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1、Table of ContentsUNITED STATES SECURITIES AND EXCHANGE COMMISSIONWASHINGTON,D.C.20549 _FORM 10-Q(Mark One)QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended January 25,2025orTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECU

2、RITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-39940 _CISCO SYSTEMS,INC.(Exact name of registrant as specified in its charter)Delaware 77-0059951(State or other jurisdiction ofincorporation or organization)(I.R.S.EmployerIdentification Number)170 West Tasman

3、 DriveSan Jose,California 95134(Address of principal executive office and zip code)(408)526-4000(Registrants telephone number,including area code)Not Applicable(Former name,former address and formal fiscal year,if changed since last report.)_ Securities registered pursuant to Section 12(b)of the Act

4、:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock,par value$0.001 per shareCSCOThe Nasdaq Stock Market LLCIndicate 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 d

5、uring thepreceding 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 past90 days.Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required

6、 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 no

7、n-accelerated filer,a smaller reporting company,or an emerginggrowth company.See the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company,”and“emerging growth company”in Rule 12b-2 ofthe Exchange Act.Large accelerated filerAccelerated filer Non-accelerated filerSmal

8、ler reporting company Emerging growth companyIf 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 revisedfinancial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate

9、 by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No Number of shares of the registrants common stock outstanding as of February 13,2025:3,978,292,432_ 1Table of ContentsCisco Systems,Inc.Form 10-Q for the Quarter Ended January 25,2025INDEXPag

10、ePart IFinancial Information3Item 1.Financial Statements(Unaudited)3Consolidated Balance Sheets at January 25,2025 and July 27,20243Consolidated Statements of Operations for the Three and Six Months Ended January 25,2025 and January 27,20244Consolidated Statements of Comprehensive Income for the Thr

11、ee and Six Months Ended January 25,2025 and January 27,20245Consolidated Statements of Cash Flows for the Six Months Ended January 25,2025 and January 27,20246Consolidated Statements of Equity for the Three and Six Months Ended January 25,2025 and January 27,20247Notes to Consolidated Financial Stat

12、ements9Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations39Item 3.Quantitative and Qualitative Disclosures About Market Risk60Item 4.Controls and Procedures61Part II.Other Information61Item 1.Legal Proceedings61Item 1A.Risk Factors62Item 2.Unregistered Sales

13、of Equity Securities,Use of Proceeds,and Issuer Purchases of Equity Securities77Item 3.Defaults Upon Senior Securities77Item 4.Mine Safety Disclosures77Item 5.Other Information77Item 6.Exhibits78Signature792Table of ContentsPART I.FINANCIAL INFORMATION Item 1.Financial Statements(Unaudited)CISCO SYS

14、TEMS,INC.CONSOLIDATED BALANCE SHEETS(in millions,except par value)(Unaudited)January 25,2025July 27,2024ASSETSCurrent assets:Cash and cash equivalents$8,556$7,508 Investments8,297 10,346 Accounts receivable,net of allowance of$80 at January 25,2025 and$87 at July 27,20245,669 6,685 Inventories2,927

15、3,373 Financing receivables,net3,074 3,338 Other current assets6,158 5,612 Total current assets34,681 36,862 Property and equipment,net1,992 2,090 Financing receivables,net3,240 3,376 Goodwill58,719 58,660 Purchased intangible assets,net10,139 11,219 Deferred tax assets6,591 6,262 Other assets6,013

16、5,944 TOTAL ASSETS$121,375$124,413 LIABILITIES AND EQUITYCurrent liabilities:Short-term debt$11,413$11,341 Accounts payable1,902 2,304 Income taxes payable1,884 1,439 Accrued compensation3,299 3,608 Deferred revenue15,999 16,249 Other current liabilities5,522 5,643 Total current liabilities40,019 40

17、,584 Long-term debt19,625 19,621 Income taxes payable1,756 3,985 Deferred revenue11,796 12,226 Other long-term liabilities2,649 2,540 Total liabilities75,845 78,956 Commitments and contingencies(Note 14)Equity:Cisco stockholders equity:Preferred stock,$0.001 par value:5 shares authorized;none issued

18、 and outstanding Common stock and additional paid-in capital,$0.001 par value:20,000 shares authorized;3,977 and 4,007shares issued and outstanding at January 25,2025 and July 27,2024,respectively46,521 45,800 Retained earnings502 1,087 Accumulated other comprehensive loss(1,493)(1,430)Total equity4

19、5,530 45,457 TOTAL LIABILITIES AND EQUITY$121,375$124,413 See Notes to Consolidated Financial Statements.3Table of ContentsCISCO SYSTEMS,INC.CONSOLIDATED STATEMENTS OF OPERATIONS(in millions,except per-share amounts)(Unaudited)Three Months EndedSix Months EndedJanuary 25,2025January 27,2024January 2

20、5,2025January 27,2024REVENUE:Product$10,234$9,232$20,348$20,371 Services3,757 3,559 7,484 7,088 Total revenue13,991 12,791 27,832 27,459 COST OF SALES:Product3,713 3,443 7,239 7,400 Services1,167 1,131 2,361 2,285 Total cost of sales4,880 4,574 9,600 9,685 GROSS MARGIN9,111 8,217 18,232 17,774 OPERA

21、TING EXPENSES:Research and development2,299 1,943 4,585 3,856 Sales and marketing2,672 2,458 5,424 4,964 General and administrative752 642 1,547 1,314 Amortization of purchased intangible assets265 66 530 133 Restructuring and other charges10 12 675 135 Total operating expenses5,998 5,121 12,761 10,

22、402 OPERATING INCOME3,113 3,096 5,471 7,372 Interest income238 324 524 684 Interest expense(404)(120)(822)(231)Other income(loss),net(60)(139)(19)(222)Interest and other income(loss),net(226)65(317)231 INCOME BEFORE PROVISION FOR INCOME TAXES2,887 3,161 5,154 7,603 Provision for income taxes459 527

23、15 1,331 NET INCOME$2,428$2,634$5,139$6,272 Net income per share:Basic$0.61$0.65$1.29$1.55 Diluted$0.61$0.65$1.28$1.54 Shares used in per-share calculation:Basic3,981 4,055 3,986 4,056 Diluted4,005 4,073 4,008 4,079 See Notes to Consolidated Financial Statements.4Table of ContentsCISCO SYSTEMS,INC.C

24、ONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(in millions)(Unaudited)Three Months EndedSix Months EndedJanuary 25,2025January 27,2024January 25,2025January 27,2024Net income$2,428$2,634$5,139$6,272 Available-for-sale investments:Change in net unrealized gains and losses,net of tax benefit(expense)o

25、f$0 and$(17)for the second quarter and first six months of fiscal 2025,respectively,and$(73)and$(33)for the corresponding periods of fiscal2024,respectively4 229 58 99 Net(gains)losses reclassified into earnings,net of tax(benefit)expense of$(17)and$(23)for the second quarter and first six months of

26、 fiscal 2025,respectively,and$(5)and$(9)for the corresponding periods of fiscal2024,respectively3 18 22 34 7 247 80 133 Cash flow hedging instruments:Change in unrealized gains and losses,net of tax benefit(expense)of$(13)and$(15)for the second quarter and first six months of fiscal 2025,respectivel

27、y,and$0 and$(9)for the corresponding periods of fiscal 2024,respectively43 1 50 30 Net(gains)losses reclassified into earnings,net of tax(benefit)expense of$3 and$5 for the second quarter and first six months of fiscal 2025,respectively,and$2 and$5 for the corresponding periods of fiscal 2024,respec

28、tively(12)(9)(19)(18)31(8)31 12 Net change in cumulative translation adjustment and actuarial gains andlosses net,of tax benefit(expense)of$0 for each of the second quarter andfirst six months of fiscal 2025,and$0 and$1 for the corresponding periods offiscal 2024,respectively(155)274(174)(82)Other c

29、omprehensive income(loss)(117)513(63)63 Comprehensive income$2,311$3,147$5,076$6,335 See Notes to Consolidated Financial Statements.5Table of ContentsCISCO SYSTEMS,INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(in millions)(Unaudited)Six Months EndedJanuary 25,2025January 27,2024Cash flows from operating

30、 activities:Net income$5,139$6,272 Adjustments to reconcile net income to net cash provided by operating activities:Depreciation,amortization,and other1,550 823 Share-based compensation expense1,748 1,463 Provision for receivables7 12 Deferred income taxes(382)(816)(Gains)losses on divestitures,inve

31、stments and other,net(5)205 Change in operating assets and liabilities,net of effects of acquisitions and divestitures:Accounts receivable969 941 Inventories441 442 Financing receivables330(33)Other assets(427)(403)Accounts payable(359)(476)Income taxes,net(2,285)(4,656)Accrued compensation(293)(763

32、)Deferred revenue(555)293 Other liabilities24(125)Net cash provided by operating activities5,902 3,179 Cash flows from investing activities:Purchases of investments(2,261)(2,253)Proceeds from sales of investments1,791 2,484 Proceeds from maturities of investments2,703 4,044 Acquisitions,net of cash

33、and cash equivalents acquired and divestitures(257)(878)Purchases of investments in privately held companies(137)(50)Return of investments in privately held companies94 123 Acquisition of property and equipment(427)(304)Other(5)(1)Net cash provided by investing activities1,501 3,165 Cash flows from

34、financing activities:Issuances of common stock320 349 Repurchases of common stockrepurchase program(3,243)(2,504)Shares repurchased for tax withholdings on vesting of restricted stock units(655)(581)Short-term borrowings,original maturities of 90 days or less,net1,012 1,398 Issuances of debt10,406 2

35、,537 Repayments of debt(11,382)(750)Dividends paid(3,185)(3,163)Other(2)(7)Net cash used in financing activities(6,729)(2,721)Effect of foreign currency exchange rate changes on cash,cash equivalents,restricted cash and restricted cashequivalents(8)(32)Net increase in cash,cash equivalents,restricte

36、d cash and restricted cash equivalents666 3,591 Cash,cash equivalents,restricted cash and restricted cash equivalents,beginning of period8,842 11,627 Cash,cash equivalents,restricted cash and restricted cash equivalents,end of period$9,508$15,218 Supplemental cash flow information:Cash paid for inte

37、rest$769$203 Cash paid for income taxes,net$2,682$6,804 See Notes to Consolidated Financial Statements.6Table of ContentsCISCO SYSTEMS,INC.CONSOLIDATED STATEMENTS OF EQUITY(in millions,except per-share amounts)(Unaudited)Three Months Ended January 25,2025Shares ofCommonStockCommon StockandAdditional

38、Paid-In CapitalRetained EarningsAccumulatedOtherComprehensive LossTotalEquityBalance at October 26,20243,974$45,991$662$(1,376)$45,277 Net income2,428 2,428 Other comprehensive income(loss)(117)(117)Issuance of common stock33 320 320 Repurchase of common stock(21)(244)(992)(1,236)Shares repurchased

39、for tax withholdings on vesting of restricted stock unitsand other(9)(475)(475)Cash dividends declared($0.40 per common share)(1,593)(1,593)Share-based compensation921 921 Other8(3)5 Balance at January 25,20253,977$46,521$502$(1,493)$45,530 Six Months Ended January 25,2025Shares ofCommonStockCommon

40、StockandAdditionalPaid-In CapitalRetained EarningsAccumulatedOtherComprehensive LossTotalEquityBalance at July 27,20244,007$45,800$1,087$(1,430)$45,457 Net income5,139 5,139 Other comprehensive income(loss)(63)(63)Issuance of common stock44 320 320 Repurchase of common stock(61)(706)(2,533)(3,239)Sh

41、ares repurchased for tax withholdings on vesting of restricted stock unitsand other(13)(649)(649)Cash dividends declared($0.80 per common share)(3,185)(3,185)Share-based compensation1,748 1,748 Other8(6)2 Balance at January 25,20253,977$46,521$502$(1,493)$45,530 7Table of ContentsCISCO SYSTEMS,INC.C

42、ONSOLIDATED STATEMENTS OF EQUITY(in millions,except per-share amounts)(Unaudited)Three Months Ended January 27,2024Shares ofCommonStockCommon StockandAdditionalPaid-In CapitalRetained EarningsAccumulatedOtherComprehensive LossTotalEquityBalance at October 28,20234,049$44,546$2,689$(2,025)$45,210 Net

43、 income2,634 2,634 Other comprehensive income(loss)513 513 Issuance of common stock34 349 349 Repurchase of common stock(25)(279)(975)(1,254)Shares repurchased for tax withholdings on vesting of restricted stock unitsand other(8)(425)(425)Cash dividends declared($0.39 per common share)(1,583)(1,583)

44、Share-based compensation802 802 Other9(4)5 Balance at January 27,20244,050$45,002$2,761$(1,512)$46,251 Six Months Ended January 27,2024Shares ofCommonStockCommon StockandAdditionalPaid-In CapitalRetained EarningsAccumulatedOtherComprehensive LossTotalEquityBalance at July 29,20234,066$44,289$1,639$(

45、1,575)$44,353 Net income6,272 6,272 Other comprehensive income(loss)63 63 Issuance of common stock43 349 349 Repurchase of common stock(48)(528)(1,978)(2,506)Shares repurchased for tax withholdings on vesting of restricted stock unitsand other(11)(581)(581)Cash dividends declared($0.78 per common sh

46、are)(3,163)(3,163)Share-based compensation1,463 1,463 Other10(9)1 Balance at January 27,20244,050$45,002$2,761$(1,512)$46,251 8Table of ContentsCISCO SYSTEMS,INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)1.Organization and Basis of PresentationThe fiscal year for Cisco Systems,Inc.(the“Co

47、mpany,”“Cisco,”“we,”“us,”or“our”)is the 52 or 53 weeks ending on the last Saturday in July.Fiscal 2025and fiscal 2024 are each 52-week fiscal years.The Consolidated Financial Statements include our accounts and those of our subsidiaries.All intercompanyaccounts and transactions have been eliminated.

48、We conduct business globally and are primarily managed on a geographic basis in the following threegeographic segments:the Americas;Europe,Middle East,and Africa(EMEA);and Asia Pacific,Japan,and China(APJC).We have prepared the accompanying financial data as of January 25,2025 and for the second qua

49、rter and first six months of fiscal 2025 and 2024,withoutaudit,pursuant to the rules and regulations of the U.S.Securities and Exchange Commission(SEC).Certain information and footnote disclosures normallyincluded in financial statements prepared in accordance with generally accepted accounting prin

50、ciples in the United States(GAAP)have been condensed oromitted pursuant to such rules and regulations.The July 27,2024 Consolidated Balance Sheet was derived from audited financial statements,but does notinclude all disclosures required by accounting principles generally accepted in the United State

51、s.However,we believe that the disclosures are adequate to makethe information presented not misleading.These Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statementsand the notes thereto included in our Annual Report on Form 10-K for the fiscal year

52、ended July 27,2024.In the opinion of management,all normal recurring adjustments necessary to state fairly the consolidated balance sheet as of January 25,2025,the results ofoperations,the statements of comprehensive income and the statements of equity for the second quarter and first six months of

53、fiscal 2025 and 2024,and thestatements of cash flows for the first six months of fiscal 2025 and 2024,as applicable,have been made.The results of operations for the second quarter andfirst six months of fiscal 2025 are not necessarily indicative of the operating results for the full fiscal year or a

54、ny future periods.Our consolidated financial statements include our accounts and investments consolidated under the voting interest model.The noncontrolling interestsattributed to these investments are not presented as a separate component in the equity section of the Consolidated Balance Sheets as

55、these amounts are notmaterial for any of the fiscal periods presented.The share of earnings attributable to the noncontrolling interests are not presented separately in theConsolidated Statements of Operations as these amounts are not material for any of the fiscal periods presented.We have evaluate

56、d subsequent events through the date that the financial statements were issued.2.Recent Accounting Pronouncements(a)Recent Accounting Standards or Updates Not Yet EffectiveSegment Reporting In November 2023,the Financial Accounting Standards Board(FASB)issued an accounting standard update that expan

57、ds the disclosurerequirements for reportable segments,primarily through enhanced disclosures around significant segment expenses.The accounting standard update will beeffective for our fiscal 2025 Form 10-K on a retrospective basis,and early adoption is permitted.We are currently evaluating the impa

58、ct of this accountingstandard update on our segment disclosures.Improvements on Income Tax Disclosures In December 2023,the FASB issued an accounting standard update expanding the requirements for disclosure ofdisaggregated information about the effective tax rate reconciliation and income taxes pai

59、d.The accounting standard update will be effective for our fiscal 2026Form 10-K.We are currently evaluating the impact of this accounting standard update on our income tax disclosures.Disaggregation of Income Statement Expenses In November 2024,the FASB issued an accounting standard update expanding

60、 the disclosure requirementsabout specific expense categories,primarily through disaggregated information on income statement line items.The accounting standard update will beeffective for our fiscal 2028 Form 10-K,and early adoption is permitted.We are currently evaluating the impact of this accoun

61、ting standard update on ourConsolidated Financial Statements.9Table of ContentsCISCO SYSTEMS,INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)3.RevenueWe enter into contracts with customers that can include various combinations of products and services which are generally distinct

62、 and accounted for asseparate performance obligations.As a result,our contracts may contain multiple performance obligations.We determine whether arrangements are distinctbased on whether the customer can benefit from the product or service on its own or together with other resources that are readil

63、y available and whether ourcommitment to transfer the product or service to the customer is separately identifiable from other obligations in the contract.We classify our hardware,perpetual software licenses,and software-as-a-service(SaaS)as distinct performance obligations.Term software licenses re

64、present multiple obligations,whichinclude software licenses and software maintenance.In transactions where we deliver hardware or software,we are typically the principal and we recordrevenue and costs of goods sold on a gross basis.We refer to our term software licenses,security software licenses,Sa

65、aS,and associated service arrangementsas subscription offers.Revenue from subscription offers includes revenue recognized over time as well as upfront.We recognize revenue upon transfer of control of promised goods or services in a contract with a customer in an amount that reflects the consideratio

66、n weexpect to receive in exchange for those products or services.Transfer of control occurs once the customer has the contractual right to use the product,generallyupon shipment,electronic delivery(or when the software is available for download by the customer),or once title and risk of loss has tra

67、nsferred to thecustomer.Transfer of control can also occur over time for software maintenance and services as the customer receives the benefit over the contract term.Ourhardware and perpetual software licenses are distinct performance obligations where revenue is recognized upfront upon transfer of

68、 control.Term softwarelicenses include multiple performance obligations where the term licenses are recognized upfront upon transfer of control,with the associated softwaremaintenance revenue recognized ratably over the contract term as services and software updates are provided.SaaS arrangements do

69、 not include the right forthe customer to take possession of the software during the term,and therefore have one distinct performance obligation which is satisfied over time withrevenue recognized ratably over the contract term as the customer consumes the services.On our product sales,we record con

70、sideration from shipping andhandling 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 January 25,2025

71、and July 27,2024 was$42 million and$37 million,respectively,and was recorded as a reduction of our accounts receivable and revenue.Significant JudgmentsRevenue is allocated among these performance obligations in a manner that reflects the consideration that we expect to be entitled to for the promis

72、ed goods orservices based on standalone selling prices(SSP).SSP is estimated for each distinct performance obligation and judgment may be required in theirdetermination.The best evidence of SSP is the observable price of a product or service when we sell the goods separately in similar circumstances

73、 and tosimilar customers.In instances where SSP is not directly observable,we determine SSP using information that may include market conditions and otherobservable inputs.We assess relevant contractual terms in our customer contracts to determine the transaction price.We apply judgment in identifyi

74、ng contractual terms anddetermining the transaction price as we may be required to estimate variable consideration when determining the amount of revenue to recognize.Variableconsideration includes potential contractual penalties and various rebate,cooperative marketing and other incentive programs

75、that we offer to our distributors,channel partners and end customers.When determining the amount of revenue to recognize,we estimate the expected usage of these programs,applying theexpected value or most likely estimate and update the estimate at each reporting period as actual utilization becomes

76、available.We also consider the customersright 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 thecontract term.Without these updates or

77、upgrades,the functionality of the software would diminish over a relatively short time period.These updates orupgrades provide the customer the full functionality of the purchased security software licenses and are required to maintain the security licenses utility as therisks and threats in the env

78、ironment are rapidly changing.In these circumstances,the revenue from these software arrangements is recognized as a singleperformance obligation satisfied over the contract term.10Table of ContentsCISCO SYSTEMS,INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)(a)Disaggregation of

79、 RevenueWe disaggregate our revenue into groups of similar products and services that depict the nature,amount,and timing of revenue and cash flows for our variousofferings.The sales cycle,contractual obligations,customer requirements,and go-to-market strategies differ for each of our product catego

80、ries,resulting indifferent economic risk profiles for each category.The following table presents this disaggregation of revenue(in millions):Three Months EndedSix Months EndedJanuary 25,2025January 27,2024January 25,2025January 27,2024Product revenue:Networking$6,850$7,081$13,603$15,904 Security2,11

81、1 973 4,129 1,984 Collaboration996 989 2,081 2,106 Observability277 188 535 378 Total Product10,234 9,232 20,348 20,371 Services3,757 3,559 7,484 7,088 Total$13,991$12,791$27,832$27,459 Amounts may not sum due to rounding.Networking consists of our core networking technologies of switching,routing,w

82、ireless,and servers.These technologies consist of both hardware andsoftware offerings,including software licenses and SaaS.Our hardware and perpetual software in this category are distinct performance obligations whererevenue is recognized upfront upon transfer of control.Term software licenses are

83、multiple performance obligations where the term license is recognizedupfront upon transfer of control with the associated software maintenance revenue recognized ratably over the contract term.SaaS arrangements in thiscategory have one distinct performance obligation which is satisfied over time wit

84、h revenue recognized ratably over the contract term.Security consists of our Network Security,Identity and Access Management,Secure Access Service Edge(SASE)and Threat Intelligence,Detection,andResponse offerings.These products consist of both hardware and software offerings,including software licen

85、ses and SaaS.Updates and upgrades for the termsoftware licenses are critical for our software to perform its intended commercial purpose because of the continuous need for our software to secure ourcustomers network environments against frequent threats.Therefore,security software licenses are gener

86、ally represented by a single distinct performanceobligation with revenue recognized ratably over the contract term.Our hardware and perpetual software in this category are distinct performance obligationswhere revenue is recognized upfront upon transfer of control.SaaS arrangements in this category

87、have one distinct performance obligation which is satisfiedover time with revenue recognized ratably over the contract term.Collaboration consists of our Webex Suite,Collaboration Devices,Contact Center and Communication Platform as a Service(CPaaS)offerings.Theseproducts consist primarily of softwa

88、re offerings,including software licenses and SaaS,as well as hardware.Our perpetual software and hardware in thiscategory are distinct performance obligations where revenue is recognized upfront upon transfer of control.Term software licenses are multiple performanceobligations where the term licens

89、e is recognized upfront upon transfer of control with the associated software maintenance revenue recognized ratably over thecontract term.SaaS arrangements in this category have one distinct performance obligation which is satisfied over time with revenue recognized ratably overthe contract term.Ob

90、servability consists of our network assurance,monitoring and analytics and observability suite offerings.These products consist primarily of softwareofferings,including software licenses and SaaS.Our perpetual software in this category are distinct performance obligations where revenue is recognized

91、upfront upon transfer of control.Term software licenses are multiple performance obligations where the term license is recognized upfront upon transfer ofcontrol with the associated software maintenance revenue recognized ratably over the contract term.SaaS arrangements in this category have one dis

92、tinctperformance 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 andadvanced services.Technical support s

93、ervices represent the majority of these offerings which are distinct performance obligations that are satisfied over timewith revenue recognized ratably over the contract term.Advanced services are distinct performance obligations that are satisfied over time with revenuerecognized as services are d

94、elivered.11Table of ContentsCISCO SYSTEMS,INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)The sales arrangements as discussed above are typically made pursuant to customer purchase orders based on master purchase or partner agreements.Cash isreceived based on our standard payment

95、 terms which is typically 30 days.We provide financing arrangements to customers for our hardware,software andservice offerings.Refer to Note 9 for additional information.For these arrangements,cash is typically received over time.Subscription revenue includes revenue recognized from our term softwa

96、re licenses,security software licenses,SaaS,and associated service arrangements.Oursubscription revenue is recorded in product and services revenue in our Consolidated Statements of Operations as follows(in millions):Three Months EndedSix Months EndedJanuary 25,2025January 27,2024January 25,2025Janu

97、ary 27,2024Product$4,432$3,110$8,851$6,317 Services3,430 3,280 6,855 6,534 Total$7,862$6,390$15,706$12,851 The majority of our product subscription revenue is recognized over time and the remainder is recognized upfront.Substantially all of our services subscriptionrevenue is recognized over time ba

98、sed on the contract term.(b)Contract BalancesAccounts ReceivableAccounts receivable,net was$5.7 billion as of January 25,2025 compared to$6.7 billion as of July 27,2024,as reported on the Consolidated Balance Sheets.The allowances for credit loss for our accounts receivable are summarized as follows

99、(in millions):Three Months EndedSix Months EndedJanuary 25,2025January 27,2024January 25,2025January 27,2024Allowance for credit loss at beginning of period$78$82$87$85 Provisions(benefits)12 9 12 11 Recoveries(write-offs),net(10)(12)(19)(17)Allowance for credit loss at end of period$80$79$80$79 Con

100、tract Assets and LiabilitiesGross contract assets by our internal risk ratings are summarized as follows(in millions):January 25,2025July 27,20241 to 4$1,223$1,266 5 to 61,659 1,456 7 and Higher82 72 Total$2,964$2,794 Contract assets consist of unbilled receivables and are recorded when revenue is r

101、ecognized in advance of scheduled billings to our customers.These amountsare primarily related to software and service arrangements where transfer of control has occurred but we have not yet invoiced.Our contract assets for theseunbilled receivables,net of allowances,were$2.9 billion as of January 2

102、5,2025 and$2.7 billion as of July 27,2024,and were included in other current assetsand other assets.Contract liabilities consist of deferred revenue.Deferred revenue was$27.8 billion as of January 25,2025 compared to$28.5 billion as of July 27,2024.Werecognized approximately$4.4 billion and$9.7 bill

103、ion of revenue during the second quarter and first six months of fiscal 2025 that was included in thedeferred revenue balance at July 27,2024.(c)Capitalized Contract Acquisition CostsWe capitalize direct and incremental costs incurred to acquire contracts,primarily sales commissions,for which the as

104、sociated revenue is expected to berecognized in future periods.We incur these costs in connection with both initial contracts and renewals.These costs are initially deferred and typicallyamortized over the term of the customer contract which corresponds to12Table of ContentsCISCO SYSTEMS,INC.NOTES T

105、O CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)the period of benefit.Capitalized contract acquisition costs were$1.5 billion and$1.3 billion as of January 25,2025 and July 27,2024,respectively,and wereincluded in other current assets and other assets.The amortization expense associated wit

106、h these costs was$238 million and$446 million for the secondquarter and first six months of fiscal 2025,respectively,and$166 million and$324 million for the corresponding periods of fiscal 2024,respectively,and wasincluded in sales and marketing expenses.4.AcquisitionsA summary of the allocation of

107、the total purchase consideration of our completed acquisitions during the first six months of fiscal 2025 is presented as follows(in millions):PurchaseConsiderationNet Tangible AssetsAcquired(LiabilitiesAssumed)PurchasedIntangible AssetsGoodwillTotal acquisitions$259$(16)$105$170 The total purchase

108、consideration related to our acquisitions completed during the first six months of fiscal 2025 consisted primarily of cash consideration.Thetotal cash and cash equivalents acquired from these acquisitions was approximately$14 million.Total transaction costs related to acquisition activities were$11

109、million and$51 million for the first six months of fiscal 2025 and 2024,respectively.These transaction costs were expensed as incurred in general andadministrative expenses(“G&A”)in the Consolidated Statements of Operations.The purchase price allocation for acquisitions completed during recent perio

110、ds is preliminary and subject to revision as additional information about fair valueof assets and liabilities becomes available.Additional information that existed as of the acquisition date but is currently unknown to us may become knownduring the remainder of the measurement period,a period not to

111、 exceed 12 months from the acquisition date.The goodwill generated from these acquisitions completed during the first six months of fiscal 2025 is primarily related to expected synergies.The goodwill isgenerally not deductible for income tax purposes.The Consolidated Financial Statements include the

112、 operating results of each acquisition from the date of acquisition.Pro forma results of operations and therevenue and net income subsequent to the acquisition date for the acquisitions completed during the first six months of fiscal 2025 have not been presentedbecause the effects of the acquisition

113、s were not material to our financial results.Compensation Expense Related to AcquisitionsIn connection with our acquisitions,we have agreed to pay certain additional amounts contingent upon the continued employment with Cisco of certainemployees of the acquired entities.The following table summarize

114、s the compensation expense related to acquisitions(in millions):Three Months EndedSix Months EndedJanuary 25,2025January 27,2024January 25,2025January 27,2024Compensation expense related to acquisitions$222$45$519$94 As of January 25,2025,we estimated that future cash compensation expense of up to$1

115、.1 billion may be required to be recognized pursuant to applicableacquisition agreements.13Table of ContentsCISCO SYSTEMS,INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)5.Goodwill and Purchased Intangible Assets(a)GoodwillThe following table presents the goodwill allocated to ou

116、r reportable segments as of January 25,2025 and during the first six months of fiscal 2025(inmillions):Balance at July 27,2024Acquisitions,net ofDivestituresForeign CurrencyTranslation and OtherBalance at January25,2025Americas$36,169$108$(67)$36,210 EMEA14,283 41(26)14,298 APJC8,208 19(16)8,211 Tot

117、al$58,660$168$(109)$58,719(b)Purchased Intangible AssetsThe following table presents details of our intangible assets acquired through acquisitions completed during the first six months of fiscal 2025(in millions,except years):FINITE LIVESINDEFINITE LIVESTOTAL CUSTOMERRELATEDTECHNOLOGYTRADE NAMEIPR&

118、DWeighted-Average UsefulLife(in Years)AmountWeighted-Average UsefulLife(in Years)AmountWeighted-Average UsefulLife(in Years)AmountAmountAmountTotal acquisitions4.0$12 4.0$93$105 The following tables present details of our purchased intangible assets(in millions):January 25,2025GrossAccumulatedAmorti

119、zationNetPurchased intangible assets with finite lives:Customer related$6,854$(1,332)$5,522 Technology6,622(2,509)4,113 Trade name551(73)478 Total purchased intangible assets with finite lives14,027(3,914)10,113 In-process research and development,with indefinite lives26 26 Total$14,053$(3,914)$10,1

120、39 July 27,2024GrossAccumulatedAmortizationNetPurchased intangible assets with finite lives:Customer related$6,844$(829)$6,015 Technology6,680(2,006)4,674 Trade name553(49)504 Total purchased intangible assets with finite lives14,077(2,884)11,193 In-process research and development,with indefinite l

121、ives26 26 Total$14,103$(2,884)$11,219 Purchased intangible assets include intangible assets acquired through acquisitions as well as through direct purchases or licenses.Impairment charges related to purchased intangible assets were$19 million for the second quarter and first six months of fiscal 20

122、25.Impairment charges wereas a result of declines in estimated fair value resulting from the reductions in or the elimination of expected future cash flows associated with certaintechnology intangible assets.14Table of ContentsCISCO SYSTEMS,INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)(U

123、naudited)The following table presents the amortization of purchased intangible assets,including impairment charges(in millions):Three Months EndedSix Months EndedJanuary 25,2025January 27,2024January 25,2025January 27,2024Amortization of purchased intangible assets:Cost of sales$340$180$665$366 Oper

124、ating expenses265 66 530 133 Total$605$246$1,195$499 The estimated future amortization expense of purchased intangible assets with finite lives as of January 25,2025 is as follows(in millions):Fiscal YearAmount2025(remaining six months)$981 2026$1,810 2027$1,467 2028$1,393 2029$1,271 Thereafter$3,19

125、1 6.Restructuring and Other ChargesIn the first quarter of fiscal 2025,we announced a restructuring plan(the“Fiscal 2025 Plan”),in order to allow us to invest in key growth opportunities anddrive more efficiencies in our business,of which approximately 7%of our global workforce would be impacted wit

126、h estimated pre-tax charges of up to$1 billion.In connection with the Fiscal 2025 Plan,we incurred charges of$10 million and$675 million for the second quarter and first six months of fiscal2025,respectively.These aggregate pre-tax charges are primarily cash-based and consist of severance and other

127、one-time termination benefits,and other costs.We expect the Fiscal 2025 Plan to be substantially completed by the end of fiscal 2025.In fiscal 2024,we initiated a restructuring plan(the“Fiscal 2024 Plan”),in order to realign the organization and enable further investment in key priority areas.We com

128、pleted the Fiscal 2024 Plan and incurred cumulative charges of$654 million.These aggregate pretax charges were primarily cash-based and consistedof severance and other one-time termination benefits,real estate-related charges,and other costs.The following table summarizes the activities related to o

129、ur restructuring liability,which were included in other current liabilities on our Consolidated BalanceSheets(in millions):FISCAL 2025 PLANFISCAL 2024 PLANEmployee SeveranceOtherEmployee SeveranceOtherTotalLiability as of July 27,2024$201$9$210 Charges605 70 675 Cash payments(491)(4)(107)(4)(606)Non

130、-cash and other(1)(51)(52)Liability as of January 25,2025$113$15$94$5$227 15Table of ContentsCISCO SYSTEMS,INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)7.Balance Sheet and Other DetailsThe following tables provide details of selected balance sheet and other items(in millions,e

131、xcept percentages):Cash,Cash Equivalents,Restricted Cash and Restricted Cash EquivalentsJanuary 25,2025July 27,2024Cash and cash equivalents$8,556$7,508 Restricted cash and restricted cash equivalents included in other current assets761 765 Restricted cash and restricted cash equivalents included in

132、 other assets191 569 Total$9,508$8,842 Our restricted cash and restricted cash equivalents are funds primarily related to contractual obligations with suppliers.InventoriesJanuary 25,2025July 27,2024Raw materials$1,692$2,039 Work in process109 83 Finished goods910 1,027 Service-related spares210 216

133、 Demonstration systems6 8 Total$2,927$3,373 Property and Equipment,NetJanuary 25,2025July 27,2024Gross property and equipment:Land,buildings,and building and leasehold improvements$3,979$4,247 Production,engineering,computer and other equipment and related software5,070 5,160 Operating lease assets7

134、7 115 Furniture,fixtures and other367 351 Total gross property and equipment9,493 9,873 Less:accumulated depreciation and amortization(7,501)(7,783)Total$1,992$2,090 16Table of ContentsCISCO SYSTEMS,INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)Remaining Performance Obligations

135、(RPO)January 25,2025July 27,2024Product$20,321$20,055 Services20,947 20,993 Total$41,268$41,048 Short-term RPO$21,017$20,882 Long-term RPO20,251 20,166 Total$41,268$41,048 Amount to be recognized as revenue over the next 12 months51%51%Deferred revenue$27,795$28,475 Unbilled contract revenue13,473 1

136、2,573 Total$41,268$41,048 Unbilled contract revenue represents noncancelable contracts for which we have not invoiced,have an obligation to perform,and revenue has not yet beenrecognized in the financial statements.Deferred RevenueJanuary 25,2025July 27,2024Product$13,033$13,219 Services14,762 15,25

137、6 Total$27,795$28,475 Reported as:Current$15,999$16,249 Noncurrent11,796 12,226 Total$27,795$28,475 Transition Tax PayableOur income tax payable associated with the one-time U.S.transition tax on accumulated earnings for foreign subsidiaries as a result of the Tax Cuts and JobsAct is as follows(in m

138、illions):January 25,2025July 27,2024Current$1,595$1,819 Noncurrent 2,273 Total$1,595$4,092 Our remaining transition tax payable as of January 25,2025 has been reduced to reflect the transition tax benefit of the U.S.Tax Court opinion in VarianMedical Systems,Inc.v.Commissioner.See Note 18.17Table of

139、 ContentsCISCO SYSTEMS,INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)8.Leases(a)Lessee ArrangementsThe following table presents our operating lease balances(in millions):Balance Sheet Line ItemJanuary 25,2025July 27,2024Operating lease right-of-use assetsOther assets$1,134 1,06

140、6 Operating lease liabilitiesOther current liabilities$362$364 Operating lease liabilitiesOther long-term liabilities1,015 906 Total operating lease liabilities$1,377$1,270 The components of our lease expenses were as follows(in millions):Three Months EndedSix Months EndedJanuary 25,2025January 27,2

141、024January 25,2025January 27,2024Operating lease expense$149$103$263$203 Short-term lease expense16 25 34 36 Variable lease expense47 50 93 106 Total lease expense$212$178$390$345 Supplemental information related to our operating leases is as follows(in millions):Six Months EndedJanuary 25,2025Janua

142、ry 27,2024Cash paid for amounts included in the measurement of lease liabilities operating cash flows$228$178 Right-of-use assets obtained in exchange for operating leases liabilities$326$182 The weighted-average lease term was 5.4 years and 4.9 years as of January 25,2025 and July 27,2024,respectiv

143、ely.The weighted-average discount rate was4.1%and 4.0%as of January 25,2025 and July 27,2024,respectively.The maturities of our operating leases(undiscounted)as of January 25,2025 are as follows(in millions):Fiscal YearAmount2025(remaining six months)$213 2026345 2027257 2028190 2029152 Thereafter40

144、2 Total lease payments1,559 Less:interest(182)Total$1,377(b)Lessor ArrangementsOur leases primarily represent sales-type leases with terms of four years on average.We provide leasing of our equipment and complementary third-partyproducts primarily through our channel partners and distributors,for wh

145、ich the income arising from these leases is recognized through interest income.Interestincome was$16 million and$33 million for the second quarter and the first six months of fiscal 2025,respectively,and$16 million and$30 million for thecorresponding periods of fiscal 2024,respectively,and was inclu

146、ded in interest income in the Consolidated Statement of Operations.The net investment of ourlease receivables is measured at the commencement date as the gross lease receivable,residual value less unearned income and allowance for credit loss.Foradditional information,see Note 9.18Table of ContentsC

147、ISCO SYSTEMS,INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)Future minimum lease payments on our lease receivables as of January 25,2025 are summarized as follows(in millions):Fiscal YearAmount2025(remaining six months)$229 2026407 2027144 2028102 2029101 Thereafter5 Total988 Le

148、ss:Present value of lease payments(886)Unearned income$102 Actual cash collections may differ from the contractual maturities due to early customer buyouts,refinancings,or defaults.We provide financing of certain equipment through operating leases,and the amounts are included in property and equipme

149、nt in the Consolidated BalanceSheets.Amounts relating to equipment on operating lease assets held by us and the associated accumulated depreciation are summarized as follows(inmillions):January 25,2025July 27,2024Operating lease assets$77$115 Accumulated depreciation(49)(61)Operating lease assets,ne

150、t$28$54 Our operating lease income was$9 million and$20 million for the second quarter and first six months of fiscal 2025,respectively,and$15 million and$31 million for the corresponding periods of fiscal 2024,respectively,and was included in product revenue in the Consolidated Statements of Operat

151、ions.Minimum future rentals on noncancelable operating leases as of January 25,2025 are summarized as follows(in millions):Fiscal YearAmount2025(remaining six months)$8 202613 20275 Total$26 9.Financing Receivables(a)Financing ReceivablesFinancing receivables primarily consist of loan receivables an

152、d lease receivables.Loan receivables represent financing arrangements related to the sale of ourhardware,software,and services(including technical support and advanced services),and also may include additional funding for other costs associated withnetwork installation and integration of our product

153、s and services.Loan receivables have terms of one year to three years on average.Lease receivablesrepresent sales-type leases resulting from the sale of Ciscos and complementary third-party products and are typically collateralized by a security interest inthe underlying assets.Lease receivables con

154、sist of arrangements with terms of four years on average.19Table of ContentsCISCO SYSTEMS,INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)A summary of our financing receivables is presented as follows(in millions):January 25,2025Loan ReceivablesLease ReceivablesTotalGross$5,423$9

155、88$6,411 Residual value 64 64 Unearned income(102)(102)Allowance for credit loss(45)(14)(59)Total,net$5,378$936$6,314 Reported as:Current$2,728$346$3,074 Noncurrent2,650 590 3,240 Total,net$5,378$936$6,314 July 27,2024Loan ReceivablesLease ReceivablesTotalGross$5,858$965$6,823 Residual value 67 67 U

156、nearned income(111)(111)Allowance for credit loss(50)(15)(65)Total,net$5,808$906$6,714 Reported as:Current$3,071$267$3,338 Noncurrent2,737 639 3,376 Total,net$5,808$906$6,714(b)Credit Quality of Financing ReceivablesThe tables below present our gross financing receivables,excluding residual value,le

157、ss unearned income,categorized by our internal credit risk rating byperiod of origination(in millions):January 25,2025Fiscal YearSix Months EndedInternal Credit Risk RatingPriorJuly 31,2021July 30,2022July 29,2023July 27,2024January 25,2025TotalLoan Receivables:1 to 4$33$193$335$639$1,466$728$3,394

158、5 to 614 52 89 321 862 627 1,965 7 and Higher1 3 51 1 7 1 64 Total Loan Receivables$48$248$475$961$2,335$1,356$5,423 Lease Receivables:1 to 4$3$22$39$160$226$105$555 5 to 63 13 31 94 126 54 321 7 and Higher 1 1 3 5 10 Total Lease Receivables$6$36$71$257$357$159$886 Total$54$284$546$1,218$2,692$1,515

159、$6,309 20Table of ContentsCISCO SYSTEMS,INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)July 27,2024Fiscal YearInternal Credit Risk RatingPriorJuly 25,2020July 31,2021July 30,2022July 29,2023July 27,2024TotalLoan Receivables:1 to 4$2$78$341$555$945$1,803$3,724 5 to 62 29 127 130

160、426 1,314 2,028 7 and Higher3 1 10 74 14 4 106 Total Loan Receivables$7$108$478$759$1,385$3,121$5,858 Lease Receivables:1 to 4$1$8$38$46$176$341$610 5 to 61 11 22 44 129 21 228 7 and Higher 1 3 4 8 16 Total Lease Receivables$2$19$61$93$309$370$854 Total$9$127$539$852$1,694$3,491$6,712 The following

161、tables present the aging analysis of gross receivables as of January 25,2025 and July 27,2024(in millions):DAYS PAST DUE(INCLUDES BILLED AND UNBILLED)January 25,202531-6061-90 91+TotalPast DueCurrentTotal120+StillAccruingNonaccrualFinancingReceivablesImpairedFinancingReceivablesLoan receivables$37$1

162、6$48$101$5,322$5,423$18$10$10 Lease receivables14 4 8 26 860 886 2 1 1 Total$51$20$56$127$6,182$6,309$20$11$11 DAYS PAST DUE(INCLUDES BILLED AND UNBILLED)July 27,202431-6061-90 91+TotalPast DueCurrentTotal120+StillAccruingNonaccrualFinancingReceivablesImpairedFinancingReceivablesLoan receivables$34$

163、17$35$86$5,772$5,858$14$7$7 Lease receivables14 4 5 23 831 854 1 Total$48$21$40$109$6,603$6,712$15$7$7 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 ispresented by contract,and the aging classi

164、fication of each contract is based on the oldest outstanding receivable,and therefore past due amounts also includeunbilled and current receivables within the same contract.(c)Allowance for Credit Loss RollforwardThe allowances for credit loss and the related financing receivables are summarized as

165、follows(in millions):Three Months Ended January 25,2025CREDIT LOSS ALLOWANCESLoan ReceivablesLease ReceivablesTotalAllowance for credit loss as of October 26,2024$49$15$64 Provisions(benefits)(2)(2)(4)Recoveries(write-offs),net(3)(3)Foreign exchange and other1 1 2 Allowance for credit loss as of Jan

166、uary 25,2025$45$14$59 21Table of ContentsCISCO SYSTEMS,INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)Three Months Ended January 27,2024CREDIT LOSS ALLOWANCESLoan ReceivablesLease ReceivablesTotalAllowance for credit loss as of October 28,2023$58$16$74 Provisions(benefits)(1)(1)

167、Recoveries(write-offs),net(4)(4)Allowance for credit loss as of January 27,2024$53$16$69 Six Months Ended January 25,2025CREDIT LOSS ALLOWANCESLoan ReceivablesLease ReceivablesTotalAllowance for credit loss as of July 27,2024$50$15$65 Provisions(benefits)(3)(2)(5)Recoveries(write-offs),net(3)(3)Fore

168、ign exchange and other1 1 2 Allowance for credit loss as of January 25,2025$45$14$59 Six Months Ended January 27,2024CREDIT LOSS ALLOWANCESLoan ReceivablesLease ReceivablesTotalAllowance for credit loss as of July 29,2023$53$19$72 Provisions(benefits)4(3)1 Recoveries(write-offs),net(4)(4)Allowance f

169、or credit loss as of January 27,2024$53$16$69 10.Investments(a)Summary of Available-for-Sale Debt InvestmentsThe following tables summarize our available-for-sale debt investments(in millions):January 25,2025AmortizedCostGrossUnrealizedGainsGrossUnrealized and CreditLossesFairValueU.S.government sec

170、urities$2,177$(29)$2,148 U.S.government agency securities112 (1)111 Non-U.S.government and agency securities363 1 364 Corporate debt securities3,292 6(94)3,204 U.S.agency mortgage-backed securities847 (111)736 Commercial paper732 732 Certificates of deposit663 663 Total$8,186$7$(235)$7,958 22Table o

171、f ContentsCISCO SYSTEMS,INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)July 27,2024AmortizedCostGrossUnrealizedGainsGrossUnrealized and CreditLossesFairValueU.S.government securities$2,380$1$(28)$2,353 U.S.government agency securities223 (2)221 Non-U.S.government and agency secu

172、rities370 1 371 Corporate debt securities3,818 5(146)3,677 U.S.agency mortgage-backed securities1,959 (178)1,781 Commercial paper1,023 1,023 Certificates of deposit439 439 Total$10,212$7$(354)$9,865 The following table presents the gross realized gains and gross realized losses related to available-

173、for-sale debt investments(in millions):Three Months EndedSix Months EndedJanuary 25,2025January 27,2024January 25,2025January 27,2024Gross realized gains$5$8$5 Gross realized losses(20)(28)(53)$(48)Total$(20)$(23)$(45)$(43)The following tables present the breakdown of the available-for-sale debt inv

174、estments with gross unrealized losses and the duration that those losses had beenunrealized at January 25,2025 and July 27,2024(in millions):UNREALIZED LOSSESLESS THAN 12 MONTHSUNREALIZED LOSSES12 MONTHS OR GREATERTOTALJanuary 25,2025Fair ValueGrossUnrealizedLossesFair ValueGrossUnrealizedLossesFair

175、 ValueGross Unrealized LossesU.S.government securities$1,431$(17)$387$(12)$1,818$(29)U.S.government agency securities30 48(1)78(1)Corporate debt securities281(2)2,193(63)2,474(65)U.S.agency mortgage-backed securities8 728(111)736(111)Total$1,750$(19)$3,356$(187)$5,106$(206)UNREALIZED LOSSESLESS THAN

176、 12 MONTHSUNREALIZED LOSSES12 MONTHS OR GREATERTOTALJuly 27,2024Fair ValueGrossUnrealizedLossesFair ValueGrossUnrealizedLossesFair ValueGross Unrealized LossesU.S.government securities$598$(2)$1,399$(26)$1,997$(28)U.S.government agency securities89 109(2)198(2)Non-U.S.government and agency securitie

177、s17 17 Corporate debt securities276(1)2,818(115)3,094(116)U.S.agency mortgage-backed securities238(1)1,438(177)1,676(178)Commercial paper10 10 Total$1,228$(4)$5,764$(320)$6,992$(324)23Table of ContentsCISCO SYSTEMS,INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)The following tab

178、le summarizes the maturities of our available-for-sale debt investments as of January 25,2025(in millions):Amortized CostFair ValueWithin 1 year$3,238$3,207 After 1 year through 5 years4,101 4,015 Mortgage-backed securities with no single maturity847 736 Total$8,186$7,958 Actual maturities may diffe

179、r from the contractual maturities because borrowers may have the right to call or prepay certain obligations.(b)Summary of Equity InvestmentsWe held marketable equity securities of$339 million and$481 million as of January 25,2025 and July 27,2024,respectively.We recognized a net unrealizedgain of$1

180、6 million and$36 million during the second quarter and first six months of fiscal 2025,respectively,and a net unrealized gain of$55 million and$17 million during the corresponding periods of fiscal 2024,respectively,on our marketable securities still held as of the reporting date.Our net adjustments

181、 tonon-marketable equity securities measured using the measurement alternative still held was a net loss of$8 million and$16 million for the second quarter andfirst six months of fiscal 2025,respectively,and a net loss of$134 million for each of the corresponding periods of fiscal 2024.We held equit

182、y interests incertain private equity funds of$0.7 billion and$0.8 billion as of January 25,2025 and July 27,2024,respectively,which are accounted for under the NAVpractical expedient.In the ordinary course of business,we have investments in privately held companies and provide financing to certain c

183、ustomers.These privately heldcompanies and customers are evaluated for consolidation under the variable interest or voting interest entity models.We evaluate on an ongoing basis ourinvestments in these privately held companies and our customer financings,and have determined that as of January 25,202

184、5,there were no additionalsignificant variable interest or voting interest entities required to be consolidated in our Consolidated Financial Statements.The carrying value of our investments in privately held companies was$1.9 billion and$1.8 billion as of January 25,2025 and July 27,2024,respective

185、ly.Ofthe total carrying value of our investments in privately held companies as of January 25,2025,$0.8 billion of such investments are considered to be in variableinterest entities which are not required to be consolidated.As of January 25,2025,we have total funding commitments of$0.2 billion relat

186、ed to privately heldinvestments.The carrying value of these investments and the additional funding commitments,collectively,represent our maximum exposure related toprivately held investments.24Table of ContentsCISCO SYSTEMS,INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)11.Fair

187、 Value(a)Assets and Liabilities Measured at Fair Value on a Recurring BasisAssets and liabilities measured at fair value on a recurring basis were as follows(in millions):JANUARY 25,2025JULY 27,2024FAIR VALUE MEASUREMENTSFAIR VALUE MEASUREMENTS Level 1Level 2TotalBalanceLevel 1Level 2TotalBalanceAss

188、ets:Cash equivalents:Money market funds$5,398$5,398$3,334$3,334 Commercial paper 129 129 468 468 Corporate debt securities 4 4 25 25 Certificates of deposit 14 14 Available-for-sale debt investments:U.S.government securities 2,148 2,148 2,353 2,353 U.S.government agency securities 111 111 221 221 No

189、n-U.S.government and agency securities 364 364 371 371 Corporate debt securities 3,204 3,204 3,677 3,677 U.S.agency mortgage-backed securities 736 736 1,781 1,781 Commercial paper 732 732 1,023 1,023 Certificates of deposit 663 663 439 439 Equity investments:Marketable equity securities339 339 481 4

190、81 Other current assets:Money market funds750 750 750 750 Other assets:Money market funds188 188 563 563 Derivative assets 105 105 64 64 Total$6,675$8,196$14,871$5,128$10,436$15,564 Liabilities:Derivative liabilities$70$70$74$74 Total$70$70$74$74 Level 1 marketable equity securities are determined b

191、y using quoted prices in active markets for identical assets.Level 2 available-for-sale debt investments arepriced using quoted market prices for similar instruments or nonbinding market prices that are corroborated by observable market data.We use inputs such asactual trade data,benchmark yields,br

192、oker/dealer quotes,and other similar data,which are obtained from quoted market prices,independent pricing vendors,or other sources,to determine the ultimate fair value of these assets and liabilities.We use such pricing data as the primary input to make our assessments anddeterminations as to the u

193、ltimate valuation of our investment portfolio and have not made,during the periods presented,any material adjustments to suchinputs.We are ultimately responsible for the financial statements and underlying estimates.Our derivative instruments are primarily classified as Level 2,asthey are not active

194、ly traded and are valued using pricing models that use observable market inputs.We did not have any transfers between Level 1 and Level 2fair value measurements during the periods presented.25Table of ContentsCISCO SYSTEMS,INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)(b)Assets

195、 Measured at Fair Value on a Nonrecurring BasisOur non-marketable equity securities using the measurement alternative are adjusted to fair value on a non-recurring basis.Adjustments are made whenobservable transactions for identical or similar investments of the same issuer occur,or due to impairmen

196、t.These securities are classified as Level 3 in the fairvalue hierarchy because we estimate the value based on valuation methods using the observable transaction price at the transaction date and other unobservableinputs such as volatility,rights,and obligations of the securities we hold.The fair va

197、lue for purchased intangible assets measured at fair value on a nonrecurring basis was categorized as Level 3 due to the use of significantunobservable inputs in the valuation.Significant unobservable inputs that were used included expected revenues and net income related to the assets and theexpect

198、ed life of the assets.The difference between the estimated fair value and the carrying value of the assets was recorded as an impairment charge,whichwas included in product cost of sales.See Note 5.(c)Other Fair Value DisclosuresThe fair value of our short-term loan receivables approximates their ca

199、rrying value due to their short duration.The aggregate carrying value of our long-termloan receivables was$2.7 billion as of each of January 25,2025 and July 27,2024.The estimated fair value of our long-term loan receivables approximatestheir carrying value.We use unobservable inputs in determining

200、discounted cash flows to estimate the fair value of our long-term loan receivables,andtherefore they are categorized as Level 3.As of January 25,2025,the estimated fair value of our short-term debt approximates its carrying value due to the short maturities.As of January 25,2025,thefair value of our

201、 senior notes was$20.2 billion with a carrying amount of$20.1 billion.This compares to a fair value of$20.4 billion and a carrying amount of$20.1 billion as of July 27,2024.The fair value of the senior notes was determined based on observable market prices in a less active market and wascategorized

202、as Level 2.12.Borrowings(a)Short-Term DebtThe following table summarizes our short-term debt(in millions,except percentages):January 25,2025July 27,2024 AmountEffective RateAmountEffective RateCurrent portion of senior notes$496 5.66%$488 6.66%Commercial paper10,916 4.75%10,853 5.43%Current portion

203、of other debt1 1.13%Total$11,413$11,341 We have a short-term debt financing program of up to$15.0 billion through the issuance of commercial paper notes.We use the proceeds from the issuance ofcommercial paper notes for general corporate purposes.The effective rates for the short-and long-term debt

204、include the interest on the notes,the accretion of the discount,the issuance costs,and,if applicable,adjustments related to hedging.26Table of ContentsCISCO SYSTEMS,INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)(b)Long-Term DebtThe following table summarizes our long-term debt(

205、in millions,except percentages):January 25,2025July 27,2024 Maturity DateAmountEffective RateAmountEffective RateSenior notes:Fixed-rate notes:3.50%June 15,2025$500 5.66%$500 6.66%4.90%February 26,20261,000 5.00%1,000 5.00%2.95%February 28,2026750 3.01%750 3.01%2.50%September 20,20261,500 2.55%1,500

206、 2.55%4.80%February 26,20272,000 4.90%2,000 4.90%4.85%February 26,20292,500 4.91%2,500 4.91%4.95%February 26,20312,500 5.04%2,500 5.04%5.05%February 26,20342,500 4.97%2,500 4.97%5.90%February 15,20392,000 6.11%2,000 6.11%5.50%January 15,20402,000 5.67%2,000 5.67%5.30%February 26,20542,000 5.28%2,000

207、 5.28%5.35%February 26,20641,000 5.42%1,000 5.42%Other debt3 1.13%3 1.13%Total20,253 20,253 Unaccreted discount/issuance costs(127)(133)Hedge accounting fair value adjustments(4)(11)Total$20,122$20,109 Reported as:Current portion of long-term debt$497$488 Long-term debt19,625 19,621 Total$20,122$20,

208、109 We entered into an interest rate swap in a prior period with an aggregate notional amount of$0.5 billion designated as a fair value hedge of certain of our fixed-rate senior notes.This swap converts the fixed interest rate of the fixed-rate note to a floating interest rate based on Secured Overn

209、ight Financing Rate(SOFR).The gain and loss related to the change in the fair value of the interest rate swap substantially offsets the change in the fair value of the hedged portion of theunderlying debt that is attributable to the change in market interest rates.For additional information,see Note

210、 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 amake-whole premium.The senior notes rank at par with the commercial paper notes that have been issued pursuant to our short-term debt fina

211、ncing program,as discussed above under“(a)Short-Term Debt.”As of January 25,2025,we were in compliance with all debt covenants.As of January 25,2025,future principal payments for long-term debt,including the current portion,are summarized as follows(in millions):Fiscal YearAmount2025(remaining six m

212、onths)$500 20261,751 20273,502 2028 20292,500 Thereafter12,000 Total$20,253 27Table of ContentsCISCO SYSTEMS,INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)(c)Credit FacilityOn February 2,2024,we entered into an amended and restated 5-year$5.0 billion unsecured revolving credit

213、agreement.The interest rate for the creditagreement is determined based on a formula using certain market rates.The credit agreement requires that we comply with certain covenants,including that wemaintain an interest coverage ratio(defined in the agreement as the ratio of consolidated EBITDA to con

214、solidated interest expense)of not less than 3.0 to 1.0.As of January 25,2025,we were in compliance with all associated covenants and we had not borrowed any funds under our credit agreement.13.Derivative Instruments(a)Summary of Derivative InstrumentsWe use derivative instruments primarily to manage

215、 exposures to foreign currency exchange rate,interest rate,and equity price risks.Our primary objective inholding derivatives is to reduce the volatility of earnings and cash flows associated with changes in foreign currency exchange rates,interest rates,and equityprices.Our derivatives expose us to

216、 credit risk to the extent that the counterparties may be unable to meet the terms of the agreement.We seek to mitigate suchrisks by limiting our counterparties to major financial institutions and requiring collateral in certain cases.In addition,the potential risk of loss with any onecounterparty r

217、esulting from credit risk is monitored.Management does not expect material losses as a result of defaults by counterparties.The fair values of our derivative instruments and the line items on the Consolidated Balance Sheets to which they were recorded are summarized as follows(inmillions):DERIVATIVE

218、 ASSETSDERIVATIVE LIABILITIES Balance Sheet Line ItemJanuary 25,2025July 27,2024Balance Sheet Line ItemJanuary 25,2025July 27,2024Derivatives designated as hedginginstruments:Foreign currency derivativesOther current assets$45$47 Other current liabilities$2$1 Foreign currency derivativesOther assets

219、15 15 Other long-term liabilities Interest rate derivativesOther current assets41 Other current liabilities7 11 Total101 62 9 12 Derivatives not designated as hedginginstruments:Foreign currency derivativesOther current assets4 2 Other current liabilities46 47 Foreign currency derivativesOther asset

220、s Other long-term liabilities15 15 Total4 2 61 62 Total$105$64$70$74 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 HEDGEDASSETS/(LIABILITIES)CUMULATIVE AMOUNT OF FAIRVALUE H

221、EDGING ADJUSTMENTINCLUDED IN THE CARRYINGAMOUNT OF THE HEDGEDASSETS/LIABILITIESBalance Sheet Line Item of Hedged ItemJanuary 25,2025July 27,2024January 25,2025July 27,2024Short-term debt$(496)$(488)$4$11 28Table of ContentsCISCO SYSTEMS,INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaud

222、ited)The effect of derivative instruments designated as fair value hedges,recognized in interest and other income(loss),net is summarized as follows(in millions):Three Months EndedSix Months EndedJanuary 25,2025January 27,2024January 25,2025January 27,2024Interest rate derivatives:Hedged items$(3)$(

223、14)$(7)$(23)Derivatives designated as hedging instruments3 14 7 23 Total$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 THREEMONTHS ENDEDGAINS(LOSSES)FOR THE SIXMONTHS ENDEDDerivati

224、ves Not Designated asHedging InstrumentsLine Item in Statements ofOperationsJanuary 25,2025January 27,2024January 25,2025January 27,2024Foreign currency derivativesOther income(loss),net$(63)$53$(95)$(77)Total return swapsdeferred compensationOperating expenses and other11 93 33 16 Equity derivative

225、sOther income(loss),net 2 Total$(52)$146$(62)$(59)The notional amounts of our outstanding derivatives are summarized as follows(in millions):January 25,2025July 27,2024Foreign currency derivatives$7,411$7,434 Interest rate derivatives2,950 500 Total return swapsdeferred compensation1,031 985 Total$1

226、1,392$8,919(b)Offsetting of Derivative InstrumentsWe present our derivative instruments at gross fair values in the Consolidated Balance Sheets.However,our master netting and other similar arrangements withthe respective counterparties allow for net settlement under certain conditions,which are desi

227、gned to reduce credit risk by permitting net settlement with thesame counterparty.To further limit credit risk,we also enter into collateral security arrangements related to certain derivative instruments whereby cash is posted as collateralbetween the counterparties based on the fair market value o

228、f the derivative instrument.Under these collateral security arrangements,the net cash collateralprovided for was$4 million and$11 million as of January 25,2025 and July 27,2024,respectively.(c)Foreign Currency Exchange RiskWe conduct business globally in numerous currencies.Therefore,we are exposed

229、to adverse movements in foreign currency exchange rates.To limit theexposure related to foreign currency changes,we enter into foreign currency contracts.We do not enter into such contracts for speculative purposes.We may hedge forecasted foreign currency transactions related to certain revenues,ope

230、rating expenses and service cost of sales with currency options andforward contracts.These currency options and forward contracts,designated as cash flow hedges,generally have maturities of less than 24 months.Thederivative instruments gain or loss is initially reported as a component of accumulated

231、 other comprehensive income(AOCI)and subsequently reclassified intoearnings when the hedged exposure affects earnings.29Table of ContentsCISCO SYSTEMS,INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)We enter into foreign exchange forward and option contracts to reduce the short-t

232、erm effects of foreign currency fluctuations on assets and liabilities such asforeign currency receivables,long-term customer financings and payables.These derivatives are not designated as hedging instruments.Gains and losses on thecontracts are included in other income(loss),net,and substantially

233、offset foreign exchange gains and losses from the remeasurement of monetary assets andliabilities 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 cu

234、rrency fluctuations on our net investmentin those foreign subsidiaries.These derivative instruments generally have maturities of up to six months.(d)Interest Rate RiskWe hold an interest rate swap designated as a fair value hedge related to a fixed-rate senior note that is due in fiscal 2025.Under t

235、he interest rate swap,wereceive fixed-rate interest payments and make interest payments based on SOFR plus a fixed number of basis points.The effect of the swap is to convert thefixed interest rate of the senior fixed-rate note to a floating interest rate based on SOFR.The gain and loss related to t

236、he change in the fair value of the interestrate swap is included in interest expense and substantially offsets the change in the fair value of the hedged portion of the underlying debt attributable to thechange in market interest rates.We periodically enter into treasury lock agreements,designated a

237、s cash flow hedges,in order to hedge the impact of changes in the U.S.benchmark interestrate on future interest payments in anticipation of future debt offerings.Changes in the fair value of treasury lock agreements are recorded to AOCI andreclassified into earnings when the hedged exposure affects

238、earnings.(e)Equity Price RiskWe hold marketable equity securities in our portfolio that are subject to price risk.To diversify our overall portfolio,we may also hold equity derivatives thatare not designated as accounting hedges.The change in the fair value of each of these investment types are incl

239、uded in other income(loss),net.We are also exposed to variability in compensation charges related to certain deferred compensation obligations to employees and directors.Although notdesignated as accounting hedges,we utilize derivatives such as total return swaps to economically hedge this exposure

240、and offset the related compensationexpense.14.Commitments and Contingencies(a)Purchase Commitments with Contract Manufacturers and SuppliersWe purchase components from a variety of suppliers and use several contract manufacturers to provide manufacturing services for our products.During thenormal co

241、urse of business,in order to manage manufacturing lead times and help ensure adequate component supply,we enter into agreements with contractmanufacturers and suppliers that allow them to procure inventory based upon criteria as defined by us or establish the parameters defining our requirements.Asi

242、gnificant portion of our reported purchase commitments arising from these agreements consists of firm,noncancelable,and unconditional commitments.Certain of these inventory purchase commitments are directly with suppliers,and relate to fixed-dollar commitments to secure supply and pricing for certai

243、nproduct components for multi-year periods.In certain instances,these agreements allow us the option to cancel,reschedule,and adjust our requirements basedon our business needs prior to firm orders being placed.The following table summarizes our inventory purchase commitments with contract manufactu

244、rers and suppliers by period(in millions):January 25,2025July 27,2024Less than 1 year$5,054$3,952 1 to 3 years681 1,085 3 to 5 years89 121 Total$5,824$5,158 We record a liability for firm,noncancelable,and unconditional purchase commitments for quantities in excess of our future demand forecasts con

245、sistent withthe valuation of our excess and obsolete inventory.As of January 25,2025 and July 27,2024,the liability for these purchase commitments was$383 millionand$498 million,respectively,and was included in other current liabilities.30Table of ContentsCISCO SYSTEMS,INC.NOTES TO CONSOLIDATED FINA

246、NCIAL STATEMENTS(Continued)(Unaudited)(b)Other CommitmentsWe have certain funding commitments,primarily related to our privately held investments.The funding commitments were$0.2 billion as of each ofJanuary 25,2025 and July 27,2024.(c)Product WarrantiesThe following table summarizes the activity re

247、lated to the product warranty liability(in millions):Six Months EndedJanuary 25,2025January 27,2024Balance at beginning of period$362$329 Provisions for warranties issued198 198 Adjustments for pre-existing warranties37 5 Settlements(203)(205)Balance at end of period$394$327 We accrue for warranty c

248、osts as part of our cost of sales based on associated material product costs,labor costs for technical support staff,and associatedoverhead.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 lifetimewarranty.(d)F

249、inancing and Other GuaranteesIn 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 Fina

250、ncing Guarantees We facilitate arrangements for third-party financing extended to channel partners,consisting of revolving short-termfinancing,with payment terms generally ranging from 60 to 90 days.These financing arrangements facilitate the working capital requirements of the channelpartners,and,i

251、n some cases,we guarantee a portion of these arrangements.The volume of channel partner financing was$6.2 billion and$6.6 billion for thesecond quarter of fiscal 2025 and 2024,respectively,and$12.2 billion and$14.8 billion for the first six months of fiscal 2025 and 2024,respectively.Thebalance of t

252、he channel partner financing subject to guarantees was$1.3 billion and$1.2 billion as of January 25,2025 and July 27,2024,respectively.Financing Guarantee Summary The aggregate amounts of channel partner financing guarantees outstanding at January 25,2025 and July 27,2024,representing the total maxi

253、mum potential future payments under financing arrangements with third parties along with the related deferred revenue,aresummarized in the following table(in millions):January 25,2025July 27,2024Maximum potential future payments$125$127 Deferred revenue(13)(13)Total$112$114(e)IndemnificationsIn the

254、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

255、 propertyinfringement or other claims made against certain parties.These agreements may limit the time or circumstances within which an indemnification claim can bemade and the amount of the claim.It is not possible to determine the maximum potential amount for claims made under the indemnification

256、obligations due to uncertainties in the litigationprocess,coordination with and contributions by other parties and the defendants in these types of cases,and the unique facts and circumstances involved ineach particular case and agreement.Historically,indemnity payments made by us have not had a mat

257、erial 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 similarindemnification obligations to our agents.31Table of ContentsCISCO SYSTEMS,INC.NOTES TO CONSOLIDATED FI

258、NANCIAL STATEMENTS(Continued)(Unaudited)(f)Legal ProceedingsBrazil Brazilian authorities have investigated our Brazilian subsidiary and certain of its former employees,as well as a Brazilian importer of our products,andits affiliates and employees,relating to alleged evasion of import taxes and alle

259、ged improper transactions involving the subsidiary and the importer.Braziliantax 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

260、federal tax authorities in prior fiscal years,tax authorities from the Brazilian state of Sao Paulohave asserted similar claims on the same legal basis in prior fiscal years.The asserted claims by Brazilian federal tax authorities are for calendar years 2003through 2007,and the asserted claims by th

261、e tax authorities from the state of Sao Paulo are for calendar years 2005 through 2007.The total asserted claims byBrazilian state and federal tax authorities aggregate to$137 million for the alleged evasion of import and other taxes,$768 million for interest,and$276million for various penalties,all

262、 determined using an exchange rate as of January 25,2025.We have completed a thorough review of the matters and believe the asserted claims against our Brazilian subsidiary are without merit,and we are defendingthe claims vigorously.While we believe there is no legal basis for the alleged liability,

263、due to the complexities and uncertainty surrounding the judicial processin 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 ourBrazilian subsidiary and are unable to reasonably estimate a range

264、 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 theEastern District of Virginia,alleging that several of our products

265、 and services infringe eleven Centripetal U.S.patents.After two bench trials and variousadministrative actions and appeals,we have been found either to not have infringed any of the patents or the patents have been invalidated.Centripetalappealed one of the invalidity decisions and we are awaiting t

266、he decision following the Federal Circuit hearing on that appeal on February 6,2025.Centripetals appeal of the non-infringement judgment of the District Court is ongoing.Between April 2020 and February 2022,Centripetal also filed complaints in the District Court of Dusseldorf in Germany(“German Cour

267、t”),asserting a total offive patents and one utility model.Centripetal sought damages and injunctive relief in all cases.In various proceedings in 2021,2022,and 2023,we have beenfound to have not infringed three patents,one patent was invalidated,and the utility model was invalidated.The infringemen

268、t action on the final patent isstayed due to an invalidity action heard on June 6,2024 in the Federal Patent Court,in which all claims,aside from one auxiliary claim,were found invalid,and for which we are awaiting the entry of judgment from the Federal Patent Court.Centripetals appeals of two of th

269、e non-infringement findings remainpending and,on March 27,2024,the Court of Appeals rejected Centripetals appeal of the third non-infringement finding.On July 10,2023,Centripetal filed a complaint in the Paris Judiciary Court asserting the French counterpart of a European Patent.Centripetal seeks da

270、magesand injunctive relief in the case.Centripetal previously asserted the German counterpart of the same European Patent in Germany and the German Courtrejected Centripetals complaint finding no infringement.We have filed our response and defenses to the complaint and the case briefing is ongoing.W

271、hile theCourt has not set a final hearing date,we anticipate that it will occur in the third calendar quarter of 2025.Due to uncertainty surrounding patent litigation processes in the U.S.and Europe,we are unable to reasonably estimate the ultimate outcome of the litigationsat this time.If we do not

272、 prevail in these litigations,we believe that any damages ultimately assessed would not have a material effect on our ConsolidatedFinancial Statements.Ramot On June 12,2019 and on February 26,2021,Ramot at Tel Aviv University Ltd.(“Ramot”)asserted patent infringement claims against Cisco and Acaciai

273、n the U.S.District Court for the Eastern District of Texas(“E.D.Tex.”)and in the District of Delaware(“D.Del.”),respectively.Ramot is seeking damages,including enhanced damages,and a royalty on future sales.Ramot alleges that certain optical transceiver modules and line cards infringe three patents.

274、Wechallenged the validity of the patents in the U.S.Patent and Trademark Office(“PTO”)and the pending District Court cases have been stayed.On September28,2021 and May 24,2022,Cisco and Acacia filed two declaratory judgment actions of noninfringement against Ramot in D.Del on other Ramot patents and

275、those proceedings are ongoing.The Court set trial in the D.Del.cases for November 3,2025.While we believe that we have strong non-infringement and invalidity arguments in these litigations,and that Ramots damages theories in such cases are notsupported by prevailing law,we are unable to reasonably e

276、stimate the ultimate outcome of these litigations at this time due to uncertainties in the litigationprocesses.If we do not prevail in court in these litigations,we believe any damages ultimately assessed would not have a material effect on our ConsolidatedFinancial Statements.32Table of ContentsCIS

277、CO SYSTEMS,INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)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 Ciscos Unified Computing System Manager infringes three pat

278、ents.Egenera sought damages,including enhanced damages,and an injunction.Two of the asserted patents were dismissed,leaving Egeneras infringement claim based on one asserted patent.On March 25,2022,the PTO preliminarilyfound all of the asserted claims of the remaining patent unpatentable in ex parte

279、 reexamination proceedings.On August 15,2022,after a jury trial for theremaining patent,the jury returned a verdict in favor of Cisco.The District Court denied Egeneras post-trial motions,and Egenera filed an appeal to theFederal Circuit on January 13,2023.The Federal Circuit heard oral argument on

280、October 11,2024 and we are awaiting the decision.In addition to the above matters,we are subject to other legal proceedings,claims,and litigation arising in the ordinary course of business,includingintellectual property litigation.While the outcome of these matters is currently not determinable,we d

281、o not believe that the ultimate costs to resolve thesematters will have a material effect on our Consolidated Financial Statements.For additional information regarding intellectual property litigation,see“Part II,Item 1A.Risk FactorsWe may be found to infringe on intellectual property rights of othe

282、rs”herein.15.Stockholders Equity(a)Stock Repurchase ProgramIn September 2001,our Board of Directors authorized a stock repurchase program.On February 12,2025,our Board of Directors authorized a$15 billionincrease to the stock repurchase program.The remaining authorized amount for stock repurchases u

283、nder this program,including the additional authorization,isapproximately$17 billion,with no termination date.The stock repurchase activity for fiscal 2025 and 2024 under the stock repurchase program,reported basedon the trade date,is summarized as follows(in millions,except per-share amounts):Quarte

284、r EndedSharesWeighted-Average Priceper ShareAmountFiscal 2025January 25,202521$58.58$1,236 October 26,202440$49.56$2,003 Fiscal 2024July 27,202443$46.80$2,002 April 27,202426$49.22$1,256 January 27,202425$49.54$1,254 October 28,202323$54.53$1,252 There were stock repurchases of$21 million and$25 mil

285、lion that were pending settlement January 25,2025 and July 27,2024,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 ofthe repurchased shares as(i)a reduction to retained earnings

286、or an increase to accumulated deficit and(ii)a reduction of common stock and additional paid-incapital.(b)Dividends DeclaredOn February 12,2025,our Board of Directors declared a quarterly dividend of$0.41 per common share to be paid on April 23,2025,to all stockholders ofrecord as of the close of bu

287、siness on April 3,2025.Future dividends will be subject to the approval of our Board of Directors.(c)Preferred StockUnder the terms of our Amended and Restated Certificate of Incorporation,the Board of Directors is authorized to issue preferred stock in one or more seriesand,in connection with the c

288、reation 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 ofJanuary 25,202

289、5,we have not issued any shares of preferred stock.33Table of ContentsCISCO SYSTEMS,INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)16.Employee Benefit Plans(a)Employee Stock Incentive PlansWe have one stock incentive plan:the 2005 Stock Incentive Plan(the“2005 Plan”).In addition

290、,we have,in connection with our acquisitions of variouscompanies,assumed the share-based awards granted under stock incentive plans of the acquired companies or issued share-based awards in replacementthereof.Share-based awards are designed to reward employees for their long-term contributions to us

291、 and provide incentives for them to remain with us.Thenumber and frequency of share-based awards are based on competitive practices,our operating results,government regulations,and other factors.The 2005 Plan provides for the granting of stock options,stock grants,stock units and stock appreciation

292、rights(SARs),the vesting of which may be time-based or upon satisfaction of performance goals,or both,and/or other conditions.Time-based and performance-based RSUs generally vest over three yearswith certain awards containing retirement eligible provisions.Employees(including employee directors and

293、executive officers)and consultants of Cisco and itssubsidiaries 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 ofDirectors at any time and for any reason,and is currently set to terminate at the 2030 Annual

294、 Meeting unless re-adopted or extended by our stockholders priorto or on such date.Under the 2005 Plans 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

295、 issued as stock grants,pursuant to stock units or pursuant to the settlement of dividendequivalents 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 restrictedstock unit award under the 2005 Plan,1.5 shares was

296、 deducted from the available share-based award balance.If awards issued under the 2005 Plan are forfeitedor terminated for any reason before being exercised or settled,then the shares underlying such awards,plus the number of additional shares,if any,that countedagainst shares available for issuance

297、 under the 2005 Plan at the time of grant as a result of the application of the share ratio described above,will becomeavailable again for issuance under the 2005 Plan.As of January 25,2025,111 million shares were authorized for future grant under the 2005 Plan.(b)Employee Stock Purchase PlanWe have

298、 an Employee Stock Purchase Plan under which eligible employees are offered shares through a 24-month offering period,which consists of fourconsecutive 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 fairmarket va

299、lue at the beginning of the offering period or the end of each 6-month purchase period.The Employee Stock Purchase Plan is scheduled to terminateon 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 toex

300、ercised purchase rights.Under the Employee Stock Purchase Plan,we issued 8 million shares during the second quarter and first six months of fiscal 2025and 10 million shares during each of the corresponding periods of fiscal 2024.As of January 25,2025,60 million shares were available for issuance und

301、er theEmployee Stock Purchase Plan.34Table of ContentsCISCO SYSTEMS,INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)(c)Summary of Share-Based Compensation ExpenseShare-based compensation expense consists of expenses for RSUs and stock purchase rights,granted to employees or assum

302、ed from acquisitions.Thefollowing table summarizes share-based compensation expense(in millions):Three Months EndedSix Months EndedJanuary 25,2025January 27,2024January 25,2025January 27,2024Cost of salesproduct$65$58$122$100 Cost of salesservices86 81 160 142 Share-based compensation expense in cos

303、t of sales151 139 282 242 Research and development413 344 767 618 Sales and marketing231 221 441 407 General and administrative121 97 236 187 Restructuring and other charges5 1 22 9 Share-based compensation expense in operating expenses770 663 1,466 1,221 Total share-based compensation expense$921$8

304、02$1,748$1,463 Income tax benefit for share-based compensation$224$202$398$345 As of January 25,2025,the total compensation cost related to unvested share-based awards not yet recognized was$5.3 billion which is expected to berecognized over approximately 1.9 years on a weighted-average basis.(d)Res

305、tricted Stock Unit AwardsA 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 UnitsWeighted-AverageGrant Date FairValue per ShareAggregate Fair ValueUn

306、vested balance at July 29,2023122$44.04 Granted and assumed63 48.97 Vested(58)43.46$2,906 Canceled/forfeited/other(10)45.65 Unvested balance at July 27,2024117$46.86 Granted and assumed51 53.32 Vested(41)47.68$2,110 Canceled/forfeited/other(6)46.83 Unvested balance at January 25,2025121$49.31 35Tabl

307、e of ContentsCISCO SYSTEMS,INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)17.Accumulated Other Comprehensive Income(Loss)The components of AOCI,net of tax,and the other comprehensive income(loss),for the first six months of fiscal 2025 and 2024 are summarized as follows(inmillio

308、ns):Net UnrealizedGains(Losses)onAvailable-for-SaleInvestmentsNet Unrealized Gains(Losses)Cash FlowHedging InstrumentsCumulativeTranslationAdjustment andActuarial Gains(Losses)Accumulated OtherComprehensiveIncome(Loss)Balance at July 27,2024$(241)$79$(1,268)$(1,430)Other comprehensive income(loss)be

309、fore reclassifications75 65(174)(34)(Gains)losses reclassified out of AOCI45(24)21 Tax benefit(expense)(40)(10)(50)Balance at January 25,2025$(161)$110$(1,442)$(1,493)Net UnrealizedGains(Losses)onAvailable-for-SaleInvestmentsNet Unrealized Gains(Losses)Cash FlowHedging InstrumentsCumulativeTranslati

310、onAdjustment andActuarial Gains(Losses)Accumulated OtherComprehensiveIncome(Loss)Balance at July 29,2023$(440)$18$(1,153)$(1,575)Other comprehensive income(loss)before reclassifications132 39(81)90(Gains)losses reclassified out of AOCI43(23)(2)18 Tax benefit(expense)(42)(4)1(45)Balance at January 27

311、,2024$(307)$30$(1,235)$(1,512)36Table of ContentsCISCO SYSTEMS,INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)18.Income TaxesThe following table provides details of income taxes(in millions,except percentages):Three Months EndedSix Months EndedJanuary 25,2025January 27,2024Janua

312、ry 25,2025January 27,2024Income before provision for income taxes$2,887$3,161$5,154$7,603 Provision for income taxes$459$527$15$1,331 Effective tax rate15.9%16.7%0.3%17.5%As of January 25,2025,we had$2.2 billion of unrecognized tax benefits,of which$1.6 billion,if recognized,would favorably impact t

313、he effective tax rate.We regularly engage in discussions and negotiations with tax authorities regarding tax matters in various jurisdictions.We believe it is reasonably possible thatcertain federal,foreign,and state tax matters may be concluded in the next 12 months.Specific positions that may be r

314、esolved include issues involving transferpricing and various other matters.On August 26,2024,the U.S.Tax Court issued an opinion in Varian Medical Systems,Inc.v.Commissioner.The opinion related to the U.S.taxation of deemedforeign dividends in the transition year of the Tax Cuts and Jobs Act(our fis

315、cal 2018).While we were not a party to the case,the opinion resulted in a change toour tax position.As such,we recorded a tax benefit of$720 million as a reduction to the provision for income taxes in the first quarter of fiscal 2025 due to thisU.S.Tax Court opinion.19.Segment Information and Major

316、Customers(a)Revenue and Gross Margin by SegmentWe conduct business globally and are primarily managed on a geographic basis consisting of three segments:the Americas,EMEA,and APJC.Ourmanagement makes financial decisions and allocates resources based on the information it receives from our internal m

317、anagement system.Sales are attributedto a segment based on the ordering location of the customer.We do not allocate research and development,sales and marketing,or general and administrativeexpenses to our segments in this internal management system because management does not include the informatio

318、n in our measurement of the performance ofthe operating segments.In addition,we do not allocate amortization and impairment of acquisition-related intangible assets,share-based compensationexpense,significant litigation settlements and other contingencies,charges related to asset impairments and res

319、tructurings,and certain other charges to thegross 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 the second quarter and first six months of fiscal 2025 and 20

320、24,based on our internal management systemand as utilized by our Chief Operating Decision Maker(“CODM”),is as follows(in millions):Three Months EndedSix Months EndedJanuary 25,2025January 27,2024January 25,2025January 27,2024Revenue:Americas$8,202$7,510$16,454$16,532 EMEA3,855 3,484 7,444 7,148 APJC

321、1,934 1,798 3,934 3,779 Total$13,991$12,791$27,832$27,459 Gross margin:Americas$5,545$4,932$11,285$10,901 EMEA2,750 2,373 5,272 4,919 APJC1,320 1,226 2,648 2,554 Segment total9,614 8,532 19,204 18,373 Unallocated corporate items(503)(315)(972)(599)Total$9,111$8,217$18,232$17,774 Amounts may not sum

322、due to rounding.37Table of ContentsCISCO SYSTEMS,INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)Revenue in the United States was$7.4 billion and$6.7 billion for the second quarter of fiscal 2025 and 2024,respectively,and$14.8 billion and$14.9 billionfor the first six months of f

323、iscal 2025 and 2024,respectively.(b)Revenue for Groups of Similar Products and ServicesWe design and sell Internet Protocol(IP)-based networking and other products related to the communications and IT industry and provide services associatedwith these products and their use.The following table prese

324、nts revenue for groups of similar products and services(in millions):Three Months EndedSix Months EndedJanuary 25,2025January 27,2024January 25,2025January 27,2024Revenue:Networking$6,850$7,081$13,603$15,904 Security2,111 973 4,129 1,984 Collaboration996 989 2,081 2,106 Observability277 188 535 378

325、Total Product10,234 9,232 20,348 20,371 Services3,757 3,559 7,484 7,088 Total$13,991$12,791$27,832$27,459 Amounts may not sum due to rounding.20.Net Income per ShareThe following table presents the calculation of basic and diluted net income per share(in millions,except per-share amounts):Three Mont

326、hs EndedSix Months EndedJanuary 25,2025January 27,2024January 25,2025January 27,2024Net income$2,428$2,634$5,139$6,272 Weighted-average sharesbasic3,981 4,055 3,986 4,056 Effect of dilutive potential common shares24 18 22 23 Weighted-average sharesdiluted4,005 4,073 4,008 4,079 Net income per shareb

327、asic$0.61$0.65$1.29$1.55 Net income per sharediluted$0.61$0.65$1.28$1.54 Antidilutive employee share-based awards,excluded22 58 59 56 38Table of ContentsItem 2.Managements Discussion and Analysis of Financial Condition and Results of OperationsForward-Looking StatementsThis Quarterly Report on Form

328、10-Q,including this Managements Discussion and Analysis of Financial Condition and Results of Operations,containsforward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933,asamended(the“Securities Act”),and

329、the Securities Exchange Act of 1934,as amended(the“Exchange Act”).All statements other than statements of historicalfacts are statements that could be deemed forward-looking statements.These statements are based on current expectations,estimates,forecasts,and projectionsabout the industries in which

330、 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,andsimilar expressions are intended to identify

331、 such forward-looking statements.In addition,any statements that refer to projections of our future financialperformance,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 f

332、orward-looking statements are only predictions and are subject to risks,uncertainties,and assumptions that are difficult topredict,including those identified below under“Part II,Item 1A.Risk Factors,”and elsewhere herein.Therefore,actual results may differ materially andadversely from those expresse

333、d in any forward-looking statements.We undertake no obligation to revise or update any forward-looking statements for anyreason.OVERVIEWCisco designs and sells a broad range of technologies that help to power,secure,and draw insights from the Internet.We are integrating artificial intelligence(AI)into our product portfolios across networking,security,collaboration and observability to simplify how