Item 1. Financial Statements (Unaudited)

CISCO SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

(in millions, except par value)

(Unaudited)

			October 30, 2021						July 31, 2021
ASSETS
Current assets:
Cash and cash equivalents			$	7,619					$	9,175
Investments			15,727						15,343
Accounts receivable, net of allowance of $114 at October 30, 2021 and $109 at July 31, 2021			5,306						5,766
Inventories			1,832						1,559
Financing receivables, net			4,070						4,380
Other current assets			3,034						2,889
Total current assets			37,588						39,112
Property and equipment, net			2,238						2,338
Financing receivables, net			4,546						4,884
Goodwill			38,802						38,168
Purchased intangible assets, net			3,350						3,619
Deferred tax assets			4,198						4,360
Other assets			5,259						5,016
TOTAL ASSETS			$	95,981					$	97,497
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt			$	506					$	2,508
Accounts payable			2,261						2,362
Income taxes payable			816						801
Accrued compensation			3,231						3,818
Deferred revenue			12,017						12,148
Other current liabilities			4,407						4,620
Total current liabilities			23,238						26,257
Long-term debt			8,996						9,018
Income taxes payable			8,553						8,538
Deferred revenue			10,055						10,016
Other long-term liabilities			2,438						2,393
Total liabilities			53,280						56,222
Commitments and contingencies (Note 14)
Equity:
Cisco stockholders’ equity:
Preferred stock, $0.001 par value: 5 shares authorized; none issued and outstanding			—						—
Common stock and additional paid-in capital, $0.001 par value: 20,000 shares authorized; 4,217 shares issued and outstanding as of each of October 30, 2021 and July 31, 2021			42,621						42,346
Retained earnings (Accumulated deficit)			553						(654)
Accumulated other comprehensive loss			(473)						(417)
Total equity			42,701						41,275
TOTAL LIABILITIES AND EQUITY			$	95,981					$	97,497

See Notes to Consolidated Financial Statements.

CISCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per-share amounts)

(Unaudited)

			Three Months Ended
			October 30, 2021						October 24, 2020
REVENUE:
Product			$	9,529					$	8,587
Service			3,371						3,342
Total revenue			12,900						11,929
COST OF SALES:
Product			3,673						3,206
Service			1,174						1,142
Total cost of sales			4,847						4,348
GROSS MARGIN			8,053						7,581
OPERATING EXPENSES:
Research and development			1,714						1,612
Sales and marketing			2,261						2,217
General and administrative			551						544
Amortization of purchased intangible assets			84						36
Restructuring and other charges			5						602
Total operating expenses			4,615						5,011
OPERATING INCOME			3,438						2,570
Interest income			121						174
Interest expense			(89)						(112)
Other income (loss), net			187						49
Interest and other income (loss), net			219						111
INCOME BEFORE PROVISION FOR INCOME TAXES			3,657						2,681
Provision for income taxes			677						507
NET INCOME			$	2,980					$	2,174
Net income per share:
Basic			$	0.71					$	0.51
Diluted			$	0.70					$	0.51
Shares used in per-share calculation:
Basic			4,218						4,230
Diluted			4,243						4,244

See Notes to Consolidated Financial Statements.

CISCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)

(Unaudited)

			Three Months Ended
			October 30, 2021						October 24, 2020
Net income			$	2,980					$	2,174
Available-for-sale investments:
Change in net unrealized gains and losses, net of tax benefit (expense) of $28 and $17 for the first quarter of fiscal 2022 and 2021, respectively			(83)						(24)
Net (gains) losses reclassified into earnings, net of tax (benefit) expense of $2 and $5 for the first quarter of fiscal 2022 and 2021, respectively			(4)						(10)
			(87)						(34)
Cash flow hedging instruments:
Change in unrealized gains and losses, net of tax benefit (expense) of $(1) and $0 for the first quarter of fiscal 2022 and 2021, respectively			7						(2)
Net (gains) losses reclassified into earnings, net of tax (benefit) expense of $0 and $1 for the first quarter of fiscal 2022 and 2021, respectively			(1)						(1)
			6						(3)
Net change in cumulative translation adjustment and actuarial gains and losses net of tax benefit (expense) of $9 and $(1) for the first quarter of fiscal 2022 and 2021, respectively			25						109
Other comprehensive income (loss)			(56)						72
Comprehensive income			$	2,924					$	2,246

See Notes to Consolidated Financial Statements.

CISCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(Unaudited)

			Three Months Ended
			October 30, 2021						October 24, 2020
Cash flows from operating activities:
Net income			$	2,980					$	2,174
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and other			533						451
Share-based compensation expense			453						438
Provision (benefit) for receivables			1						13
Deferred income taxes			(98)						(120)
(Gains) losses on divestitures, investments and other, net			(211)						(59)
Change in operating assets and liabilities, net of effects of acquisitions and divestitures:
Accounts receivable			427						1,526
Inventories			(275)						(21)
Financing receivables			672						167
Other assets			(170)						(259)
Accounts payable			(93)						73
Income taxes, net			17						(84)
Accrued compensation			(585)						(165)
Deferred revenue			(95)						(45)
Other liabilities			(129)						7
Net cash provided by operating activities			3,427						4,096
Cash flows from investing activities:
Purchases of investments			(2,951)						(3,756)
Proceeds from sales of investments			580						657
Proceeds from maturities of investments			1,856						1,425
Acquisitions, net of cash and cash equivalents acquired and divestitures			(336)						(830)
Purchases of investments in privately held companies			(101)						(68)
Return of investments in privately held companies			53						29
Acquisition of property and equipment			(122)						(171)
Proceeds from sales of property and equipment			1						4
Net cash used in by investing activities			(1,020)						(2,710)
Cash flows from financing activities:
Issuances of common stock			—						1
Repurchases of common stock—repurchase program			(273)						(800)
Shares repurchased for tax withholdings on vesting of restricted stock units			(133)						(89)
Repayments of debt			(2,000)						—
Dividends paid			(1,561)						(1,520)
Other			(3)						35
Net cash used in financing activities			(3,970)						(2,373)
Net decrease in cash, cash equivalents, and restricted cash			(1,563)						(987)
Cash, cash equivalents, and restricted cash, beginning of period			9,942						11,812
Cash, cash equivalents, and restricted cash, end of period			$	8,379					$	10,825
Supplemental cash flow information:
Cash paid for interest			$	124					$	160
Cash paid for income taxes, net			$	758					$	710

See Notes to Consolidated Financial Statements.

CISCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(in millions, except per-share amounts)

(Unaudited)

Three Months Ended October 30, 2021			Shares of Common Stock						Common Stock and Additional Paid-In Capital						Retained Earnings (Accumulated Deficit)						Accumulated Other Comprehensive Loss						Total Equity
Balance at July 31, 2021			4,217						$	42,346					$	(654)					$	(417)					$	41,275
Net income															2,980												2,980
Other comprehensive loss																					(56)						(56)
Issuance of common stock			7																								—
Repurchase of common stock			(5)						(46)						(210)												(256)
Shares repurchased for tax withholdings on vesting of restricted stock units			(2)						(133)																		(133)
Cash dividends declared ($0.37 per common share)															(1,561)												(1,561)
Share-based compensation									453																		453
Other									1						(2)												(1)
Balance at October 30, 2021			4,217						$	42,621					$	553					$	(473)					$	42,701

Three Months Ended October 24, 2020			Shares of Common Stock						Common Stock and Additional Paid-In Capital						Accumulated Deficit						Accumulated Other Comprehensive Loss						Total Equity
Balance at July 25, 2020			4,237						$	41,202					$	(2,763)					$	(519)					$	37,920
Net income															2,174												2,174
Other comprehensive income																					72						72
Issuance of common stock			7						1																		1
Repurchase of common stock			(20)						(192)						(608)												(800)
Shares repurchased for tax withholdings on vesting of restricted stock units			(2)						(89)																		(89)
Cash dividends declared ($0.36 per common share)															(1,521)												(1,521)
Effect of adoption of accounting standard															(38)												(38)
Share-based compensation									438																		438
Balance at October 24, 2020			4,222						$	41,360					$	(2,756)					$	(447)					$	38,157

CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

**1.**Organization and Basis of Presentation

The fiscal year for Cisco Systems, Inc. (the “Company,” “Cisco,” “we,” “us,” or “our”) is the 52 or 53 weeks ending on the last Saturday in July. Fiscal 2022 is a 52-week fiscal year and fiscal 2021 was a 53-week fiscal year. The Consolidated Financial Statements include our accounts and those of our subsidiaries. All intercompany accounts and transactions have been eliminated. We conduct business globally and are primarily managed on a geographic basis in the following three geographic segments: the Americas; Europe, Middle East, and Africa (EMEA); and Asia Pacific, Japan, and China (APJC).

We have prepared the accompanying financial data as of October 30, 2021 and for the first quarter of fiscal 2022 and 2021, without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (GAAP) have been condensed or omitted pursuant to such rules and regulations. The July 31, 2021 Consolidated Balance Sheet was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States. However, we believe that the disclosures are adequate to make the information presented not misleading. These Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended July 31, 2021.

The preparation of financial statements and related disclosures in conformity with GAAP requires us to make judgments, assumptions, and estimates that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. The inputs into certain of our judgments, assumptions, and estimates considered the economic implications of the COVID-19 pandemic on our critical and significant accounting estimates. The actual results that we experience may differ materially from our estimates. As the COVID-19 pandemic continues to develop, many of our estimates could require increased judgment and carry a higher degree of variability and volatility. As events continue to evolve our estimates may change materially in future periods.

In the opinion of management, all normal recurring adjustments necessary to present fairly the consolidated balance sheet as of October 30, 2021, the results of operations, the statements of comprehensive income, the statements of cash flows and the statements of equity for the first quarter of fiscal 2022 and 2021, as applicable, have been made. The results of operations for the first quarter of fiscal 2022 are not necessarily indicative of the operating results for the full fiscal year or any future periods.

Our consolidated financial statements include our accounts and entities consolidated under the variable interest and voting models. The noncontrolling interests attributed to these investments, if material, are presented as a separate component from our equity in the equity section of the Consolidated Balance Sheets. The share of earnings attributable to the noncontrolling interests are not presented separately in the Consolidated Statements of Operations as these amounts are not material for any of the fiscal periods presented.

Certain reclassifications have been made to the amounts in prior periods in order to conform to the current period’s presentation. We have evaluated subsequent events through the date that the financial statements were issued.

**2.**Recent Accounting Pronouncements

**(a)**New Accounting Updates Recently Adopted

Acquired Revenue Contracts with Customers in Business Combination In October 2021, the Financial Accounting Standards Board (FASB) issued an accounting standard update that requires companies to apply Accounting Standards Codification 606 to recognize and measure contract assets and contract liabilities from contracts with customers acquired in a business combination. We early adopted this accounting standard update beginning in the first quarter of fiscal 2022 and did not have a material impact on our Consolidated Financial Statements. The ongoing impact of this standard will be fact dependent on the transactions within its scope.

**(b)**Recent Accounting Standards or Updates Not Yet Effective

Reference Rate Reform In March 2020, the FASB issued an accounting standard update and subsequent amendments that provide optional expedients and exceptions to the current guidance on contract modification and hedging relationships to ease the financial reporting burden of the expected market transition from the London InterBank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. This accounting standard update was effective upon issuance and may be

CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

applied prospectively through December 31, 2022. We are currently evaluating the impact of this accounting standard update on our Consolidated Financial Statements.

**3.**Revenue

We enter into contracts with customers that can include various combinations of products and services which are generally distinct and accounted for as separate performance obligations. As a result, our contracts may contain multiple performance obligations. We determine whether arrangements are distinct based on whether the customer can benefit from the product or service on its own or together with other resources that are readily available and whether our commitment to transfer the product or service to the customer is separately identifiable from other obligations in the contract. We classify our hardware, perpetual software licenses, and software-as-a-service (SaaS) as distinct performance obligations. Term software licenses represent multiple obligations, which include software licenses and software maintenance. In transactions where we deliver hardware or software, we are typically the principal and we record revenue and costs of goods sold on a gross basis. We refer to our term software licenses, security software licenses, SaaS, and associated service arrangements as subscription offers.

We recognize revenue upon transfer of control of promised goods or services in a contract with a customer in an amount that reflects the consideration we expect to receive in exchange for those products or services. Transfer of control occurs once the customer has the contractual right to use the product, generally upon shipment, electronic delivery (or when the software is available for download by the customer), or once title and risk of loss has transferred to the customer. Transfer of control can also occur over time for software maintenance and services as the customer receives the benefit over the contract term. Our hardware and perpetual software licenses are distinct performance obligations where revenue is recognized upfront upon transfer of control. Term software licenses include multiple performance obligations where the term licenses are recognized upfront upon transfer of control, with the associated software maintenance revenue recognized ratably over the contract term as services and software updates are provided. SaaS arrangements do not include the right for the customer to take possession of the software during the term, and therefore have one distinct performance obligation which is satisfied over time with revenue recognized ratably over the contract term as the customer consumes the services. On our product sales, we record consideration from shipping and handling on a gross basis within net product sales. We record our revenue net of any associated sales taxes.

An allowance for future sales returns is established based on historical trends in product return rates. The allowance for future sales returns as of October 30, 2021 and July 31, 2021 was $49 million and $55 million, respectively, and was recorded as a reduction of our accounts receivable and revenue.

Significant Judgments

Revenue is allocated among these performance obligations in a manner that reflects the consideration that we expect to be entitled to for the promised goods or services based on standalone selling prices (SSP). SSP is estimated for each distinct performance obligation and judgment may be required in their determination. The best evidence of SSP is the observable price of a product or service when we sell the goods separately in similar circumstances and to similar customers. In instances where SSP is not directly observable, we determine SSP using information that may include market conditions and other observable inputs.

We assess relevant contractual terms in our customer contracts to determine the transaction price. We apply judgment in identifying contractual terms and determining the transaction price as we may be required to estimate variable consideration when determining the amount of revenue to recognize. Variable consideration includes potential contractual penalties and various rebate, cooperative marketing and other incentive programs that we offer to our distributors, channel partners and customers. When determining the amount of revenue to recognize, we estimate the expected usage of these programs, applying the expected value or most likely estimate and update the estimate at each reporting period as actual utilization becomes available. We also consider the customers’ right of return in determining the transaction price, where applicable.

We assess certain software licenses, such as for security software, that contain critical updates or upgrades which customers can download throughout the contract term. Without these updates or upgrades, the functionality of the software would diminish over a relatively short time period. These updates or upgrades provide the customer the full functionality of the purchased security software licenses and are required to maintain the security license’s utility as the risks and threats in the environment are rapidly changing. In these circumstances, the revenue from these software arrangements is recognized as a single performance obligation satisfied over the contract term.

CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

**(a)**Disaggregation of Revenue

We disaggregate our revenue into groups of similar products and services that depict the nature, amount, and timing of revenue and cash flows for our various offerings. The sales cycle, contractual obligations, customer requirements, and go-to-market strategies differ for each of our product categories, resulting in different economic risk profiles for each category. Effective in the first quarter of fiscal 2022, we began reporting our product and service revenue in the following categories: Secure, Agile Networks; Hybrid Work; End-to-End Security; Internet for the Future; Optimized Application Experiences; Other Products; and Services. This change will better align our product categories with our strategic priorities. The following table presents this disaggregation of revenue (in millions):

			Three Months Ended
			October 30, 2021						October 24, 2020
Product revenue:
Secure, Agile Networks			$	5,967					$	5,434
Hybrid Work			1,109						1,193
End-to-End Security			895						861
Internet for the Future			1,374						942
Optimized Application Experiences			181						153
Other Products			3						3
Total Product			9,529						8,587
Services			3,371						3,342
Total			$	12,900					$	11,929

Amounts may not sum due to rounding.

Secure, Agile Networks consists of our core networking technologies of switching, enterprise routing, wireless, and compute products. These technologies consist of both hardware and software offerings, including software licenses and SaaS, that help our customers build networks, automate, orchestrate, integrate, and digitize data. Our hardware and perpetual software in this category are distinct performance obligations where revenue is recognized upfront upon transfer of control. Term software licenses are multiple performance obligations where the term license is recognized upfront upon transfer of control with the associated software maintenance revenue recognized ratably over the contract term. SaaS arrangements in this category have one distinct performance obligation which is satisfied over time with revenue recognized ratably over the contract term.

Hybrid Work consists of our collaboration offerings. These products consist primarily of software offerings, including software licenses and SaaS, as well as hardware. Our perpetual software and hardware in this category are distinct performance obligations where revenue is recognized upfront upon transfer of control. Term software licenses are multiple performance obligations where the term license is recognized upfront upon transfer of control with the associated software maintenance revenue recognized ratably over the contract term. SaaS arrangements in this category have one distinct performance obligation which is satisfied over time with revenue recognized ratably over the contract term.

End-to-End Security consists of our overall security offerings. These products consist of both hardware and software offerings, including software licenses and SaaS. Updates and upgrades for the term software licenses are critical for our software to perform its intended commercial purpose because of the continuous need for our software to secure our customers’ network environments against frequent threats. Therefore, security software licenses are generally represented by a single distinct performance obligation with revenue recognized ratably over the contract term. Our hardware and perpetual software in this category are distinct performance obligations where revenue is recognized upfront upon transfer of control. SaaS arrangements in this category have one distinct performance obligation which is satisfied over time with revenue recognized ratably over the contract term.

Internet for the Future consists of our routed optical networking, public 5G, silicon, and optics offerings. These products consist primarily of both hardware and software offerings, including software licenses and SaaS. Our hardware and perpetual software in this category are distinct performance obligations where revenue is recognized upfront upon transfer of control. Term software licenses are multiple performance obligations where the term license is recognized upfront upon transfer of control with the associated software maintenance revenue recognized ratably over the contract term. SaaS arrangements in this category have one distinct performance obligation which is satisfied over time with revenue recognized ratably over the contract term.

CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Optimized Application Experiences consists of our full stack observability and cloud-native platform offerings. These products consist primarily of software offerings, including software licenses and SaaS. Our perpetual software in this category are distinct performance obligations where revenue is recognized upfront upon transfer of control. Term software licenses are multiple performance obligations where the term license is recognized upfront upon transfer of control with the associated software maintenance revenue recognized ratably over the contract term. SaaS arrangements in this category have one distinct performance obligation which is satisfied over time with revenue recognized ratably over the contract term.

In addition to our product offerings, we provide a broad range of service and support options for our customers, including technical support services and advanced services. Technical support services represent the majority of these offerings which are distinct performance obligations that are satisfied over time with revenue recognized ratably over the contract term. Advanced services are distinct performance obligations that are satisfied over time with revenue recognized as services are delivered.

The sales arrangements as discussed above are typically made pursuant to customer purchase orders based on master purchase or partner agreements. Cash is received based on our standard payment terms which is typically 30 days. We provide financing arrangements to customers for all of our hardware, software and service offerings. Refer to Note 9 for additional information. For these arrangements, cash is typically received over time.

**(b)**Contract Balances

Accounts receivable, net was $5.3 billion as of October 30, 2021 compared to $5.8 billion as of July 31, 2021, as reported on the Consolidated Balance Sheets.

The allowances for credit loss for our accounts receivable are summarized as follows (in millions):

			Three Months Ended
			October 30, 2021						October 24, 2020
Allowance for credit loss at beginning of period			$	109					$	143
Provisions (benefits)			19						14
Recoveries (write-offs), net			(14)						(6)
Foreign exchange and other			—						(26)
Allowance for credit loss at end of period			$	114					$	125

Contract assets consist of unbilled receivables and are recorded when revenue is recognized in advance of scheduled billings to our customers. These amounts are primarily related to software and service arrangements where transfer of control has occurred but we have not yet invoiced. Our contract assets for these unbilled receivables, net of allowances, were $1.4 billion as of each of October 30, 2021 and July 31, 2021, and were included in other current assets and other assets.

Gross contract assets by our internal risk ratings are summarized as follows (in millions):

			October 30, 2021						July 31, 2021
1 to 4			$	445					$	521
5 to 6			839						770
7 and Higher			154						166
Total			$	1,438					$	1,457

Contract liabilities consist of deferred revenue. Deferred revenue was $22.1 billion as of October 30, 2021 compared to $22.2 billion as of July 31, 2021. We recognized approximately $4.1 billion of revenue during the first quarter of fiscal 2022 that was included in the deferred revenue balance at July 31, 2021.

**(c)**Capitalized Contract Acquisition Costs

We capitalize direct and incremental costs incurred to acquire contracts, primarily sales commissions, for which the associated revenue is expected to be recognized in future periods. We incur these costs in connection with both initial contracts and renewals. These costs are initially deferred and typically amortized over the term of the customer contract which corresponds to the period of benefit. Deferred sales commissions were $994 million and $967 million as of October 30, 2021 and July 31, 2021, respectively, and were included in other current assets and other assets. The amortization expense associated with these costs was $187 million and $123 million for the first quarter of fiscal 2022 and 2021, respectively, and was included in sales and marketing expenses.

CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

**4.**Acquisitions and Divestitures

We completed one acquisition during the first quarter of fiscal 2022. A summary of the allocation of the total purchase consideration is presented as follows (in millions):

			Purchase Consideration						Net Tangible Assets Acquired (Liabilities Assumed)						Purchased Intangible Assets						Goodwill
Total acquisitions (one in total)			$	323					$	8					$	10					$	305

The total purchase consideration related to our acquisitions completed during the first quarter of fiscal 2022 consisted of cash consideration and vested share-based awards assumed. The total cash and cash equivalents acquired from these acquisitions was approximately $6 million. Total transaction costs related to acquisition and divestiture activities were $19 million and $4 million for the first quarter of fiscal 2022 and 2021, respectively. These transaction costs were expensed as incurred in general and administrative expenses (“G&A”) in the Consolidated Statements of Operations.

The goodwill generated from acquisitions completed during the first quarter of fiscal 2022 is primarily related to expected synergies. The goodwill is generally not deductible for income tax purposes.

The Consolidated Financial Statements include the operating results of each acquisition from the date of acquisition. Pro forma results of operations and the revenue and net income subsequent to the acquisition date for the acquisitions completed during the first quarter of fiscal 2022 have not been presented because the effects of the acquisitions, individually and in the aggregate, were not material to our financial results.

**5.**Goodwill and Purchased Intangible Assets

**(a)**Goodwill

The following table presents the goodwill allocated to our reportable segments as of October 30, 2021 and during the first quarter of fiscal 2022 (in millions):

			Balance at July 31, 2021						Acquisitions & Divestitures						Foreign Currency Translation and Other						Balance at October 30, 2021
Americas			$	23,673					$	204					$	315					$	24,192
EMEA			9,094						77						9						9,180
APJC			5,401						24						5						5,430
Total			$	38,168					$	305					$	329					$	38,802

**(b)**Purchased Intangible Assets

The following table presents details of our intangible assets acquired through acquisitions completed during the first quarter of fiscal 2022 (in millions, except years):

			FINITE LIVES																																				INDEFINITE LIVES						TOTAL
			TECHNOLOGY												CUSTOMER RELATIONSHIPS												OTHER												IPR&D
			Weighted- Average Useful Life (in Years)						Amount						Weighted- Average Useful Life (in Years)						Amount						Weighted- Average Useful Life (in Years)						Amount						Amount						Amount
Total acquisitions (one in total)			2.0						$	6					2.0						$	4					—						$	—					$	—					$	10

CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following tables present details of our purchased intangible assets (in millions):

October 30, 2021						Gross						Accumulated Amortization						Net
Purchased intangible assets with finite lives:
Technology						$	3,485					$	(1,482)					$	2,003
Customer relationships						1,391						(597)						794
Other						71						(23)						48
Total purchased intangible assets with finite lives						4,947						(2,102)						2,845
In-process research and development, with indefinite lives						505						—						505
Total						$	5,452					$	(2,102)					$	3,350

July 31, 2021						Gross						Accumulated Amortization						Net
Purchased intangible assets with finite lives:
Technology						$	3,629					$	(1,437)					$	2,192
Customer relationships						1,387						(523)						864
Other						71						(13)						58
Total purchased intangible assets with finite lives						5,087						(1,973)						3,114
In-process research and development, with indefinite lives						505						—						505
Total						$	5,592					$	(1,973)					$	3,619

Purchased intangible assets include intangible assets acquired through acquisitions as well as through direct purchases or licenses.

The following table presents the amortization of purchased intangible assets, including impairment charges (in millions):

			Three Months Ended
			October 30, 2021						October 24, 2020
Amortization of purchased intangible assets:
Cost of sales			$	202					$	170
Operating expenses			84						36
Total			$	286					$	206

The estimated future amortization expense of purchased intangible assets with finite lives as of October 30, 2021 is as follows (in millions):

Fiscal Year			Amount
2022 (remaining nine months)			$	763
2023			$	879
2024			$	750
2025			$	394
2026			$	58
Thereafter			$	1

**6.**Restructuring and Other Charges

We initiated a restructuring plan in fiscal 2021 (the “Fiscal 2021 Plan”), which included a voluntary early retirement program, in order to realign the organization and enable further investment in key priority areas. The total pretax charges are estimated to be approximately $900 million. In connection with the Fiscal 2021 Plan, we have incurred cumulative charges of $887 million and substantially completed this plan in fiscal 2021.

We initiated a restructuring plan in fiscal 2020 (the “Fiscal 2020 Plan”) in order to realign the organization and enable further investment in key priority areas. In connection with the Fiscal 2020 Plan, we incurred cumulative charges of $259 million. We completed the Fiscal 2020 Plan in fiscal 2021.

CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The aggregate pretax charges related to these plans are primarily cash-based and consist of severance and other one-time termination benefits, and other costs.

The following tables summarize the activities related to the restructuring and other charges (in millions):

						FISCAL 2020 AND PRIOR PLANS												FISCAL 2021 PLAN
						Employee Severance						Other						Employee Severance						Other						Total
Liability as of July 31, 2021						$	—					$	10					$	16					$	8					$	34
Charges						—						(1)						4						2						5
Cash payments						—						(1)						(8)						—						(9)
Non-cash items						—						—						—						(4)						(4)
Liability as of October 30, 2021						$	—					$	8					$	12					$	6					$	26

						FISCAL 2020 AND PRIOR PLANS												FISCAL 2021 PLAN
						Employee Severance						Other						Employee Severance						Other						Total
Liability as of July 25, 2020						$	58					$	14					$	—					$	—					$	72
Charges						—						—						590						12						602
Cash payments						(58)						—						(272)						—						(330)
Non-cash items						—						—						—						(11)						(11)
Liability as of October 24, 2020						$	—					$	14					$	318					$	1					$	333

**7.**Balance Sheet and Other Details

The following tables provide details of selected balance sheet and other items (in millions):

Cash, Cash Equivalents, and Restricted Cash

						October 30, 2021						July 31, 2021
Cash and cash equivalents						$	7,619					$	9,175
Restricted cash included in other current assets						10						14
Restricted cash included in other assets						750						753
Total cash, cash equivalents, and restricted cash						$	8,379					$	9,942

Our restricted cash balances are funds primarily related to contractual obligations with suppliers.

Inventories

						October 30, 2021						July 31, 2021
Raw materials						$	1,090					$	801
Work in process						41						54
Finished goods:
Deferred cost of sales						85						97
Manufactured finished goods						465						422
Total finished goods						550						519
Service-related spares						142						174
Demonstration systems						9						11
Total						$	1,832					$	1,559

CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Property and Equipment, Net

						October 30, 2021						July 31, 2021
Gross property and equipment:
Land, buildings, and building and leasehold improvements						$	4,310					$	4,304
Computer equipment and related software						861						858
Production, engineering, and other equipment						5,023						5,106
Operating lease assets						250						273
Furniture, fixtures and other						377						377
Total gross property and equipment						10,821						10,918
Less: accumulated depreciation and amortization						(8,583)						(8,580)
Total						$	2,238					$	2,338

Remaining Performance Obligations

						October 30, 2021						July 31, 2021
Product						$	13,384					$	13,270
Service						16,751						17,623
Total						$	30,135					$	30,893
Current						$	15,941					$	16,289
Noncurrent						14,194						14,604
Total						$	30,135					$	30,893

Remaining Performance Obligations (RPO) are comprised of deferred revenue plus unbilled contract revenue. As of October 30, 2021, the aggregate amount of RPO was comprised of $22.1 billion of deferred revenue and $8.1 billion of unbilled contract revenue. We expect approximately 53% of this amount to be recognized as revenue over the next 12 months. As of July 31, 2021, the aggregate amount of RPO was comprised of $22.2 billion of deferred revenue and $8.7 billion of unbilled contract revenue. Unbilled contract revenue represents noncancelable contracts for which we have not invoiced, have an obligation to perform, and revenue has not yet been recognized in the financial statements.

Deferred Revenue

						October 30, 2021						July 31, 2021
Product						$	9,681					$	9,416
Service						12,391						12,748
Total						$	22,072					$	22,164
Reported as:
Current						$	12,017					$	12,148
Noncurrent						10,055						10,016
Total						$	22,072					$	22,164

CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

**8.**Leases

**(a)**Lessee Arrangements

The following table presents our operating lease balances (in millions):

			Balance Sheet Line Item						October 30, 2021						July 31, 2021
Operating lease right-of-use assets			Other assets						$	1,118					$	1,095
Operating lease liabilities			Other current liabilities						$	353					$	337
Operating lease liabilities			Other long-term liabilities						834						831
Total operating lease liabilities									$	1,187					$	1,168

The components of our lease expenses were as follows (in millions):

			Three Months Ended
			October 30, 2021						October 24, 2020
Operating lease expense			$	95					$	98
Short-term lease expense			17						18
Variable lease expense			49						46
Total lease expense			$	161					$	162

Supplemental information related to our operating leases is as follows (in millions):

			Three Months Ended
			October 30, 2021						October 24, 2020
Cash paid for amounts included in the measurement of lease liabilities — operating cash flows			$	98					$	105
Right-of-use assets obtained in exchange for operating leases liabilities			$	120					$	115

The weighted-average lease term was 4.9 years and 5.2 years as of October 30, 2021 and July 31, 2021, respectively. The weighted-average discount rate was 1.7% as of each of October 30, 2021 and July 31, 2021.

The maturities of our operating leases (undiscounted) as of October 30, 2021 are as follows (in millions):

Fiscal Year			Amount
2022 (remaining nine months)			$	283
2023			307
2024			224
2025			145
2026			84
Thereafter			218
Total lease payments			1,261
Less interest			(74)
Total			$	1,187

**(b)**Lessor Arrangements

Our leases primarily represent sales-type leases with terms of four years on average. We provide leasing of our equipment and complementary third-party products primarily through our channel partners and distributors, for which the income arising from these leases is recognized through interest income. Interest income was $15 million and $21 million for the first quarter of fiscal 2022 and 2021, respectively, and was included in interest income in the Consolidated Statement of Operations. The net investment of our lease receivables is measured at the commencement date as the gross lease receivable, residual value less unearned income and allowance for credit loss. For additional information, see Note 9.

CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Future minimum lease payments on our lease receivables as of October 30, 2021 are summarized as follows (in millions):

Fiscal Year			Amount
2022 (remaining nine months)			$	557
2023			514
2024			290
2025			146
2026			48
Thereafter			5
Total			1,560
Less: Present value of lease payments			1,490
Unearned income			$	70

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 equipment in the Consolidated Balance Sheets. Amounts relating to equipment on operating lease assets held by us and the associated accumulated depreciation are summarized as follows (in millions):

			October 30, 2021						July 31, 2021
Operating lease assets			$	250					$	273
Accumulated depreciation			(156)						(165)
Operating lease assets, net			$	94					$	108

Our operating lease income was $32 million and $43 million for the first quarter of fiscal 2022 and 2021, respectively, and was included in product revenue in the Consolidated Statement of Operations.

Minimum future rentals on noncancelable operating leases as of October 30, 2021 are summarized as follows (in millions):

Fiscal Year			Amount
2022 (remaining nine months)			$	35
2023			25
2024			7
2025			1
Total			$	68

**9.**Financing Receivables

**(a)**Financing Receivables

Financing receivables primarily consist of lease receivables, loan receivables, and financed service contracts. Lease receivables represent sales-type leases resulting from the sale of Cisco’s and complementary third-party products and are typically collateralized by a security interest in the underlying assets. Lease receivables consist of arrangements with terms of four years on average. Loan receivables represent financing arrangements related to the sale of our hardware, software, and services, which may include additional funding for other costs associated with network installation and integration of our products and services. Loan receivables have terms of three years on average. Financed service contracts include financing receivables related to technical support and advanced services. Revenue related to the technical support services is typically deferred and included in deferred service revenue and is recognized ratably over the period during which the related services are to be performed, which typically ranges from one year to three years.

CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

A summary of our financing receivables is presented as follows (in millions):

October 30, 2021			Lease Receivables						Loan Receivables						Financed Service Contracts						Total
Gross			$	1,560					$	4,809					$	2,329					$	8,698
Residual value			97						—						—						97
Unearned income			(70)						—						—						(70)
Allowance for credit loss			(33)						(74)						(2)						(109)
Total, net			$	1,554					$	4,735					$	2,327					$	8,616
Reported as:
Current			$	736					$	2,198					$	1,136					$	4,070
Noncurrent			818						2,537						1,191						4,546
Total, net			$	1,554					$	4,735					$	2,327					$	8,616

July 31, 2021			Lease Receivables						Loan Receivables						Financed Service Contracts						Total
Gross			$	1,710					$	5,203					$	2,453					$	9,366
Residual value			103						—						—						103
Unearned income			(78)						—						—						(78)
Allowance for credit loss			(38)						(86)						(3)						(127)
Total, net			$	1,697					$	5,117					$	2,450					$	9,264
Reported as:
Current			$	780					$	2,372					$	1,228					$	4,380
Noncurrent			917						2,745						1,222						4,884
Total, net			$	1,697					$	5,117					$	2,450					$	9,264

**(b)**Credit Quality of Financing Receivables

Gross financing receivables(1) categorized by our internal credit risk rating by period of origination as of October 30, 2021 and July 31, 2021 are summarized as follows (in millions):

									Fiscal Year																								Three Months Ended
Internal Credit Risk Rating			Prior						July 28, 2018						July 27, 2019						July 25, 2020						July 31, 2021						October 30, 2021						Total
Lease Receivables:
1 to 4			$	11					$	75					$	134					$	204					$	244					$	58					$	726
5 to 6			10						44						141						258						247						15						715
7 and Higher			1						4						9						19						4						12						49
Total Lease Receivables			$	22					$	123					$	284					$	481					$	495					$	85					$	1,490
Loan Receivables:
1 to 4			$	27					$	108					$	265					$	733					$	1,299					$	503					$	2,935
5 to 6			11						55						170						439						764						307						1,746
7 and Higher			2						3						41						40						28						14						128
Total Loan Receivables			$	40					$	166					$	476					$	1,212					$	2,091					$	824					$	4,809
Financed Service Contracts:
1 to 4			$	3					$	20					$	85					$	189					$	824					$	334					$	1,455
5 to 6			3						19						90						257						370						116						855
7 and Higher			—						1						4						7						4						3						19
Total Financed Service Contracts			$	6					$	40					$	179					$	453					$	1,198					$	453					$	2,329
Total			$	68					$	329					$	939					$	2,146					$	3,784					$	1,362					$	8,628

CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

									Fiscal Year
Internal Credit Risk Rating			Prior						July 29, 2017						July 28, 2018						July 27, 2019						July 25, 2020						July 31, 2021						Total
Lease Receivables:
1 to 4			$	2					$	20					$	100					$	168					$	282					$	227					$	799
5 to 6			1						17						65						187						285						231						786
7 and Higher			—						2						6						12						23						4						47
Total Lease Receivables			$	3					$	39					$	171					$	367					$	590					$	462					$	1,632
Loan Receivables:
1 to 4			$	4					$	86					$	134					$	577					$	990					$	1,552					$	3,343
5 to 6			—						19						75						202						505						925						1,726
7 and Higher			1						2						4						50						43						34						134
Total Loan Receivables			$	5					$	107					$	213					$	829					$	1,538					$	2,511					$	5,203
Financed Service Contracts:
1 to 4			$	—					$	38					$	26					$	106					$	252					$	1,053					$	1,475
5 to 6			—						6						26						105						302						520						959
7 and Higher			—						—						1						6						7						5						19
Total Financed Service Contracts			$	—					$	44					$	53					$	217					$	561					$	1,578					$	2,453
Total			$	8					$	190					$	437					$	1,413					$	2,689					$	4,551					$	9,288

(1) Lease receivables calculated as gross lease receivables less unearned income.

The following tables present the aging analysis of gross receivables as of October 30, 2021 and July 31, 2021 (in millions):

			DAYS PAST DUE (INCLUDES BILLED AND UNBILLED)
October 30, 2021			31-60						61-90						91+						Total Past Due						Current						Total						120+ Still Accruing						Nonaccrual Financing Receivables						Impaired Financing Receivables
Lease receivables			$	34					$	12					$	22					$	68					$	1,422					$	1,490					$	8					$	24					$	24
Loan receivables			77						17						27						121						4,688						4,809						6						29						29
Financed service contracts			21						39						18						78						2,251						2,329						4						3						3
Total			$	132					$	68					$	67					$	267					$	8,361					$	8,628					$	18					$	56					$	56

			DAYS PAST DUE (INCLUDES BILLED AND UNBILLED)
July 31, 2021			31-60						61-90						91+						Total Past Due						Current						Total						120+ Still Accruing						Nonaccrual Financing Receivables						Impaired Financing Receivables
Lease receivables			$	21					$	17					$	29					$	67					$	1,565					$	1,632					$	1					$	33					$	26
Loan receivables			71						17						35						123						5,080						5,203						4						33						33
Financed service contracts			18						13						18						49						2,404						2,453						3						3						3
Total			$	110					$	47					$	82					$	239					$	9,049					$	9,288					$	8					$	69					$	62

Past due financing receivables are those that are 31 days or more past due according to their contractual payment terms. The data in the preceding tables is presented by contract, and the aging classification of each contract is based on the oldest outstanding receivable, and therefore past due amounts also include unbilled and current receivables within the same contract.

CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

**(c)**Allowance for Credit Loss Rollforward

The allowances for credit loss and the related financing receivables are summarized as follows (in millions):

Three months ended October 30, 2021			CREDIT LOSS ALLOWANCES
			Lease Receivables						Loan Receivables						Financed Service Contracts						Total
Allowance for credit loss as of July 31, 2021			$	38					$	86					$	3					$	127
Provisions (benefits)			(5)						(12)						(1)						(18)
Allowance for credit loss as of October 30, 2021			$	33					$	74					$	2					$	109

Three months ended October 24, 2020			CREDIT LOSS ALLOWANCES
			Lease Receivables						Loan Receivables						Financed Service Contracts						Total
Allowance for credit loss as of July 25, 2020			$	48					$	81					$	9					$	138
Provisions (benefits)			(3)						3						(1)						(1)
Other			1						17						(1)						17
Allowance for credit loss as of October 24, 2020			$	46					$	101					$	7					$	154

**10.**Available-for-Sale Debt and Equity Investments

**(a)**Summary of Available-for-Sale Debt Investments

The following tables summarize our available-for-sale debt investments (in millions):

October 30, 2021			Amortized Cost						Gross Unrealized Gains						Gross Unrealized and Credit Losses						Fair Value
U.S. government securities			$	2,032					$	12					$	(9)					$	2,035
U.S. government agency securities			142						—						—						142
Corporate debt securities			9,114						156						(50)						9,220
U.S. agency mortgage-backed securities			2,790						24						(21)						2,793
Commercial paper			1,054						—						—						1,054
Certificates of deposit			269						—						—						269
Total			$	15,401					$	192					$	(80)					$	15,513

July 31, 2021			Amortized Cost						Gross Unrealized Gains						Gross Unrealized and Credit Losses						Fair Value
U.S. government securities			$	1,773					$	21					$	—					$	1,794
U.S. government agency securities			152						—						—						152
Non-U.S. government and agency securities			3						—						—						3
Corporate debt securities			8,727						213						(30)						8,910
U.S. agency mortgage-backed securities			2,838						34						(10)						2,862
Commercial paper			1,190						—						—						1,190
Certificates of deposit			295						—						—						295
Total			$	14,978					$	268					$	(40)					$	15,206

CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following table presents the gross realized gains and gross realized losses related to available-for-sale debt investments (in millions):

			Three Months Ended
			October 30, 2021						October 24, 2020
Gross realized gains			$	6					$	15
Gross realized losses			—						—
Total			$	6					$	15

The following tables present the breakdown of the available-for-sale debt investments with gross unrealized losses and the duration that those losses had been unrealized at October 30, 2021 and July 31, 2021 (in millions):

			UNREALIZED LOSSES LESS THAN 12 MONTHS												UNREALIZED LOSSES 12 MONTHS OR GREATER												TOTAL
October 30, 2021			Fair Value						Gross Unrealized Losses						Fair Value						Gross Unrealized Losses						Fair Value						Gross Unrealized Losses
U.S. government securities			$	1,341					$	(9)					$	2					$	—					$	1,343					$	(9)
U.S. government agency securities			100						—						—						—						100						—
Corporate debt securities			3,204						(24)						27						(1)						3,231						(25)
U.S. agency mortgage-backed securities			1,937						(20)						52						(1)						1,989						(21)
Commercial paper			25						—						—						—						25						—
Total			$	6,607					$	(53)					$	81					$	(2)					$	6,688					$	(55)

			UNREALIZED LOSSES LESS THAN 12 MONTHS												UNREALIZED LOSSES 12 MONTHS OR GREATER												TOTAL
July 31, 2021			Fair Value						Gross Unrealized Losses						Fair Value						Gross Unrealized Losses						Fair Value						Gross Unrealized Losses
U.S. government securities			$	468					$	—					$	—					$	—					$	468					$	—
U.S. government agency securities			26						—						—						—						26						—
Corporate debt securities			1,086						(5)						6						—						1,092						(5)
U.S. agency mortgage-backed securities			1,293						(10)						13						—						1,306						(10)
Commercial paper			37						—						—						—						37						—
Total			$	2,910					$	(15)					$	19					$	—					$	2,929					$	(15)

The following table summarizes the maturities of our available-for-sale debt investments as of October 30, 2021 (in millions):

			Amortized Cost						Fair Value
Within 1 year			$	4,291					$	4,281
After 1 year through 5 years			8,013						8,106
After 5 years through 10 years			301						326
After 10 years			6						7
Mortgage-backed securities with no single maturity			2,790						2,793
Total			$	15,401					$	15,513

Actual maturities may differ from the contractual maturities because borrowers may have the right to call or prepay certain obligations.

CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

**(b)**Summary of Equity Investments

We recognized a net unrealized gain of $5 million during the first quarter of fiscal 2022 on our marketable securities still held as of the reporting date. Our net adjustments to non-marketable equity securities measured using the measurement alternative still held was a net gain of $2 million for the first quarter of fiscal 2022. We held equity interests in certain private equity funds of $1.0 billion and $0.9 billion as of October 30, 2021 and July 31, 2021, respectively, which are accounted for under the NAV practical expedient.

In the ordinary course of business, we have investments in privately held companies and provide financing to certain customers. These privately held companies and customers are evaluated for consolidation under the variable interest or voting interest entity models. We evaluate on an ongoing basis our investments in these privately held companies and our customer financings, and have determined that as of October 30, 2021, there were no significant 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 $1.7 billion and $1.5 billion as of October 30, 2021 and July 31, 2021, respectively. Of the total carrying value of our investments in privately held companies as of October 30, 2021, $1.0 billion of such investments are considered to be in variable interest entities which are unconsolidated. As of October 30, 2021, we have total funding commitments of $0.2 billion related to privately held investments, some of which may be based on the achievement of certain agreed-upon milestones or are required to be funded on demand. The carrying value of these investments and the additional funding commitments, collectively, represent our maximum exposure related to privately held investments.

11. Fair Value

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be either recorded or disclosed at fair value, we consider the principal or most advantageous market in which we would transact, and we also consider assumptions that market participants would use when pricing the asset or liability.

**(a)**Fair Value Hierarchy

The accounting guidance for fair value measurement requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is as follows:

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

**(b)**Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis were as follows (in millions):

			OCTOBER 30, 2021																		JULY 31, 2021
			FAIR VALUE MEASUREMENTS																		FAIR VALUE MEASUREMENTS
			Level 1						Level 2						Total Balance						Level 1						Level 2						Total Balance
Assets:
Cash equivalents:
Money market funds			$	4,351					$	—					$	4,351					$	5,694					$	—					$	5,694
Commercial paper			—						10						10						—						114						114
Certificates of deposit			—						27						27						—						—						—
U.S. government securities			—						—						—						—						300						300
Corporate debt securities			—						41						41						—						—						—
Non-U.S. government and agency securities			—						30						30						—						—						—
Available-for-sale debt investments:
U.S. government securities			—						2,035						2,035						—						1,794						1,794
U.S. government agency securities			—						142						142						—						152						152
Corporate debt securities			—						9,220						9,220						—						8,910						8,910
U.S. agency mortgage-backed securities			—						2,793						2,793						—						2,862						2,862
Non-U.S. government and agency securities			—						—						—						—						3						3
Commercial paper			—						1,054						1,054						—						1,190						1,190
Certificates of deposit			—						269						269						—						295						295
Equity investments:
Marketable equity securities			214						—						214						137						—						137
Other assets:
Money market funds			750						—						750						750						—						750
Derivative assets			—						116						116						—						126						126
Total			$	5,315					$	15,737					$	21,052					$	6,581					$	15,746					$	22,327
Liabilities:
Derivative liabilities			$	—					$	33					$	33					$	—					$	20					$	20
Total			$	—					$	33					$	33					$	—					$	20					$	20

Level 1 marketable securities are determined by using quoted prices in active markets for identical assets. Level 2 available-for-sale debt investments are priced using quoted market prices for similar instruments or nonbinding market prices that are corroborated by observable market data. We use inputs such as actual trade data, benchmark yields, broker/dealer quotes, and other similar data, which are obtained from quoted market prices, independent pricing vendors, or other sources, to determine the ultimate fair value of these assets and liabilities. We use such pricing data as the primary input to make our assessments and determinations as to the ultimate valuation of our investment portfolio and have not made, during the periods presented, any material adjustments to such inputs. We are ultimately responsible for the financial statements and underlying estimates. Our derivative instruments are primarily classified as Level 2, as they are not actively traded and are valued using pricing models that use observable market inputs. We did not have any transfers between Level 1 and Level 2 fair value measurements during the periods presented.

**(c)**Assets Measured at Fair Value on a Nonrecurring Basis

Our non-marketable equity securities using the measurement alternative are adjusted to fair value on a non-recurring basis. Adjustments are made when observable transactions for identical or similar investments of the same issuer occur, or due to impairment. These securities are classified as Level 3 in the fair value hierarchy because we estimate the value based on

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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valuation methods using the observable transaction price at the transaction date and other unobservable inputs such as volatility, rights, and obligations of the securities we hold.

(d) Other Fair Value Disclosures

The fair value of our short-term loan receivables and financed service contracts approximates their carrying value due to their short duration. The aggregate carrying value of our long-term loan receivables and financed service contracts as of October 30, 2021 and July 31, 2021 was $3.7 billion and $4.0 billion, respectively. The estimated fair value of our long-term loan receivables and financed service contracts approximates their carrying value. We use significant unobservable inputs in determining discounted cash flows to estimate the fair value of our long-term loan receivables and financed service contracts, and therefore they are categorized as Level 3.

As of October 30, 2021, the estimated fair value of our short-term debt approximates its carrying value due to the short maturities. As of October 30, 2021, the fair value of our senior notes was $11.5 billion with a carrying amount of $9.5 billion. This compares to a fair value of $13.7 billion and a carrying amount of $11.5 billion as of July 31, 2021. The fair value of the senior notes was determined based on observable market prices in a less active market and was categorized as Level 2 in the fair value hierarchy.

**12.**Borrowings

**(a)**Short-Term Debt

The following table summarizes our short-term debt (in millions, except percentages):

			October 30, 2021												July 31, 2021
			Amount						Effective Rate						Amount						Effective Rate
Current portion of long-term debt			$	506					1.13		%				$	2,508					1.75		%

We have a short-term debt financing program of up to $10.0 billion through the issuance of commercial paper notes. We use the proceeds from the issuance of commercial paper notes for general corporate purposes. We had no commercial paper outstanding as of October 30, 2021 and July 31, 2021.

The effective rates for the short- and long-term debt include the interest on the notes, the accretion of the discount, the issuance costs, and, if applicable, adjustments related to hedging.

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**(b)**Long-Term Debt

The following table summarizes our long-term debt (in millions, except percentages):

									October 30, 2021												July 31, 2021
			Maturity Date						Amount						Effective Rate						Amount						Effective Rate
Senior notes:
Fixed-rate notes:
1.85%			September 20, 2021						$	—					—						$	2,000					1.90%
3.00%			June 15, 2022						500						1.13%						500						1.13%
2.60%			February 28, 2023						500						2.68%						500						2.68%
2.20%			September 20, 2023						750						2.27%						750						2.27%
3.625%			March 4, 2024						1,000						0.97%						1,000						1.00%
3.50%			June 15, 2025						500						1.29%						500						1.29%
2.95%			February 28, 2026						750						3.01%						750						3.01%
2.50%			September 20, 2026						1,500						2.55%						1,500						2.55%
5.90%			February 15, 2039						2,000						6.11%						2,000						6.11%
5.50%			January 15, 2040						2,000						5.67%						2,000						5.67%
Total									9,500												11,500
Unaccreted discount/issuance costs									(78)												(80)
Hedge accounting fair value adjustments									80												106
Total									$	9,502											$	11,526
Reported as:
Current portion of long-term debt									$	506											$	2,508
Long-term debt									8,996												9,018
Total									$	9,502											$	11,526

We have entered into interest rate swaps in prior periods with an aggregate notional amount of $2.0 billion designated as fair value hedges of certain of our fixed-rate senior notes. These swaps convert the fixed interest rates of the fixed-rate notes to floating interest rates based on the London InterBank Offered Rate (“LIBOR”). The gains and losses related to changes in the fair value of the interest rate swaps substantially offset changes in the fair value of the hedged portion of the underlying debt that are attributable to the changes in market interest rates. For additional information, see Note 13.

Interest is payable semiannually on each class of the senior fixed-rate notes. Each of the senior fixed-rate notes is redeemable by us at any time, subject to a make-whole premium. The senior notes rank at par with the commercial paper notes that may be issued in the future pursuant to our short-term debt financing program, as discussed above under “(a) Short-Term Debt.” As of October 30, 2021, we were in compliance with all debt covenants.

As of October 30, 2021, future principal payments for long-term debt, including the current portion, are summarized as follows (in millions):

Fiscal Year			Amount
2022 (remaining nine months)			$	500
2023			500
2024			1,750
2025			500
2026			750
Thereafter			5,500
Total			$	9,500

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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**(c)**Credit Facility

On May 13, 2021, we entered into a 5-year credit agreement with certain institutional lenders that provides for a $3.0 billion unsecured revolving credit facility that is scheduled to expire on May 13, 2026. The credit agreement is structured as an amendment and restatement of our 364-day credit agreement, which would have terminated on May 14, 2021. As of October 30, 2021, we were in compliance with the required interest coverage ratio and the other covenants, and we had not borrowed any funds under the credit agreement.

Any advances under the 5-year credit agreement will accrue interest at rates that are equal to, based on certain conditions, either (a) with respect to loans in U.S. dollars, (i) LIBOR or (ii) the Base Rate (to be defined as the highest of (x) the Bank of America prime rate, (y) the Federal Funds rate plus 0.50% and (z) a daily rate equal to one-month LIBOR plus 1.0%), (b) with respect to loans in Euros, EURIBOR, (c) with respect to loans in Yen, TIBOR and (d) with respect to loans in Pounds Sterling, SONIA plus a credit spread adjustment, plus a margin that is based on our senior debt credit ratings as published by Standard & Poor’s Financial Services, LLC and Moody’s Investors Service, Inc., provided that in no event will the interest rate be less than 0.0%. We will pay a quarterly commitment fee during the term of the 5-year credit agreement which may vary depending on our senior debt credit ratings. In addition, the 5-year credit agreement incorporates certain sustainability-linked metrics. Specifically, our applicable interest rate and commitment fee are subject to upward or downward adjustments if we achieve, or fail to achieve, certain specified targets based on two key performance indicator metrics: (i) social impact and (ii) foam reduction. We may also, upon the agreement of either the then-existing lenders or additional lenders not currently parties to the agreement, increase the commitments under the credit facility by up to an additional $2.0 billion and, at our option, extend the maturity of the facility for an additional year up to two times. The credit agreement requires that we comply with certain covenants, including that we maintain an interest coverage ratio as defined in the agreement.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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**13.**Derivative Instruments

**(a)**Summary of Derivative Instruments

We use derivative instruments primarily to manage exposures to foreign currency exchange rate, interest rate, and equity price risks. Our primary objective in holding derivatives is to reduce the volatility of earnings and cash flows associated with changes in foreign currency exchange rates, interest rates, and equity prices. Our derivatives expose us to credit risk to the extent that the counterparties may be unable to meet the terms of the agreement. We do, however, seek to mitigate such risks by limiting our counterparties to major financial institutions and requiring collateral in certain cases. In addition, the potential risk of loss with any one counterparty resulting from this type of credit risk is monitored. Management does not expect material losses as a result of defaults by counterparties.

The fair values of our derivative instruments and the line items on the Consolidated Balance Sheets to which they were recorded are summarized as follows (in millions):

			DERIVATIVE ASSETS																		DERIVATIVE LIABILITIES
			Balance Sheet Line Item						October 30, 2021						July 31, 2021						Balance Sheet Line Item						October 30, 2021						July 31, 2021
Derivatives designated as hedging instruments:
Foreign currency derivatives			Other current assets						$	21					$	14					Other current liabilities						$	7					$	3
Foreign currency derivatives			Other assets						4						1						Other long-term liabilities						—						—
Interest rate derivatives			Other current assets						6						9						Other current liabilities						—						—
Interest rate derivatives			Other assets						75						99						Other long-term liabilities						—						—
Total									106						123												7						3
Derivatives not designated as hedging instruments:
Foreign currency derivatives			Other current assets						10						3						Other current liabilities						22						16
Foreign currency derivatives			Other assets						—						—						Other long-term liabilities						4						1
Total									10						3												26						17
Total									$	116					$	126											$	33					$	20

The following amounts were recorded on the Consolidated Balance Sheets related to cumulative basis adjustments for our fair value hedges (in millions):

						CARRYING AMOUNT OF THE HEDGED ASSETS/(LIABILITIES)												CUMULATIVE AMOUNT OF FAIR VALUE HEDGING ADJUSTMENT INCLUDED IN THE CARRYING AMOUNT OF THE HEDGED ASSETS/LIABILITIES
Balance Sheet Line Item of Hedged Item						October 30, 2021						July 31, 2021						October 30, 2021						July 31, 2021
Short-term debt						$	(506)					$	(508)					$	(6)					$	(9)
Long-term debt						$	(1,571)					$	(1,594)					$	(74)					$	(97)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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 Ended
						October 30, 2021						October 24, 2020
Interest rate derivatives:
Hedged items						$	26					$	19
Derivatives designated as hedging instruments						(27)						(20)
Total						$	(1)					$	(1)

The effect on the Consolidated Statements of Operations of derivative instruments not designated as hedges is summarized as follows (in millions):

												GAINS (LOSSES) FOR THE THREE MONTHS ENDED
Derivatives Not Designated as Hedging Instruments						Line Item in Statements of Operations						October 30, 2021						October 24, 2020
Foreign currency derivatives						Other income (loss), net						$	(20)					$	14
Total return swaps—deferred compensation						Operating expenses and other						21						23
Equity derivatives						Other income (loss), net						4						5
Total												$	5					$	42

The notional amounts of our outstanding derivatives are summarized as follows (in millions):

			October 30, 2021						July 31, 2021
Foreign currency derivatives			$	4,778					$	4,139
Interest rate derivatives			2,000						2,000
Total return swaps—deferred compensation			778						730
Total			$	7,556					$	6,869

**(b)**Offsetting of Derivative Instruments

We present our derivative instruments at gross fair values in the Consolidated Balance Sheets. However, our master netting and other similar arrangements with the respective counterparties allow for net settlement under certain conditions, which are designed to reduce credit risk by permitting net settlement with the same counterparty. As of October 30, 2021 and July 31, 2021, the potential effects of these rights of set-off associated with the derivative contracts would be a reduction to both derivative assets and derivative liabilities of $32 million and $17 million, respectively.

To further limit credit risk, we also enter into collateral security arrangements related to certain derivative instruments whereby cash is posted as collateral between the counterparties based on the fair market value of the derivative instrument. Under these collateral security arrangements, the net cash collateral received as of October 30, 2021 and July 31, 2021 was $82 million and $109 million, respectively. Including the effects of collateral, this results in a net derivative asset of $1 million and a net derivative liability of $3 million as of October 30, 2021 and July 31, 2021, respectively.

**(c)**Foreign Currency Exchange Risk

We conduct business globally in numerous currencies. Therefore, we are exposed to adverse movements in foreign currency exchange rates. To limit the exposure related to foreign currency changes, we enter into foreign currency contracts. We do not enter into such contracts for speculative purposes.

We hedge forecasted foreign currency transactions related to certain revenues, operating expenses and service cost of sales with currency options and forward contracts. These currency options and forward contracts, designated as cash flow hedges, generally have maturities of less than 24 months. The derivative instrument’s gain or loss is initially reported as a component of accumulated other comprehensive income (“AOCI”) and subsequently reclassified into earnings when the hedged exposure affects earnings. During the periods presented, we did not discontinue any cash flow hedges for which it was probable that a forecasted transaction would not occur.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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We enter into foreign exchange forward and option contracts to reduce the short-term effects of foreign currency fluctuations on assets and liabilities such as foreign currency receivables, long-term customer financings and payables. These derivatives are not designated as hedging instruments. Gains and losses on the contracts are included in other income (loss), net, and substantially offset foreign exchange gains and losses from the remeasurement of intercompany balances, other current assets, or liabilities denominated in currencies other than the functional currency of the reporting entity.

We hedge certain net investments in our foreign operations with forward contracts to reduce the effects of foreign currency fluctuations on our net investment in those foreign subsidiaries. These derivative instruments generally have maturities of up to six months.

**(d)**Interest Rate Risk

We hold interest rate swaps designated as fair value hedges related to fixed-rate senior notes that are due in fiscal 2022 through 2025. Under these interest rate swaps, we receive fixed-rate interest payments and make interest payments based on LIBOR plus a fixed number of basis points. The effect of such swaps is to convert the fixed interest rates of the senior fixed-rate notes to floating interest rates based on LIBOR. The gains and losses related to changes in the fair value of the interest rate swaps are included in interest expense and substantially offset changes in the fair value of the hedged portion of the underlying debt that are attributable to the changes in market interest rates.

**(e)**Equity Price Risk

We hold marketable equity securities in our portfolio that are subject to price risk. To diversify our overall portfolio, we also hold equity derivatives that are not designated as accounting hedges. The change in the fair value of each of these investment types are included in other income (loss), net.

We are also exposed to variability in compensation charges related to certain deferred compensation obligations to employees. Although not designated as accounting hedges, we utilize derivatives such as total return swaps to economically hedge this exposure and offset the related compensation expense.

**14.**Commitments and Contingencies

**(a)**Purchase Commitments with Contract Manufacturers and Suppliers

We purchase components from a variety of suppliers and use several contract manufacturers to provide manufacturing services for our products. During the normal course of business, in order to manage manufacturing lead times and help ensure adequate component supply, we enter into agreements with contract manufacturers and suppliers that allow them to procure inventory based upon criteria as defined by us or establish the parameters defining our requirements. A significant portion of our reported purchase commitments arising from these agreements consists of firm, noncancelable, and unconditional commitments. Certain of these inventory purchase commitments with contract manufacturers and suppliers relate to arrangements to secure supply and pricing for certain product components for multi-year periods. In certain instances, these agreements allow us the option to cancel, reschedule, and adjust our requirements based on our business needs prior to firm orders being placed.

The following table summarizes our inventory purchase commitments with contract manufacturers and suppliers by period (in millions):

			October 30, 2021						July 31, 2021
Less than 1 year			$	7,621					$	6,903
1 to 3 years			2,072						1,806
3 to 5 years			1,359						1,545
Total			$	11,052					$	10,254

We record a liability for firm, noncancelable, and unconditional purchase commitments for quantities in excess of our future demand forecasts consistent with the valuation of our excess and obsolete inventory. As of October 30, 2021 and July 31, 2021, the liability for these purchase commitments was $179 million and $151 million, respectively, and was included in other current liabilities. For further discussion around the Supply Constraints Impacts and Risks, see Result of Operations—Product Gross Margin and Liquidity and Capital Resources—Inventory Supply Chain.

CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

**(b)**Other Commitments

In connection with our acquisitions, we have agreed to pay certain additional amounts contingent upon the achievement of certain agreed-upon technology, development, product, or other milestones or upon the continued employment with Cisco of certain employees of the acquired entities.

The following table summarizes the compensation expense related to acquisitions (in millions):

			Three Months Ended
			October 30, 2021						October 24, 2020
Compensation expense related to acquisitions			$	89					$	57

As of October 30, 2021, we estimated that future cash compensation expense of up to $673 million may be required to be recognized pursuant to the applicable business combination agreements.

We also have certain funding commitments, primarily related to our privately held investments, some of which are based on the achievement of certain agreed-upon milestones or are required to be funded on demand. The funding commitments were $0.2 billion as of each of October 30, 2021 and July 31, 2021.

**(c)**Product Warranties

The following table summarizes the activity related to the product warranty liability (in millions):

			Three Months Ended
			October 30, 2021						October 24, 2020
Balance at beginning of period			$	336					$	331
Provisions for warranties issued			114						121
Adjustments for pre-existing warranties			2						1
Settlements			(111)						(122)
Balance at end of period			$	341					$	331

We accrue for warranty costs as part of our cost of sales based on associated material product costs, labor costs for technical support staff, and associated overhead. Our products are generally covered by a warranty for periods ranging from 90 days to five years, and for some products we provide a limited lifetime warranty.

**(d)**Financing and Other Guarantees

In the ordinary course of business, we provide financing guarantees for various third-party financing arrangements extended to channel partners and end-user customers. Payments under these financing guarantee arrangements were not material for the periods presented.

Channel Partner Financing Guarantees We facilitate arrangements for third-party financing extended to channel partners, consisting of revolving short-term financing, with payment terms generally ranging from 60 to 90 days. These financing arrangements facilitate the working capital requirements of the channel partners, and, in some cases, we guarantee a portion of these arrangements. The volume of channel partner financing was $6.6 billion and $6.1 billion for the first quarter of fiscal 2022 and 2021, respectively. The balance of the channel partner financing subject to guarantees was $1.3 billion as of each of October 30, 2021 and July 31, 2021.

End-User Financing Guarantees We also provide financing guarantees for third-party financing arrangements extended to end-user customers related to leases and loans, which typically have terms of up to three years. The volume of financing provided by third parties for leases and loans as to which we had provided guarantees was $2 million and $5 million for the first quarter of fiscal 2022 and 2021, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Financing Guarantee Summary The aggregate amounts of financing guarantees outstanding at October 30, 2021 and July 31, 2021, representing the total maximum potential future payments under financing arrangements with third parties along with the related deferred revenue, are summarized in the following table (in millions):

			October 30, 2021						July 31, 2021
Maximum potential future payments relating to financing guarantees:
Channel partner			$	197					$	155
End user			4						5
Total			$	201					$	160
Deferred revenue associated with financing guarantees:
Channel partner			$	(5)					$	(16)
End user			(4)						(5)
Total			$	(9)					$	(21)
Total			$	192					$	139

**(e)**Indemnifications

In the normal course of business, we have indemnification obligations to other parties, including customers, lessors, and parties to other transactions with us, with respect to certain matters. We have agreed to indemnify against losses arising from a breach of representations or covenants or out of intellectual property infringement or other claims made against certain parties. These agreements may limit the time or circumstances within which an indemnification claim can be made and the amount of the claim.

It is not possible to determine the maximum potential amount for claims made under the indemnification obligations discussed in this section (e) due to uncertainties in the litigation process, coordination with and contributions by other parties and the defendants in these cases, and the unique facts and circumstances involved in each particular case and agreement. We are unable to reasonably estimate the ultimate outcome of the cases discussed below in this section (e), but we do not believe that any potential indemnity liability would be material, and historically, indemnity payments made by us have not had a material effect on our Consolidated Financial Statements.

We were asked by seven of our customers to indemnify them in connection with patent infringement claims asserted against them by Estech Systems, Inc. (“Estech”) in the Eastern District of Texas (“E.D. Tex.”) court and the Western District of Texas (“W.D. Tex.”) court between April 24, 2020 and August 25, 2020. Estech alleged that the customer defendants infringe three patents generally related to IP telephony by using collaboration technology from us and other providers. Estech was seeking monetary damages from the customer defendants. Estech and the customer defendants resolved Estech’s claims, and we resolved the customer defendants’ indemnity claims for an amount that did not have a material effect on our Consolidated Financial Statements.

In addition, we have entered into indemnification agreements with our officers and directors, and our Amended and Restated Bylaws contain similar indemnification obligations to our agents.

CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

**(f)**Legal Proceedings

Brazil Brazilian authorities have investigated our Brazilian subsidiary and certain of its former employees, as well as a Brazilian importer of our products, and its affiliates and employees, relating to alleged evasion of import taxes and alleged improper transactions involving the subsidiary and the importer. Brazilian tax authorities have assessed claims against our Brazilian subsidiary based on a theory of joint liability with the Brazilian importer for import taxes, interest, and penalties. In addition to claims asserted by the Brazilian federal tax authorities in prior fiscal years, tax authorities from the Brazilian state of Sao Paulo have asserted similar claims on the same legal basis in prior fiscal years. The asserted claims by Brazilian federal tax authorities are for calendar years 2003 through 2007, and the asserted claims by the tax authorities from the state of Sao Paulo are for calendar years 2005 through 2007. The total asserted claims by Brazilian state and federal tax authorities aggregate to $144 million for the alleged evasion of import and other taxes, $719 million for interest, and $355 million for various penalties, all determined using an exchange rate as of October 30, 2021.

We have completed a thorough review of the matters and believe the asserted claims against our Brazilian subsidiary are without merit, and we are defending the claims vigorously. While we believe there is no legal basis for the alleged liability, due to the complexities and uncertainty surrounding the judicial process in Brazil and the nature of the claims asserting joint liability with the importer, we are unable to determine the likelihood of an unfavorable outcome against our Brazilian subsidiary and are unable to reasonably estimate a range of loss, if any. We do not expect a final judicial determination for several years.

China We are investigating allegations of a self-enrichment scheme involving now-former employees in China. Some of those employees are also alleged to have made or directed payments from the funds they received to various third parties, including employees of state-owned enterprises. We voluntarily disclosed this investigation to the Department of Justice (“DOJ”) and Securities and Exchange Commission (“SEC”). We take such allegations very seriously and we are providing results of our investigation to the DOJ and SEC. While the outcome of our investigation is currently not determinable, we do not expect that it will have a material adverse effect on our Consolidated Financial Statements.

SRI International On September 4, 2013, SRI International, Inc. (“SRI”) asserted claims against us in the U.S. District Court for the District of Delaware (“D. Del.”), accusing our products and services in the area of network intrusion detection of infringing two patents. On May 12, 2016, a jury returned a verdict finding willful infringement. The jury awarded SRI damages of $24 million. On May 25, 2017, the district court awarded SRI enhanced damages and attorneys’ fees, entered judgment in the new amount of $57 million, and ordered an ongoing royalty of 3.5% through the expiration of the patents in 2018. We appealed to the United States Court of Appeals for the Federal Circuit (“Federal Circuit”), and on July 12, 2019, the Federal Circuit vacated the enhanced damages award; vacated and remanded in part the willful infringement finding; vacated and remanded the attorneys’ fees award for further proceedings; and affirmed the district court’s other findings. Cisco paid SRI $28 million, representing the portion of the judgment that the Federal Circuit affirmed, plus interest and royalties on post-verdict sales.

On April 1, 2020, the district court issued a final judgment on the remanded issues, finding no evidence of willful infringement and reinstating the $8 million award of attorneys’ fees. In a second round of appeals to the Federal Circuit in April 2020, SRI appealed the judgment of no willful infringement, and Cisco filed a cross-appeal on the attorneys’ fees award. On September 28, 2021, the Federal Circuit reversed the district court’s denial of SRI’s motion to reinstate the willfulness verdict, restored the district court’s award of enhanced damages, and affirmed the district court’s award of attorney fees. We intend to seek review of the Federal Circuit’s decision. While the remaining proceedings may result in an additional loss, we do not believe it would have a material effect on our Consolidated Financial Statements.

Centripetal On February 13, 2018, Centripetal Networks, Inc. (“Centripetal”) asserted patent infringement claims against us in the U.S. District Court for the Eastern District of Virginia, alleging that several Cisco products and services (including Cisco’s Catalyst switches, ASR and ISR series routers, ASAs with FirePOWER services, and Stealthwatch products) infringe eleven Centripetal U.S. patents. Cisco thereafter petitioned the Patent Trial and Appeal Board (PTAB) of the United States Patent and Trademark Office (“PTO”) to review the validity of nine of the asserted patents. The PTAB instituted inter partes review proceedings (“IPR Proceedings”) on six asserted patents and certain claims of another asserted patent. The PTAB has issued Final Written Decisions for seven patents in the instituted IPR Proceedings, and all claims of five patents have been found unpatentable and several of the claims of the other two patents have been found unpatentable. Centripetal appealed the PTAB’s findings of unpatentability to the Federal Circuit. The Federal Circuit affirmed the PTAB’s findings of unpatentability as to three of the patents on March 10, 2021, and affirmed the PTAB’s findings of unpatentability as to the remaining four patents on May 11, 2021. On August 9, 2021, Centripetal filed a writ of certiorari seeking review of the Federal Circuit’s affirmance of several of the PTAB’s unpatentability findings, which the U.S. Supreme Court denied on October 4, 2021.

For the five asserted U.S. patents not subject to the IPR Proceedings, the district court conducted a bench trial by videoconference from May 6, 2020 to June 25, 2020. On October 5, 2020, the district court issued a judgment finding validity and willful infringement of four of the asserted patents and non-infringement of the fifth patent. The district court awarded

CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Centripetal $1.9 billion, comprised of $756 million in damages, $1.1 billion in enhanced damages for willful infringement, and pre-judgment interest in the amount of $14 million. The district court declined to issue an injunction but, instead, awarded Centripetal a running royalty against revenue from the products found to infringe for an initial three-year term at a rate of 10%, with a minimum annual royalty of $168 million and a maximum annual royalty of $300 million, and for a second three-year term at a rate of 5%, with a minimum annual royalty of $84 million and a maximum annual royalty of $150 million. We believe that the district court’s findings of validity, infringement, and willful infringement, its award of damages, including enhanced damages, and its award of an ongoing royalty are not supported by either the law or the evidence presented at trial. We have appealed the district court’s judgment as to the four patents found valid and infringed to the Federal Circuit. On October 28, 2020, by agreement of the parties, the district court stayed execution of the judgment until after resolution of any appeal in the matter and waived the requirement of any bond or security; accordingly, no money is currently due under the judgment.

On April 29, 2020 and April 30, 2020, Centripetal submitted complaints in the District Court of Dusseldorf in Germany against Cisco Systems GmbH and Cisco Systems, Inc., asserting three European patents seeking both injunctive relief and damages. Two of the three European patents are counterparts to two U.S. patents Centripetal asserted against us in the U.S. district court proceedings, one of which has been invalidated by the PTAB. On June 22, 2021, Centripetal amended one of its complaints to assert one additional European patent and one additional German Utility Model patent. Centripetal seeks both injunctive relief and damages on these newly added patents. We believe we have strong defenses.

Due to uncertainty surrounding patent litigation processes in the U.S. and Europe, however, we are unable to reasonably estimate the ultimate outcome of either litigation at this time. If we do not prevail in either litigation, we believe that any damages ultimately assessed would not have a material effect on our Consolidated Financial Statements.

Ramot On June 12, 2019, Ramot at Tel Aviv University Ltd. (“Ramot”) asserted patent infringement claims against us in E.D. Tex., seeking damages, including enhanced damages for allegations of willful infringement, and a running royalty on future sales. Ramot alleges that certain Cisco optical transceiver modules and line cards infringe three patents. As of November 27, 2020, the PTO preliminarily found all asserted claims unpatentable in ex parte reexamination proceedings. On January 13, 2021, the court entered an order staying the case pending the conclusion of the ex parte reexamination proceedings (“Reexamination Proceedings”). While we believe that we have strong non-infringement and invalidity arguments, and that Ramot’s damages theories are not supported by prevailing law, we are unable to reasonably estimate the ultimate outcome of this litigation at this time due to uncertainties in the litigation processes. If we do not prevail in court, we believe that any damages ultimately assessed would not have a material effect on our Consolidated Financial Statements.

On February 26, 2021, Ramot asserted patent infringement claims against Acacia Communications, Inc. (“Acacia”) (which we subsequently acquired) in D. Del, seeking damages, including enhanced damages for allegations of willful infringement, and a running royalty on future sales. Ramot alleges that certain Acacia optical transceiver modules and integrated circuits infringe two of the three patents that Ramot has asserted in its E.D. Tex. case. On September 3, 2021, the court stayed the case pending the ultimate resolution of the Reexamination Proceedings. Due to the early stage of the litigation as well as uncertainties in the litigation processes, we are unable, at this time, to reasonably estimate a potential range of loss, if any, or the ultimate outcome of this litigation.

Viasat On January 21, 2016, Viasat, Inc. (“Viasat”) filed suit against Acacia (which we subsequently acquired) in the California Superior Court for San Diego County (“SDSC”) seeking unpaid royalties for breach of contract and the implied covenant of good faith and fair dealing, and damages for trade secret misappropriation for certain products (“Viasat 1”). Acacia counterclaimed for patent and trade secret misappropriation, contract, and unfair competition claims. On July 17, 2019, the jury found for Viasat on its contract claims, and awarded Viasat $49 million for unpaid royalties through 2018. The jury further found that Acacia willfully misappropriated Viasat’s trade secrets and awarded Viasat $1. On Acacia’s counterclaims, the jury found for Acacia on its contract and trade secret claims and awarded Acacia $1. Both Acacia and Viasat have pending appeals to the California Court of Appeal. On November 6, 2019, Viasat filed a second suit in SDSC, alleging contract and trade secret claims for Acacia products sold from January 1, 2019 forward (“Viasat 2”). On February 28, 2020, the court stayed Viasat 2 pending the appeal in Viasat 1. On June 9, 2020, Viasat filed a third suit in SDSC (“Viasat 3”). In Viasat 3, Viasat alleges contract and trade secrets claims for sales of additional Acacia products. On August 11, 2020, the court stayed Viasat 3 pending the appeal in Viasat 1.

On July 28, 2017, Acacia filed suit in the Commonwealth of Massachusetts Superior Court - Business Litigation Session against ViaSat alleging claims for defamation, unfair competition, business torts, and declaratory judgment of no trade secret misappropriation. On April 5, 2018, ViaSat counterclaimed with contract, trade secret, and unfair competition claims (collectively, with Viasat 1, Viasat 2 and Viasat 3, the “Viasat Cases”). On December 13, 2018, the Massachusetts court entered an order staying the Massachusetts litigation, which has been extended to December 31, 2021.

CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

While we believe Acacia has strong defenses in each of the Viasat Cases, we are unable to reasonably estimate the ultimate outcome of any of the Viasat Cases at this time due to uncertainties in the litigation processes. If Acacia does not prevail, we believe that any relief ultimately assessed in any of the Viasat Cases would not have a material effect on our Consolidated Financial Statements.

In addition, we are subject to other legal proceedings, claims, and litigation arising in the ordinary course of business, including intellectual property litigation. While the outcome of these matters is currently not determinable, we do not believe that the ultimate costs to resolve these matters will have a material effect on our Consolidated Financial Statements. For additional information regarding intellectual property litigation, see “Part II, Item 1A. Risk Factors—We may be found to infringe on intellectual property rights of others” herein.

**15.**Stockholders’ Equity

**(a)**Cash Dividends on Shares of Common Stock

We declared and paid cash dividends of $0.37 and $0.36 per common share, or $1.6 billion and $1.5 billion, on our outstanding common stock for the first quarter of fiscal 2022 and 2021, respectively.

Any future dividends will be subject to the approval of our Board of Directors.

**(b)**Stock Repurchase Program

In September 2001, our Board of Directors authorized a stock repurchase program. As of October 30, 2021, the remaining authorized amount for stock repurchases under this program was approximately $7.7 billion with no termination date. A summary of the stock repurchase activity for fiscal 2022 and 2021 under the stock repurchase program, reported based on the trade date, is summarized as follows (in millions, except per-share amounts):

Quarter Ended						Shares						Weighted-Average Price per Share						Amount
Fiscal 2022
October 30, 2021						5						$	56.49					$	256
Fiscal 2021
July 31, 2021						15						$	53.30					$	791
May 1, 2021						10						$	48.71					$	510
January 23, 2021						19						$	42.82					$	801
October 24, 2020						20						$	40.44					$	800

There were stock repurchases of $8 million and $25 million that were pending settlement as of October 30, 2021 and July 31, 2021, respectively.

The purchase price for the shares of our stock repurchased is reflected as a reduction to stockholders’ equity. We are required to allocate the purchase price of the repurchased shares as (i) a reduction to retained earnings or an increase to accumulated deficit and (ii) a reduction of common stock and additional paid-in capital.

(c) Preferred Stock

Under the terms of our Amended and Restated Certificate of Incorporation, the Board of Directors is authorized to issue preferred stock of one or more series and, in connection with the creation of such series, to fix by resolution the designation, powers (including voting powers (if any)), preferences and relative, participating, optional or other special rights of such series, and any qualification, limitations or restrictions thereof, of the shares of such series. As of October 30, 2021, we had not issued any shares of preferred stock.

CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

**16.**Employee Benefit Plans

**(a)**Employee Stock Incentive Plans

Stock Incentive Plan Program Description We have one stock incentive plan: the 2005 Stock Incentive Plan (the “2005 Plan”). In addition, we have, in connection with our acquisitions of various companies, assumed the share-based awards granted under stock incentive plans of the acquired companies or issued share-based awards in replacement thereof. Share-based awards are designed to reward employees for their long-term contributions to us and provide incentives for them to remain with us. The number and frequency of share-based awards are based on competitive practices, our operating results, government regulations, and other factors. Our primary stock incentive plan is summarized as follows:

2005 Plan The 2005 Plan provides for the granting of stock options, stock grants, stock units and stock appreciation rights (SARs), the vesting of which may be time-based or upon satisfaction of performance goals, or both, and/or other conditions. Employees (including employee directors and executive officers) and consultants of Cisco and its subsidiaries and affiliates and non-employee directors of Cisco are eligible to participate in the 2005 Plan. As of October 30, 2021, the maximum number of shares issuable under the 2005 Plan over its term was 790 million shares. The 2005 Plan may be terminated by our Board of Directors at any time and for any reason, and is currently set to terminate at the 2030 Annual Meeting unless re-adopted or extended by our stockholders prior to or on such date.

Under the 2005 Plan’s share reserve feature, a distinction is made between the number of shares in the reserve attributable to (i) stock options and SARs and (ii) “full value” awards (i.e., stock grants and stock units). Shares issued as stock grants, pursuant to stock units or pursuant to the settlement of dividend equivalents are counted against shares available for issuance under the 2005 Plan on a 1.5-to-1 ratio. For each share awarded as restricted stock or a restricted stock unit award under the 2005 Plan, 1.5 shares was deducted from the available share-based award balance. If awards issued under the 2005 Plan are forfeited or terminated for any reason before being exercised or settled, then the shares underlying such awards, plus the number of additional shares, if any, that counted against shares available for issuance under the 2005 Plan at the time of grant as a result of the application of the share ratio described above, will become available again for issuance under the 2005 Plan. As of October 30, 2021, 241 million shares were authorized for future grant under the 2005 Plan.

**(b)**Employee Stock Purchase Plan

We have an Employee Stock Purchase Plan under which 721 million shares of our common stock have been reserved for issuance as of October 30, 2021. Eligible employees are offered shares through a 24-month offering period, which consists of four consecutive 6-month purchase periods. Employees may purchase a limited amount of shares of our stock at a discount of up to 15% of the lesser of the fair market value at the beginning of the offering period or the end of each 6-month purchase period. The Employee Stock Purchase Plan is scheduled to terminate on the earlier of (i) January 3, 2030 and (ii) the date on which all shares available for issuance under the Employee Stock Purchase Plan are sold pursuant to exercised purchase rights. No shares were issued under the Employee Stock Purchase Plan during each of the first quarters of fiscal 2022 and 2021. As of October 30, 2021, 125 million shares were available for issuance under the Employee Stock Purchase Plan.

CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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**(c)**Summary of Share-Based Compensation Expense

Share-based compensation expense consists primarily of expenses for RSUs, stock purchase rights, and stock options, granted to employees or assumed from acquisitions. The following table summarizes share-based compensation expense (in millions):

			Three Months Ended
			October 30, 2021						October 24, 2020
Cost of sales—product			$	25					$	24
Cost of sales—service			44						41
Share-based compensation expense in cost of sales			69						65
Research and development			181						167
Sales and marketing			140						134
General and administrative			62						61
Restructuring and other charges			1						11
Share-based compensation expense in operating expenses			384						373
Total share-based compensation expense			$	453					$	438
Income tax benefit for share-based compensation			$	104					$	81

As of October 30, 2021, the total compensation cost related to unvested share-based awards not yet recognized was $3.7 billion which is expected to be recognized over approximately 2.6 years on a weighted-average basis.

**(d)**Restricted Stock Unit Awards

A summary of the restricted stock and stock unit activity, which includes time-based and performance-based or market-based RSUs, is as follows (in millions, except per-share amounts):

			Restricted Stock/ Stock Units						Weighted-Average Grant Date Fair Value per Share						Aggregate Fair Value
Unvested balance at July 25, 2020			96						$	42.03
Granted and assumed			51						41.89
Vested			(39)						39.63						$	1,813
Canceled/forfeited/other			(14)						42.13
Unvested balance at July 31, 2021			94						42.93
Granted and assumed			8						54.37
Vested			(8)						41.84						$	393
Canceled/forfeited/other			(3)						43.51
Unvested balance at October 30, 2021			91						$	43.99

CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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**17.**Comprehensive Income (Loss)

The components of AOCI, net of tax, and the other comprehensive income (loss), for the first quarter of fiscal 2022 and 2021 are summarized as follows (in millions):

			Net Unrealized Gains (Losses) on Available-for-Sale Investments						Net Unrealized Gains (Losses) Cash Flow Hedging Instruments						Cumulative Translation Adjustment and Actuarial Gains (Losses)						Accumulated Other Comprehensive Income (Loss)
Balance at July 31, 2021			$	182					$	(1)					$	(598)					$	(417)
Other comprehensive income (loss) before reclassifications			(111)						8						16						(87)
(Gains) losses reclassified out of AOCI			(6)						(1)						—						(7)
Tax benefit (expense)			30						(1)						9						38
Balance at October 30, 2021			$	95					$	5					$	(573)					$	(473)

			Net Unrealized Gains (Losses) on Available-for-Sale Investments						Net Unrealized Gains (Losses) Cash Flow Hedging Instruments						Cumulative Translation Adjustment and Actuarial Gains (Losses)						Accumulated Other Comprehensive Income (Loss)
Balance at July 25, 2020			$	315					$	(6)					$	(828)					$	(519)
Other comprehensive income (loss) before reclassifications			(41)						(2)						110						67
(Gains) losses reclassified out of AOCI			(15)						(2)						—						(17)
Tax benefit (expense)			22						1						(1)						22
Balance at October 24, 2020			$	281					$	(9)					$	(719)					$	(447)

**18.**Income Taxes

The following table provides details of income taxes (in millions, except percentages):

			Three Months Ended
			October 30, 2021						October 24, 2020
Income before provision for income taxes			$	3,657					$	2,681
Provision for income taxes			$	677					$	507
Effective tax rate			18.5		%				18.9		%

As of October 30, 2021, we had $3.1 billion of unrecognized tax benefits, of which $2.3 billion, if recognized, would favorably impact the effective tax rate. We regularly engage in discussions and negotiations with tax authorities regarding tax matters in various jurisdictions. We believe it is reasonably possible that certain federal, foreign, and state tax matters may be concluded in the next 12 months. Specific positions that may be resolved include issues involving transfer pricing and various other matters.

CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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**19.**Segment Information and Major Customers

**(a)**Revenue and Gross Margin by Segment

We conduct business globally and are primarily managed on a geographic basis consisting of three segments: the Americas, EMEA, and APJC. Our management makes financial decisions and allocates resources based on the information it receives from our internal management system. Sales are attributed to a segment based on the ordering location of the customer. We do not allocate research and development, sales and marketing, or general and administrative expenses to our segments in this internal management system because management does not include the information in our measurement of the performance of the operating segments. In addition, we do not allocate amortization and impairment of acquisition-related intangible assets, share-based compensation expense, significant litigation settlements and other contingencies, charges related to asset impairments and restructurings, and certain other charges to the gross margin for each segment because management does not include this information in our measurement of the performance of the operating segments.

Summarized financial information by segment for the first quarter of fiscal 2022 and 2021, based on our internal management system and as utilized by our Chief Operating Decision Maker (“CODM”), is as follows (in millions):

			Three Months Ended
			October 30, 2021						October 24, 2020
Revenue:
Americas			$	7,561					$	7,198
EMEA			3,303						2,964
APJC			2,036						1,767
Total			$	12,900					$	11,929
Gross margin:
Americas			$	4,875					$	4,847
EMEA			2,128						1,894
APJC			1,317						1,113
Segment total			8,321						7,853
Unallocated corporate items			(268)						(272)
Total			$	8,053					$	7,581

Amounts may not sum and percentages may not recalculate due to rounding.

Revenue in the United States was $6.8 billion and $6.5 billion for the first quarter of fiscal 2022 and 2021, respectively.

CISCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

**(b)**Revenue for Groups of Similar Products and Services

We design and sell Internet Protocol (IP)-based networking and other products related to the communications and IT industry and provide services associated with these products and their use. Effective in the first quarter of fiscal 2022, we began reporting our product and service revenue in the following categories: Secure, Agile Networks; Hybrid Work; End-to-End Security; Internet for the Future; Optimized Application Experiences; Other Products; and Services. This change will better align our product categories with our strategic priorities.

The following table presents revenue for groups of similar products and services (in millions):

			Three Months Ended
			October 30, 2021						October 24, 2020
Revenue:
Secure, Agile Networks			$	5,967					$	5,434
Hybrid Work			1,109						1,193
End-to-End Security			895						861
Internet for the Future			1,374						942
Optimized Application Experiences			181						153
Other Products			3						3
Total Product			9,529						8,587
Services			3,371						3,342
Total			$	12,900					$	11,929

Amounts may not sum due to rounding.

**20.**Net Income per Share

The following table presents the calculation of basic and diluted net income per share (in millions, except per-share amounts):

			Three Months Ended
			October 30, 2021						October 24, 2020
Net income			$	2,980					$	2,174
Weighted-average shares—basic			4,218						4,230
Effect of dilutive potential common shares			25						14
Weighted-average shares—diluted			4,243						4,244
Net income per share—basic			$	0.71					$	0.51
Net income per share—diluted			$	0.70					$	0.51
Antidilutive employee share-based awards, excluded			12						35

Employee equity share options, unvested shares, and similar equity instruments granted and assumed by us are treated as potential common shares outstanding in computing diluted earnings per share. Diluted shares outstanding include the dilutive effect of in-the-money options, unvested restricted stock, and restricted stock units. The dilutive effect of such equity awards is calculated based on the average share price for each fiscal period using the treasury stock method. Under the treasury stock method, the amount the employee must pay for exercising stock options and the amount of compensation cost for future service that has not yet been recognized are collectively assumed to be used to repurchase shares.