Published
# Cisco Systems, Inc. (CSCO) — Business, Risks and Management's Discussion Fiscal year 2026 ended July 25, 2026. Unless noted, this narrative is drawn from Cisco's Annual Report on Form 10-K for fiscal 2026 (accession 0000858877-26-000132, filed September 2, 2026), with within-year detail from the Quarterly Report on Form 10-Q for the quarter ended April 25, 2026 (accession 0000858877-26-000078, filed May 19, 2026). --- ## Business *From the fiscal 2026 Form 10-K, accession 0000858877-26-000132.* Cisco designs and sells hardware, software and AI-powered digital infrastructure used to power, secure and draw insights from the Internet. The company was incorporated in California in 1984, reincorporated in Delaware in 2021, and is headquartered in San Jose, California. Its common stock trades on Nasdaq under the symbol CSCO. As of July 25, 2026 Cisco had approximately 82,400 employees, of whom roughly 25,400 were in worldwide sales and marketing. **How the business is organized.** Cisco manages the company by geography and reports three geographic segments: Americas; Europe, Middle East and Africa (EMEA); and Asia Pacific, Japan and China (APJC). Products and technologies are separately grouped into four categories — Networking, Security, Collaboration and Observability — and the company also sells a full range of lifecycle services, including technical support and professional services. **Strategy.** Cisco frames its strategy as "securely connect everything," organized around three customer priorities: building modern infrastructure, protecting against cyber threats, and harnessing AI and data. It markets the combined portfolio as "One Cisco," delivering three outcomes — AI-ready data centers, future-proofed workplaces, and digital resilience. Management describes the rise of agentic AI and inference workloads as fundamentally altering network traffic patterns and driving demand for connectivity, and positions Cisco as supplying the network infrastructure that powers AI training and inference for both hyperscalers and enterprises. **Product categories.** - **Networking** — switching, routing, wireless and servers, sold as integrated hardware and software systems. Campus switching centers on the Cisco 9000 family with an embedded Unified Networking Experience (UNX) software subscription and cloud management through Cisco Cloud Control; the newer Cisco 9350, 9610 and 9550 Smart Switches are built on Cisco Silicon One, the company's unified, programmable networking silicon architecture, and carry quantum-resistant security and post-quantum cryptography. Data center switching is led by the Nexus 9000 series, with the N9300 Series Smart Switches embedding Data Processing Units and integrating Cisco Hypershield to converge networking and security. Service provider routing includes AI infrastructure solutions for hyperscalers, the Cisco 8000 series (also Silicon One based), routed optical networking, and 800G optics. The portfolio also includes Acacia coherent optical interconnect and ruggedized Industrial IoT switching and routing. - **Security** — network security, identity and access management, Secure Access Service Edge (SASE), and identity and agentic security. Offerings include Extended Detection and Response (XDR), Cisco Hypershield and AI Defense. - **Collaboration** — the Webex Suite, collaboration devices, contact center and Communication Platform as a Service (CPaaS), sold as perpetual licenses, subscriptions and hardware. - **Observability** — the observability suite and network assurance. Splunk Observability correlates telemetry and business context, including agent observability for AI agent behavior, quality, performance and cost; ThousandEyes provides network assurance across enterprise, Internet and cloud networks. Splunk combined with AppDynamics is the core monitoring offering. **Customers and route to market.** Customers span enterprise (large organizations plus mid-market and small business), public sector (federal, state and local government and education) and service provider and cloud (carriers, hyperscalers, Internet, cable and wireless providers, and media/content providers). A substantial portion of products and services is sold indirectly through channel partners — systems integrators, service providers, resellers and distributors — with the remainder sold direct. Distributor sales are recognized on a sell-in basis under a two-tier model, with terms permitting limited returns, price-change credits, rebates and cooperative marketing. **Financing arm.** Cisco Capital provides customer financing — loans, sales-type, direct financing and operating leases, and channel financing — to help customers acquire hardware, software, services and complementary third-party equipment. Management regards customer financing as a competitive advantage, particularly on large infrastructure projects. **Acquisitions, investments and alliances.** Cisco acquires companies for talent, technology, products, operational capability or market access; invests in privately held companies whose technology is complementary or offers insight into emerging technologies; and pursues strategic alliances for technology exchange, product development, joint sales and marketing, or new market creation. **Competition.** Cisco competes across product categories with, among others, Amazon Web Services, Arista Networks, Broadcom, Ciena, CrowdStrike, Datadog, Dell Technologies, Dynatrace, Fortinet, Hewlett-Packard Enterprise, Huawei, Microsoft, Nokia, Nvidia, Palo Alto Networks, RingCentral, Zoom and Zscaler. Barriers to entry are described as relatively low. The company notes persistent price-focused competition from competitors in Asia, especially China, and expects it to continue. --- ## Risk factors *From the fiscal 2026 Form 10-K, accession 0000858877-26-000132 — the substantive risks, condensed.* **Results are hard to predict.** Quarterly and annual results fluctuate with customer demand patterns (especially service provider and cloud), order timing, size and mix, price and product competition, industry consolidation, channel mix, gross margin swings, and the accuracy of the judgments and estimates behind reported balances. Large orders from a small number of customers can move a quarter on their own, and nonlinear shipping patterns — where shipments run ahead of bookings, or manufacturing issues delay shipments — both distort revenue and raise cost through underutilized capacity and overtime. Because operating expenses are planned against forecast revenue and are relatively fixed in the short term, a revenue shortfall cannot be quickly offset. **Supply chain and purchase commitments — the most prominent risk this year.** Cisco does not own the bulk of its manufacturing. In fiscal 2025 and 2026 it entered into additional purchase commitments with contract manufacturers and suppliers related to manufacturing Cisco Silicon One, memory components and other products to meet expected demand from hyperscalers and other customers, and expects to continue doing so in fiscal 2027. It has also increased inventory deposits and prepayments. Management states plainly that these commitments and prepayments have significantly increased supply chain exposure, that this exposure already produced negative impacts to product gross margin in recent periods, and that further negative impacts may follow. The exposure includes material excess and obsolete inventory, losses on purchase commitments and other charges if demand falls or is delayed, if customers change architecture or specifications, or if the exposure cannot be mitigated. Manufacturing capacity and supply constraints — specifically the memory shortages experienced in fiscal 2026 — remain a significant risk, and Cisco expects to continue to be adversely affected by rising costs of constrained memory components. Certain components are available only from limited or single sources. **Gross margin may not be sustainable.** Product gross margin is exposed to customer, geographic and product mix (including hardware versus software and cloud versus on-premise); increases in material, labor and manufacturing costs, particularly semiconductors and memory, which Cisco saw in fiscal 2026 and expects to continue seeing; new product and business model introductions; entry into lower-margin markets; discounts and channel shifts; excess and obsolete inventory charges; revenue deferrals and purchased-intangible amortization from acquisitions; tariffs and royalty costs; and price competition from Asia. **Concentration in service provider, cloud and hyperscaler demand.** Sales to this market are characterized by large and sporadic purchases and may be concentrated among a limited number of customers. AI infrastructure demand depends on a small number of customers' capital spending, deployment timing and scale, architecture decisions, and whether they buy from Cisco, buy from another vendor or build internally. Customers may delay, reduce or cancel planned deployments. Products for this market can involve bespoke designs and features that would be difficult to resell if the primary customer cut orders. As the hyperscaler business grows, changes in the timing or size of a few customers' purchases have a larger effect on revenue, gross margin and results. **Competitive architecture risk.** In markets supporting AI and cloud infrastructure, customers select among competing network architectures before selecting individual products; if customers adopt architectures not designed around Cisco's products, opportunity is limited even where Cisco's products are superior. Competitors now include semiconductor companies, systems providers and cloud providers as well as traditional networking vendors, and "white box" hardware competes in programmable networking. Certain of Cisco's largest customers, including hyperscalers, have the technical and financial resources to design their own networking equipment, semiconductors and software or to buy directly from contract manufacturers. **Software and subscription model.** Cisco has shifted toward recurring software and subscription offerings, a shift accelerated by the Splunk acquisition. Market acceptance depends on security, reliability, performance, support terms, data privacy concerns and regulation; growth requires converting new customers and generating timely renewals. Cisco has experienced, and may again experience, service interruptions, storage failures and performance problems, and it incurs substantial ongoing cost to deliver and scale these offerings, including reliance on third-party providers. **Product development and technology transitions.** The company commits significant resources to strategic priorities such as Cisco Silicon One and optics before knowing whether the market will accept them. If its model of how networking, security or observability evolves is wrong, or if the successful approach differs from Cisco's, many of its initiatives and investments may be of limited value. **AI-specific risk.** Cisco incorporates AI in its offerings and operations. Agentic AI systems operating with autonomous decision-making and access to multiple tools and data sources may introduce unauthorized actions, privilege escalation and exploitation by malicious actors; algorithms and training methodologies may be flawed; and the AI legal and regulatory landscape is uncertain and inconsistent across jurisdictions. **Cybersecurity.** Cisco experiences cyber attacks on a regular basis against both its products and services and its own IT environment, and states that nation-state actors or their agents have in the past successfully attacked its solutions and exploited vulnerabilities to carry out attacks. AI is increasing the speed, scale and effectiveness of attacks, including "zero-minute" exploitation with little or no delay between vulnerability discovery and exploitation, and can chain low-severity vulnerabilities into severe combined exploits. Vulnerabilities can persist after security updates are issued if root causes are not addressed, if customers do not deploy updates, or if a patched vulnerability is reintroduced through a security regression. Failure to timely implement post-quantum cryptography could render existing cryptographic protections ineffective once viable quantum computing emerges. As of the date of the 10-K, Cisco does not believe its business, results of operations or financial condition have been materially affected by cybersecurity risks, including as a result of previously identified incidents. **Acquisitions.** Acquisitions carry integration difficulty (particularly for companies with large global operations or complex products), management distraction, dependence on unfamiliar supply chains, loss of key employees and customers, dilution, use of cash or incurrence of debt, assumed liabilities and litigation, write-offs and restructuring charges, goodwill and intangibles subject to impairment testing, and tax effects. The company states that prior acquisitions have produced mixed results. **Restructuring and asset impairment.** Changes in industry structure and market conditions could force product or business discontinuances, impairments and workforce reductions. Cisco notes it initiated a restructuring plan in the fourth quarter of fiscal 2026 that it expects to substantially complete by the end of fiscal 2027, and cautions that the business may not end up more efficient or effective than before. **Geographic, macroeconomic and geopolitical exposure.** Tariffs and other trade barriers, inflation, central bank policy, the Russia–Ukraine war, Middle East conflicts, China–Taiwan relations, government disruptions or shutdowns, economic challenges in China, import/export restrictions and adverse tax consequences all bear on results. Cisco is also exposed to customer credit risk given open-credit sales and its financing activities, and to currency movements — a stronger dollar raises the real cost of products sold in dollars outside the United States, while a weaker dollar raises local operating expenses and foreign-currency component costs. **Other named risks.** Distribution-model disruption and two-tier distributor inventory management; product quality and software defects; difficulty enforcing proprietary rights and exposure to third-party infringement claims; reliance on third-party licenses; evolving privacy, data and cybersecurity law (GDPR and the EU Data Act, the California Privacy Rights Act, Singapore's Personal Data Protection Act); evolving regulatory and procurement requirements affecting what Cisco may sell and to whom; retention and recruitment of key personnel; counterfeit versions of Cisco products; volatility in the tax provision and tax audit outcomes; natural catastrophe exposure, including a Silicon Valley headquarters in a seismically active region; and debt — $23.0 billion of senior unsecured notes outstanding at fiscal year end maturing from calendar 2026 through 2064, plus a $15.0 billion commercial paper program under which $6.7 billion was outstanding at July 25, 2026. Cisco also flags reputational and disclosure risk around environmental, social and governance matters, including its September 2021 goal of net zero across all scopes of greenhouse gas emissions by 2040. --- ## Management's discussion and analysis — fiscal 2026 *From the fiscal 2026 Form 10-K, accession 0000858877-26-000132.* ### Results | Year ended | July 25, 2026 | July 26, 2025 | Variance | |---|---|---|---| | Revenue | $63,325M | $56,654M | +12% | | Gross margin percentage | 64.5% | 64.9% | (0.4) pts | | Research and development | $9,563M | $9,300M | +3% | | Sales and marketing | $11,559M | $10,966M | +5% | | General and administrative | $2,761M | $2,992M | (8)% | | Total R&D, S&M, G&A | $23,883M | $23,258M | +3% | | Total as a percentage of revenue | 37.7% | 41.1% | (3.4) pts | | Restructuring and other charges in operating expenses | $693M | $744M | (7)% | | Operating income as a percentage of revenue | 24.3% | 20.8% | +3.5 pts | | Effective tax rate | 17.1% | 8.3% | +8.8 pts | | Net income | $13,267M | $10,180M | +30% | | Net income as a percentage of revenue | 21.0% | 18.0% | +3.0 pts | | Diluted earnings per share | $3.33 | $2.55 | +31% | Management describes fiscal 2026 as strong revenue growth and profitability in a continued positive demand environment. Total revenue was $63.3 billion, up 12%; product revenue rose 16% to $48,295 million while services revenue was flat at $15,030 million. Total software revenue was $23.2 billion across all product areas and services, an increase of 4%, and total subscription revenue increased 1%. **AI infrastructure is the year's swing factor.** Demand for AI infrastructure from hyperscaler customers represented approximately 6% of total revenue in fiscal 2026, compared with less than 2% in fiscal 2025. Management expects this demand to remain a significant driver of results in fiscal 2027, and points to the associated customer concentration and supply considerations in the risk factors. **Revenue by geographic segment.** Americas $37,799 million (+12%, up $4,143 million); EMEA $16,613 million (+12%, up $1,789 million); APJC $8,914 million (+9%, up $740 million). Product revenue grew 17% in the Americas — led by the Service Provider and Cloud customer market, largely on AI infrastructure solutions, with the United States up 18%, Canada 8% and Mexico 25%, partly offset by a 10% decline in Brazil; 15% in EMEA, with the United Kingdom up 31%, Germany 16% and France 11%; and 13% in APJC, with Australia up 13%, Japan 16%, India 2% and China 23%. **Product revenue by category.** Networking $34,668 million, up 22% or $6,364 million, driven primarily by AI infrastructure solutions including Cisco Silicon One based systems and optics, with double-digit increases in Service Provider Routing, Data Center Switching, Wireless and servers and growth in Campus Switching and Enterprise Routing. Security $8,232 million, up 2% or $138 million, on SASE and network security. Collaboration $4,300 million, up 4% or $146 million. Observability $1,095 million, up 4% or $40 million, on network assurance growth partly offset by a decline in the observability suite. **Gross margin.** Total gross margin fell 0.4 percentage points to 64.5%. Product gross margin fell 0.5 percentage points, with mix of products sold costing 3.6 points — primarily because of the higher Networking revenue — partly offset by productivity of 1.1 points, purchased intangible amortization of 0.9 points, the non-recurrence of a fiscal 2025 charge from a legal dispute with a supplier worth 0.8 points, and pricing of 0.2 points. Management notes that productivity benefits were adversely affected by higher memory costs. Services gross margin rose 0.3 percentage points on cost efficiencies. By segment, gross margin was 65.1% in the Americas (down from 68.2%, on product mix), 71.2% in EMEA (up slightly) and 66.6% in APJC (up), with unallocated corporate items of $(1,532) million against $(2,148) million in fiscal 2025. **Operating expenses and restructuring.** Combined R&D, sales and marketing and G&A rose 3% but fell 3.4 points as a share of revenue. Foreign currency fluctuations, net of hedging, increased those combined expenses by approximately $195 million, or 0.8%. Restructuring and other charges were $693 million, down from $744 million. In the fourth quarter of fiscal 2026 Cisco announced a restructuring plan to allow investment in key growth opportunities including silicon, optics, security and AI; total pre-tax charges are estimated at up to $1 billion, the plan is expected to be substantially completed by the end of fiscal 2027, and $511 million of charges were incurred under it during fiscal 2026. The fiscal 2025 plan incurred cumulative charges of $926 million and was substantially completed in fiscal 2026; the fiscal 2024 plan incurred cumulative charges of $654 million and is complete. Cisco expects to reinvest substantially all of the savings from these plans, so overall cost savings are not expected to be material. **Taxes.** The effective tax rate was 17.1% versus 8.3% in fiscal 2025. The 8.8 point increase was primarily due to a $720 million tax benefit recognized in fiscal 2025 related to a U.S. Tax Court opinion on the U.S. taxation of deemed foreign dividends in the transition year of the Tax Cuts and Jobs Act (Cisco's fiscal 2018), plus an increase in state taxes from a valuation allowance adjustment for California deferred tax assets in fiscal 2026. Gross unrecognized tax benefits were $2.5 billion at year end, a $0.2 billion increase, of which $1.7 billion would affect the effective tax rate if recognized. Gross deferred tax assets were $11.2 billion against a $1.4 billion valuation allowance, itself up $0.5 billion, primarily because future California taxable income is expected to be insufficient to fully use accumulated California credits and net operating loss carryforwards. **Other income.** The change in other income (loss), net was driven primarily by higher unrealized gains on non-marketable equity securities and lower losses on available-for-sale debt investments, partly offset by lower gains on marketable equity securities. Interest income fell on a lower average balance of cash and available-for-sale debt investments and lower rates; interest expense fell on a lower average debt balance and lower effective rates on commercial paper. ### Liquidity, capital allocation and the balance sheet | Fiscal year | 2026 | 2025 | |---|---|---| | Cash and cash equivalents and investments | $15,918M | $16,110M | | Cash provided by operating activities | $14,177M | $14,193M | | Remaining performance obligations | $46,734M | $43,533M | | Repurchases of common stock — repurchase program | $6,106M | $5,995M | | Dividends paid | $6,553M | $6,437M | | Inventories | $5,694M | $3,164M | | Total debt | $29,533M | $28,093M | Cash and investments fell $192 million on the year. Uses of cash were dividends of $6.6 billion, share repurchases of $6.1 billion, $1.9 billion of shares repurchased for tax withholding on vesting restricted stock units, $1.8 billion of debt repayment, $1.4 billion of capital expenditures and $0.5 billion of net cash paid for acquisitions; these were partly offset by $14.2 billion of operating cash flow, $3.2 billion of net commercial paper issuance and the release of approximately $0.6 billion of restricted cash previously held in escrow. Operating cash flow was flat year over year, with higher cash collections offset by higher payments to contract manufacturers and suppliers and the final $2.3 billion U.S. transition tax payment on accumulated foreign earnings under the Tax Act. Free cash flow — operating cash flow less capital expenditures — was $12,767 million, down from $13,288 million, as capital expenditures rose to $1,410 million from $905 million. Cisco targets returning a minimum of 50% of free cash flow annually to stockholders. Dividends of $1.66 per share totalled $6,553 million; 76 million shares were repurchased at a weighted-average price of $80.26 for $6,106 million, against 105 million shares at $56.53 in fiscal 2025. Approximately $8.1 billion remained authorized under the repurchase program at July 25, 2026, with no termination date. **The inventory build is the year's most striking balance-sheet movement.** Inventories rose 80% to $5,694 million and inventory purchase commitments rose 126% to $17,165 million — a combined 112% increase — driven by commitments with contract manufacturers and suppliers to manufacture Cisco Silicon One and other products for hyperscaler and other customer demand, and significantly by higher memory prices and commitments to secure supply and pricing for memory and certain components. Inventory deposits and prepayments rose to $1,104 million from $825 million. Management expects inventory balances may increase in future quarters. Certain of these commitments are fixed-dollar arrangements securing supply and pricing for multi-year periods, and certain relate to long-term supply agreements for fixed quantities of memory components at variable market-based pricing; a significant portion is firm, noncancelable and unconditional. Total provisions for inventory and the liability for purchase commitments were $387 million in fiscal 2026, against $493 million and $819 million in fiscal 2025 and 2024. Other balance-sheet items: accounts receivable, net rose 11% to $7,470 million on higher revenue. Financing receivables increased 28% to a carrying value of $8.3 billion, primarily on higher customer demand for financing of hardware, software and services. Channel partner financing volume was $29.9 billion, up from $24.9 billion, with $1.2 billion subject to guarantees and approximately $127 million of maximum potential future payments under those guarantees. Goodwill was $59.5 billion with no impairment in fiscal 2026, 2025 or 2024; the excess of fair value over carrying value at annual testing was $64.7 billion for the Americas, $88.6 billion for EMEA and $33.7 billion for APJC, and a hypothetical 10% decline in each reporting unit's fair value would not have caused impairment. Non-marketable equity securities carried at $4.0 billion, up from $1.9 billion, primarily on $1.4 billion of net unrealized gains recognized on observable price changes plus additional investments; marketable equity securities were $361 million. Remaining performance obligations totalled $46,734 million, up 7% — product RPO up 9% to $23,436 million and services RPO up 6% to $23,298 million, split $22,776 million short-term and $23,958 million long-term. Deferred revenue rose 3% to $29,781 million, with deferred product revenue up 2% on recurring software deferrals and deferred services revenue up 4% on higher business volume. Debt at year end comprised $23.0 billion principal of senior fixed-rate notes (carrying amount $22.9 billion, fair value $22.7 billion) maturing between calendar 2026 and 2064, plus $6.7 billion of commercial paper against a $15.0 billion program, up from $3.5 billion a year earlier. Cisco has an amended and restated 5-year $5.0 billion unsecured revolving credit agreement entered February 2, 2024, requiring an interest coverage ratio of not less than 3.0 to 1.0; nothing was drawn and all covenants were met. Contractual obligations at July 25, 2026 totalled $51,075 million, of which $20,764 million falls due in less than one year — including $14,341 million of purchase commitments with contract manufacturers and suppliers and $3,502 million of long-term debt. **Acquisitions during the year.** Acquisitions completed in fiscal 2026 carried total purchase consideration of $550 million, consisting primarily of cash, allocated to $10 million of net tangible assets, $190 million of purchased intangible assets and $350 million of goodwill, with approximately $30 million of cash acquired. The 10-K does not name the individual fiscal 2026 acquisitions or give per-deal prices; none was material enough for separate pro forma presentation. For comparison, fiscal 2025 acquisitions totalled $293 million of consideration, and fiscal 2024 was dominated by Splunk Inc., completed March 18, 2024 at $157 per share in cash for approximately $27 billion of merger consideration, allocated to $19.3 billion of goodwill, $10.6 billion of purchased intangible assets and $2.8 billion of net liabilities. Compensation expense related to acquisitions was $360 million in fiscal 2026, down from $876 million, with up to $293 million of future cash compensation expense estimated as of year end. ### Market risk Approximately 75% of operating expenses are U.S.-dollar denominated, and revenue is primarily denominated in U.S. dollars, so the direct effect of currency fluctuation on revenue has not been material. A hypothetical 50 basis point move in market rates would change the fair value of financing receivables by approximately $0.1 billion and the fair value of fixed-rate debt by approximately $0.7 billion, though it would not change interest expense on the fixed-rate debt; commercial paper reprices with market rates. ### Legal proceedings Brazilian federal and Sao Paulo state tax authorities have asserted claims against Cisco's Brazilian subsidiary on a theory of joint liability with a Brazilian importer for alleged evasion of import taxes, covering calendar years 2004–2007 (federal) and 2005–2007 (state). The remaining asserted claims aggregate $153 million of alleged evaded import and other taxes, $969 million of interest and $315 million of penalties, at exchange rates as of July 25, 2026. Cisco believes the claims are without merit and is defending them vigorously, but cannot determine the likelihood of an unfavorable outcome or reasonably estimate a range of loss, and does not expect a final judicial determination for several years. In the Centripetal Networks patent litigations, the Federal Circuit affirmed the district court's non-infringement decision on April 29, 2026, and the Patent Trial and Appeal Board found all claims unpatentable on remand; a German court gave a preliminary opinion of non-infringement at an April 2, 2026 hearing, with a related invalidity appeal hearing set for November 10, 2026, and a French final hearing set for October 8, 2026. In the Ramot at Tel Aviv University matters, the District of Delaware granted Cisco summary judgment of non-infringement of all patents in suit before the rescheduled December 1, 2025 trial; Ramot has appealed to the Federal Circuit. Cisco believes any damages ultimately assessed in the Ramot matters would not have a material effect on its financial statements. --- ## Within the year: the fourth quarter and the third quarter ### Fourth quarter of fiscal 2026 *From the fiscal 2026 Form 10-K, accession 0000858877-26-000132.* Fourth-quarter revenue rose 18% to $17,252 million against $14,673 million. Product revenue rose 24% to $13.5 billion and services revenue was flat at $3.8 billion. By segment, Americas revenue rose 18%, EMEA 19% and APJC 14%. By product category, product revenue rose 28% in Networking — reflecting AI infrastructure and data center switching — 14% in Security, 12% in Collaboration and 6% in Observability. Total gross margin rose 0.9 percentage points to 64.1%, primarily because the fourth quarter of fiscal 2025 carried a charge from a legal dispute with a supplier that did not recur, and because of favorable pricing, partly offset by product mix and higher memory costs. Combined R&D, sales and marketing and G&A fell 5.1 points as a share of revenue to 35.1% on revenue growth and disciplined expense management. Operating income as a percentage of revenue rose 3.7 points to 24.7%, partly offset by higher restructuring and other charges — restructuring and other charges in operating expenses were $511 million in the quarter against $35 million a year earlier, reflecting the newly announced plan. Net income was $3,859 million and diluted earnings per share rose 52% to $0.97. ### Third quarter of fiscal 2026 *From the Form 10-Q for the quarter ended April 25, 2026, accession 0000858877-26-000078.* Third-quarter revenue rose 12% to $15,841 million, with product revenue up 17% and services revenue down 1%. Software revenue was $5.7 billion across all product areas and services, up 1%, and total subscription revenue decreased 2%. Total gross margin fell 2.0 percentage points to 63.6%, with product gross margin down 2.5 points on product mix and higher memory costs, partly offset by productivity improvements and lower purchased-intangible amortization. Operating income as a percentage of revenue rose 2.4 points to 25.0%, net income was $3,373 million and diluted earnings per share rose 37% to $0.85. Americas revenue rose $1.2 billion, EMEA $0.3 billion and APJC $0.2 billion. By product category, Networking product revenue rose 25% on AI infrastructure and campus networking, Observability rose 3%, Security was flat and Collaboration declined 1%. For the first nine months of fiscal 2026, revenue rose 10% to $46,073 million, gross margin fell 0.8 points to 64.7%, operating margin rose 3.4 points to 24.1%, and diluted earnings per share rose 24% to $2.36 — the last partly offset by the $720 million income tax benefit recorded in the first nine months of fiscal 2025. Nine-month operating cash flow was $8,791 million against $9,959 million a year earlier. At April 25, 2026 inventories stood at $4,708 million and total debt at $31,303 million, and remaining performance obligations were $43,462 million, essentially flat against the fiscal 2025 year-end figure — the growth in RPO came in the fourth quarter. Acquisitions completed in the first nine months of fiscal 2026 carried total purchase consideration of only $49 million, so the great majority of the year's $550 million of acquisition consideration was spent in the fourth quarter. The through-year pattern management describes is consistent: AI infrastructure and networking driving accelerating revenue growth quarter by quarter, operating leverage improving, and product gross margin under pressure from mix and memory cost — pressure that eased in the fourth quarter only because of the non-recurrence of the prior-year supplier dispute charge and favorable pricing. --- ## Subsequent events *From the fiscal 2026 Form 10-K, accession 0000858877-26-000132.* Cisco's fiscal 2026 Form 10-K contains no separate subsequent-events note. The items it discloses that fall after the July 25, 2026 fiscal year end are: - **Dividend declared.** On August 12, 2026 the Board of Directors declared a quarterly dividend of $0.42 per common share, payable October 21, 2026 to stockholders of record as of the close of business on October 2, 2026. Future dividends are subject to Board approval. - **Shares outstanding and holders of record.** 3,942,586,873 shares of common stock were outstanding as of August 27, 2026, and there were 29,241 registered stockholders as of the same date. - **Near-term debt maturity.** $1,500 million of 2.50% senior fixed-rate notes mature on September 20, 2026, shortly after the September 2, 2026 filing date; $3,502 million of long-term debt principal falls due within one year of the fiscal year end. - **Restructuring continuing into fiscal 2027.** The restructuring plan announced in the fourth quarter of fiscal 2026, with estimated total pre-tax charges of up to $1 billion of which $511 million was incurred in fiscal 2026, is expected to be substantially completed by the end of fiscal 2027, so the balance of the charges falls in periods after the fiscal year covered by this report. - **Ongoing litigation dates after year end.** In the Centripetal matters, an appeal hearing in a related German invalidity proceeding is set for November 10, 2026 and a final hearing in France is set for October 8, 2026; Ramot's appeal of the Delaware summary judgment of non-infringement to the Federal Circuit is ongoing. - **Purchase commitments extending into fiscal 2027.** Cisco states it expects to continue entering into additional purchase commitments with contract manufacturers and suppliers in fiscal 2027, including commitments to secure supply and pricing for memory and certain components, and that inventory balances may increase in future quarters. No acquisition, divestiture, new financing or litigation settlement occurring after July 25, 2026 is disclosed in the fiscal 2026 Form 10-K. The Form 10-Q for the quarter ended April 25, 2026 likewise contains no subsequent-events note; the events occurring after that quarter end — including the fourth-quarter restructuring plan and the fourth-quarter acquisition activity — are captured in the fiscal 2026 Form 10-K and described above. --- ## Annual meeting and governance The 2026 Annual Meeting of Stockholders is to be held on December 15, 2026. Charles H. Robbins is Chair and Chief Executive Officer, having served as CEO since July 2015 and Chair since December 2017. Mark Patterson has been Executive Vice President and Chief Financial Officer since July 2025, having previously been Chief Strategy Officer. Jeetendra Patel is President and Chief Product Officer. Deborah L. Stahlkopf is Executive Vice President and Chief Legal Officer, Thimaya Subaiya is Executive Vice President, Operations, and Oliver Tuszik is Executive Vice President, Global Sales and Chief Sales Officer. Nichlas A. Fink is Senior Vice President and Chief Accounting Officer. The 10-K was signed on September 2, 2026.