2023 Annual Report
Creating
a world of
potential
Cisco (Nasdaq: CSCO) is the worldwide leader
in technology that powers the internet.
Discover more at thenetwork.cisco.com and
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About
Cisco
Our strategy
We securely connect everything to make anything possible
Our dierentiation
Innovation
Customer outcomes at
massive scale
●
Market-leading secure networking
●
Integrated solutions across broad
portfolio
●
Unmatched, AI-driven insights
●
400B security events observed
per day
●
630B observability metrics tracked
per day
Trust
Purpose-driven, neutral,
trusted brand
●
Data protection and privacy at
foundation
●
Top-rated supply chain
●
Goal to reach net zero greenhouse
gas emissions across value chain
by 2040
Global reach
Broad customer and partner
reach
●
1M+ customers and partner
ecosystem
●
99% of world’s largest companies
●
82,000+ government organizations
Cisco 2023 Annual Report 1
TABLE OF CONTENTS
Introduction to
summary report
This summary provides an overview
of Cisco. It does not contain all the
information you should consider.
Please refer to our latest Annual Report
on Form 10-K, our Proxy Statement
for our 2023 Annual Meeting of
Stockholders, and our Purpose Report
which are all available on our website
at www.cisco.com
FORWARD-LOOKING STATEMENTS
This summary report and our annual report on Form 10-K (“Annual Report”) contain projections and other forward-looking statements
regarding future events or the future financial performance of Cisco, including future operating results. These projections, goals and
statements are only predictions. Actual events or results may differ materially from those in the projections, goals or other forward-looking
statements. See Cisco’s filing with the Securities and Exchange Commission, including its most recent Annual Report for a discussion of
important risk factors that could cause actual events or results to differ materially from those in the projections, goals or other forward-
looking statements.
Our purpose
To power an inclusive future for all
We know that when we leverage the strengths and
success of our company and people, we can positively
impact the world, including the most vulnerable and
underserved. We do this by closing the digital divide,
empowering the future of work, fighting for equality and
social justice, and building a regenerative planet.
Customer priorities
●
Transform infrastructure
●
Secure the enterprise
●
Power hybrid work
●
Reimagine applications
●
Journey to sustainability
These priorities are central to how we
innovate and develop our technology
2 Letter to stockholders
4 Fiscal 2023
financial highlights
6 Cisco strategy
7 Leadership
8 Corporate governance
12 Our purpose
2
4
6
7
8
12
Cisco 2023 Annual Report2
To our stockholders,
Fiscal 2023 was a milestone year for Cisco. We delivered
record revenue of nearly $57 billion, up 11% year-over-
year, which was our highest growth rate in over a decade.
We also delivered record net income, earnings per share,
and operating cash flow, and returned $10.6 billion to
stockholders. Even more impressive is that we achieved
this while successfully navigating a dynamic operating
environment. I am incredibly proud of all that our teams did
this past year to deliver these results and to create value for
our customers and stockholders.
While change is a constant in our industry, our priorities
remain the same: growing our market share; driving
innovation and extending our leadership; delivering
exceptional stockholder value; and transforming our business
model by growing recurring revenue. Fiscal 2023 marked a
year of good progress on these priorities, and we expect this
to continue into next year as well.
Strong execution and share gains
At the start of the fiscal year, we were proactively managing
through an evolving and complex market environment and
taking actions to remediate supply challenges that affected
almost every industry worldwide. Our past mitigation actions
included redesigning hundreds of products and sourcing
alternative key components to improve the resilience of our
supply chain.
Chuck Robbins
Chair and Chief Executive Officer
Letter to
stockholders
Our ability to navigate successfully through this environment
led to our record results indicating solid customer demand in
fiscal 2023. Quarterly sequential product order growth in our
fourth quarter was over 30%, the second highest rate in 20
years, which is a testament to the strength of our portfolio
and our execution.
In addition, as supply constraints eased, we were able to
deliver more of our technology to our customers which led
to market share gains of over three percentage points in
our three largest networking markets—Campus Switching,
Wireless LAN and Service Provider Routing. We expect this
market share momentum to continue in fiscal 2024.
Innovation momentum
Our customers are increasingly turning to Cisco to help them
securely connect their businesses today and to build the
networks of tomorrow. Throughout the year, we executed on
our innovation strategy and announced several new solutions
spanning generative artificial intelligence (AI), networking,
security, full stack observability, sustainability, and hybrid
work. Across our portfolio, we are focused on delivering a
simpler and more unified experience for our customers.
We know that the acceleration of AI will fundamentally
change our world and create new growth opportunities
for us. We launched new, market-leading AI technologies
across our Collaboration and Security portfolios in addition
to new infrastructure to allow our customers to process AI
workloads more efficiently.
“The visibility we achieve
through our growing recurring
revenue enables us to strengthen our
commitment to increasing shareholder
returns through capital return,
innovation, and strong execution.”
Cisco 2023 Annual Report 3
While hyperscalers are continuing their investments to grow
public cloud infrastructure, they are also beginning their
buildouts to capitalize on the possibilities of generative AI.
In fact, our core networking technology is already powering
some of the leading AI models run by hyperscalers around
the world.
We expect to see more demand for our technologies as
these use cases require higher networking requirements.
To address this demand, we launched our next generation
Silicon One switching ASICs to support large-scale Graphics
Processing Unit (GPU) clusters for AI workloads and, by the
end of fiscal 2023, we had taken cumulative orders for over
half a billion dollars for ethernet fabrics. Additionally, we
are piloting 800G capabilities for AI training fabrics. Overall,
Cisco is committed to helping our customers navigate this
transition in a trusted and responsible way, and we believe
we are well positioned to win.
Security also remains a top priority. Our Security Cloud
platform has comprehensive capabilities across the
network, endpoint, and the cloud – helping to simplify
security management while increasing efficacy. Our new
technologies like Extended Detection and Response (XDR),
Cisco Multicloud Defense, and Cisco Secure Access, a
secure service edge (SSE) solution, are seeing rapid early
adoption. These innovations, combined with our recent
acquisitions, show how we are extending our security
portfolio with deep telemetry, AI, and identity threat
capabilities.
As part of our journey to simplification, we have been
working to enable the monitoring and management of all
Cisco networking products—whether on premises or in the
cloud—from one place. At Cisco Live, we introduced the
Cisco Networking Cloud, a unified management platform
and a cloud-native Full Stack Observability (FSO) platform
to deliver unparalleled insights.
I believe our portfolio is stronger than ever, and that Cisco
has never been better positioned to help deliver our
customers’ outcomes. As we look ahead, this gives me
great confidence in our ability to drive innovation and extend
our technology leadership by investing in significant new
opportunities for growth in Cloud, Security, and AI.
Accelerating our business
transformation for greater visibility
In fiscal 2023, we continued to make progress on the
transformation of our business to more recurring-
based offerings driven by higher levels of software and
subscriptions. We generated almost $17 billion of software
revenue, 84% of which was subscription based. Total
subscription revenue including services sold as subscriptions
was over $24 billion and represented 43% of Cisco’s total
revenue.
With the success of this transformation, we have gained
greater predictability and visibility through our growing
Annualized Recurring Revenue (ARR) and Remaining
Performance Obligations (RPO). As we look ahead to fiscal
2024, we expect these factors, combined with our healthy
backlog, will account for approximately 40% of the year’s
revenue. Additionally, we have almost $1 billion of Enterprise
Networking software subscriptions available to renew in
fiscal 2024.
Long-term value creation
and sustainability
The visibility we achieve through our growing recurring
revenue enables us to strengthen our commitment to
increasing shareholder returns through capital return,
innovation, and strong execution. Our long-term strategy is
to deliver operating leverage by growing earnings per share
faster than revenue. We will also provide a high degree of
consistency in our stock repurchase program and continue
to grow our dividend.
Cisco is committed to being a sustainable business as we
believe it is not only a commercial and moral imperative, but
also a tremendous opportunity. As we work towards our net
zero goals, our technologies such as IoT, Silicon One and
power over ethernet, are helping our customers on their own
sustainability journeys by enabling significant reductions in
power consumption.
I’m incredibly proud that for the third year in a row, Cisco
was ranked #1 in the United States on Fortune Magazine’s
100 Best Companies to Work For list, as well as being a #1
Great Place to Work in 15 other countries around the world.
This positions Cisco as a premier destination for top talent
worldwide.
To summarize, we had a phenomenal year. Our fiscal
2023 results demonstrate the strength of our business
today and are a solid foundation for future growth. Our
long-established leadership in networking, the breadth of
our portfolio, the trust we’ve built with our customers and
partners, and our collective commitment to innovation and to
our purpose give me great confidence in our future and our
ability to capture the many opportunities ahead.
Thank you for your continued support.
Chuck Robbins
Chair and Chief Executive Officer
October 12, 2023
Cisco 2023 Annual Report4
*
Amounts may not sum and percentages may not recalculate due to rounding
By product category and services*
2021 2022 2023
64.0%
25.8%
62.5%
27.1%
62.7%
26.4%
2021 2022 2023
64.0%
25.8%
62.5%
27.1%
62.7%
26.4%
2021 2022 2023
64.0%
25.8%
62.5%
27.1%
62.7%
26.4%
51%
Secure, Agile
Networks
9%
Internet for
theFuture
7%
Collaboration
7%
End-to-End
Security
1%
Optimized
Application
Experiences
24%
Services
Gross margin
Operating margin
FY23 Revenue
By geographical segment*
59%
Americas
27%
EMEA
15%
APJC
$15.5
2021
$13.2
2022
$19.9
2023
($B)
Revenue trend*
(%)
Margin
Product revenue
Services revenue
$49.8
2021 2022 2023
$36.0
$13.8
$38.0
$13.5
$43.1
$13.9
$51.6
2021 2022 2023
$36.0
$13.8
$38.0
$13.5
$43.1
$13.9
$57.0
($B)
Operating cash flow
Fiscal 2023 financial highlights
2021 2022 2023
$36.0
$13.8
38.0%
13.5%
43.1%
13.9%
All amounts on an annual basis.
Fiscal 2023 financial highlights
Cisco 2023 Annual Report 5
R. Scott Herren
EVP and Chief Financial Officer
Total stockholder return
$265.46
$177.38
$142.29
202320222021202020192018
Cisco Systems, Inc. S&P 500 S&P Information Technology
Comparison of 5-year cumulative
total return**
among Cisco Systems, Inc., the S&P
500 Index, and the S&P Information
Technology Index
This graph shows a 5-year comparison of
the cumulative total stockholder return on
Cisco common stock with the cumulative
total returns of the S&P 500 Index and
the S&P Information Technology Index.
The graph tracks the performance of
a $100 investment in Cisco’s common
stock and in each of the indexes (with the
reinvestment of all dividends). Stockholder
returns over the indicated period are
based on historical data and should not be
considered indicative of future stockholder
returns.
**
$100 invested on 7/28/18 in stock or
index, including reinvestment of dividends.
Fiscal year ending July 29, 2023.
Total stockholder return
Primary uses of cash in FY23
Dividends paid
per share
Share repurchases and
diluted share count
($) (Millions)
Dividends paid per share
Capital allocation
Share repurchases and
diluted share count
$M
$1.46
$1.50
$1.54
59
4,254 4,236
64
146
20232022
2021
202220212020
4,192
Absolute number of
shares repurchased
Diluted share count
Dividends paid per share
Capital allocation
Share repurchases and
diluted share count
$B
$M
$1.42
$1.46
$1.50
64
4,236
146
88
202220212020
202320222021
4,105
Absolute number of
shares repurchased
Diluted share count
4,192
“We had a very strong
fiscal year with record
results. We executed well,
delivering strong top line
growth, profitability, and
cash flow. We continued
to make progress on our
business model shift to more
recurring revenue which
provides greater visibility and
predictability, while making
strategic investments in
innovation to drive growth.
We are committed to
expanding operating leverage
and increasing shareholder
returns over the long term.”
Capital allocation
49%
Dividends
33%
Share repurchases
9%
Repayment of debt
7%
Capital
expenditures
2%
Acquisitions,
net
Cisco 2023 Annual Report6
Cisco strategy
As our customers add billions of new
connections to their enterprises, and as
more applications move to a multicloud
environment, the network becomes even
more critical. Our customers are navigating
change at an unprecedented pace. In this
dynamic environment, we believe their
priorities are to transform infrastructure,
secure the enterprise, power hybrid work,
reimagine applications, and drive toward
sustainability.
Secure, Agile
Networks
Build networking
solutions with
built-in simplicity,
security, agility
and automation
that can be
consumed as a
service
Optimized
Application
Experiences
Enable greater
speed, agility
and scale of
cloud-native
applications
Hybrid
Work
Deliver highly
secure access, a
safer workplace
and collaboration
experiences
for the hybrid
workforce
Internet for
the Future
Transform
connectivity
by efficiently
meeting the
ever-growing
demand for
low-latency and
higher speeds
End-to-End
Security
Build simple,
integrated, and
high efficacy
end-to-end
security solutions,
delivered on-
premise or in the
cloud
Capabilities
at the Edge
Develop new
capabilities for a
distributed world
while enhancing
the developer
experience
and extending
enterprise and
carrier networks
Our strategy is to securely connect everything. We are
committed to driving a trusted customer experience through
our innovation, solutions, choice, and people.
We are continuing to incorporate Artificial Intelligence (AI)
and Machine Learning (ML) across our portfolio to enable
further innovation and to empower our customers to drive
increased productivity and better user experiences.
We are investing in new opportunities in AI, launching new
technologies across our product portfolios designed to boost
productivity, enhance policy management and simplify tasks.
Increasingly, our offerings are crossing multiple product
categories. As our core networking offerings evolve,
we expect we will add more common software features
across our core networking platforms. We are increasing
the amount of software offerings that we provide and the
proportion of subscription software offerings. We are also
focused on the entire customer lifecycle to drive expansion
and renewals. We are also accelerating our efforts to enable
the delivery of network functionality as a service, as our
customers increasingly want to consume technologies in
flexible ways.
To execute on our strategy and address our customer
priorities, we are focusing on the following strategic pillars:
Secure, Agile Networks; Optimized Application Experiences;
Hybrid Work; Internet for the Future; End-to-End Security
and Capabilities at the Edge.
7Cisco 2023 Annual Report
Chuck Robbins
Chair and Chief
Executive Officer
Liz Centoni
EVP, Chief Strategy
Officer, and General
Manager, Applications
Eyal Dagan
EVP, Common
Hardware Group
Jonathan Davidson
EVP and General Manager,
Cisco Networking
Maria Poveromo
SVP and Chief
Communications Officer
R. Scott Herren
EVP and Chief
Financial Officer
Carrie Palin
SVP and Chief
Marketing Officer
Jeff Sharritts
EVP and Chief
Customer and Partner
Officer
Francine Katsoudas
EVP and Chief People,
Policy & Purpose
Officer
Maria Martinez
EVP and Chief
Operating Officer
Jeetu Patel
EVP and General
Manager, Security &
Collaboration
Dev Stahlkopf
EVP, Chief Legal Officer
and Chief Compliance
Officer
Mark Patterson
SVP, Chief of Staff
to the Chairand CEO
Leadership
Cisco’s executive leadership team
Leadership@Cisco
Learn more about Cisco’s executive
leadership team at https://newsroom.
cisco.com/c/r/newsroom/en/us/
executives.html
Diverse leadership
At Cisco, diversity, inclusion, and
collaboration are fundamental to
who we are, how we create the best
teams, and how we drive success. A
diverse workplace creates a vibrant
culture where everyone is welcomed,
respected, valued, and heard.
Cisco has signed the CEO Action
for Diversity and Inclusion™ Pledge.
We are delivering on this pledge by
accelerating full-spectrum diversity—
including gender identity, age,
race, ethnicity, sexual orientation,
disability status, nationality, religion,
military status, background,
culture, experience, strengths and
perspectives. It starts at the top in that
46% of our executive leadership team
(ELT) are women and 54% are diverse
in terms of gender or ethnicity,
making Cisco an industry leader in
ELT diversity.
54%
diverse
based on
gender or
ethnicity
Cisco 2023 Annual Report8
Cisco’s Board of Directors recognizes that being a sustainable
business is essential for success and in fiscal 2023 created
a new Environmental, Social and Public Policy Committee.
This committee will enhance oversight of Cisco’s initiatives,
policies, programs, and strategies tied to environmental
sustainability and other key corporate social responsibility
and public policy matters.
Stockholder
engagement
At Cisco, we recognize the importance
of regular and transparent communication
with our stockholders. Each year, we
continually engage with a significant
portion of stockholders that includes our
top institutional investors.
In fiscal 2023, our Board of Directors,
Executive Leadership and Investor
Relations team met with investors
representing approximately 40% of our
shares outstanding, including 79% of
our 30 largest stockholders.
We engaged with these stockholders
on a variety of topics, including our
business and long-term strategy,
corporate governance and risk
management practices, board leadership
and refreshment, diversity, corporate
responsibility initiatives (including
environmental, social, and governance
topics), executive compensation
program, and other matters of
stockholder interest.
Risk management
approach
We believe that risk is inherent
in innovation and the pursuit of
long-term growth opportunities.
Cisco’s management is responsible
for day-to-day risk management
Corporate
governance
activities. The Board of Directors, acting
directly and through its committees, is
responsible for the oversight of Cisco’s
risk management. With the oversight
of the Board of Directors, Cisco has
implemented practices, processes, and
programs designed to help manage the
risks to which we are exposed in our
business and to align risk-taking with our
efforts to increase stockholder value.
Policies
and practices
We have adopted corporate governance
policies, guidelines, and practices that
are consistent with our commitment to
transparency and best-in-class practices,
as well as to ensure compliance with the
rules and regulations of the SEC, the listing
requirements of Nasdaq, and applicable
corporate governance requirements.
●
Stockholder proxy access
●
Annual election of all directors (since IPO)
●
Majority voting (since 2007)
●
Robust Lead Independent
Director role
●
Stockholder right to call a
special meeting (since IPO)
●
No poison pill
●
Recoupment/clawback policy
●
Stock ownership guidelines for
directors and executive officers
●
Stockholder recommendations for
director candidate to the Board
●
Stockholder right to act by
written consent (since IPO)
Risk oversight
Audit Committee
The Audit Committee, which
oversees financial and risk
management policies, and
programs related to cybersecurity
and data protection, currency,
interest rate, equity, and insurance
risk, receives regular reports on
enterprise risk management (ERM)
from the chair of the ERM operating
committee and receives regular
reports on cybersecurity from
senior management on a quarterly
basis and a detailed presentation
from our Chief Security and Trust
Officer two or more times per year.
Other committees
Other board committees oversee
certain categories of risk associated
with their respective areas
of responsibility.
Board of Directors
The Board of Directors regularly
discusses many core subjects with
executive management, including
strategy, operations, information
systems, finance, legal and public
policy matters, in which risk
oversight is an inherent element.
Management
Cisco’s management has
implemented an ERM program,
managed by Cisco’s internal audit
function, that is designed to work
across the business to identify,
evaluate, govern, and manage risks
and Cisco’s response to those risks.
Cisco’s internal audit function
manages the enterprise ERM
program and performs an annual
risk assessment that is used by the
ERM program. The structure of the
ERM program includes both an ERM
operating committee that focuses
on risk management-related
topics and an ERM executive
committee consisting of members
of management.
The ERM operating committee
conducts global risk reviews and
provides regular updates to the
ERM executive committee.
Corporate governance
9Cisco 2023 Annual Report
Executive
compensation
Consistent with our business model
transformation to meet the evolving needs
of our customers and increasing the amount
of subscription offerings that we provide, we
incorporated a product annualized recurring
revenue (ARR) performance metric into our
fiscal 2023 executive compensation program to
better align our program with our transforming
business model. Additionally, our pay-for-
performance philosophy underscores our
commitment to sound compensation and
governance practices.
Given the importance of ESG matters to Cisco’s
strategy, for fiscal 2023, we continued to
incorporate a team performance factor into
our variable cash incentive plan, the Executive
Incentive Plan, which was scored based on
the executive leadership team’s joint execution
with respect to our overall ESG strategy,
including specific goals on environmental and
social matters.
These charts summarize the major elements
of target total direct compensation for our CEO
and our other named executive officers (NEOs
1
)
as a group for fiscal 2023 and demonstrate our
continued pay-for-performance philosophy.
1 As dened in our Proxy Statement for our 2023
Annual Meeting of Stockholders
Independent compensation
committee
Independent compensation
consultant
Comprehensive annual
compensation program
riskassessment
Annual compensation peer
group review
Caps on incentive
compensation
Performance on specific
initiatives considered in
the variable cash incentive
program for executive
officers
No employment,
severance, or change in
control agreements for our
executive officers
Stock ownership
guidelines
Recoupment/clawback
policy
Limited perquisites
No single-trigger vesting of
equity award grants
No stock option repricing
or cash-out of underwater
equity awards
No supplemental executive
retirement plan or
executive-defined benefit
pension plan
No golden parachute tax
gross-ups
Broad anti-pledging and
anti-hedging policies
We apply leading executive compensation
practices
Our executive
compensation program
rewards performance
Compensation philosophy is
designed to attract and retain,
motivate performance, and
reward achievement
Performance measures are aligned
with stockholderinterests
Majority of annual total direct
compensation is performance-based
No dividends or dividend
equivalents are paid or settled on
unvested awards
CEO
NEOs
other
than CEO
CEO
NEOs
other
than CEO
67%
Performance-based
equity incentive awards
57%
Performance-based
equity incentive awards
23%
Time-based equity
incentive awards
32%
Time-based equity
incentive awards
8%
Variable cash
incentive awards
7%
Variable cash
incentive awards
3%
Base salary
5%
Base salary
Amounts may not sum due to rounding.
Corporate governance
10 Cisco 2023 Annual Report
Board of Directors
Cisco’s Board of Directors is composed of skilled and
diverse directors who are committed to strong corporate
governance structures and practices that help Cisco build
long-term stockholder value. The Board believes strongly
in the value of an independent board of directors and has
established a Lead Independent Director role with broad
authority and responsibility. Independent board members
have consistently comprised over 75% of the members of the
Board of Directors and all members of our Board committees,
including the Audit Committee, the Compensation and
Management Development Committee and the Nomination
and Governance Committee are independent.
M. Michele Burns, 65
Independent Director
Former Chair and CEO, Mercer LLC
Wesley G. Bush, 62
Independent Director
Former Chair and CEO,
Northrop Grumman Corporation
John D. Harris II, 62
Independent Director
Former Vice President of Business
Development, Raytheon Company
Charles H. Robbins, 57
Chair and Chief Executive Officer
Michael D. Capellas, 69
Lead Independent Director
Founder and CEO, Capellas Strategic Partners
Dr. Kristina M. Johnson, 66
Independent Director
Former President, The Ohio State University
Mark Garrett, 65
Independent Director
Former CFO, Adobe Systems Incorporated
Roderick C. McGeary, 73
Independent Director
Former Vice Chair, Consulting, KPMG LLP
Dr. Lisa T. Su, 53
Independent Director
Chair, President and CEO,
Advanced Micro Devices, Inc.
Marianna Tessel, 55
Independent Director
Executive Vice President and General
Manager, Small Business and
Self–Employed Group, Intuit Inc.
Director
Since
AU
C
AQ
ESPPNG
Committees
Board skills and attributes
Leadership
Sales and marketing
Academia
Technology
Financial experience
Public company board
experience
Global business
2022
2003
2019
2006
2018
2021
2012
2003
2023
2015
2020
2021
Sarah Rae Murphy, 40
Independent Director
Former Chief Procurement Officer and Senior
Vice President of Global Sourcing, United Airlines
Daniel H. Schulman, 65
Independent Director
Former President and Chief Executive Ocer,
PayPal Holdings, Inc.
Environmental, Social and Public
Policy Committee
ESPP
Audit CommitteeAU
Compensation and Management
Development Committee
C
Acquisition CommitteeAQ
Nomination and Governance CommitteeNG
Chair
Member
Key to
Committees
Corporate governance
Leadership
12
Financial experience
11
Global business
11
Public company
board experience
10
Gender/ethnic/racial/
sexualorientation diversity
6
42% Women
58% Men
83% White
8% African American or
Black and Native American
8% Asian
17% LGBTQ+
11 Independent
1 Non-Independent
7 Director 0-5 years
1 Director 6-8 years
4 Director 9+ years
The role of the Board of
Directors in strategy
One of the Board’s key responsibilities is
overseeing management’s formulation and
execution of Cisco’s strategy. Throughout the
year, our CEO, the executive leadership team,
and other leaders from across the company
provide detailed business and strategy updates
to the Board. During these reviews, the Board
engages with the executive leadership team and
other business leaders regarding various topics,
including business strategy and initiatives, capital
allocation, portfolio updates, the competitive
landscape, talent and culture (including inclusion
and diversity), other matters affecting our long-
term strategy (including our environmental
impact and human rights implications of Cisco
product development and sales), and regulatory
developments. Additionally, on an annual basis,
the Board reviews and approves Cisco’s financial
plan. The Lead Independent Director also chairs
regularly scheduled executive sessions of the
independent directors, without Cisco management
present, during which Cisco’s strategy is reviewed
and other topics are discussed.
Board snapshot
Board Skills and Attributes
11Cisco 2023 Annual Report
Director
tenure
Race/ethnicity
diversity
* Percentages may not total 100% due to rounding.
Gender
diversity
Sexual
orientation
diversity
Board
governance
structure
Academia
1
Technology
10
Sales and marketing
7
Cisco 2023 Annual Report12
Our purpose
For decades, Cisco has been evolving and expanding
the way it positively impacts people and the planet, and
we are driven by our Corporate Purpose: to Power an
Inclusive Future for All. We believe that technology, when
thoughtfully and strategically applied, can help address
inequities; bring positive, lasting change to people’s lives
and communities; and benefit the planet. To help fulfill our
Purpose, we leverage our technology and catalyze our
networks, partners, and people to make a positive impact
in communities worldwide and for the planet. We know we
can achieve so much more when we work in partnership
with those aligned with our values and purpose.
The upcoming fiscal 2023 Purpose Report, which will
be published in December 2023, will describe our latest
impact, goals, and progress on our Purpose journey.
Purpose governance
andmanagement
Cisco’s People, Policy, and Purpose organization leads
our social investment programs and champions our
commitment to environmental, social, and governance
(ESG) performance and transparency. Within this
organization is a core reporting team which engages with
stakeholders, leads ESG materiality assessments
1
for all
our voluntary reporting, and stewards reporting activities.
Our reporting is aligned with standards set by the Global
Reporting Initiative, Sustainability Accounting Standards
Board, the Task Force on Climate-related Financial
Disclosures, and the UN Sustainable Development Goals.
1 ESG materiality, as referred to in this Report, and our ESG materiality assessment process are dierent from "materiality" in the context of Securities and
Exchange Commission (SEC) disclosure obligations. Issues deemed material for purposes of our ESG reporting and for purposes of determining our ESG
strategy may not be considered material for SEC reporting purposes, nor does inclusion of information in our ESG reporting indicate that the topic or
information is material to Cisco's business or operating results.
“We are driven by our Purpose to harness
the power of connectivity for our customers,
employees, and communities around
the world.”
Francine Katsoudas
EVP and Chief People,
Policy & Purpose Officer
Cisco 2023 Annual Report
Our purpose
13
Purpose governance and management
Board of Directors
Environmental, Social, and Public Policy
Committee
Oversees the Company’s initiatives, policies, programs, and
strategies concerning environmental sustainability and other key
corporate social responsibility and public policy matters.
People, Policy,and
Purpose Organization
Business Functions and
Cross-Functional Groups
Governance, Risk,
and Controls
Champions Cisco’s company-wide
commitment to ESG performance and
transparency
Conduct due diligence and implement
policies and programs for specific
focus areas
Champion Enterprise Risk Management (ERM)
efforts across the business to identify, assess,
and manage risks
ESG Topics
*
Environmental Social
Governance
●
Climate change
and GHGs
●
Circular economy
●
Operational waste
●
Environmental regeneration
and protection
●
Water
●
Inclusion and diversity
●
Talent
●
Human rights and working conditions
in the supply chain
●
Employee wellbeing
●
Employee health and safety
and labor rights
●
Digital inclusion
●
Community impact
●
Critical human needs and disaster relief
●
Economic empowerment
●
Corporate governance
●
Data security and privacy
●
Business ethics
●
Innovation and responsible
technology
* These ESG focus areas are the topics identied in our FY23 ESG materiality assessment. The topics found to be of greater importance are noted in bold.
Other Board
Committees
●
Acquisition
●
Audit
●
Compensation and Management Development
●
Nomination and Governance
Powering an inclusive
future for all
Cisco’s Purpose to Power an Inclusive Future for
All is increasingly a differentiator for our business.
We can do good for the world and do good for
business when we combine our technology, our
people, and our broader networks. We pursue our
Purpose by closing the digital divide, empowering
the future of work, fighting for equality and social
justice, and building a regenerative planet. Our
ESG programs and disclosures deliver value to
our stakeholders, including our stockholders,
customers, partners, suppliers, employees, our
global communities, and the environment.
Power
Since our founding in 1984, Cisco has helped power the
world’s connectivity and accelerate the transition to the
digital age. Our software and solutions protect the data
of millions of users within public sector organizations and
businesses of all sizes. At Cisco, we cultivate trust and hold
ourselves to the highest standards of business conduct.
This requires applying leading security and privacy,
and human rights principles to the design, sourcing,
manufacturing, and sale of our solutions, and working
to integrate a human rights perspective across Cisco’s
global business. Cisco works to instill trust by operating
with transparency, fairness, accountability, and integrity in
every aspect of our business — from the integrity of our
solutions and networks, to our cyber-resilience strategies
that we openly share with organizations around the world,
to our financial transparency and high standards of fair and
responsible conduct.
Cisco 2023 Annual Report
Our purpose
14
Cisco is committed to making our products and solutions
responsibly, and that commitment extends to our manufacturing
partners and suppliers, and the standards they uphold for labor,
health and safety, environment, and human rights. We are a
founding member of the Responsible Business Alliance (RBA) and
have long adopted the RBA Code of Conduct as our Supplier Code
of Conduct. We assess our suppliers’ conformance to our policies
through risk assessments, audits, and targeted engagements. If
suppliers do not meet our standards, we work with them to improve
and hold them accountable to achieve that improvement. We also
work across the Information and Communications Technology (ICT)
industry to build supplier capacity to support a baseline of human
rights and environmental standards. This work in our supply chain is
a core element of our commitment to our Purpose.
Inclusive
We believe Diversity, Equity & Inclusion (DEI) is a core competency
and lens that we leverage to accelerate and amplify Cisco’s existing
business goals and mission. It is intrinsic to who we are — and who
we intend to be long into the future. We promote inclusivity through
our Conscious Culture and Social Impact Initiatives. Our Conscious
Culture is a set of expectations, principles, and measures that define
Cisco’s values, beliefs, and ethos. Our values and expectations are
laid out in our Code of Business Conduct. Every employee must
certify compliance with the code each year to help uphold integrity in
the workplace and the ethical use of data and resources, and to help
prevent conflicts of interest. Living a Conscious Culture requires us to
act with dignity, respect, fairness, and equity in each of our interactions
with one another, allowing us to become a catalyst for social change.
When people are respected for who they are and encouraged to seek
balance between work and personal life, we believe they are more
productive and successful in their jobs and able to give their best to
their families and communities. In fiscal 2017, we set a goal to achieve
80% employee participation in community impact by 2020. We
achieved that goal and have sustained or exceeded 80% employee
participation since then.
At Cisco, we believe in equal rights, access to opportunity, and
promoting justice and fair treatment. In 2020, we transformed our
longstanding advocacy for social justice into a global, enterprise-wide
commitment to leading bolder action and creating lasting change.
Guided by our Social Justice Beliefs, we designed 12 Actions for
Social Justice to bring together the full power of our technology, our
people, and our ecosystem. We embarked on a five-year journey,
backed by a US$300 million commitment, to explore new ways to
address systemic challenges and create opportunities that can change
the trajectory of entire communities – and power an inclusive future
for all.
Selected company goals
25 million
additional people reached through
Cisco Networking Academy’s digital and
cybersecurity skills training by FY32
1 billion
people positively impacted through
our social impact grants and signature
programs by FY25
Note: Progress against all goals listed by fiscal year (FY) is
measured through the end of the fiscal year.
For more information see our ESG Reporting Hub at
https://www.cisco.com/c/m/en_us/about/csr/esg-hub.html
Diversity highlights
●
At Cisco, 46% of our ELT are women and 54%
are diverse in terms of gender or ethnicity
●
On our Board of Directors, 42% are women,
58% are men, 8% are Asian, 8% are African
American or Black, and Native American, 83%
are White, and 17% are diverse in terms of
sexual orientation
●
In FY22 (data excludes certain acquisitions) our
global employee base was comprised of 29%
women, 71% men, and 0.1% nonbinary, and
our U.S. employee base was comprised of the
following ethnicities: 50.9% White/Caucasian,
34.6% Asian, 6.6% Hispanic/Latino, 5.5%
African American/Black, 1.9% two or more
races (not Hispanic or Latinx), 0.3% American
Indian or Alaska Native, and 0.2% Native
Hawaiian/Other Pacic Islander
71% Men
29% Women
0.1% Nonbinary
Global
employees
based on
FY22 data
Cisco 2023 Annual Report
Our purpose
15
Our science-based
net-zero GHG emissions
goal and near-term targets
Cisco’s 12 Actions initially focused on driving greater impact across
the African American/Black community. Now, we’re building a
strategic framework and holistic services that can be adapted and
scaled across the full spectrum of diversity, including underserved or
vulnerable communities around the world.
Cisco has always been committed to compensating our employees
fairly and equitably. We are a founding signer of the White House
Equal Pay Pledge and the Parity.org pledge, and are a leader in
the charge to make fair pay a reality for all employees through the
Employers for Pay Equity Consortium.
In 2016, Cisco set a goal to positively impact one billion people by
2025 through our social impact grants and signature programs
2
, and
we are well on our way to realizing this goal. We prepare millions of
learners with digital skills through Cisco Networking Academy, one of
the world’s longest running learning and digital skills programs. In fiscal
2023, we celebrated its 25th anniversary, reaching 20.5 million learners
across 190 countries since 1997. As we marked these successes, we
also announced an ambitious next phase goal: to provide digital and
cybersecurity skills training to an additional 25 million people through
Cisco Networking Academy over the next decade.
2 Some of our social impact grantees receive funding from other organizations.
In January 2022 Cisco completed an external limited assurance review
of our progress toward this goal. For more information see the criteria
document and assurance report available at our ESG Reporting Hub at
https://www.cisco.com/c/m/en_us/about/csr/esg-hub.html.
Near-Term Targets
By FY25:
Net-Zero Goal
By 2040:
90% reduction in absolute Scope 1 and 2
GHG emissions
Compared to FY19. We will neutralize any remaining
emissions by removing an equal amount from
the atmosphere.
By FY30:
30% reduction in absolute Scope3
emissions from purchased goods and
services, upstream transportation and
distribution, and use of sold products
Compared to FY19.
You will be able to read more about our progress toward our
net-zero goal and near-term targets in our fiscal 2023 Purpose
Report and ESG Reporting Hub.
Reach net-zero emissions across our
value chain
By reducing our absolute Scope 1, 2, and 3
emissions by at least 90% compared to FY19
and neutralizing any remaining emissions by
removing an equal amount from the atmosphere.
Future
An inclusive future depends on a healthy planet. Our holistic
approach to environmental sustainability includes how we operate
our business, how we help our customers and suppliers make
progress toward their sustainability goals, and how we do our part
to help the world adapt to a changing climate.
Our environmental sustainability strategy focuses on three
priorities: accelerating the transition to clean energy, evolving our
business to circular, and fostering resilient ecosystems.
Accelerating the transition to clean energy
To power the world with renewables, the grid requires updated digital
infrastructure in order to connect diverse, decentralized sources of
clean energy. But even as the world electrifies, we must simultaneously
reduce the amount of energy used by a connected economy. To help
advance these priorities, we will:
●
Improve our product power efficiency
●
Collaborate with our customers, partners, and suppliers to
accelerate the energy transition
●
Continue to increase our use of renewable energy in Cisco’s
operations
One important piece of Cisco’s clean energy strategy is our goal
to reach net-zero greenhouse gas (GHG) emissions across our
value chain by 2040, by prioritizing reductions across all scopes
of emissions. We are proud that Cisco’s 2040 net-zero goal was
approved by the Science Based Targets initiative (SBTi) in 2022, under
its Net-Zero Standard. Cisco was one of the first technology hardware
and equipment companies to have its net-zero goal validated under
the SBTi Net-Zero Standard.
16 Cisco 2023 Annual Report
Our purpose
Evolving our business to circular
The world must transition from a linear economy that extracts
resources and eventually wastes them, to a circular one
which finds new uses for products and their inputs. We aim to
transform our business to extend the useful life of our products
and provide ongoing services. This includes continuing to deploy
business models to extend the value of our products and reduce
environmental impacts.
In fiscal 2023, we continued to work towards our goal of
100% of new Cisco products and packaging incorporating our
Circular Design Principles by fiscal 2025. This included further
embedding circularity into key design tools and the standard
product development process. You will be able to read more
about our progress on this goal and others in our fiscal 2023
Purpose Report and ESG Reporting Hub.
Fostering resilient ecosystems
It is in our shared interest to help humans and nature navigate
a changing climate by investing in regenerative technologies,
workforces, and nature itself. This includes enabling
communities to adapt to climate realities, cultivating skills and
talent for the regenerative economy, and deploying Cisco
technology to protect and restore ecosystems and biodiversity.
Examples include:
●
A multi-year, multi-million-dollar partnership with Mercy Corps,
the global humanitarian nonprofit, to help them develop and
scale technology-enabled climate solutions that can build
resilience in communities that are experiencing devastating
drought conditions in Kenya.
●
An investment from the Cisco Foundation of US$100 million
over ten years in climate solutions that draw down the carbon
already in the atmosphere and/or regenerate depleted
ecosystems. As of the end of fiscal 2023, the Cisco
Foundation had disbursed approximately US$19.8 million
dollars to early-stage solutions that are in diverse stages of
development, from conceptual ideas to solutions that are ready
for commercial deployment and widespread impact.
Selected circular
economy goals
100%
of new Cisco products and
packaging incorporate circular
design principles by FY25
70%
of Cisco component and
manufacturing suppliers (by
spend) achieve a zero-waste
diversion rate at one or more
sites by FY25
50%
of plastic used in our products
(by weight) made of recycled
content by FY25 (the plastics
included in this goal exclude
those contained in commodity
components sourced from
suppliers, e.g., plastic screws,
fans, and cables)
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended July 29, 2023
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
(State or other jurisdiction of
incorporation or organization)
170 West Tasman Drive
San Jose, California
(Address of principal executive offices)
77-0059951
(IRS Employer
Identification No.)
95134-1706
(Zip Code)
Registrant’s telephone number, including area code: (408) 526-4000
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
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Ye s No
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. Ye s 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the
filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
Aggregate market value of registrant’s common stock held by non-affiliates of the registrant, based upon the closing price of a share of the registrant’s
common stock on January 27, 2023 as reported by the Nasdaq Global Select Market on that date: $198.6 billion
Number of shares of the registrant’s common stock outstanding as of September 1, 2023: 4,054,857,783
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement relating to the 2023 Annual Meeting of Stockholders, to be held on December 6, 2023, are
incorporated by reference into Part III of this Annual Report on Form 10-K where indicated.
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 1B. Unresolved Staff Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of
Equity Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Item 6. [Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . 32
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . . . 100
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
PART III
Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . . 101
Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Item 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
PART IV
Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Item 16. Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unresolved Staff Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of
Equity Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . .
Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . . .
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . .
Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
Item 10.
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1
This Annual Report on Form 10-K, including the “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 “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.
PART I
Item 1. Business
General
Cisco designs and sells a broad range of technologies that power the Internet. We are integrating our product portfolios across
networking, security, collaboration, applications and the cloud to create highly secure, intelligent platforms for our customers’
digital businesses. These platforms are designed to help our customers manage more users, devices and things connecting to
their networks. This will enable us to provide customers with a highly secure, intelligent platform for their digital business.
We conduct our business globally and manage our business by geography. Our business is organized into the following three
geographic segments: Americas; Europe, Middle East, and Africa (EMEA); and Asia Pacific, Japan, and China (APJC).
Our products and technologies are grouped into the following categories: Secure, Agile Networks; Internet for the Future;
Collaboration; End-to-End Security; Optimized Application Experiences; and Other Products. In addition to our product offerings,
we provide a broad range of service offerings, including technical support services and advanced services. Increasingly, we are
delivering our technologies through software and services. Our customers include businesses of all sizes, public institutions,
governments, and service providers, including large webscale providers. These customers often look to us as a strategic partner
to help them use information technology (IT) to differentiate themselves and drive positive business outcomes.
We were incorporated in California in 1984 and reincorporated in Delaware in 2021. Our headquarters are in San Jose, California.
The mailing address of our headquarters is 170 West Tasman Drive, San Jose, California 95134-1706, and our telephone number
at that location is (408) 526-4000. Our website is www.cisco.com. Through a link on the Investor Relations section of our
website, we make available the following filings as soon as reasonably practicable after they are electronically filed with or
furnished to the Securities and Exchange Commission (SEC) at sec.gov: our Annual Report on Form 10-K, Quarterly Reports on
Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or
15(d) of the Exchange Act. All such filings are available free of charge. The information published on our website, or any other
website referenced herein, is not incorporated into this report.
Strategy and Priorities
As our customers add billions of new connections to their enterprises, and as more applications move to a multicloud environment,
the network becomes even more critical. Our customers are navigating change at an unprecedented pace. In this dynamic
environment, we believe their priorities are to transform infrastructure, secure the enterprise, power hybrid work, reimagine
applications, and drive toward sustainability.
Our strategy is to securely connect everything. We are committed to driving a trusted customer experience, through our
innovation, solutions, choice, and people.
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Customer Priorities
Transform Infrastructure
In an increasingly digital and connected world, where each new connection to the Internet puts more demand on the network,
our customers are looking to modernize and transform their infrastructure in an automated way in order to manage and monitor
each connection in real time. Our strategy to help our customers transform their infrastructure with the network at the core
began with Software-Defined Access (SD-Access) technology, one of our leading enterprise architectures, and continued with
the launch of our Catalyst 9000 series of switches.
We have continued to transform our enterprise access portfolio by bringing together several technologies to form the only
integrated architecture with built-in simplicity, automation and security at the foundation. This architecture is designed to enable
our customers to securely connect their users and devices to applications and data over any network, no matter where they are.
We have introduced several innovations that extend our networking capabilities to wireless and enterprise routing products,
including Software-Defined Wide Area Network (SD-WAN) and Internet of Things (IoT) edge platforms. Our SD-WAN
solutions are designed to provide direct branch to cloud connectivity, enabling the workforce to access their software-as-
a-service (SaaS) applications and workloads in an optimized and highly secure manner. We have continued to expand our
SD-WAN offering, through our Cloud OnRamp integrations with several webscale providers to deliver predictable and highly
secure application experiences.
To further our innovation in this area, we are applying the latest technologies, such as machine learning and advanced analytics,
to operate and enhance network capabilities. These network product offerings are designed to help enable customers to detect
cybersecurity threats, even in encrypted traffic. As such, we have created, in our view, the only network that is designed for
security while also helping to maintain privacy.
Our customers are operating in multicloud environments with private, public and hybrid clouds. For the data center, our strategy
is to deliver multicloud architectures that bring policy and operational consistency, regardless of where applications or data
reside, by extending our Application Centric Infrastructure (ACI) and our hyperconverged offerings. We continue to invest
in our data center portfolio to help meet the growing demand for cloud-delivered technologies. Our Nexus Cloud platform is
designed to help our customers deploy, manage, and operate their data center networks from the cloud.
Our technology strategy for the Internet for the Future is aimed at addressing the broad adoption of multicloud and application
environments. We continue to make significant investments in the development of software, silicon and optics — which we
believe are the building blocks for the Internet for the Future.
We introduced Cisco Silicon One, a single unified silicon architecture, as well as the Cisco 8000 carrier-class router family built
on Cisco Silicon One and our operating system, Cisco IOS XR7. We have also expanded our Cisco Silicon One platform from
a routing focused solution to one which addresses the webscale switching market. By combining our routed optical networking
solution integrating our routers with pluggable optics, we can further help deliver cost savings to our customers.
Secure the Enterprise
With the rapid growth in modern applications, and with more distributed work environments, securing the enterprise has become
more complex and difficult for our customers to manage. We believe every organization requires new or enhanced security
architectures to defend against increasing cyber attacks. Our security strategy is focused on delivering a simple and effective
cyber-security architecture combining network, cloud and endpoint-based solutions that recognizes the critical importance of
data privacy.
We are investing significant resources across our security portfolio focused on cloud-based offerings, artificial intelligence-
driven threat detection and end-to-end security architectures. We unveiled our strategic plan for a global, cloud-delivered,
integrated platform that secures and connects organizations of any shape and size. Cisco Security Cloud is designed to be the
most open, end-to-end, security platform across hybrid multi-cloud environments, while also minimizing the attack surface
and automating security policies across an organization’s environment. This extends to our secure access service edge (SASE)
framework and Zero Trust architecture, where we have developed a cloud-delivered stack. We are also delivering unified
detection and response capabilities with Cisco Extended Detection and Response (XDR), a cloud-based solution, and introduced
new innovations across firewall, multicloud and application security capabilities. To enable a more optimized hybrid work
experience with simple access across any location, device, and application, we have brought to market a security service edge
(SSE) solution. Additionally, we have announced generative AI capabilities as part of our Security Cloud platform to simplify
security operations and increase efficiency.
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Power Hybrid Work
Over the last several years, the world has shifted to a hybrid work environment, and we believe that our customers are looking
to support a blend of onsite and offsite workers into the future. To enable a hybrid workforce, customers require secure access,
collaboration, and technologies to empower their teams to connect seamlessly and to work from anywhere.
Customers are looking to us to help improve how their people communicate, collaborate and to increase productivity. At Cisco,
we are focused on providing and delivering highly secure collaboration experiences to help our customers create a secure hybrid
work environment.
We believe our collaboration portfolio, which includes our subscription-based Webex conferencing platform, with meetings,
devices, calling and messaging, is at the center of our customers’ strategy for enabling their teams to be more productive and
secure. To help our customers transform their workplaces, we continue to invest to expand our capabilities by introducing
new Webex Calling innovations in the Webex Suite to improve work flexibility, reliability, and quality. We also launched new
devices for hybrid work which we are making interoperable with other vendors’ collaboration offerings to create a seamless
user experience.
Reimagine Applications
In our view, over the next several years, customers will be increasingly writing modern software applications that can run on
any hybrid cloud and will be adding billions of connections to their environments. In a multicloud environment, customers must
reimagine how they design, develop and deploy their applications. They need to be able to build applications quickly, deploy
them nearly anywhere, monitor experiences, and act in real time.
We believe we are uniquely positioned to enable successful business outcomes for customers in hybrid and multicloud
environments. In our view, networks are increasingly critical to business success and we believe our customers will benefit
from the insights and intelligence that we are making accessible through our highly differentiated platforms.
We are continuing our commitment to deliver full stack observability from the application to the infrastructure to give our
customers greater insights that enable faster, better decision making. We are doing this by adding key elements to our portfolio,
such as: infrastructure optimization with Intersight, network monitoring with technology from ThousandEyes, application
performance monitoring with AppDynamics, as well as our security innovations.
Journey to Sustainability
The world faces serious environmental challenges, such as climate change, resource depletion, and biodiversity loss, and, as a
large global corporation, Cisco can play a role in supporting mitigation of these challenges. Our strategy focuses on accelerating
the transition to clean energy, evolving our business from linear to circular, and investing in resilient ecosystems. We are
striving to reduce our own environmental footprint, and to use our technology and expertise to help our customers and suppliers
reduce theirs, contributing to a healthier and more resilient planet. Additionally, we have set long-term goals to address the
environmental impacts from our products and business operations.
We strive to reduce the effects of our operations and supply chain, help our customers decrease greenhouse gas (GHG) emissions,
and support our communities experiencing direct effects of a changing climate by, among others:
• Continuing to invest in renewable energy, including investments in solar and wind energy;
• Designing our products and packaging for reuse, repair, recycling, and resource efficiency and managing our
equipment for multiple lifecycles;
• Continuing to standardize visibility and insights across our portfolio to enable customers to measure, monitor, and
manage energy consumption;
• Investing in projects to improve the efficiency of our offices, labs, and data centers worldwide;
• Working with our component suppliers, manufacturing partners, and logistic providers to reduce emissions and set
goals for absolute GHG emissions reductions;
• Helping our employees to engage with events and opportunities to raise awareness and create a sense of community
around sustainability; and
• Providing critical connectivity in the aftermath of natural disasters.
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Strategic Pillars
To execute on our strategy and address our customer priorities, we are focusing on the following six strategic pillars:
• Secure, Agile Networks — Build networking solutions with built-in simplicity, security, agility and automation that
can be consumed as-a-service.
• Optimized Application Experiences — Enable greater speed, agility and scale of cloud-native applications.
• Hybrid Work — Deliver highly secure access, a safer workplace and collaboration experiences for the hybrid
workforce.
• Internet for the Future — Transform connectivity by efficiently meeting the ever-growing demand for low-latency
and higher speeds.
• End-to-End Security — Build simple, integrated, and high efficacy end-to-end security solutions, delivered on-
premise or in the cloud.
• Capabilities at the Edge — Develop new capabilities for a distributed world while enhancing the developer experience
and extending enterprise and carrier networks.
We are continuing to incorporate Artificial Intelligence (AI) and Machine Learning (ML) across our portfolio to enable further
innovation and to empower our customers to drive increased productivity and better user experiences. We are investing in new
opportunities in AI, launching new technologies across our product portfolios designed to boost productivity, enhance policy
management and simplify tasks. Our AI-scale infrastructure will allow our customers to process AI workloads more efficiently.
We are also accelerating our efforts to enable the delivery of network functionality as a service as our customers increasingly
want to consume technologies in flexible ways. We made the initial step with our as-a-service portfolio, Cisco Plus, and our first
offer, Cisco Plus hybrid cloud, which combines our data center compute, networking and storage portfolio. Cisco Plus includes
our plans to deliver networking-as-a-service, which is designed to unify networking, security and observability across access,
wide area network (WAN), and cloud domains.
Transforming our Business Model
We are transforming our offerings to meet the evolving needs of our customers. Historically, our various networking technology
products have aligned with their respective product categories. However, increasingly our offerings are crossing multiple product
categories. As our core networking offerings evolve, we expect we will add more common software features across our core
networking platforms. We are increasing the amount of software offerings that we provide and the proportion of subscription
software offerings. We have various software offerings that fall into the broad categories of subscription arrangements and
perpetual licenses. Our subscription arrangements include term software licenses and associated service arrangements, as well
as SaaS.
As part of the transformation of our business, we continued to make strides to develop and sell more software and subscription-
based offerings. We are also focused on the entire customer lifecycle to drive expansion and renewals. We will continue to invest
in network-as-a-service offerings to provide our customers with flexibility in how they want to consume our technologies.
For a discussion of the risks associated with our strategy, see “Item 1A. Risk Factors,” including the risk factor entitled “We
depend upon the development of new products and services, and enhancements to existing products and services, and if
we fail to predict and respond to emerging technological trends and customers’ changing needs, our operating results and
market share may suffer.” For information regarding sales of our major products and services, see Note 19 to the Consolidated
Financial Statements.
Products and Services
Our products and services are grouped into the following categories:
Secure, Agile Networks
Secure, Agile Networks consists of our core networking technologies of switching, enterprise routing, wireless, and compute
products. These technologies consist of both hardware and software offerings, including software licenses and SaaS, that help
our customers build networks, automate, orchestrate, integrate, and digitize data. We believe it is critical for us to continue
to deliver continuous value to our customers. We continued to make progress in shifting more of our business to software
and subscriptions across our core networking portfolio, and in expanding our software offerings. Our objective is to continue
converging our on-premise solutions with our cloud managed solutions across our enterprise networking portfolio.
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Our Switching portfolio encompasses campus switching as well as data center switching offerings. Our campus switching
offerings provide the foundation for converged data, voice, video, and IoT services. These switches offer enhanced security and
reliability and are designed to scale efficiently as our customers grow. Within campus switching are our Catalyst 9000 series of
switches that include hardware with embedded software, along with a software subscription referred to as Cisco DNA. Cisco
DNA provides automation, analytics and security features and can be centrally monitored, managed, and configured. With the
expansion of WiFi-6, we have expanded our portfolio to include multi-gigabit technology in our switches in order to manage
higher bandwidth and manage network speed. Our data center switching offerings, led by the Nexus 9000 series, provide the
foundation for mission critical data centers with high availability, scalability, and security across traditional data centers and
private and public cloud data centers. We continue to add greater visibility and analytics across our networks and applications,
enabling us to deliver better experiences for our customers.
Our Enterprise Routing portfolio interconnects public and private wireline and mobile networks, delivering highly secure and
reliable connectivity to campus, data center and branch networks for our large to small enterprise and commercial customers.
Our routing solutions are designed to meet the scale, reliability, and security needs of our customers.
Our Wireless portfolio provides indoor and outdoor wireless coverage designed for seamless roaming use of voice, video, and
data applications. These products include wireless access points and controllers that are on-premise and cloud managed, and
combined with our Switching portfolio, delivers a converged access solution that is powerful, yet simple.
Our Compute portfolio incorporates various technologies and solutions including the Cisco Unified Computing System,
HyperFlex, our hyperconverged offering, and software management capabilities, which combine computing, networking, and
storage infrastructure management and virtualization to deliver agility, simplicity, and scale.
Internet for the Future
Our Internet for the Future product category consists of our routed optical networking, 5G, silicon and optics solutions. We are
focusing on transforming connectivity to the Internet and the cloud environment by efficiently meeting the growing demand for
low-latency and higher speeds. Our routed optical networking systems, based on our Silicon One and pluggable optic solutions,
allow us to transform the economics of building and operating networks for our service provider customers, including our
webscale customers. Our Cisco 8000 series routers provide broad capacity in high-density designs, allowing our customers to
reduce operational footprints, lower carbon emissions, and evolve to more efficient network architectures. We believe silicon
and optics are foundational technologies for the continued buildout of the Internet. As connection speeds increase, optics become
increasingly important in our view.
Collaboration
Our Collaboration product category consists of our Meetings, Collaboration Devices, Calling, Contact Center and
Communication Platform as a Service (CPaaS) offerings. Our offerings within the Collaboration portfolio consist of software
offerings, including perpetual licenses and subscription arrangements, as well as hardware. Our Collaboration strategy is
to power hybrid work by reimagining employee and customer experiences to be more inclusive and engaging by providing
technology that enables distributed teams to collaborate effortlessly. We offer end-to-end collaboration solutions that can be
delivered from the cloud, on-premise or within hybrid cloud environments allowing customers to transition their collaboration
solutions from on-premise to the cloud. Artificial intelligence and machine learning capabilities are embedded across the
Webex portfolio, providing collaboration experiences that integrate people insights, relationship and audio intelligence to help
improve productivity. Our CPaaS is a cloud communications platform that integrates communication channels and existing
back-end business systems together to help enable the orchestration and automation of all customer and employee interactions.
End-to-End Security
The End-to-End Security product category consists of our Cloud and Application Security, Industrial Security, Network
Security, and User and Device Security offerings. Security continues to be a leading priority for our customers, regardless of
size or industry. We continue to invest in resources across our security portfolio focused on cloud-based offerings, AI-driven
threat detection and end-to-end security architectures. Additionally, we continue to invest in expanding our SASE architecture
by delivering combined network and security functionality in a single cloud-native service.
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Optimized Application Experiences
The Optimized Application Experiences product category consists of our full stack observability and network assurance
offerings. Our full stack observability offerings are designed to bring together and provide end-to-end visibility of our customer’s
environments across applications, networks, multi-cloud infrastructures and the Internet, to help deliver full stack observability
for modern environments and drive relevant real-time insights. Our Intersight Infrastructure Services, a cloud-delivered SaaS
offering, provides lifecycle operations management, automation, orchestration, and monitoring capabilities for customers’
infrastructure deployments from Data Center to the Edge. Our monitoring and analytics offering, AppDynamics, monitors
performance across different application-related domains. Our network assurance offering, ThousandEyes, is a network
intelligence platform that provides in-depth visibility into network and Internet performance. It enables organizations to see,
understand, and improve every digital experience and assure seamless connectivity for their modern digital environments.
Services
In addition to our product offerings, we provide a broad range of service and support options for our customers. Our overall
service and support offerings are combined into one organization, Customer Experience, that is responsible for the end-to-end
customer experience.
Our support and maintenance services help our customers ensure their products operate efficiently, remain available, and benefit
from the most up-to-date system and application software. These services help customers protect their network investments,
manage risk, and minimize downtime for systems running mission-critical applications.
We also provide comprehensive advisory services that are focused on responsive, preventive, and consultative support of our
technologies for specific networking needs. We are investing in and expanding advisory services in the areas of software,
cloud, security, and analytics, which reflects our strategy of selling customer outcomes. We are focused on three priorities:
utilizing technology advisory services to drive higher product and services; assessment and migration services providing the
tools, expertise and methodologies to enable our customers to migrate to new technology platforms; and providing optimization
services aligned with customers’ business expectations.
Customers and Markets
Many factors influence the IT, collaboration, and networking requirements of our customers. These include the size of the
organization, number and types of technology systems, geographic location, and business applications deployed throughout the
customer’s network. Our customer base is not limited to any specific industry, geography, or market segment. Our customers
primarily operate in the following markets: enterprise, commercial, service provider, and public sector.
Enterprise
Enterprise businesses are large regional, national, or global organizations with multiple locations or branch offices. Many
enterprise businesses have unique IT, collaboration, and networking needs within a multivendor environment. We offer service
and support packages, financing, and managed network services, primarily through our service provider partners. We sell these
products through a network of third-party application and technology vendors and channel partners, as well as selling directly
to these customers.
Commercial
The commercial market represents larger, or midmarket and small businesses. We sell to our midmarket customers through a
combination of our direct sales force and channel partners. These customers typically require the latest advanced technologies
that our enterprise customers demand, but with less complexity. Small businesses require information technologies and
communications products that are easy to configure, install, and maintain. We sell to these smaller organizations within the
commercial market primarily through channel partners.
Service Providers
Service providers offer data, voice, video, and mobile/wireless services to businesses, governments, utilities, and consumers
worldwide. The service provider market includes regional, national, and international wireline carriers, webscale operators
as well as Internet, cable, and wireless providers. We also include media, broadcast, and content providers within our service
provider market, as the lines in the telecommunications industry continue to blur between traditional network-based, content-
based and application-based services. Service providers use a variety of our products and services for their own networks.
In addition, many service providers use Cisco data center, virtualization, and collaboration technologies to offer managed or
Internet-based services to their business customers. Compared with other customers, service providers are more likely to require
network design, deployment, and support services because of the greater scale and higher complexity of their networks, whose
requirements are addressed, we believe, by our architectural approach.
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Public Sector
The public sector market includes federal, state and local governments, as well as educational institution customers. Many
public sector customers have unique IT, collaboration, and networking needs within a multi-vendor environment. We sell to
public sector customers through a network of third-party application and technology vendors, channel partners, as well as
through direct sales.
Sales Overview
As of the end of fiscal 2023, our worldwide sales and marketing functions consisted of approximately 26,000 employees,
including managers, sales representatives, and technical support personnel. We sell our products and services both directly and
indirectly through a variety of channels with support from our salesforce. A substantial portion of our products and services
is sold indirectly through channel partners, and the remainder is sold through direct sales. Channel partners include systems
integrators, service providers, other third-party resellers, and distributors.
Systems integrators and service providers typically sell directly to end users and often provide system installation, technical
support, professional services, and other support services in addition to network equipment sales. Systems integrators also
typically integrate our products into an overall solution. Some service providers are also systems integrators.
Distributors may hold inventory and sell to systems integrators, service providers, and other third-party resellers. We refer to
sales through distributors as our two-tier system of sales to the end customer. Revenue from two-tier distributors is recognized
based on a sell-in method. These distributors may be given business terms that allow them to return a limited portion of inventory,
receive credits for changes in selling prices, receive certain rebates, and participate in various cooperative marketing programs.
For information regarding risks related to our sales channels, see “Item 1A. Risk Factors,” including the risk factors entitled
“Disruption of or changes in our distribution model could harm our sales and margins” and “Inventory management relating to
our sales to our two-tier distribution channel is complex, and excess inventory may harm our gross margins.”
For information regarding risks relating to our international operations, see “Item 1A. Risk Factors,” including the risk factors
entitled “Our operating results may be adversely affected by unfavorable economic and market conditions and the uncertain
geopolitical environment;” “Entrance into new or developing markets exposes us to additional competition and will likely
increase demands on our service and support operations;” “Due to the global nature of our operations, political or economic
changes or other factors in a specific country or region could harm our operating results and financial condition;” “We are
exposed to fluctuations in currency exchange rates that could negatively impact our financial results and cash flows;” and
“Cyber attacks, data breaches or other incidents may disrupt our operations, harm our operating results and financial condition,
and damage our reputation or otherwise materially harm our business; and cyber attacks, data breaches or other incidents on
our customers’ or third-party providers’ networks, or in cloud-based services provided to, by, or enabled by us, could result in
claims of liability against us, give rise to legal and/or regulatory action, damage our reputation or otherwise materially harm our
business,” among others.
Our service offerings complement our products through a range of consulting, technical, project, quality, and software
maintenance services, including 24-hour online and telephone support through technical assistance centers.
Financing Arrangements
We provide financing arrangements for certain qualified customers to build, maintain, and upgrade their networks. We believe
customer financing is a competitive advantage in obtaining business, particularly for those customers involved in significant
infrastructure projects. Our financing arrangements include loans, leases (sales-type, direct financing and operating) and
channels financing arrangements.
Acquisitions, Investments, and Alliances
The markets in which we compete require a wide variety of technologies, products, and capabilities. We continue to evaluate
opportunities to acquire and invest in businesses and technologies that complement and enable further investment in our key
priority areas.
Acquisitions
We acquire companies in order to gain access to talent, technology, products and features, operational capabilities or new markets.
The risks associated with acquisitions are more fully discussed in “Item 1A. Risk Factors,” including the risk factor entitled
“We have made and expect to continue to make acquisitions that could disrupt our operations and harm our operating results.”
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Investments in Privately Held Companies
We make investments in privately held companies that develop technology or provide services that are complementary to our
products or that provide insights into emerging technologies that may become relevant to our businesses. The risks associated
with these investments are more fully discussed in “Item 1A. Risk Factors,” including the risk factor entitled “We are exposed
to fluctuations in the market values of our portfolio investments and in interest rates; impairment of our investments could harm
our earnings.”
Strategic Alliances
We pursue strategic alliances with other companies in areas where collaboration can produce industry advancement and
accelerate new markets. The objectives and goals of a strategic alliance can include technology exchange, product development,
joint sales and marketing, or new market creation.
Companies with which we have strategic alliances in some areas may be competitors in other areas, and in our view this trend
may increase. The risks associated with our strategic alliances are more fully discussed in “Item 1A. Risk Factors,” including
the risk factor entitled “If we do not successfully manage our strategic alliances, we may not realize the expected benefits from
such alliances and we may experience increased competition or delays in product development.”
Competition
We compete in the networking and communications equipment markets, providing products and services designed to transport,
and help secure data, voice, and video traffic across cloud, private and public networks and the Internet. These market factors
represent a competitive threat to us. We compete with numerous vendors in each product category. The overall number of our
competitors providing niche product solutions may increase. Also, the identity and composition of competitors may change as
we increase our activity in newer product areas, and in key priority and growth areas. As we continue to expand globally, we
may see new competition in different geographic regions. In particular, we have experienced price-focused competition from
competitors in Asia, especially from China, and we anticipate this will continue.
Our competitors (in each case relative to only some of our products or services) include: Amazon Web Services LLC; Arista
Networks, Inc.; Broadcom Inc.; Ciena Corporation; CrowdStrike Holdings, Inc.; Datadog Inc.; Dell Technologies Inc.; Dynatrace
Inc.; Fortinet, Inc.; Hewlett-Packard Enterprise Company; Huawei Technologies Co., Ltd.; Juniper Networks, Inc.; Microsoft
Corporation; New Relic, Inc.; Nokia Corporation; Nvidia Corporation; Palo Alto Networks, Inc.; RingCentral, Inc.; VMware,
Inc.; Zoom Video Communications, Inc.; and Zscaler, Inc.; among others.
Some of our competitors compete across many of our product lines, while others are primarily focused in a specific product area.
Barriers to entry are relatively low, and new ventures to create products that do or could compete with our products are regularly
formed. In addition, some of our competitors may have greater resources, including technical and engineering resources, than
we do. As we expand into new markets, we will face competition not only from our existing competitors but also from other
competitors, including existing companies with strong technological, marketing, and sales positions in those markets. We also
sometimes face competition from resellers and distributors of our products. Companies with which we have strategic alliances in
some areas may be competitors in other areas, and this trend may increase. For example, the enterprise data center is undergoing
a fundamental transformation arising from the convergence of technologies, including computing, networking, storage, and
software, that previously were segregated. Additionally, companies that are strategic alliance partners in some areas of our
business may acquire or form alliances with our competitors, thereby reducing their business with us.
The principal competitive factors in the markets in which we presently compete and may compete in the future include the
ability to sell successful business outcomes; the ability to provide a broad range of networking and communications products
and services; product performance; price; the ability to introduce new products, including providing continuous new customer
value and products with price-performance advantages; the ability to reduce production costs; the ability to provide value-
added features such as security, reliability, and investment protection; conformance to standards; market presence; the ability to
provide financing; and disruptive technology shifts and new business models.
We also face competition from customers to which we license or supply technology and suppliers from which we transfer
technology. The inherent nature of networking requires interoperability. As such, we must cooperate and, at the same time,
compete with many companies. Any inability to effectively manage these complicated relationships with customers, suppliers,
and strategic alliance partners could have a material adverse effect on our business, operating results, and financial condition
and accordingly affect our chances of success.
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Research and Development
We regularly introduce new products and features to address the requirements of our markets. We allocate our research
and development budget among our product categories, which consist of Secure, Agile Networks; Internet for the Future;
Collaboration; End-to-End Security; Optimized Application Experiences; and Other Product technologies. Our research and
development expenditures are applied generally to all product areas, with specific areas of focus being identified from time to
time. Our expenditures for research and development costs were expensed as incurred.
The industry in which we compete is subject to rapid technological developments, evolving standards, changes in customer
requirements, and new product introductions and enhancements. As a result, our success depends, in part, on our ability, on
a cost-effective and timely basis, to continue to enhance our existing products and to develop and introduce new products
that improve performance and reduce total cost of ownership. To achieve these objectives, our management and engineering
personnel work with customers to identify and respond to customer needs, as well as with other innovators of Internet networking
products, including universities, laboratories, and corporations. We also expect to continue to make acquisitions and strategic
investments, where appropriate, to provide us with access to new technologies. Nonetheless, there can be no assurance that we
will be able to successfully develop products to address new customer requirements and technological changes or that those
products will achieve market acceptance.
Manufacturing
We rely on contract manufacturers for our manufacturing needs. We presently use a variety of independent third-party companies
to provide services related to printed-circuit board assembly, in-circuit test, product repair, and product assembly. Proprietary
software in electronically programmable memory chips is used to configure products that meet customer requirements and to
maintain quality control and security. The manufacturing process enables us to configure the hardware and software in unique
combinations to meet a wide variety of individual customer requirements. The manufacturing process also uses automated
testing equipment and burn-in procedures, as well as comprehensive inspection, testing, and statistical process controls, which
are designed to help ensure the quality and reliability of our products. The manufacturing processes and procedures are generally
certified to International Organization for Standardization 9001 standards.
Our arrangements with contract manufacturers generally provide for quality, cost, and delivery requirements, as well as
manufacturing process terms, such as continuity of supply; inventory management; flexibility regarding capacity, quality, and
cost management; oversight of manufacturing; and conditions for use of our intellectual property. We have not entered into any
significant long-term contracts with any manufacturing service provider. We generally have the option to renew arrangements
on an as-needed basis. These arrangements generally do not commit us to purchase any particular amount or any quantities
beyond amounts covered by orders or forecasts that we submit covering discrete periods of time.
Patents, Intellectual Property, and Licensing
We seek to establish and maintain our proprietary rights in our technology and products through the use of patents, copyrights,
trademarks, and trade secret laws. We have a program to file applications for and obtain patents, copyrights, and trademarks
in the United States and in selected foreign countries where we believe filing for such protection is appropriate. We also
seek to maintain our trade secrets and confidential information by nondisclosure policies and through the use of appropriate
confidentiality agreements. We have obtained a substantial number of patents and trademarks in the United States and in other
countries. There can be no assurance, however, that the rights obtained can be successfully enforced against infringing products
in every jurisdiction. Although we believe the protection afforded by our patents, copyrights, trademarks, and trade secrets has
value, the rapidly changing technology in the networking industry and uncertainties in the legal process make our future success
dependent primarily on the innovative skills, technological expertise, and management abilities of our employees rather than on
the protection afforded by patent, copyright, trademark, and trade secret laws.
Many of our products are designed to include software or other intellectual property licensed from third parties. While it may
be necessary in the future to seek or renew licenses relating to various aspects of our products, we believe, based upon past
experience and standard industry practice, that such licenses generally could be obtained on commercially reasonable terms.
Nonetheless, there can be no assurance that the necessary licenses would be available on acceptable terms, if at all. Our inability
to obtain certain licenses or other rights or to obtain such licenses or rights on favorable terms, or the need to engage in litigation
regarding these matters, could have a material adverse effect on our business, operating results, and financial condition.
Moreover, inclusion in our products of software or other intellectual property licensed from third parties on a nonexclusive basis
can limit our ability to protect our proprietary rights in our products.
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The industry in which we compete is characterized by rapidly changing technology, a large number of patents, and frequent
claims and related litigation regarding patent and other intellectual property rights. There can be no assurance that our patents
and other proprietary rights will not be challenged, invalidated, or circumvented; that others will not assert intellectual property
rights to technologies that are relevant to us; or that our rights will give us a competitive advantage. In addition, the laws of some
foreign countries may not protect our proprietary rights to the same extent as the laws of the United States. The risks associated
with patents and intellectual property are more fully discussed in “Item 1A. Risk Factors,” including the risk factors entitled
“Our proprietary rights may prove difficult to enforce,” “We may be found to infringe on intellectual property rights of others,”
and “We rely on the availability of third-party licenses.”
Government Regulation
We are subject to numerous regulations and laws in the United States and abroad that involve matters central to our business.
Many of these regulations and laws are evolving and their applicability and scope, as interpreted by courts and regulators,
remain uncertain. These regulations and laws involve a variety of matters including privacy, data protection and personal
information, tax, trade, encryption technology, environmental sustainability (including climate change), human rights, product
certification, and national security.
A failure, or alleged failure, by us to comply with regulations or laws could have a material adverse effect on our business,
operating results, or financial condition. For additional information about government regulation and laws applicable to our
business, see “Item 1A. Risk Factors,” including the risk factor entitled “Our business, operating results and financial condition
could be materially harmed by evolving regulatory uncertainty or obligations applicable to our products and services” and Note
14 to the Consolidated Financial Statements, subsection (f) “Legal Proceedings.”
Talent and Culture
At Cisco, we value our people and our technology, and we leverage our broader ecosystems to positively impact the world and
pursue our purpose to Power an Inclusive Future for All. Our goal is to attract, retain, and develop talent in order to help our
customers connect, secure, and accelerate their digital agility. Our relationship with our employees is one of mutual benefit.
Our employees bring talent and ingenuity to everything we do, and in turn, we provide employees with meaningful careers and
development opportunities.
For the third year in a row, Cisco has been named the number one company to work for in Fortune Magazine’s 100 Best
Companies to Work For® 2023 rankings in the United States. Fortune and Great Place to Work have published their United
States rankings for the past 26 years, and Cisco has been recognized on every annual list. Cisco has also received top ranking in
15 additional countries, including Australia, Canada, Costa Rica, Mexico, Norway, Poland, Portugal, Saudi Arabia, Singapore,
Indonesia, Japan, Spain, Switzerland, United Kingdom, and Vietnam.
As of July 29, 2023, we had approximately 84,900 employees and they are categorized as follows:
Employees by Geography
Employee by Line Items on Consolidated Statement of
Operations
United States
47.6%
Rest of World
52.4%
Cost of
sales
31.5%
Sales and
marketing
30.4%
Research and
development
28.0%
General and
administrative
10.1%
We support our employees through times of change and enable them to be their best. We do this by fostering a Conscious
Culture. Conscious Culture speaks to the importance of everyone being aware — “conscious” — of the environment they are
part of, and feeling accountable, empowered, and expected to contribute to creating a culture where all Cisco employees feel safe
and can thrive. We’re aware of how we treat one another and speak up when we see behavior that’s out of step with our beliefs.
There is a direct connection between the culture we create internally and how our people are helping bring about a better world.
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In the same way that every employee at Cisco is responsible for our Conscious Culture, we also want every employee to feel
responsible for and contribute to our purpose to Power an Inclusive Future for All. This is as much a commitment from Cisco as
it is from our employees. Our people often ask the toughest questions around how we are impacting society for the better, from
addressing homelessness to combating climate change. And often the best ideas for how we can do even more come directly
from them. Future employees expect it too. More and more, talent want to work for a company where their work has meaning
and where they see their values reflected in the organization.
Inclusion & Diversity
Inclusion and diversity are core components in our Conscious Culture. Inclusivity is our strength and our priority. We want
every employee to feel valued, respected, and heard. We are prioritizing inclusion and diversity across the company, recognizing
that connecting people of all experiences and backgrounds allows us to improve innovation and collaboration.
In order to continue accelerating diversity and finding extraordinary talent, we have designed a framework that includes
introducing new tools and technologies to help accurately map the talent market, creating job roles that attract highly qualified
diverse candidates, and expanding the diversity within our interview panels.
We currently have a total of 29 Inclusive Communities comprised of 11 Employee Resource Organizations and 18 Employee
Networks supporting full-spectrum diversity globally, including gender, ethnicity, race, sexual orientation, age, ability, veteran
status, religion, culture, background, as well as varied experiences, strengths, and perspectives. These thriving communities
continue to be a source of strength and support for employees, and they help to foster a more conscious culture by providing
opportunities for proximity and learning.
Cisco has signed the CEO Action for Diversity and Inclusion Pledge. The CEO Action for Diversity & Inclusion Pledge is
a CEO-driven pledge to drive measurable action and meaningful change in advancing diversity, equity and inclusion in the
workplace. This year, Cisco also signed The Valuable 500 statement, a global movement putting disability inclusion on the
business leadership agenda and celebrating those committed to inclusion. We are delivering on these actions by accelerating
diversity across the full-spectrum of diversity — including gender, age, race, ethnicity, sexual orientation, ability, nationality,
religion, veteran status, background, culture, experience, strengths and perspectives. At Cisco, it starts at the top: 42% of our
Executive Leadership Team (ELT) are women and 50% are diverse in terms of ethnicity.
We publish certain gender diversity and ethnic diversity workforce data annually. Across our global company, we have driven
broad improvements in overall workforce diversity. Based on our fiscal 2022 data which excludes certain acquisitions, our global
employee base was comprised of 29% women, 71% men and 0.1% nonbinary, and our U.S. employee base was comprised of the
following ethnicities: 50.9% White/Caucasian, 34.6% Asian, 6.6% Hispanic/Latino, 5.5% African American/Black, 1.9% two or
more races (not Hispanic or Latino), 0.3% American Indian or Alaska Native and 0.2% Native Hawaiian/Other Pacific Islander.
With respect to social justice, Cisco has been partnering across the globe to scale and amplify our positive impact. We have
published our Social Justice Beliefs & Actions, which is our blueprint for how we respond to injustice and address inequity for
any community. We are creating actions that can be replicated and scaled and are designed to cover the full spectrum of diversity,
inclusive of gender, generation, race, ethnicity, sexual orientation, ability, nationality, and background — the foundation of
our Conscious Culture. This work is part of a plan for Cisco to drive transformational, generational impact for vulnerable
communities. Our Social Justice Action Office helps drive accountability, progress, and excellence in our strategic actions in
this area, which are designed to address the broader ecosystem including our employees, partners, customers, and suppliers.
Compensation and Benefits
Our total compensation philosophy is designed to attract, reward, and retain talent. It provides market competitive,
performance-based compensation aligned with each employee’s contribution and impact to the value we drive to our customers,
partners and stockholders. We reward and recognize our employees for effecting innovation, collaboration, profitability, and
growth within our geographies, product lines, and functions.
Cisco has always been committed to compensating our employees fairly and equitably. We are a founding signer of the White
House Equal Pay Pledge and the Parity.org pledge, and are a leader in the charge to make fair pay a reality for all employees
through the Employers for Pay Equity Consortium. We have also introduced an innovative and inclusive framework that provides
us powerful analytics to evaluate our complex compensation system. For example, by using these powerful analytics, we are
able to test for pay parity on a regular basis, and when gaps are found, we strive to correct them.
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As part of our Social Justice Beliefs and Actions, we have expanded our pay parity program beyond base salary to include
additional forms of compensation fairness such as promotion, bonuses, and stock decisions made in our rewards programs. We
aim to ensure the program addresses all employees across the full spectrum of diversity incorporating our global self-reported
data collection.
Health & Well-being
We have an ongoing commitment to focus on the health, safety, and well-being of our employees. We provide our employees and
their families with high-quality, flexible, and convenient benefits and resources for their physical, mental, and financial well-
being. We strive to support our employees as they balance careers and personal lives, as well as their own physical, emotional,
and financial health. We continue to emphasize a focus on both physical and mental health, recognizing the need to create an
environment where employees can speak openly about mental health and other matters.
We have hosted discussions during Cisco Check-Ins, expanded our Safe to Talk program, introduced mindfulness courses,
enhanced our Employee Assistance Program offerings, improved the out-of-network provider benefit for substance abuse and
mental health treatment, and more. In fiscal 2023, we continued to offer employees “A Day for Me,” which were paid days off
that allowed for each individual to recharge and rest. We have moved towards a hybrid work model in certain countries, giving
our employees the flexibility to work offsite or at onsite Cisco locations.
Employee Development
We know careers are not static pathways that look the same for everyone. We also know that the world of work will continue
to rapidly evolve, requiring new skillsets. At Cisco, we believe that your career is owned by you, supported by your leader, and
enabled by Cisco. This means that while each employee has the power to shape their career on their own terms, they also have a
supportive ecosystem to develop the skills they need to succeed both today and tomorrow. We strive to create a culture of “one
company, many careers.” In fiscal 2023, we launched a new career strategy for our people focused on areas we know determine
a successful career at Cisco—personal brand, network, expertise, and experience—and created customized offerings that map
to each of them.
Employee Engagement
We believe that strong communication is key in our Conscious Culture. This communication includes regular, virtual all hands,
which we refer to as a “Cisco Check-In,” and weekly team leader check-ins, which we refer to as a “Team Space Check-In.” Our
regular virtual Cisco Check-Ins were initially launched with a focus on sharing medical information at the start of the COVID-19
pandemic. The Cisco Check-Ins have since evolved into a forum where we can discuss much more with our employees, from
business updates to social justice to physical and mental health.
In fiscal 2023, we have seen a high level of employee engagement. For example, there were approximately 2.3 million Team
Space Check-Ins by our employees in fiscal 2023, reflecting approximately 73,500 employees submitting Team Space Check-
Ins. Employees also participate in our global Engagement Pulse Survey and the Real Deal Survey. These surveys allow our
employees to provide confidential feedback on our culture, company strategy and trust in their direct leaders.
Purpose Report and ESG Reporting Hub
Additional information regarding Cisco’s ESG initiatives and progress can be found in our annual Purpose Report and on our
ESG Reporting Hub at https://www.cisco.com/c/m/en_us/about/csr/esg-hub.html. The contents of our Purpose Report, our ESG
Reporting Hub and related supplemental information are not incorporated by reference into this Annual Report on Form 10-K
or in any other report or document we file with the SEC.
Information about our Executive Officers
The following table shows the name, age, and position as of August 31, 2023 of each of our executive officers:
Name Age Position with the Company
Charles H. Robbins . . . . . . . . . . . . . . . 57 Chair and Chief Executive Officer
R. Scott Herren . . . . . . . . . . . . . . . . . . 61 Executive Vice President and Chief Financial Officer
Maria Martinez . . . . . . . . . . . . . . . . . . 65 Executive Vice President and Chief Operating Officer
Jeff Sharritts . . . . . . . . . . . . . . . . . . . . 55 Executive Vice President and Chief Customer and Partner Officer
Deborah L. Stahlkopf . . . . . . . . . . . . . 53 Executive Vice President and Chief Legal Officer
13
Mr. Robbins serves as our Chief Executive Officer since July 2015, as a member of the Board of Directors since May 2015, and
as Chair of the Board since December 2017. Mr. Robbins joined Cisco in December 1997, from which time until March 2002
he held a number of managerial positions within Cisco’s sales organization. Mr. Robbins was promoted to Vice President in
March 2002, assuming leadership of Cisco’s U.S. channel sales organization. Additionally, in July 2005, Mr. Robbins assumed
leadership of Cisco’s Canada channel sales organization. In December 2007, Mr. Robbins was promoted to Senior Vice President,
U.S. Commercial, and, in August 2009 he was appointed Senior Vice President, U.S. Enterprise, Commercial and Canada. In
July 2011, Mr. Robbins was named Senior Vice President, Americas. In October 2012, Mr. Robbins was promoted to Senior
Vice President, Worldwide Field Operations, in which position he served until assuming the role of Chief Executive Officer.
Mr. Robbins is also a member of the board of directors of BlackRock, Inc. (since 2017).
Mr. Herren joined Cisco in December 2020 and serves as our Executive Vice President and Chief Financial Officer. Prior to
joining Cisco, Mr. Herren served as Senior Vice President and Chief Financial Officer of Autodesk, Inc. (“Autodesk”) since
November 2014. Prior to joining Autodesk, Mr. Herren served as Senior Vice President of Finance at Citrix Systems, Inc. (“Citrix”)
from September 2011 to October 2014, and in a variety of other leadership roles after joining Citrix in March 2000, including
as Vice President and Managing Director for EMEA and Vice President and General Manager of Citrix’s virtualization systems
group. Before joining Citrix, Mr. Herren spent over 15 years in senior strategy and financial positions at FedEx Corporation and
International Business Machines Corporation.
Ms. Martinez joined Cisco in April 2018 and served as our Executive Vice President and Chief Customer Experience
Officer until her appointment as our Executive Vice President and Chief Operating Officer in March 2021. Prior to joining
Cisco, Ms. Martinez served in a variety of senior executive roles at salesforce.com, inc. (“Salesforce”), including as President,
Global Customer Success and Latin America from March 2016 to April 2018; President, Sales and Customer Success from
February 2013 to March 2016; Executive Vice President and Chief Growth Officer from February 2012 to February 2013;
and as Executive Vice President, Customers for Life from February 2010 to February 2012. Ms. Martinez’s experience prior
to Salesforce includes serving as Corporate Vice President of Worldwide Services at Microsoft Corporation (“Microsoft”),
President and Chief Executive Officer of Embrace Networks, Inc., and various senior leadership roles at Motorola, Inc. and
AT&T Inc./Bell Laboratories. Ms. Martinez is a member of the board of directors of McKesson Corporation (since 2019) and
Cue Health Inc. (since 2021).
Mr. Sharritts joined Cisco in July 2000 and serves as our Executive Vice President and Chief Customer and Partner Officer.
Previously, Mr. Sharritts served as Cisco’s Senior Vice President, Americas Sales from July 2018 to May 2022, in which
position he served until his current role. Mr. Sharritts also served as Cisco’s Senior Vice President, U.S. Commercial Sales from
December 2014 to July 2018. Additionally, Mr. Sharritts has held several other leadership positions in Cisco’s Commercial,
Public Sector, Service Provider, and Channels sales organizations from July 2000 to December 2014. Mr. Sharritts is a member
of the board of directors of Mueller Water Products, Inc. (since 2021).
Ms. Stahlkopf joined Cisco in August 2021 and serves as our Executive Vice President and Chief Legal Officer. Prior to joining
Cisco, Ms. Stahlkopf spent 14 years at Microsoft, where she served most recently as Corporate Vice President, General Counsel
and Corporate Secretary, Corporate, External and Legal Affairs from April 2018 to July 2021. Ms. Stahlkopf also served in other
leadership roles at Microsoft, including as Vice President and Deputy General Counsel from December 2015 to April 2018 and
as Associate General Counsel from December 2010 to December 2015. Prior to joining Microsoft, Ms. Stahlkopf practiced law
at Perkins Coie LLP and Cooley Godward LLP. Ms. Stahlkopf is a member of the board of directors of NextEra Energy, Inc.
(since 2023).
14
Item 1A. Risk Factors
Set forth below and elsewhere in this report and in other documents we file with the SEC are descriptions of the risks and
uncertainties that could cause our actual results to differ materially from the results contemplated by the forward-looking
statements contained in this report.
Risks Related to our Business and Industry
Our operating results may fluctuate in future periods, which may adversely affect our stock price.
Our operating results have been in the past, and will continue to be, subject to quarterly and annual fluctuations as a result of
numerous factors, some of which may contribute to more pronounced fluctuations in an uncertain global economic environment.
These factors include:
• Fluctuations in demand for our products and services, especially with respect to service providers and Internet
businesses, in part due to changes in the global economic environment
• Changes in sales and implementation cycles for our products and reduced visibility into our customers’ spending
plans and associated revenue
• Our ability to maintain appropriate inventory levels and purchase commitments
• Price and product competition in the communications and networking industries, which can change rapidly due to
technological innovation and different business models from various geographic regions
• The overall movement toward industry consolidation among both our competitors and our customers
• The introduction and market acceptance of new technologies and products, and our success in new and evolving
markets, and in emerging technologies, as well as the adoption of new standards
• The transformation of our business to deliver more software and subscription offerings where revenue is recognized
over time
• Variations in sales channels, product costs, mix of products sold, or mix of direct sales and indirect sales
• The timing, size, and mix of orders from customers
• Manufacturing and customer lead times
• Fluctuations in our gross margins, and the factors that contribute to such fluctuations
• The ability of our customers, channel partners, contract manufacturers and suppliers to obtain financing or to fund
capital expenditures, especially during a period of global credit market disruption or in the event of customer, channel
partner, contract manufacturer or supplier financial problems
• Actual events, circumstances, outcomes, and amounts differing from judgments, assumptions, and estimates used in
determining the values of certain assets (including the amounts of related valuation allowances), liabilities, and other
items reflected in our Consolidated Financial Statements
• How well we execute on our strategy and operating plans and the impact of changes in our business model that could
result in significant restructuring charges
• Our ability to achieve targeted cost reductions
• Benefits anticipated from our investments
• Changes in tax laws or accounting rules, or interpretations thereof
As a consequence, operating results for a particular future period are difficult to predict, and, therefore, prior results are not
necessarily indicative of results to be expected in future periods. Any of the foregoing factors, or any other factors discussed
elsewhere herein, could have a material adverse effect on our business, results of operations, and financial condition that could
adversely affect our stock price.
Our operating results may be adversely affected by unfavorable economic and market conditions and the uncertain
geopolitical environment.
Challenging economic conditions, including rising inflation, or other changes, worldwide have from time to time contributed,
and may continue to contribute, to slowdowns in the communications and networking industries at large, as well as in specific
segments and markets in which we operate, resulting in: reduced demand for our products as a result of continued constraints
on IT-related capital spending by our customers, particularly service providers, and other customer markets as well; increased
price competition for our products, not only from our competitors but also as a consequence of customers disposing of unutilized
products; risk of excess and obsolete inventories; risk of supply constraints; risk of excess facilities and manufacturing capacity;
and higher overhead costs as a percentage of revenue and higher interest expense.
15
The global macroeconomic environment continues to be challenging and inconsistent. In certain prior periods, we have seen a
broad-based weakening in the global macroeconomic environment which has impacted and could impact in the future certain
of our markets. Additionally, instability in the global credit markets, the impact of uncertainty regarding global central bank
monetary policy, the instability in the geopolitical environment in many parts of the world (including as a result of the on-going
Russia and Ukraine war, and China-Taiwan relations), the current economic challenges in China, including global economic
ramifications of Chinese economic difficulties, and other disruptions may continue to put pressure on global economic
conditions. If global economic and market conditions, or economic conditions in key markets, remain uncertain or deteriorate
further, we may experience material impacts on our business, operating results, and financial condition.
Our operating results in one or more segments may also be affected by uncertain or changing economic conditions particularly
germane to that segment or to particular customer markets within that segment. In addition, reports of certain intelligence
gathering methods of the U.S. government could affect customers’ perception of the products of IT companies which design
and manufacture products in the United States. Trust and confidence in us as an IT supplier are critical to the development and
growth of our markets. Impairment of that trust, or foreign regulatory actions taken in response to reports of certain intelligence
gathering methods of the U.S. government, could affect the demand for our products from customers outside of the United States
and could have an adverse effect on our operating results.
Our revenue for a particular period is difficult to predict, and a shortfall in revenue may harm our operating results.
As a result of a variety of factors discussed in this report, our revenue for a particular quarter is difficult to predict, especially
in light of a challenging and inconsistent global macroeconomic environment (including as a result of the on-going Russia and
Ukraine war), and related market uncertainty. Our revenue may grow at a slower rate than in past periods, or decline as it did in
certain prior periods. Our ability to meet financial expectations could also be adversely affected if the nonlinear sales pattern
seen in some of our past quarters recurs in future periods. We have experienced periods of time during which shipments have
exceeded net bookings or manufacturing issues have delayed shipments, leading to nonlinearity in shipping patterns. In addition
to making it difficult to predict revenue for a particular period, nonlinearity in shipping can increase costs, because irregular
shipment patterns result in periods of underutilized capacity and periods in which overtime expenses may be incurred, as well as
in potential additional inventory management-related costs. In addition, to the extent that manufacturing issues and any related
component shortages result in delayed shipments in the future, and particularly in periods in which our contract manufacturers
are operating at higher levels of capacity, it is possible that revenue for a quarter could be adversely affected if such matters occur
and are not remediated within the same quarter.
The timing of large orders can also have a significant effect on our business and operating results from quarter to quarter. From
time to time, we receive large orders that have a significant effect on our operating results in the period in which the order
is recognized as revenue. The timing of such orders is difficult to predict, and the timing of revenue recognition from such
orders may affect period to period changes in revenue. As a result, our operating results could vary materially from quarter
to quarter based on the receipt of such orders and their ultimate recognition as revenue. Longer than normal manufacturing
lead times in the past have caused, and in the future could cause, some customers to place the same or a similar order multiple
times within our various sales channels and to cancel the duplicative orders upon shipment or receipt of the product, or to also
place orders with other vendors with shorter manufacturing lead times. Such multiple ordering (along with other factors) or risk
of order cancellation may cause difficulty in predicting our revenue. Further, our efforts to improve manufacturing lead-time
performance may result in more variability and less predictability in our revenue and operating results. In addition, when
facing component supply-related challenges, we have increased our efforts in procuring components in order to meet customer
expectations, which in turn contribute to an increase in inventory and purchase commitments. In prior periods, we increased
our inventory and purchase commitments in light of the significant supply constraints seen industry-wide due to component
shortages. These increases in our inventory and purchase commitments to shorten lead times could also lead to material excess
and obsolete inventory charges or other negative impacts to our product gross margin in future periods if product demand
significantly weakens for a sustained duration. We plan our operating expense levels based primarily on forecasted revenue
levels. These expenses and the impact of long-term commitments are relatively fixed in the short term. A shortfall in revenue
could lead to operating results being below expectations because we may not be able to quickly reduce these fixed expenses
in response to short-term business changes. Any of the above factors could have a material adverse impact on our operations
and financial results. For additional information and a further discussion of impacts and risks related to our supply constraints,
inventory commitments and our purchase commitments with contract manufacturers and suppliers, see Results of Operations—
Product Gross Margin—Supply Constraints Impacts and Risks, Liquidity and Capital Resources—Inventory Supply Chain and
Note 14 to the Consolidated Financial Statements.
16
Supply chain issues, including financial problems of contract manufacturers or component suppliers, or a shortage of
adequate component supply or manufacturing capacity that increase our costs or cause a delay in our ability to fulfill
orders, could have an adverse impact on our business and operating results, and our failure to estimate customer demand
properly may result in excess or obsolete component supply, which could adversely affect our gross margins.
The fact that we do not own or operate the bulk of our manufacturing facilities and that we are reliant on our extended supply
chain could have an adverse impact on the supply of our products and on our business and operating results. Financial problems
of either contract manufacturers or component suppliers, reservation of manufacturing capacity at our contract manufacturers
by other companies, and industry consolidation occurring within one or more component supplier markets, such as the
semiconductor market, in each case, could either limit supply or increase costs.
A reduction or interruption in supply, including disruptions on our global supply chain, caused in part by public health emergencies,
geopolitical tensions (including as a result of China-Taiwan relations) or a significant natural disaster (including as a result of
climate change); a significant increase in the price of one or more components (including as a result of inflation); a failure to
adequately authorize procurement of inventory by our contract manufacturers; a failure to appropriately cancel, reschedule, or
adjust our requirements based on our business needs; or a decrease in demand for our products could materially adversely affect
our business, operating results, and financial condition and could materially damage customer relationships. Furthermore, as
a result of binding price or purchase commitments with suppliers, we may be obligated to purchase components at prices that
are higher than those available in the current market. In the event that we become committed to purchase components at prices
in excess of the current market price when the components are actually used, our gross margins could decrease. In addition,
vendors may be under pressure to allocate product to certain customers for business, regulatory or political reasons, and/or
demand changes in agreed pricing as a condition of supply. Although we have generally secured additional supply or taken
other mitigation actions when significant disruptions have occurred, if similar situations occur in the future, they could have a
material adverse effect on our business, results of operations, and financial condition.
Our growth and ability to meet customer demands depend in part on our ability to obtain timely deliveries of parts from our
suppliers and contract manufacturers. We have experienced component shortages in the past, including shortages caused by
manufacturing process issues, that have affected our operations, including longer than normal lead times. For example, in
recent periods, there was a market shortage of semiconductor and other component supply which affected lead times, the cost
of that supply, and our ability to meet customer demand for our products. While supply constraints remain, we saw an overall
improvement of such constraints in fiscal 2023. Additionally, we may in the future experience a shortage of certain component
parts as a result of our own manufacturing issues, manufacturing issues at our suppliers or contract manufacturers, capacity
problems experienced by our suppliers or contract manufacturers including capacity or cost problems resulting from industry
consolidation, or strong demand for those parts. Growth in the economy is likely to create greater pressures on us and our
suppliers to accurately project overall component demand and component demands within specific product categories and to
establish optimal component levels and manufacturing capacity, especially for labor-intensive components, components for
which we purchase a substantial portion of the supply, or the re-ramping of manufacturing capacity for highly complex products.
During periods of shortages or delays the price of components may increase, or the components may not be available at all, and
we may also encounter shortages if we do not accurately anticipate our needs. We may not be able to secure enough components
at reasonable prices or of acceptable quality to build new products in a timely manner in the quantities or configurations needed.
Accordingly, our revenue and gross margins could suffer until other sources can be developed.
Our operating results would also be adversely affected if, anticipating greater demand than actually develops, we commit to
the purchase of more components than we need, which is more likely to occur during periods of demand uncertainties such
as we have experienced in recent periods and expect to continue to experience over the short- and medium-term. Although in
many cases we use standard parts and components for our products, certain components are presently available only from a
single source or limited sources, and a global economic downturn and related market uncertainty could negatively impact the
availability of components from one or more of these sources, especially during times such as we have recently seen when there
are supplier constraints based on labor and other actions taken during economic downturns. We may not be able to diversify
sources in a timely manner, which could harm our ability to deliver products to customers and seriously impact present and
future sales.
We believe that we may be faced with the following challenges in the future: new markets in which we participate may grow
quickly, which may make it difficult to quickly obtain significant component capacity; as we acquire companies and new
technologies, we may be dependent on unfamiliar supply chains or relatively small supply partners; and we face competition for
certain components that are supply-constrained, from existing competitors, and companies in other markets.
Manufacturing capacity and component supply constraints could continue to be significant issues for us. 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 improve manufacturing lead-time performance and to help ensure adequate component
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supply, we enter into agreements with contract manufacturers and suppliers that either allow them to procure inventory based
upon criteria as defined by us or that establish the parameters defining our requirements. 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. When facing component supply-related challenges we have increased our efforts in procuring components in order to
meet customer expectations, which in turn contributes to an increase in inventory and purchase commitments. In past periods,
we increased our inventory and purchase commitments in light of the supply constraints seen industry-wide due to component
shortages. These increases in our inventory and purchase commitments to shorten lead times could also lead to material excess
and obsolete inventory charges or other negative impacts to our product gross margin in future periods if we fail to anticipate
customer demand properly and product demand significantly weakens for a sustained duration. For additional information and a
further discussion of impacts and risks related to our supply constraints, inventory commitments and our purchase commitments
with contract manufacturers and suppliers, see Results of Operations—Product Gross Margin—Supply Constraints Impacts
and Risks, Liquidity and Capital Resources—Inventory Supply Chain and Note 14 to the Consolidated Financial Statements.
We expect gross margin to vary over time, and our level of product gross margin may not be sustainable.
Although our product gross margin increased in fiscal 2023, our level of product gross margins declined in fiscal 2022 and
have declined in certain prior periods on a year-over-year basis, and could decline in future periods due to adverse impacts from
various factors, including:
• Changes in customer, geographic, or product mix, including mix of configurations within each product group
• Introduction of new products, including products with price-performance advantages, and new business models
including the transformation of our business to deliver more software and subscription offerings
• Our ability to reduce production costs
• Entry into new markets or growth in lower margin markets, including markets with different pricing and cost
structures, through acquisitions or internal development
• Sales discounts
• Increases in material, labor or other manufacturing-related costs (i.e. component costs, broker fees, expedited freight
and overtime) or higher supply chain logistics costs, any of which could be significant, especially during periods
of supply constraints for certain costs, such as those that have impacted the market for components, including
semiconductors and memory in past periods, and which costs have in the past and may continue to be exacerbated
by inflation
• Excess inventory, inventory holding charges, and obsolescence charges
• Changes in shipment volume
• The timing of revenue recognition and revenue deferrals
• Increased costs (including those caused by tariffs or economic conditions, including inflation), loss of cost savings
or dilution of savings due to changes in component pricing or charges incurred due to inventory holding periods if
parts ordering does not correctly anticipate product demand or if the financial health of either contract manufacturers
or suppliers deteriorates
• Lower than expected benefits from value engineering
• Increased price competition, including competitors from Asia, especially from China
• Changes in distribution channels
• Increased warranty or royalty costs
• Increased amortization of purchased intangible assets, especially from acquisitions
• How well we execute on our strategy and operating plans
Changes in service gross margin may result from various factors such as changes in the mix between technical support services
and advanced services, as well as the timing of technical support service contract initiations and renewals and the addition of
personnel and other resources to support higher levels of service business in future periods.
Sales to the service provider market are especially volatile, and weakness in orders from this industry may harm our
operating results and financial condition.
Sales to the service provider market have been characterized by large and sporadic purchases, especially relating to our router
sales and sales of certain other Secure, Agile Networks and Collaboration products, in addition to longer sales cycles. Service
provider product orders significantly decreased during fiscal 2023 and we have experienced similar weakness in certain prior
periods. Product orders from the service provider market could continue to decline and, as has been the case in the past, such
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weakness could persist over extended periods of time given fluctuating market conditions. Sales activity in this industry depends
upon the stage of completion of expanding network infrastructures; the availability of funding; and the extent to which service
providers are affected by regulatory, economic, and business conditions in the country of operations. Weakness in orders from
this industry, including as a result of any slowdown in capital expenditures by service providers (which may be more prevalent
during a global economic downturn, or periods of economic, political or regulatory uncertainty), could have a material adverse
effect on our business, operating results, and financial condition. Such slowdowns may continue or recur in future periods.
Orders from this industry could decline for many reasons other than the competitiveness of our products and services within
their respective markets. For example, in the past, many of our service provider customers have been materially and adversely
affected by slowdowns in the general economy, by overcapacity, by changes in the service provider market, by regulatory
developments, and by constraints on capital availability, resulting in business failures and substantial reductions in spending and
expansion plans. These conditions have materially harmed our business and operating results in the past, and could affect our
business and operating results in any future period. Finally, service provider customers typically have longer implementation
cycles; require a broader range of services, including design services; demand that vendors take on a larger share of risks; often
require acceptance provisions, which can lead to a delay in revenue recognition; and expect financing from vendors. All these
factors can add further risk to business conducted with service providers.
Disruption of or changes in our distribution model could harm our sales and margins.
If we fail to manage distribution of our products and services properly, or if our distributors’ financial condition or operations
weaken, our revenue and gross margins could be adversely affected. A substantial portion of our products and services is sold
through our channel partners, and the remainder is sold through direct sales. Our channel partners include systems integrators,
service providers, other third-party resellers, and distributors. Systems integrators and service providers typically sell directly to
end users and often provide system installation, technical support, professional services, and other support services in addition
to network equipment sales. Systems integrators also typically integrate our products into an overall solution, and a number
of service providers are also systems integrators. Distributors stock inventory and typically sell to systems integrators, service
providers, and other third-party resellers. We refer to sales through distributors as our two-tier system of sales to the end
customer. If sales through indirect channels increase, this may lead to greater difficulty in forecasting the mix of our products
and, to a degree, the timing of orders from our customers.
Historically, we have seen fluctuations in our gross margins based on changes in the balance of our distribution channels. There
can be no assurance that changes in the balance of our distribution model in future periods would not have an adverse effect
on our gross margins and profitability. Some factors could result in disruption of or changes in our distribution model, which
could harm our sales and margins, including the following: competition with some of our channel partners, including through
our direct sales, which may lead these channel partners to use other suppliers that do not directly sell their own products or
otherwise compete with them; some of our channel partners may demand that we absorb a greater share of the risks that their
customers may ask them to bear; some of our channel partners may have insufficient financial resources and may not be able
to withstand changes and challenges in business conditions; and revenue from indirect sales could suffer if our distributors’
financial condition or operations weaken. In addition, we depend on our channel partners globally to comply with applicable
regulatory requirements. To the extent that they fail to do so, that could have a material adverse effect on our business, operating
results, and financial condition. Further, sales of our products outside of agreed territories can result in disruption to our
distribution channels.
The markets in which we compete are intensely competitive, which could adversely affect our achievement of revenue growth.
The markets in which we compete are characterized by rapid change, converging technologies, and a migration to networking and
communications solutions that offer relative advantages. These market factors represent a competitive threat to us. We compete
with numerous vendors in each product category. The overall number of our competitors providing niche product solutions may
increase. Also, the identity and composition of competitors may change as we increase our activity in newer product areas,
and in key priority and growth areas. For example, as products related to network programmability, such as software defined
networking (SDN) products, have become more prevalent, we have faced increased competition from companies that develop
networking products based on commoditized hardware, referred to as “white box” hardware, to the extent customers decide to
purchase those product offerings instead of ours. In addition, the growth in demand for technology delivered as a service enables
new competitors to enter the market. As we continue to expand globally, we may see new competition in different geographic
regions. In particular, we have experienced price-focused competition from competitors in Asia, especially from China, and
we anticipate this will continue. For information regarding our competitors, see the section entitled “Competition” contained in
Item 1. Business of this report.
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Some of our competitors compete across many of our product lines, while others are primarily focused in a specific product area.
Barriers to entry are relatively low, and new ventures to create products that do or could compete with our products are regularly
formed. In addition, some of our competitors may have greater resources, including technical and engineering resources, than
we do. As we expand into new markets, we will face competition not only from our existing competitors but also from other
competitors, including existing companies with strong technological, marketing, and sales positions in those markets. We also
sometimes face competition from resellers and distributors of our products. Companies with which we have strategic alliances in
some areas may be competitors in other areas, and this trend may increase. For example, the enterprise data center is undergoing
a fundamental transformation arising from the convergence of technologies, including computing, networking, storage, and
software, that previously were segregated. Due to several factors, including the availability of highly scalable and general
purpose microprocessors, ASICs offering advanced services, standards based protocols, cloud computing and virtualization,
the convergence of technologies within the enterprise data center is spanning multiple, previously independent, technology
segments. Also, some of our current and potential competitors for enterprise data center business have made acquisitions, or
announced new strategic alliances, designed to position them to provide end-to-end technology solutions for the enterprise data
center. As a result of all of these developments, we face greater competition in the development and sale of enterprise data center
technologies, including competition from entities that are among our long-term strategic alliance partners. Companies that are
strategic alliance partners in some areas of our business may acquire or form alliances with our competitors, thereby reducing
their business with us.
The principal competitive factors in the markets in which we presently compete and may compete in the future include the
ability to sell successful business outcomes; the ability to provide a broad range of networking and communications products
and services; product performance; price; the ability to introduce new products, including providing continuous new customer
value and products with price-performance advantages; the ability to reduce production costs; the ability to provide value-added
features such as security, reliability, and investment protection; conformance to standards; market presence; the ability to
provide financing; and disruptive technology shifts and new business models.
We also face competition from customers to which we license or supply technology and suppliers from which we transfer
technology. The inherent nature of networking requires interoperability. As such, we must cooperate and at the same time
compete with many companies. Any inability to effectively manage these complicated relationships with customers, suppliers,
and strategic alliance partners could have a material adverse effect on our business, operating results, and financial condition
and accordingly affect our chances of success.
If we do not successfully manage our strategic alliances, we may not realize the expected benefits from such alliances, and
we may experience increased competition or delays in product development.
We have several strategic alliances with large and complex organizations and other companies with which we work to offer
complementary products and services. These arrangements are generally limited to specific projects, the goal of which is
generally to facilitate product compatibility and adoption of industry standards. There can be no assurance we will realize
the expected benefits from these strategic alliances or from joint ventures. If successful, these relationships may be mutually
beneficial and result in industry growth. However, alliances carry an element of risk because, in most cases, we must compete in
some business areas with a company with which we have a strategic alliance and, at the same time, cooperate with that company
in other business areas. Also, if these companies fail to perform or if these relationships fail to materialize as expected, we
could suffer delays in product development or other operational difficulties. Joint ventures can be difficult to manage, given the
potentially different interests of joint venture partners.
Inventory management relating to our sales to our two-tier distribution channel is complex, and excess inventory may harm
our gross margins.
We must manage inventory relating to sales to our distributors effectively, because inventory held by them could affect our
results of operations. Our distributors may increase orders during periods of product shortages, cancel orders if their inventory
is too high, or delay orders in anticipation of new products. They also may adjust their orders in response to the supply of our
products and the products of our competitors that are available to them, and in response to seasonal fluctuations in end-user
demand. Our distributors are generally given business terms that allow them to return a portion of inventory, receive credits for
changes in selling price, and participate in various cooperative marketing programs. Inventory management remains an area of
focus as we balance the need to maintain strategic inventory levels to ensure competitive lead times against the risk of inventory
obsolescence because of rapidly changing technology and customer requirements. When facing component supply-related
challenges, we have increased our efforts in procuring components in order to meet customer expectations. If we ultimately
determine that we have excess inventory, we may have to reduce our prices and write down inventory, which in turn could result
in lower gross margins.
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We depend upon the development of new products and services, and enhancements to existing products and services, and if
we fail to predict and respond to emerging technological trends and customers’ changing needs, our operating results and
market share may suffer.
The markets for our products and services are characterized by rapidly changing technology, evolving industry standards, new
product and service introductions, and evolving methods of building and operating networks. Our operating results depend on
our ability to develop and introduce new products and services into existing and emerging markets and to reduce the production
costs of existing products. If customers do not purchase and/or renew our offerings our business could be harmed.
The process of developing new technology, including more programmable, flexible and virtual networks, and technology related
to other market transitions— such as security, digital transformation and IoT, and cloud— is complex and uncertain, and if we
fail to accurately predict customers’ changing needs and emerging technological trends our business could be harmed. We must
commit significant resources, including the investments we have been making in our strategic priorities to developing new
products and services before knowing whether our investments will result in products and services the market will accept. In
particular, if our model of the evolution of networking does not emerge as we believe it will, or if the industry does not evolve
as we believe it will, or if our strategy for addressing this evolution is not successful, many of our strategic initiatives and
investments may be of no or limited value. For example, if we do not introduce products related to network programmability,
such as software-defined-networking products, in a timely fashion, or if product offerings in this market that ultimately succeed
are based on technology, or an approach to technology, that differs from ours, such as, for example, networking products based
on “white box” hardware, our business could be harmed. Similarly, our business could be harmed if we fail to develop, or fail
to develop in a timely fashion, offerings to address other transitions, or if the offerings addressing these other transitions that
ultimately succeed are based on technology, or an approach to technology, different from ours. In addition, our business could
be adversely affected in periods surrounding our new product introductions if customers delay purchasing decisions to qualify
or otherwise evaluate the new product offerings. We have also been transforming our business to move from selling individual
products and services to selling products and services integrated into architectures and solutions, and we are seeking to meet
the evolving needs of customers which include offering our products and solutions in the manner in which customers wish to
consume them. As a part of this transformation, we continue to make changes to how we are organized and how we build and
deliver our technology, including changes in our business models with customers. If our strategy for addressing our customer
needs, or the architectures and solutions we develop do not meet those needs, or the changes we are making in how we are
organized and how we build and deliver or technology is incorrect or ineffective, our business could be harmed.
Furthermore, we may not execute successfully on our vision or strategy because of challenges with regard to product planning
and timing, technical hurdles that we fail to overcome in a timely fashion, or a lack of appropriate resources. This could result in
competitors, some of which may also be our strategic alliance partners, providing those solutions before we do and loss of market
share, revenue, and earnings. In addition, the growth in demand for technology delivered as a service enables new competitors
to enter the market. The success of new products and services depends on several factors, including proper new product and
service definition, component costs, timely completion and introduction of these products and services, differentiation of new
products and services from those of our competitors, and market acceptance of these products and services. There can be no
assurance that we will successfully identify new product and services opportunities, develop and bring new products and
services to market in a timely manner, or achieve market acceptance of our products and services or that products, services
and technologies developed by others will not render our products, services or technologies obsolete or noncompetitive. The
products and technologies in our other product categories and key priority and growth areas may not prove to have the market
success we anticipate, and we may not successfully identify and invest in other emerging or new products and services.
Changes in industry structure and market conditions could lead to charges related to discontinuances of certain of our
products or businesses, asset impairments and workforce reductions or restructurings.
In response to changes in industry and market conditions, we may be required to strategically realign our resources and to
consider restructuring, disposing of, or otherwise exiting businesses. Any resource realignment, or decision to limit investment
in or dispose of or otherwise exit businesses, may result in the recording of special charges, such as inventory and technology-
related write-offs, workforce reduction or restructuring costs, charges relating to consolidation of excess facilities, or claims
from third parties who were resellers or users of discontinued products. Our estimates with respect to the useful life or ultimate
recoverability of our carrying basis of assets, including purchased intangible assets, could change as a result of such assessments
and decisions. Although in certain instances our supply agreements allow us the option to cancel, reschedule, and adjust our
requirements based on our business needs prior to firm orders being placed, our loss contingencies may include liabilities for
contracts that we cannot cancel with contract manufacturers and suppliers. Further, our estimates relating to the liabilities for
excess facilities are affected by changes in real estate market conditions. Additionally, we are required to perform goodwill
impairment tests on an annual basis and between annual tests in certain circumstances, and future goodwill impairment tests
may result in a charge to earnings. We initiated a restructuring plan in the second quarter of fiscal 2023, for which we expect
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such plan to be substantially completed by the end of the first quarter of fiscal 2024. Our business may not be more efficient or
effective than prior to implementation of the plan. Our restructuring activities, including any related charges and the impact of the
related headcount restructurings, could have a material adverse effect on our business, operating results, and financial condition.
Over the long term we intend to invest in engineering, sales, service and marketing activities, and in key priority and growth
areas, and these investments may achieve delayed, or lower than expected, benefits which could harm our operating results.
While we intend to focus on managing our costs and expenses, over the long term, we also intend to invest in personnel and
other resources related to our engineering, sales, service and marketing functions as we realign and dedicate resources on key
priority and growth areas. We also intend to focus on maintaining leadership in core networking and services. We are likely
to recognize the costs associated with these investments earlier than some of the anticipated benefits, and the return on these
investments may be lower, or may develop more slowly, than we expect. If we do not achieve the benefits anticipated from these
investments (including if our selection of areas for investment does not play out as we expect), or if the achievement of these
benefits is delayed, our operating results may be adversely affected.
We have made and expect to continue to make acquisitions that could disrupt our operations and harm our operating results.
Our growth depends upon market growth, our ability to enhance our existing products, and our ability to introduce new products
on a timely basis. We intend to continue to address the need to develop new products and enhance existing products through
acquisitions of other companies, product lines, technologies, and personnel. Acquisitions involve numerous risks, including
the following:
• Difficulties or delays in integrating the operations (including IT security), systems, technologies, products, and
personnel of the acquired companies, particularly with companies that have large and widespread operations and/or
complex products
• Diversion of management’s attention from normal daily operations of the business and the challenges of managing
larger and more widespread operations resulting from acquisitions
• Potential difficulties in completing projects associated with in-process research and development intangibles
• Difficulties in entering markets in which we have no or limited direct prior experience and where competitors in such
markets have stronger market positions
• Initial dependence on unfamiliar supply chains or relatively small supply partners
• Insufficient revenue to offset increased expenses associated with acquisitions
• The potential loss of key employees, customers, distributors, vendors and other business partners of the companies
we acquire following and continuing after announcement of acquisition plans
Acquisitions may also cause us to:
• Issue common stock that would dilute our current stockholders’ percentage ownership
• Use a substantial portion of our cash resources, or incur debt
• Significantly increase our interest expense, leverage and debt service requirements if we incur additional debt to pay
for an acquisition
• Assume liabilities
• Record goodwill and intangible assets that are subject to impairment testing on a regular basis and potential periodic
impairment charges
• Incur amortization expenses related to certain intangible assets
• Incur tax expenses related to the effect of acquisitions on our legal structure
• Incur large write-offs and restructuring and other related expenses
• Become subject to intellectual property or other litigation
Mergers and acquisitions of high-technology companies are inherently risky and subject to many factors outside of our control,
and no assurance can be given that our previous or future acquisitions will be successful and will not materially adversely
affect our business, operating results, or financial condition. Failure to manage and successfully integrate acquisitions could
materially harm our business and operating results. Prior acquisitions have resulted in a wide range of outcomes, from successful
introduction of new products and technologies to a failure to do so. Even when an acquired company has already developed and
marketed products, there can be no assurance that product enhancements will be made in a timely fashion or that pre-acquisition
due diligence will have identified all possible issues that might arise with respect to such products. In addition, our effective
tax rate for future periods is uncertain and could be impacted by mergers and acquisitions. Risks related to new product
development also apply to acquisitions.
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Entrance into new or developing markets exposes us to additional competition and will likely increase demands on our
service and support operations.
As we focus on new market opportunities and key priority and growth areas, we compete with large telecommunications and other
equipment suppliers as well as startup companies. Several of our competitors may have greater resources, including technical
and engineering resources, than we do. Additionally, as customers in these markets complete infrastructure deployments, they
may require greater levels of service, support, and financing than we have provided in the past, especially in emerging countries.
Demand for these types of service, support, or financing contracts may increase in the future. There can be no assurance that
we can provide products, service, support, and financing to effectively compete for these market opportunities. Further, entry
into other markets has subjected and will subject us to additional risks, particularly to those markets, including the effects of
general market conditions and reduced consumer confidence. For example, as we add direct selling capabilities globally to meet
changing customer demands, we will face increased legal and regulatory requirements.
Product quality problems could lead to reduced revenue, gross margins, and net income.
We produce highly complex products that incorporate leading-edge technology, including both hardware and software. Software
typically contains bugs that can unexpectedly interfere with expected operations. There can be no assurance that our pre-shipment
testing programs will be adequate to detect all defects, either ones in individual products or ones that could affect numerous
shipments, which might interfere with customer satisfaction, reduce sales opportunities, or affect gross margins. From time to
time, we have had to replace certain components and provide remediation in response to the discovery of defects or bugs in
products that we had shipped. There can be no assurance that such remediation, depending on the product involved, would not
have a material impact. An inability to cure a product defect could result in the failure of a product line, temporary or permanent
withdrawal from a product or market, damage to our reputation, inventory costs, or product reengineering expenses, any of
which could have a material impact on our revenue, margins, and net income.
Due to the global nature of our operations, political or economic changes or other factors in a specific country or region
could harm our operating results and financial condition.
We conduct significant sales and customer support operations in countries around the world. As such, our growth depends in
part on our increasing sales into emerging countries. We also depend on non-U.S. operations of our contract manufacturers,
component suppliers and distribution partners. Our business in emerging countries in the aggregate experienced a decline in
orders in certain prior periods. We continue to assess the sustainability of any improvements in our business in these countries
and there can be no assurance that our investments in these countries will be successful. Our future results could be materially
adversely affected by a variety of political, economic or other factors relating to our operations inside and outside the United
States, any or all of which could have a material adverse effect on our operating results and financial condition, including the
following: impacts from global central bank monetary policy; issues related to the political relationship between the United
States and other countries that can affect regulatory matters, affect the willingness of customers in those countries to purchase
products from companies headquartered in the United States or affect our ability to procure components if a government body
were to deny us access to those components; government-related disruptions or shutdowns; the challenging and inconsistent
global macroeconomic environment; foreign currency exchange rates; geopolitical tensions (including China-Taiwan relations);
political or social unrest; economic instability or weakness or natural disasters in a specific country or region, including
economic challenges in China and global economic ramifications of Chinese economic difficulties; environmental protection
regulations (including new laws and regulations related to climate change); trade protection measures such as tariffs, and other
legal and regulatory requirements, some of which may affect our ability to import our products to, export our products from,
or sell our products in various countries or affect our ability to procure components; political considerations that affect service
provider and government spending patterns; health or similar issues, including pandemics or epidemics; difficulties in staffing
and managing international operations; and adverse tax consequences, including imposition of withholding or other taxes on
our global operations.
Issues related to the development and use of artificial intelligence (AI) could give rise to legal and/or regulatory action,
damage our reputation or otherwise materially harm of our business.
We currently incorporate AI technology in certain of our products and services and in our business operations. Our research
and development of such technology remains ongoing. AI presents risks, challenges, and unintended consequences that could
affect our and our customers’ adoption and use of this technology. AI algorithms and training methodologies may be flawed.
Additionally, AI technologies are complex and rapidly evolving, and we face significant competition in the market and from
other companies regarding such technologies. While we aim to develop and use AI responsibly and attempt to identify and
mitigate ethical and legal issues presented by its use, we may be unsuccessful in identifying or resolving issues before they
arise. AI-related issues, deficiencies and/or failures could (i) give rise to legal and/or regulatory action, including with respect to
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proposed legislation regulating AI in jurisdictions such as the European Union and others, and as a result of new applications of
existing data protection, privacy, intellectual property, and other laws; (ii) damage our reputation; or (iii) otherwise materially
harm our business.
We are exposed to the credit risk of some of our customers and to credit exposures in weakened markets, which could result
in material losses.
Most of our sales are on an open credit basis, with typical payment terms of 30 days in the United States, and, because of
local customs or conditions, longer in some markets outside the United States. Beyond our open credit arrangements, we have
also experienced demands for customer financing and facilitation of leasing arrangements. Our loan financing arrangements
may include not only financing the acquisition of our products and services but also providing additional funds for other costs
associated with network installation and integration of our products and services. Our exposure to the credit risks relating to our
financing activities may increase if our customers are adversely affected by a global economic downturn or periods of economic
uncertainty. There can be no assurance that programs we have in place to monitor and mitigate credit risks will be effective.
In the past, there have been significant bankruptcies among customers both on open credit and with loan or lease financing
arrangements, particularly among Internet businesses and service providers, causing us to incur economic or financial losses.
There can be no assurance that additional losses will not be incurred. Although these losses have not been material to date,
future losses, if incurred, could harm our business and have a material adverse effect on our operating results and financial
condition. Additionally, to the degree that turmoil in the credit markets makes it more difficult for some customers to obtain
financing, those customers’ ability to pay could be adversely impacted, which in turn could have a material adverse impact on
our business, operating results, and financial condition.
We are exposed to fluctuations in the market values of our portfolio investments and in interest rates; impairment of our
investments could harm our earnings.
We maintain an investment portfolio of various holdings, types, and maturities. Our portfolio includes available-for-sale debt
investments and equity investments, the values of which are subject to market price volatility. If such investments suffer market
price declines, as we experienced with some of our investments in the past, we may recognize in earnings the decline in the fair
value of our investments below their cost basis. Our privately held investments are subject to risk of loss of investment capital.
These investments are inherently risky because the markets for the technologies or products they have under development are
typically in the early stages and may never materialize. We could lose our entire investment in these companies. For information
regarding the market risks associated with the fair value of portfolio investments and interest rates, refer to the section titled
“Quantitative and Qualitative Disclosures About Market Risk.”
We are exposed to fluctuations in currency exchange rates that could negatively impact our financial results and cash flows.
Because a significant portion of our business is conducted outside the United States, we face exposure to adverse movements in
foreign currency exchange rates, including emerging market currencies which can have extreme currency volatility. An increase
in the value of the dollar could increase the real cost to our customers of our products in those markets outside the United
States where we sell in dollars and a weakened dollar could increase the cost of local operating expenses and procurement of
raw materials to the extent that we must purchase components in foreign currencies. These exposures may change over time as
business practices evolve, and they could have a material adverse impact on our financial results and cash flows.
Failure to retain and recruit key personnel would harm our ability to meet key objectives.
Our success has always depended in large part on our ability to attract and retain highly skilled technical, managerial, sales, and
marketing personnel. Competition for such personnel is intense, especially in the Silicon Valley area of Northern California and
other major United States locations. Stock incentive plans are designed to reward employees for their long-term contributions
and provide incentives for them to remain with us. Volatility or lack of positive performance in our stock price or equity
incentive awards, or changes to our overall compensation program, including our stock incentive program, resulting from the
management of share dilution and share-based compensation expense or otherwise, may also adversely affect our ability to
retain key employees. As a result of one or more of these factors, we may increase our hiring in geographic areas outside the
United States, which could subject us to additional geopolitical and exchange rate risk. The loss of services of any of our key
personnel; the inability to retain and attract qualified personnel in the future; or delays in hiring required personnel, particularly
in engineering and sales fields, could make it difficult to meet key objectives, such as timely and effective product introductions.
In addition, companies in our industry whose employees accept positions with competitors frequently claim that competitors
have engaged in improper hiring practices. We have received these claims in the past and may receive additional claims to this
effect in the future.
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Adverse resolution of litigation or governmental investigations may harm our operating results or financial condition.
We are a party to lawsuits in the normal course of our business. Additionally, in connection with the Russia and Ukraine war and
our decision to stop business operations and orderly wind down our business in Russia, there are existing claims and lawsuits
in Russia, and the potential for future claims and lawsuits in Russia and/or Belarus, related to such decision and related trade
restrictions and sanctions. In the event of an unfavorable resolution of any of these lawsuits, the potential outcome could include
the seizure of our assets in Russia and/or Belarus, which, collectively, represents less than 0.1% of our total assets at the end of
fiscal 2023. Litigation can be costly, lengthy, and disruptive to normal business operations. Moreover, the results of complex
legal proceedings are difficult to predict. An unfavorable resolution of lawsuits or governmental investigations could have a
material adverse effect on our business, operating results, or financial condition. For additional information regarding certain of
the matters in which we are involved, see Note 14 to the Consolidated Financial Statements, subsection (f) “Legal Proceedings.”
Our operating results may be adversely affected and damage to our reputation may occur due to production and sale of
counterfeit versions of our products.
As is the case with leading products around the world, our products are subject to efforts by third parties to produce counterfeit
versions of our products. While we work diligently with law enforcement authorities in various countries to block the manufacture
of counterfeit goods and to interdict their sale, and to detect counterfeit products in customer networks, and have succeeded in
prosecuting counterfeiters and their distributors, resulting in fines, imprisonment and restitution to us, there can be no guarantee
that such efforts will succeed. While counterfeiters often aim their sales at customers who might not have otherwise purchased
our products due to lack of verifiability of origin and service, such counterfeit sales, to the extent they replace otherwise
legitimate sales, could adversely affect our operating results.
Changes in our provision for income taxes or adverse outcomes resulting from examination of our income tax returns could
adversely affect our results.
Our provision for income taxes is subject to volatility and could be adversely affected 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, global intangible low-tax income
and base erosion and anti-abuse 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 attribute 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 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. Further, 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 effect on our operating results
and financial condition.
Our business and operations are especially subject to the risks of earthquakes, floods, and other natural catastrophic events
(including as a result of global climate change).
Our corporate headquarters, including certain of our research and development operations are located in the Silicon Valley area
of Northern California, a region known for seismic activity. Additionally, a certain number of our facilities are located near
rivers that have experienced flooding in the past. Also certain of our customers, suppliers and logistics centers are located in
regions that have been or may be affected by earthquake, tsunami and flooding or other weather-related activity which in the
past has disrupted, and in the future could disrupt, the flow of supply chain components and delivery of products. In addition,
global climate change may result in significant natural disasters occurring more frequently and/or with greater intensity, such
as drought, wildfires, storms, sea-level rise, changing precipitation, and flooding. We have not to date experienced a material
event as a result of these kinds of natural disasters; however, the occurrence of any such event in the future could have a material
adverse impact on our business, operating results, and financial condition.
25
Terrorism, war, and other events may harm our business, operating results and financial condition.
The continued threat of terrorism and heightened security and military action in response thereto, or any other current or future
acts of terrorism, war (such as the on-going Russia and Ukraine war), and other events (such as economic sanctions and trade
restrictions, including those related to the on-going Russia and Ukraine war) may cause further disruptions to the economies
of the United States and other countries and create further uncertainties or could otherwise negatively impact our business,
operating results, and financial condition. Likewise, events such as loss of infrastructure and utilities services such as energy,
transportation, or telecommunications could have similar negative impacts. To the extent that such disruptions or uncertainties
result in delays or cancellations of customer orders or the manufacture or shipment of our products, our business, operating
results, and financial condition could be materially and adversely affected.
There can be no assurance that our operating results and financial condition will not be adversely affected by our incurrence
of debt.
As of the end of fiscal 2023, we have senior unsecured notes outstanding in an aggregate principal amount of $8.5 billion that
mature at specific dates from calendar year 2023 through 2040. We have also established a commercial paper program under
which we may issue short-term, unsecured commercial paper notes on a private placement basis up to a maximum aggregate
amount outstanding at any time of $10.0 billion. We had no commercial paper notes outstanding under this program as of July 29,
2023. There can be no assurance that our incurrence of this debt or any future debt will be a better means of providing liquidity
to us than would our use of our existing cash resources. Further, we cannot be assured that our maintenance of this indebtedness
or incurrence of future indebtedness will not adversely affect our operating results or financial condition. In addition, changes
by any rating agency to our credit rating can negatively impact the value and liquidity of both our debt and equity securities, as
well as the terms upon which we may borrow under our commercial paper program or future debt issuances.
Our reputation and/or business could be negatively impacted by ESG matters and/or our reporting of such matters.
There is an increasing focus from regulators, certain investors, and other stakeholders concerning environmental, social, and
governance (“ESG”) matters, both in the United States and internationally. We communicate certain ESG-related initiatives, goals,
and/or commitments regarding environmental matters, diversity and inclusion, responsible sourcing and social investments, and
other matters, in our annual Purpose Report, on our website, in our filings with the SEC, and elsewhere. These initiatives, goals,
or commitments could be difficult to achieve and costly to implement. For example, in September 2021, we announced our goal
to achieve net zero across all scopes of greenhouse gas emissions by 2040, the achievement of which relies, in large part, on the
accuracy of our estimates and assumptions around the enhanced power efficiency of our products, the adoption of renewable
energy at customer and supplier sites, and the adoption of certain of our products and services by our customers. We could fail
to achieve, or be perceived to fail to achieve, our 2040 net zero goal or other ESG-related initiatives, goals, or commitments. In
addition, we could be criticized for the timing, scope or nature of these initiatives, goals, or commitments, or for any revisions
to them. To the extent that our required and voluntary disclosures about ESG matters increase, we could be criticized for the
accuracy, adequacy, or completeness of such disclosures. Our actual or perceived failure to achieve our ESG-related initiatives,
goals, or commitments could negatively impact our reputation or otherwise materially harm our business.
Risks Related to Intellectual Property
Our proprietary rights may prove difficult to enforce.
We generally rely on patents, copyrights, trademarks, and trade secret laws to establish and maintain proprietary rights in our
technology and products. Although we have been issued numerous patents and other patent applications are currently pending,
there can be no assurance that any of these patents or other proprietary rights will not be challenged, invalidated, or circumvented
or that our rights will, in fact, provide competitive advantages to us. Furthermore, many key aspects of networking technology
are governed by industrywide standards, which are usable by all market entrants. In addition, there can be no assurance that
patents will be issued from pending applications or that claims allowed on any patents will be sufficiently broad to protect our
technology. In addition, the laws of some foreign countries may not protect our proprietary rights to the same extent as do the
laws of the United States. The outcome of any actions taken in these foreign countries may be different than if such actions were
determined under the laws of the United States. Although we are not dependent on any individual patents or group of patents for
particular segments of the business for which we compete, if we are unable to protect our proprietary rights to the totality of the
features (including aspects of products protected other than by patent rights) in a market, we may find ourselves at a competitive
disadvantage to others who need not incur the substantial expense, time, and effort required to create innovative products that
have enabled us to be successful.
26
We may be found to infringe on intellectual property rights of others.
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. Because of the existence of a large number of patents in the networking field, the
secrecy of some pending patents, and the rapid rate of issuance of new patents, it is not economically practical or even possible
to determine in advance whether a product or any of its components infringes or will infringe on the patent rights of others.
The asserted claims and/or initiated litigation can include claims against us or our manufacturers, suppliers, or customers,
alleging infringement of their proprietary rights with respect to our existing or future products or components of those products.
Regardless of the merit of these claims, they can be time-consuming, result in costly litigation and diversion of technical and
management personnel, or require us to develop a non-infringing technology or enter into license agreements. Where claims are
made by customers, resistance even to unmeritorious claims could damage customer relationships. There can be no assurance
that licenses will be available on acceptable terms and conditions, if at all, or that our indemnification by our suppliers will be
adequate to cover our costs if a claim were brought directly against us or our customers. Furthermore, because of the potential
for high court awards that are not necessarily predictable, it is not unusual to find even arguably unmeritorious claims settled for
significant amounts. If any infringement or other intellectual property claim made against us by any third party is successful,
if we are required to indemnify a customer with respect to a claim against the customer, 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. For additional information regarding our indemnification
obligations, see Note 14(e) to the Consolidated Financial Statements contained in this report. Our exposure to risks associated
with the use of intellectual property may be increased as a result of acquisitions, as we have a lower level of visibility into the
development process with respect to such technology or the care taken to safeguard against infringement risks. Further, in the
past, third parties have made infringement and similar claims after we have acquired technology that had not been asserted prior
to our acquisition.
We rely on the availability of third-party licenses.
Many of our products are designed to include software or other intellectual property licensed from third parties. It may be
necessary in the future to seek or renew licenses relating to various aspects of these products. There can be no assurance that
the necessary licenses would be available on acceptable terms, if at all. The inability to obtain certain licenses or other rights
or to obtain such licenses or rights on favorable terms, or the need to engage in litigation regarding these matters, could have a
material adverse effect on our business, operating results, and financial condition. Moreover, the inclusion in our products of
software or other intellectual property licensed from third parties on a nonexclusive basis could limit our ability to protect our
proprietary rights in our products.
Risks Related to Cybersecurity, Privacy, and Regulatory Requirements
Cyber attacks, data breaches or other incidents may disrupt our operations, harm our operating results and financial
condition, and damage our reputation or otherwise materially harm our business; and cyber attacks, data breaches or other
incidents on our customers’ or third-party providers’ networks, or in cloud-based services provided to, by, or enabled by us,
could result in claims of liability against us, give rise to legal and/or regulatory action, damage our reputation or otherwise
materially harm our business.
We experience cyber attacks and other attempts to gain unauthorized access to our products, services, and IT environment on
a regular basis, and we anticipate continuing to be subject to such attempts as cyber attacks become increasingly sophisticated
and more difficult to predict and protect against. Despite our implementation of security measures, (i) our products and services,
and (ii) the servers, data centers, and cloud-based solutions on which our and third-party data is stored or processed (including
servers, data centers and cloud-based solutions operated by third parties on which we rely) (collectively, our “IT environment”),
are vulnerable to cyber attacks, data breaches, malware, inadvertent error, disruptions, tampering or other theft or misuse,
including by employees, contingent workers, malicious actors, or nation-states or their agents (which cyber attack or related
activity may intensify during periods of diplomatic or armed conflict). Further, a cyber attack or other incident could go
undetected and persist in our environments for extended periods. Cyber-related events have caused, and in the future could
result in, compromise to, or the disruption of access to, the operation of our products, services, and IT environment or those of
our customers or third-party providers we rely on, or result in confidential information stored on our systems, our customers’
systems, or other third-party systems being improperly accessed, processed, disclosed now or in the future, or be lost or stolen.
For example, in December 2021, multiple vulnerabilities were reported for the widely used Java logging library, Apache Log4j.
We reviewed the use of this library within our products and services, its use in our enterprise IT environment, and its use by
our third-party providers, and have taken steps to mitigate these vulnerabilities, including by providing security updates for
affected products to our customers. We have not to date experienced a material event related to a cybersecurity matter; however,
27
the occurrence of any such event in the future could subject us to liability to our customers, data subjects, suppliers, business
partners, employees, and others, give rise to legal and/or regulatory action, could damage our reputation or could otherwise
materially harm our business, any of which could have a material adverse effect on our business, operating results, and financial
condition. Efforts to limit the ability of malicious actors to disrupt the operations of the Internet or undermine our own security
efforts are costly to implement and may not be successful. Breaches of security in our customers’ or third-party providers’
networks, in third-party products we use, or in cloud-based services provided to, by, or enabled by us, regardless of whether the
breach is attributable to a vulnerability in our products or services, or a failure to maintain the digital security infrastructure
or security tools that protect the integrity of our products, services, and IT environment, could, in each case, result in claims of
liability against us, damage our reputation or otherwise materially harm our business.
Vulnerabilities and critical security defects, prioritization decisions regarding remedying vulnerabilities or security defects,
failure of third-party providers to remedy vulnerabilities or security defects, or customers not deploying security updates
in a timely manner or deciding not to upgrade products, services or solutions could result in claims of liability against us,
damage our reputation, or otherwise materially harm our business.
The products and services we sell to customers, and our cloud-based solutions, inevitably contain vulnerabilities or security
defects which have not been remedied and cannot be disclosed without compromising security. We also make prioritization
decisions in determining which vulnerabilities or security defects to fix and the timing of these fixes. Customers may also need
to test security updates before they can be deployed which can delay implementation. When customers do not deploy security
updates in a timely manner, or decide not to upgrade to the latest versions of our products, services or cloud-based solutions
containing the security update, they may be left vulnerable. In addition, we rely on third-party providers of software and cloud-
based services on which our and third-party data is stored or processed, and we cannot control the timing at which third-party
providers remedy vulnerabilities, which could leave us vulnerable. Vulnerabilities and security defects, prioritization errors in
remedying vulnerabilities or security defects, failure of third-party providers to remedy vulnerabilities or security defects, or
customers not deploying security updates in a timely manner or deciding not to upgrade products, services or solutions could
result in claims of liability against us, damage our reputation or otherwise materially harm our business.
Our actual or perceived failure to adequately protect personal data could result in claims of liability against us, damage our
reputation or otherwise materially harm our business.
Global privacy and data protection-related laws and regulations are evolving, extensive, and complex. Compliance with these
laws and regulations is difficult and costly. In addition, evolving legal requirements restricting or controlling the collection,
processing, or cross-border transmission of data, including for regulation of cloud-based services, could materially affect our
customers’ ability to use, and our ability to sell, our products and services. The interpretation and application of these laws in
some instances is uncertain, and our legal and regulatory obligations are subject to frequent changes. For example, the European
Union’s (“EU”) General Data Protection Regulation (“GDPR”) applies to our activities conducted from an establishment in the
EU or related to products and services offered in the EU and imposes a range of compliance obligations regarding the handling
of personal data. Additionally, we are subject to California’s Consumer Privacy Act and other laws, regulations and obligations
that relate to the handling of personal data. Our actual or perceived failure to comply with applicable laws and regulations or
other obligations relating to personal data, or to protect personal data from unauthorized access, use, or other processing, could
subject us to liability to our customers, data subjects, suppliers, business partners, employees, and others, give rise to legal and/
or regulatory action, could damage our reputation or could otherwise materially harm our business, any of which could have a
material adverse effect on our business, operating results, and financial condition.
Our business, operating results and financial condition could be materially harmed by evolving regulatory uncertainty or
obligations applicable to our products and services.
Changes in regulatory requirements applicable to the industries and sectors in which we operate, in the United States and in
other countries, could materially affect the sales of our products and services. In particular, economic sanctions and changes to
export and import control requirements have impacted and may continue to impact our ability to sell and support our products
and services in certain jurisdictions. In addition, changes in telecommunications regulations could impact our service provider
customers’ purchase of our products and services, and they could also impact sales of our own regulated offerings. Additional
areas of uncertainty that could impact sales of our products and services include laws, regulations, or customer procurement
requirements related to encryption technology, data, artificial intelligence, privacy, cybersecurity, environmental sustainability
(including climate change), human rights, product certification, product accessibility, country of origin, and national security
controls applicable to our supply chain. Changes in regulatory requirements in any of these areas or our actual or perceived
failure to comply with applicable laws and regulations or other obligations relating to these areas could have a material adverse
effect on our business, operating results, and financial condition.
28
Risks Related to Ownership of Our Stock
Our stock price may be volatile.
Historically, our common stock has experienced substantial price volatility, particularly as a result of variations between our
actual financial results and the published expectations of analysts and as a result of announcements by our competitors and
us. Furthermore, speculation in the press or investment community about our strategic position, financial condition, results of
operations, business, security of our products, or significant transactions can cause changes in our stock price. In addition, the
stock market has experienced extreme price and volume fluctuations that have affected the market price of many technology
companies, in particular, and that have often been unrelated to the operating performance of these companies. These factors,
as well as general economic and political conditions and the announcement of proposed and completed acquisitions or other
significant transactions, or any difficulties associated with such transactions, by us or our current or potential competitors,
may materially adversely affect the market price of our common stock in the future. Additionally, volatility, lack of positive
performance in our stock price or changes to our overall compensation program, including our stock incentive program, may
adversely affect our ability to retain key employees, virtually all of whom are compensated, in part, based on the performance
of our stock price.
29
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Our corporate headquarters are located at an owned site in San Jose, California, in the United States of America. The locations
of our headquarters by geographic segment are as follows:
Americas EMEA APJC
San Jose, California, USA Amsterdam, Netherlands Singapore
In addition to our headquarters site, we own additional sites in the United States, which include facilities in the surrounding
areas of San Jose, California; Research Triangle Park, North Carolina; and Richardson, Texas. We also own land for expansion
in some of these locations. In addition, we lease office space in many U.S. locations.
Outside the United States our operations are conducted primarily in leased sites. Other significant sites (in addition to the two
non-U.S. headquarters locations) are located in Australia, Belgium, Canada, China, Germany, India, Israel, Japan, Poland, and
the United Kingdom.
We believe that our existing facilities, including both owned and leased, are in good condition and suitable for the conduct of
our business.
Item 3. Legal Proceedings
For a description of pending legal proceedings in which we are involved, see Note 14 “Commitments and Contingencies - (f)
Legal Proceedings” of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K,
which is incorporated herein by reference.
Item 4. Mine Safety Disclosures
Not applicable.
30
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of
Equity Securities
(a) Cisco common stock is traded on the Nasdaq Global Select Market under the symbol CSCO. There were 33,809 registered
stockholders as of September 1, 2023.
(b) None.
(c) Issuer purchases of equity securities (in millions, except per-share amounts):
Period
Tot a l
Number of
Shares
Purchased
Average Price Paid
per Share
Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs
Approximate Dollar
Value of Shares
That May Yet Be
Purchased
Under the Plans or
Programs
April 30, 2023 to May 27, 2023 . . . . . . . . . . . . . . . . . . . 5 $ 47.88 5 $ 11,946
May 28, 2023 to June 24, 2023 . . . . . . . . . . . . . . . . . . . . 9 $ 50.45 9 $ 11,513
June 25, 2023 to July 29, 2023 . . . . . . . . . . . . . . . . . . . . 11 $ 51.69 11 $ 10,934
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 $ 50.49 25
On September 13, 2001, we announced that our Board of Directors had authorized a stock repurchase program. As of July
29, 2023, the remaining authorized amount for stock repurchases under this program is approximately $10.9 billion with no
termination date.
For the majority of restricted stock units granted, the number of shares issued on the date the restricted stock units vest is net of
shares withheld to meet applicable tax withholding requirements. Although these withheld shares are not issued or considered
common stock repurchases under our stock repurchase program and therefore are not included in the preceding table, they are
treated as common stock repurchases in our financial statements as they reduce the number of shares that would have been
issued upon vesting (see Note 15 to the Consolidated Financial Statements).
31
Stock Performance Graph
The information contained in this Stock Performance Graph section shall not be deemed to be “soliciting material” or “ filed”
or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), except to the extent that Cisco specifically incorporates it by reference into a
document filed under the Securities Act of 1933, as amended, or the Exchange Act.
The following graph shows a five-year comparison of the cumulative total stockholder return on Cisco common stock with the
cumulative total returns of the S&P 500 Index, and the S&P Information Technology Index. The graph tracks the performance
of a $100 investment in the Company’s common stock and in each of the indexes (with the reinvestment of all dividends) on the
date specified. Stockholder returns over the indicated period are based on historical data and should not be considered indicative
of future stockholder returns.
Comparison of 5-Year Cumulative Total Return Among Cisco Systems, Inc.,
the S&P 500 Index, and the S&P Information Technology Index
$0
$50
$100
$150
$200
$250
$300
July 2023
Cisco Systems, Inc.
S&P 500 S&P Information Technology
July 2018 July 2019 July 2020 July 2021 July 2022
July 2018 July 2019 July 2020 July 2021 July 2022 July 2023
Cisco Systems, Inc. . . . . . . . . . . . . . . . . . . $ 100.00 $ 136.47 $ 115.60 $ 142.33 $ 120.02 $ 142.29
S&P 500 . . . . . . . . . . . . . . . . . . . . . . . . . . $ 100.00 $ 109.53 $ 118.72 $ 164.83 $ 157.18 $ 177.38
S&P Information Technology . . . . . . . . . $ 100.00 $ 116.56 $ 150.84 $ 221.77 $ 209.55 $ 265.46
Item 6. [Reserved]
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Annual Report on Form 10-K, including this Management’s Discussion and Analysis of Financial Condition and Results
of Operations, contains forward-looking statements regarding future events and our future results that are subject to the safe
harbors created under the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934,
as amended (the “Exchange Act”). All statements other than statements of historical facts are statements that could be deemed
forward-looking statements. These statements are based on current expectations, estimates, forecasts, and projections about
the industries in which we operate and the beliefs and assumptions of our management. Words such as “expects,” “anticipates,”
“targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “momentum,” “seeks,” “estimates,” “continues,” “endeavors,”
“strives,” “may,” variations of such words, and similar expressions are intended to identify such forward-looking statements. In
addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our
businesses, and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned
that these forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are
difficult to predict, including those under “Part I, Item 1A. Risk Factors,” and elsewhere herein. Therefore, actual results may
differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise
or update any forward-looking statements for any reason.
OVERVIEW
Cisco designs and sells a broad range of technologies that power the Internet. We are integrating our product portfolios across
networking, security, collaboration, applications and the cloud to create highly secure, intelligent platforms for our customers’
digital businesses. These platforms are designed to help our customers manage more users, devices and things connecting to
their networks. This will enable us to provide customers with a highly secure, intelligent platform for their digital business.
A summary of our results is as follows (in millions, except percentages and per-share amounts):
Three Months Ended Yea r s Ended
July 29,
2023
July 30,
2022 Variance
July 29,
2023
July 30,
2022 Variance
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,203 $ 13,102 16 % $ 56,998 $ 51,557 11%
Gross margin percentage . . . . . . . . . . . . . . . . . . . 64.1% 61.3% 2.8 pts 62.7% 62.5% 0.2 pts
Research and development . . . . . . . . . . . . . . . . . . $ 1,953 $ 1,682 16% $ 7,551 $ 6,774 11%
Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . $ 2,579 $ 2,349 10% $ 9,880 $ 9,085 9%
General and administrative . . . . . . . . . . . . . . . . . $ 690 $ 489 41% $ 2,478 $ 2,101 18%
Total R&D, sales and marketing, general and
administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,222 $ 4,520 16% $ 19,909 $ 17,960 11%
Total as a percentage of revenue . . . . . . . . . . . . . . 34.3% 34.5% (0.2) pts 34.9% 34.8% 0.1 pts
Restructuring and other charges included in
operating expenses . . . . . . . . . . . . . . . . . . . . . . . . $ 203 $ (2) NM $ 531 $ 6 NM
Operating income as a percentage of revenue . . . 28.0% 26.2% 1.8 pts 26.4% 27.1% (0.7) pts
Interest and other income (loss), net . . . . . . . . . . . $ 218 $ (18) NM $ 287 $ 508 (44)%
Income tax percentage . . . . . . . . . . . . . . . . . . . . . 11.5% 17.6% (6.1) pts 17.7% 18.4% (0.7) pts
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,958 $ 2,815 41% $ 12,613 $ 11,812 7%
Net income as a percentage of revenue . . . . . . . . 26.0% 21.5% 4.5 pts 22.1% 22.9% (0.8) pts
Earnings per share—diluted . . . . . . . . . . . . . . . . $ 0.97 $ 0.68 43% $ 3.07 $ 2.82 9%
Percentages may not recalculate due to rounding.
NM — Not meaningful
33
Fiscal 2023 Compared with Fiscal 2022
In fiscal 2023, we delivered strong results with growth in revenue and profitability. We remain focused on delivering innovation
across our technologies to assist our customers in executing on their digital transformations. In past periods, we took multiple
actions in order to mitigate component shortages and address supply constraints seen industry-wide. During fiscal 2023, we saw
an overall improvement of supply constraints and, as a result, we were able to increase the delivery of products to our customers,
which positively impacted product revenue. Further, we continued to make progress in the transition of our business model
delivering increased software and subscriptions. We remain focused on accelerating innovation across our portfolio, and we
believe that we have made continued progress on our strategic priorities. We continue to operate in a challenging macroeconomic
and highly competitive environment. While the overall environment remains uncertain, we continue to aggressively invest in
priority areas with the objective of driving profitable growth over the long term.
Total revenue increased by 11% compared with fiscal 2022. Within total revenue, product revenue increased by 13% and service
revenue increased by 2%. In fiscal 2023, total software revenue was $17.0 billion across all product areas and service, an increase
of 12%. Within total software revenue, subscription revenue increased 16%. Although product revenue increased, we saw a
decline in product demand in fiscal 2023. We believe this was due to customers absorbing recently shipped products, adjusting
to significant reductions in product lead times, and macroeconomic conditions.
Total gross margin increased by 0.2 percentage points. Product gross margin increased by 0.5 percentage points, largely driven
by favorable pricing and favorable product mix partially offset by negative impacts from productivity. As a percentage of
revenue, research and development, sales and marketing, and general and administrative expenses, collectively, increased by
0.1 percentage points. Operating income as a percentage of revenue decreased by 0.7 percentage points driven primarily by
restructuring and other charges of $531 million in fiscal 2023. Diluted earnings per share increased by 9%, driven by an increase
of 7% in net income and a decrease in diluted share count of 87 million shares.
In terms of our geographic segments, revenue from the Americas increased by $3.6 billion, EMEA revenue increased by $1.4
billion and revenue in our APJC segment increased by $0.4 billion. We experienced product revenue growth across each of our
customer markets. From a product category perspective, total product revenue increased 13% year over year, driven by growth in
revenue in Secure, Agile Networks of 22%; Internet for the Future of 1%; End-to-End Security of 4% and Optimized Application
Experiences of 11%; partially offset by a product revenue decline in Collaboration of 9%.
34
Fourth Quarter Snapshot
For the fourth quarter of fiscal 2023, as compared with the fourth quarter of fiscal 2022, total revenue increased by 16%. Within
total revenue, product revenue increased by 20% and service revenue increased by 4%. With regard to our geographic segment
performance, on a year-over-year basis, revenue in Americas increased by 21%, EMEA increased by 10% and APJC by 7%. From
a product category perspective, we experienced product revenue growth in Secure, Agile Networks; Internet for the Future and
Optimized Application Experiences; partially offset by a decline in Collaboration. Product revenue in End-to-End Security was
flat. Total gross margin increased by 2.8 percentage points, driven by favorable pricing, favorable product mix and productivity
benefits driven by lower freight and logistics costs, component and other costs. As a percentage of revenue, research and
development, sales and marketing, and general and administrative expenses, collectively, decreased by 0.2 percentage points.
Operating income as a percentage of revenue increased by 1.8 percentage points. Diluted earnings per share increased by 43%,
driven by an increase in net income of 41% and a decrease in diluted share count of 44 million shares.
Strategy and Priorities
As our customers add billions of new connections to their enterprises, and as more applications move to a multicloud environment,
the network becomes even more critical. Our customers are navigating change at an unprecedented pace. In this dynamic
environment, we believe their priorities are to transform infrastructure, secure the enterprise, power hybrid work, reimagine
applications, and drive toward sustainability.
Our strategy is to securely connect everything. We are committed to driving a trusted customer experience, through our
innovation, solutions, choice, and people.
For a full discussion of our strategy and priorities, see “Item 1. Business.”
Other Key Financial Measures
The following is a summary of our other key financial measures for fiscal 2023 compared with fiscal 2022 (in millions):
Fiscal 2023 Fiscal 2022
Cash and cash equivalents and investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,146 $ 19,267
Cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,886 $ 13,226
Remaining performance obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,868 $ 31,539
Repurchases of common stock—stock repurchase program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,271 $ 7,734
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,302 $ 6,224
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,644 $ 2,568
35
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted
in the United States requires us to make judgments, assumptions, and estimates that affect the amounts reported in the
Consolidated Financial Statements and accompanying notes. Note 2 to the Consolidated Financial Statements describes the
significant accounting policies and methods used in the preparation of the Consolidated Financial Statements. The accounting
policies described below are significantly affected by critical accounting estimates. Such accounting policies require significant
judgments, assumptions, and estimates used in the preparation of the Consolidated Financial Statements, and actual results
could differ materially from the amounts reported based on these policies.
Revenue Recognition
We enter into contracts with customers that can include various combinations of products and services which are generally
distinct and accounted for as separate performance obligations. 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 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. 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 distributors 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.
36
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, which is a component of our cost of sales. 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.
We record a liability for firm, noncancelable, and unconditional purchase commitments with contract manufacturers and suppliers
for quantities in excess of our future demand forecasts consistent with the valuation of our excess and obsolete inventory.
Our provision for inventory was $307 million, $102 million, and $116 million in fiscal 2023, 2022, and 2021, respectively. The
provision for the liability related to purchase commitments with contract manufacturers and suppliers was $423 million, $227
million, and $76 million in fiscal 2023, 2022, and 2021, respectively. If there were to be a sudden and significant decrease in
demand for our products, if there were a higher incidence of inventory obsolescence because of rapidly changing technology and
customer requirements, or if supply constraints were to continue, 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 Constraints Impacts and Risks, see “—Results of Operations—Gross
Margin—Supply Constraints 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.
Goodwill and Purchased Intangible Asset Impairments
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 new accounting guidance for the fair value measurement of nonfinancial assets.
In response to changes in industry and market conditions, we could be required to strategically realign our resources and
consider restructuring, disposing of, or otherwise exiting businesses, which could result in an impairment of goodwill. There
was no impairment of goodwill in fiscal 2023, 2022, and 2021. For the annual impairment testing in fiscal 2023, the excess of
the fair value over the carrying value for each of our reporting units was $61.3 billion for the Americas, $73.8 billion for EMEA,
and $34.3 billion for APJC.
During the fourth quarter of fiscal 2023, we performed a sensitivity analysis for goodwill impairment with respect to each of
our respective reporting units and determined that a hypothetical 10% decline in the fair value of each reporting unit would not
result in an impairment of goodwill for any reporting unit.
The fair value of acquired technology and patents, as well as acquired technology under development, is determined at acquisition
date primarily using the income approach, which discounts expected future cash flows to present value. The discount rates used
in the present value calculations are typically derived from a weighted-average cost of capital analysis and then adjusted to
37
reflect risks inherent in the development lifecycle as appropriate. We consider the pricing model for products related to these
acquisitions to be standard within the high-technology communications industry, and the applicable discount rates represent the
rates that market participants would use for valuation of such intangible assets.
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 to the future undiscounted cash flows the asset 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 to be impaired, the amount of any impairment is measured as the
difference between the carrying value and the fair value of the impaired asset. Assumptions and estimates about future values
and remaining useful lives of our purchased intangible assets are complex and subjective. They can be affected by a variety of
factors, including external factors such as industry and economic trends, and internal factors such as changes in our business
strategy and our internal forecasts. Our ongoing consideration of all the factors described previously could result in impairment
charges in the future, which could adversely affect our net income.
Income Taxes
We are subject to income taxes in the United States and numerous foreign jurisdictions. Our effective tax rates differ from the
statutory rate, primarily due to the tax impact of state taxes, foreign operations, R&D tax credits, foreign-derived intangible
income deductions, global intangible low-taxed income, tax audit settlements, nondeductible compensation, and international
realignments. Our effective tax rate was 17.7%, 18.4%, and 20.1% in fiscal 2023, 2022, and 2021, 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 in light of
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, as well as 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. In the event that 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 laws, regulations, or interpretations thereof; by expiration of or lapses
in tax incentives; by transfer pricing adjustments, including the effect of acquisitions on our legal structure; by tax effects of
nondeductible compensation; by tax costs related to intercompany realignments; by changes in accounting principles; or by
changes in tax laws and regulations, treaties, or interpretations thereof, including changes to the taxation of earnings of our
foreign subsidiaries, the deductibility of expenses attributable to foreign income, and the foreign tax credit rules. Significant
judgment is required to determine the recognition and measurement attributes prescribed in the accounting guidance for
uncertainty in income taxes. The OECD, an international association comprised of 38 countries, including the United States,
has made changes and is contemplating additional changes to numerous long-standing tax principles. There can be no assurance
that these changes and any contemplated changes if finalized, once adopted by countries, will not have an adverse impact on our
provision for income taxes. As a result of certain of our ongoing employment and capital investment actions and commitments,
our income in certain countries was subject to reduced tax rates. Our failure to meet these commitments could adversely
impact our provision for income taxes. In addition, we are subject to the continuous examination of our income tax returns by
the IRS and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to
determine the adequacy of our provision for income taxes. There can be no assurance that the outcomes from these continuous
examinations will not have an adverse impact on our operating results and financial condition.
38
RESULTS OF OPERATIONS
A discussion regarding our financial condition and results of operations for fiscal 2023 compared to fiscal 2022 is presented
below. A discussion regarding our financial condition and results of operations for fiscal 2022 compared to fiscal 2021 can
be found under Item 7 in our Annual Report on Form 10-K for the fiscal year ended July 30, 2022, filed with the SEC on
September 8, 2022.
Revenue
The following table presents the breakdown of revenue between product and service (in millions, except percentages):
Yea r s Ended 2023 vs. 2022
July 29,
2023
July 30,
2022
July 31,
2021
Variance
in Dollars
Variance
in Percent
Revenue:
Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 43,142 $ 38,018 $ 36,014 $ 5,124 13 %
Percentage of revenue . . . . . . . . . . . . . . . . . . . . . 75.7% 73.7% 72.3%
Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,856 13,539 13,804 317 2%
Percentage of revenue . . . . . . . . . . . . . . . . . . . . . 24.3% 26.3% 27.7%
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 56,998 $ 51,557 $ 49,818 $ 5,441 11 %
We manage our business primarily on a geographic basis, organized into three geographic segments. Our revenue, which
includes product and service for each segment, is summarized in the following table (in millions, except percentages):
Yea r s Ended 2023 vs. 2022
July 29,
2023
July 30,
2022
July 31,
2021
Variance
in Dollars
Variance
in Percent
Revenue:
Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33,447 $ 29,814 $ 29,161 $ 3,633 12%
Percentage of revenue . . . . . . . . . . . . . . . . . . . . . 58.7% 57.8% 58.5%
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,135 13,715 12,951 1,420 10%
Percentage of revenue . . . . . . . . . . . . . . . . . . . . . 26.6% 26.6% 26.0%
APJC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,417 8,027 7,706 390 5%
Percentage of revenue . . . . . . . . . . . . . . . . . . . . . 14.8% 15.6% 15.5%
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 56,998 $ 51,557 $ 49,818 $ 5,441 11%
Amounts may not sum and percentages may not recalculate due to rounding.
Total revenue in fiscal 2023 increased by 11% compared with fiscal 2022. Product revenue increased by 13% and service
revenue increased by 2%. Our total revenue reflected growth across each of our geographic segments.
In addition to the impact of macroeconomic factors, including the IT spending environment and the level of spending by
government entities, revenue by segment in a particular period may be significantly impacted by the timing of revenue
recognition for complex transactions with multiple performance obligations. In addition, certain customers tend to make large
and sporadic purchases, and the revenue related to these transactions may also be affected by the timing of revenue recognition,
which in turn would impact the revenue of the relevant segment.
39
Product Revenue by Segment
The following table presents the breakdown of product revenue by segment (in millions, except percentages):
Yea r s Ended 2023 vs. 2022
July 29,
2023
July 30,
2022
July 31,
2021
Variance
in Dollars
Variance
in Percent
Product revenue:
Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,019 $ 21,620 $ 20,688 $ 3,399 16 %
Percentage of product revenue . . . . . . . . . . . . 58.0% 56.9% 57.5%
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,866 10,545 9,805 1,321 13 %
Percentage of product revenue . . . . . . . . . . . . 27.5% 27.7% 27.2%
APJC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,257 5,854 5,521 403 7 %
Percentage of product revenue . . . . . . . . . . . . 14.5% 15.4% 15.3%
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 43,142 $ 38,018 $ 36,014 $ 5,124 13 %
Amounts may not sum and percentages may not recalculate due to rounding.
Americas
Product revenue in the Americas segment increased by 16%. The product revenue increase was driven by growth across all
customer markets. From a country perspective, product revenue increased by 15% in the United States, 10% in Canada, 31% in
Mexico and 25% in Brazil.
EMEA
The increase in product revenue in the EMEA segment of 13% was driven by growth in the public sector, enterprise and
commercial markets, partially offset by a decline in the service provider market. From a country perspective, product revenue
increased by 16% in Germany, 4% in the United Kingdom and 19% in France.
APJC
Product revenue in the APJC segment increased by 7%, driven by growth in the commercial and public sector markets, partially
offset by a decline in the service provider market. Product revenue in the enterprise market was flat. From a country perspective,
product revenue increased by 62% in India, 13% in Australia and 8% in China, partially offset by a decline of 6% in Japan.
40
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):
Yea r s Ended 2023 vs. 2022
July 29,
2023
July 30,
2022
July 31,
2021
Variance
in Dollars
Variance
in Percent
Product revenue:
Secure, Agile Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,105 $ 23,831 $ 22,725 $ 5,274 22 %
Internet for the Future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,306 5,276 4,511 30 1 %
Collaboration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,052 4,472 4,727 (420) (9)%
End-to-End Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,859 3,699 3,382 160 4 %
Optimized Application Experiences . . . . . . . . . . . . . . . . . . . . 811 729 654 82 11 %
Other Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 11 15 (2) (15)%
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 43,142 $ 38,018 $ 36,014 $ 5,124 13 %
Amounts may not sum and percentages may not recalculate due to rounding. Amounts for prior fiscal years have been reclassified
to conform to the current fiscal year’s presentation.
Secure, Agile Networks
The Secure, Agile Networks product category represents our core networking offerings related to switching, enterprise routing,
wireless, and compute. Secure, Agile Networks revenue increased by 22%, or $5.3 billion, with growth across the portfolio
except servers. Revenue grew in both campus switching and data center switching. This was primarily driven by strong growth
in our Catalyst 9000 series, Nexus 9000 series and Meraki switching offerings. The increase in enterprise routing was primarily
driven by growth in our Catalyst 8000 routers, SD-WAN and IoT routing offerings. Wireless had strong double-digit growth
driven by our WiFi-6 products and Meraki offerings.
Internet for the Future
The Internet for the Future product category includes our routed optical networking, 5G, silicon and optics solutions. Revenue
in our Internet for the Future product category increased by 1%, or $30 million, primarily driven by growth in our Core routing
portfolio, including our Cisco 8000 series offerings. We also saw double-digit growth in the webscale provider market.
Collaboration
The Collaboration product category consists of our Meetings, Collaboration Devices, Calling, Contact Center and CPaaS
offerings. Revenue in our Collaboration product category decreased 9%, or $420 million, primarily driven by declines in
Collaboration Devices and Meetings, partially offset by growth in our Calling and Contact Center offerings.
End-to-End Security
Revenue in our End-to-End Security product category increased by 4%, or $160 million, primarily driven by growth in our
Unified Threat Management offerings and Zero Trust portfolio.
Optimized Application Experiences
The Optimized Application Experiences product category consists of our full stack observability and network assurance
offerings. Revenue in our Optimized Application Experiences product category increased 11%, or $82 million, driven by growth
across the portfolio, including double-digit growth in our ThousandEyes offerings.
41
Service Revenue by Segment
The following table presents the breakdown of service revenue by segment (in millions, except percentages):
Yea r s Ended 2023 vs. 2022
July 29,
2023
July 30,
2022
July 31,
2021
Variance
in Dollars
Variance
in Percent
Service revenue:
Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 8,427
$ 8,194 $ 8,472 $ 233 3%
Percentage of service revenue. . . . . . . . . . . . . . . .
60.8%
60.5% 61.4%
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,269
3,171 3,146 98 3%
Percentage of service revenue. . . . . . . . . . . . . . . .
23.6%
23.4% 22.8%
APJC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,160
2,173 2,186 (13) (1)%
Percentage of service revenue. . . . . . . . . . . . . . . .
15.6%
16.0% 15.8%
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 13,856
$ 13,539 $ 13,804 $ 317 2%
Amounts may not sum and percentages may not recalculate due to rounding.
Service revenue increased 2%, driven by growth in our solution support and maintenance business offerings, partially offset
by declines in our advisory services and software support offerings. Service revenue increased in the Americas and EMEA
segments, partially offset by a decline in the APJC segment.
Gross Margin
The following table presents the gross margin for products and services (in millions, except percentages):
AMOUNT PERCENTAGE
Yea r s Ended July 29, 2023 July 30, 2022 July 31, 2021 July 29, 2023 July 30, 2022 July 31, 2021
Gross margin:
Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,552 $ 23,204 $ 22,714 61.5% 61.0% 63.1%
Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,201 9,044 9,180 66.4% 66.8% 66.5%
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 35,753 $ 32,248 $ 31,894 62.7% 62.5% 64.0%
Product Gross Margin
The following table summarizes the key factors that contributed to the change in product gross margin percentage from fiscal
2022 to fiscal 2023:
Product
Gross Margin
Percentage
Fiscal 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61.0%
Productivity
(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2.5)%
Product pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.7%
Mix of products sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.8%
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.5%
Fiscal 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61.5%
(1)
Productivity includes overall manufacturing-related costs, such as component costs, warranty expense, provision for inventory, freight,
logistics, shipment volume, and other items not categorized elsewhere.
Product gross margin increased by 0.5 percentage points primarily driven by favorable pricing and product mix. The favorable
pricing was primarily driven by price increases implemented during fiscal 2022 and were recognized as we ship our products.
This was partially offset by negative impacts from productivity, largely driven by increased costs from component and other
costs, partially offset by lower freight and logistics costs. We implemented the price increases to partially offset increases in
commodity and other costs.
42
Supply Constraints Impacts and Risks
During fiscal 2023, we saw an overall improvement of supply constraints which have persisted industry-wide for multiple periods.
In past periods, we took multiple actions in order to mitigate component shortages and address significant supply constraints.
These supply constraints resulted in significant increased costs (i.e., component and other commodity costs, expedite fees,
etc.) which had, and may continue to have, a negative impact on our product gross margin and resulted in extended lead times
for us and our customers. The mitigating actions we took included: partnering with several of our key suppliers utilizing our
volume purchasing ability and extending supply coverage, including, in certain cases, revising supplier arrangements; paying
and committing to pay in the future significantly higher costs for certain components; modifying our product designs in order to
leverage alternate suppliers, where possible; and continually optimizing our inventory build and customer delivery plans, among
others. These mitigating actions have resulted in increased inventory balances, inventory purchase commitments, and inventory
deposits and prepayments compared to prior fiscal years, which, in turn, has increased our supply chain exposure, which could
result in negative impacts to our product gross margin in future periods, including material excess and obsolete charges, if
product demand significantly decreases for a sustained duration or we are unable to continue to mitigate the remaining supply
chain exposures. We believe these mitigating actions have helped us to optimize our access to critical components and meet
customer demand for our products as a result of the component shortages and significant supply constraints we saw in past
periods. While these mitigating actions have resulted in a decrease of our overall supply chain balances during fiscal 2023, these
balances continue to be higher as compared to prior fiscal years.
Service Gross Margin
Our service gross margin percentage decreased by 0.4 percentage points primarily due to higher headcount-related and delivery
costs, partially offset by higher sales volume and favorable mix of service offerings.
Our service gross margin normally experiences some fluctuations due to various factors such as the timing of contract initiations
in our renewals, our strategic investments in headcount, and the resources we deploy to support the overall service business.
Other factors include the mix of service offerings, as the gross margin from our advanced services is typically lower than the
gross margin from technical support services.
Gross Margin by Segment
The following table presents the total gross margin for each segment (in millions, except percentages):
AMOUNT PERCENTAGE
Yea r s Ended July 29, 2023 July 30, 2022 July 31, 2021 July 29, 2023 July 30, 2022 July 31, 2021
Gross margin:
Americas . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,350 $ 19,117 $ 19,499 63.8% 64.1% 66.9%
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,016 8,969 8,466 66.2% 65.4% 65.4%
APJC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,424 5,241 4,949 64.4% 65.3% 64.2%
Segment total . . . . . . . . . . . . . . . . . . . . . . . 36,788 33,326 32,914 64.5% 64.6% 66.1%
Unallocated corporate items
(1)
. . . . . . . . . . (1,035) (1,078) (1,020)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 35,753 $ 32,248 $ 31,894 62.7% 62.5% 64.0%
(1)
The unallocated corporate items include the effects of amortization and impairments of acquisition-related intangible assets, share-based
compensation expense, significant litigation settlements and other contingencies, charges related to asset impairments and restructurings,
and certain other charges. We do not allocate these items to the gross margin for each segment because management does not include such
information in measuring the performance of the operating segments.
Amounts may not sum and percentages may not recalculate due to rounding.
We experienced a gross margin percentage decrease in our Americas segment due to negative impacts from productivity,
partially offset by favorable pricing and favorable product mix.
Gross margin in our EMEA segment increased due to favorable pricing, and to a lesser extent, favorable product mix, partially
offset by negative impacts from productivity.
The APJC segment gross margin percentage decrease was due to negative impacts from productivity and pricing erosion,
partially offset by favorable product mix and higher service gross margin.
43
Research and Development (“R&D”), Sales and Marketing, and General and Administrative (“G&A”) Expenses
R&D, sales and marketing, and G&A expenses are summarized in the following table (in millions, except percentages):
Yea r s Ended 2023 vs. 2022
July 29, 2023 July 30, 2022 July 31, 2021
Variance in
Dollars
Variance in
Percent
Research and development . . . . . . . . . . . . . . . . $ 7,551 $ 6,774 $ 6,549 $ 777 11%
Percentage of revenue . . . . . . . . . . . . . . . . . . . 13.2% 13.1% 13.1%
Sales and marketing . . . . . . . . . . . . . . . . . . . . . 9,880 9,085 9,259 795 9%
Percentage of revenue . . . . . . . . . . . . . . . . . . . 17.3% 17.6% 18.6%
General and administrative . . . . . . . . . . . . . . . 2,478 2,101 2,152 377 18%
Percentage of revenue . . . . . . . . . . . . . . . . . . . 4.3% 4.1% 4.3%
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,909 $ 17,960 $ 17,960 $ 1,949 11%
Percentage of revenue . . . . . . . . . . . . . . . . . 34.9% 34.8% 36.1%
R&D Expenses
R&D expenses increased due to higher headcount-related expenses, higher share-based compensation expense and higher
discretionary spending, partially offset by lower contracted services spending and lower acquisitions and divestitures related costs.
We continue to invest in R&D in order to bring a broad range of products to market in a timely fashion. If we believe that we
are unable to enter a particular market in a timely manner with internally developed products, we may purchase or license
technology from other businesses, or we may partner with or acquire businesses as an alternative to internal R&D.
Sales and Marketing Expenses
Sales and marketing expenses increased primarily due to higher headcount-related expenses, higher discretionary spending and
higher share-based compensation expense, partially offset by the absence of certain non-recurring charges recognized due to
the Russia and Ukraine war in fiscal 2022 and lower contracted services spending.
G&A Expenses
G&A expenses increased due to higher headcount-related expenses, higher discretionary spending and higher share-based
compensation expense, partially offset by the absence of certain non-recurring charges recognized due to the Russia and Ukraine
war in fiscal 2022 and lower acquisition and divestitures related costs.
Effect of Foreign Currency
In fiscal 2023, foreign currency fluctuations, net of hedging, decreased the combined R&D, sales and marketing, and G&A
expenses by approximately $364 million, or 2.0%, compared with fiscal 2022.
Amortization of Purchased Intangible Assets
The following table presents the amortization of purchased intangible assets including impairment charges (in millions):
Yea r s Ended July 29, 2023 July 30, 2022 July 31, 2021
Amortization of purchased intangible assets:
Cost of sales .................................................. $ 649 $ 749 $ 716
Operating expenses ............................................. 282 328 215
Total ...................................................... $ 931 $ 1,077 $ 931
The decrease in amortization of purchased intangible assets was primarily due to certain purchased intangible assets that
became fully amortized, partially offset by amortization of purchased intangibles from our recent acquisitions.
44
Restructuring and Other Charges
The following table presents restructuring and other charges (in millions):
Yea r s Ended July 29, 2023 July 30, 2022 July 31, 2021
Restructuring and other charges included in operating expenses ............ $ 531 $ 6 $ 886
In the second quarter of fiscal 2023, we announced a restructuring plan in order to rebalance the organization and enable further
investment in key priority areas, of which approximately 5% of the global workforce would be impacted. The total pretax
charges are estimated to be approximately $700 million. In connection with this restructuring plan, we incurred charges of $535
million during fiscal 2023. We expect the plan to be substantially completed by the end of the first quarter of fiscal 2024. We
expect to reinvest substantially all of the costs savings from this restructuring plan in our key priority areas. As a result, the
overall cost savings from this restructuring plan are not expected to be material for future periods.
Operating Income
The following table presents our operating income and our operating income as a percentage of revenue (in millions, except
percentages):
Yea r s Ended July 29, 2023 July 30, 2022 July 31, 2021
Operating income ............................................... $ 15,031 $ 13,969 $ 12,833
Operating income as a percentage of revenue ......................... 26.4% 27.1% 25.8%
Operating income increased by 8%, and as a percentage of revenue operating income decreased by 0.7 percentage points.
The increase in operating income was primarily due to a revenue increase and a gross margin percentage increase (driven by
favorable pricing and favorable product mix, partially offset by negative impacts from productivity), partially offset by higher
operating expenses. The decrease in operating income as a percentage of revenue was primarily due to an operating expenses
percentage increase.
Interest and Other Income (Loss), Net
Interest Income (Expense), Net The following table summarizes interest income and interest expense (in millions):
Yea r s Ended 2023 vs. 2022
July 29, 2023 July 30, 2022 July 31, 2021
Variance
in Dollars
Interest income ................................. $ 962 $ 476 $ 618 $ 486
Interest expense ................................ (427) (360) (434) (67)
Interest income (expense), net ................... $ 535 $ 116 $ 184 $ 419
Interest income increased driven by higher average balance of cash and available-for-sale debt investments and higher interest
rates. The increase in interest expense was driven by higher interest rates, partially offset by a lower average debt balance.
Other Income (Loss), Net The components of other income (loss), net, are summarized as follows (in millions):
Yea r s Ended 2023 vs. 2022
July 29, 2023 July 30, 2022 July 31, 2021
Variance
in Dollars
Gains (losses) on investments, net:
Available-for-sale debt investments ............... $ (21) $ 9 $ 53 $ (30)
Marketable equity investments ................... 37 (38) 6 75
Privately held investments ...................... (193) 486 266 (679)
Net gains (losses) on investments .............. (177 ) 457 325 (634)
Other gains (losses), net ........................... (71) (65) (80) (6)
Other income (loss), net ................... $ (248) $ 392 $ 245 $ (640)
45
The decrease in our other income (loss), net was primarily driven by realized and unrealized losses and impairment charges
on our privately held investments and changes in net gains (losses) on our available-for-sale debt investments and marketable
equity investments.
Provision for Income Taxes
The provision for income taxes resulted in an effective tax rate of 17.7% for fiscal 2023, compared with 18.4% for fiscal 2022. The
net 0.7 percentage points decrease in the effective tax rate was primarily due to an increase in U.S. foreign-derived intangible
income deduction benefit driven by the capitalization and amortization of R&D expenses effective for fiscal 2023 as required
by the Tax Cuts and Jobs Act (“the Tax Act”) partially offset by a decrease in the U.S. federal research tax credit and stock
compensation windfall benefit.
For a full reconciliation of our effective tax rate to the U.S. federal statutory rate of 21% and for further explanation of our
provision for income taxes, see Note 18 to the Consolidated Financial Statements.
46
LIQUIDITY AND CAPITAL RESOURCES
The following sections discuss the effects of changes in our balance sheet, our capital allocation strategy including stock
repurchase program and dividends, our contractual obligations, and certain other commitments and activities on our liquidity
and capital resources.
Balance Sheet and Cash Flows
Cash and Cash Equivalents and Investments The following table summarizes our cash and cash equivalents and
investments (in millions):
July 29, 2023 July 30, 2022
Increase
(Decrease)
Cash and cash equivalents ........................................... $ 10,123 $ 7,079 $ 3,044
Available-for-sale debt investments.................................... 15,592 11,947 3,645
Marketable equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 431 241 190
Total ......................................................... $ 26,146 $ 19,267 $ 6,879
The net increase in cash and cash equivalents and investments from fiscal 2022 to fiscal 2023 was primarily driven by cash
provided by operating activities of $19.9 billion. This source of cash was partially offset by cash returned to stockholders in the
form of cash dividends of $6.3 billion and repurchases of common stock of $4.3 billion under the stock repurchase program,
a net decrease in debt of $1.1 billion, capital expenditures of $0.8 billion and net cash paid for acquisitions and divestitures
of $0.3 billion.
In February 2023, an IRS announcement related to the California floods (IR-2023-33) deferred our remaining fiscal 2023 U.S.
federal income tax payment deadlines until October 2023. Beginning in fiscal 2023, we were required to capitalize and amortize
R&D expenses as required by the Tax Act. This change would have resulted in significantly higher cash paid for income taxes
during fiscal 2023 absent the payment deferral. As of July 29, 2023, we have deferred approximately $2.8 billion of federal
tax payments. Our cash paid for income taxes for the first quarter of fiscal 2024 will significantly increase as a result of these
deferred federal tax payments.
We maintain an investment portfolio of various holdings, types, and maturities. We classify our investments as short-term
investments based on their nature and their availability for use in current operations. We believe the overall credit quality
of our portfolio is strong, with our cash equivalents and our available-for-sale debt investment portfolio consisting primarily
of high quality investment-grade securities. We believe that our strong cash and cash equivalents and investments position
allows us to use our cash resources for strategic investments to gain access to new technologies, for acquisitions, for customer
financing activities, for working capital needs, and for the repurchase of shares of common stock and payment of dividends as
discussed below.
Securities Lending We periodically engage in securities lending activities with certain of our available-for-sale debt investments.
These transactions are accounted for as a secured lending of the securities, and the securities are typically loaned only on
an overnight basis. We require collateral equal to at least 102% of the fair market value of the loaned security and that the
collateral be in the form of cash or liquid, high-quality assets. We engage in these secured lending transactions only with highly
creditworthy counterparties, and the associated portfolio custodian has agreed to indemnify us against collateral losses. We did
not experience any losses in connection with the secured lending of securities during the periods presented. As of July 29, 2023
and July 30, 2022, we had no outstanding securities lending transactions.
Free Cash Flow and Capital Allocation As part of our capital allocation strategy, we target to return a minimum of 50% of our
free cash flow annually to our stockholders through cash dividends and repurchases of common stock.
We define free cash flow as net cash provided by operating activities less cash used to acquire property and equipment. The
following table reconciles our net cash provided by operating activities to free cash flow (in millions):
Yea r s Ended July 29, 2023 July 30, 2022 July 31, 2021
Net cash provided by operating activities ........................... $ 19,886 $ 13,226 $ 15,454
Acquisition of property and equipment ............................. (849) (477) (692)
Free cash flow ................................................. $ 19,037 $ 12,749 $ 14,762
47
We expect that cash provided by operating activities may fluctuate in future periods as a result of a number of factors, including
fluctuations in our operating results, the rate at which products are shipped during the quarter (which we refer to as shipment
linearity), the timing and collection of accounts receivable and financing receivables, inventory and supply chain management,
deferred revenue and the timing and amount of tax and other payments. For additional discussion, see “Part I, Item 1A. Risk
Factors” in this report.
We consider free cash flow to be a liquidity measure that provides useful information to management and investors because
of our intent to return a stated percentage of free cash flow to stockholders in the form of dividends and stock repurchases.
We further regard free cash flow as a useful measure because it reflects cash that can be used to, among other things, invest in
our business, make strategic acquisitions, repurchase common stock, and pay dividends on our common stock, after deducting
capital investments. A limitation of the utility of free cash flow as a measure of financial performance and liquidity is that
the free cash flow does not represent the total increase or decrease in our cash balance for the period. In addition, we have
other required uses of cash, including repaying the principal of our outstanding indebtedness. Free cash flow is not a measure
calculated in accordance with U.S. generally accepted accounting principles and should not be regarded in isolation or as an
alternative for net cash provided by operating activities or any other measure calculated in accordance with such principles, and
other companies may calculate free cash flow in a different manner than we do.
The following table summarizes the dividends paid and stock repurchases (in millions, except per-share amounts):
DIVIDENDS STOCK REPURCHASE PROGRAM TOTAL
Yea r s Ended Per Share Amount Shares
Weighted-Average
Price per Share Amount Amount
July 29, 2023 .......................... $ 1.54 $ 6,302 88 $ 48.49 $ 4,271 $ 10,573
July 30, 2022 ........................... $ 1.50 $ 6,224 146 $ 52.82 $ 7,734 $ 13,958
July 31, 2021 ........................... $ 1.46 $ 6,163 64 $ 45.48 $ 2,902 $ 9,065
On August 16, 2023, our Board of Directors declared a quarterly dividend of $0.39 per common share to be paid on October
25, 2023, to all stockholders of record as of the close of business on October 4, 2023. Any future dividends are subject to the
approval of our Board of Directors.
The remaining authorized amount for stock repurchases under this program is approximately $10.9 billion, with no termination
date.
Accounts Receivable, Net The following table summarizes our accounts receivable, net (in millions):
July 29, 2023 July 30, 2022
Increase
(Decrease)
Accounts receivable, net ............................................. $ 5,854 $ 6,622 $ (768)
Our accounts receivable net, as of July 29, 2023 decreased by approximately 12% compared with the end of fiscal 2022, primarily
due to timing and amount of product and service billings at the end of fiscal 2023 compared with the end of fiscal 2022.
Inventory Supply Chain The following table summarizes our inventories and inventory purchase commitments with contract
manufacturers and suppliers (in millions):
July 29, 2023 July 30, 2022 July 31, 2021
Variance vs.
July 30, 2022
Variance vs.
July 31, 2021
Inventories ..................................... $ 3,644 $ 2,568 $ 1,559 $ 1,076 $ 2,085
Inventory purchase commitments ................... $ 7,253 $ 12,964 $ 10,254 $ (5,711) $ (3,001)
Inventory deposits and prepayments ................. $ 1,109 $ 1,484 $ 162 $ (375) $ 947
The following table summarizes our inventory purchase commitments with contract manufacturers and suppliers by period
(in millions):
July 29, 2023 July 30, 2022 July 31, 2021
Variance vs.
July 30, 2022
Variance vs.
July 31, 2021
Less than 1 year ............................... $ 5,270 $ 9,954 $ 6,903 $ (4,684) $ (1,633)
1 to 3 years ................................... 1,783 2,240 1,806 (457) (23)
3 to 5 years ................................... 200 770 1,545 (570) (1,345)
Total ...................................... $ 7,253 $ 12,964 $ 10,254 $ (5,711) $ (3,001)
48
Inventory as of July 29, 2023 increased by 42% and inventory purchase commitments with contract manufacturers and suppliers
decreased by 44% from our balances at the end of fiscal 2022. The combined decrease of 30% in our inventory and inventory
purchase commitments as compared with the end of fiscal 2022 was primarily due to fulfillment of customer demand as overall
supply constraints improved and our continued efforts to work with contract manufacturers and suppliers to optimize our
inventory and purchase commitment levels.
We increased our balances in prior fiscal years in order to address significant supply constraints seen industry-wide. The
increases were primarily due to arrangements to secure supply and pricing for certain product components and commitments
with contract manufacturers to meet customer demand and to address extended lead times, as well as advance payments with
suppliers to secure future supply, as a result of the supply constraints. As discussed, our risks of future material excess and
obsolete inventory and related losses are further outlined in the Result of Operations—Product Gross Margin section.
We purchase components from a variety of suppliers and use several contract manufacturers to provide manufacturing services
for our products. During the normal course of business, in order to manage manufacturing lead times and help ensure adequate
component supply, we enter into agreements with contract manufacturers and suppliers that allow them to procure inventory
based upon criteria as defined by us or that establish the parameters defining our requirements and our commitment to securing
manufacturing capacity.
Our inventory purchase commitments are for short-term product manufacturing requirements as well as for commitments to
suppliers to secure manufacturing capacity. Certain of our inventory purchase commitments with contract manufacturers and
suppliers relate to arrangements to secure supply and pricing for certain product components for multi-year periods. A significant
portion of our reported purchase commitments arising from these agreements are firm, noncancelable, and unconditional
commitments. In certain instances, these agreements allow us the option to cancel, reschedule, and adjust our requirements
based on our business needs prior to firm orders being placed.
Inventory and supply chain management remain areas of focus as we balance the need to maintain supply chain flexibility to
help ensure competitive lead times with the risk of inventory obsolescence because of supply constraints, rapidly changing
technology and customer requirements. We believe the amount of our inventory and inventory purchase commitments is
appropriate for our current and expected customer demand and revenue levels.
Financing Receivables and Guarantees The following table summarizes our financing receivables (in millions):
July 29, 2023 July 30, 2022
Increase
(Decrease)
Loan receivables, net .............................................. $ 5,857 $ 6,739 $ (882)
Lease receivables, net ............................................. 978 1,175 (197)
Total, net..................................................... $ 6,835 $ 7,914 $ (1,079)
Financing Receivables Our financing arrangements include loans and leases. Our loan receivables include customer financing
for purchases of our hardware, software and services (including technical support and advanced services), and also may
include additional funds for other costs associated with network installation and integration of our products and services. Lease
receivables include sales-type leases. Arrangements related to leases are generally collateralized by a security interest in the
underlying assets. Financing receivables decreased by 14%.
Financing Guarantees In the normal course of business, third parties may provide financing arrangements to our customers
and channel partners under financing programs. The financing arrangements provided by third parties are related to leases and
loans and typically have terms of up to three years. In some cases, we provide guarantees to third parties for these lease and
loan arrangements. The financing arrangements to channel partners consist of revolving short-term financing provided by third
parties, with payment terms generally ranging from 60 to 90 days. In certain instances, these financing arrangements result in
a transfer of our receivables to the third party. The receivables are derecognized upon transfer, as these transfers qualify as true
sales, and we receive payments for the receivables from the third party based on our standard payment terms.
49
The volume of channel partner financing was $32.1 billion, $27.9 billion, and $26.7 billion in fiscal 2023, 2022, and 2021,
respectively. These financing arrangements facilitate the working capital requirements of the channel partners, and in some
cases, we guarantee a portion of these arrangements. The balance of the channel partner financing subject to guarantees was
$1.7 billion and $1.4 billion as of July 29, 2023 and July 30, 2022, respectively. We could be called upon to make payments under
these guarantees in the event of nonpayment by the channel partners. Historically, our payments under these arrangements
have been immaterial. Where we provide a guarantee, we defer the revenue associated with the channel partner financing
arrangement in accordance with revenue recognition policies, or we record a liability for the fair value of the guarantees.
In either case, the deferred revenue is recognized as revenue when the guarantee is removed. As of July 29, 2023, the total
maximum potential future payments related to these guarantees was approximately $159 million, of which approximately $34
million was recorded as deferred revenue.
Borrowings
Senior Notes The following table summarizes the principal amount of our senior notes (in millions):
Maturity Date July 29, 2023 July 30, 2022
Senior notes:
Fixed-rate notes:
2.60% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . February 28, 2023 $ — $ 500
2.20% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . September 20, 2023 750 750
3.625% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . March 4, 2024 1,000 1,000
3.50% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . June 15, 2025 500 500
2.95% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . February 28, 2026 750 750
2.50% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . September 20, 2026 1,500 1,500
5.90% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . February 15, 2039 2,000 2,000
5.50% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . January 15, 2040 2,000 2,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,500 $ 9,000
Interest is payable semiannually on each class of the senior fixed-rate notes, each of which is redeemable by us at any time,
subject to a make-whole premium. We were in compliance with all debt covenants as of July 29, 2023.
Commercial Paper We have a short-term debt financing program in which up to $10.0 billion is available through the issuance
of commercial paper notes. We use the proceeds from the issuance of commercial paper notes for general corporate purposes.
We had no commercial paper outstanding as of July 29, 2023 and $0.6 billion outstanding as of July 30, 2022.
Credit Facility On May 13, 2021, we entered into a 5-year credit agreement with certain institutional lenders that provides for
a $3.0 billion unsecured revolving credit facility that is scheduled to expire on May 13, 2026. As of July 29, 2023, we were in
compliance with the required interest coverage ratio and the other covenants, and we had not borrowed any funds under the
credit agreement. On April 18, 2023, we entered into an amendment to the credit agreement to replace the LIBOR index with
Term Secured Overnight Financing Rate (SOFR).
Any advances under the 5-year credit agreement will accrue interest at rates that are equal to, based on certain conditions,
either (a) with respect to loans in U.S. dollars, (i) Term SOFR (plus a 0.10% credit spread adjustment) or (ii) the Base Rate (to
be defined as the highest of (x) the Bank of America prime rate, (y) the Federal Funds rate plus 0.50% and (z) Term SOFR plus
1.0%), (b) with respect to loans in Euros, EURIBOR, (c) with respect to loans in Yen, TIBOR and (d) with respect to loans
in Pounds Sterling, SONIA, plus a margin that is based on our senior debt credit ratings as published by Standard & Poor’s
Financial Services, LLC and Moody’s Investors Service, Inc., provided that in no event will the interest rate be less than 0.0%.
We will pay a quarterly commitment fee during the term of the 5-year credit agreement which may vary depending on our senior
debt credit ratings. In addition, the 5-year credit agreement incorporates certain sustainability-linked metrics. Specifically, our
applicable interest rate and commitment fee are subject to upward or downward adjustments if we achieve, or fail to achieve,
certain specified targets based on two key performance indicator metrics: (i) social impact and (ii) foam reduction. We may also,
upon the agreement of either the then-existing lenders or additional lenders not currently parties to the agreement, increase the
commitments under the credit facility by up to an additional $2.0 billion and, at our option, extend the maturity of the facility
for an additional year up to two times. The credit agreement requires that we comply with certain covenants, including that we
maintain an interest coverage ratio as defined in the agreement.
50
Remaining Performance Obligations The following table presents the breakdown of remaining performance obligations
(in millions):
July 29, 2023 July 30, 2022
Increase
(Decrease)
Product. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,802 $ 14,090 $ 1,712
Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,066 17,449 1,617
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,868 $ 31,539 $ 3,329
Short-term RPO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,910 $ 16,936 $ 974
Long-term RPO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,958 14,603 2,355
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,868 $ 31,539 $ 3,329
Total remaining performance obligations increased 11% in fiscal 2023. Remaining performance obligations for product increased
12% and remaining performance obligations for service increased 9%, compared to fiscal 2022. We expect approximately 51%
of total remaining performance obligations to be recognized as revenue over the next 12 months.
Deferred Revenue The following table presents the breakdown of deferred revenue (in millions):
July 29, 2023 July 30, 2022
Increase
(Decrease)
Product. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,505 $ 10,427 $ 1,078
Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,045 12,837 1,208
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,550 $ 23,264 $ 2,286
Reported as:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,908 $ 12,784 $ 1,124
Noncurrent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,642 10,480 1,162
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,550 $ 23,264 $ 2,286
Total deferred revenue increased 10% in fiscal 2023. The increase in deferred product revenue of 10% was primarily due to
increased deferrals related to our recurring software offerings. The increase in deferred service revenue of 9% was driven by
higher business volume and the impact of contract renewals, partially offset by amortization of deferred service revenue.
Contractual Obligations
The impact of contractual obligations on our liquidity and capital resources in future periods should be analyzed in conjunction
with the factors that impact our cash flows from operations discussed previously. In addition, we plan for and measure our
liquidity and capital resources through an annual budgeting process. The following table summarizes our contractual obligations
at July 29, 2023 (in millions):
PAYMENTS DUE BY PERIOD
July 29, 2023 Tot al
Less than 1
Yea r
1 to 3
Yea r s
3 to 5
Yea r s
More than
5 Year s
Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,116 $ 341 $ 426 $ 172 $ 177
Purchase commitments with contract manufacturers
and suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,253 5,270 1,783 200 —
Other purchase obligations . . . . . . . . . . . . . . . . . . . . . . 2,476 1,222 976 265 13
Senior notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,500 1,750 1,250 1,500 4,000
Transition tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . 5,456 1,364 4,092 — —
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . 1,365 — 215 166 984
Total by period . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,166 $ 9,947 $ 8,742 $ 2,303 $ 5,174
Other long-term liabilities (uncertainty in the timing
of future payments) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,726
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,892
51
Operating Leases For more information on our operating leases, see Note 8 to the Consolidated Financial Statements.
Purchase Commitments with Contract Manufacturers and Suppliers We purchase components from a variety of suppliers and
use several contract manufacturers to provide manufacturing services for our products. Our inventory purchase commitments
are for short-term product manufacturing requirements as well as for commitments to suppliers to secure manufacturing
capacity. Certain of our inventory purchase commitments with contract manufacturers and suppliers relate to arrangements to
secure supply and pricing for certain product components for multi-year periods. A significant portion of our reported purchase
commitments arising from these agreements are firm, noncancelable, and unconditional commitments. We record a liability for
firm, noncancelable, and unconditional purchase commitments for quantities in excess of our future demand forecasts consistent
with the valuation of our excess and obsolete inventory. See further discussion in “Inventory Supply Chain.”
Other Purchase Obligations Other purchase obligations represent an estimate of all contractual obligations in the ordinary
course of business, other than operating leases and commitments with contract manufacturers and suppliers, for which we
have not received the goods or services. Purchase orders are not included in the preceding table as they typically represent our
authorization to purchase rather than binding contractual purchase obligations.
Long-Term Debt The amount of long-term debt in the preceding table represents the principal amount of the respective debt
instruments. See Note 12 to the Consolidated Financial Statements.
Transition Tax Payable Transition tax payable represents future cash tax payments associated with the one-time U.S. transition
tax on accumulated earnings for foreign subsidiaries as a result of the Tax Act.
Other Long-Term Liabilities Other long-term liabilities primarily include noncurrent income taxes payable, accrued liabilities
for deferred compensation, deferred tax liabilities, and certain other long-term liabilities. Due to the uncertainty in the timing
of future payments, our noncurrent income taxes payable of approximately $1.7 billion and deferred tax liabilities of $62 million
were presented as one aggregated amount in the total column on a separate line in the preceding table. Noncurrent income taxes
payable include uncertain tax positions. See Note 18 to the Consolidated Financial Statements.
Other Commitments
In connection with our acquisitions, we have agreed to pay certain additional amounts contingent upon the achievement of
certain agreed-upon technology, development, product, or other milestones or the continued employment with us of certain
employees of the acquired entities. See Note 14 to the Consolidated Financial Statements.
We also have certain funding commitments primarily related to our privately held investments, some of which may be based on
the achievement of certain agreed-upon milestones or are required to be funded on demand. The funding commitments were
$0.3 billion and $0.4 billion as of July 29, 2023 and July 30, 2022, respectively.
In the ordinary course of business, we have privately held investments and provide financing to certain customers. Certain of
these investments are considered to be variable interest entities. We evaluate on an ongoing basis our privately held investments
and customer financings, and we have determined that as of July 29, 2023 there were no material unconsolidated variable
interest entities.
On an ongoing basis, we reassess our privately held investments and customer financings to determine if they are variable
interest entities and if we would be regarded as the primary beneficiary pursuant to the applicable accounting guidance. As a
result of this ongoing assessment, we may be required to make additional disclosures or consolidate these entities. Because we
may not control these entities, we may not have the ability to influence these events.
We provide financing guarantees, which are generally for various third-party financing arrangements extended to our channel
partners. We could be called upon to make payments under these guarantees in the event of nonpayment by the channel partners.
See the previous discussion of these financing guarantees under “Financing Receivables and Guarantees.”
Liquidity and Capital Resource Requirements
Based on past performance and current expectations, we believe our cash and cash equivalents, investments, cash generated from
operations, and ability to access capital markets and committed credit lines will satisfy, through at least the next 12 months, our
liquidity requirements, both in total and domestically, including the following: working capital needs (including inventory and
other supply related payments), capital expenditures, investment requirements, stock repurchases, cash dividends, contractual
obligations, commitments, principal and interest payments on debt, pending acquisitions, future customer financings, and other
liquidity requirements associated with our operations. We expect increased payments related to inventory and other supply
related payments through at least the next 12 months. There are no other transactions, arrangements, or relationships with
unconsolidated entities or other persons that are reasonably likely to materially affect the liquidity and the availability of, as well
as our requirements for, capital resources.
52
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Our financial position is exposed to a variety of risks, including interest rate risk, equity price risk, and foreign currency
exchange risk.
Interest Rate Risk
Available-for-Sale Debt Investments We maintain an investment portfolio of various holdings, types, and maturities. Our
primary objective for holding available-for-sale debt investments is to achieve an appropriate investment return consistent with
preserving principal and managing risk. At any time, a sharp rise in market interest rates could have a material adverse impact
on the fair value of our available-for-sale debt investment portfolio. Conversely, declines in interest rates, including the impact
from lower credit spreads, could have a material adverse impact on interest income for our investment portfolio. We may utilize
derivative instruments designated as hedging instruments to achieve our investment objectives. We had no outstanding hedging
instruments for our available-for-sale debt investments as of July 29, 2023. Our available-for-sale debt investments are held
for purposes other than trading. Our available-for-sale debt investments are not leveraged as of July 29, 2023. We monitor our
interest rate and credit risks, including our credit exposures to specific rating categories and to individual issuers. We believe
the overall credit quality of our portfolio is strong.
The following tables present the hypothetical fair values of our available-for-sale debt investments, including the hedging effects
when applicable, as a result of selected potential market decreases and increases in interest rates. The market changes reflect
immediate hypothetical parallel shifts in the yield curve of plus or minus 50 basis points (BPS), plus 100 BPS, and plus 150 BPS.
The hypothetical fair values as of July 29, 2023 and July 30, 2022 are as follows (in millions):
VALUATION OF SECURITIES
GIVEN AN INTEREST RATE
DECREASE OF X BASIS POINTS
FA I R VALU E
AS OF
JULY 29, 2023
VALUATION OF SECURITIES
GIVEN AN INTEREST RATE
INCREASE OF X BASIS POINTS
(150 BPS) (100 BPS) (50 BPS) 50 BPS 100 BPS 150 BPS
Available-for-sale debt investments . . . $15,901 $15,798 $15,695 $15,592 $15,489 $15,386 $15,284
VALUATION OF SECURITIES
GIVEN AN INTEREST RATE
DECREASE OF X BASIS POINTS
FAIR VALUE
AS OF
JULY 30, 2022
VALUATION OF SECURITIES
GIVEN AN INTEREST RATE
INCREASE OF X BASIS POINTS
(150 BPS) (100 BPS) (50 BPS) 50 BPS 100 BPS 150 BPS
Available-for-sale debt investments . . . $12,263 $12,158 $12,052 $11,947 $11,841 $11,735 $11,630
Financing Receivables As of July 29, 2023, our financing receivables had a carrying value of $6.8 billion, compared with
$7.9 billion as of July 30, 2022. As of July 29, 2023, a hypothetical 50 BPS increase or decrease in market interest rates would
change the fair value of our financing receivables by a decrease or increase of approximately $0.1 billion, respectively.
Debt As of July 29, 2023, we had $8.5 billion in principal amount of senior fixed-rate notes outstanding. The carrying amount
of the senior notes was $8.4 billion, and the related fair value based on market prices was $8.7 billion. As of July 29, 2023, a
hypothetical 50 BPS increase or decrease in market interest rates would change the fair value of the fixed-rate debt, excluding
the $1.5 billion of hedged debt, by a decrease or increase of approximately $0.3 billion, respectively. However, this hypothetical
change in interest rates would not impact the interest expense on the fixed-rate debt that is not hedged.
Equity Price Risk
Marketable Equity Investments The fair value of our marketable equity investments is subject to market price volatility. We
hold equity securities for strategic purposes or to diversify our overall investment portfolio. These equity securities are held for
purposes other than trading. The total fair value of our marketable equity securities was $431 million and $241 million as of
July 29, 2023 and July 30, 2022, respectively.
Privately Held Investments These investments are recorded in other assets in our Consolidated Balance Sheets. As of July 29,
2023, the total carrying amount of our investments in privately held investments was $1.8 billion, compared with $1.9 billion
at July 30, 2022. Some of these companies in which we invested are in the startup or development stages. These investments
are inherently risky because the markets for the technologies or products these companies are developing are typically in the
early stages and may never materialize. We could lose our entire investment in these companies. Our evaluation of privately
held investments is based on the fundamentals of the businesses invested in, including, among other factors, the nature of their
technologies and potential for financial return.
53
Foreign Currency Exchange Risk
Our foreign exchange forward contracts outstanding at fiscal year-end are summarized in U.S. dollar equivalents as follows
(in millions):
July 29, 2023 July 30, 2022
Notional Amount Fair Value Notional Amount Fair Value
Forward contracts:
Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,014 $ (33) $ 2,578 $ (50)
Sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,406 $ 31 $ 1,943 $ 50
We conduct business globally in numerous currencies. The direct effect of foreign currency fluctuations on revenue has not
been material because our revenue is primarily denominated in U.S. dollars. However, if the U.S. dollar strengthens relative to
other currencies, such strengthening could have an indirect effect on our revenue to the extent it raises the cost of our products
to non-U.S. customers and thereby reduces demand. A weaker U.S. dollar could have the opposite effect. However, the precise
indirect effect of currency fluctuations is difficult to measure or predict because our revenue is influenced by many factors in
addition to the impact of such currency fluctuations.
Approximately 75% of our operating expenses are U.S.-dollar denominated. In fiscal 2023, foreign currency fluctuations, net
of hedging, decreased our combined R&D, sales and marketing, and G&A expenses by approximately $364 million, or 2.0%,
as compared with fiscal 2022. To reduce variability in operating expenses and service cost of sales caused by non-U.S.-dollar
denominated operating expenses and costs, we may hedge certain forecasted foreign currency transactions with currency options
and forward contracts. These hedging programs are not designed to provide foreign currency protection over long time horizons.
In designing a specific hedging approach, we consider several factors, including offsetting exposures, significance of exposures,
costs associated with entering into a particular hedge instrument, and potential effectiveness of the hedge. The gains and losses
on foreign exchange contracts mitigate the effect of currency movements on our operating expenses and service cost of sales.
We also enter into foreign exchange forward and option contracts to reduce the short-term effects of foreign currency fluctuations
on receivables and payables that are denominated in currencies other than the functional currencies of the entities. The market
risks associated with these foreign currency receivables and payables relate primarily to variances from our forecasted foreign
currency transactions and balances. We do not enter into foreign exchange forward or option contracts for speculative purposes.
54
Item 8. Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID 238) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Reports of Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Consolidated Statements of Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Note 1: Basis of Presentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Note 2: Summary of Significant Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Note 3: Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Note 4: Acquisitions and Divestitures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Note 5: Goodwill and Purchased Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Note 6: Restructuring and Other Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Note 7: Balance Sheet and Other Details . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Note 8: Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Note 9: Financing Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Note 10: Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Note 11: Fair Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Note 12: Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Note 13: Derivative Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Note 14: Commitments and Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Note 15: Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Note 16: Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Note 17: Comprehensive Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Note 18: Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Note 19: Segment Information and Major Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Note 20: Net Income per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Report of Independent Registered Public Accounting Firm (PCAOB ID 238) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reports of Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
55
57
58
59
60
61
62
63
Note 1: Basis of Presentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 2: Summary of Significant Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 4: Acquisitions and Divestitures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 5: Goodwill and Purchased Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 6: Restructuring and Other Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 7: Balance Sheet and Other Details . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 8: Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 9: Financing Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 10: Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 11: Fair Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 12: Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 13: Derivative Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 14: Commitments and Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 15: Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 16: Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 17: Comprehensive Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 18: Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 19: Segment Information and Major Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 20: Net Income per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 3: Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
63
63
69
71
72
73
74
75
77
80
82
83
84
86
90
90
94
95
98
99
55
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Cisco Systems, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Cisco Systems, Inc. and its subsidiaries (the “Company”) as
of July 29, 2023 and July 30, 2022, and the related consolidated statements of operations, of comprehensive income, of equity
and of cash flows for each of the three years in the period ended July 29, 2023, including the related notes (collectively referred
to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as
of July 29, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of July 29, 2023 and July 30, 2022, and the results of its operations and its cash flows for each of the
three years in the period ended July 29, 2023 in conformity with accounting principles generally accepted in the United States
of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of July 29, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control
over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the
accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions
on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on
our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control
over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that
a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)
56
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective,
or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue recognition — identification of contractual terms in certain customer arrangements
As described in Note 2 to the consolidated financial statements, management assesses relevant contractual terms in its customer
arrangements to determine the transaction price and recognizes revenue upon transfer of control of the promised goods or
services in an amount that reflects the consideration the Company expects to receive in exchange for those products or services.
Management applies judgment in determining the transaction price which is dependent on the contractual terms. In order to
determine the transaction price, management may be required to estimate variable consideration when determining the amount
of revenue to recognize. For the year ended July 29, 2023, the Company’s total revenue was $57.0 billion.
The principal considerations for our determination that performing procedures relating to the identification of contractual terms
in certain customer arrangements is a critical audit matter are the significant judgment by management in identifying contractual
terms due to the volume and customized nature of the Company’s customer arrangements. This in turn led to significant auditor
judgment and effort in performing procedures to evaluate whether the contractual terms used in the determination of the
transaction price and the timing of revenue recognition were appropriately identified and determined by management.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to
the revenue recognition process, including those related to the identification of contractual terms in customer arrangements
that impact the determination of the transaction price and revenue recognition. These procedures also included, among others,
(i) testing the completeness and accuracy of management’s identification of the contractual terms by examining customer
arrangements on a test basis, and (ii) testing management’s process for determining the appropriate amount and timing of
revenue recognition based on the contractual terms identified in the customer arrangements.
San Jose, California
September 7, 2023
We have served as the Company’s auditor since 1988.
57
Reports of Management
Statement of Management’s Responsibility
Cisco’s management has always assumed full accountability for maintaining compliance with our established financial
accounting policies and for reporting our results with objectivity and the highest degree of integrity. It is critical for investors
and other users of the Consolidated Financial Statements to have confidence that the financial information that we provide is
timely, complete, relevant, and accurate. Management is responsible for the fair presentation of Cisco’s Consolidated Financial
Statements, prepared in accordance with accounting principles generally accepted in the United States of America, and has full
responsibility for their integrity and accuracy.
Management, with oversight by Cisco’s Board of Directors, has established and maintains a strong ethical climate so that our
affairs are conducted to the highest standards of personal and corporate conduct. Management also has established an effective
system of internal controls. Cisco’s policies and practices reflect corporate governance initiatives that are compliant with the
listing requirements of Nasdaq and the corporate governance requirements of the Sarbanes-Oxley Act of 2002.
We are committed to enhancing stockholder value and fully understand and embrace our fiduciary oversight responsibilities.
We are dedicated to ensuring that our high standards of financial accounting and reporting, as well as our underlying system of
internal controls, are maintained. Our culture demands integrity, and we have the highest confidence in our processes, our internal
controls and our people, who are objective in their responsibilities and who operate under the highest level of ethical standards.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting for Cisco. Internal
control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance
of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles and that receipts and expenditures of the Company are being made
only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have
a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Management (with the participation of the principal executive officer and principal financial officer) conducted
an evaluation of the effectiveness of Cisco’s internal control over financial reporting based on the framework in
Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on this evaluation, management concluded that Cisco’s internal control over financial reporting was
effective as of July 29, 2023. PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited the
effectiveness of Cisco’s internal control over financial reporting and has issued a report on Cisco’s internal control over financial
reporting, which is included in their report on the preceding pages.
Charles H. Robbins R. Scott Herren
Chair and Chief Executive Officer Executive Vice President and Chief Financial Officer
September 7, 2023 September 7, 2023
58
CISCO SYSTEMS, INC.
Consolidated Balance Sheets
(in millions, except par value)
July 29, 2023 July 30, 2022
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,123 $ 7,079
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,023 12,188
Accounts receivable, net of allowance of $85 at July 29, 2023
and $83 at July 30, 2022. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,854 6,622
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,644 2,568
Financing receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,352 3,905
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,352 4,355
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,348 36,717
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,085 1,997
Financing receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,483 4,009
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,535 38,304
Purchased intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,818 2,569
Deferred tax assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,576 4,449
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,007 5,957
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 101,852 $ 94,002
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,733 $ 1,099
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,313 2,281
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,235 961
Accrued compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,984 3,316
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,908 12,784
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,136 5,199
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,309 25,640
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,658 8,416
Income taxes payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,756 7,725
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,642 10,480
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,134 1,968
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,499 54,229
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; 4,066 and 4,110 shares issued and outstanding at July 29, 2023
and July 30, 2022, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,289 42,714
Retained earnings (Accumulated deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,639 (1,319)
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,575) (1,622)
Total equit y . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,353 39,773
TOTAL LIABILITIES AND EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 101,852 $ 94,002
See Notes to Consolidated Financial Statements.
59
CISCO SYSTEMS, INC.
Consolidated Statements of Operations
(in millions, except per-share amounts)
Yea r s Ended July 29, 2023 July 30, 2022 July 31, 2021
REVENUE:
Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 43,142 $ 38,018 $ 36,014
Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,856 13,539 13,804
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,998 51,557 49,818
COST OF SALES:
Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,590 14,814 13,300
Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,655 4,495 4,624
Total cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,245 19,309 17,924
GROSS MARGIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,753 32,248 31,894
OPERATING EXPENSES:
Research and development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,551 6,774 6,549
Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,880 9,085 9,259
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,478 2,101 2,152
Amortization of purchased intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . 282 313 215
Restructuring and other charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 531 6 886
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,722 18,279 19,061
OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,031 13,969 12,833
Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 962 476 618
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (427) (360) (434)
Other income (loss), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (248) 392 245
Interest and other income (loss), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 287 508 429
INCOME BEFORE PROVISION FOR INCOME TAXES . . . . . . . . . . . . . 15,318 14,477 13,262
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,705 2,665 2,671
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,613 $ 11,812 $ 10,591
Net income per share:
Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3.08 $ 2.83 $ 2.51
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3.07 $ 2.82 $ 2.50
Shares used in per-share calculation:
Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,093 4,170 4,222
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,105 4,192 4,236
See Notes to Consolidated Financial Statements.
60
CISCO SYSTEMS, INC.
Consolidated Statements of Comprehensive Income
(in millions)
Yea r s Ended July 29, 2023 July 30, 2022 July 31, 2021
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,613 $ 11,812 $ 10,591
Available-for-sale investments:
Change in net unrealized gains and losses, net of tax benefit (expense)
of $35, $174, and $46 for fiscal 2023, 2022, and 2021, respectively . . . . (78) (557) (95)
Net (gains) losses reclassified into earnings, net of tax expense
(benefit) of $(4), $5, and $15 for fiscal 2023, 2022, and 2021,
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 (4) (38)
(61) (561) (133)
Cash flow hedging instruments:
Change in unrealized gains and losses, net of tax benefit (expense) of
$(7), $(20), and $(4) for fiscal 2023, 2022, and 2021, respectively . . . . . 22 67 16
Net (gains) losses reclassified into earnings, net of tax (benefit)
expense of $15, $7, and $3 for fiscal 2023, 2022, and 2021,
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (48) (22) (11)
(26) 45 5
Net change in cumulative translation adjustment and actuarial gains and
losses, net of tax benefit (expense) of $19, $(44), and $(2) for fiscal 2023,
2022, and 2021, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134 (689) 230
Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 (1,205) 102
Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,660 $ 10,607 $ 10,693
See Notes to Consolidated Financial Statements.
61
CISCO SYSTEMS, INC.
Consolidated Statements of Cash Flows
(in millions)
Yea r s Ended July 29, 2023 July 30, 2022 July 31, 2021
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,613 $ 11,812 $ 10,591
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,726 1,957 1,862
Share-based compensation expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,353 1,886 1,761
Provision (benefit) for receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 55 (6)
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,085) (309) (384)
(Gains) losses on divestitures, investments and other, net. . . . . . . . . . . . . . . . . . . 206 (453) (354)
Change in operating assets and liabilities, net of effects of acquisitions
and divestitures:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 734 (1,009) (107)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,069) (1,030) (244)
Financing receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,102 1,241 1,577
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 (1,615) (797)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 (55) (53)
Income taxes, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,218 (690) (549)
Accrued compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 651 (427) 643
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,326 1,328 1,560
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 535 (46)
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,886 13,226 15,454
Cash flows from investing activities:
Purchases of investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,871) (6,070) (9,328)
Proceeds from sales of investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,054 2,660 3,373
Proceeds from maturities of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,978 5,686 8,409
Acquisitions, net of cash and cash equivalents acquired and divestitures . . . . . . . . . (301) (373) (7,038)
Purchases of investments in privately held companies . . . . . . . . . . . . . . . . . . . . . . . . (185) (186) (175)
Return of investments in privately held companies . . . . . . . . . . . . . . . . . . . . . . . . . . 90 237 194
Acquisition of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (849) (477) (692)
Proceeds from sales of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 91 28
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (26) (15) (56)
Net cash provided by (used in) investing activities . . . . . . . . . . . . . . . . . . . . . (5,107) 1,553 (5,285)
Cash flows from financing activities:
Issuances of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 700 660 643
Repurchases of common stock - repurchase program. . . . . . . . . . . . . . . . . . . . . . . . . (4,293) (7,689) (2,877)
Shares repurchased for tax withholdings on vesting of restricted stock units . . . . . . (597) (692) (636)
Short-term borrowings, original maturities of 90 days or less, net . . . . . . . . . . . . . . (602) 606 (5)
Issuances of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1,049 —
Repayments of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (500) (3,550) (3,000)
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,302) (6,224) (6,163)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (32) (122) (59)
Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11,626) (15,962) (12,097)
Effect of foreign currency exchange rate changes on cash, cash equivalents, restricted
cash and restricted cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (105) (180) 58
Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash
equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,048 (1,363) (1,870)
Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of
fiscal year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,579 9,942 11,812
Cash, cash equivalents, restricted cash and restricted cash equivalents, end of
fiscal year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,627 $ 8,579 $ 9,942
Supplemental cash flow information:
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 376 $ 355 $ 438
Cash paid for income taxes, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,571 $ 3,663 $ 3,604
See Notes to Consolidated Financial Statements.
62
CISCO SYSTEMS, INC.
Consolidated Statements of Equity
(in millions, except per-share amounts)
Shares of
Common
Stock
Common Stock
and Additional
Paid-In Capital
Retained
Earnings
(Accumulated
Deficit)
Accumulated
Other
Comprehensive
Income (Loss)
Tot al
Equity
BALANCE AT JULY 25, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,237 $ 41,202 $ (2,763) $ (519) $37,920
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,591 10,591
Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . 102 102
Issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 643 643
Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (64) (625) (2,277) (2,902)
Shares repurchased for tax withholdings on vesting of restricted
stock units and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14) (636) (636)
Cash dividends declared ($1.46 per common share) . . . . . . . . . . . (6,166) (6,166)
Effect of adoption of accounting standard . . . . . . . . . . . . . . . . . . . (38) (38)
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,761 1,761
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 (1) —
BALANCE AT JULY 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,217 $ 42,346 $ (654) $ (417) $41,275
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,812 11,812
Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . (1,205) (1,205)
Issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 660 660
Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (146) (1,490) (6,244) (7,734)
Shares repurchased for tax withholdings on vesting of restricted
stock units and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13) (692) (692)
Cash dividends declared ($1.50 per common share) . . . . . . . . . . . (6,224) (6,224)
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,886 1,886
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) 4 (9) (5)
BALANCE AT JULY 30, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . 4,110 $ 42,714 $ (1,319) $ (1,622) $39,773
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,613 12,613
Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . 47 47
Issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 700 700
Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . (88) (930) (3,341) (4,271)
Shares repurchased for tax withholdings on vesting of
restricted stock units and other . . . . . . . . . . . . . . . . . . . . . . . . . . (13) (551) (551)
Cash dividends declared ($1.54 per common share) . . . . . . . . . (6,302) (6,302)
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,353 2,353
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 (12) (9)
BALANCE AT JULY 29, 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . 4,066 $ 44,289 $ 1,639 $ (1,575) $44,353
See Notes to Consolidated Financial Statements.
63
CISCO SYSTEMS, INC.
Notes to Consolidated Financial Statements
1. Basis of Presentation
The fiscal year for Cisco Systems, Inc. (the “Company,” “Cisco,” “we,” “us,” or “our”) is the 52 or 53 weeks ending on the
last Saturday in July. Fiscal 2023 and fiscal 2022 were each 52-week fiscal years, and fiscal 2021 was a 53-week fiscal year.
The Consolidated Financial Statements include our accounts and those of our subsidiaries. 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).
Our consolidated financial statements include our accounts and investments consolidated under the voting interest model. The
noncontrolling interests attributed to these investments are not presented as a separate component in the equity section of the
Consolidated Balance Sheets as these amounts are not material for any of the fiscal periods presented. The share of earnings
attributable to the noncontrolling interests are not presented separately in the Consolidated Statements of Operations as these
amounts are not material for any of the fiscal periods presented.
Certain reclassifications have been made to the amounts for prior years in order to conform to the current year’s presentation.
We have evaluated subsequent events through the date that the financial statements were issued.
2. Summary of Significant Accounting Policies
(a) Cash and Cash Equivalents We consider all highly liquid investments purchased with an original or remaining maturity
of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents are maintained with various
financial institutions.
(b) Available-for-Sale Debt Investments We classify our investments in fixed income securities as available-for-sale debt
investments. Our available-for-sale debt investments primarily consist of U.S. government, U.S. government agency, non-
U.S. government and agency, corporate debt, U.S. agency mortgage-backed securities, commercial paper and certificates of
deposit. These available-for-sale debt investments are primarily held in the custody of a major financial institution. A specific
identification method is used to determine the cost basis of available-for-sale debt investments sold. These investments are
recorded in the Consolidated Balance Sheets at fair value. Unrealized gains and losses on these investments are included as
a separate component of accumulated other comprehensive income (loss) (AOCI), net of tax. We classify our investments as
current based on the nature of the investments and their availability for use in current operations.
(c) Equity Instruments Our equity investments are accounted for as follows:
▪ Marketable equity securities have readily determinable fair value (RDFV) that are measured and recorded at fair value
through income.
▪ Non-marketable equity securities do not have RDFV and are measured using a measurement alternative recorded at cost
less any impairment, plus or minus changes resulting from qualifying observable price changes. For certain of these
securities, we have elected to apply the net asset value (NAV) practical expedient. The NAV is the estimated fair value of
these investments.
▪ Equity method investments are securities we do not control, but are able to exert significant influence over the investee.
These investments are measured at cost less any impairment, plus or minus our share of equity method investee income
or loss.
(d) Impairments of Investments For our available-for-sale debt securities in an unrealized loss position, we determine whether
a credit loss exists. In this assessment, among other factors, we consider the extent to which the fair value is less than the
amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the
security. If factors indicate a credit loss exists, an allowance for credit loss is recorded to other income (loss), net, limited by the
amount that the fair value is less than the amortized cost basis. The amount of fair value change relating to all other factors will
be recognized in other comprehensive income (OCI).
Note 1: Basis of Presentation
Note 2: Summary of Significant Accounting Policies
64
We hold non-marketable equity and other investments (“privately held investments”) which are included in other assets in
the Consolidated Balance Sheets. We monitor these investments for impairments and make reductions in carrying values if
we determine that an impairment charge is required based primarily on the financial condition and near-term prospects of
these companies.
(e) Inventories Inventories are stated at the lower of cost or net realizable value. Cost is computed using standard cost,
which approximates actual cost, on a first-in, first-out basis. We provide inventory write-downs based on excess and obsolete
inventories determined primarily by future demand forecasts. The write-down is measured as the difference between the
cost of the inventory and net realizable value based upon assumptions about future demand and charged to the provision for
inventory, which is a component of cost of sales. At the point of 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. In addition, we record a liability for firm, noncancelable, and unconditional purchase commitments with
contract manufacturers and suppliers for quantities in excess of our future demand forecasts consistent with our valuation of
excess and obsolete inventory.
(f) Allowance for Accounts Receivable, Contract Assets and Financing Receivables We estimate our allowances for credit
losses using relevant available information from internal and external sources, related to past events, current conditions and
reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit
losses. When assessing for credit losses, we determine collectibility by pooling our assets with similar characteristics.
The allowances for credit losses are each measured on a collective basis when similar risk characteristics exist. Our internal
credit risk ratings are categorized as 1 through 10, with the lowest credit risk rating representing the highest quality. Assets that
do not share risk characteristics are evaluated on an individual basis. The allowances for credit losses are each measured by
multiplying the exposure probability of default, the probability the asset will default within a given time frame, by the loss given
default rate, the percentage of the asset not expected to be collected due to default, based on the pool of assets.
Probability of default rates are published quarterly by third-party credit agencies. Adjustments to our internal credit risk
ratings may take into account including, but not limited to, various customer-specific factors, the potential sovereign risk of the
geographic locations in which the customer is operating and macroeconomic conditions. These factors are updated regularly or
when facts and circumstances indicate that an update is deemed necessary.
(g) Financing Receivables and Guarantees We provide financing arrangements, including loan receivables and lease
receivables, for certain qualified end-user customers to build, maintain, and upgrade their networks. Loan receivables represent
financing arrangements related to the sale of our hardware, software, and services (including technical support and advanced
services), and also may include additional funding for other costs associated with network installation and integration of our
products and services. Loan receivables have terms of one year to three years on average. Lease receivables represent sales-type
leases resulting from the sale of Cisco’s and complementary third-party products and are typically collateralized by a security
interest in the underlying assets. Lease receivables consist of arrangements with terms of four years on average.
Outstanding financing receivables that are aged 31 days or more from the contractual payment date are considered past due. We
do not accrue interest on financing receivables that are considered impaired and more than 120 days past due unless either the
receivable has not been collected due to administrative reasons or the receivable is well secured and in the process of collection.
Financing receivables may be placed on nonaccrual status earlier if, in management’s opinion, a timely collection of the full
principal and interest becomes uncertain. After a financing receivable has been categorized as nonaccrual, interest will be
recognized when cash is received. A financing receivable may be returned to accrual status after all of the customer’s delinquent
balances of principal and interest have been settled, and the customer remains current for an appropriate period.
We facilitate arrangements for third-party financing extended to channel partners, consisting of revolving short-term financing,
generally with payment terms ranging from 60 to 90 days. In certain instances, these financing arrangements result in a transfer
of our receivables to the third party. The receivables are derecognized upon transfer, as these transfers qualify as true sales,
and we receive a payment for the receivables from the third party based on our standard payment terms. These financing
arrangements facilitate the working capital requirements of the channel partners, and, in some cases, we guarantee a portion
of these arrangements. We could be called upon to make payments under these guarantees in the event of nonpayment by the
channel partners. Deferred revenue relating to these financing arrangements is recorded in accordance with revenue recognition
policies or for the fair value of the financing guarantees.
65
(h) Leases We lease real estate, information technology (IT) and other equipment and vehicles. We also have arrangements
with certain suppliers and contract manufacturers which includes the leasing of dedicated space and equipment costs. Our leases
have the option to extend or terminate the lease when it is reasonably certain that we will exercise that option.
As a lessee, we determine if an arrangement is a lease at commencement. Our ROU lease assets represent our right to use an
underlying asset for the lease term and lease liabilities represent our obligation to make lease payments related to the lease.
Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments
over the lease term. We use incremental borrowing rates based on information available at the commencement date to determine
the present value of our lease payments. Certain of our lease agreements contain variable lease payments. Our variable lease
payments can fluctuate depending on the level of activity or the cost of certain services where we have elected to combine lease
and non-lease components. While these payments are not included as part of our lease liabilities, they are recognized as variable
lease expense in the period they are incurred.
We provide leasing of our equipment and complementary third-party products primarily through our channel partners and
distributors, for which the income arising from these leases is recognized through interest income. As a lessor, we determine if
an arrangement is a lease at inception. We provide leasing arrangements for our equipment to certain qualified customers. Our
lease portfolio primarily consists of sales-type leases. We allocate the consideration in a bundled contract with our customers
based on relative standalone selling prices of our lease and non-lease components. The residual value on our leased equipment is
determined at the inception of the lease based on an analysis of estimates of the value of equipment, market factors and historical
customer behavior. Residual value estimates are reviewed on a periodic basis and other-than-temporary declines are expensed in
the period they occur. Our leases generally provide an end-of-term option for the customer to extend the lease under mutually-
agreed terms, return the leased equipment, or purchase the equipment for either the then-market value of the equipment or a
pre-determined purchase price. If a customer chooses to terminate their lease prior to the original end of term date, the customer
is required to pay all remaining lease payments in full.
(i) Depreciation and Amortization Property and equipment are stated at cost, less accumulated depreciation or amortization,
whenever applicable. Depreciation and amortization expenses for property and equipment were approximately $0.7 billion,
$0.8 billion, and $0.8 billion for fiscal 2023, 2022, and 2021, respectively. Depreciation and amortization are computed using
the straight-line method, generally over the following periods:
Asset Category Period
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 years
Building improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 years
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shorter of remaining lease term or up to 10 years
Computer equipment and related software. . . . . . . . . . . . . . . . . . . . . . . . 30 to 36 months
Production, engineering, and other equipment . . . . . . . . . . . . . . . . . . . . Up to 5 years
Operating lease assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Based on lease term
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 years
(j) Business Combinations We allocate the fair value of the purchase consideration of our acquisitions to the tangible assets,
liabilities, and intangible assets acquired, including in-process research and development (IPR&D), based on their estimated
fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities
is recorded as goodwill. IPR&D is initially capitalized at fair value as an intangible asset with an indefinite life and assessed for
impairment thereafter. When an IPR&D project is completed, the IPR&D is reclassified as an amortizable purchased intangible
asset and amortized over the asset’s estimated useful life. Acquisition-related expenses and related restructuring costs are
recognized separately from the business combination and are expensed as incurred.
(k) Goodwill and Purchased Intangible Assets Goodwill is tested for impairment on an annual basis in the fourth fiscal
quarter and, when specific circumstances dictate, between annual tests. When impaired, the carrying value of goodwill is
written down to fair value. Identifying a potential impairment consists of comparing the fair value of a reporting unit with
its carrying amount, including goodwill. Purchased intangible assets with finite lives are carried at cost, less accumulated
amortization. Amortization is computed over the estimated useful lives of the respective assets. See “Long-Lived Assets” for our
policy regarding impairment testing of purchased intangible assets with finite lives. Purchased intangible assets with indefinite
lives are assessed for potential impairment annually or when events or circumstances indicate that their carrying amounts might
be impaired.
66
(l) Long-Lived Assets Long-lived assets that are held and used by us are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability of
long-lived assets is based on an estimate of the undiscounted future cash flows resulting from the use of the asset and its eventual
disposition. Measurement of an impairment loss for long-lived assets that management expects to hold and use is based on the
difference between the fair value of the asset and its carrying value. Long-lived assets to be disposed of are reported at the lower
of carrying amount or fair value less costs to sell.
(m) Fair Value Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. When determining the fair value measurements
for assets and liabilities required or permitted to be either recorded or disclosed at fair value, we consider the principal or most
advantageous market in which we would transact, and we also consider assumptions that market participants would use when
pricing the asset or liability.
The accounting guidance for fair value measurement requires an entity to maximize the use of observable inputs and minimize
the use of unobservable inputs when measuring fair value. The standard establishes a fair value hierarchy based on the level
of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization
within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The fair value hierarchy is as follows:
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or
liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities
in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which
significant inputs are observable or can be derived principally from, or corroborated by, observable market data. We use inputs
such as actual trade data, benchmark yields, broker/dealer quotes, and other similar data, which are obtained from quoted market
prices, independent pricing vendors, or other sources, to determine the ultimate fair value of assets or liabilities.
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant
to the measurement of the fair value of the assets or liabilities. The fair values are determined based on model-based techniques
such as discounted cash flow models using inputs that we could not corroborate with market data.
(n) Derivative Instruments We recognize derivative instruments as either assets or liabilities and measure those instruments
at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the
resulting designation. For a derivative instrument designated as a fair value hedge, the gain or loss is recognized in earnings in the
period of change together with the offsetting loss or gain on the hedged item attributed to the risk being hedged. For a derivative
instrument designated as a cash flow hedge, the gain or loss is initially reported as a component of AOCI and subsequently
reclassified into earnings when the hedged exposure affects earnings. For a derivative instrument designated as a net investment
hedge of our foreign operations, the gain or loss is recorded in the cumulative translation adjustment within AOCI together with
the offsetting loss or gain of the hedged exposure of the underlying foreign operations. For derivative instruments that are not
designated as accounting hedges, changes in fair value are recognized in earnings in the period of change. We record derivative
instruments in the statements of cash flows to operating, investing, or financing activities consistent with the cash flows of the
hedged item.
Hedge effectiveness for foreign exchange forward contracts used as cash flow hedges is assessed by comparing the change in
the fair value of the hedge contract with the change in the fair value of the forecasted cash flows of the hedged item. Hedge
effectiveness for equity forward contracts and foreign exchange net investment hedge forward contracts is assessed by comparing
changes in fair value due to changes in spot rates for both the derivative and the hedged item. For foreign exchange option
contracts, hedge effectiveness is assessed based on the hedging instrument’s entire change in fair value. Hedge effectiveness for
interest rate swaps is assessed by comparing the change in fair value of the swap with the change in the fair value of the hedged
item due to changes in the benchmark interest rate.
(o) Foreign Currency Translation Assets and liabilities of non-U.S. subsidiaries that operate in a local currency environment,
where that local currency is the functional currency, are translated to U.S. dollars at exchange rates in effect at the balance
sheet date, with the resulting translation adjustments directly recorded to a separate component of AOCI. Income and expense
accounts are translated at average exchange rates during the year. Remeasurement adjustments are recorded in other income
(loss), net.
67
(p) Concentrations of Risk Cash and cash equivalents are maintained with several financial institutions. Deposits held with
banks may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand
and are maintained with financial institutions with reputable credit and therefore bear minimal credit risk. We seek to mitigate
our credit risks by spreading such risks across multiple counterparties and monitoring the risk profiles of these counterparties.
We perform ongoing credit evaluations of our customers and, with the exception of certain financing transactions, do not require
collateral from our customers. We receive certain of our components from sole suppliers. Additionally, we rely on a limited
number of contract manufacturers and suppliers to provide manufacturing services for our products. The inability of a contract
manufacturer or supplier to fulfill our supply requirements could materially impact future operating results.
(q) Revenue Recognition We enter into contracts with customers that can include various combinations of products and
services which are generally distinct and accounted for as separate performance obligations. 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 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.
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. The allowance for future
sales returns as of July 29, 2023 and July 30, 2022 was $39 million and $43 million, respectively, and was recorded as a reduction
of our accounts receivable and 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
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.
68
(r) Advertising Costs We expense all advertising costs as incurred. Advertising costs included within sales and marketing
expenses were approximately $205 million, $219 million, and $268 million for fiscal 2023, 2022, and 2021, respectively.
(s) Share-Based Compensation Expense We measure and recognize the compensation expense for all share-based awards
made to employees and directors, including employee stock options, restricted stock units (RSUs), performance-based restricted
stock units (PRSUs), and employee stock purchases related to the Employee Stock Purchase Plan (Employee Stock Purchase
Rights) based on estimated fair values. Share-based compensation expense is reduced for forfeitures as they occur.
(t) Software Development Costs Software development costs, including costs to develop software sold, leased, or otherwise
marketed, that are incurred subsequent to the establishment of technological feasibility are capitalized. Costs incurred during
the application development stage for internal-use software and cloud-based applications are capitalized. Such software
development costs capitalized during the periods presented were not material.
(u) Income Taxes Income tax expense is based on pretax financial accounting income. Deferred tax assets and liabilities are
recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their
reported amounts. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not
be realized.
We account for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions.
The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is
more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes,
if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon
settlement. We classify the liability for unrecognized tax benefits as current to the extent that we anticipate payment (or receipt)
of cash within one year. Interest and penalties related to uncertain tax positions are recognized in the provision for income taxes.
(v) Computation of Net Income per Share Basic net income per share is computed using the weighted-average number of
common shares outstanding during the period. Diluted net income per share is computed using the weighted-average number
of common shares and dilutive potential common shares outstanding during the period. Diluted shares outstanding includes the
dilutive effect of in-the-money options, unvested restricted stock, and restricted stock units. The dilutive effect of such equity
awards is calculated based on the average share price for each fiscal period using the treasury stock method. Under the treasury
stock method, the amount the employee must pay for exercising stock options and the amount of compensation cost for future
service that we have not yet recognized are collectively assumed to be used to repurchase shares.
(w) Consolidation of Variable Interest Entities Our approach in assessing the consolidation requirement for variable interest
entities focuses on identifying which enterprise has the power to direct the activities that most significantly impact the variable
interest entity’s economic performance and which enterprise has the obligation to absorb losses or the right to receive benefits
from the variable interest entity. Should we conclude that we are the primary beneficiary of a variable interest entity, the assets,
liabilities, and results of operations of the variable interest entity will be included in our Consolidated Financial Statements.
(x) Use of Estimates The preparation of financial statements and related disclosures in conformity with accounting principles
generally accepted in the United States requires management to make estimates and judgments that affect the amounts reported
in the Consolidated Financial Statements and accompanying notes. Estimates are used for the following, among others:
▪ Revenue recognition
▪ Allowances for accounts receivable, sales returns, and financing receivables
▪ Inventory valuation and liability for purchase commitments with contract manufacturers and suppliers
▪ Loss contingencies and product warranties
▪ Fair value measurements
▪ Goodwill and purchased intangible asset impairments
▪ Income taxes
The actual results that we experience may differ materially from our estimates.
(y) Recent Accounting Standards or Updates Not Yet Effective as of Fiscal Year End
Reference Rate Reform In March 2020, the Financial Accounting Standards Board issued an accounting standard update and
subsequent amendments that provide optional expedients and exceptions to the current guidance on contract modification
and hedging relationships to ease the financial reporting burden of the expected market transition from the London InterBank
Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. This accounting standard update was
effective upon issuance and may be applied prospectively through December 31, 2024. We adopted this accounting standard
update in fiscal 2023 and it did not have a material impact on our Consolidated Financial Statements upon adoption.
69
3. Revenue
(a) Disaggregation of Revenue
We disaggregate our revenue into groups of similar products and services that depict the nature, amount, and timing of revenue
and cash flows for our various offerings. The sales cycle, contractual obligations, customer requirements, and go-to-market
strategies differ for each of our product categories, resulting in different economic risk profiles for each category.
The following table presents this disaggregation of revenue (in millions):
Yea r s Ended July 29, 2023 July 30, 2022 July 31, 2021
Product revenue:
Secure, Agile Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,105 $ 23,831 $ 22,725
Internet for the Future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,306 5,276 4,511
Collaboration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,052 4,472 4,727
End-to-End Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,859 3,699 3,382
Optimized Application Experiences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 811 729 654
Other Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 11 15
Total Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,142 38,018 36,014
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,856 13,539 13,804
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 56,998 $ 51,557 $ 49,818
Amounts may not sum due to rounding. We have made certain reclassifications to the product revenue amounts for prior periods
to conform to the current year presentation.
Secure, Agile Networks consists of our core networking technologies of switching, enterprise routing, wireless, and compute
products. These technologies consist of both hardware and software offerings, including software licenses and SaaS, that help
our customers build networks, automate, orchestrate, integrate, and digitize data. 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.
Internet for the Future consists of our routed optical networking, 5G, silicon, and optics solutions. These products consist
primarily 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.
Collaboration consists of our Meetings, Collaboration Devices, Calling, Contact Center and CPaaS offerings. These products
consist primarily of software offerings, including software licenses and SaaS, as well as hardware. Our perpetual software and
hardware in this category are distinct performance obligations where revenue is recognized upfront upon transfer of control. Term
software licenses are multiple performance obligations where the term license is recognized upfront upon transfer of control with
the associated software maintenance revenue recognized ratably over the contract term. SaaS arrangements in this category have
one distinct performance obligation which is satisfied over time with revenue recognized ratably over the contract term.
End-to-End Security consists of our Cloud and Application Security, Industrial Security, Network Security, and User and
Device Security 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.
Note 3: Revenue
70
Optimized Application Experiences consists of our full stack observability and network assurance 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 all of our hardware, software and service offerings. Refer to Note 9 for additional information.
For these arrangements, cash is typically received over time.
(b) Contract Balances
Accounts Receivable
Accounts receivable, net was $5.9 billion as of July 29, 2023 compared to $6.6 billion as of July 30, 2022, as reported on the
Consolidated Balance Sheets.
The allowances for credit loss for our accounts receivable are summarized as follows (in millions):
July 29, 2023 July 30, 2022 July 31, 2021
Allowance for credit loss at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 83 $ 109 $ 143
Provisions (benefits) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 64 21
Recoveries (write-offs), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (37) (81) (29)
Foreign exchange and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (9) (26)
Allowance for credit loss at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 85 $ 83 $ 109
Contract Assets and Liabilities
Gross contract assets by our internal risk ratings are summarized as follows (in millions):
July 29, 2023 July 30, 2022
1 to 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 672 $ 414
5 to 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 954 814
7 and Higher . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 158
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,686 $ 1,386
Contract assets consist of unbilled receivables and are recorded when revenue is recognized in advance of scheduled billings to
our customers. These amounts are primarily related to software and service arrangements where transfer of control has occurred
but we have not yet invoiced. As of July 29, 2023 and July 30, 2022, our contract assets for these unbilled receivables, net of
allowances, were $1.6 billion and $1.3 billion, respectively, and were included in other current assets and other assets.
Contract liabilities consist of deferred revenue. Deferred revenue was $25.6 billion as of July 29, 2023 compared to $23.3 billion
as of July 30, 2022. We recognized approximately $12.7 billion of revenue during fiscal 2023 that was included in the deferred
revenue balance at July 30, 2022.
(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. Deferred sales commissions were $1.1 billion and $1.0 billion as of July 29, 2023 and July 30, 2022,
respectively, and were included in other current assets and other assets. The amortization expense associated with these costs
was $723 million and $679 million for fiscal 2023 and 2022, respectively, and was included in sales and marketing expenses.
71
4. Acquisitions and Divestitures
(a) Acquisition Summary
We completed five acquisitions during fiscal 2023. A summary of the allocation of the total purchase consideration is presented
as follows (in millions):
Fiscal 2023
Purchase
Consideration
Net Tangible
Assets
Acquired
(Liabilities
Assumed)
Purchased
Intangible
Assets Goodwill
Total acquisitions (five in total) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 315 $ (18) $ 150 $ 183
The total purchase consideration related to our acquisitions completed during fiscal 2023 consisted primarily of cash
consideration. The total cash and cash equivalents acquired from these acquisitions was approximately $7 million.
Fiscal 2022 Acquisitions
Allocation of the purchase consideration for acquisitions completed in fiscal 2022 is summarized as follows (in millions):
Fiscal 2022
Purchase
Consideration
Net Tangible
Assets
Acquired
(Liabilities
Assumed)
Purchased
Intangible
Assets Goodwill
Total acquisitions (three in total) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 364 $ 12 $ 20 $ 332
The total purchase consideration related to our acquisitions completed during fiscal 2022 consisted of cash consideration and
vested share-based awards assumed. The total cash and cash equivalents acquired from these acquisitions was approximately
$7 million.
Fiscal 2021 Acquisitions
In fiscal 2021, we completed 13 acquisitions for total purchase consideration of $7.5 billion.
(b) Other Acquisition and Divestiture Information
Total transaction costs related to acquisition and divestiture activities during fiscal 2023, 2022, and 2021 were $26 million,
$50 million, and $46 million, respectively. These transaction costs were expensed as incurred in G&A expenses in the
Consolidated Statements of Operations.
The goodwill generated from acquisitions completed during fiscal 2023 is primarily related to expected synergies. The goodwill
is generally not deductible for income tax purposes.
The Consolidated Financial Statements include the operating results of each acquisition from the date of acquisition. Pro
forma results of operations and the revenue and net income subsequent to the acquisition date for the acquisitions completed
during fiscal 2023, 2022, and 2021 have not been presented because the effects of the acquisitions were not material to our
financial results.
Note 4: Acquisitions and Divestitures
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5. Goodwill and Purchased Intangible Assets
(a) Goodwill
The following tables present the goodwill allocated to our reportable segments as of July 29, 2023 and July 30, 2022, as well as
the changes to goodwill during fiscal 2023 and 2022 (in millions):
Balance at
July 30, 2022 Acquisitions
Foreign
Currency
Translation
and Other
Balance at
July 29, 2023
Americas ............................................ $ 23,882 $ 123 $ 30 $ 24,035
EMEA .............................................. 9,062 44 12 9,118
APJC ............................................... 5,360 16 6 5,382
Tota l ............................................. $ 38,304 $ 183 $ 48 $ 38,535
Balance at
July 31, 2021 Acquisitions
Foreign
Currency
Translation
and Other
Balance at
July 30, 2022
Americas ............................................ $ 23,673 $ 222 $ (13) $ 23,882
EMEA .............................................. 9,094 83 (115) 9,062
APJC ............................................... 5,401 27 (68) 5,360
Total ............................................. $ 38,168 $ 332 $ (196) $ 38,304
(b) Purchased Intangible Assets
The following tables present details of our intangible assets acquired through acquisitions completed during fiscal 2023 and
2022 (in millions, except years):
FINITE LIVES
INDEFINITE
LIVES
TECHNOLOGY
CUSTOMER
RELATIONSHIPS IPR&D TOTAL
Fiscal 2023
Weighted-
Average Useful
Life (in Years) Amount
Weighted-
Average Useful
Life (in Years) Amount Amount Amount
Total acquisitions (five in total) . . . . . . . . . . . . . . . . 3.7 $ 138 1.8 $ 12 $ — $ 150
FINITE LIVES
INDEFINITE
LIVES
TECHNOLOGY
CUSTOMER
RELATIONSHIPS IPR&D TOTAL
Fiscal 2022
Weighted-
Average Useful
Life (in Years) Amount
Weighted-
Average Useful
Life (in Years) Amount Amount Amount
Total acquisitions (three in total) . . . . . . . . . . . . . . . 2.7 $ 16 2.0 $ 4 $ — $ 20
The following tables present details of our purchased intangible assets (in millions):
July 29, 2023 Gross
Accumulated
Amortization Net
Purchased intangible assets with finite lives:
Technolog y . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,998 $ (1,691) $ 1,307
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,228 (905) 323
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 (22) 18
Total purchased intangible assets with finite lives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,266 (2,618) 1,648
In-process research and development, with indefinite lives . . . . . . . . . . . . . . . . . . . . . 170 — 170
Tota l . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,436 $ (2,618) $ 1,818
Note 5: Goodwill and Purchased Intangible Assets
73
July 30, 2022 Gross
Accumulated
Amortization Net
Purchased intangible assets with finite lives:
Tech nology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,631 $ (1,102) $ 1,529
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,354 (769) 585
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 (16) 25
Total purchased intangible assets with finite lives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,026 (1,887) 2,139
In-process research and development, with indefinite lives . . . . . . . . . . . . . . . . . . . . . . . 430 — 430
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,456 $ (1,887) $ 2,569
Purchased intangible assets include intangible assets acquired through acquisitions as well as through direct purchases or licenses.
The following table presents the amortization of purchased intangible assets, including impairment charges (in millions):
Yea r s Ended July 29, 2023 July 30, 2022 July 31, 2021
Amortization of purchased intangible assets:
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 649 $ 749 $ 716
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 282 328 215
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 931 $ 1,077 $ 931
The estimated future amortization expense of purchased intangible assets with finite lives as of July 29, 2023 is as follows
(in millions):
Fiscal Year Amount
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 875
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 502
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 154
2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 78
2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 39
6. Restructuring and Other Charges
In the second quarter of fiscal 2023, we announced a restructuring plan (the “Fiscal 2023 Plan”), in order to rebalance the
organization and enable further investment in key priority areas, of which approximately 5% of the global workforce would be
impacted. The total pretax charges are estimated to be approximately $700 million. This rebalancing includes talent movement
options and restructuring. Additionally, we have begun optimizing our real estate portfolio, aligned to the broader hybrid work
strategy. In connection with the Fiscal 2023 Plan, we incurred charges of $535 million in fiscal 2023. These aggregate pretax
charges will be primarily cash-based and will consist of severance and other one-time termination benefits, real estate-related
charges, and other costs. We expect the plan to be substantially completed by the end of the first quarter of fiscal 2024.
We initiated a restructuring plan in fiscal 2021 (the “Fiscal 2021 Plan”), which was completed in fiscal 2022. In connection with
the Fiscal 2021 Plan, we incurred cumulative charges of $892 million. The aggregate pretax charges related to this plan were
primarily cash-based and consist of severance and other one-time termination benefits, and other costs.
Note 6: Restructuring and Other Charges
74
The following table summarizes the activities related to the restructuring and other charges, as discussed above (in millions):
FISCAL 2023 PLAN
FISCAL 2021 AND
PRIOR PLANS
Employee
Severance Other
Employee
Severance Other Tot al
Liability as of July 25, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ — $ 58 $ 14 $ 72
Charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 836 50 886
Cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (879) (11) (890)
Non-cash items. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 1 (35) (34)
Liability as of July 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 16 18 34
Charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 9 (3) 6
Cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (23) (2) (25)
Non-cash items. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — (6) (6)
Liability as of July 30, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 2 7 9
Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 465 70 — (4) 531
Cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (301) (11) (1) (1) (314)
Non-cash items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 (15) — — (13)
Liability as of July 29, 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 166 $ 44 $ 1 $ 2 $ 213
7. Balance Sheet and Other Details
The following tables provide details of selected balance sheet and other items (in millions):
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents
July 29, 2023 July 30, 2022
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,123 $ 7,079
Restricted cash and restricted cash equivalents included in other current assets. . . . . . . . . . . . . . . . . . 191 —
Restricted cash and restricted cash equivalents included in other assets . . . . . . . . . . . . . . . . . . . . . . . . 1,313 1,500
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,627 $ 8,579
Our restricted cash and restricted cash equivalents are funds primarily related to contractual obligations with suppliers.
Inventories
July 29, 2023 July 30, 2022
Raw materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,685 $ 1,601
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 264 150
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,493 717
Service-related spares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186 90
Demonstration systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 10
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,644 $ 2,568
Property and Equipment, Net
July 29, 2023 July 30, 2022
Gross property and equipment:
Land, buildings, and building and leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,229 $ 4,219
Computer equipment and related software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 744 779
Production, engineering, and other equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,611 4,647
Operating lease assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135 185
Furniture, fixtures and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 339 335
Total gross property and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,058 10,165
Less: accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,973) (8,168)
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,085 $ 1,997
Note 7: Balance Sheet and Other Details
75
Remaining Performance Obligations (RPO)
July 29, 2023 July 30, 2022
Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,802 $ 14,090
Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,066 17,449
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,868 $ 31,539
Short-term RPO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
17,910
$ 16,936
Long-term RPO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,958 14,603
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,868 $ 31,539
Amount to be recognized as revenue over the next 12 months . . . . . . . . . . . . . . . . . . . . . . . . . . . .
51%
54 %
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
25,550
$ 23,264
Unbilled contract revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,318 8,275
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,868 $ 31,539
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
July 29, 2023 July 30, 2022
Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,505 $ 10,427
Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,045 12,837
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,550 $ 23,264
Reported as:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,908 $ 12,784
Noncurrent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,642 10,480
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,550 $ 23,264
Transition Tax Payable
Our income tax payable associated with the one-time U.S. transition tax on accumulated earnings for foreign subsidiaries as a
result of the Tax Act is as follows (in millions):
July 29, 2023 July 30, 2022
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,364 $ 727
Noncurrent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,092 5,456
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,456 $ 6,183
8. Leases
(a) Lessee Arrangements
The following table presents our operating lease balances (in millions):
Balance Sheet Line Item July 29, 2023 July 30, 2022
Operating lease right-of-use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets $ 971 $ 1,003
Operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other current liabilities $ 313 $ 322
Operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other long-term liabilities 707 724
Total operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,020 $ 1,046
Note 8: Leases
76
The components of our lease expenses were as follows (in millions):
Yea r s Ended July 29, 2023 July 30, 2022
Operating lease expense � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 425 $ 390
Short-term lease expense � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 65 66
Variable lease expense � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 242 173
Total lease expense � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 732 $ 629
Supplemental information related to our operating leases is as follows (in millions):
Yea r s Ended July 29, 2023 July 30, 2022
Cash paid for amounts included in the measurement of lease liabilities — operating cash flows � � � � � $ 387 $ 408
Right-of-use assets obtained in exchange for operating leases liabilities � � � � � � � � � � � � � � � � � � � � � � � � $ 326 $ 331
The weighted-average lease term was 4�6 years and 4�7 years as of July 29, 2023 and July 30, 2022, respectively� The weighted-
average discount rate was 3�1% and 2�2% as of July 29, 2023 and July 30, 2022, respectively�
The maturities of our operating leases (undiscounted) as of July 29, 2023 are as follows (in millions):
Fiscal Year Amount
2024 � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 341
2025 � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 259
2026 � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 167
2027 � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 99
2028 � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 73
Thereafter � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 177
Total lease payments � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 1,116
Less interest� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � (96)
Total � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 1,020
(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 for fiscal 2023 and 2022 was $51 million and $54 million,
respectively, and was included in interest income in the Consolidated Statement of Operations� The net investment of our lease
receivables is measured at the commencement date as the gross lease receivable, residual value less unearned income and
allowance for credit loss� For additional information, see Note 9�
Future minimum lease payments on our lease receivables as of July 29, 2023 are summarized as follows (in millions):
Fiscal Year Amount
2024 � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 371
2025 � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 221
2026 � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 167
2027 � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 147
2028 � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 100
Thereafter � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 9
Total � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 1,015
Less: Present value of lease payments � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 927
Unearned income � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 88
Actual cash collections may differ from the contractual maturities due to early customer buyouts, refinancings, or defaults�
77
We provide financing of certain equipment through operating leases, and the amounts are included in property and equipment
in the Consolidated Balance Sheets� Amounts relating to equipment on operating lease assets held by us and the associated
accumulated depreciation are summarized as follows (in millions):
July 29, 2023 July 30, 2022
Operating lease assets � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 135 $ 185
Accumulated depreciation� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � (78) (111)
Operating lease assets, net� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 57 $ 74
Our operating lease income for fiscal 2023 and 2022 was $73 million and $107 million, respectively, and was included in product
revenue in the Consolidated Statement of Operations�
Minimum future rentals on noncancelable operating leases as of July 29, 2023 are summarized as follows (in millions):
Fiscal Year Amount
2024 � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 25
2025 � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 12
2026 � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 6
Total � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 43
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�
A summary of our financing receivables is presented as follows (in millions):
July 29, 2023
Loan
Receivables
Lease
Receivables Total
Gross � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 5,910 $ 1,015 $ 6,925
Residual value � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � — 70 70
Unearned income � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � — (88) (88)
Allowance for credit loss � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � (53) (19) (72)
Tota l, net � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 5,857 $ 978 $ 6,835
Reported as:
Current � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 2,988 $ 364 $ 3,352
Noncurrent � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 2,869 614 3,483
Tota l, net � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 5,857 $ 978 $ 6,835
July 30, 2022
Loan
Receivables
Lease
Receivables Tot al
Gross � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 6,842 $ 1,176 $ 8,018
Residual value � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � — 76 76
Unearned income� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � — (54) (54)
Allowance for credit loss � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � (103) (23) (126)
Total, net � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 6,739 $ 1,175 $ 7,914
Reported as:
Current � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 3,327 $ 578 $ 3,905
Noncurrent � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 3,412 597 4,009
Total, net � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 6,739 $ 1,175 $ 7,914
Note 9: Financing Receivables
78
(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):
July 29, 2023 Fiscal Year
July 27, July 25, July 31, July 30, July 29,
Internal Credit Risk Rating Prior 2019 2020 2021 2022 2023 Total
Loan Receivables:
1 to 4� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 10 $ 53 $ 251 $ 791 $ 1,077 $ 1,784 $ 3,966
5 to 6� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 3 14 131 287 465 936 1,836
7 and Higher � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 1 7 15 17 29 39 108
Total Loan Receivables � � � � � � � � � � � � � � � � � � � � � � � $ 14 $ 74 $ 397 $ 1,095 $ 1,571 $ 2,759 $ 5,910
Lease Receivables:
1 to 4� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 2 $ 20 $ 57 $ 111 $ 84 $ 235 $ 509
5 to 6� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 2 13 44 58 87 191 395
7 and Higher � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � — 1 2 4 5 11 23
Total Lease Receivables � � � � � � � � � � � � � � � � � � � � � � � $ 4 $ 34 $ 103 $ 173 $ 176 $ 437 $ 927
Tota l � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 18 $ 108 $ 500 $ 1,268 $ 1,747 $ 3,196 $ 6,837
July 30, 2022 Fiscal Year
July 28, July 27, July 25, July 31, July 30,
Internal Credit Risk Rating Prior 2018 2019 2020 2021 2022 Total
Loan Receivables:
1 to 4� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 2 $ 49 $ 173 $ 536 $ 1,458 $ 2,287 $ 4,505
5 to 6� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 1 17 115 345 709 1,030 2,217
7 and Higher� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 1 1 22 45 39 12 120
Total Loan Receivables � � � � � � � � � � � � � � � � � � � � � � � � $ 4 $ 67 $ 310 $ 926 $ 2,206 $ 3,329 $ 6,842
Lease Receivables:
1 to 4� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 2 $ 25 $ 74 $ 124 $ 176 $ 152 $ 553
5 to 6� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 1 10 67 146 165 151 540
7 and Higher� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � — 1 4 12 2 10 29
Total Lease Receivables � � � � � � � � � � � � � � � � � � � � � � � � $ 3 $ 36 $ 145 $ 282 $ 343 $ 313 $ 1,122
Total � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 7 $ 103 $ 455 $ 1,208 $ 2,549 $ 3,642 $ 7,964
The following tables present the aging analysis of gross receivables as of July 29, 2023 and July 30, 2022 (in millions):
DAYS PAST DUE
(INCLUDES BILLED AND UNBILLED)
July 29, 2023 31 - 60 61 - 90 91+
Tot a l
Past Due Current Tota l
120+ Still
Accruing
Nonaccrual
Financing
Receivables
Impaired
Financing
Receivables
Loan receivables� � � � � � � � � $ 47 $ 20 $ 37 $ 104 $ 5,806 $ 5,910 $ 17 $ 12 $ 12
Lease receivables � � � � � � � � 16 4 23 43 884 927 6 3 3
Tota l � � � � � � � � � � � � � � � � $ 63 $ 24 $ 60 $ 147 $ 6,690 $ 6,837 $ 23 $ 15 $ 15
DAYS PAST DUE
(INCLUDES BILLED AND UNBILLED)
July 30, 2022 31 - 60 61 - 90 91+
Tot al
Past Due Current Total
120+ Still
Accruing
Nonaccrual
Financing
Receivables
Impaired
Financing
Receivables
Loan receivables � � � � � � � � � $ 98 $ 62 $ 129 $ 289 $ 6,553 $ 6,842 $ 14 $ 60 $ 60
Lease receivables � � � � � � � � � 8 6 26 40 1,082 1,122 7 11 11
Total � � � � � � � � � � � � � � � � $ 106 $ 68 $ 155 $ 329 $ 7,635 $ 7,964 $ 21 $ 71 $ 71
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�
79
(c) Allowance for Credit Loss Rollforward
The allowances for credit loss and the related financing receivables are summarized as follows (in millions):
CREDIT LOSS ALLOWANCES
Loan
Receivables
Lease
Receivables Tota l
Allowance for credit loss as of July 30, 2022 � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 103 $ 23 $ 126
Provisions (benefits) � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � (7) (1) (8)
Recoveries (write-offs), net � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � (38) (3) (41)
Foreign exchange and other � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � (5) — (5)
Allowance for credit loss as of July 29, 2023 � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 53 $ 19 $ 72
CREDIT LOSS ALLOWANCES
Loan
Receivables
Lease
Receivables Total
Allowance for credit loss as of July 31, 2021 � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 89 $ 38 $ 127
Provisions (benefits) � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 4 (13) (9)
Recoveries (write-offs), net � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � — (2) (2)
Foreign exchange and other � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 10 — 10
Allowance for credit loss as of July 30, 2022 � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 103 $ 23 $ 126
CREDIT LOSS ALLOWANCES
Loan
Receivables
Lease
Receivables Total
Allowance for credit loss as of July 25, 2020 � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 90 $ 48 $ 138
Provisions (benefits) � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � (17) (10) (27)
Recoveries (write-offs), net � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � (1) (1) (2)
Foreign exchange and other � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 17 1 18
Allowance for credit loss as of July 31, 2021 � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 89 $ 38 $ 127
80
10. Investments
(a) Summary of Available-for-Sale Debt Investments
The following tables summarize our available-for-sale debt investments (in millions):
July 29, 2023
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
and Credit
Losses
Fair
Value
U.S. government securities � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 3,587 $ 1 $ (62) $ 3,526
U.S. government agency securities � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 428 — (5) 423
Non-U.S. government and agency securities � � � � � � � � � � � � � � � � � � � � � � 364 — (1) 363
Corporate debt securities � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 7,238 3 (327) 6,914
U.S. agency mortgage-backed securities � � � � � � � � � � � � � � � � � � � � � � � � � 2,421 14 (230) 2,205
Commercial paper � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 1,484 — — 1,484
Certificates of deposit � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 677 — — 677
Tota l � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 16,199 $ 18 $ (625) $ 15,592
July 30, 2022
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
and Credit
Losses
Fair
Value
U�S� government securities � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 1,287 $ — $ (49) $ 1,238
U�S� government agency securities � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 142 — (4) 138
Non-U�S� government and agency securities� � � � � � � � � � � � � � � � � � � � � � � � 272 — — 272
Corporate debt securities � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 8,127 2 (311) 7,818
U�S� agency mortgage-backed securities� � � � � � � � � � � � � � � � � � � � � � � � � � � 2,134 — (158) 1,976
Commercial paper � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 255 — — 255
Certificates of deposit � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 250 — — 250
Total � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 12,467 $ 2 $ (522) $ 11,947
The following table presents the gross realized gains and gross realized losses related to available-for-sale debt investments
(in millions):
Yea r s Ended July 29, 2023 July 30, 2022 July 31, 2021
Gross realized gains � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 4 $ 27 $ 55
Gross realized losses � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � (25) (18) (2)
Total � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ (21) $ 9 $ 53
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 July 29, 2023 and July 30, 2022 (in millions):
UNREALIZED LOSSES
LESS THAN 12 MONTHS
UNREALIZED LOSSES
12 MONTHS OR GREATER TOTAL
July 29, 2023 Fair Value
Gross
Unrealized
Losses Fair Value
Gross
Unrealized
Losses Fair Value
Gross
Unrealized
Losses
U.S. government securities � � � � � � � � � � � � � � $ 2,394 $ (26) $ 931 $ (36) $ 3,325 $ (62)
U.S. government agency securities � � � � � � � � 343 (2) 72 (3) 415 (5)
Non-U.S. government and agency
securities � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 363 (1) — — 363 (1)
Corporate debt securities � � � � � � � � � � � � � � � 1,736 (22) 4,315 (275) 6,051 (297)
U.S. agency mortgage-backed securities � � � 658 (13) 1,438 (217) 2,096 (230)
Commercial paper � � � � � � � � � � � � � � � � � � � � � 97 — — — 97 —
Certificates of deposit � � � � � � � � � � � � � � � � � � 2 — — — 2 —
Tota l � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 5,593 $ (64) $ 6,756 $ (531) $ 12,349 $ (595)
Note 10: Investments
81
UNREALIZED LOSSES
LESS THAN 12 MONTHS
UNREALIZED LOSSES
12 MONTHS OR GREATER TOTAL
July 30, 2022 Fair Value
Gross
Unrealized
Losses Fair Value
Gross
Unrealized
Losses Fair Value
Gross
Unrealized
Losses
U�S� government securities � � � � � � � � � � � � � � � $ 1,110 $ (44) $ 120 $ (5) $ 1,230 $ (49)
U�S� government agency securities�� � � � � � � � � 114 (2) 24 (2) 138 (4)
Non-U�S� government and agency securities� � 264 — — — 264 —
Corporate debt securities � � � � � � � � � � � � � � � � � 6,920 (240) 422 (37) 7,342 (277)
U�S� agency mortgage-backed securities� � � � � 1,305 (96) 615 (62) 1,920 (158)
Total � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 9,713 $ (382) $ 1,181 $ (106) $ 10,894 $ (488)
The following table summarizes the maturities of our available-for-sale debt investments as of July 29, 2023 (in millions):
Amortized Cost Fair Value
Within 1 year � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 5,510 $ 5,462
After 1 year through 5 years � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 8,197 7,856
After 5 years through 10 years � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 69 67
After 10 years � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 2 2
Mortgage-backed securities with no single maturity � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 2,421 2,205
Total � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 16,199 $ 15,592
Actual maturities may differ from the contractual maturities because borrowers may have the right to call or prepay
certain obligations�
(b) Summary of Equity Investments
We held marketable equity securities of $431 million and $241 million as of July 29, 2023 and July 30, 2022, respectively� We
recognized a net unrealized gain of $36 million during fiscal 2023 and a net unrealized loss of $38 million during fiscal 2022 on
our marketable securities still held as of the reporting date� Our net adjustments to non-marketable equity securities measured
using the measurement alternative still held was a net loss of $8 million and a net gain of $32 million for fiscal 2023 and 2022,
respectively� We held equity interests in certain private equity funds of $0�9 billion and $1�1 billion as of July 29, 2023 and
July 30, 2022, respectively, which are accounted for under the NAV practical expedient�
In the ordinary course of business, we have investments in privately held companies and provide financing to certain customers�
These privately held companies and customers are evaluated for consolidation under the variable interest or voting interest entity
models� We evaluate on an ongoing basis our investments in these privately held companies and our customer financings, and
have determined that as of July 29, 2023, there were no additional significant variable interest or voting interest entities required
to be consolidated in our Consolidated Financial Statements�
As of July 29, 2023, the carrying value of our investments in privately held companies was $1�8 billion� Of the total carrying
value of our investments in privately held companies as of July 29, 2023, $1�0 billion of such investments are considered to be in
variable interest entities which are unconsolidated� We have total funding commitments of $0�3 billion related to privately held
investments, some of which may be based on the achievement of certain agreed-upon milestones or are required to be funded on
demand� The carrying value of these investments and the additional funding commitments, collectively, represent our maximum
exposure related to privately held investments�
82
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):
JULY 29, 2023
FAIR VALUE MEASUREMENTS
JULY 30, 2022
FAIR VALUE MEASUREMENTS
Level 1 Level 2
Tot a l
Balance Level 1 Level 2
Tot al
Balance
Assets:
Cash equivalents:
Money market funds � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 6,496 $ — $ 6,496 $ 3,930 $ — $ 3,930
Commercial paper � � � � � � � � � � � � � � � � � � � � � � � � � � � � � — 1,090 1,090 — 72 72
Certificates of deposit � � � � � � � � � � � � � � � � � � � � � � � � � � — 47 47 — 32 32
Corporate debt securities � � � � � � � � � � � � � � � � � � � � � � � � — 25 25 — 1 1
U�S� government securities � � � � � � � � � � � � � � � � � � � � � � — — — — 12 12
Available-for-sale debt investments:
U�S� government securities � � � � � � � � � � � � � � � � � � � � � � — 3,526 3,526 — 1,238 1,238
U�S� government agency securities � � � � � � � � � � � � � � � � — 423 423 — 138 138
Non-U�S� government and agency securities� � � � � � � � � — 363 363 — 272 272
Corporate debt securities � � � � � � � � � � � � � � � � � � � � � � � � — 6,914 6,914 — 7,818 7,818
U�S� agency mortgage-backed securities� � � � � � � � � � � � — 2,205 2,205 — 1,976 1,976
Commercial paper � � � � � � � � � � � � � � � � � � � � � � � � � � � � � — 1,484 1,484 — 255 255
Certificates of deposit � � � � � � � � � � � � � � � � � � � � � � � � � � — 677 677 — 250 250
Equity investments:
Marketable equity securities � � � � � � � � � � � � � � � � � � � � � 431 — 431 241 — 241
Other current assets:
Money market funds � � � � � � � � � � � � � � � � � � � � � � � � � � � 188 — 188 — — —
Other assets:
Money market funds � � � � � � � � � � � � � � � � � � � � � � � � � � � 1,313 — 1,313 1,500 — 1,500
Derivative assets � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � — 32 32 — 78 78
Total � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 8,428 $ 16,786 $ 25,214 $ 5,671 $ 12,142 $ 17,813
Liabilities:
Derivative liabilities� � � � � � � � � � � � � � � � � � � � � � � � � � � � $ — $ 75 $ 75 $ — $ 89 $ 89
Total � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ — $ 75 $ 75 $ — $ 89 $ 89
(b) Assets Measured at Fair Value on a Nonrecurring Basis
Our non-marketable equity securities using the measurement alternative are adjusted to fair value on a non-recurring basis�
Adjustments are made when observable transactions for identical or similar investments of the same issuer occur, or due to
impairment� These securities are classified as Level 3 in the fair value hierarchy because we estimate the value based on
valuation methods using the observable transaction price at the transaction date and other unobservable inputs such as volatility,
rights, and obligations of the securities we hold�
Note 11: Fair Value
83
(c) Other Fair Value Disclosures
The fair value of our short-term loan receivables approximates their carrying value due to their short duration� The aggregate
carrying value of our long-term loan receivables as of July 29, 2023 and July 30, 2022 was $2�9 billion and $3�4 billion,
respectively� The estimated fair value of our long-term loan receivables approximates their carrying value� We use unobservable
inputs in determining discounted cash flows to estimate the fair value of our long-term loan receivables, and therefore they are
categorized as Level 3�
As of July 29, 2023 and July 30, 2022, the estimated fair value of our short-term debt approximates its carrying value due to the
short maturities� As of July 29, 2023, the fair value of our senior notes was $8�7 billion, with a carrying amount of $8�4 billion�
This compares to a fair value of $9�7 billion and a carrying amount of $8�9 billion as of July 30, 2022� The fair value of the senior
notes was determined based on observable market prices in a less active market and was categorized as Level 2�
12. Borrowings
(a) Short-Term Debt
The following table summarizes our short-term debt (in millions, except percentages):
July 29, 2023 July 30, 2022
Amount Effective Rate
Amount Effective Rate
Current portion of long-term debt � � � � � � � � � � � � � � $ 1,733 4.45% $ 499 2�68%
Commercial paper � � � � � � � � � � � � � � � � � � � � � � � � � �
— —
600 2�05%
Total � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 1,733 $ 1,099
We have a short-term debt financing program of up to $10�0 billion through the issuance of commercial paper notes� We use the
proceeds from the issuance of commercial paper notes for general corporate purposes�
The effective rates for the short- and long-term debt include the interest on the notes, the accretion of the discount, the issuance
costs, and, if applicable, adjustments related to hedging�
(b) Long-Term Debt
The following table summarizes our long-term debt (in millions, except percentages):
July 29, 2023 July 30, 2022
Maturity Date Amount Effective Rate Amount Effective Rate
Senior notes:
Fixed-rate notes:
2�60% � � � � � � � � � � � � � � � � � � � � � � � � � February 28, 2023 $ — — $ 500 2�68%
2�20% � � � � � � � � � � � � � � � � � � � � � � � � � September 20, 2023 750 2.27% 750 2�27%
3�625% � � � � � � � � � � � � � � � � � � � � � � � � March 4, 2024 1,000 6.08% 1,000 2�69%
3�50% � � � � � � � � � � � � � � � � � � � � � � � � � June 15, 2025 500 6.38% 500 3�20%
2�95% � � � � � � � � � � � � � � � � � � � � � � � � � February 28, 2026 750 3.01% 750 3�01%
2�50% � � � � � � � � � � � � � � � � � � � � � � � � � September 20, 2026 1,500 2.55% 1,500 2�55%
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%
Total � � � � � � � � � � � � � � � � � � � � � � � 8,500 9,000
Unaccreted discount/issuance costs � � � � � � � (68) (75)
Hedge accounting fair value adjustments � � � (41) (10)
Total � � � � � � � � � � � � � � � � � � � � � � � $ 8,391 $ 8,915
Reported as:
Short-term debt � � � � � � � � � � � � � � � � � � � � � � � $ 1,733 $ 499
Long-term debt � � � � � � � � � � � � � � � � � � � � � � � 6,658 8,416
Total � � � � � � � � � � � � � � � � � � � � � � � $ 8,391 $ 8,915
Note 12: Borrowings
84
We have entered into interest rate swaps in prior periods with an aggregate notional amount of $1�5 billion designated as fair
value hedges of certain of our fixed-rate senior notes� These swaps convert the fixed interest rates of the fixed-rate notes
to floating interest rates based on SOFR� The gains and losses related to changes in the fair value of the interest rate swaps
substantially offset changes in the fair value of the hedged portion of the underlying debt that are attributable to the changes in
market interest rates� For additional information, see Note 13�
Interest is payable semiannually on each class of the senior fixed-rate notes� Each of the senior fixed-rate notes is redeemable
by us at any time, subject to a make-whole premium� The senior notes rank at par with the commercial paper notes that may be
issued in the future pursuant to our short-term debt financing program, as discussed above under “(a) Short-Term Debt�” As of
July 29, 2023, we were in compliance with all debt covenants�
As of July 29, 2023, future principal payments for long-term debt, including the current portion, are summarized as follows
(in millions):
Fiscal Year Amount
2024 � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 1,750
2025 � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 500
2026 � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 750
2027 � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 1,500
Thereafter � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 4,000
Total � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 8,500
(c) Credit Facility
On May 13, 2021, we entered into a 5-year credit agreement with certain institutional lenders that provides for a $3�0 billion
unsecured revolving credit facility that is scheduled to expire on May 13, 2026� As of July 29, 2023, we were in compliance with
the required interest coverage ratio and the other covenants, and we had not borrowed any funds under the credit agreement� On
April 18, 2023, we entered into an amendment to the credit agreement to replace the LIBOR index with Term SOFR�
Any advances under the 5-year credit agreement will accrue interest at rates that are equal to, based on certain conditions,
either (a) with respect to loans in U�S� dollars, (i) Term SOFR (plus a 0�10% credit spread adjustment) or (ii) the Base Rate (to
be defined as the highest of (x) the Bank of America prime rate, (y) the Federal Funds rate plus 0�50% and (z) Term SOFR plus
1�0%), (b) with respect to loans in Euros, EURIBOR, (c) with respect to loans in Yen, TIBOR and (d) with respect to loans
in Pounds Sterling, SONIA, plus a margin that is based on our senior debt credit ratings as published by Standard & Poor’s
Financial Services, LLC and Moody’s Investors Service, Inc�, provided that in no event will the interest rate be less than 0�0%�
We will pay a quarterly commitment fee during the term of the 5-year credit agreement which may vary depending on our senior
debt credit ratings� In addition, the 5-year credit agreement incorporates certain sustainability-linked metrics� Specifically, our
applicable interest rate and commitment fee are subject to upward or downward adjustments if we achieve, or fail to achieve,
certain specified targets based on two key performance indicator metrics: (i) social impact and (ii) foam reduction� We may also,
upon the agreement of either the then-existing lenders or additional lenders not currently parties to the agreement, increase the
commitments under the credit facility by up to an additional $2�0 billion and, at our option, extend the maturity of the facility
for an additional year up to two times� The credit agreement requires that we comply with certain covenants, including that we
maintain an interest coverage ratio as defined in the 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 do, however, 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 this type of credit risk is monitored� Management does not expect material losses as
a result of defaults by counterparties�
Note 13: Derivative Instruments
85
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
July 29,
2023
July 30,
2022 Balance Sheet Line Item
July 29,
2023
July 30,
2022
Derivatives designated as hedging instruments:
Foreign currency derivatives � � � � � � � � � � � � � � � � � � Other current assets $ 22 $ 55 Other current liabilities $ — $ —
Foreign currency derivatives � � � � � � � � � � � � � � � � � � Other assets 9 9 Other long-term liabilities — —
Interest rate derivatives � � � � � � � � � � � � � � � � � � � � � � Other current assets — — Other current liabilities 17 —
Interest rate derivatives � � � � � � � � � � � � � � � � � � � � � � Other assets — — Other long-term liabilities 24 10
Tot al � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 31 64 41 10
Derivatives not designated as hedging instruments:
Foreign currency derivatives � � � � � � � � � � � � � � � � � � Other current assets 1 14 Other current liabilities 25 69
Foreign currency derivatives � � � � � � � � � � � � � � � � � � Other assets — — Other long-term liabilities 9 9
Equity derivatives � � � � � � � � � � � � � � � � � � � � � � � � � � Other current assets — — Other current liabilities — 1
Tot al � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 1 14 34 79
Tot al � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 32 $ 78 $ 75 $ 89
The following amounts were recorded on the Consolidated Balance Sheets related to cumulative basis adjustments for our fair
value hedges (in millions):
CARRYING AMOUNT OF
THE HEDGED ASSETS/
(LIABILITIES)
CUMULATIVE AMOUNT
OF FAIR VALUE HEDGING
ADJUSTMENT INCLUDED IN
THE CARRYING AMOUNT
OF THE HEDGED ASSETS/
LIABILITIES
Balance Sheet Line Item of Hedged Item July 29, 2023 July 30, 2022 July 29, 2023 July 30, 2022
Short-term debt � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ (983) $ — $ 17 $ —
Long-term debt � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ (476) $ (1,487) $ 24 $ 10
The effect of derivative instruments designated as fair value hedges, recognized in interest and other income (loss), net is
summarized as follows (in millions):
GAINS (LOSSES) FOR
THE YEARS ENDED
July 29, 2023 July 30, 2022 July 31, 2021
Interest rate derivatives:
Hedged items � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 31 $ 116 $ 65
Derivatives designated as hedging instruments � � � � � � � � � � � � � � � � � � � � � � � � (31) (118) (67)
Total � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $
— $ (2) $ (2)
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 YEARS ENDED
Derivatives Not Designated as Hedging Instruments Line Item in Statements of Operations
July 29,
2023
July 30,
2022
July 31,
2021
Foreign currency derivatives � � � � � � � � � � � � � � � � � � � � � � � � Other income (loss), net $ 1 $ (237) $ 2
Total return swaps—deferred compensation � � � � � � � � � � � � Operating expenses and other 58 (92) 157
Equity derivatives � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � Other income (loss), net 13 9 20
Total � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 72 $ (320) $ 179
The notional amounts of our outstanding derivatives are summarized as follows (in millions):
July 29, 2023 July 30, 2022
Foreign currency derivatives � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 5,419 $ 4,521
Interest rate derivatives � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 1,500 1,500
Total return swaps—deferred compensation � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 792 651
Total � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 7,711 $ 6,672
86
(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�
To further limit credit risk, we also enter into collateral security arrangements related to certain derivative instruments whereby
cash is posted as collateral between the counterparties based on the fair market value of the derivative instrument� Under these
collateral security arrangements, the net cash collateral provided for was $40 million and $14 million as of July 29, 2023 and
July 30, 2022, respectively�
(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 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 intercompany balances, other current assets,
or 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 hold interest rate swaps designated as fair value hedges related to fixed-rate senior notes that are due in fiscal 2024 through
2025� Under these interest rate swaps, we receive fixed-rate interest payments and make interest payments based on SOFR plus
a fixed number of basis points� The effect of such swaps is to convert the fixed interest rates of the senior fixed-rate notes to
floating interest rates based on SOFR� The gains and losses related to changes in the fair value of the interest rate swaps are
included in interest expense and substantially offset changes in the fair value of the hedged portion of the underlying debt that
are attributable to the changes in market interest rates�
(e) Equity Price Risk
We hold marketable equity securities in our portfolio that are subject to price risk� To diversify our overall portfolio, we also hold
equity derivatives that are not designated as accounting hedges� The change in the fair value of each of these investment types
are included in other income (loss), net�
We are also exposed to variability in compensation charges related to certain deferred compensation obligations to employees�
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 with contract manufacturers and suppliers relate to arrangements to secure supply
and pricing for certain product components for multi-year periods� In certain instances, these agreements allow us the option to
cancel, reschedule, and adjust our requirements based on our business needs prior to firm orders being placed�
Note 14: Commitments and Contingencies .
87
The following table summarizes our inventory purchase commitments with contract manufacturers and suppliers (in millions):
Commitments by Period
July 29,
2023
July 30,
2022
Less than 1 year � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 5,270 $ 9,954
1 to 3 years � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 1,783 2,240
3 to 5 years � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 200 770
Total � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 7,253 $ 12,964
We record a liability for firm, noncancelable, and unconditional purchase commitments for quantities in excess of our future demand
forecasts consistent with the valuation of our excess and obsolete inventory� As of July 29, 2023 and July 30, 2022, the liability for these
purchase commitments was $529 million and $313 million, respectively, and was included in other current liabilities�
(b) Other Commitments
In connection with our acquisitions, we have agreed to pay certain additional amounts contingent upon the achievement of
certain agreed-upon technology, development, product, or other milestones or upon the continued employment with Cisco of
certain employees of the acquired entities�
The following table summarizes the compensation expense related to acquisitions (in millions):
July 29, 2023 July 30, 2022 July 31, 2021
Compensation expense related to acquisitions � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 222 $ 271 $ 262
As of July 29, 2023, we estimated that future cash compensation expense of up to $349 million may be required to be recognized
pursuant to the applicable business combination agreements�
We also have certain funding commitments, primarily related to our privately held investments, some of which are based on
the achievement of certain agreed-upon milestones or are required to be funded on demand� The funding commitments were
$0�3 billion and $0�4 billion as of July 29, 2023 and July 30, 2022, respectively�
(c) Product Warranties
The following table summarizes the activity related to the product warranty liability (in millions):
July 29, 2023 July 30, 2022 July 31, 2021
Balance at beginning of fiscal year � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 333 $ 336 $ 331
Provisions for warranties issued � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 386 415 496
Adjustments for pre-existing warranties � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 18 3 —
Settlements � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � (408) (421) (491)
Balance at end of fiscal year � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 329 $ 333 $ 336
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 $32�1 billion, $27�9 billion, and $26�7 billion in fiscal 2023,
2022, and 2021, respectively� The balance of the channel partner financing subject to guarantees was $1�7 billion and $1�4 billion
as of July 29, 2023 and July 30, 2022, respectively�
88
Financing Guarantee Summary The aggregate amounts of channel partner financing guarantees outstanding at July 29, 2023
and July 30, 2022, 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):
July 29, 2023 July 30, 2022
Maximum potential future payments � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 159 $ 188
Deferred revenue � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � (34) (9)
Total � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 125 $ 179
(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 asserted claims by Brazilian federal tax authorities are for calendar years 2003 through 2007, and the asserted claims by the
tax authorities from the state of Sao Paulo are for calendar years 2005 through 2007� The total asserted claims by Brazilian state
and federal tax authorities aggregate to $171 million for the alleged evasion of import and other taxes, $974 million for interest,
and $423 million for various penalties, all determined using an exchange rate as of July 29, 2023�
We have completed a thorough review of the matters and believe the asserted claims against our Brazilian subsidiary are without
merit, and we are defending the claims vigorously� While we believe there is no legal basis for the alleged liability, due to the
complexities and uncertainty surrounding the judicial process in Brazil and the nature of the claims asserting joint liability with
the importer, we are unable to determine the likelihood of an unfavorable outcome against our Brazilian subsidiary and are
unable to reasonably estimate a range of loss, if any� We do not expect a final judicial determination for several years�
Centripetal On February 13, 2018, Centripetal Networks, Inc� (“Centripetal”) asserted patent infringement claims against us
in the U�S� District Court for the Eastern District of Virginia, alleging that several of our products and services infringe eleven
Centripetal U�S� patents� The district court case went to trial on five asserted patents� Subsequently, on October 5, 2020, the
district court issued a judgment finding validity and willful infringement of four of the asserted patents and non-infringement
of the fifth patent and awarded $1�9 billion in damages and $14 million in pre-judgment interest, declined to issue an injunction
but, instead, awarded Centripetal a royalty against future revenue for an initial three-year term at a 10% rate, with a minimum
and maximum annual royalty of $168 million and $300 million, respectively, and for a second three-year term at a 5% rate, with
a minimum and maximum annual royalty of $84 million and $150 million, respectively� We appealed and, on June 23, 2022,
the U�S� Court of Appeals for the Federal Circuit (“Federal Circuit”) vacated the district court’s final judgment, remanded the
case back to the district court to be assigned to a new judge and ordered the district court to conduct additional proceedings�
The district court held a hearing on these additional proceedings over three days beginning on June 22, 2023, and a decision is
pending� Prior to the hearing, on May 24, 2023, the Patent Trial and Appeal Board cancelled all claims of one of the Centripetal
patents that was the subject of the hearing� On August 9, 2022, Centripetal filed a petition for writ of certiorari in the U�S� Supreme
Court challenging the Federal Circuit’s decision� The Supreme Court denied Centripetal’s petition on December 5, 2022�
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Between April 2020 and February 2022, Centripetal filed complaints in the District Court of Dusseldorf in Germany (“German
Court”), asserting a total of five patents and one utility model� Centripetal sought damages and injunctive relief in all cases� On
December 10, 2021, the German Court rejected Centripetal’s complaints on two patents, and Centripetal has appealed� A hearing
for a Cisco nullity action in the Federal Patent Court in Germany on one of those two patents occurred on August 1, 2022, and
we are waiting for the Court’s opinion� On December 21, 2021, the German Court stayed its decision on infringement of the third
patent pending a decision by the Federal Patent Court in a related nullity proceeding� On May 17, 2022, Centripetal withdrew
its complaint for infringement of the German utility model� The German Court conducted a hearing on the remaining two
Centripetal complaints on November 22, 2022� The German Court found no infringement on one patent and stayed the decision
in the final case pending a decision by the European Patent Office in a related opposition proceeding�
On July 10, 2023, Centripetal filed a complaint in the Paris Judiciary Court asserting the French counterpart of a European
Patent� Centripetal seeks damages and injunctive relief in the case� Centripetal previously asserted the German counterpart of
the same European Patent in Germany and the German Court rejected Centripetal’s complaint finding no infringement�
Due to uncertainty surrounding patent litigation processes in the U�S� and Europe, we are unable to reasonably estimate the
ultimate outcome of the litigations at this time� If we do not prevail in either litigation, we believe that any damages ultimately
assessed would not have a material effect on our Consolidated Financial Statements�
Ramot On June 12, 2019, Ramot at Tel Aviv University Ltd� (“Ramot”) asserted patent infringement claims against us in the U�S�
District Court for the Eastern District of Texas (“E�D� Tex�”), seeking damages, including enhanced damages, and a royalty on
future sales� Ramot alleges that certain Cisco optical transceiver modules and line cards infringe three patents� We challenged
the validity of all three patents in the U�S� Patent and Trademark Office (“PTO”) by way of ex parte reexamination proceedings
and the pending District Court case has been stayed� On July 10, 2023, the PTO issued a reexamination certificate finding all
amended claims patentable with respect to one asserted patent and reexamination proceedings for the other two asserted patents
are still pending�
On February 26, 2021, Ramot asserted patent infringement claims against Acacia Communications, Inc� (“Acacia”) in the
District of Delaware (“D� Del�”), seeking damages, including enhanced damages, and a royalty on future sales� Ramot alleges
that certain Acacia optical transceiver modules and integrated circuits infringe two of the three patents that Ramot asserted in
the E�D� Tex� case and this case is also stayed pending the reexamination proceedings referenced above�
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 in the same family as those involved in the pending cases above� Ramot is asserting
counterclaims for infringement of the same patents and seeks damages, including enhanced damages, and a royalty on future
sales� 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�
Viasat On November 6, 2019, Viasat, Inc� (“Viasat”) filed suit against Acacia in the California Superior Court for San Diego
County (“SDSC”), alleging contract and trade secret claims for certain Acacia products sold from January 1, 2019 forward
(“Viasat 2019”)� In May 2023, a judgment was entered against Cisco in Viasat 2019 for an amount that did not have a material
effect on our Consolidated Financial Statements� Acacia has filed an appeal with the California Court of Appeal and no hearing
date has been set�
On June 9, 2020, Viasat filed another suit in SDSC alleging contract and trade secret claims for sales of additional Acacia
products (“Viasat 2020”)� In October 2022, an amended complaint was filed in Viasat 2020 asserting the same claims but
alleging additional information� A trial date has been set for January 26, 2024� We are unable to reasonably estimate the ultimate
outcome of Viasat 2020 at this time due to uncertainties in the litigation processes� If we do not prevail, we believe that any relief
ultimately assessed in Viasat 2020 will not have a material effect on our Consolidated Financial Statements�
Egenera On August 8, 2016, Egenera, Inc� (“Egenera”) asserted infringement claims against us in the U�S� District Court
for the District of Massachusetts, alleging that Cisco’s Unified Computing System Manager infringes three patents� Egenera
sought damages, including enhanced damages, and an injunction� Two of the asserted patents were dismissed, leaving Egenera’s
infringement claim based on one asserted patent� On March 25, 2022, the PTO preliminarily found all of the asserted claims
of the remaining patent unpatentable in ex parte reexamination proceedings� On August 15, 2022, after a jury trial for the
remaining patent, the jury returned a verdict in favor of Cisco� The District Court denied Egenera’s post-trial motions, and
Egenera filed an appeal to the Federal Circuit on January 13, 2023 and those proceedings are ongoing�
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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�
For additional information regarding intellectual property litigation, see “Part I, Item 1A� Risk Factors—We may be found to
infringe on intellectual property rights of others” herein�
15. Stockholders’ Equity
(a) Stock Repurchase Program
In September 2001, our Board of Directors authorized a stock repurchase program� As of July 29, 2023, the remaining authorized
amount for stock repurchases under this program was approximately $10�9 billion with no termination date�
A summary of the stock repurchase activity under the stock repurchase program, reported based on the trade date, is summarized
as follows (in millions, except per-share amounts):
Years Ended Shares
Weighted-
Average Price
per Share Amount
July 29, 2023 � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 88 $ 48.49 $ 4,271
July 30, 2022 � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 146 $ 52�82 $ 7,734
July 31, 2021 � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 64 $ 45�48 $ 2,902
There were $48 million, $70 million and $25 million in stock repurchases that were pending settlement as of July 29, 2023,
July 30, 2022 and July 31, 2021, 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 August 16, 2023, our Board of Directors declared a quarterly dividend of $0�39 per common share to be paid on
October 25, 2023, to all stockholders of record as of the close of business on October 4, 2023� 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 July 29, 2023, we had 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� Our primary stock incentive plan is
summarized as follows:
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� 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�
Note 15: Stockholders’ Equity
Note 16: Employee Benefit Plans .
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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 July 29, 2023, 124 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� We issued 19 million, 18 million, and 17 million shares under the Employee Stock Purchase Plan in fiscal
2023, 2022, and 2021, respectively� As of July 29, 2023, 88 million shares were available for issuance under the Employee Stock
Purchase Plan�
(c) Summary of Share-Based Compensation Expense
Share-based compensation expense consists primarily of expenses for RSUs, stock purchase rights, and stock options, granted
to employees or assumed from acquisitions� The following table summarizes share-based compensation expense (in millions):
Yea r s Ended July 29, 2023 July 30, 2022 July 31, 2021
Cost of sales—product � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 151 $ 112 $ 99
Cost of sales—service � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 245 199 176
Share-based compensation expense in cost of sales � � � � � � � � � � � � � � � � � � � � � � � � � � � 396 311 275
Research and development � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 1,008 790 694
Sales and marketing � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 673 572 540
General and administrative � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 270 212 226
Restructuring and other charges � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 6 1 26
Share-based compensation expense in operating expenses � � � � � � � � � � � � � � � � � � � � � � 1,957 1,575 1,486
Total share-based compensation expense � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 2,353 $ 1,886 $ 1,761
Income tax benefit for share-based compensation � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 449 $ 457 $ 387
As of July 29, 2023, the total compensation cost related to unvested share-based awards not yet recognized was $4�7 billion,
which is expected to be recognized over approximately 2�2 years on a weighted-average basis�
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(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 25, 2020 � � � � � � � � � � � � � � � � � � � � � � � � � � � � 96 $ 42�03
Granted and assumed � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 51 41�89
Vested � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � (39) 39�63 $ 1,813
Canceled/forfeited/other � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � (14) 42�13
UNVESTED BALANCE AT JULY 31, 2021 � � � � � � � � � � � � � � � � � � � � � � � � � � � � 94 42�93
Granted and assumed � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 52 50�06
Vested � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � (37) 42�27 $ 1,979
Canceled/forfeited/other � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � (12) 45�63
UNVESTED BALANCE AT JULY 30, 2022 � � � � � � � � � � � � � � � � � � � � � � � � � � � 97 46.67
Granted and assumed � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 72 42.08
Vested � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � (39) 46.69 $ 1,746
Canceled/forfeited/other� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � (8) 45.17
UNVESTED BALANCE AT JULY 29, 2023 � � � � � � � � � � � � � � � � � � � � � � � � � � � 122 $ 44.04
(e) Valuation of Employee Share-Based Awards
Time-based restricted stock units and PRSUs that are based on our financial performance metrics or non-financial operating
goals are valued using the market value of our common stock on the date of grant, discounted for the present value of expected
dividends� On the date of grant, we estimated the fair value of the total shareholder return (TSR) component of the PRSUs using
a Monte Carlo simulation model� The PRSUs granted during the fiscal years presented are contingent on the achievement of
our financial performance metrics, our comparative market-based returns, or the achievement of financial and non-financial
operating goals�
The assumptions for the valuation of time-based RSUs and PRSUs are summarized as follows:
RESTRICTED STOCK UNITS
Yea r s Ended July 29, 2023 July 30, 2022 July 31, 2021
Number of shares granted (in millions)� � � � � � � � � � � � � � � � � � � � � � � � 70 50 48
Grant date fair value per share � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 42.13 $ 49�68 $ 42�04
Weighted-average assumptions/inputs:
Expected dividend yield� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 3.4% 2�9% 3�3%
Range of risk-free interest rates � � � � � � � � � � � � � � � � � � � � � � � � � � � 3.7% – 5.7% 0�0% – 3�0% 0�0% – 0�9%
PERFORMANCE BASED RESTRICTED STOCK UNITS
Yea r s Ended July 29, 2023 July 30, 2022 July 31, 2021
Number of shares granted (in millions)� � � � � � � � � � � � � � � � � � � � � � � � 2 2 2
Grant date fair value per share � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � $ 40.44 $ 59�64 $ 37�91
Weighted-average assumptions/inputs:
Expected dividend yield� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � N/A 0�4% 3�6%
Range of risk-free interest rates � � � � � � � � � � � � � � � � � � � � � � � � � � � N/A 0�0% – 0�7% 0�1% – 0�4%
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The assumptions for the valuation of employee stock purchase rights are summarized as follows:
EMPLOYEE STOCK PURCHASE RIGHTS
Years Ended July 29, 2023 July 30, 2022 July 31, 2021
Weighted-average assumptions:
Expected volatility � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 28.7% 27�9% 29�2%
Risk-free interest rate� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 2.8% 0�1% 0�3%
Expected dividend � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 3.6% 3�2% 3�2%
Expected life (in years) � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 1.2 1�2 1�3
Weighted-average estimated grant date fair value per share � � � � � � � � � � � � � � � � � � � � � � $ 12.40 $ 12�90 $ 12�46
The valuation of employee stock purchase rights and the related assumptions are for the employee stock purchases made during
the respective fiscal years�
We used the implied volatility for traded options (with contract terms corresponding to the expected life of the employee stock
purchase rights) on our stock as the expected volatility assumption required in the Black-Scholes model� The implied volatility
is more representative of future stock price trends than historical volatility� The risk-free interest rate assumption is based upon
observed interest rates appropriate for the term of our employee stock purchase rights� The dividend yield assumption is based
on the history and expectation of dividend payouts at the grant date�
(f) Employee 401(k) Plans
We sponsor the Cisco Systems, Inc� 401(k) Plan (the “Plan”) to provide retirement benefits for our employees� As allowed under
Section 401(k) of the Internal Revenue Code, the Plan provides for tax-deferred salary contributions and after-tax contributions
for eligible employees� The Plan allows employees to contribute up to 75% of their annual eligible earnings to the Plan on a
pretax and after-tax basis, including Roth contributions� Employee contributions are limited to a maximum annual amount as
set periodically by the Internal Revenue Code� We match pretax and Roth employee contributions up to 100% of the first 4�5%
of eligible earnings that are contributed by employees� Therefore, the maximum matching contribution that we may allocate
to each participant’s account will not exceed $14,850 for the 2023 calendar year due to the $330,000 annual limit on eligible
earnings imposed by the Internal Revenue Code� All matching contributions vest immediately� Our matching contributions to
the Plan totaled $342 million, $306 million, and $290 million in fiscal 2023, 2022, and 2021, respectively�
The Plan allows employees who meet the age requirements and reach the Plan contribution limits to make catch-up contributions
(pretax or Roth) not to exceed the lesser of 75% of their annual eligible earnings or the limit set forth in the Internal Revenue
Code� Catch-up contributions are not eligible for matching contributions� In addition, the Plan provides for discretionary profit-
sharing contributions as determined by the Board of Directors� Such contributions to the Plan are allocated among eligible
participants in the proportion of their salaries to the total salaries of all participants� There were no discretionary profit-sharing
contributions made in fiscal 2023, 2022, and 2021�
We also sponsor other 401(k) plans as a result of acquisitions of other companies� Our contributions to these plans were not
material to Cisco on either an individual or aggregate basis for any of the fiscal years presented�
(g) Deferred Compensation Plans
The Cisco Systems, Inc� Deferred Compensation Plan (the “Deferred Compensation Plan”), a nonqualified deferred compensation
plan, became effective in 2007� As required by applicable law, participation in the Deferred Compensation Plan is limited to
a select group of our management employees� Under the Deferred Compensation Plan, which is an unfunded and unsecured
deferred compensation arrangement, a participant may elect to defer base salary, bonus, and/or commissions, pursuant to such
rules as may be established by Cisco, up to the maximum percentages for each deferral election as described in the plan�
We may also, at our discretion, make a matching contribution to the employee under the Deferred Compensation Plan� A
matching contribution equal to 4�5% of eligible compensation in excess of the Internal Revenue Code limit for qualified plans
for calendar year 2023 that is deferred by participants under the Deferred Compensation Plan (with a $1�5 million cap on eligible
compensation) will be made to eligible participants’ accounts at the end of calendar year 2023� The total deferred compensation
liability under the Deferred Compensation Plan, together with deferred compensation plans assumed from acquired companies,
was approximately $910 million and $760 million as of July 29, 2023 and July 30, 2022, respectively, and was recorded primarily
in other long-term liabilities�
94
17. Comprehensive Income (Loss)
The components of AOCI, net of tax, and the other comprehensive income (loss) 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 25, 2020. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 315 $ (6) $ (828) $ (519)
Other comprehensive income (loss) before reclassifications. . . . (141) 20 229 108
(Gains) losses reclassified out of AOCI. . . . . . . . . . . . . . . . . . . . (53) (14) 3 (64)
Tax benefit (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 (1) (2) 58
BALANCE AT JULY 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182 (1) (598) (417)
Other comprehensive income (loss) before reclassifications. . . . (731) 87 (647) (1,291)
(Gains) losses reclassified out of AOCI. . . . . . . . . . . . . . . . . . . . (9) (29) 2 (36)
Tax benefit (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179 (13) (44) 122
BALANCE AT JULY 30, 2022. . . . . . . . . . . . . . . . . . . . . . . . . . . . (379) 44 (1,287) (1,622)
Other comprehensive income (loss) before reclassifications . . (113) 29 116 32
(Gains) losses reclassified out of AOCI . . . . . . . . . . . . . . . . . . 21 (63) (1) (43)
Tax benefit (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 8 19 58
BALANCE AT JULY 29, 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (440) $ 18 $ (1,153) $ (1,575)
Note 17: Comprehensive Income (Loss)
95
18. Income Taxes
(a) Provision for Income Taxes
The provision for income taxes consists of the following (in millions):
Yea r s Ended July 29, 2023 July 30, 2022 July 31, 2021
Federal:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,754 $ 2,203 $ 1,959
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,955) (176) (203)
1,799 2,027 1,756
State:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 623 458 513
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (175) (156) (46)
448 302 467
Foreign:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 412 313 583
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 23 (135)
458 336 448
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,705 $ 2,665 $ 2,671
Income before provision for income taxes consists of the following (in millions):
Yea r s Ended July 29, 2023 July 30, 2022 July 31, 2021
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,074 $ 13,550 $ 12,335
International. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,244 927 927
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,318 $ 14,477 $ 13,262
The items accounting for the difference between income taxes computed at the federal statutory rate and the provision for
income taxes consist of the following:
Yea r s Ended July 29, 2023 July 30, 2022 July 31, 2021
Federal statutory rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.0% 21.0 % 21.0%
Effect of:
State taxes, net of federal tax benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4 1.7 2.7
Foreign income at other than U.S. rates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.1) 0.8 1.5
Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.3) (1.6) (1.4)
Foreign-derived intangible income deduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5.8) (3.9) (4.2)
Stock-based compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1 0.3 0.6
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.6) 0.1 (0.1)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.7% 18.4 % 20.1 %
During fiscal 2023, we resolved certain items with the Internal Revenue Service (IRS) related to the audit of our federal income
tax returns for the fiscal years ended July 26, 2014 through July 30, 2016. As a result of the resolution, we recognized a net
benefit to the provision for income taxes of $145 million, which included a reduction of interest expense of $53 million.
Foreign taxes associated with the repatriation of earnings of foreign subsidiaries were not provided on a cumulative total of
$6.5 billion of undistributed earnings for certain foreign subsidiaries as of the end of fiscal 2023. We intend to reinvest these
earnings indefinitely in such foreign subsidiaries. If these earnings were distributed in the form of dividends or otherwise, or if
the shares of the relevant foreign subsidiaries were sold or otherwise transferred, we could be subject to additional income and
withholding taxes. The amount of potential unrecognized deferred income tax liability related to these earnings is approximately
$681 million.
Note 18: Income Taxes .
96
Unrecognized Tax Benefits
The aggregate changes in the balance of gross unrecognized tax benefits were as follows (in millions):
Yea r s Ended July 29, 2023 July 30, 2022 July 31, 2021
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,101 $ 3,106 $ 2,518
Additions based on tax positions related to the current year . . . . . . . . . . . . . . . . . . . . . . 159 157 224
Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261 74 618
Reductions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (265) (81) (122)
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,063) (69) (93)
Lapse of statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (56) (86) (39)
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,137 $ 3,101 $ 3,106
As a result of resolving certain items related to the IRS audit of our federal tax income tax returns for the fiscal years ended
July 26, 2014 through July 30, 2016, the amount of gross unrecognized tax benefits in fiscal 2023 was reduced by approximately
$1.1 billion. We also reduced the amount of accrued interest by $69 million.
As of July 29, 2023, $1.7 billion of the unrecognized tax benefits would affect the effective tax rate if realized. We recognized
net interest expense of $27 million, $33 million and $74 million during fiscal 2023, 2022, and 2021, respectively. Our net penalty
expense for fiscal 2023, 2022, and 2021 was not material. Our total accrual for interest and penalties was $523 million, $486
million, and $444 million as of the end of fiscal 2023, 2022, and 2021, respectively. We are no longer subject to U.S. federal
income tax audit for returns covering tax years through fiscal 2013. We are no longer subject to foreign or state income tax audits
for returns covering tax years through fiscal 2003 and fiscal 2008, respectively.
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 estimate that the
unrecognized tax benefits at July 29, 2023 could be reduced by $350 million in the next 12 months.
(b) Deferred Tax Assets and Liabilities
The following table presents the breakdown for net deferred tax assets (in millions):
July 29, 2023 July 30, 2022
Deferred tax assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,576 $ 4,449
Deferred tax liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (62) (55)
Total net deferred tax assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,514 $ 4,394
97
The following table presents the components of the deferred tax assets and liabilities (in millions):
July 29, 2023 July 30, 2022
ASSETS
Allowance for accounts receivable and returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 81 $ 90
Sales-type and direct-financing leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 29
Inventory write-downs and capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 452 430
Deferred foreign income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218 210
IPR&D and purchased intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,082 1,184
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 10
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,801 1,744
Credits and net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,218 1,336
Share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198 138
Accrued compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328 333
Lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246 248
Capitalized research expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,042 149
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 484 439
Gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,188 6,340
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (754) (834)
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,434 5,506
LIABILITIES
Goodwill and purchased intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (602) (767)
Unrealized gains on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (26)
ROU lease assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (234) (237)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (84) (82)
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (920) (1,112)
Total net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,514 $ 4,394
The changes in the valuation allowance for deferred tax assets are summarized as follows (in millions):
July 29, 2023 July 30, 2022 July 31, 2021
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 834 $ 771 $ 700
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 84 91
Deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18) (10) (5)
Write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (93) (12) (16)
Foreign exchange and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) 1 1
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 754 $ 834 $ 771
As of July 29, 2023, our federal, state, and foreign net operating loss carryforwards before valuation allowance for income
tax purposes were $320 million, $879 million, and $524 million, respectively. A significant amount of the net operating loss
carryforwards relates to acquisitions and, as a result, is limited in the amount that can be recognized in any one year. If not
utilized, the federal, state, and foreign net operating loss carryforwards will begin to expire in fiscal 2024. We have provided
a valuation allowance of $82 million and $10 million for deferred tax assets related to foreign and state net operating losses
respectively that are not expected to be realized.
As of July 29, 2023, our federal, state, and foreign tax credit carryforwards for income tax purposes before valuation allowance
were approximately $5 million, $1.6 billion, and $2 million, respectively. The federal tax credit carryforwards will begin to
expire in fiscal 2026. The majority of state and foreign tax credits can be carried forward indefinitely. We have provided a
valuation allowance of $594 million for deferred tax assets related to state and foreign tax credits carryforwards that are not
expected to be realized.
98
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 management makes financial decisions and allocates resources based on the information it receives from
our internal management system. Sales are attributed to a segment based on the ordering location of the customer. We do not
allocate research and development, sales and marketing, or general and administrative expenses to our segments in this internal
management system because management does not include the information in our measurement of the 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 gross margin for each segment because management does not include this
information in our measurement of the performance of the operating segments.
Summarized financial information by segment for fiscal 2023, 2022, and 2021, based on our internal management system and
as utilized by our Chief Operating Decision Maker (CODM), is as follows (in millions):
Yea r s Ended July 29, 2023 July 30, 2022 July 31, 2021
Revenue:
Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33,447 $ 29,814 $ 29,161
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,135 13,715 12,951
APJC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,417 8,027 7,706
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 56,998 $ 51,557 $ 49,818
Gross margin:
Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,350 $ 19,117 $ 19,499
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,016 8,969 8,466
APJC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,424 5,241 4,949
Segment total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,788 33,326 32,914
Unallocated corporate items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,035) (1,078) (1,020)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 35,753 $ 32,248 $ 31,894
Amounts may not sum due to rounding.
Revenue in the United States was $29.9 billion, $26.7 billion, and $26.1 billion for fiscal 2023, 2022, and 2021, respectively.
(b) Revenue for Groups of Similar Products and Services
We design and sell IP-based networking and other products related to the communications and IT industry and provide services
associated with these products and their use.
The following table presents revenue for groups of similar products and services (in millions):
Yea r s Ended July 29, 2023 July 30, 2022 July 31, 2021
Revenue:
Secure, Agile Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,105 $ 23,831 $ 22,725
Internet for the Future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,306 5,276 4,511
Collaboration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,052 4,472 4,727
End-to-End Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,859 3,699 3,382
Optimized Application Experiences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 811 729 654
Other Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 11 15
Total Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,142 38,018 36,014
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,856 13,539 13,804
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 56,998 $ 51,557 $ 49,818
Amounts may not sum due to rounding. We have made certain reclassifications to the amounts for prior fiscal years to conform
to the current fiscal year’s presentation.
Note 19: Segment Information and Major Customers
99
(c) Additional Segment Information
No single customer accounted for 10% or more of revenue in fiscal 2023, 2022, and 2021.
The majority of our assets as of July 29, 2023 and July 30, 2022 were attributable to our U.S. operations. Our long-lived assets
are based on the physical location of the assets. The following table presents our long-lived assets, which consists of property
and equipment, net and operating lease right-of-use assets information for geographic areas (in millions):
July 29, 2023 July 30, 2022 July 31, 2021
Long-lived assets:
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,113 $ 2,004 $ 2,189
International. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 943 997 1,244
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,056 $ 3,001 $ 3,433
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):
Yea r s Ended July 29, 2023 July 30, 2022 July 31, 2021
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,613 $ 11,812 $ 10,591
Weighted-average shares—basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,093 4,170 4,222
Effect of dilutive potential common shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 22 14
Weighted-average shares—diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,105 4,192 4,236
Net income per share—basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3.08 $ 2.83 $ 2.51
Net income per share—diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3.07 $ 2.82 $ 2.50
Antidilutive employee share-based awards, excluded . . . . . . . . . . . . . . . . . . . . . . . . . . 86 70 69
Note 20: Net Income per Share
100
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Based on our management’s evaluation (with the participation of our principal executive officer and principal financial officer),
as of the end of the period covered by this report, our principal executive officer and principal financial officer have concluded
that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934 as amended, (the “Exchange Act”)) are effective to ensure that information required to be disclosed by us in reports that
we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms and is accumulated and communicated to our management, including our
principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Internal Control over Financial Reporting
Management’s report on our internal control over financial reporting and the report of our independent registered public
accounting firm on our internal control over financial reporting are set forth, respectively, on page 57 under the caption
“Management’s Report on Internal Control Over Financial Reporting” and on page 55 of this report.
There was no change in our internal control over financial reporting during our fourth quarter of fiscal 2023 that has materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
Rule 10b5-1 Trading Arrangements
On June 13, 2023, Jeff Sharritts, Cisco’s Executive Vice President and Chief Customer and Partner Officer, adopted a trading
plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act. Mr. Sharritts’ trading plan
provides for the sale of 146,825 gross shares (with any shares underlying performance-based equity awards being calculated at
target), plus any related dividend-equivalent shares earned with respect to such shares and excluding, as applicable, any shares
withheld to satisfy tax withholding obligations in connection with the net settlement of the equity awards. Mr. Sharritts’ trading
plan is scheduled to terminate on June 21, 2024, subject to early termination for certain specified events set forth therein.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
101
PART III
Item 10. Directors, Executive Officers and Corporate Governance
We have adopted a code of ethics that applies to our principal executive officer and all members of our finance department,
including the principal financial officer and principal accounting officer. This code of ethics can be found at the “Financial
Officer Code of Ethics” link in the Corporate Governance section of Cisco’s Investor Relations website at investor.cisco.com.
We intend to satisfy any disclosure requirement regarding an amendment to, or waiver from, a provision of this code of ethics
by posting such information on that website or in a report on Form 8-K.
The additional information required by this item is included in our Proxy Statement related to the 2023 Annual Meeting of
Stockholders to be filed with the SEC within 120 days after September 7, 2023 (the “Proxy Statement”) and is incorporated
herein by reference.
Item 11. Executive Compensation
The information required by this item is included in our Proxy Statement and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is included in our Proxy Statement and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item is included in our Proxy Statement and is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
The information required by this item is included in our Proxy Statement and is incorporated herein by reference.
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) 1. Financial Statements
See the “Index to Consolidated Financial Statements” on page 54 of this report.
2. Financial Statement Schedule
All financial statement schedules have been omitted, since the required information is not applicable
or is shown in the financial statements or notes herein.
3. Exhibits
See the “Index to Exhibits” beginning on page 102 of this report.
102
INDEX TO EXHIBITS
Exhibit
Number Exhibit Description Incorporated by Reference
Filed
Herewith
Form File No. Exhibit Filing Date
3.1 Amended and Restated Certificate of Incorporation of
Cisco Systems, Inc., as currently in effect
8-K12B 001-39940 3.1 1/25/2021
3.2 Amended and Restated Bylaws of Cisco Systems, Inc., as
currently in effect
8-K 001-39940 3.2 3/10/2023
4.1 Indenture, dated February 17, 2009, between Cisco
Systems, Inc. and the Bank of New York Mellon Trust
Company, N.A., as trustee
8-K 000-18225 4.1 2/17/2009
4.2 Indenture, dated November 17, 2009, between Cisco
Systems, Inc. and the Bank of New York Mellon Trust
Company, N.A., as trustee
8-K 000-18225 4.1 11/17/2009
4.3 Indenture, dated March 3, 2014, between the Company and
The Bank of New York Mellon Trust Company, N.A.,
as trustee
8-K 000-18225 4.1 3/3/2014
4.4 First Supplemental Indenture, dated January 25, 2021 to
the Indenture, dated February 17, 2009, between Cisco
Systems, Inc. and the Bank of New York Mellon Trust
Company, N.A., as trustee
10-Q 001-39940 4.1 2/16/2021
4.5 First Supplemental Indenture, dated January 25, 2021 to
the Indenture, dated November 17, 2009, between Cisco
Systems, Inc. and the Bank of New York Mellon Trust
Company, N.A., as trustee
10-Q 001-39940 4.2 2/16/2021
4.6 First Supplemental Indenture, dated January 25, 2021 to the
Indenture, dated March 3, 2014, between the Company and
The Bank of New York Mellon Trust Company
10-Q 001-39940 4.3 2/16/2021
4.7 Forms of Global Note for the registrant’s 5.90% Senior
Notes due 2039
8-K 000-18225 4.1 2/17/2009
4.8 Forms of Global Note for the registrant’s 4.45% Senior
Notes due 2020 and 5.50% Senior Notes due 2040
8-K 000-18225 4.1 11/17/2009
4.9 Form of Officer’s Certificate setting forth the terms of the
Fixed and Floating Rate Notes issued in March 2014
8-K 000-18225 4.2 3/3/2014
4.10 Form of Officer’s Certificate setting forth the terms of the
Fixed and Floating Notes issued in June 2015
8-K 000-18225 4.1 6/18/2015
4.11 Form of Officer’s Certificate setting forth the terms of the
Fixed and Floating Notes issued in February 2016
8-K 000-18225 4.1 2/29/2016
4.12 Form of Officer’s Certificate setting forth the terms of the
Fixed and Floating Notes issued in September 2016
8-K 000-18225 4.1 9/20/2016
4.13 Description of Registrant’s Securities 10-K 001-39940 4.13 9/9/2021
10.1* Cisco Systems, Inc. 2005 Stock Incentive Plan
(including related form agreements)
X
10.2* Cisco Systems, Inc. Employee Stock Purchase Plan 10-Q 001-39940 10.7 2/16/2021
10.3* Cisco Systems, Inc. Deferred Compensation Plan,
as amended
10-Q 001-39940 10.3 11/22/2022
10.4* Cisco Systems, Inc. Executive Incentive Plan 8-K 000-18225 10.2 12/12/2017
10.5* Form of Indemnity Agreement 8-K12B 001-39940 10.1 1/25/2021
10.6 First Amendment to Second Amended and Restated Credit
Agreement, dated as of April 18, 2023, by and among Cisco
Systems, Inc., certain lenders party thereto, and Bank of
America, N.A., as administration agent, swing line lender,
and L/C issuer
10-Q 001-39940 10.1 5/24/2023
10.7 Commercial Paper Issuing and Paying Agent Agreement,
dated September 29, 2022, by and between Cisco Systems,
Inc. and Citibank, N.A.
8-K 001-39940 10.1 10/4/2022
103
Exhibit
Number Exhibit Description Incorporated by Reference
Filed
Herewith
Form File No. Exhibit Filing Date
10.8 Form of Amendment to Commercial Paper
Dealer Agreement
8-K 001-39940 10.2 10/4/2022
10.9* Letter Agreement by and between Cisco Systems, Inc.
and Dev Stahlkopf
10-Q 001-39940 10.4 11/22/2022
21.1 Subsidiaries of the Registrant X
23.1 Consent of Independent Registered Public Accounting Firm X
24.1 Power of Attorney (included on page 104 of this Annual
Report on Form 10-K)
X
31.1 Rule 13a–14(a)/15d–14(a) Certification of Principal
Executive Officer
X
31.2 Rule 13a–14(a)/15d–14(a) Certification of Principal
Financial Officer
X
32.1 Section 1350 Certification of Principal Executive Officer X
32.2 Section 1350 Certification of Principal Financial Officer X
101.INS Inline XBRL Instance Document X
101.SCH Inline XBRL Taxonomy Extension Schema Document X
101.CAL Inline XBRL Taxonomy Extension Calculation
Linkbase Document
X
101.DEF Inline XBRL Taxonomy Extension Definition
Linkbase Document
X
101.LAB Inline XBRL Taxonomy Extension Label
Linkbase Document
X
101.PRE Inline XBRL Taxonomy Extension Presentation
Linkbase Document
X
104 Cover Page Interactive Data File (Embedded within the
Inline XBRL document and included in Exhibit 101)
X
* Indicates a management contract or compensatory plan or arrangement.
Item 16. Form 10-K Summary
None.
104
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
September 7, 2023 CISCO SYSTEMS, INC.
/S/ CharleS h. robbinS
Charles H. Robbins
Chair and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints
Charles H. Robbins and R. Scott Herren, jointly and severally, his attorney-in-fact, each with the full power of substitution,
for such person, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the
same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite
and necessary to be done in connection therewith, as fully to all intents and purposes as he might do or could do in person
hereby ratifying and confirming all that each of said attorneys-in-fact and agents, or his substitute, may do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report on Form 10-K has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date
/S/ CharleS h. robbinS Chair and Chief Executive Officer September 7, 2023
Charles H. Robbins
(Principal Executive Officer)
/S/ r. SCott herren Executive Vice President and Chief Financial Officer September 7, 2023
R. Scott Herren
(Principal Financial Officer)
/S/ M. ViCtoria Wong Senior Vice President and Chief Accounting Officer September 7, 2023
M. Victoria Wong
(Principal Accounting Officer)
105
Signature Title Date
/S/ M. MiChele burnS Director September 7, 2023
M. Michele Burns
/S/
WeSley g. buSh Director September 7, 2023
Wesley G. Bush
/S/
MiChael D. CapellaS Lead Independent Director September 7, 2023
Michael D. Capellas
/S/
Mark garrett Director September 7, 2023
Mark Garrett
/S/
John D. harriS II Director September 7, 2023
John D. Harris II
/S/
kriStina M. JohnSon Director September 7, 2023
Dr. Kristina M. Johnson
/S/
roDeriCk C. MCgeary Director September 7, 2023
Roderick C. McGeary
/S/
Sarah rae Murphy Director September 7, 2023
Sarah Rae Murphy
/S/
liSa t. Su Director September 7, 2023
Dr. Lisa T. Su
/S/
Marianna teSSel Director September 7, 2023
Marianna Tessel
Principal accounting
officer
Vickie Wong
Senior Vice President and
Chief Accounting Officer
Jeff Sharritts
Executive Vice President
and Chief Customer and
Partner Officer
Maria Martinez
Executive Vice President
and Chief Operating Officer
R. Scott Herren
Executive Vice President
and Chief Financial Officer
Dev Stahlkopf
Executive Vice President,
Chief Legal Officer and Chief
Compliance Officer
Resources
For more information about
Cisco, to view the Annual
Report online, or to obtain
other financial information
without charge, contact:
INVESTOR RELATIONS
Cisco Systems, Inc.
170 West Tasman Drive
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Cisco’s stock trades on the
Nasdaq Global Select Market
under the ticker symbol CSCO.
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
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San Jose, CA
This Summary Report and our Annual
Report, including the “Management’s
Discussion and Analysis of Financial
Condition and Results of Operations”
discussed therein, 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, and the Securities
Exchange Act of 1934, as amended.
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 (1) projections
of our future financial performance;
(2)our anticipated growth and trends in
our businesses; (3) ourEnvironmental,
Social and Governance (ESG) goals,
commitments and programs; (4) the scope
and impact of our corporate responsibility
risks and opportunities, and the related
standards and expectations of third
parties; and (5) 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 in the attached
Form 10-K, under “Item 1A. Risk Factors,”
and elsewhere therein. 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.
FORWARD-LOOKING STATEMENTS
Stockholder information
and forward-looking
statements
Executive officers
Chuck Robbins
Chair and
Chief Executive Officer
TRANSFER AGENT AND REGISTRAR
Computershare Investor Services
P.O. Box 505000
Louisville, KY 40233-5000
www-us.computershare.com/
investor
Toll-free: 1 (800) 254-5194
International: 1 (781) 575-2879
NOTICE OF ANNUAL MEETING
Date: December 6th, 2023
Time: 8:00 a.m. Pacific time
Virtual stockholder meeting
www.virtualshareholdermeeting.
com/CSCO2023
Published October 2023
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Cisco has approximately 350 offices worldwide.
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