FULLTEXT DEL 1 AV 2
10-Q – 2026-05-19 – csco-20260425.htm
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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 April 25, 2026
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 May 14, 2026: 3,941,434,665
____________________________________
1
Table of Contents
Cisco Systems, Inc.
Form 10-Q for the Quarter Ended April 25, 2026
INDEX
Page
Part I Financial Information
3
Item 1. Financial Statements (Unaudited)
3
Consolidated Balance Sheets at April 25, 2026 and July 26, 2025
3
Consolidated Statements of Operations for the Three and Nine Months Ended April 25, 2026 and April 26, 2025
4
Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended April 25, 2026 and April 26, 2025
5
Consolidated Statements of Cash Flows for the Nine Months Ended April 25, 2026 and April 26, 2025
6
Consolidated Statements of Equity for the Three and Nine Months Ended April 25, 2026 and April 26, 2025
7
Notes to Consolidated Financial Statements
9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
36
Item 3. Quantitative and Qualitative Disclosures About Market Risk
57
Item 4. Controls and Procedures
58
Part II. Other Information
58
Item 1. Legal Proceedings
58
Item 1A. Risk Factors
59
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
74
Item 3. Defaults Upon Senior Securities
74
Item 4. Mine Safety Disclosures
74
Item 5. Other Information
74
Item 6. Exhibits
76
Signature
77
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
CISCO SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except par value)
(Unaudited)
April 25, 2026 July 26, 2025
ASSETS
Current assets:
Cash and cash equivalents $ 7,083 $ 8,346
Investments 9,557 7,764
Accounts receivable, net of allowance of $ 73 at April 25, 2026 and $ 69 at July 26, 2025
6,480 6,701
Inventories 4,708 3,164
Financing receivables, net 2,936 3,061
Other current assets 5,795 5,950
Total current assets 36,559 34,986
Property and equipment, net 2,577 2,113
Financing receivables, net 3,642 3,466
Goodwill 59,292 59,136
Purchased intangible assets, net 7,850 9,175
Deferred tax assets 7,558 7,356
Other assets 8,068 6,059
TOTAL ASSETS $ 125,546 $ 122,291
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt $ 11,932 $ 5,232
Accounts payable 2,970 2,528
Income taxes payable 173 1,857
Accrued compensation 3,290 3,611
Deferred revenue 16,446 16,416
Other current liabilities 4,730 5,420
Total current liabilities 39,541 35,064
Long-term debt 19,371 22,861
Income taxes payable 2,304 2,165
Deferred revenue 12,153 12,363
Other long-term liabilities 3,316 2,995
Total liabilities 76,685 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; 3,940 and 3,960 shares issued and outstanding at April 25, 2026 and July 26, 2025, respectively
48,950 47,747
Retained earnings 704 50
Accumulated other comprehensive loss ( 793 ) ( 954 )
Total equity 48,861 46,843
TOTAL LIABILITIES AND EQUITY $ 125,546 $ 122,291
See Notes to Consolidated Financial Statements.
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CISCO SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per-share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
April 25, 2026 April 26, 2025 April 25, 2026 April 26, 2025
REVENUE:
Product $ 12,117 $ 10,374 $ 34,836 $ 30,722
Services 3,724 3,775 11,237 11,259
Total revenue 15,841 14,149 46,073 41,981
COST OF SALES:
Product 4,613 3,688 12,752 10,927
Services 1,148 1,183 3,524 3,544
Total cost of sales 5,761 4,871 16,276 14,471
GROSS MARGIN 10,080 9,278 29,797 27,510
OPERATING EXPENSES:
Research and development 2,377 2,335 7,132 6,920
Sales and marketing 2,855 2,724 8,607 8,148
General and administrative 661 739 2,082 2,286
Amortization of purchased intangible assets 228 244 690 774
Restructuring and other charges ( 1 ) 34 182 709
Total operating expenses 6,120 6,076 18,693 18,837
OPERATING INCOME 3,960 3,202 11,104 8,673
Interest income 214 250 646 774
Interest expense ( 377 ) ( 403 ) ( 1,097 ) ( 1,225 )
Other income (loss), net 242 ( 102 ) 423 ( 121 )
Interest and other income (loss), net 79 ( 255 ) ( 28 ) ( 572 )
INCOME BEFORE PROVISION FOR INCOME TAXES 4,039 2,947 11,076 8,101
Provision for income taxes 666 456 1,668 471
NET INCOME $ 3,373 $ 2,491 $ 9,408 $ 7,630
Net income per share:
Basic $ 0.85 $ 0.63 $ 2.38 $ 1.92
Diluted $ 0.85 $ 0.62 $ 2.36 $ 1.91
Shares used in per-share calculation:
Basic 3,952 3,972 3,954 3,981
Diluted 3,982 4,002 3,987 4,004
See Notes to Consolidated Financial Statements.
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CISCO SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
(Unaudited)
Three Months Ended Nine Months Ended
April 25, 2026 April 26, 2025 April 25, 2026 April 26, 2025
Net income $ 3,373 $ 2,491 $ 9,408 $ 7,630
Available-for-sale investments:
Change in net unrealized gains and losses, net of tax benefit (expense) of $ 3 and $( 4 ) for the third quarter and first nine months of fiscal 2026, respectively, and $( 10 ) and $( 27 ) for the corresponding periods of fiscal 2025, respectively
( 3 ) 41 36 99
Net (gains) losses reclassified into earnings, net of tax (benefit) expense of $ 0 and $( 2 ) for the third quarter and first nine months of fiscal 2026, respectively, and $( 8 ) and $( 31 ) for the corresponding periods of fiscal 2025, respectively
— 22 6 44
( 3 ) 63 42 143
Cash flow hedging instruments:
Change in unrealized gains and losses, net of tax benefit (expense) of $( 2 ) and $( 20 ) for the third quarter and first nine months of fiscal 2026, respectively, and $ 16 and $ 1 for the corresponding periods of fiscal 2025, respectively
7 ( 54 ) 65 ( 4 )
Net (gains) losses reclassified into earnings, net of tax (benefit) expense of $ 3 and $ 8 for the third quarter and first nine months of fiscal 2026, respectively, and $ 4 and $ 9 for the corresponding periods of fiscal 2025, respectively
( 10 ) ( 11 ) ( 27 ) ( 30 )
( 3 ) ( 65 ) 38 ( 34 )
Net change in cumulative translation adjustment and actuarial gains and losses, net of tax benefit (expense) of $( 2 ) and $( 3 ) for the third quarter and first nine months of fiscal 2026, respectively, and $ 0 for each of the corresponding periods of fiscal 2025
49 362 81 188
Other comprehensive income (loss) 43 360 161 297
Comprehensive income $ 3,416 $ 2,851 $ 9,569 $ 7,927
See Notes to Consolidated Financial Statements.
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CISCO SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited)
Nine Months Ended
April 25, 2026 April 26, 2025
Cash flows from operating activities:
Net income $ 9,408 $ 7,630
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and other 1,902 2,176
Share-based compensation expense 2,903 2,693
Provision for receivables 11 17
Deferred income taxes ( 217 ) ( 792 )
(Gains) losses on divestitures, investments and other, net ( 500 ) 52
Change in operating assets and liabilities, net of effects of acquisitions and divestitures:
Accounts receivable 187 1,406
Inventories ( 1,549 ) 541
Financing receivables ( 34 ) 505
Other assets ( 602 ) ( 516 )
Accounts payable 444 ( 10 )
Income taxes, net ( 2,342 ) ( 2,002 )
Accrued compensation ( 332 ) ( 431 )
Deferred revenue ( 141 ) ( 524 )
Other liabilities ( 347 ) ( 786 )
Net cash provided by operating activities 8,791 9,959
Cash flows from investing activities:
Purchases of investments ( 7,367 ) ( 3,066 )
Proceeds from sales of investments 1,884 2,228
Proceeds from maturities of investments 3,811 3,985
Acquisitions, net of cash and cash equivalents acquired and divestitures ( 46 ) ( 291 )
Purchases of non-marketable equity securities ( 699 ) ( 265 )
Return of investments in non-marketable equity securities 223 108
Acquisition of property and equipment ( 1,020 ) ( 688 )
Other ( 6 ) ( 5 )
Net cash provided by (used in) investing activities ( 3,220 ) 2,006
Cash flows from financing activities:
Issuances of common stock 354 320
Repurchases of common stock — repurchase program
( 4,605 ) ( 4,748 )
Shares repurchased for tax withholdings on vesting of restricted stock units ( 1,362 ) ( 910 )
Short-term borrowings, original maturities of 90 days or less, net 412 ( 479 )
Issuances of debt 10,640 17,388
Repayments of debt ( 7,854 ) ( 18,545 )
Dividends paid ( 4,894 ) ( 4,812 )
Other ( 32 ) ( 80 )
Net cash used in financing activities ( 7,341 ) ( 11,866 )
Effect of foreign currency exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents ( 57 ) ( 23 )
Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents ( 1,827 ) 76
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 $ 7,083 $ 8,918
Supplemental cash flow information:
Cash paid for interest $ 1,305 $ 1,370
Cash paid for income taxes, net $ 4,228 $ 3,265
See Notes to Consolidated Financial Statements.
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CISCO SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(in millions, except per-share amounts)
(Unaudited)
Three Months Ended April 25, 2026 Shares of
Common
Stock Common Stock
and
Additional
Paid-In Capital Retained Earnings Accumulated
Other
Comprehensive Loss Total
Equity
Balance at January 24, 2026 3,949 $ 48,493 $ 66 $ ( 836 ) $ 47,723
Net income 3,373 3,373
Other comprehensive income (loss) 43 43
Issuance of common stock 10 — —
Repurchase of common stock ( 16 ) ( 191 ) ( 1,061 ) ( 1,252 )
Shares repurchased for tax withholdings on vesting of restricted stock units and other ( 3 ) ( 266 ) ( 14 ) ( 280 )
Cash dividends declared ($ 0.42 per common share)
( 1,660 ) ( 1,660 )
Share-based compensation 914 914
Balance at April 25, 2026 3,940 $ 48,950 $ 704 $ ( 793 ) $ 48,861
Nine Months Ended April 25, 2026 Shares of
Common
Stock Common Stock
and
Additional
Paid-In Capital Retained Earnings Accumulated
Other
Comprehensive Loss Total
Equity
Balance at July 26, 2025 3,960 $ 47,747 $ 50 $ ( 954 ) $ 46,843
Net income 9,408 9,408
Other comprehensive income (loss) 161 161
Issuance of common stock 61 354 354
Repurchase of common stock ( 63 ) ( 762 ) ( 3,842 ) ( 4,604 )
Shares repurchased for tax withholdings on vesting of restricted stock units and other ( 18 ) ( 1,292 ) ( 18 ) ( 1,310 )
Cash dividends declared ($ 1.24 per common share)
( 4,894 ) ( 4,894 )
Share-based compensation 2,903 2,903
Balance at April 25, 2026 3,940 $ 48,950 $ 704 $ ( 793 ) $ 48,861
See Notes to Consolidated Financial Statements.
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CISCO SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(in millions, except per-share amounts)
(Unaudited)
Three Months Ended April 26, 2025 Shares of
Common
Stock Common Stock
and
Additional
Paid-In Capital Retained Earnings Accumulated
Other
Comprehensive Loss Total
Equity
Balance at January 25, 2025 3,977 $ 46,521 $ 502 $ ( 1,493 ) $ 45,530
Net income 2,491 2,491
Other comprehensive income (loss) 360 360
Issuance of common stock 12 — —
Repurchase of common stock ( 25 ) ( 295 ) ( 1,209 ) ( 1,504 )
Shares repurchased for tax withholdings on vesting of restricted stock units and other ( 4 ) ( 255 ) ( 5 ) ( 260 )
Cash dividends declared ($ 0.41 per common share)
( 1,627 ) ( 1,627 )
Share-based compensation 945 945
Balance at April 26, 2025 3,960 $ 46,916 $ 152 $ ( 1,133 ) $ 45,935
Nine Months Ended April 26, 2025 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 7,630 7,630
Other comprehensive income (loss) 297 297
Issuance of common stock 56 320 320
Repurchase of common stock ( 86 ) ( 1,001 ) ( 3,742 ) ( 4,743 )
Shares repurchased for tax withholdings on vesting of restricted stock units and other ( 17 ) ( 896 ) ( 11 ) ( 907 )
Cash dividends declared ($ 1.21 per common share)
( 4,812 ) ( 4,812 )
Share-based compensation 2,693 2,693
Balance at April 26, 2025 3,960 $ 46,916 $ 152 $ ( 1,133 ) $ 45,935
See Notes to Consolidated Financial Statements.
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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 April 25, 2026 and for the third quarter and first nine months 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 April 25, 2026, the results of operations, the statements of comprehensive income and the statements of equity for the third quarter and first nine months of fiscal 2026 and 2025, and the statements of cash flows for the first nine months of fiscal 2026 and 2025, as applicable, have been made. The results of operations for the third quarter and first nine months of fiscal 2026 are not necessarily indicative of the operating results for the full fiscal year or any future periods.
Certain reclassifications have been made to the amounts in prior periods in order to conform to the current period’s presentation.
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. We expect to adopt this accounting standard update on a prospective basis in our fiscal 2026 Form 10-K.
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 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.
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CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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.
(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 Nine Months Ended
April 25, 2026 April 26, 2025 April 25, 2026 April 26, 2025
Product revenue:
Networking $ 8,815 $ 7,068 $ 24,877 $ 20,671
Security 2,008 2,013 6,006 6,142
Collaboration 1,024 1,031 3,133 3,112
Observability 269 261 820 796
Total Product 12,117 10,374 34,836 30,722
Services 3,724 3,775 11,237 11,259
Total revenue $ 15,841 $ 14,149 $ 46,073 $ 41,981
Amounts may not sum due to rounding.
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CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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.
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 Nine Months Ended
April 25, 2026 April 26, 2025 April 25, 2026 April 26, 2025
Product $ 4,432 $ 4,483 $ 13,406 $ 13,334
Services 3,359 3,433 10,221 10,288
Total $ 7,791 $ 7,916 $ 23,627 $ 23,622
The majority of our product subscription revenue is recognized over time and the remainder is recognized upfront. Substantially all of our services subscription revenue is recognized over time based on the contract term.
(b) Contract Balances
Accounts Receivable
Accounts receivable, net was $ 6.5 billion as of April 25, 2026 compared to $ 6.7 billion as of July 26, 2025, as reported on the Consolidated Balance Sheets.
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CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The allowances for credit loss for our accounts receivable are summarized as follows (in millions):
Three Months Ended Nine Months Ended
April 25, 2026 April 26, 2025 April 25, 2026 April 26, 2025
Allowance for credit loss at beginning of period $ 76 $ 80 $ 69 $ 87
Provisions 1 13 15 25
Write-offs, net of recoveries ( 4 ) ( 11 ) ( 11 ) ( 30 )
Allowance for credit loss at end of period $ 73 $ 82 $ 73 $ 82
Contract Assets and Liabilities
Gross contract assets by our internal risk ratings are summarized as follows (in millions):
April 25, 2026 July 26, 2025
1 to 4 $ 1,224 $ 1,358
5 to 6 2,012 1,868
7 and Higher 92 73
Total $ 3,328 $ 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 $ 3.3 billion as of April 25, 2026 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 $ 28.6 billion as of April 25, 2026 compared to $ 28.8 billion as of July 26, 2025. We recognized approximately $ 3.7 billion and $ 13.5 billion of revenue during the third quarter and first nine months 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 the period of benefit. Capitalized contract acquisition costs were $ 1.5 billion as of each of April 25, 2026 and July 26, 2025, and were included in other current assets and other assets. The amortization expense associated with these costs was $ 230 million and $ 713 million for the third quarter and first nine months of fiscal 2026, respectively, and $ 272 million and $ 718 million for the corresponding periods of fiscal 2025, respectively, and was included in sales and marketing expenses.
4. Acquisitions
Allocation of the total purchase consideration for acquisitions we completed during the first nine months of fiscal 2026 is summarized as follows (in millions):
Purchase Consideration Net Tangible Assets Acquired (Liabilities Assumed) Purchased Intangible Assets Goodwill
Total acquisitions $ 49 $ — $ 14 $ 35
The total purchase consideration related to acquisitions consisted primarily of cash consideration. Total transaction costs related to acquisition activities were $ 11 million and $ 12 million for the first nine months 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.
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CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The goodwill generated from the acquisitions completed during the first nine months 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 acquisitions completed during the first nine months of fiscal 2026 have not been presented because the effects of the acquisitions were 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 Nine Months Ended
April 25, 2026 April 26, 2025 April 25, 2026 April 26, 2025
Compensation expense related to acquisitions $ 87 $ 216 $ 295 $ 735
As of April 25, 2026, we estimated that future cash compensation expense of up to $ 282 million may be required to be recognized pursuant to applicable acquisition agreements.
5. Goodwill and Purchased Intangible Assets
(a) Goodwill
The following table presents the goodwill allocated to our reportable segments as of April 25, 2026 and changes to goodwill during the first nine months of fiscal 2026 (in millions):
Balance at July 26, 2025 Acquisitions Foreign Currency Translation and Other Balance at April 25, 2026
Americas $ 36,468 $ 21 $ 76 $ 36,565
EMEA 14,397 9 28 14,434
APJC 8,271 5 17 8,293
Total $ 59,136 $ 35 $ 121 $ 59,292
(b) Purchased Intangible Assets
The following table presents details of our intangible assets acquired through acquisitions completed during the first nine months 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 — $ — 2.5 $ 14 — $ — $ — $ 14
The following tables present details of our purchased intangible assets with finite lives (in millions):
April 25, 2026 Gross Accumulated Amortization Net
Customer related $ 6,242 $ ( 1,826 ) $ 4,416
Technology 5,005 ( 1,991 ) 3,014
Trade name 510 ( 90 ) 420
Total $ 11,757 $ ( 3,907 ) $ 7,850
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CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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.
Impairment charges related to purchased intangible assets were $ 19 million for the first nine months of fiscal 2025. Impairment charges were as a result of declines in estimated fair value resulting from the reductions in or the elimination of expected future cash flows associated with certain technology intangible assets. The fair value for purchased intangible assets measured at fair value on a nonrecurring basis was categorized as Level 3 due to the use of significant unobservable inputs in the valuation. Significant unobservable inputs that were used included expected revenues and net income related to the assets and the expected life of the assets. The difference between the estimated fair value and the carrying value of the assets was recorded as an impairment charge, which was included in product cost of sales.
The following table presents the amortization of purchased intangible assets, including impairment charges (in millions):
Three Months Ended Nine Months Ended
April 25, 2026 April 26, 2025 April 25, 2026 April 26, 2025
Amortization of purchased intangible assets:
Cost of sales $ 229 $ 269 $ 704 $ 934
Operating expenses 228 244 690 774
Total $ 457 $ 513 $ 1,394 $ 1,708
The estimated future amortization expense of purchased intangible assets with finite lives as of April 25, 2026 is as follows (in millions):
Fiscal Year Amount
2026 (remaining three months) $ 447
2027 1,495
2028 1,415
2029 1,287
2030 1,003
Thereafter 2,203
Total $ 7,850
6. Restructuring and Other Charges
In the fourth quarter of fiscal 2026, we announced a restructuring plan (the “Fiscal 2026 Plan”) to allow us to invest in key growth opportunities including silicon, optics, security and artificial intelligence (AI). The total pre-tax charges are estimated to be up to $ 1 billion consisting of severance and other one-time termination benefits, and other costs. We expect this plan to be substantially completed by the end of fiscal 2027.
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. In connection with the Fiscal 2025 Plan, we incurred charges of $ 182 million in the first nine months of fiscal 2026. These aggregate pre-tax charges were primarily cash-based and consisted of severance and other one-time termination benefits, and other costs. In connection with the Fiscal 2025 Plan, we incurred cumulative charges of $ 926 million and substantially completed the plan in the second quarter of fiscal 2026.
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CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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 142 40 182
Cash payments ( 169 ) ( 27 ) ( 196 )
Non-cash and other ( 1 ) ( 38 ) ( 39 )
Liability as of April 25, 2026 $ 38 $ 21 $ 59
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
April 25, 2026 July 26, 2025
Cash and cash equivalents $ 7,083 $ 8,346
Restricted cash and restricted cash equivalents included in other current assets — 564
Total $ 7,083 $ 8,910
In the table above, our restricted cash and restricted cash equivalents are funds primarily related to contractual obligations with suppliers.
Inventories
April 25, 2026 July 26, 2025
Raw materials $ 2,546 $ 1,744
Work in process 826 261
Finished goods 1,107 933
Service-related spares 222 220
Demonstration systems 7 6
Total $ 4,708 $ 3,164
Property and Equipment, Net
April 25, 2026 July 26, 2025
Gross property and equipment:
Land, buildings, and building and leasehold improvements $ 4,132 $ 4,045
Production, engineering, computer and other equipment and related software 5,366 5,178
Operating lease assets 56 51
Furniture, fixtures and other 304 316
Total gross property and equipment 9,858 9,590
Less: accumulated depreciation and amortization ( 7,281 ) ( 7,477 )
Total $ 2,577 $ 2,113
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CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Remaining Performance Obligations (RPO)
April 25, 2026 July 26, 2025
Product $ 22,058 $ 21,572
Services 21,404 21,961
Total $ 43,462 $ 43,533
Short-term RPO $ 21,818 $ 21,723
Long-term RPO 21,644 21,810
Total $ 43,462 $ 43,533
Amount to be recognized as revenue over the next 12 months
50 % 50 %
Deferred revenue $ 28,599 $ 28,779
Unbilled contract revenue 14,863 14,754
Total $ 43,462 $ 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.
Deferred Revenue
April 25, 2026 July 26, 2025
Product $ 13,461 $ 13,490
Services 15,138 15,289
Total $ 28,599 $ 28,779
Reported as:
Current $ 16,446 $ 16,416
Noncurrent 12,153 12,363
Total $ 28,599 $ 28,779
8. Leases
(a) Lessee Arrangements
The following table presents our operating lease balances (in millions):
Balance Sheet Line Item April 25, 2026 July 26, 2025
Operating lease right-of-use assets Other assets $ 1,450 $ 1,301
Operating lease liabilities Other current liabilities $ 410 $ 375
Operating lease liabilities Other long-term liabilities 1,288 1,175
Total operating lease liabilities $ 1,698 $ 1,550
The components of our lease expenses were as follows (in millions):
Three Months Ended Nine Months Ended
April 25, 2026 April 26, 2025 April 25, 2026 April 26, 2025
Operating lease expense $ 134 $ 115 $ 397 $ 378
Short-term lease expense 26 18 77 52
Variable lease expense 80 47 229 140
Total lease expense $ 240 $ 180 $ 703 $ 570
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CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Supplemental information related to our operating leases is as follows (in millions):
Nine Months Ended
April 25, 2026 April 26, 2025
Cash paid for amounts included in the measurement of lease liabilities —
operating cash flows $ 392 $ 345
Right-of-use assets obtained in exchange for operating leases liabilities $ 510 $ 483
The weighted-average lease term was 5.8 years and 5.7 years as of April 25, 2026 and July 26, 2025, respectively. The weighted-average discount rate was 4.0 % and 4.1 % as of April 25, 2026 and July 26, 2025, respectively.
The maturities of our operating leases (undiscounted) as of April 25, 2026 are as follows (in millions):
Fiscal Year Amount
2026 (remaining three months) $ 146
2027 426
2028 315
2029 251
2030 212
Thereafter 583
Total lease payments 1,933
Less: interest ( 235 )
Total $ 1,698
(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 $ 13 million and $ 44 million for the third quarter and first nine months of fiscal 2026, respectively, and $ 16 million and $ 49 million for the corresponding periods of fiscal 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 April 25, 2026 are summarized as follows (in millions):
Fiscal Year Amount
2026 (remaining three months) $ 105
2027 397
2028 114
2029 143
2030 140
Total 899
Less: Present value of lease payments ( 814 )
Unearned income $ 85
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.
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CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
A summary of our financing receivables is presented as follows (in millions):
April 25, 2026 Loan Receivables Lease Receivables Total
Gross $ 5,744 $ 899 $ 6,643
Residual value — 67 67
Unearned income — ( 85 ) ( 85 )
Allowance for credit loss ( 36 ) ( 11 ) ( 47 )
Total, net $ 5,708 $ 870 $ 6,578
Reported as:
Current $ 2,584 $ 352 $ 2,936
Noncurrent 3,124 518 3,642
Total, net $ 5,708 $ 870 $ 6,578
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):
April 25, 2026 Fiscal Year Nine Months Ended
Internal Credit Risk Rating Prior July 30, 2022 July 29, 2023 July 27, 2024 July 26, 2025 April 25, 2026 Total
Loan Receivables:
1 to 4 $ 7 $ 41 $ 147 $ 690 $ 1,136 $ 1,534 $ 3,555
5 to 6 15 12 83 231 772 1,040 2,153
7 and Higher — 2 3 11 17 3 36
Total Loan Receivables $ 22 $ 55 $ 233 $ 932 $ 1,925 $ 2,577 $ 5,744
Lease Receivables:
1 to 4 $ — $ 5 $ 37 $ 75 $ 92 $ 53 $ 262
5 to 6 1 18 83 144 141 156 543
7 and Higher — 1 1 4 1 2 9
Total Lease Receivables $ 1 $ 24 $ 121 $ 223 $ 234 $ 211 $ 814
Total $ 23 $ 79 $ 354 $ 1,155 $ 2,159 $ 2,788 $ 6,558
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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 April 25, 2026 and July 26, 2025 (in millions):
DAYS PAST DUE
(INCLUDES BILLED AND UNBILLED)
April 25, 2026 31-60 61-90 91+ Total
Past Due Current Total 120+ Still Accruing Nonaccrual
Financing
Receivables Impaired
Financing
Receivables
Loan receivables $ 42 $ 18 $ 12 $ 72 $ 5,672 $ 5,744 $ 5 $ 1 $ 1
Lease receivables 5 6 7 18 796 814 3 1 1
Total $ 47 $ 24 $ 19 $ 90 $ 6,468 $ 6,558 $ 8 $ 2 $ 2
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 April 25, 2026 CREDIT LOSS ALLOWANCES
Loan Receivables Lease Receivables Total
Allowance for credit loss as of January 24, 2026 $ 34 $ 11 $ 45
Provisions (benefits) 2 ( 1 ) 1
Foreign exchange and other — 1 1
Allowance for credit loss as of April 25, 2026 $ 36 $ 11 $ 47
Three Months Ended April 26, 2025 CREDIT LOSS ALLOWANCES
Loan Receivables Lease Receivables Total
Allowance for credit loss as of January 25, 2025 $ 45 $ 14 $ 59
Provisions (benefits) ( 2 ) ( 1 ) ( 3 )
Foreign exchange and other 1 1 2
Allowance for credit loss as of April 26, 2025 $ 44 $ 14 $ 58
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CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Nine Months Ended April 25, 2026 CREDIT LOSS ALLOWANCES
Loan Receivables Lease Receivables Total
Allowance for credit loss as of July 26, 2025 $ 37 $ 13 $ 50
Provisions (benefits) ( 1 ) ( 3 ) ( 4 )
Foreign exchange and other — 1 1
Allowance for credit loss as of April 25, 2026 $ 36 $ 11 $ 47
Nine Months Ended April 26, 2025 CREDIT LOSS ALLOWANCES
Loan Receivables Lease Receivables Total
Allowance for credit loss as of July 27, 2024 $ 50 $ 15 $ 65
Provisions (benefits) ( 5 ) ( 3 ) ( 8 )
Recoveries (write-offs), net ( 3 ) — ( 3 )
Foreign exchange and other 2 2 4
Allowance for credit loss as of April 26, 2025 $ 44 $ 14 $ 58
10. Investments
(a) Summary of Available-for-Sale Debt Investments
The following tables summarize our available-for-sale debt investments (in millions):
April 25, 2026 Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized and Credit Losses Fair
Value
U.S. government securities $ 1,716 $ 2 $ ( 6 ) $ 1,712
U.S. government agency securities 41 — — 41
Non-U.S. government and agency securities 400 — — 400
Corporate debt securities 2,791 4 ( 37 ) 2,758
Mortgage- and asset-backed securities 211 — ( 8 ) 203
Commercial paper 2,731 — — 2,731
Certificates of deposit 1,335 — — 1,335
Total $ 9,225 $ 6 $ ( 51 ) $ 9,180
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
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CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following table presents the gross realized gains and gross realized losses related to available-for-sale debt investments (in millions):
Three Months Ended Nine Months Ended
April 25, 2026 April 26, 2025 April 25, 2026 April 26, 2025
Gross realized gains $ 3 $ 1 $ 14 $ 9
Gross realized losses ( 3 ) ( 31 ) ( 22 ) ( 84 )
Total $ — $ ( 30 ) $ ( 8 ) $ ( 75 )
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 April 25, 2026 and July 26, 2025 (in millions):
UNREALIZED LOSSES
LESS THAN 12 MONTHS UNREALIZED LOSSES
12 MONTHS OR GREATER TOTAL
April 25, 2026 Fair Value Gross
Unrealized
Losses Fair Value Gross
Unrealized
Losses Fair Value Gross
Unrealized
Losses
U.S. government securities $ 1,004 $ ( 5 ) $ 185 $ ( 1 ) $ 1,189 $ ( 6 )
U.S. government agency securities 7 — — — 7 —
Non-U.S. government and agency securities 263 — — — 263 —
Corporate debt securities 1,073 ( 6 ) 926 ( 5 ) 1,999 ( 11 )
Mortgage- and asset-backed securities 86 — 73 ( 8 ) 159 ( 8 )
Commercial paper 74 — — — 74 —
Total $ 2,507 $ ( 11 ) $ 1,184 $ ( 14 ) $ 3,691 $ ( 25 )
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 April 25, 2026 (in millions):
Amortized Cost Fair Value
Within 1 year $ 5,919 $ 5,888
After 1 year through 5 years 3,015 3,010
After 5 years through 10 years 80 79
Mortgage- and asset-backed securities with no single maturity 211 203
Total $ 9,225 $ 9,180
Actual maturities may differ from the contractual maturities because borrowers may have the right to call or prepay certain obligations.
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CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(b) Marketable Equity Securities
We held marketable equity securities of $ 377 million and $ 383 million as of April 25, 2026 and July 26, 2025, respectively. We recognized net unrealized gains of $ 26 million and $ 21 million during the third quarter and first nine months of fiscal 2026, respectively, and net unrealized losses of $ 35 million and $ 6 million for the corresponding periods of fiscal 2025, respectively, on our marketable securities still held as of the reporting date.
(c) Non-Marketable Equity Securities
Our non-marketable equity securities are investments in privately held entities, venture funds, and publicly traded entities that do not have readily determinable fair value (RDFV). The carrying value of these investments are summarized below (in millions):
April 25, 2026 July 26, 2025
Initial cost of non-marketable equity securities measured under the measurement alternative $ 1,102 $ 975
Cumulative upward adjustments 440 195
Cumulative downward adjustments, including impairments ( 602 ) ( 597 )
Non-marketable equity securities under measurement alternative 940 573
Restricted equity securities 379 —
Consolidated investments 702 508
Non-marketable equity securities under net asset value (NAV), equity method and other 925 840
Total $ 2,946 $ 1,921
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.
Restricted equity securities are investments in publicly traded entities measured at fair value on a recurring basis. These investments are classified as Level 2 in the fair value hierarchy, as they are valued using pricing models that use observable market inputs reduced by a discount for lack of marketability (“DLOM”). The fair value of these restricted equity securities was $ 379 million as of April 25, 2026 and we recognized unrealized losses of $ 31 million for the third quarter and first nine months of fiscal 2026.
Our non-marketable equity securities classified as consolidated investments include venture funds that qualified for investment company specific accounting, the accounts of which are consolidated within our financial statements under the voting interest entity model. The noncontrolling interest attributed to these investments was $ 271 million and $ 162 million as of April 25, 2026 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.
Of the total carrying value of our non-marketable equity securities as of April 25, 2026, $ 0.9 billion of such investments are considered to be in variable interest entities which are unconsolidated.
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CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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):
APRIL 25, 2026 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 $ 4,258 $ — $ 4,258 $ 5,885 $ — $ 5,885
Commercial paper — 953 953 — 336 336
Certificates of deposit — 25 25 — — —
Corporate debt securities — 16 16 — 1 1
Non-U.S. government and agency securities — 58 58 — — —
Available-for-sale debt investments:
U.S. government securities — 1,712 1,712 — 1,961 1,961
U.S. government agency securities — 41 41 — 67 67
Non-U.S. government and agency securities — 400 400 — 458 458
Corporate debt securities — 2,758 2,758 — 3,090 3,090
Mortgage- and asset-backed securities — 203 203 — 286 286
Commercial paper — 2,731 2,731 — 950 950
Certificates of deposit — 1,335 1,335 — 569 569
Equity investments:
Marketable equity securities 377 — 377 383 — 383
Other current assets:
Money market funds — — — 563 — 563
Derivative assets — 90 90 — 32 32
Total $ 4,635 $ 10,322 $ 14,957 $ 6,831 $ 7,750 $ 14,581
Liabilities:
Derivative liabilities — 86 86 — 31 31
Total $ — $ 86 $ 86 $ — $ 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. We did not have any transfers between Level 1 and Level 2 fair value measurements during the periods presented.
For more discussion on the fair value measurement of our non-marketable equity securities, see Note 10.
(b) 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 April 25, 2026 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.
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CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
As of April 25, 2026, the estimated fair value of our short-term debt approximates its carrying value due to the short maturities. As of April 25, 2026, the fair value of our senior fixed-rate notes was $ 23.3 billion, with a carrying amount of $ 22.9 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 fixed-rate 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):
April 25, 2026 July 26, 2025
Amount Effective Rate Amount Effective Rate
Current portion of senior fixed-rate notes $ 3,498 3.89 % $ 1,749 4.15 %
Commercial paper 8,434 3.78 % 3,482 4.37 %
Current portion of other debt — — 1 1.13 %
Total $ 11,932 $ 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.
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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):
April 25, 2026 July 26, 2025
Maturity Date Amount Effective Rate Amount Effective Rate
Senior fixed-rate notes:
4.90 % February 26, 2026 $ — — $ 1,000 5.00 %
2.95 % February 28, 2026 — — 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 23,002 24,753
Unaccreted discount/issuance costs ( 133 ) ( 142 )
Total $ 22,869 $ 24,611
Reported as:
Current portion of long-term debt $ 3,498 $ 1,750
Long-term debt 19,371 22,861
Total $ 22,869 $ 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 fixed-rate 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 April 25, 2026, we were in compliance with all debt covenants.
As of April 25, 2026, future principal payments for long-term debt, including the current portion, are summarized as follows (in millions):
Fiscal Year Amount
2026 (remaining three months) $ —
2027 3,502
2028 1,000
2029 2,500
2030 1,000
Thereafter 15,000
Total $ 23,002
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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 April 25, 2026, 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 April 25,
2026 July 26,
2025 Balance Sheet Line Item April 25,
2026 July 26,
2025
Derivatives designated as hedging instruments:
Foreign currency derivatives Other current assets $ 38 $ 17 Other current liabilities $ 4 $ 2
Foreign currency derivatives Other assets 45 10 Other long-term liabilities — 2
Total 83 27 4 4
Derivatives not designated as hedging instruments:
Foreign currency derivatives Other current assets 7 3 Other current liabilities 36 17
Foreign currency derivatives Other assets — 2 Other long-term liabilities 46 10
Total 7 5 82 27
Total $ 90 $ 32 $ 86 $ 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 GAINS (LOSSES) FOR THE NINE MONTHS ENDED
Derivatives Not Designated as Hedging Instruments Line Item in Statements of Operations April 25, 2026 April 26, 2025 April 25, 2026 April 26, 2025
Foreign currency derivatives Other income (loss), net $ 31 $ 163 $ ( 18 ) $ 68
Total return swaps—deferred compensation Operating expenses and other 34 ( 105 ) 102 ( 72 )
Total $ 65 $ 58 $ 84 $ ( 4 )
The notional amounts of our outstanding derivatives are summarized as follows (in millions):
April 25, 2026 July 26, 2025
Foreign currency derivatives $ 8,895 $ 8,978
Total return swaps—deferred compensation 1,253 1,087
Total $ 10,148 $ 10,065
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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 addition, certain of these inventory purchase commitments are related to long-term supply agreements for fixed quantities of certain memory components for which pricing is variable. 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.
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CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following table summarizes our inventory purchase commitments with contract manufacturers and suppliers by period (in millions):
April 25, 2026 July 26, 2025
Less than 1 year $ 14,149 $ 7,202
1 to 3 years 1,556 320
3 to 5 years 328 77
Total $ 16,033 $ 7,599
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 April 25, 2026 and July 26, 2025, the liability for these purchase commitments was $ 209 million and $ 206 million, respectively, and was included in other current liabilities.
(b) Other Commitments
We have certain funding commitments, primarily related to our non-marketable equity securities. The funding commitments were $ 0.6 billion and $ 0.3 billion as of April 25, 2026 and July 26, 2025, respectively. The funding commitments and the carrying value of our non-marketable equity securities, collectively, represent our maximum exposure related to non-marketable equity securities.
(c) Product Warranties
The following table summarizes the activity related to the product warranty liability (in millions):
Nine Months Ended
April 25, 2026 April 26, 2025
Balance at beginning of period $ 399 $ 362
Provisions for warranties issued 309 300
Adjustments for pre-existing warranties — 40
Settlements ( 337 ) ( 306 )
Balance at end of period $ 371 $ 396
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 $ 7.7 billion and $ 5.9 billion for the third quarter of fiscal 2026 and 2025, respectively, and $ 21.7 billion and $ 18.1 billion for the first nine months of fiscal 2026 and 2025, respectively. The balance of the channel partner financing subject to guarantees was $ 1.2 billion as of April 25, 2026 and $ 1.3 billion as of July 26, 2025.
Financing Guarantee Summary The aggregate amounts of channel partner financing guarantees outstanding at April 25, 2026 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):
April 25, 2026 July 26, 2025
Maximum potential future payments $ 127 $ 123
Deferred revenue ( 12 ) ( 13 )
Total $ 115 $ 110
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(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 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 $ 155 million for the alleged evasion of import and other taxes, $ 966 million for interest, and $ 320 million for various penalties, all determined using an exchange rate as of April 25, 2026.
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 Centripetal Networks, Inc. (“Centripetal”) filed various patent litigations in the U.S., Germany, and France. These cases have either concluded with findings of non-infringement or invalidity or are in various stages of appeals. In the U.S., there was an appeal from our win in the Eastern District of Virginia that was pending in the Federal Circuit Court of Appeals, and on April 29, 2026, the Federal Circuit affirmed the District Court’s non-infringement decision, and one Patent Trial and Appeal Board ("PTAB") inter partes review decision that was remanded to the PTAB for further proceedings. In Germany, there was an infringement hearing on one patent on April 2, 2026, during which the German Court announced its preliminary opinion that Cisco does not infringe, and an appeal hearing in a related invalidity proceeding set for November 10, 2026. In France, Centripetal also filed an infringement case alleging infringement of the French counterpart to U.S. and German patents previously found to not be infringed. Those proceedings are ongoing and there is a final hearing set for October 8, 2026.
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. Del. on other Ramot patents. The Court rescheduled the trial date in the D. Del. cases for December 1, 2025. Prior to trial, the D. Del. Court granted our motion for summary judgment of non-infringement of all patents-in suit. Ramot appealed that decision to the Federal Circuit and those proceedings are ongoing.
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.
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CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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 April 25, 2026, the remaining authorized amount for stock repurchases under this program was approximately $ 9.6 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
April 25, 2026 16 $ 80.28 $ 1,252
January 24, 2026 18 $ 76.29 $ 1,351
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 $ 19 million and $ 20 million that were pending settlement April 25, 2026 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 May 13, 2026, our Board of Directors declared a quarterly dividend of $ 0.42 per common share to be paid on July 22, 2026, to all stockholders of record as of the close of business on July 6, 2026. Future dividends will be subject to the approval of our Board of Directors.
(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 April 25, 2026, we have not issued any shares of preferred stock.
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.
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CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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 April 25, 2026, 129 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 third quarter of each of fiscal 2026 and 2025. We issued 8 million shares during each of the first nine months of fiscal 2026 and fiscal 2025. As of April 25, 2026, 42 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 Nine Months Ended
April 25, 2026 April 26, 2025 April 25, 2026 April 26, 2025
Cost of sales—product $ 64 $ 67 $ 195 $ 189
Cost of sales—services 86 85 256 245
Share-based compensation expense in cost of sales 150 152 451 434
Research and development 420 422 1,324 1,189
Sales and marketing 239 235 752 676
General and administrative 105 121 354 357
Restructuring and other charges — 15 22 37
Share-based compensation expense in operating expenses 764 793 2,452 2,259
Total share-based compensation expense $ 914 $ 945 $ 2,903 $ 2,693
Income tax benefit for share-based compensation $ 275 $ 218 $ 814 $ 616
As of April 25, 2026, the total compensation cost related to unvested share-based awards not yet recognized was $ 4.5 billion which is expected to be recognized over approximately 1.7 years on a weighted-average basis.
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CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(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 26, 2025 113 $ 52.26
Granted and assumed 45 68.41
Vested ( 53 ) 49.60 $ 3,912
Canceled/forfeited/other 1 40.55
Unvested balance at April 25, 2026 106 $ 60.04
17. Accumulated Other Comprehensive Income (Loss)
The components of AOCI, net of tax, and the other comprehensive income (loss), for the first nine months 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 40 85 83 208
(Gains) losses reclassified out of AOCI 8 ( 35 ) 1 ( 26 )
Tax benefit (expense) ( 6 ) ( 12 ) ( 3 ) ( 21 )
Balance at April 25, 2026 $ ( 15 ) $ 103 $ ( 881 ) $ ( 793 )
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 126 ( 5 ) 188 309
(Gains) losses reclassified out of AOCI 75 ( 39 ) — 36
Tax benefit (expense) ( 58 ) 10 — ( 48 )
Balance at April 26, 2025 $ ( 98 ) $ 45 $ ( 1,080 ) $ ( 1,133 )
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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 Nine Months Ended
April 25, 2026 April 26, 2025 April 25, 2026 April 26, 2025
Income before provision for income taxes $ 4,039 $ 2,947 $ 11,076 $ 8,101
Provision for income taxes 666 456 1,668 471
Effective tax rate 16.5 % 15.5 % 15.1 % 5.8 %
As of April 25, 2026, we had $ 2.5 billion of unrecognized tax benefits, of which $ 1.7 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.
We made our final transition tax payment of $ 2.3 billion in the second quarter of fiscal 2026 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. 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. The income tax receivable associated with this tax benefit was included in other assets in the Consolidated Balance Sheets.
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.
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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 Nine Months Ended
April 25, 2026 April 26, 2025 April 25, 2026 April 26, 2025
Revenue:
Americas $ 9,569 $ 8,380 $ 27,403 $ 24,834
EMEA 4,054 3,736 12,262 11,179
APJC 2,218 2,034 6,409 5,968
Total $ 15,841 $ 14,149 $ 46,073 $ 41,981
Gross margin:
Americas $ 6,100 $ 5,676 $ 17,917 $ 16,960
EMEA 2,892 2,659 8,787 7,931
APJC 1,466 1,367 4,247 4,016
Segment total 10,458 9,703 30,951 28,907
Unallocated corporate items ( 378 ) ( 425 ) ( 1,154 ) ( 1,397 )
Total $ 10,080 $ 9,278 $ 29,797 $ 27,510
Supplemental information about our significant expenses:
Americas:
Cost of sales — product $ 2,864 $ 2,091 $ 7,629 $ 6,019
Cost of sales — services 606 612 1,857 1,854
Segment total $ 3,470 $ 2,703 $ 9,486 $ 7,873
EMEA:
Cost of sales — product $ 881 $ 790 $ 2,611 $ 2,392
Cost of sales — services 281 286 865 855
Segment total $ 1,162 $ 1,076 $ 3,476 $ 3,247
APJC:
Cost of sales — product $ 582 $ 481 $ 1,629 $ 1,407
Cost of sales — services 170 186 532 546
Segment total $ 752 $ 667 $ 2,161 $ 1,953
Amounts may not sum due to rounding.
Revenue in the United States was $ 8.7 billion and $ 7.6 billion for the third quarter of fiscal 2026 and 2025, respectively, and $ 24.8 billion and $ 22.4 billion for the first nine months of fiscal 2026 and 2025, respectively.
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CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(b) Revenue for Groups of Similar Products and Services
We design and sell Internet Protocol (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 Nine Months Ended
April 25, 2026 April 26, 2025 April 25, 2026 April 26, 2025
Revenue:
Networking $ 8,815 $ 7,068 $ 24,877 $ 20,671
Security 2,008 2,013 6,006 6,142
Collaboration 1,024 1,031 3,133 3,112
Observability 269 261 820 796
Total Product 12,117 10,374 34,836 30,722
Services 3,724 3,775 11,237 11,259
Total $ 15,841 $ 14,149 $ 46,073 $ 41,981
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 Nine Months Ended
April 25, 2026 April 26, 2025 April 25, 2026 April 26, 2025
Net income $ 3,373 $ 2,491 $ 9,408 $ 7,630
Weighted-average shares—basic 3,952 3,972 3,954 3,981
Effect of dilutive potential common shares 30 30 33 23
Weighted-average shares—diluted 3,982 4,002 3,987 4,004
Net income per share—basic $ 0.85 $ 0.63 $ 2.38 $ 1.92
Net income per share—diluted $ 0.85 $ 0.62 $ 2.36 $ 1.91
Antidilutive employee share-based awards, excluded — 11 — 61
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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 Nine Months Ended
April 25,
2026 April 26,
2025 % Variance April 25,
2026 April 26,
2025 % Variance
Revenue $ 15,841 $ 14,149 12 % $ 46,073 $ 41,981 10 %
Gross margin percentage 63.6 % 65.6 % (2.0) pts 64.7 % 65.5 % (0.8) pts
Research and development $ 2,377 $ 2,335 2 % $ 7,132 $ 6,920 3 %
Sales and marketing $ 2,855 $ 2,724 5 % $ 8,607 $ 8,148 6 %
General and administrative $ 661 $ 739 (11) % $ 2,082 $ 2,286 (9) %
Total research and development, sales and marketing, general and administrative $ 5,893 $ 5,798 2 % $ 17,821 $ 17,354 3 %
Total as a percentage of revenue 37.2 % 41.0 % (3.8) pts 38.7 % 41.3 % (2.6) pts
Operating income as a percentage of revenue 25.0 % 22.6 % 2.4 pts 24.1 % 20.7 % 3.4 pts
Income tax percentage 16.5 % 15.5 % 1.0 pts 15.1 % 5.8 % 9.3 pts
Net income $ 3,373 $ 2,491 35 % $ 9,408 $ 7,630 23 %
Net income as a percentage of revenue 21.3 % 17.6 % 3.7 pts 20.4 % 18.2 % 2.2 pts
Earnings per share—diluted $ 0.85 $ 0.62 37 % $ 2.36 $ 1.91 24 %
Percentages may not recalculate due to rounding.
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Three Months Ended April 25, 2026 Compared with Three Months Ended April 26, 2025
In the third quarter of fiscal 2026, we delivered strong revenue growth and profitability as we saw a continued positive demand environment. Total revenue increased by 12% compared with the third quarter of fiscal 2025. Within total revenue, product revenue increased by 17% and services revenue decreased by 1%. In the third quarter of fiscal 2026, total software revenue was $5.7 billion across all product areas and services, an increase of 1%. Total subscription revenue decreased 2%.
Total gross margin decreased by 2.0 percentage points. Product gross margin decreased by 2.5 percentage points, primarily driven by negative impacts from product mix and higher memory costs, partially offset by productivity improvements and lower amortization of purchased intangible assets. As a percentage of revenue, research and development, sales and marketing, and general and administrative expenses, collectively, decreased by 3.8 percentage points. Operating income as a percentage of revenue increased by 2.4 percentage points, primarily driven by revenue growth, partially offset by lower gross margin in the third quarter of fiscal 2026. Diluted earnings per share increased 37%, driven by revenue growth and operating margin improvement.
In terms of our geographic segments, revenue from the Americas increased by $1.2 billion, EMEA revenue increased by $0.3 billion and APJC revenue increased by $0.2 billion. From a customer market standpoint, we experienced product revenue growth across all of our customer markets.
From a product category perspective, the product revenue increase of 17% was driven by growth in Networking of 25%, particularly within our AI Infrastructure and Campus Networking solutions. We also saw product revenue growth in Observability of 3%. This growth was partially offset by a product revenue decline in Collaboration of 1%. Product revenue in Security was flat.
We continue to operate in a highly competitive and complex environment, especially as it relates to memory constraints and costs, and trade policy. Notwithstanding these challenges, we believe that we are making progress on our strategic priorities. We continue to invest in key priority areas with the objective of driving profitable growth over the long term. We remain focused on delivering innovation across our technologies to assist our customers in executing on their digital transformations and on accelerating innovation across our portfolio.
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Nine Months Ended April 25, 2026 Compared with Nine Months Ended April 26, 2025
Total revenue increased 10%, with product revenue increasing 13% and services revenue was flat. Total gross margin decreased 0.8 percentage points, primarily driven by negative impacts from product mix and to a lesser extent pricing, partially offset by productivity improvements and lower amortization of purchased intangible assets. As a percentage of revenue, research and development, sales and marketing, and general and administrative expenses, collectively, decreased by 2.6 percentage points. Operating income as a percentage of revenue increased by 3.4 percentage points, primarily driven by higher revenue, lower restructuring and other charges and lower amortization of purchased intangible assets, partially offset by lower gross margin in the first nine months of fiscal 2026. Diluted earnings per share increased 24%, driven by revenue growth and operating margin improvement, partially offset by the income tax benefit of $720 million we had in the first nine months of fiscal 2025.
Strategy and Priorities
In today’s digital-first world, businesses and organizations globally are deploying technology to pursue their strategic objectives, from accelerating growth to enhancing operational efficiency and fostering innovation. Our strategy is to securely connect everything to make those desired outcomes possible.
For additional discussion of our strategy and priorities, see Item 1. Business in our Annual Report on Form 10-K for the fiscal year ended July 26, 2025.
Other Key Financial Measures
The following is a summary of our other key financial measures for the third quarter of fiscal 2026 (in millions):
April 25,
2026 July 26,
2025
Cash and cash equivalents and investments $ 16,640 $ 16,110
Remaining performance obligations $ 43,462 $ 43,533
Inventories $ 4,708 $ 3,164
Total debt $ 31,303 $ 28,093
Nine Months Ended
April 25,
2026 April 26,
2025
Cash provided by operating activities $ 8,791 $ 9,959
Repurchases of common stock—stock repurchase program $ 4,604 $ 4,743
Dividends paid $ 4,894 $ 4,812
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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.
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We record a provision for firm, noncancelable, and unconditional purchase commitments with contract manufacturers and suppliers for quantities in excess of our future demand forecasts consistent with the valuation of our excess and obsolete inventory. Both provisions are a component of cost of sales.
Our total provisions for inventory and the liability related to purchase commitments with contract manufacturers and suppliers were $187 million and $459 million for the first nine months of fiscal 2026 and 2025, respectively. If there were to be a sudden and significant decrease in demand for our products, or a higher incidence of inventory obsolescence because of rapidly changing technology or customer requirements, then we could be required to increase our inventory write-downs, and our liability for purchase commitments with contract manufacturers and suppliers, and accordingly our profitability, could be adversely affected. We regularly evaluate our exposure for inventory write-downs and the adequacy of our liability for purchase commitments. For further discussion around the supply chain impacts and risks, see “—Results of Operations—Gross Margin—Supply Chain Impacts and Risks” and “—Liquidity and Capital Resources—Inventory Supply Chain.”
Loss Contingencies
We are subject to the possibility of various losses arising in the ordinary course of business. We consider the likelihood of the incurrence of a liability, as well as our ability to reasonably estimate the amount of loss, in determining loss contingencies. An estimated loss contingency is accrued when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. We regularly evaluate information available to us to determine whether such accruals should be made or adjusted and whether new accruals are required.
Third parties, including customers, have in the past and may in the future assert claims or initiate litigation related to exclusive patent, copyright, trademark, and other intellectual property rights to technologies and related standards that are relevant to us. These assertions have increased over time as a result of our growth and the general increase in the pace of patent claims assertions, particularly in the United States. If any infringement or other intellectual property claim made against us by any third party is successful, or if we fail to develop non-infringing technology or license the proprietary rights on commercially reasonable terms and conditions, our business, operating results, and financial condition could be materially and adversely affected.
Valuation of Goodwill and Purchased Intangible Assets
Goodwill
Our methodology for allocating the purchase price relating to purchase acquisitions is determined through established valuation techniques. Goodwill represents a residual value as of the acquisition date, which in most cases results in measuring goodwill as an excess of the purchase consideration transferred plus the fair value of any noncontrolling interest in the acquired company over the fair value of net assets acquired, including contingent consideration. We perform goodwill impairment tests on an annual basis in the fourth fiscal quarter and between annual tests in certain circumstances for each reporting unit. The assessment of fair value for goodwill and purchased intangible assets is based on factors that market participants would use in an orderly transaction in accordance with the guidance for the fair value measurement of nonfinancial assets.
In response to changes in industry and market conditions, we could be required to strategically realign our resources and consider restructuring, disposing of, or otherwise exiting businesses, which could result in an impairment of goodwill. There was no impairment of goodwill in each of the first nine months of fiscal 2026 and 2025.
Purchased Intangible Assets
The accounting for acquisitions requires significant estimates and judgments in the valuation of purchased intangible assets. Critical estimates used in the valuation of purchased intangible assets include, but are not limited to, the amount and timing of expected future cash flows, useful lives and discount rates. While our estimates of fair value are based on assumptions that are believed to be reasonable, these assumptions are inherently uncertain and unpredictable and would not reflect unanticipated events and circumstances that may occur.
We make judgments about the recoverability of purchased intangible assets with finite lives whenever events or changes in circumstances indicate that an impairment may exist. Recoverability of purchased intangible assets with finite lives is measured by comparing the carrying amount of the asset group to the future undiscounted cash flows the asset group is expected to generate. We review indefinite-lived intangible assets for impairment annually or whenever events or changes in circumstances indicate that the asset might be impaired. If the asset is considered impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. Assumptions and estimates about future values and remaining useful lives of our purchased intangible assets are complex and subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business
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strategy and our internal forecasts. Our ongoing consideration of all the factors described previously could result in impairment charges in the future, which could adversely affect our net income.
Income Taxes
We are subject to income taxes in the United States and numerous foreign jurisdictions. Our effective tax rates differ from the statutory rate, primarily due to the tax impact of state taxes, foreign operations, R&D tax credits, foreign-derived intangible income deductions, global intangible low-taxed income, tax audit settlements, nondeductible compensation, and international realignments. Our effective tax rate was 16.5% and 15.5% in the third quarter of fiscal 2026 and 2025, respectively and 15.1% and 5.8% in the first nine months of fiscal 2026 and 2025, respectively.
Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. Although we believe our reserves are reasonable, no assurance can be given that the final tax outcome of these matters will not be different from that which is reflected in our historical income tax provisions and accruals. We adjust these reserves due to changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact the provision for income taxes in the period in which such determination is made. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate, and the related net interest and penalties.
Significant judgment is also required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, we consider all available evidence, including past operating results, estimates of future taxable income, and the feasibility of tax planning strategies. If we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.
Our provision for income taxes is subject to volatility and could be adversely impacted by earnings being lower than anticipated in countries that have lower tax rates and higher than anticipated in countries that have higher tax rates; by changes in the valuation of our deferred tax assets and liabilities; by changes to foreign-derived intangible income deduction, global intangible low-tax income and base erosion and anti-abuse tax, research and development capitalization and amortization, and corporate alternative minimum tax laws, regulations, or interpretations thereof; by expiration of or lapses in tax incentives; by transfer pricing adjustments, including the effect of acquisitions on our legal structure; by tax effects of nondeductible compensation; by tax costs related to intercompany realignments; by changes in accounting principles; or by changes in tax laws and regulations, treaties, or interpretations thereof, including changes to the taxation of earnings of our foreign subsidiaries, the deductibility of expenses attributable to foreign income, and the foreign tax credit rules. Significant judgment is required to determine the recognition and measurement attributes prescribed in the accounting guidance for uncertainty in income taxes. The Organisation for Economic Co-operation and Development (OECD), an international association comprised of 38 countries, including the United States, has made changes, including a Pillar Two framework that imposes a minimum tax rate of 15% in each taxing jurisdiction, and is contemplating additional changes to numerous long-standing tax principles. There can be no assurance that these changes and any contemplated changes if finalized, once adopted by countries, will not have an adverse impact on our provision for income taxes. As a result of certain of our ongoing employment and capital investment actions and commitments, our income in certain countries was subject to reduced tax rates. Our failure to meet these commitments could adversely impact our provision for income taxes. In addition, we are subject to the continuous examination of our income tax returns by the Internal Revenue Service (IRS) and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. There can be no assurance that the outcomes from these continuous examinations will not have an adverse impact on our operating results and financial condition.
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RESULTS OF OPERATIONS
Revenue
The following table presents the breakdown of revenue between product and services (in millions, except percentages):
Three Months Ended Nine Months Ended
April 25,
2026 April 26,
2025 Variance
in Dollars Variance
in Percent April 25,
2026 April 26,
2025 Variance
in Dollars Variance
in Percent
Revenue:
Product $ 12,117 $ 10,374 $ 1,743 17 % $ 34,836 $ 30,722 $ 4,114 13 %
Percentage of revenue 76.5 % 73.3 % 75.6 % 73.2 %
Services 3,724 3,775 (51) (1) % 11,237 11,259 (22) — %
Percentage of revenue 23.5 % 26.7 % 24.4 % 26.8 %
Total $ 15,841 $ 14,149 $ 1,692 12 % $ 46,073 $ 41,981 $ 4,092 10 %
Amounts may not sum and percentages may not recalculate due to rounding.
We manage our business primarily on a geographic basis, organized into three geographic segments. Our revenue, which includes product and services for each segment, is summarized in the following table (in millions, except percentages):
Three Months Ended Nine Months Ended
April 25,
2026 April 26,
2025 Variance
in Dollars Variance
in Percent April 25,
2026 April 26,
2025 Variance
in Dollars Variance
in Percent
Revenue:
Americas $ 9,569 $ 8,380 $ 1,189 14 % $ 27,403 $ 24,834 $ 2,569 10 %
Percentage of revenue 60.4 % 59.2 % 59.5 % 59.2 %
EMEA 4,054 3,736 318 9 % 12,262 11,179 1,083 10 %
Percentage of revenue 25.6 % 26.4 % 26.6 % 26.6 %
APJC 2,218 2,034 184 9 % 6,409 5,968 441 7 %
Percentage of revenue 14.0 % 14.4 % 13.9 % 14.2 %
Total $ 15,841 $ 14,149 $ 1,692 12 % $ 46,073 $ 41,981 $ 4,092 10 %
Amounts may not sum and percentages may not recalculate due to rounding.
Three Months Ended April 25, 2026 Compared with Three Months Ended April 26, 2025
Total revenue increased by 12%. Product revenue increased by 17% and services revenue decreased by 1%. Our total revenue reflected growth across each of our geographic segments.
In addition to the impact of macroeconomic factors, including the IT spending environment and the level of spending by government entities, revenue by segment in a particular period may be significantly impacted by the timing of revenue recognition for complex transactions with multiple performance obligations. In addition, certain customers tend to make large and sporadic purchases, and the revenue related to these transactions may also be affected by the timing of revenue recognition, which in turn would impact the revenue of the relevant segment.
Nine Months Ended April 25, 2026 Compared with Nine Months Ended April 26, 2025
Total revenue increased by 10%. Product revenue increased by 13% and services revenue was flat. Our total revenue reflected growth across each of our geographic segments.
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Product Revenue by Segment
The following table presents the breakdown of product revenue by segment (in millions, except percentages):
Three Months Ended Nine Months Ended
April 25,
2026 April 26,
2025 Variance
in Dollars Variance
in Percent April 25,
2026 April 26,
2025 Variance
in Dollars Variance
in Percent
Product revenue:
Americas $ 7,375 $ 6,125 $ 1,250 20 % $ 20,731 $ 18,075 $ 2,656 15 %
Percentage of product revenue 60.9 % 59.1 % 59.5 % 58.8 %
EMEA 3,101 2,805 296 11 % 9,434 8,417 1,017 12 %
Percentage of product revenue 25.6 % 27.0 % 27.1 % 27.4 %
APJC 1,640 1,444 196 14 % 4,671 4,230 441 10 %
Percentage of product revenue 13.5 % 13.9 % 13.4 % 13.8 %
Total $ 12,117 $ 10,374 $ 1,743 17 % $ 34,836 $ 30,722 $ 4,114 13 %
Amounts may not sum and percentages may not recalculate due to rounding.
Americas
Three Months Ended April 25, 2026 Compared with Three Months Ended April 26, 2025
Product revenue in the Americas segment increased by 20%, with growth across each of our customer markets, led by the Service Provider and Cloud customer market which was largely driven by revenue from our AI Infrastructure solutions. From a country perspective, product revenue increased in the United States, Canada and Mexico by 22%, 9% and 32%, respectively, partially offset by a decline in Brazil of 10%.
Nine Months Ended April 25, 2026 Compared with Nine Months Ended April 26, 2025
Product revenue in the Americas segment increased by 15%, with growth across each of our customer markets, led by the Service Provider and Cloud customer market which was largely driven by revenue from our AI Infrastructure solutions. From a country perspective, product revenue increased in the United States, Canada and Mexico by 16%, 4%, and 31%, respectively, partially offset by a decline in Brazil of 13%.
EMEA
Three Months Ended April 25, 2026 Compared with Three Months Ended April 26, 2025
Product revenue in the EMEA segment increased by 11%, with growth across each of our customer markets. From a country perspective, product revenue increased in the United Kingdom and Germany by 26% and 7%, respectively.
Nine Months Ended April 25, 2026 Compared with Nine Months Ended April 26, 2025
Product revenue in the EMEA segment increased by 12%, with growth across each of our customer markets. From a country perspective, product revenue increased in the United Kingdom and Germany by 24% and 11%, respectively.
APJC
Three Months Ended April 25, 2026 Compared with Three Months Ended April 26, 2025
Product revenue in the APJC segment increased by 14%, with growth across each of our customer markets. From a country perspective, product revenue increased in Japan, India, Australia and China by 12%, 22%, 19% and 42%, respectively.
Nine Months Ended April 25, 2026 Compared with Nine Months Ended April 26, 2025
Product revenue in the APJC segment increased by 10%, with growth across each of our customer markets. From a country perspective, product revenue increased in Japan, India, Australia and China by 17%, 8%, 2% and 17%, respectively.
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Product Revenue by Category
In addition to the primary view on a geographic basis, we also prepare financial information related to product categories and customer markets for various purposes.
The following table presents product revenue by category (in millions, except percentages):
Three Months Ended Nine Months Ended
April 25,
2026 April 26,
2025 Variance
in Dollars Variance
in Percent April 25,
2026 April 26,
2025 Variance
in Dollars Variance
in Percent
Product revenue
Networking $ 8,815 $ 7,068 $ 1,747 25 % $ 24,877 $ 20,671 $ 4,206 20 %
Security 2,008 2,013 (5) — % 6,006 6,142 (136) (2) %
Collaboration 1,024 1,031 (7) (1) % 3,133 3,112 21 1 %
Observability 269 261 8 3 % 820 796 24 3 %
Total $ 12,117 $ 10,374 $ 1,743 17 % $ 34,836 $ 30,722 $ 4,114 13 %
Amounts may not sum and percentages may not recalculate due to rounding.
Networking
Three Months Ended April 25, 2026 Compared with Three Months Ended April 26, 2025
The Networking product category consists of our core networking technologies of switching, routing, wireless, and servers. Revenue from the Networking product category increased by 25%, or $1.7 billion primarily driven by our AI Infrastructure and Campus Networking solutions. The increase was primarily driven by growth across the portfolio led by double digit revenue growth in Campus Switching, Data Center Switching, Wireless and Service Provider Routing.
Nine Months Ended April 25, 2026 Compared with Nine Months Ended April 26, 2025
Revenue from the Networking product category increased by 20%, or $4.2 billion. The increase was primarily driven by double digit revenue growth in Service Provider Routing, particularly within our AI Infrastructure solutions, Data Center Switching, Campus Switching, Wireless and Enterprise Routing.
Security
Three Months Ended April 25, 2026 Compared with Three Months Ended April 26, 2025
The Security product category consists of our Network Security, Identity and Access Management, SASE and Threat Intelligence, Detection, and Response offerings. Revenue in our Security product category was flat, primarily driven by declines in our prior generation products and Splunk offerings. We continued to see a change in how our customers consumed Splunk offerings, shifting from fewer on-premise deals to more cloud subscriptions. These declines were offset by growth in new and refreshed products.
Nine Months Ended April 25, 2026 Compared with Nine Months Ended April 26, 2025
Revenue from the Security product category decreased by 2%, or $136 million, primarily driven by Threat Intelligence, Detection, and Response offerings and our prior generation products, partially offset by growth in SASE offerings.
Collaboration
Three Months Ended April 25, 2026 Compared with Three Months Ended April 26, 2025
The Collaboration product category consists of our Webex Suite, Collaboration Devices, Contact Center and CPaaS offerings. Revenue in our Collaboration product category decreased by 1%, or $7 million, primarily driven by declines in Webex Suite offerings partially offset by growth in Collaboration Devices, Cloud Contact Center and CPaaS offerings.
Nine Months Ended April 25, 2026 Compared with Nine Months Ended April 26, 2025
Revenue from the Collaboration product category increased by 1%, or $21 million, primarily driven by revenue growth in our Collaboration Devices and CPaaS offerings, partially offset by declines in Webex Suite offerings.
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Observability
Three Months Ended April 25, 2026 Compared with Three Months Ended April 26, 2025
The Observability product category consists of our network assurance, monitoring and analytics and observability suite offerings. Revenue in our Observability product category increased by 3%, primarily due to growth in ThousandEyes, partially offset by a decline in Splunk offerings.
Nine Months Ended April 25, 2026 Compared with Nine Months Ended April 26, 2025
Revenue from Observability product category increased by 3%, or $24 million, primarily driven by growth in ThousandEyes, partially offset by a decline in Splunk offerings.
Services Revenue by Segment
The following table presents the breakdown of services revenue by segment (in millions, except percentages):
Three Months Ended Nine Months Ended
April 25,
2026 April 26,
2025 Variance
in Dollars Variance
in Percent April 25,
2026 April 26,
2025 Variance
in Dollars Variance
in Percent
Services revenue:
Americas $ 2,194 $ 2,254 $ (60) (3) % $ 6,672 $ 6,759 $ (87) (1) %
Percentage of service revenue 58.9 % 59.7 % 59.4 % 60.0 %
EMEA 953 931 22 2 % 2,829 2,762 67 2 %
Percentage of service revenue 25.6 % 24.7 % 25.2 % 24.5 %
APJC 578 590 (12) (2) % 1,738 1,738 — — %
Percentage of service revenue 15.5 % 15.6 % 15.4 % 15.5 %
Total $ 3,724 $ 3,775 $ (51) (1) % $ 11,237 $ 11,259 $ (22) — %
Amounts may not sum and percentages may not recalculate due to rounding.
Services revenue decreased by 1% in the third quarter of fiscal 2026 compared with the third quarter of fiscal 2025, with the decline primarily driven by lower revenue from support services, partially offset by higher professional services. Services revenue declined in the Americas and APJC segments, partially offset by an increase in the EMEA segment for the third quarter of fiscal 2026.
Services revenue was flat in the first nine months of fiscal 2026 compared to the first nine months of fiscal 2025. Services revenue increased in the EMEA segment, offset by a decline in the Americas segment. Services revenue in the APJC segment was flat.
Gross Margin
The following table presents the gross margin for products and services (in millions, except percentages):
Three Months Ended Nine Months Ended
AMOUNT PERCENTAGE AMOUNT PERCENTAGE
April 25,
2026 April 26,
2025 April 25,
2026 April 26,
2025 April 25,
2026 April 26,
2025 April 25,
2026 April 26,
2025
Gross margin:
Product $ 7,504 $ 6,686 61.9 % 64.4 % $ 22,084 $ 19,795 63.4 % 64.4 %
Services 2,576 2,592 69.2 % 68.7 % 7,713 7,715 68.6 % 68.5 %
Total $ 10,080 $ 9,278 63.6 % 65.6 % $ 29,797 $ 27,510 64.7 % 65.5 %
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Table of Contents
CISCO SYSTEMS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Product Gross Margin
The following table summarizes the key factors that contributed to the change in product gross margin percentage for the third quarter and first nine months of fiscal 2026, as compared with the corresponding prior year periods:
Product Gross Margin Percentage
Three Months Ended Nine Months Ended
Fiscal 2025 64.4 % 64.4 %
Productivity (1)
1.2 % 1.7 %
Product pricing (0.1) % (0.5) %
Mix of products sold (4.4) % (3.3) %
Amortization of purchased intangible assets 0.7 % 1.0 %
Others 0.1 % 0.1 %
Fiscal 2026 61.9 % 63.4 %