounting standard update to modernize the accounting for internal-use software costs and clarify the criteria for capitalization. The accounting standard update will be effective for our interim and annual reporting periods of fiscal 2029, with early adoption permitted. We are currently evaluating the impact of this accounting standard update on our Consolidated Financial Statements. 3. Revenue 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. As a result, our contracts 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 software-as-a-service (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 8 Table of Contents CISCO SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) 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. Significant Judgments 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. 9 Table of Contents CISCO SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) (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): Three Months Ended October 25, 2025 October 26, 2024 Product revenue: Networking $ 7,768 $ 6,753 Security 1,980 2,017 Collaboration 1,055 1,085 Observability 274 258 Total Product 11,077 10,114 Services 3,806 3,727 Total revenue $ 14,883 $ 13,841 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, Secure Access Service Edge (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 Communication Platform as a Service (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. 10 Table of Contents CISCO SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) 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 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): Three Months Ended October 25, 2025 October 26, 2024 Product $ 4,500 $ 4,419 Services 3,500 3,425 Total $ 8,000 $ 7,844 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 $ 4.8 billion as of October 25, 2025 compared to $ 6.7 billion as of July 26, 2025, as reported on the Consolidated Balance Sheets. The allowances for credit loss for our accounts receivable are summarized as follows (in millions): Three Months Ended October 25, 2025 October 26, 2024 Allowance for credit loss at beginning of period $ 69 $ 87 Provisions ( 4 ) — Write-offs, net of recoveries ( 3 ) ( 9 ) Allowance for credit loss at end of period $ 62 $ 78 Contract Assets and Liabilities Gross contract assets by our internal risk ratings are summarized as follows (in millions): October 25, 2025 July 26, 2025 1 to 4 $ 1,379 $ 1,358 5 to 6 2,001 1,868 7 and Higher 75 73 Total $ 3,455 $ 3,299 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. Our contract assets for these unbilled receivables, net of allowances, were $ 3.4 billion as of October 25, 2025 and $ 3.2 billion as of July 26, 2025, of which $ 1.8 billion and $ 1.7 billion, respectively, were included in other current assets, with remaining balances included in other assets. Contract liabilities consist of deferred revenue. Deferred revenue was $ 28.0 billion as of October 25, 2025 compared to $ 28.8 billion as of July 26, 2025. We recognized approximately $ 5.4 billion of revenue during the first quarter of fiscal 2026 that was included in the deferred revenue balance at July 26, 2025. (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 11 Table of Contents CISCO SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) the period of benefit. Capitalized contract acquisition costs were $ 1.5 billion as of each of October 25, 2025 and July 26, 2025, and were included in other current assets and other assets. The amortization expense associated with these costs was $ 234 million and $ 208 million for the first quarter of fiscal 2026 and 2025, respectively, and was included in sales and marketing expenses. 4. Acquisitions Allocation of the total purchase consideration for an acquisition we completed during the first quarter of fiscal 2026 is summarized as follows (in millions): Purchase Consideration Net Tangible Assets Acquired (Liabilities Assumed) Purchased Intangible Assets Goodwill Allocation of purchase consideration $ 10 $ 1 $ 4 $ 5 The total purchase consideration related to this acquisition consisted primarily of cash consideration. Total transaction costs related to acquisition activities were $ 3 million and $ 9 million for the first quarter of fiscal 2026 and 2025, respectively. These transaction costs were expensed as incurred in general and administrative expenses (“G&A”) in the Consolidated Statements of Operations. The purchase price allocation for acquisitions completed during recent periods is preliminary and subject to revision as additional information about fair value of assets and liabilities becomes 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. The goodwill generated from the acquisition completed during the first quarter of fiscal 2026 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 acquisition completed during the first quarter of fiscal 2026 have not been presented because the effects of the acquisition was not material to our financial results. 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): Three Months Ended October 25, 2025 October 26, 2024 Compensation expense related to acquisitions $ 110 $ 297 As of October 25, 2025, we estimated that future cash compensation expense of up to $ 502 million may be required to be recognized pursuant to applicable acquisition agreements. 12 Table of Contents CISCO SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) 5. Goodwill and Purchased Intangible Assets (a) Goodwill The following table presents the goodwill allocated to our reportable segments as of October 25, 2025 and changes to goodwill during the first quarter of fiscal 2026 (in millions): Balance at July 26, 2025 Acquisitions, net of Divestitures Foreign Currency Translation and Other Balance at October 25, 2025 Americas $ 36,468 $ 3 $ ( 14 ) $ 36,457 EMEA 14,397 1 ( 5 ) 14,393 APJC 8,271 1 ( 3 ) 8,269 Total $ 59,136 $ 5 $ ( 22 ) $ 59,119 (b) Purchased Intangible Assets The following table presents details of our intangible assets acquired through acquisitions completed during the first quarter of fiscal 2026 (in millions, except years): FINITE LIVES INDEFINITE LIVES TOTAL CUSTOMER RELATED TECHNOLOGY TRADE NAME IPR&D Weighted- Average Useful Life (in Years) Amount Weighted- Average Useful Life (in Years) Amount Weighted- Average Useful Life (in Years) Amount Amount Amount Total — $ — 3.0 $ 4 — $ — $ — $ 4 The following tables present details of our purchased intangible assets with finite lives (in millions): October 25, 2025 Gross Accumulated Amortization Net Customer related $ 6,340 $ ( 1,488 ) $ 4,852 Technology 5,209 ( 1,791 ) 3,418 Trade name 526 ( 83 ) 443 Total $ 12,075 $ ( 3,362 ) $ 8,713 July 26, 2025 Gross Accumulated Amortization Net Customer related $ 6,341 $ ( 1,268 ) $ 5,073 Technology 5,254 ( 1,606 ) 3,648 Trade name 526 ( 72 ) 454 Total $ 12,121 $ ( 2,946 ) $ 9,175 Purchased intangible assets include intangible assets acquired through acquisitions as well as through direct purchases or licenses. The following table presents the amortization of purchased intangible assets, including impairment charges (in millions): Three Months Ended October 25, 2025 October 26, 2024 Amortization of purchased intangible assets: Cost of sales $ 240 $ 325 Operating expenses 231 265 Total $ 471 $ 590 13 Table of Contents CISCO SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) The estimated future amortization expense of purchased intangible assets with finite lives as of October 25, 2025 is as follows (in millions): Fiscal Year Amount 2026 (remaining nine months) $ 1,359 2027 1,481 2028 1,403 2029 1,277 2030 993 Thereafter 2,200 Total $ 8,713 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, of which approximately 7 % of our global workforce would be impacted with estimated pre-tax charges of up to $ 1 billion. In connection with the Fiscal 2025 Plan, we incurred charges of $ 147 million in the first quarter of fiscal 2026, and the plan is expected to be completed in the second quarter of fiscal 2026. These aggregate pre-tax charges are primarily cash-based and consist of severance and other one-time termination benefits, and other costs. The following table summarizes the activities related to our restructuring liability, which was included in other current liabilities on our Consolidated Balance Sheets (in millions): FISCAL 2025 PLAN Employee Severance Other Total Liability as of July 26, 2025 $ 66 $ 46 $ 112 Charges 113 34 147 Cash payments ( 61 ) ( 21 ) ( 82 ) Non-cash and other ( 1 ) ( 35 ) ( 36 ) Liability as of October 25, 2025 $ 117 $ 24 $ 141 7. Balance Sheet and Other Details The following tables provide details of selected balance sheet and other items (in millions, except percentages): Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents October 25, 2025 July 26, 2025 Cash and cash equivalents $ 8,400 $ 8,346 Restricted cash and restricted cash equivalents included in other current assets 1 564 Total $ 8,401 $ 8,910 Our restricted cash and restricted cash equivalents are funds primarily related to contractual obligations with suppliers. 14 Table of Contents CISCO SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) Inventories October 25, 2025 July 26, 2025 Raw materials $ 1,758 $ 1,744 Work in process 411 261 Finished goods 985 933 Service-related spares 236 220 Demonstration systems 5 6 Total $ 3,395 $ 3,164 Property and Equipment, Net October 25, 2025 July 26, 2025 Gross property and equipment: Land, buildings, and building and leasehold improvements $ 4,062 $ 4,045 Production, engineering, computer and other equipment and related software 5,232 5,178 Operating lease assets 49 51 Furniture, fixtures and other 318 316 Total gross property and equipment 9,661 9,590 Less: accumulated depreciation and amortization ( 7,413 ) ( 7,477 ) Total $ 2,248 $ 2,113 Remaining Performance Obligations (RPO) October 25, 2025 July 26, 2025 Product $ 21,904 $ 21,572 Services 20,969 21,961 Total $ 42,873 $ 43,533 Short-term RPO $ 20,971 $ 21,723 Long-term RPO 21,902 21,810 Total $ 42,873 $ 43,533 Amount to be recognized as revenue over the next 12 months 49 % 50 % Deferred revenue $ 27,969 $ 28,779 Unbilled contract revenue 14,904 14,754 Total $ 42,873 $ 43,533 Unbilled contract revenue represents noncancelable contracts for which we have not invoiced, have an obligation to perform, and revenue has not yet been recognized in the financial statements. 15 Table of Contents CISCO SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) Deferred Revenue October 25, 2025 July 26, 2025 Product $ 13,252 $ 13,490 Services 14,717 15,289 Total $ 27,969 $ 28,779 Reported as: Current $ 15,801 $ 16,416 Noncurrent 12,168 12,363 Total $ 27,969 $ 28,779 Transition Tax Payable/Receivable Our income tax payable and receivable associated with the one-time U.S. transition tax on accumulated earnings for foreign subsidiaries as a result of the Tax Cuts and Jobs Act are as follows: October 25, 2025 July 26, 2025 Current income taxes payable $ 2,273 $ 1,595 Less: Noncurrent income tax receivable included in other assets ( 678 ) — Net $ 1,595 $ 1,595 The income tax receivable as of October 25, 2025 reflects the transition tax benefit of the U.S. Tax Court opinion in Varian Medical Systems, Inc. v. Commissioner . See Note 18. 8. Leases (a) Lessee Arrangements The following table presents our operating lease balances (in millions): Balance Sheet Line Item October 25, 2025 July 26, 2025 Operating lease right-of-use assets Other assets $ 1,303 $ 1,301 Operating lease liabilities Other current liabilities $ 403 $ 375 Operating lease liabilities Other long-term liabilities 1,145 1,175 Total operating lease liabilities $ 1,548 $ 1,550 The components of our lease expenses were as follows (in millions): Three Months Ended October 25, 2025 October 26, 2024 Operating lease expense $ 131 $ 114 Short-term lease expense 25 18 Variable lease expense 72 46 Total lease expense $ 228 $ 178 Supplemental information related to our operating leases is as follows (in millions): Three Months Ended October 25, 2025 October 26, 2024 Cash paid for amounts included in the measurement of lease liabilities — operating cash flows $ 131 $ 114 Right-of-use assets obtained in exchange for operating leases liabilities $ 123 $ 127 16 Table of Contents CISCO SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) The weighted-average lease term was 5.3 years and 5.7 years as of October 25, 2025 and July 26, 2025, respectively. The weighted-average discount rate was 3.9 % and 4.1 % as of October 25, 2025 and July 26, 2025, respectively. The maturities of our operating leases (undiscounted) as of October 25, 2025 are as follows (in millions): Fiscal Year Amount 2026 (remaining nine months) $ 360 2027 346 2028 262 2029 209 2030 183 Thereafter 374 Total lease payments 1,734 Less: interest ( 186 ) Total $ 1,548 (b) Lessor Arrangements Our leases primarily represent sales-type leases with terms of four years on average. We provide leasing of our equipment and complementary third-party products primarily through our channel partners and distributors, for which the income arising from these leases is recognized through interest income. Interest income was $ 16 million and $ 17 million for the first quarter of fiscal 2026 and 2025, respectively, and was included in interest income in the Consolidated Statement of Operations. The net investment of our lease receivables is measured at the commencement date as the gross lease receivable, residual value less unearned income and allowance for credit loss. For additional information, see Note 9. Future minimum lease payments on our lease receivables as of October 25, 2025 are summarized as follows (in millions): Fiscal Year Amount 2026 (remaining nine months) $ 303 2027 346 2028 171 2029 180 2030 60 Total 1,060 Less: Present value of lease payments ( 962 ) Unearned income $ 98 Actual cash collections may differ from the contractual maturities due to early customer buyouts, refinancings, or defaults. 9. Financing Receivables (a) Financing Receivables Financing receivables primarily consist of loan receivables and lease receivables. 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. 17 Table of Contents CISCO SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) A summary of our financing receivables is presented as follows (in millions): October 25, 2025 Loan Receivables Lease Receivables Total Gross $ 5,826 $ 1,060 $ 6,886 Residual value — 67 67 Unearned income — ( 98 ) ( 98 ) Allowance for credit loss ( 37 ) ( 14 ) ( 51 ) Total, net $ 5,789 $ 1,015 $ 6,804 Reported as: Current $ 2,714 $ 371 $ 3,085 Noncurrent 3,075 644 3,719 Total, net $ 5,789 $ 1,015 $ 6,804 July 26, 2025 Loan Receivables Lease Receivables Total Gross $ 5,628 $ 982 $ 6,610 Residual value — 66 66 Unearned income — ( 99 ) ( 99 ) Allowance for credit loss ( 37 ) ( 13 ) ( 50 ) Total, net $ 5,591 $ 936 $ 6,527 Reported as: Current $ 2,715 $ 346 $ 3,061 Noncurrent 2,876 590 3,466 Total, net $ 5,591 $ 936 $ 6,527 (b) Credit Quality of Financing Receivables The tables below present our gross financing receivables, excluding residual value, less unearned income, categorized by our internal credit risk rating by period of origination (in millions): October 25, 2025 Fiscal Year Three Months Ended Internal Credit Risk Rating Prior July 30, 2022 July 29, 2023 July 27, 2024 July 26, 2025 October 25, 2025 Total Loan Receivables: 1 to 4 $ 58 $ 186 $ 306 $ 1,003 $ 1,361 $ 662 $ 3,576 5 to 6 38 36 131 466 1,137 400 2,208 7 and Higher — 6 7 4 22 3 42 Total Loan Receivables $ 96 $ 228 $ 444 $ 1,473 $ 2,520 $ 1,065 $ 5,826 Lease Receivables: 1 to 4 $ 6 $ 21 $ 110 $ 194 $ 218 $ 35 $ 584 5 to 6 4 20 70 117 103 50 364 7 and Higher — 1 2 6 2 3 14 Total Lease Receivables $ 10 $ 42 $ 182 $ 317 $ 323 $ 88 $ 962 Total $ 106 $ 270 $ 626 $ 1,790 $ 2,843 $ 1,153 $ 6,788 18 Table of Contents CISCO SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) July 26, 2025 Fiscal Year Internal Credit Risk Rating Prior July 31, 2021 July 30, 2022 July 29, 2023 July 27, 2024 July 26, 2025 Total Loan Receivables: 1 to 4 $ 2 $ 83 $ 236 $ 371 $ 1,258 $ 1,556 $ 3,506 5 to 6 2 56 53 167 561 1,248 2,087 7 and Higher — — 6 9 4 16 35 Total Loan Receivables $ 4 $ 139 $ 295 $ 547 $ 1,823 $ 2,820 $ 5,628 Lease Receivables: 1 to 4 $ — $ 9 $ 23 $ 112 $ 187 $ 207 $ 538 5 to 6 — 6 25 77 120 103 331 7 and Higher — — 1 3 8 2 14 Total Lease Receivables $ — $ 15 $ 49 $ 192 $ 315 $ 312 $ 883 Total $ 4 $ 154 $ 344 $ 739 $ 2,138 $ 3,132 $ 6,511 The following tables present the aging analysis of gross receivables as of October 25, 2025 and July 26, 2025 (in millions): DAYS PAST DUE (INCLUDES BILLED AND UNBILLED) October 25, 2025 31-60 61-90 91+ Total Past Due Current Total 120+ Still Accruing Nonaccrual Financing Receivables Impaired Financing Receivables Loan receivables $ 46 $ 27 $ 31 $ 104 $ 5,722 $ 5,826 $ 8 $ 3 $ 3 Lease receivables 12 2 16 30 932 962 5 1 1 Total $ 58 $ 29 $ 47 $ 134 $ 6,654 $ 6,788 $ 13 $ 4 $ 4 DAYS PAST DUE (INCLUDES BILLED AND UNBILLED) July 26, 2025 31-60 61-90 91+ Total Past Due Current Total 120+ Still Accruing Nonaccrual Financing Receivables Impaired Financing Receivables Loan receivables $ 18 $ 18 $ 16 $ 52 $ 5,576 $ 5,628 $ 4 $ 5 $ 5 Lease receivables 7 3 6 16 867 883 4 1 1 Total $ 25 $ 21 $ 22 $ 68 $ 6,443 $ 6,511 $ 8 $ 6 $ 6 Past due financing receivables are those that are 31 days or more past due according to their contractual payment terms. The data in the preceding tables is presented by contract, and the aging classification of each contract is based on the oldest outstanding receivable, and therefore past due amounts also include unbilled and current receivables within the same contract. (c) Allowance for Credit Loss Rollforward The allowances for credit loss and the related financing receivables are summarized as follows (in millions): Three Months Ended October 25, 2025 CREDIT LOSS ALLOWANCES Loan Receivables Lease Receivables Total Allowance for credit loss as of July 26, 2025 $ 37 $ 13 $ 50 Provisions (benefits) — 1 1 Allowance for credit loss as of October 25, 2025 $ 37 $ 14 $ 51 Three Months Ended October 26, 2024 CREDIT LOSS ALLOWANCES Loan Receivables Lease Receivables Total Allowance for credit loss as of July 27, 2024 $ 50 $ 15 $ 65 Provisions (benefits) ( 1 ) — ( 1 ) Allowance for credit loss as of October 26, 2024 $ 49 $ 15 $ 64 19 Table of Contents CISCO SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) 10. Investments (a) Summary of Available-for-Sale Debt Investments The following tables summarize our available-for-sale debt investments (in millions): October 25, 2025 Amortized Cost Gross Unrealized Gains Gross Unrealized and Credit Losses Fair Value U.S. government securities $ 1,637 $ 7 $ ( 4 ) $ 1,640 U.S. government agency securities 49 — — 49 Non-U.S. government and agency securities 409 1 — 410 Corporate debt securities 2,979 14 ( 44 ) 2,949 Mortgage- and asset-backed securities 270 — ( 16 ) 254 Commercial paper 884 — — 884 Certificates of deposit 756 — — 756 Total $ 6,984 $ 22 $ ( 64 ) $ 6,942 July 26, 2025 Amortized Cost Gross Unrealized Gains Gross Unrealized and Credit Losses Fair Value U.S. government securities $ 1,971 $ 2 $ ( 12 ) $ 1,961 U.S. government agency securities 67 — — 67 Non-U.S. government and agency securities 458 — — 458 Corporate debt securities 3,138 13 ( 61 ) 3,090 Mortgage- and asset-backed securities 320 — ( 34 ) 286 Commercial paper 950 — — 950 Certificates of deposit 569 — — 569 Total $ 7,473 $ 15 $ ( 107 ) $ 7,381 The following table presents the gross realized gains and gross realized losses related to available-for-sale debt investments (in millions): Three Months Ended October 25, 2025 October 26, 2024 Gross realized gains $ 10 $ 8 Gross realized losses ( 14 ) ( 33 ) Total $ ( 4 ) $ ( 25 ) The following tables present the breakdown of the available-for-sale debt investments with gross unrealized losses and the duration that those losses had been unrealized at October 25, 2025 and July 26, 2025 (in millions): UNREALIZED LOSSES LESS THAN 12 MONTHS UNREALIZED LOSSES 12 MONTHS OR GREATER TOTAL October 25, 2025 Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses U.S. government securities $ — $ — $ 436 $ ( 4 ) $ 436 $ ( 4 ) U.S. government agency securities 5 — — — 5 — Corporate debt securities 63 — 1,583 ( 18 ) 1,646 ( 18 ) Mortgage- and asset-backed securities 4 — 160 ( 16 ) 164 ( 16 ) Commercial paper 10 — — — 10 — Total $ 82 $ — $ 2,179 $ ( 38 ) $ 2,261 $ ( 38 ) 20 Table of Contents CISCO SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) UNREALIZED LOSSES LESS THAN 12 MONTHS UNREALIZED LOSSES 12 MONTHS OR GREATER TOTAL July 26, 2025 Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses U.S. government securities $ 1,076 $ ( 6 ) $ 302 $ ( 6 ) $ 1,378 $ ( 12 ) U.S. government agency securities 8 — 21 — 29 — Non-U.S. government and agency securities 292 — — — 292 — Corporate debt securities 106 — 1,800 ( 35 ) 1,906 ( 35 ) Mortgage- and asset-backed securities 5 — 279 ( 34 ) 284 ( 34 ) Commercial paper 30 — — — 30 — Total $ 1,517 $ ( 6 ) $ 2,402 $ ( 75 ) $ 3,919 $ ( 81 ) The following table summarizes the maturities of our available-for-sale debt investments as of October 25, 2025 (in millions): Amortized Cost Fair Value Within 1 year $ 3,925 $ 3,883 After 1 year through 5 years 2,768 2,784 After 5 years through 10 years 21 21 Mortgage- and asset-backed securities with no single maturity 270 254 Total $ 6,984 $ 6,942 Actual maturities may differ from the contractual maturities because borrowers may have the right to call or prepay certain obligations. (b) Marketable Equity Securities We held marketable equity securities of $ 394 million and $ 383 million as of October 25, 2025 and July 26, 2025, respectively. We recognized net unrealized gains of $ 30 million and $ 25 million during the first quarter of fiscal 2026 and fiscal 2025, respectively, on our marketable securities still held as of the reporting date. (c) Investments in Privately Held Companies The carrying value of our investments in privately held companies was $ 2.1 billion and $ 1.9 billion as of October 25, 2025 and July 26, 2025, respectively. As of October 25, 2025, we have total funding commitments of $ 0.5 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. Investments in privately held companies measured using the measurement alternative had a carrying value of $ 0.7 billion and $ 0.6 billion as of October 25, 2025 and July 26, 2025, respectively. We have recorded cumulative adjustments to the carrying value of our investments in privately held companies measured using the measurement alternative as follows (in millions): October 25, 2025 July 26, 2025 Cumulative upward adjustments $ 277 $ 195 Cumulative downward adjustments, including impairments ( 595 ) ( 597 ) Net adjustments $ ( 318 ) $ ( 402 ) We held equity interests in certain private equity funds o f $ 0.7 billion as of each of October 25, 2025 and July 26, 2025, which are accounted for under the NAV practical expedient. Of the total carrying value of our investments in privately held companies as of October 25, 2025, $ 0.8 billion of such investments are considered to be in variable interest entities which are unconsolidated. 21 Table of Contents CISCO SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) Certain of our investments in privately held companies are required to be consolidated under the voting interest entity model. The noncontrolling interest attributed to these investments was $ 206 million and $ 162 million as of October 25, 2025 and July 26, 2025, respectively, and is included in the equity section of the Consolidated Balance Sheets. The share of earnings attributable to the noncontrolling interest attributed to these investments is not material for any of the periods presented and is included in other income (loss), net in the Consolidated Statements of Operations. 11. Fair Value (a) Assets and Liabilities Measured at Fair Value on a Recurring Basis Assets and liabilities measured at fair value on a recurring basis were as follows (in millions): OCTOBER 25, 2025 JULY 26, 2025 FAIR VALUE MEASUREMENTS FAIR VALUE MEASUREMENTS Level 1 Level 2 Total Balance Level 1 Level 2 Total Balance Assets: Cash equivalents: Money market funds $ 6,082 $ — $ 6,082 $ 5,885 $ — $ 5,885 Commercial paper — 149 149 — 336 336 Corporate debt securities — — — — 1 1 Available-for-sale debt investments: U.S. government securities — 1,640 1,640 — 1,961 1,961 U.S. government agency securities — 49 49 — 67 67 Non-U.S. government and agency securities — 410 410 — 458 458 Corporate debt securities — 2,949 2,949 — 3,090 3,090 Mortgage- and asset-backed securities — 254 254 — 286 286 Commercial paper — 884 884 — 950 950 Certificates of deposit — 756 756 — 569 569 Equity investments: Marketable equity securities 394 — 394 383 — 383 Other current assets: Money market funds — — — 563 — 563 Derivative assets — 55 55 — 32 32 Total $ 6,476 $ 7,146 $ 13,622 $ 6,831 $ 7,750 $ 14,581 Liabilities: Derivative liabilities $ — $ 58 $ 58 $ — $ 31 $ 31 Total $ — $ 58 $ 58 $ — $ 31 $ 31 Level 1 marketable equity securities are determined by using quoted prices in active markets for identical assets. Level 2 available-for-sale debt investments are priced using quoted market prices for similar instruments or nonbinding market prices that are 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 these assets and liabilities. We use such pricing data as the primary input to make our assessments and determinations as to the ultimate valuation of our investment portfolio and have not made, during the periods presented, any material adjustments to such inputs. We are ultimately responsible for the financial statements and underlying estimates. Our derivative instruments are primarily classified as Level 2, as they are not actively traded and are valued using pricing models that use observable market inputs. We did not have any transfers between Level 1 and Level 2 fair value measurements during the periods presented. 22 Table of Contents CISCO SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) (b) Assets Measured at Fair Value on a Nonrecurring Basis Our non-marketable equity securities using the measurement alternative are adjusted to fair value on a non-recurring basis. Adjustments are made when observable transactions for identical or similar investments of the same issuer occur, or due to impairment. These securities are classified as Level 3 in the fair value hierarchy because we estimate the value based on valuation methods using the observable transaction price at the transaction date and other unobservable inputs such as volatility, rights, and obligations of the securities we hold. (c) Other Fair Value Disclosures The fair value of our short-term loan receivables approximates their carrying value due to their short duration. The aggregate carrying value of our long-term loan receivables was $ 3.1 billion and $ 2.9 billion as of October 25, 2025 and July 26, 2025, respectively. The estimated fair value of our long-term loan receivables approximates their carrying value. We use unobservable inputs in determining discounted cash flows to estimate the fair value of our long-term loan receivables, and therefore they are categorized as Level 3. As of October 25, 2025, the estimated fair value of our short-term debt approximates its carrying value due to the short maturities. As of October 25, 2025, the fair value of our senior notes was $ 25.5 billion, with a carrying amount of $ 24.6 billion. This compares to a fair value of $ 25.0 billion and a carrying amount of $ 24.6 billion as of July 26, 2025. The fair value of the senior notes was determined based on observable market prices in a less active market and was categorized as Level 2. 12. Borrowings (a) Short-Term Debt The following table summarizes our short-term debt (in millions, except percentages): October 25, 2025 July 26, 2025 Amount Effective Rate Amount Effective Rate Current portion of senior notes $ 3,249 3.41 % $ 1,749 4.15 % Commercial paper 3,476 4.09 % 3,482 4.37 % Current portion of other debt — — 1 1.13 % Total $ 6,725 $ 5,232 We have a short-term debt financing program of up to $ 15.0 billion through the issuance of commercial paper notes. We use the proceeds from the issuance of commercial paper notes for general corporate purposes. The effective rates for the short- and long-term debt include the interest on the notes, the accretion of the discount, the issuance costs, and, if applicable, adjustments related to hedging. 23 Table of Contents CISCO SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) (b) Long-Term Debt The following table summarizes our long-term debt (in millions, except percentages): October 25, 2025 July 26, 2025 Maturity Date Amount Effective Rate Amount Effective Rate Senior notes: Fixed-rate notes: 4.90 % February 26, 2026 $ 1,000 5.00 % $ 1,000 5.00 % 2.95 % February 28, 2026 750 3.01 % 750 3.01 % 2.50 % September 20, 2026 1,500 2.55 % 1,500 2.55 % 4.80 % February 26, 2027 2,000 4.90 % 2,000 4.90 % 4.55 % February 24, 2028 1,000 4.61 % 1,000 4.61 % 4.85 % February 26, 2029 2,500 4.91 % 2,500 4.91 % 4.75 % February 24, 2030 1,000 4.73 % 1,000 4.73 % 4.95 % February 26, 2031 2,500 5.04 % 2,500 5.04 % 4.95 % February 24, 2032 1,000 4.94 % 1,000 4.94 % 5.05 % February 26, 2034 2,500 4.97 % 2,500 4.97 % 5.10 % February 24, 2035 1,250 5.11 % 1,250 5.11 % 5.90 % February 15, 2039 2,000 6.11 % 2,000 6.11 % 5.50 % January 15, 2040 2,000 5.67 % 2,000 5.67 % 5.30 % February 26, 2054 2,000 5.28 % 2,000 5.28 % 5.50 % February 24, 2055 750 5.49 % 750 5.49 % 5.35 % February 26, 2064 1,000 5.42 % 1,000 5.42 % Other debt 2 1.13 % 3 1.13 % Total 24,752 24,753 Unaccreted discount/issuance costs ( 139 ) ( 142 ) Total $ 24,613 $ 24,611 Reported as: Current portion of long-term debt $ 3,249 $ 1,750 Long-term debt 21,364 22,861 Total $ 24,613 $ 24,611 Interest is payable semiannually on each class of the senior fixed-rate notes. Each of the senior fixed-rate notes is redeemable by us at any time, subject to a make-whole premium. The senior notes rank at par with the commercial paper notes that have been issued pursuant to our short-term debt financing program, as discussed above under “(a) Short-Term Debt.” As of October 25, 2025, we were in compliance with all debt covenants. As of October 25, 2025, future principal payments for long-term debt, including the current portion, are summarized as follows (in millions): Fiscal Year Amount 2026 (remaining nine months) $ 1,750 2027 3,502 2028 1,000 2029 2,500 2030 1,000 Thereafter 15,000 Total $ 24,752 24 Table of Contents CISCO SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) (c) 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 October 25, 2025, we were in compliance with all associated covenants and we had no t borrowed any funds under our credit agreement. 13. Derivative Instruments (a) Summary of Derivative Instruments We use derivative instruments primarily to manage exposures to foreign currency exchange rate, interest rate, and equity price risks. Our primary objective in holding derivatives is to reduce the volatility of earnings and cash flows associated with changes in foreign currency exchange rates, interest rates, and equity prices. Our derivatives expose us to credit risk to the extent that the counterparties may be unable to meet the terms of the agreement. We seek to mitigate such risks by limiting our counterparties to major financial institutions and requiring collateral in certain cases. In addition, the potential risk of loss with any one counterparty resulting from credit risk is monitored. Management does not expect material losses as a result of defaults by counterparties. The fair values of our derivative instruments and the line items on the Consolidated Balance Sheets to which they were recorded are summarized as follows (in millions): DERIVATIVE ASSETS DERIVATIVE LIABILITIES Balance Sheet Line Item October 25, 2025 July 26, 2025 Balance Sheet Line Item October 25, 2025 July 26, 2025 Derivatives designated as hedging instruments: Foreign currency derivatives Other current assets $ 27 $ 17 Other current liabilities $ 1 $ 2 Foreign currency derivatives Other assets 27 10 Other long-term liabilities — 2 Total 54 27 1 4 Derivatives not designated as hedging instruments: Foreign currency derivatives Other current assets 1 3 Other current liabilities 30 17 Foreign currency derivatives Other assets — 2 Other long-term liabilities 27 10 Total 1 5 57 27 Total $ 55 $ 32 $ 58 $ 31 The effect on the Consolidated Statements of Operations of derivative instruments not designated as hedges is summarized as follows (in millions): GAINS (LOSSES) FOR THE THREE MONTHS ENDED Derivatives Not Designated as Hedging Instruments Line Item in Statements of Operations October 25, 2025 October 26, 2024 Foreign currency derivatives Other income (loss), net $ ( 46 ) $ ( 32 ) Total return swaps—deferred compensation Operating expenses and other 54 22 Total $ 8 $ ( 10 ) The notional amounts of our outstanding derivatives are summarized as follows (in millions): October 25, 2025 July 26, 2025 Foreign currency derivatives $ 8,006 $ 8,978 Total return swaps—deferred compensation 1,195 1,087 Total $ 9,201 $ 10,065 25 Table of Contents CISCO SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) (b) Offsetting of Derivative Instruments We present our derivative instruments at gross fair values in the Consolidated Balance Sheets. However, our master netting and other similar arrangements with the respective counterparties allow for net settlement under certain conditions, which are designed to reduce credit risk by permitting net settlement with the same counterparty. (c) Foreign Currency Exchange Risk We conduct business globally in numerous currencies. Therefore, we are exposed to adverse movements in foreign currency exchange rates. To limit the exposure related to foreign currency changes, we enter into foreign currency contracts. We do not enter into such contracts for speculative purposes. We may hedge forecasted foreign currency transactions related to certain revenues, operating expenses and service cost of sales with currency options and forward contracts. These currency options and forward contracts, designated as cash flow hedges, generally have maturities of less than 24 months. The derivative instrument’s gain or loss is initially reported as a component of accumulated other comprehensive income (AOCI) and subsequently reclassified into earnings when the hedged exposure affects earnings. We enter into foreign exchange forward and option contracts to reduce the short-term effects of foreign currency fluctuations on assets and liabilities such as foreign currency receivables, long-term customer financings and payables. These derivatives are not designated as hedging instruments. Gains and losses on the contracts are included in other income (loss), net, and substantially offset foreign exchange gains and losses from the remeasurement of monetary assets and liabilities denominated in currencies other than the functional currency of the reporting entity. We hedge certain net investments in our foreign operations with forward contracts to reduce the effects of foreign currency fluctuations on our net investment in those foreign subsidiaries. These derivative instruments generally have maturities of up to six months . (d) Interest Rate Risk We periodically enter into treasury lock agreements, designated as cash flow hedges, in order to hedge the impact of changes in the U.S. benchmark interest rate on future interest payments in anticipation of future debt offerings. Changes in the fair value of treasury lock agreements are recorded to AOCI and reclassified into earnings when the hedged exposure affects earnings. (e) Equity Price Risk We are exposed to variability in compensation charges related to certain deferred compensation obligations to employees and directors. Although not designated as accounting hedges, we utilize derivatives such as total return swaps to economically hedge this exposure and offset the related compensation expense. 14. Commitments and Contingencies (a) Purchase Commitments with Contract Manufacturers and Suppliers We purchase components from a variety of suppliers and use several contract manufacturers to provide manufacturing services for our products. During the normal course of business, in order to manage manufacturing lead times and help ensure adequate component supply, we enter into agreements with contract manufacturers and suppliers that allow them to procure inventory based upon criteria as defined by us or establish the parameters defining our requirements. A significant portion of our reported purchase commitments arising from these agreements consists of firm, noncancelable, and unconditional commitments. Certain of these inventory purchase commitments are directly with suppliers, and relate to fixed-dollar commitments to secure supply and pricing for certain product components for multi-year periods. In certain instances, these agreements allow us the option to cancel, reschedule, and adjust our requirements based on our business needs prior to firm orders being placed. The following table summarizes our inventory purchase commitments with contract manufacturers and suppliers by period (in millions): October 25, 2025 July 26, 2025 Less than 1 year $ 7,879 $ 7,202 1 to 3 years 396 320 3 to 5 years 46 77 Total $ 8,321 $ 7,599 26 Table of Contents CISCO SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) We record a liability for firm, noncancelable, and unconditional purchase commitments for quantities in excess of our future demand forecasts consistent with the valuation of our excess and obsolete inventory. As of October 25, 2025 and July 26, 2025, the liability for these purchase commitments was $ 185 million and $ 206 million, respectively, and was included in other current liabilities. (b) Other Commitments We have certain funding commitments, primarily related to our privately held investments. The funding commitments were $ 0.5 billion and $ 0.3 billion as of October 25, 2025 and July 26, 2025, respectively. (c) Product Warranties The following table summarizes the activity related to the product warranty liability (in millions): Three Months Ended October 25, 2025 October 26, 2024 Balance at beginning of period $ 399 $ 362 Provisions for warranties issued 104 105 Adjustments for pre-existing warranties — 1 Settlements ( 111 ) ( 111 ) Balance at end of period $ 392 $ 357 We accrue for warranty costs as part of our cost of sales based on associated material product costs, labor costs for technical support staff, and associated overhead. Our products are generally covered by a warranty for periods ranging from 90 days to five years , and for some products we provide a limited lifetime warranty. (d) Financing and Other Guarantees In the ordinary course of business, we provide financing guarantees for various third-party financing arrangements extended to channel partners customers. Payments under these financing guarantee arrangements were not material for the periods presented. Channel Partner Financing Guarantees We facilitate arrangements for third-party financing extended to channel partners, consisting of revolving short-term financing, with payment terms generally ranging from 60 to 90 days. These financing arrangements facilitate the working capital requirements of the channel partners, and, in some cases, we guarantee a portion of these arrangements. The volume of channel partner financing was $ 6.7 billion and $ 6.0 billion for the first quarter of fiscal 2026 and 2025, respectively. The balance of the channel partner financing subject to guarantees was $ 1.5 billion and $ 1.3 billion as of October 25, 2025 and July 26, 2025, respectively. Financing Guarantee Summary The aggregate amounts of channel partner financing guarantees outstanding at October 25, 2025 and July 26, 2025, representing the total maximum potential future payments under financing arrangements with third parties along with the related deferred revenue, are summarized in the following table (in millions): October 25, 2025 July 26, 2025 Maximum potential future payments $ 134 $ 123 Deferred revenue ( 17 ) ( 13 ) Total $ 117 $ 110 (e) Indemnifications In the normal course of business, we have indemnification obligations to other parties, including customers, lessors, and parties to other transactions with us, with respect to certain matters. We have agreed to indemnify against losses arising from a breach of representations or covenants or out of intellectual property infringement or other claims made against certain parties. These agreements may limit the time or circumstances within which an indemnification claim can be made and the amount of the claim. It is not possible to determine the maximum potential amount for claims made under the indemnification obligations due to uncertainties in the litigation process, coordination with and contributions by other parties and the defendants in these types of 27 Table of Contents CISCO SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) cases, and the unique facts and circumstances involved in each particular case and agreement. Historically, indemnity payments made by us have not had a material effect on our Consolidated Financial Statements. In addition, we have entered into indemnification agreements with our officers and directors, and our Amended and Restated Bylaws contain similar indemnification obligations to our agents. (f) Legal Proceedings Brazil Brazilian authorities have investigated our Brazilian subsidiary and certain of its former employees, as well as a Brazilian importer of our products, and its affiliates and employees, relating to alleged evasion of import taxes and alleged improper transactions involving the subsidiary and the importer. Brazilian tax authorities have assessed claims against our Brazilian subsidiary based on a theory of joint liability with the Brazilian importer for import taxes, interest, and penalties. In addition to claims asserted by the Brazilian federal tax authorities in prior fiscal years, tax authorities from the Brazilian state of Sao Paulo have asserted similar claims on the same legal basis in prior fiscal years. The remaining asserted claims by Brazilian federal tax authorities are for calendar years 2004 through 2007, and the remaining asserted claims by the tax authorities from the state of Sao Paulo are for calendar years 2005 through 2007. The total remaining asserted claims by Brazilian state and federal tax authorities aggregate to $ 145 million for the alleged evasion of import and other taxes, $ 851 million for interest, and $ 298 million for various penalties, all determined using an exchange rate as of October 25, 2025. We have completed a thorough review of the matters and believe the asserted claims against our Brazilian subsidiary are without merit, and we are defending the claims vigorously. While we believe there is no legal basis for the alleged liability, due to the complexities and uncertainty surrounding the judicial process in Brazil and the nature of the claims asserting joint liability with the importer, we are unable to determine the likelihood of an unfavorable outcome against our Brazilian subsidiary and are unable to reasonably estimate a range of loss, if any. We do not expect a final judicial determination for several years. Centripetal On February 13, 2018, Centripetal Networks, Inc. (“Centripetal”) asserted patent infringement claims against us in the U.S. District Court for the Eastern District of Virginia, alleging that several of our products and services infringe eleven Centripetal U.S. patents. After two bench trials and various administrative actions and appeals, we have been found either to not have infringed any of the patents or the patents have been invalidated. Centripetal appealed one of the Patent Trial and Appeal Board’s (“PTAB”) invalidity decisions and on October 22, 2025, the Federal Circuit vacated the decision and remanded the case to the PTAB for further consideration. Centripetal’s appeal of the non-infringement judgment of the District Court is ongoing. Between April 2020 and February 2022, Centripetal also filed complaints in the District Court of Dusseldorf in Germany (“German Court”), asserting five patents and one utility model. Centripetal sought damages and injunctive relief in all cases. In various proceedings in 2021, 2022, and 2023, we have been found to have not infringed three patents, one patent was invalidated, and the utility model was invalidated. The infringement action on the final patent is stayed due to an invalidity action heard on June 6, 2024 in the Federal Patent Court, in which all claims, aside from one auxiliary claim, were found invalid, and for which we are awaiting a decision on appeal from the German Federal Court of Justice. Centripetal’s appeals of two of the non-infringement findings remain pending and, on March 27, 2024, the Court of Appeals rejected Centripetal’s appeal of the third non-infringement finding. In an appellate decision on December 11, 2024, the German Federal Court of Justice revoked one of the two patents for which Centripetal appealed the finding of non-infringement, rendering moot the noninfringement appeal of that patent. On July 10, 2023, Centripetal filed a complaint in the Paris Judiciary Court asserting the French counterpart of a European Patent. Centripetal seeks damages and injunctive relief in the case. Centripetal previously asserted the German counterpart of the same European Patent in Germany and the German Court rejected Centripetal’s complaint finding no infringement. We have filed our response and defenses to the complaint and the case briefing is ongoing. While the Court has not set a final hearing date, we anticipate that it will occur in the third calendar quarter of 2026. Due to uncertainty surrounding patent litigation processes in the U.S. and Europe, we are unable to reasonably estimate the ultimate outcome of the litigations at this time. If we do not prevail in these litigations, we believe that any damages ultimately assessed would not have a material effect on our Consolidated Financial Statements. Ramot On June 12, 2019 and on February 26, 2021, Ramot at Tel Aviv University Ltd. (“Ramot”) asserted patent infringement claims against Cisco and Acacia in the U.S. District Court for the Eastern District of Texas (“E.D. Tex.”) and in the District of Delaware (“D. Del.”), respectively. Ramot is seeking damages, including enhanced damages, and a royalty on future sales. Ramot alleges that certain optical transceiver modules and line cards infringe three patents. We challenged the validity of the patents in the U.S. Patent and Trademark Office (“PTO”) and the pending District Court cases have been stayed. On September 28, 2021 and May 24, 2022, Cisco and Acacia filed two declaratory judgment actions of noninfringement against Ramot in D. 28 Table of Contents CISCO SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) Del. on other Ramot patents and those proceedings are ongoing. The Court rescheduled the trial date in the D. Del. cases for December 1, 2025. While we believe that we have strong non-infringement and invalidity arguments in these litigations, and that Ramot’s damages theories in such cases are not supported by prevailing law, we are unable to reasonably estimate the ultimate outcome of these litigations at this time due to uncertainties in the litigation processes. If we do not prevail in court in these litigations, we believe any damages ultimately assessed would not have a material effect on our Consolidated Financial Statements. In addition to the above matters, we are subject to other legal proceedings, claims, and litigation arising in the ordinary course of business, including intellectual property litigation. While the outcome of these matters is currently not determinable, we do not believe that the ultimate costs to resolve these matters will have a material effect on our Consolidated Financial Statements. 15. Stockholders’ Equity (a) Stock Repurchase Program In September 2001, our Board of Directors authorized a stock repurchase program. As of October 25, 2025, the remaining authorized amount for stock repurchases under this program was approximately $ 12.2 billion, with no termination date. The stock repurchase activity for fiscal 2026 and 2025 under the stock repurchase program, reported based on the trade date, is summarized as follows (in millions, except per-share amounts): Quarter Ended Shares Weighted-Average Price per Share Amount Fiscal 2026 October 25, 2025 29 $ 68.28 $ 2,001 Fiscal 2025 July 26, 2025 19 $ 64.65 $ 1,252 April 26, 2025 25 $ 59.78 $ 1,504 January 25, 2025 21 $ 58.58 $ 1,236 October 26, 2024 40 $ 49.56 $ 2,003 There were stock repurchases of $ 29 million and $ 20 million that were pending settlement October 25, 2025 and July 26, 2025, respectively. The purchase price for the shares of our stock repurchased is reflected as a reduction to stockholders’ equity. We are required to allocate the purchase price of the repurchased shares as (i) a reduction to retained earnings or an increase to accumulated deficit and (ii) a reduction of common stock and additional paid-in capital. (b) Dividends Declared On November 12, 2025, our Board of Directors declared a quarterly dividend of $ 0.41 per common share to be paid on January 21, 2026, to all stockholders of record as of the close of business on January 2, 2026. Future dividends will be subject to the approval of our Board of Directors. (c) Preferred Stock Under the terms of our Amended and Restated Certificate of Incorporation, the Board of Directors is authorized to issue preferred stock in one or more series and, in connection with the creation of such series, to fix by resolution the designation, powers (including voting powers (if any)), preferences and relative, participating, optional or other special rights, if any, of such series, and any qualifications, limitations or restrictions thereof, of the shares of such series. As of October 25, 2025, we have not issued any shares of preferred stock. 29 Table of Contents CISCO SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) 16. Employee Benefit Plans (a) Employee Stock Incentive Plans We have one stock incentive plan: the 2005 Stock Incentive Plan (the “2005 Plan”). In addition, we have, in connection with our acquisitions of various companies, assumed the share-based awards granted under stock incentive plans of the acquired companies or issued share-based awards in replacement thereof. Share-based awards are designed to reward employees for their long-term contributions to us and provide incentives for them to remain with us. The number and frequency of share-based awards are based on competitive practices, our operating results, government regulations, and other factors. The 2005 Plan provides for the granting of stock options, stock grants, stock units and stock appreciation rights (SARs), the vesting of which may be time-based or upon satisfaction of performance goals, or both, and/or other conditions. Time-based and performance-based RSUs generally vest over three years with certain awards containing retirement eligible provisions. Employees (including employee directors and executive officers) and consultants of Cisco and its subsidiaries and affiliates and non-employee directors of Cisco are eligible to participate in the 2005 Plan. The 2005 Plan may be terminated by our Board of Directors at any time and for any reason, and is currently set to terminate at the 2030 Annual Meeting unless re-adopted or extended by our stockholders prior to or on such date. Under the 2005 Plan’s share reserve feature, a distinction is made between the number of shares in the reserve attributable to (i) stock options and SARs and (ii) “full value” awards (i.e., stock grants and stock units). Shares issued as stock grants, pursuant to stock units or pursuant to the settlement of dividend equivalents are counted against shares available for issuance under the 2005 Plan on a 1.5 -to-1 ratio. For each share awarded as restricted stock or a restricted stock unit award under the 2005 Plan, 1.5 shares was deducted from the available share-based award balance. If awards issued under the 2005 Plan are forfeited or terminated for any reason before being exercised or settled, then the shares underlying such awards, plus the number of additional shares, if any, that counted against shares available for issuance under the 2005 Plan at the time of grant as a result of the application of the share ratio described above, will become available again for issuance under the 2005 Plan. As of October 25, 2025, 90 million shares were authorized for future grant under the 2005 Plan. (b) Employee Stock Purchase Plan We have an Employee Stock Purchase Plan under which eligible employees are offered shares through a 24 -month offering period, which consists of four consecutive 6 -month purchase periods. Employees may purchase a limited amount of shares of our stock at a discount of up to 15 % of the lesser of the fair market value at the beginning of the offering period or the end of each 6 -month purchase period. The Employee Stock Purchase Plan is scheduled to terminate on the earlier of (i) January 3, 2030 and (ii) the date on which all shares available for issuance under the Employee Stock Purchase Plan are sold pursuant to exercised purchase rights. No shares were issued under the Employee Stock Purchase Plan during the first quarter of each of fiscal 2026 and 2025. As of October 25, 2025, 50 million shares were available for issuance under the Employee Stock Purchase Plan. (c) Summary of Share-Based Compensation Expense Share-based compensation expense consists of expenses for RSUs and stock purchase rights, granted to employees or assumed from acquisitions. The following table summarizes share-based compensation expense and the income tax benefit for share-based compensation (in millions): Three Months Ended October 25, 2025 October 26, 2024 Cost of sales—product $ 68 $ 57 Cost of sales—services 82 74 Share-based compensation expense in cost of sales 150 131 Research and development 484 354 Sales and marketing 269 210 General and administrative 131 115 Restructuring and other charges 21 17 Share-based compensation expense in operating expenses 905 696 Total share-based compensation expense $ 1,055 $ 827 Income tax benefit for share-based compensation $ 241 $ 174 30 Table of Contents CISCO SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) As of October 25, 2025, the total compensation cost related to unvested share-based awards not yet recognized was $ 4.2 billion which is expected to be recognized over approximately 1.9 years on a weighted-average basis. (d) Restricted Stock Unit Awards A summary of the restricted stock and stock unit activity, which includes time-based and performance-based or market-based RSUs, is as follows (in millions, except per-share amounts): Restricted Stock/ Stock Units Weighted-Average Grant Date Fair Value per Share Aggregate Fair Value Unvested balance at July 27, 2024 117 $ 46.86 Granted and assumed 70 55.73 Vested ( 65 ) 46.95 $ 3,707 Canceled/forfeited/other ( 9 ) 48.04 Unvested balance at July 26, 2025 113 52.26 Granted and assumed 11 64.74 Vested ( 12 ) 46.35 $ 851 Canceled/forfeited/other 4 48.91 Unvested balance at October 25, 2025 116 $ 53.91 17. Accumulated Other Comprehensive Income (Loss) The components of AOCI, net of tax, and the other comprehensive income (loss), for the first quarter of fiscal 2026 and 2025 are summarized as follows (in millions): Net Unrealized Gains (Losses) on Available-for-Sale Investments Net Unrealized Gains (Losses) Cash Flow Hedging Instruments Cumulative Translation Adjustment and Actuarial Gains (Losses) Accumulated Other Comprehensive Income (Loss) Balance at July 26, 2025 $ ( 57 ) $ 65 $ ( 962 ) $ ( 954 ) Other comprehensive income (loss) before reclassifications 48 42 ( 41 ) 49 (Gains) losses reclassified out of AOCI 4 ( 9 ) — ( 5 ) Tax benefit (expense) ( 11 ) ( 8 ) ( 1 ) ( 20 ) Balance at October 25, 2025 $ ( 16 ) $ 90 $ ( 1,004 ) $ ( 930 ) Net Unrealized Gains (Losses) on Available-for-Sale Investments Net Unrealized Gains (Losses) Cash Flow Hedging Instruments Cumulative Translation Adjustment and Actuarial Gains (Losses) Accumulated Other Comprehensive Income (Loss) Balance at July 27, 2024 $ ( 241 ) $ 79 $ ( 1,268 ) $ ( 1,430 ) Other comprehensive income (loss) before reclassifications 71 9 ( 19 ) 61 (Gains) losses reclassified out of AOCI 25 ( 9 ) — 16 Tax benefit (expense) ( 23 ) — — ( 23 ) Balance at October 26, 2024 $ ( 168 ) $ 79 $ ( 1,287 ) $ ( 1,376 ) 31 Table of Contents CISCO SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) 18. Income Taxes The following table provides details of income taxes (in millions, except percentages): Three Months Ended October 25, 2025 October 26, 2024 Income before provision for (benefit from) income taxes $ 3,391 $ 2,267 Provision for (benefit from) income taxes 531 ( 444 ) Effective tax rate 15.7 % ( 19.6 ) % As of October 25, 2025, we had $ 2.3 billion of unrecognized tax benefits, of which $ 1.6 billion, if recognized, would favorably impact the effective tax rate. We regularly engage in discussions and negotiations with tax authorities regarding tax matters in various jurisdictions. We believe it is reasonably possible that certain federal, foreign, and state tax matters may be concluded in the next 12 months. Specific positions that may be resolved include issues involving transfer pricing and various other matters. On August 26, 2024, the U.S. Tax Court issued an opinion in Varian Medical Systems, Inc. v. Commissioner . The opinion related to the U.S. taxation of deemed foreign dividends in the transition year of the Tax Cuts and Jobs Act (our fiscal 2018). While we were not a party to the case, the opinion resulted in a change to our tax position. As such, we recorded a tax benefit of $ 720 million as a reduction to the provision for income taxes in the first quarter of fiscal 2025 due to this U.S. Tax Court opinion. 19. Segment Information and Major Customers (a) Revenue and Gross Margin by Segment We conduct business globally and are primarily managed on a geographic basis consisting of three segments: the Americas, EMEA, and APJC. Our chief executive officer is the chief operating decision maker (CODM). The CODM reviews certain financial information for each segment, to evaluate performance and allocate resources by comparing actual performance to our annual targets. Performance of each segment is measured based on segment revenue and segment gross margin. Sales are attributed to a segment based on the location of the customer. We do not allocate research and development, sales and marketing, or general and administrative expenses to our segments because the CODM does not include this information in our measurement of performance of the operating segments. In addition, we do not allocate amortization and impairment of acquisition-related intangible assets, share-based compensation expense, significant litigation settlements and other contingencies, charges related to asset impairments and restructurings, and certain other charges to the cost of sales and gross margin for each segment because the CODM does not include this information in the measurement of the performance of our operating segments. 32 Table of Contents CISCO SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) The following summarizes our revenue and gross margin by segment and the significant expenses by each segment (in millions): Three Months Ended October 25, 2025 October 26, 2024 Revenue: Americas $ 8,989 $ 8,252 EMEA 3,784 3,588 APJC 2,111 2,001 Total $ 14,883 $ 13,841 Gross margin: Americas $ 6,001 $ 5,740 EMEA 2,722 2,522 APJC 1,413 1,328 Segment total 10,136 9,590 Unallocated corporate items ( 391 ) ( 469 ) Total $ 9,745 $ 9,121 Supplemental information about our significant expenses: Americas: Cost of sales — product $ 2,349 $ 1,877 Cost of sales — services 639 635 Segment total $ 2,988 $ 2,512 EMEA: Cost of sales — product $ 768 $ 778 Cost of sales — services 294 288 Segment total $ 1,062 $ 1,066 APJC: Cost of sales — product $ 514 $ 490 Cost of sales — services 184 183 Segment total $ 698 $ 673 Amounts may not sum due to rounding. Revenue in the United States was $ 8.1 billion and $ 7.4 billion for the first quarter of fiscal 2026 and 2025, respectively. 33 Table of Contents CISCO SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) (b) Revenue for Groups of Similar Products and Services We design and sell IP-based networking and other products related to the communications and IT industry and provide services associated with these products and their use. The following table presents revenue for groups of similar products and services (in millions): Three Months Ended October 25, 2025 October 26, 2024 Revenue: Networking $ 7,768 $ 6,753 Security 1,980 2,017 Collaboration 1,055 1,085 Observability 274 258 Total Product 11,077 10,114 Services 3,806 3,727 Total $ 14,883 $ 13,841 Amounts may not sum due to rounding. 20. Net Income per Share The following table presents the calculation of basic and diluted net income per share (in millions, except per-share amounts): Three Months Ended October 25, 2025 October 26, 2024 Net income $ 2,860 $ 2,711 Weighted-average shares—basic 3,956 3,990 Effect of dilutive potential common shares 37 23 Weighted-average shares—diluted 3,993 4,013 Net income per share—basic $ 0.72 $ 0.68 Net income per share—diluted $ 0.72 $ 0.68 Antidilutive employee share-based awards, excluded — 13 34 Table of Contents Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements This Quarterly Report on Form 10-Q, including this Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts are statements that could be deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “momentum,” “seeks,” “estimates,” “continues,” “endeavors,” “strives,” “may,” variations of such words, and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified below under “Part II, Item 1A. Risk Factors,” and elsewhere herein. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason. OVERVIEW Cisco designs and sells a broad range of technologies that help to power, secure, and draw insights from the Internet. We are incorporating artificial intelligence (AI) into our product portfolios across networking, security, collaboration and observability as well as integrating our products more tightly together. We are simplifying how our technology is delivered, managed and optimized and helping customers maximize the business value of their technology investments. A summary of our results is as follows (in millions, except percentages and per-share amounts): Three Months Ended October 25, 2025 October 26, 2024 % Variance Revenue $ 14,883 $ 13,841 8 % Gross margin percentage 65.5 % 65.9 % (0.4) pts Research and development $ 2,400 $ 2,286 5 % Sales and marketing $ 2,871 $ 2,752 4 % General and administrative $ 733 $ 795 (8) % Total research and development, sales and marketing, general and administrative $ 6,004 $ 5,833 3 % Total as a percentage of revenue 40.3 % 42.1 % (1.8) pts Operating income as a percentage of revenue 22.6 % 17.0 % 5.6 pts Interest and other income (loss), net $ 28 $ (91) NM Income tax percentage 15.7 % (19.6) % 35.3 pts Net income $ 2,860 $ 2,711 5 % Net income as a percentage of revenue 19.2 % 19.6 % (0.4) pts Earnings per share—diluted $ 0.72 $ 0.68 6 % NM – Not Meaningful Percentages may not recalculate due to rounding. 35 Table of Contents CISCO SYSTEMS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Three Months Ended October 25, 2025 Compared with Three Months Ended October 26, 2024 In the first quarter of fiscal 2026, we delivered strong revenue growth across all geographies and solid margins as we saw a positive demand environment. Total revenue increased by 8% compared with the first quarter of fiscal 2025, driven by revenue from Networking, particularly within our AI Infrastructure and Campus Networking solutions. Within total revenue, product revenue increased by 10% and services revenue increased by 2%. In the first quarter of fiscal 2026, total software revenue was $5.7 billion across all product areas and services, an increase of 3%. Total subscription revenue increased 2%. Total gross margin decreased by 0.4 percentage points. Product gross margin decreased by 0.6 percentage points, primarily driven by negative impacts from product mix and pricing, partially offset by productivity improvements and lower amortization of purchased intangible assets. As a percentage of revenue, research and development, sales and marketing, and general and administrative expenses, collectively, decreased by 1.8 percentage points. Operating income as a percentage of revenue increased by 5.6 percentage points primarily driven by lower restructuring and other charges and revenue growth in the first quarter of fiscal 2026. Diluted earnings per share increased 6%, driven by the revenue growth and operating margin improvement, partially offset by the income tax benefit of $720 million we had in the first quarter of fiscal 2025. In terms of our geographic segments, revenue from the Americas increased by $0.7 billion, EMEA revenue increased by $0.2 billion and APJC revenue increased by $0.1 billion. From a customer market standpoint, we experienced product revenue growth across all of our customer markets. From a product category perspective, the product revenue increase of 10% was driven by growth in Networking of 15% and Observability of 6%, partially offset by declines in Collaboration of 3% and Security of 2%. 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. Strategy and Priorities In today ’ s digital-first world, businesses and organizations globally are deploying technology to pursue their strategic objectives, from accelerating growth to enhancing operational efficiency and fostering innovation. Our strategy is to securely connect everything to make those desired outcomes possible. For additional discussion of our strategy and priorities, see Item 1. Business in our Annual Report on Form 10-K for the fiscal year ended July 26, 2025. Other Key Financial Measures The following is a summary of our other key financial measures for the first quarter of fiscal 2026 (in millions): October 25, 2025 July 26, 2025 Cash and cash equivalents and investments $ 15,736 $ 16,110 Remaining performance obligations $ 42,873 $ 43,533 Inventories $ 3,395 $ 3,164 Total debt $ 28,089 $ 28,093 Three Months Ended October 25, 2025 October 26, 2024 Cash provided by operating activities $ 3,212 $ 3,661 Repurchases of common stock—stock repurchase program $ 2,001 $ 2,003 Dividends paid $ 1,617 $ 1,592 36 Table of Contents CISCO SYSTEMS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) CRITICAL ACCOUNTING ESTIMATES The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires us to make judgments, assumptions, and estimates that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Note 2 to the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended July 26, 2025, as updated as applicable in Note 2 to the Consolidated Financial Statements herein, describes the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements. The accounting policies described below are significantly affected by critical accounting estimates. Such accounting policies require significant judgments, assumptions, and estimates used in the preparation of the Consolidated Financial Statements, and actual results could differ materially from the amounts reported based on these policies. Revenue Recognition We enter into contracts with customers that can include various combinations of products and services which are generally distinct and accounted for as separate performance obligations, resulting in contracts that may contain multiple performance obligations. We determine whether arrangements are distinct based on whether the customer can benefit from the product or service on its own or together with other resources that are readily available and whether our commitment to transfer the product or service to the customer is separately identifiable from other obligations in the contract. We classify our hardware, perpetual software licenses, and SaaS as distinct performance obligations. Term software licenses represent multiple obligations, which include software licenses and software maintenance. In transactions where we deliver hardware or software, we are typically the principal and we record revenue and costs of goods sold on a gross basis. We recognize revenue upon transfer of control of promised goods or services in a contract with a customer in an amount that reflects the consideration we expect to receive in exchange for those products or services. Transfer of control occurs once the customer has the contractual right to use the product, generally upon shipment, electronic delivery (or when the software is available for download by the customer), or once title and risk of loss has transferred to the customer. Transfer of control can also occur over time for software maintenance and services as the customer receives the benefit over the contract term. Our hardware and perpetual software licenses are distinct performance obligations where revenue is recognized upfront upon transfer of control. Term software licenses include multiple performance obligations where the term licenses are recognized upfront upon transfer of control, with the associated software maintenance revenue recognized ratably over the contract term as services and software updates are provided. SaaS arrangements do not include the right for the customer to take possession of the software during the term, and therefore have one distinct performance obligation which is satisfied over time with revenue recognized ratably over the contract term as the customer consumes the services. On our product sales, we record consideration from shipping and handling on a gross basis within net product sales. We record our revenue net of any associated sales taxes. Revenue is allocated among these performance obligations in a manner that reflects the consideration that we expect to be entitled to for the promised goods or services based on standalone selling prices (SSP). SSP is estimated for each distinct performance obligation and judgment may be required in their determination. The best evidence of SSP is the observable price of a product or service when we sell the goods separately in similar circumstances and to similar customers. In instances where SSP is not directly observable, we determine SSP using information that may include market conditions and other observable inputs. We assess relevant contractual terms in our customer contracts to determine the transaction price. We apply judgment in identifying contractual terms and determining the transaction price as we may be required to estimate variable consideration when determining the amount of revenue to recognize. Variable consideration includes potential contractual penalties and various rebate, cooperative marketing and other incentive programs that we offer to our distributors, channel partners and customers that we sell to directly. When determining the amount of revenue to recognize, we estimate the expected usage of these programs, applying the expected value or most likely estimate and update the estimate at each reporting period as actual utilization becomes available. We also consider the customers’ right of return in determining the transaction price, where applicable. If actual credits received by customers under these programs were to deviate significantly from our estimates, which are based on historical experience, our revenue could be adversely affected. See Note 3 to the Consolidated Financial Statements for more details. Inventory Valuation and Liability for Purchase Commitments with Contract Manufacturers and Suppliers Inventory is written down based on excess and obsolete inventories, determined primarily by future demand forecasts. Inventory write-downs are measured as the difference between the cost of the inventory and net realizable value, based upon assumptions about future demand, and are charged to the provision for inventory. At the point of the loss recognition, a new, lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. 37 Table of Contents 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 $63 million and $201 million for the first quarter of fiscal 2026 and 2025, respectively. If there were to be a sudden and significant decrease in demand for our products, or a higher incidence of inventory obsolescence because of rapidly changing technology or customer requirements, then we could be required to increase our inventory write-downs, and our liability for purchase commitments with contract manufacturers and suppliers, and accordingly our profitability, could be adversely affected. We regularly evaluate our exposure for inventory write-downs and the adequacy of our liability for purchase commitments. For further discussion around the supply chain impacts and risks, see “—Results of Operations—Gross Margin—Supply Chain Impacts and Risks” and “—Liquidity and Capital Resources—Inventory Supply Chain.” Loss Contingencies We are subject to the possibility of various losses arising in the ordinary course of business. We consider the likelihood of the incurrence of a liability, as well as our ability to reasonably estimate the amount of loss, in determining loss contingencies. An estimated loss contingency is accrued when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. We regularly evaluate information available to us to determine whether such accruals should be made or adjusted and whether new accruals are required. Third parties, including customers, have in the past and may in the future assert claims or initiate litigation related to exclusive patent, copyright, trademark, and other intellectual property rights to technologies and related standards that are relevant to us. These assertions have increased over time as a result of our growth and the general increase in the pace of patent claims assertions, particularly in the United States. If any infringement or other intellectual property claim made against us by any third party is successful, or if we fail to develop non-infringing technology or license the proprietary rights on commercially reasonable terms and conditions, our business, operating results, and financial condition could be materially and adversely affected. Valuation of Goodwill and Purchased Intangible Assets Goodwill Our methodology for allocating the purchase price relating to purchase acquisitions is determined through established valuation techniques. Goodwill represents a residual value as of the acquisition date, which in most cases results in measuring goodwill as an excess of the purchase consideration transferred plus the fair value of any noncontrolling interest in the acquired company over the fair value of net assets acquired, including contingent consideration. We perform goodwill impairment tests on an annual basis in the fourth fiscal quarter and between annual tests in certain circumstances for each reporting unit. The assessment of fair value for goodwill and purchased intangible assets is based on factors that market participants would use in an orderly transaction in accordance with the guidance for the fair value measurement of nonfinancial assets. In response to changes in industry and market conditions, we could be required to strategically realign our resources and consider restructuring, disposing of, or otherwise exiting businesses, which could result in an impairment of goodwill. There was no impairment of goodwill in each of the first quarter of fiscal 2026 and 2025. Purchased Intangible Assets The accounting for acquisitions requires significant estimates and judgments in the valuation of purchased intangible assets. Critical estimates used in the valuation of purchased intangible assets include, but are not limited to, the amount and timing of expected future cash flows, useful lives and discount rates. While our estimates of fair value are based on assumptions that are believed to be reasonable, these assumptions are inherently uncertain and unpredictable and would not reflect unanticipated events and circumstances that may occur. We make judgments about the recoverability of purchased intangible assets with finite lives whenever events or changes in circumstances indicate that an impairment may exist. Recoverability of purchased intangible assets with finite lives is measured by comparing the carrying amount of the asset group to the future undiscounted cash flows the asset group is expected to generate. We review indefinite-lived intangible assets for impairment annually or whenever events or changes in circumstances indicate that the asset might be impaired. If the asset is considered impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. Assumptions and estimates about future values and remaining useful lives of our purchased intangible assets are complex and subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business 38 Table of Contents CISCO SYSTEMS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) strategy and our internal forecasts. Our ongoing consideration of all the factors described previously could result in impairment charges in the future, which could adversely affect our net income. Income Taxes We are subject to income taxes in the United States and numerous foreign jurisdictions. Our effective tax rates differ from the statutory rate, primarily due to the tax impact of state taxes, foreign operations, R&D tax credits, foreign-derived intangible income deductions, global intangible low-taxed income, tax audit settlements, nondeductible compensation, and international realignments. Our effective tax rate was a tax provision of 15.7% and a benefit of 19.6% in the first quarter of fiscal 2026 and 2025, respectively. Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. Although we believe our reserves are reasonable, no assurance can be given that the final tax outcome of these matters will not be different from that which is reflected in our historical income tax provisions and accruals. We adjust these reserves due to changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact the provision for income taxes in the period in which such determination is made. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate, and the related net interest and penalties. Significant judgment is also required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, we consider all available evidence, including past operating results, estimates of future taxable income, and the feasibility of tax planning strategies. If we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made. Our provision for income taxes is subject to volatility and could be adversely impacted by earnings being lower than anticipated in countries that have lower tax rates and higher than anticipated in countries that have higher tax rates; by changes in the valuation of our deferred tax assets and liabilities; by changes to foreign-derived intangible income deduction, global intangible low-tax income and base erosion and anti-abuse tax, research and development capitalization and amortization, and corporate alternative minimum tax laws, regulations, or interpretations thereof; by expiration of or lapses in tax incentives; by transfer pricing adjustments, including the effect of acquisitions on our legal structure; by tax effects of nondeductible compensation; by tax costs related to intercompany realignments; by changes in accounting principles; or by changes in tax laws and regulations, treaties, or interpretations thereof, including changes to the taxation of earnings of our foreign subsidiaries, the deductibility of expenses attributable to foreign income, and the foreign tax credit rules. Significant judgment is required to determine the recognition and measurement attributes prescribed in the accounting guidance for uncertainty in income taxes. The Organisation for Economic Co-operation and Development (OECD), an international association comprised of 38 countries, including the United States, has made changes, including a Pillar Two framework that imposes a minimum tax rate of 15% in each taxing jurisdiction, and is contemplating additional changes to numerous long-standing tax principles. There can be no assurance that these changes and any contemplated changes if finalized, once adopted by countries, will not have an adverse impact on our provision for income taxes. As a result of certain of our ongoing employment and capital investment actions and commitments, our income in certain countries was subject to reduced tax rates. Our failure to meet these commitments could adversely impact our provision for income taxes. In addition, we are subject to the continuous examination of our income tax returns by the Internal Revenue Service (IRS) and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. There can be no assurance that the outcomes from these continuous examinations will not have an adverse impact on our operating results and financial condition. 39 Table of Contents CISCO SYSTEMS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) RESULTS OF OPERATIONS Revenue The following table presents the breakdown of revenue between product and services (in millions, except percentages): Three Months Ended October 25, 2025 October 26, 2024 Variance in Dollars Variance in Percent Revenue: Product $ 11,077 $ 10,114 $ 963 10 % Percentage of revenue 74.4 % 73.1 % Services 3,806 3,727 79 2 % Percentage of revenue 25.6 % 26.9 % Total $ 14,883 $ 13,841 $ 1,042 8 % Amounts may not sum and percentages may not recalculate due to rounding. We manage our business primarily on a geographic basis, organized into three geographic segments. Our revenue, which includes product and services for each segment, is summarized in the following table (in millions, except percentages): Three Months Ended October 25, 2025 October 26, 2024 Variance in Dollars Variance in Percent Revenue: Americas $ 8,989 $ 8,252 $ 737 9 % Percentage of revenue 60.4 % 59.6 % EMEA 3,784 3,588 196 5 % Percentage of revenue 25.4 % 25.9 % APJC 2,111 2,001 110 5 % Percentage of revenue 14.2 % 14.5 % Total $ 14,883 $ 13,841 $ 1,042 8 % Amounts may not sum and percentages may not recalculate due to rounding. Three Months Ended October 25, 2025 Compared with Three Months Ended October 26, 2024 Total revenue increased by 8%. Product revenue increased by 10% and services revenue increased by 2%. 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. 40 Table of Contents CISCO SYSTEMS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Product Revenue by Segment The following table presents the breakdown of product revenue by segment (in millions, except percentages): Three Months Ended October 25, 2025 October 26, 2024 Variance in Dollars Variance in Percent Product revenue: Americas $ 6,706 $ 6,002 $ 704 12 % Percentage of product revenue 60.5 % 59.3 % EMEA 2,846 2,686 160 6 % Percentage of product revenue 25.7 % 26.6 % APJC 1,525 1,426 99 7 % Percentage of product revenue 13.8 % 14.1 % Total $ 11,077 $ 10,114 $ 963 10 % Amounts may not sum and percentages may not recalculate due to rounding. Three Months Ended October 25, 2025 Compared with Three Months Ended October 26, 2024 Americas Product revenue in the Americas segment increased by 12%, with growth across each of our customer markets, led by the Service Provider and Cloud customer market which was largely driven by revenue from our AI Infrastructure solutions. From a country perspective, product revenue increased in the United States and Mexico by 13% and 25%, respectively, partially offset by declines in Brazil and Canada of 28% and 3%, respectively. EMEA Product revenue in the EMEA segment increased by 6%, with growth across each of our customer markets. From a country perspective, product revenue increased in the Netherlands, United Kingdom and Saudi Arabia by 35%, 6% and 9%, 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, Singapore and China by 12%, 50%, and 15%, respectively, partially offset by a decline in Australia of 11%. 41 Table of Contents CISCO SYSTEMS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Product Revenue by Category In addition to the primary view on a geographic basis, we also prepare financial information related to product categories and customer markets for various purposes. The following table presents product revenue by category (in millions, except percentages): Three Months Ended October 25, 2025 October 26, 2024 Variance in Dollars Variance in Percent Product revenue Networking $ 7,768 $ 6,753 $ 1,015 15 % Security 1,980 2,017 (37) (2) % Collaboration 1,055 1,085 (30) (3) % Observability 274 258 16 6 % Total $ 11,077 $ 10,114 $ 963 10 % Amounts may not sum and percentages may not recalculate due to rounding. Three Months Ended October 25, 2025 Compared with Three Months Ended October 26, 2024 Networking The Networking product category consists of our core networking technologies of switching, routing, wireless, and servers. Revenue from the Networking product category increased by 15%, or $1.0 billion. The increase was primarily driven by double digit revenue growth in Service Provider Routing, particularly within our AI Infrastructure solutions, Data Center Switching, and Enterprise Routing. We also experienced revenue growth 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 decreased by 2%, or $37 million. The decline was driven in part due to a change in how our customers consumed Splunk offerings, shifting from fewer on-premise deals to more cloud subscriptions. We also experienced a revenue decline in our prior generation products. These declines were partially offset by growth in Secure Firewall, Duo, and SASE offerings. Collaboration The Collaboration product category consists of our Webex Suite, Collaboration Devices, Contact Center and CPaaS offerings. Revenue in our Collaboration product category decreased by 3%, or $30 million, primarily driven by declines in our Devices and 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 6%, or $16 million, primarily driven by growth in ThousandEyes. 42 Table of Contents CISCO SYSTEMS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Services Revenue by Segment The following table presents the breakdown of services revenue by segment (in millions, except percentages): Three Months Ended October 25, 2025 October 26, 2024 Variance in Dollars Variance in Percent Services revenue: Americas $ 2,283 $ 2,249 $ 34 2 % Percentage of service revenue 60.0 % 60.3 % EMEA 938 903 35 4 % Percentage of service revenue 24.6 % 24.2 % APJC 586 575 11 2 % Percentage of service revenue 15.4 % 15.5 % Total $ 3,806 $ 3,727 $ 79 2 % Amounts may not sum and percentages may not recalculate due to rounding. Services revenue increased 2% in the first quarter of fiscal 2026 compared with the first quarter of fiscal 2025, with the growth driven by higher revenue from professional and support services. Services revenue increased across all of our geographic segments for the first quarter of fiscal 2026. Gross Margin The following table presents the gross margin for products and services (in millions, except percentages): Three Months Ended AMOUNT PERCENTAGE October 25, 2025 October 26, 2024 October 25, 2025 October 26, 2024 Gross margin: Product $ 7,143 $ 6,588 64.5 % 65.1 % Services 2,602 2,533 68.4 % 68.0 % Total $ 9,745 $ 9,121 65.5 % 65.9 % Product Gross Margin The following table summarizes the key factors that contributed to the change in product gross margin percentage for the first quarter of fiscal 2026, as compared with the corresponding prior year period: Product Gross Margin Percentage Fiscal 2025 65.1 % Productivity (1) 1.7 % Product pricing (1.1) % Mix of products sold (2.2) % Amortization of purchased intangible assets 1.1 % Others (0.1) % Fiscal 2026 64.5 % (1) Productivity includes overall manufacturing-related costs, such as component costs, warranty expense, provisions for inventory and the liability related to the purchase commitments with contract manufacturers and suppliers, freight, logistics, shipment volume, and other items not categorized elsewhere. 43 Table of Contents CISCO SYSTEMS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Three Months Ended October 25, 2025 Compared with Three Months Ended October 26, 2024 Product gross margin decreased by 0.6 percentage points primarily driven by negative impacts from product mix and pricing, partially offset by productivity improvements and lower amortization of purchased intangible assets. Supply Chain Impacts and Risks We regularly enter into purchase commitments with contract manufacturers and suppliers and in recent periods have increased such commitments related to manufacturing Cisco Silicon One and other products to meet demand from hyperscalers and other customers. We expect to continue entering into these additional purchase commitments in fiscal 2026. These purchase commitments have in turn significantly increased our supply chain exposure. This exposure includes potential material excess and obsolete or other charges if product demand significantly decreases for a sustained duration, we are unable to generate demand for certain products, or we are otherwise unable to mitigate this exposure. Additionally, while we are exposed to new and proposed tariffs and other trade policies, the extent of such exposure is uncertain but could be significant if the exposure remains and we are unable to mitigate it. Services Gross Margin Three Months Ended October 25, 2025 Compared with Three Months Ended October 26, 2024 Our services gross margin percentage increased by 0.4 percentage points primarily due to cost efficiencies. Our services gross margin normally experiences some fluctuations due to various factors such as the timing of contract initiations in our renewals, our strategic investments in headcount, and the resources we deploy to support the overall service business. Other factors include the mix of service offerings, as the gross margin from our advanced services is typically lower than the gross margin from technical support services. Gross Margin by Segment The following table presents the total gross margin for each segment (in millions, except percentages): Three Months Ended AMOUNT PERCENTAGE October 25, 2025 October 26, 2024 October 25, 2025 October 26, 2024 Gross margin: Americas $ 6,001 $ 5,740 66.8 % 69.6 % EMEA 2,722 2,522 71.9 % 70.3 % APJC 1,413 1,328 66.9 % 66.4 % Segment total 10,136 9,590 68.1 % 69.3 % Unallocated corporate items (1) (391) (469) Total $ 9,745 $ 9,121 65.5 % 65.9 % (1) The unallocated corporate items include the effects of amortization and impairments of acquisition-related intangible assets, share-based compensation expense, significant litigation settlements and other contingencies, charges related to asset impairments and restructurings, and certain other charges. We do not allocate these items to the gross margin for each segment because management does not include such information in measuring the performance of the operating segments. Amounts may not sum and percentages may not recalculate due to rounding. Three Months Ended October 25, 2025 Compared with Three Months Ended October 26, 2024 We experienced a gross margin percentage decrease in our Americas segment due to negative impacts from product mix and pricing, partially offset by positive impacts from productivity improvements. Gross margin percentage in our EMEA segment increased primarily due to productivity improvements, partially offset by negative impacts from pricing and product mix. The increase in the APJC segment gross margin percentage was primarily due to productivity improvements, partially offset by negative impacts from pricing and product mix. 44 Table of Contents CISCO SYSTEMS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Research and Development (“R&D”), Sales and Marketing, and General and Administrative (“G&A”) Expenses R&D, sales and marketing, and G&A expenses are summarized in the following table (in millions, except percentages): Three Months Ended October 25, 2025 October 26, 2024 Variance in Dollars Variance in Percent Research and development $ 2,400 $ 2,286 $ 114 5 % Percentage of revenue 16.1 % 16.5 % Sales and marketing 2,871 2,752 119 4 % Percentage of revenue 19.3 % 19.9 % General and administrative 733 795 (62) (8) % Percentage of revenue 4.9 % 5.7 % Total $ 6,004 $ 5,833 $ 171 3 % Percentage of revenue 40.3 % 42.1 % Three Months Ended October 25, 2025 Compared with Three Months Ended October 26, 2024 R&D Expenses R&D expenses increased primarily due to higher headcount-related expenses reflecting our investments in AI and higher share-based compensation expense, partially offset by lower acquisition-related costs. Sales and Marketing Expenses Sales and marketing expenses increased primarily due to higher share-based compensation expense, higher contracted services spending, higher headcount-related expenses, and higher discretionary spending. G&A Expenses G&A expenses decreased primarily due to lower acquisition-related costs and lower headcount-related expenses. Effect of Foreign Currency In the first quarter of fiscal 2026, foreign currency fluctuations, net of hedging, increased the combined R&D, sales and marketing, and G&A expenses by approximately $36 million, or 0.6%, compared with the first quarter of fiscal 2025. Amortization of Purchased Intangible Assets The following table presents the amortization of purchased intangible assets including impairment charges (in millions): Three Months Ended October 25, 2025 October 26, 2024 Amortization of purchased intangible assets: Cost of sales $ 240 $ 325 Operating expenses 231 265 Total $ 471 $ 590 For the first quarter of fiscal 2026, the decrease in amortization of purchased intangible assets was primarily due to certain purchased intangible assets that became fully amortized. Restructuring and Other Charges 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 $147 million in the first quarter of fiscal 2026. We expect this plan to be completed by the end of the second quarter of fiscal 2026. 45 Table of Contents CISCO SYSTEMS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Operating Income The following table presents our operating income and our operating income as a percentage of revenue (in millions, except percentages): Three Months Ended October 25, 2025 October 26, 2024 Operating income $ 3,363 $ 2,358 Operating income as a percentage of revenue 22.6 % 17.0 % Three Months Ended October 25, 2025 Compared with Three Months Ended October 26, 2024 Operating income increased by 43%, and operating income as a percentage of revenue increased by 5.6 percentage points. These changes primarily resulted from lower restructuring and other charges and revenue growth in the first quarter of fiscal 2026. Interest and Other Income (Loss), Net Interest Income (Expense), Net The following table summarizes interest income and interest expense (in millions): Three Months Ended October 25, 2025 October 26, 2024 Variance in Dollars Interest income $ 222 $ 286 $ (64) Interest expense (350) (418) 68 Interest income (expense), net $ (128) $ (132) $ 4 Three Months Ended October 25, 2025 Compared with Three Months Ended October 26, 2024 The decrease in interest income was driven by a lower average balance of cash and available-for-sale debt investments and lower interest rates. The decrease in interest expense was driven by a lower average balance of debt outstanding and lower effective interest rate on commercial paper during the period. Other Income (Loss), Net The components of other income (loss), net, are summarized as follows (in millions): Three Months Ended October 25, 2025 October 26, 2024 Variance in Dollars Gains (losses) on investments, net: Available-for-sale debt investments $ (4) $ (25) $ 21 Marketable equity investments 31 24 7 Privately held investments 163 74 89 Net gains (losses) on investments 190 73 117 Other gains (losses), net (34) (32) (2) Other income (loss), net $ 156 $ 41 $ 115 Three Months Ended October 25, 2025 Compared with Three Months Ended October 26, 2024 The change in our other income (loss), net was primarily driven by higher unrealized gains on privately held investments. Provision for (Benefit from) Income Taxes Three Months Ended October 25, 2025 Compared with Three Months Ended October 26, 2024 The provision for (benefit from) income taxes resulted in an effective tax rate of 15.7% for the first quarter of fiscal 2026, compared with an effective tax rate of (19.6)% for the first quarter of fiscal 2025. The increase in the effective tax rate was primarily due to a $720 million tax benefit related to the U.S. Tax Court opinion issued during the first quarter of fiscal 2025 regarding the U.S. taxation of deemed foreign dividends in the transition year of the Tax Cut and Job Act ( “ Tax Act ” ) (our fiscal 2018). 46 Table of Contents CISCO SYSTEMS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) LIQUIDITY AND CAPITAL RESOURCES The following sections discuss the effects of changes in our balance sheet, our capital allocation strategy including stock repurchase program and dividends, our contractual obligations, and certain other commitments and activities on our liquidity and capital resources. Balance Sheet and Cash Flows Cash and Cash Equivalents and Investments The following table summarizes our cash and cash equivalents and investments (in millions): October 25, 2025 July 26, 2025 Increase (Decrease) Cash and cash equivalents $ 8,400 $ 8,346 $ 54 Available-for-sale debt investments 6,942 7,381 (439) Marketable equity securities 394 383 11 Total $ 15,736 $ 16,110 $ (374) The net decrease in cash and cash equivalents and investments in the first quarter of fiscal 2026 was primarily driven by cash returned to stockholders in the form of cash dividends of $1.6 billion and repurchases of common stock of $2.0 billion, and capital expenditures of $0.3 billion. These uses of cash were partially offset by net cash provided by operating activities of $3.2 billion and the release to us of approximately $0.6 billion of restricted cash previously held in escrow. 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 October 25, 2025 and July 26, 2025, we had no outstanding securities lending transactions. Free Cash Flow and Capital Allocation As part of our capital allocation strategy, we target to return a minimum of 50% of our free cash flow annually to our stockholders through cash dividends and repurchases of common stock. We define free cash flow as net cash provided by operating activities less cash used to acquire property and equipment. The following table reconciles our net cash provided by operating activities to free cash flow (in millions): Three Months Ended October 25, 2025 October 26, 2024 Net cash provided by operating activities $ 3,212 $ 3,661 Acquisition of property and equipment (323) (217) Free cash flow $ 2,889 $ 3,444 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 II, Item 1A. Risk Factors” in this report. 47 Table of Contents CISCO SYSTEMS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) We consider free cash flow to be a liquidity measure that provides useful information to management and investors because of our intent to return a stated percentage of free cash flow to stockholders in the form of dividends and stock repurchases. We further regard free cash flow as a useful measure because it reflects cash that can be used to, among other things, invest in our business, make strategic acquisitions, repurchase common stock, and pay dividends on our common stock, after deducting capital investments. A limitation of the utility of free cash flow as a measure of financial performance and liquidity is that the free cash flow does not represent the total increase or decrease in our cash balance for the period. In addition, we have other required uses of cash, including repaying the principal of our outstanding indebtedness. Free cash flow is not a measure calculated in accordance with U.S. generally accepted accounting principles and should not be regarded in isolation or as an alternative for net cash provided by operating activities or any other measure calculated in accordance with such principles, and other companies may calculate free cash flow in a different manner than we do. The following table summarizes the dividends paid and stock repurchases (in millions, except per-share amounts): DIVIDENDS STOCK REPURCHASE PROGRAM Quarter Ended Per Share Amount Shares Weighted-Average Price per Share Amount TOTAL Fiscal 2026 October 25, 2025 $ 0.41 $ 1,617 29 $ 68.28 $ 2,001 $ 3,618 Fiscal 2025 July 26, 2025 $ 0.41 $ 1,625 19 $ 64.65 $ 1,252 $ 2,877 April 26, 2025 $ 0.41 $ 1,627 25 $ 59.78 $ 1,504 $ 3,131 January 25, 2025 $ 0.40 $ 1,593 21 $ 58.58 $ 1,236 $ 2,829 October 26, 2024 $ 0.40 $ 1,592 40 $ 49.56 $ 2,003 $ 3,595 On November 12, 2025, our Board of Directors declared a quarterly dividend of $0.41 per common share to be paid on January 21, 2026, to all stockholders of record as of the close of business on January 2, 2026. 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 $12.2 billion, with no termination date. Accounts Receivable, Net The following table summarizes our accounts receivable, net (in millions): October 25, 2025 July 26, 2025 Increase (Decrease) Accounts receivable, net $ 4,827 $ 6,701 $ (1,874) Our accounts receivable net, as of October 25, 2025 decreased by approximately 28%, as compared with the end of fiscal 2025, primarily due to timing and amount of product and service billings in the first quarter of fiscal 2026 compared with the fourth quarter of fiscal 2025. 48 Table of Contents CISCO SYSTEMS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Inventory Supply Chain The following table summarizes our inventories and balances with contract manufacturers and suppliers (in millions): October 25, 2025 July 26, 2025 Variance vs. July 26, 2025 Inventories $ 3,395 $ 3,164 $ 231 Inventory purchase commitments $ 8,321 $ 7,599 $ 722 Inventory deposits and prepayments $ 1,023 $ 825 $ 198 The following table summarizes our inventory purchase commitments with contract manufacturers and suppliers by period (in millions): October 25, 2025 July 26, 2025 Variance vs. July 26, 2025 Less than 1 year $ 7,879 $ 7,202 $ 677 1 to 3 years 396 320 76 3 to 5 years 46 77 (31) Total $ 8,321 $ 7,599 $ 722 Inventory as of October 25, 2025 increased by 7% and inventory purchase commitments with contract manufacturers and suppliers increased by 10% from our balances at the end of fiscal 2025. The combined increase of 9% in our inventory and inventory purchase commitments as compared with the end of fiscal 2025 was primarily related to commitments with contract manufacturers and suppliers related to manufacturing Cisco Silicon One and other products to meet the demand from hyperscalers and other customers. We expect our inventory balances may increase in future quarters as we work to fulfill this demand. In recent periods, we have increased our levels of inventory and purchase commitments with contract manufacturers and suppliers primarily related to Cisco Silicon One. The increases were primarily due to arrangements to secure supply and pricing for certain product components and commitments with contract manufacturers to meet customer demand and help manage lead times. Our risks of future material excess and obsolete inventory and related losses are further outlined in the Result of Operations—Product Gross Margin section. We purchase components from a variety of suppliers and use several contract manufacturers to provide manufacturing services for our products. During the normal course of business, in order to manage manufacturing lead times and help ensure adequate component supply, we enter into agreements with contract manufacturers and suppliers that allow them to procure inventory based upon criteria as defined by us or that establish the parameters defining our requirements and our commitment to securing manufacturing capacity. Our inventory purchase commitments are for short-term product manufacturing requirements as well as for commitments to suppliers to secure manufacturing capacity. Certain of our inventory purchase commitments are entered into directly with suppliers and relate to fixed-dollar commitments to secure supply and pricing for certain product components for multi-year periods. 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): October 25, 2025 July 26, 2025 Increase (Decrease) Loan receivables, net $ 5,789 $ 5,591 $ 198 Lease receivables, net 1,015 936 79 Total, net $ 6,804 $ 6,527 $ 277 49 Table of Contents CISCO SYSTEMS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)