Cisco Systems, Inc.

Welcome to Cisco's third quarter and fiscal year 2026 financial results conference call. At the request of Cisco, today's conference is being recorded. If you have any objections, you may disconnect. Now, I would like to introduce Sammy Badri, head of investor relations. Sir, you may begin.

Good afternoon, everyone. This is Sammy Badri, Cisco's head of investor relations, and I am joined by Chuck Robbins, our chair and CEO, and Mark Patterson, our CFO. Cisco's earnings press release and supplemental information, including GAAP to non-GAAP reconciliations, are available on our investor relations website. Today's call is also being live streamed on YouTube and LinkedIn. Following this call, we'll also make the recorded webcast and slides available on our website. Throughout today's call, we'll be referencing both GAAP and non-GAAP financial results. We will discuss product results in terms of revenue and geographic and customer results in terms of product orders, unless stated otherwise. All comparisons will be made on a year-over-year basis. Please note that our discussion today will include forward-looking statements, including our guidance for the fourth quarter and fiscal year 2026. These statements are subject to risks and uncertainties detailed in our SEC filings, particularly our most recent 10 and 10 reports, which identify important risk factors that could cause actual results to differ materially from those contained in our forward-looking statements. With respect to guidance, Please also see the slides and press release that accompany this call for further details. Cisco will not comment on its financial guidance during the quarter unless it is done through an explicit public disclosure. Now I'll turn it over to Chuck.

Thanks, Sammy. Thank you all for joining us today. Q3 was a great quarter for Cisco with our momentum accelerating and revenue and earnings per share both growing double digits and coming in above the high end of our guidance ranges. We delivered record revenue of 15.8 billion in Q3, up 12% year-over-year. Product revenue was up 17%, once again driven by robust demand for our AI infrastructure and campus networking solutions. Our record top-line performance, combined with operating efficiencies and outstanding execution by our teams, allowed us to deliver non-GAAP EPS growth of 10%. demonstrating the effectiveness of the initiatives we outlined last quarter to mitigate memory price increases across the market. We believe the trust our customers and partners place in us has never mattered more, and our technology is more relevant than ever in the AI era. As a result, we saw record high demand in Q3. Overall, total product orders grew 35% year over year. Excluding hyperscaler orders, which grew triple digits, product orders were up 19% year over year, demonstrating the continued broad-based demand we see for our technology globally. Enterprise product orders were up 18% year-over-year in Q3, with strength across our entire networking portfolio. Public sector orders were up 27% year-over-year, with double-digit growth across all geographies. Product orders from service provider and cloud customers accelerated in Q3, growing 105% year-over-year. with five of the top hyperscalers each growing in triple digits. We also saw solid growth from telco customers in Q3 with orders up 9%. Telcos are investing in Cisco technology as they prepare their networks to handle the scale, speed, and complexity of AI. Now some color on demand from a product perspective. Networking product orders continue to accelerate, growing more than 50% in Q3, driven by triple digit growth in service provider routing and compute, and double-digit growth in data center switching, campus switching, wireless, enterprise routing, and industrial IoT products. This marks the seventh consecutive quarter of double-digit growth for our networking portfolio overall. AI infrastructure orders taken from hyperscalers totaled $1.9 billion in Q3, compared to $600 million in the year prior, with strong growth across our silicon-1 systems and market-leading Acacia optics. The year-to-date total of $5.3 billion in orders taken from hyperscalers already exceeds our prior expectations of $5 billion for FY26 with a full quarter remaining. Given this strong demand, we now expect to take AI infrastructure orders of approximately $9 billion from hyperscalers in FY26, four and a half times our FY25 total. We expect to recognize approximately $4 billion in AI infrastructure revenue from hyperscalers in fiscal year 26. Our Acacia business had its strongest quarter to date with more than $1 billion in orders in Q3 and is on track to grow over 200% year-over-year in fiscal year 26. Acacia is leading the coherent pluggable optics market, and we saw strong momentum across this business. To date, we have shipped over 750,400 gig and over 40,800 gig coherent pluggable optics, which we believe far exceeds the next largest supplier shipments for both speeds. We had five new design wins with hyperscalers in Q3, two for optics, each with different hyperscalers, and three for systems, including the first two wins for our silicon one P200 powered system for major scale across use cases and a silicon-1 G200 powered system for a scale-out use case. Separately, we took approximately $300 million in AI infrastructure orders from Neocloud, Sovereign, and Enterprise customers in Q3. We have seen triple-digit year-over-year order growth in each quarter of fiscal year 26, with approximately $900 million in orders taken year-to-date, and we have a growing pipeline of approximately $3 billion for our high-performance AI infrastructure portfolio across these customers. Enterprise data center switching orders grew more than 40% year-over-year and have now grown double digits seven of the past nine quarters. We believe the AI infrastructure opportunity in enterprise is continuing to ramp as Nexus switch orders tagged for AI deployments were up almost 50% sequentially in Q3. Within campus networking, we had record orders in Q3 growing more than 25% year-over-year. We are seeing exceptionally strong demand for our next generation switching, routing, and wireless portfolio, which continues to ramp faster than prior product launches. We reported our highest ever wireless orders this quarter, growing more than 40% year-over-year. Customers are upgrading to modern Wi-Fi, evidenced by strong double-digit sequential growth in orders for Wi-Fi 7, making up half of the wireless mix in Q3. Research conducted recently with around 3,500 technology leaders across global enterprises confirms increased urgency to modernize campus and branch networks. With traffic across these networks expected to increase 3x over the next three years because of AI, 93% of respondents are accelerating their network modernization plans. These findings support our belief that we are still at the start of a multi-year, multi-billion dollar campus refresh opportunity. The strong demand we see for our technology is driven by our ability to deliver AI native capabilities across our products, including weaving security into the fabric of the network and modernizing the operational stack of campus networks. Many of the world's leading companies are investing in Cisco secure networking solutions for the high performance connectivity, automated management and robust security they need to scale their AI initiatives. Our Cisco unified edge solution is also gaining traction. and we've already booked a single enterprise deal for over 1,200 units. Unified Edge brings together compute, networking, security, storage, and software to run AI applications at the edge where data is generated and decisions are made. Our industrial IoT portfolio also reported its strongest quarter ever in Q3 and has now grown in double digits for eight consecutive quarters. We expect this demand to continue with the onshoring of manufacturing to the United States and as agentic and physical AI are expected to drive massive increases in network traffic. Now shifting to security. In Q3, our core security portfolio, excluding Splunk, saw double-digit order growth across new and refreshed products with strong double-digit order growth year-over-year in firewalls. Additionally, over 1,000 new customers purchased our new products, including Secure Access, XDR, HyperShield, and AI Defense in Q3. bringing the total of net new customers to approximately 5,000 since launch. The decline in our prior generation portfolio continues to offset the growth in our new and refreshed portfolio, but to a lesser extent than in the first half of the year. Turning to Splunk, as expected, we continue to see an acceleration in the shift to cloud subscriptions and away from on-premise deals, creating a near-term drag on revenue growth, as we've previously outlined. We expect the mix of cloud business to continue to grow in Q4 while we are on track to exceed our target of 1,000 new customer logos for Splunk in fiscal year 26. AI is accelerating the pace of innovation for security defenders and adversaries, and we are innovating with speed and skill to help create an asymmetrical advantage for defenders. In March, we announced a major expansion of our secure AI factory with NVIDIA, giving customers a framework for deploying AI across their entire infrastructure, from data centers to local sites, eliminating the need to stitch together disconnected systems and embedding security from the start. We have also introduced several new security innovations designed to protect the entire AI lifecycle. Defense Claw is an open source solution that helps customers safely deploy agents using common frameworks such as Open Claw by enforcing guardrails and protecting against malicious behavior and attacks. To deliver an integrated zero trust solution for the agentic workforce, we introduced zero trust access for AI agents and recently announced our intent to acquire Galileo and Asterisk to expand our security and observability platform to include agentic identity, access management, and behavior monitoring. We also announced new capabilities for the agentic SOC and observability for AI to help detect and respond to new emerging threats at machine speed and scale. We are working collaboratively across the industry to help defend against AI-enabled threats and shape next-generation security capabilities. Cisco is a founding member of Project Glasswing and is participating in private testing of Anthropic's Cloud Mythos preview model, specifically designed for proactive cybersecurity defense testing. We are also part of OpenAI's Trusted Access for Cyber program. Building on these initiatives, we announced earlier this week that Cisco is open sourcing the Foundry Security Spec, a production-grade blueprint for building scalable, agentic security evaluation systems using both available and new AI models. We are providing this blueprint to customers to accelerate their ability to take advantage of agentic AI and stay ahead of adversaries. Turning to our innovation in other areas, Cisco IQ, our unified AI-powered delivery engine for Cisco services, is now generally available with more than 250 customers already onboarded. Cisco IQ provides customers with a real-time benchmark view of Cisco assets and configurations in their environment, helping to future-proof it against emerging architectural threats. We also continue to accelerate AI advancements internally for our teams, Circuit, our proprietary AI assistant, is now fully embedded in how Cisco operates, with near universal adoption across our employee base and over 8 million total quarterly interactions. Circuit leverages a network of advanced third-party AI models, automatically choosing the best engine for every task or letting users make that choice. As a founding design partner with OpenAI on Codex, Our engineers have been using it from the beginning, and as of this week, we have made codecs available to our entire product organization to enable them to build tools and reimagine new products at unprecedented speed. Finally, we are also proud of our incredible progress in quantum networking. We recently introduced a working research prototype of the Cisco Universal Quantum Switch designed to route and preserve quantum information between systems at room temperature and over standard telecom fiber. By building this infrastructure now, we are helping to accelerate the entire quantum ecosystem that will power the data centers of the future. To ensure we are capturing the significant opportunities in silicon, optics, security and AI, we announced a restructuring plan today to reallocate resources and allow us to invest in these key growth areas. These actions are building from a position of strength and focusing on the technologies that will accelerate our growth, deliver unmatched innovation to customers and partners, and define our future. To summarize, our innovation pipeline is accelerating and our latest offerings across the portfolio are seeing some of the fastest adoption in our history. This is translating to broad-based record high demand for our technology, which has never been more relevant to customers than it is in the AI era. This combination, as well as the outstanding execution by our teams, is driving record results and delivering value to our shareholders. Now I'll turn it over to Mark for more detail on the quarter and our outlook.