Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Quarterly Report on Form 10-Q, including this Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts are statements that could be deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “momentum,” “seeks,” “estimates,” “continues,” “endeavors,” “strives,” “may,” variations of such words, and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified below under “Part II, Item 1A. Risk Factors,” and elsewhere herein. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason.

OVERVIEW

Cisco designs and sells a broad range of technologies that help to power, secure, and draw insights from the Internet. We are incorporating artificial intelligence (AI) into our product portfolios across networking, security, collaboration and observability as well as integrating our products more tightly together. We are simplifying how our technology is delivered, managed and optimized and helping customers maximize the business value of their technology investments.

A summary of our results is as follows (in millions, except percentages and per-share amounts):

			Three Months Ended
			October 25, 2025						October 26, 2024						% Variance
Revenue			$	14,883					$	13,841					8		%
Gross margin percentage			65.5		%				65.9		%				(0.4)			pts
Research and development			$	2,400					$	2,286					5		%
Sales and marketing			$	2,871					$	2,752					4		%
General and administrative			$	733					$	795					(8)		%
Total research and development, sales and marketing, general and administrative			$	6,004					$	5,833					3		%
Total as a percentage of revenue			40.3		%				42.1		%				(1.8)			pts
Operating income as a percentage of revenue			22.6		%				17.0		%				5.6			pts
Interest and other income (loss), net			$	28					$	(91)					NM
Income tax percentage			15.7		%				(19.6)		%				35.3			pts
Net income			$	2,860					$	2,711					5		%
Net income as a percentage of revenue			19.2		%				19.6		%				(0.4)			pts
Earnings per share—diluted			$	0.72					$	0.68					6		%

NM – Not Meaningful

Percentages may not recalculate due to rounding.

CISCO SYSTEMS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Three Months Ended October 25, 2025 Compared with Three Months Ended October 26, 2024

In the first quarter of fiscal 2026, we delivered strong revenue growth across all geographies and solid margins as we saw a positive demand environment. Total revenue increased by 8% compared with the first quarter of fiscal 2025, driven by revenue from Networking, particularly within our AI Infrastructure and Campus Networking solutions. Within total revenue, product revenue increased by 10% and services revenue increased by 2%. In the first quarter of fiscal 2026, total software revenue was $5.7 billion across all product areas and services, an increase of 3%. Total subscription revenue increased 2%.

Total gross margin decreased by 0.4 percentage points. Product gross margin decreased by 0.6 percentage points, primarily driven by negative impacts from product mix and pricing, partially offset by productivity improvements and lower amortization of purchased intangible assets. As a percentage of revenue, research and development, sales and marketing, and general and administrative expenses, collectively, decreased by 1.8 percentage points. Operating income as a percentage of revenue increased by 5.6 percentage points primarily driven by lower restructuring and other charges and revenue growth in the first quarter of fiscal 2026. Diluted earnings per share increased 6%, driven by the revenue growth and operating margin improvement, partially offset by the income tax benefit of $720 million we had in the first quarter of fiscal 2025.

In terms of our geographic segments, revenue from the Americas increased by $0.7 billion, EMEA revenue increased by $0.2 billion and APJC revenue increased by $0.1 billion. From a customer market standpoint, we experienced product revenue growth across all of our customer markets. From a product category perspective, the product revenue increase of 10% was driven by growth in Networking of 15% and Observability of 6%, partially offset by declines in Collaboration of 3% and Security of 2%.

We continue to operate in a highly competitive environment, and one that is complex especially with respect to tariffs and trade policy. We plan to continue to invest in key priority areas with the objective of driving profitable growth over the long term. We remain focused on delivering innovation across our technologies to assist our customers in executing on their digital transformations and on accelerating innovation across our portfolio. We believe that we are making progress on our strategic priorities.

Strategy and Priorities

In today’s digital-first world, businesses and organizations globally are deploying technology to pursue their strategic objectives, from accelerating growth to enhancing operational efficiency and fostering innovation. Our strategy is to securely connect everything to make those desired outcomes possible.

For additional discussion of our strategy and priorities, see Item 1. Business in our Annual Report on Form 10-K for the fiscal year ended July 26, 2025.

Other Key Financial Measures

The following is a summary of our other key financial measures for the first quarter of fiscal 2026 (in millions):

						October 25, 2025						July 26, 2025
Cash and cash equivalents and investments						$	15,736					$	16,110
Remaining performance obligations						$	42,873					$	43,533
Inventories						$	3,395					$	3,164
Total debt						$	28,089					$	28,093

						Three Months Ended
						October 25, 2025						October 26, 2024
Cash provided by operating activities						$	3,212					$	3,661
Repurchases of common stock—stock repurchase program						$	2,001					$	2,003
Dividends paid						$	1,617					$	1,592

CISCO SYSTEMS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires us to make judgments, assumptions, and estimates that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Note 2 to the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended July 26, 2025, as updated as applicable in Note 2 to the Consolidated Financial Statements herein, describes the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements. The accounting policies described below are significantly affected by critical accounting estimates. Such accounting policies require significant judgments, assumptions, and estimates used in the preparation of the Consolidated Financial Statements, and actual results could differ materially from the amounts reported based on these policies.

Revenue Recognition

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

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

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

We assess relevant contractual terms in our customer contracts to determine the transaction price. We apply judgment in identifying contractual terms and determining the transaction price as we may be required to estimate variable consideration when determining the amount of revenue to recognize. Variable consideration includes potential contractual penalties and various rebate, cooperative marketing and other incentive programs that we offer to our distributors, channel partners and customers that we sell to directly. When determining the amount of revenue to recognize, we estimate the expected usage of these programs, applying the expected value or most likely estimate and update the estimate at each reporting period as actual utilization becomes available. We also consider the customers’ right of return in determining the transaction price, where applicable. If actual credits received by customers under these programs were to deviate significantly from our estimates, which are based on historical experience, our revenue could be adversely affected.

See Note 3 to the Consolidated Financial Statements for more details.

Inventory Valuation and Liability for Purchase Commitments with Contract Manufacturers and Suppliers

Inventory is written down based on excess and obsolete inventories, determined primarily by future demand forecasts. Inventory write-downs are measured as the difference between the cost of the inventory and net realizable value, based upon assumptions about future demand, and are charged to the provision for inventory. At the point of the loss recognition, a new, lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.

CISCO SYSTEMS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

We record a provision for firm, noncancelable, and unconditional purchase commitments with contract manufacturers and suppliers for quantities in excess of our future demand forecasts consistent with the valuation of our excess and obsolete inventory. Both provisions are a component of cost of sales.

Our total provisions for inventory and the liability related to purchase commitments with contract manufacturers and suppliers were $63 million and $201 million for the first quarter of fiscal 2026 and 2025, respectively. If there were to be a sudden and significant decrease in demand for our products, or a higher incidence of inventory obsolescence because of rapidly changing technology or customer requirements, then we could be required to increase our inventory write-downs, and our liability for purchase commitments with contract manufacturers and suppliers, and accordingly our profitability, could be adversely affected. We regularly evaluate our exposure for inventory write-downs and the adequacy of our liability for purchase commitments. For further discussion around the supply chain impacts and risks, see “—Results of Operations—Gross Margin—Supply Chain Impacts and Risks” and “—Liquidity and Capital Resources—Inventory Supply Chain.”

Loss Contingencies

We are subject to the possibility of various losses arising in the ordinary course of business. We consider the likelihood of the incurrence of a liability, as well as our ability to reasonably estimate the amount of loss, in determining loss contingencies. An estimated loss contingency is accrued when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. We regularly evaluate information available to us to determine whether such accruals should be made or adjusted and whether new accruals are required.

Third parties, including customers, have in the past and may in the future assert claims or initiate litigation related to exclusive patent, copyright, trademark, and other intellectual property rights to technologies and related standards that are relevant to us. These assertions have increased over time as a result of our growth and the general increase in the pace of patent claims assertions, particularly in the United States. If any infringement or other intellectual property claim made against us by any third party is successful, or if we fail to develop non-infringing technology or license the proprietary rights on commercially reasonable terms and conditions, our business, operating results, and financial condition could be materially and adversely affected.

Valuation of Goodwill and Purchased Intangible Assets

Goodwill

Our methodology for allocating the purchase price relating to purchase acquisitions is determined through established valuation techniques. Goodwill represents a residual value as of the acquisition date, which in most cases results in measuring goodwill as an excess of the purchase consideration transferred plus the fair value of any noncontrolling interest in the acquired company over the fair value of net assets acquired, including contingent consideration. We perform goodwill impairment tests on an annual basis in the fourth fiscal quarter and between annual tests in certain circumstances for each reporting unit. The assessment of fair value for goodwill and purchased intangible assets is based on factors that market participants would use in an orderly transaction in accordance with the guidance for the fair value measurement of nonfinancial assets.

In response to changes in industry and market conditions, we could be required to strategically realign our resources and consider restructuring, disposing of, or otherwise exiting businesses, which could result in an impairment of goodwill. There was no impairment of goodwill in each of the first quarter of fiscal 2026 and 2025.

Purchased Intangible Assets

The accounting for acquisitions requires significant estimates and judgments in the valuation of purchased intangible assets. Critical estimates used in the valuation of purchased intangible assets include, but are not limited to, the amount and timing of expected future cash flows, useful lives and discount rates. While our estimates of fair value are based on assumptions that are believed to be reasonable, these assumptions are inherently uncertain and unpredictable and would not reflect unanticipated events and circumstances that may occur.

We make judgments about the recoverability of purchased intangible assets with finite lives whenever events or changes in circumstances indicate that an impairment may exist. Recoverability of purchased intangible assets with finite lives is measured by comparing the carrying amount of the asset group to the future undiscounted cash flows the asset group is expected to generate. We review indefinite-lived intangible assets for impairment annually or whenever events or changes in circumstances indicate that the asset might be impaired. If the asset is considered impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. Assumptions and estimates about future values and remaining useful lives of our purchased intangible assets are complex and subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business

CISCO SYSTEMS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

strategy and our internal forecasts. Our ongoing consideration of all the factors described previously could result in impairment charges in the future, which could adversely affect our net income.

Income Taxes

We are subject to income taxes in the United States and numerous foreign jurisdictions. Our effective tax rates differ from the statutory rate, primarily due to the tax impact of state taxes, foreign operations, R&D tax credits, foreign-derived intangible income deductions, global intangible low-taxed income, tax audit settlements, nondeductible compensation, and international realignments. Our effective tax rate was a tax provision of 15.7% and a benefit of 19.6% in the first quarter of fiscal 2026 and 2025, respectively.

Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. Although we believe our reserves are reasonable, no assurance can be given that the final tax outcome of these matters will not be different from that which is reflected in our historical income tax provisions and accruals. We adjust these reserves due to changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact the provision for income taxes in the period in which such determination is made. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate, and the related net interest and penalties.

Significant judgment is also required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, we consider all available evidence, including past operating results, estimates of future taxable income, and the feasibility of tax planning strategies. If we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.

Our provision for income taxes is subject to volatility and could be adversely impacted by earnings being lower than anticipated in countries that have lower tax rates and higher than anticipated in countries that have higher tax rates; by changes in the valuation of our deferred tax assets and liabilities; by changes to foreign-derived intangible income deduction, global intangible low-tax income and base erosion and anti-abuse tax, research and development capitalization and amortization, and corporate alternative minimum tax laws, regulations, or interpretations thereof; by expiration of or lapses in tax incentives; by transfer pricing adjustments, including the effect of acquisitions on our legal structure; by tax effects of nondeductible compensation; by tax costs related to intercompany realignments; by changes in accounting principles; or by changes in tax laws and regulations, treaties, or interpretations thereof, including changes to the taxation of earnings of our foreign subsidiaries, the deductibility of expenses attributable to foreign income, and the foreign tax credit rules. Significant judgment is required to determine the recognition and measurement attributes prescribed in the accounting guidance for uncertainty in income taxes. The Organisation for Economic Co-operation and Development (OECD), an international association comprised of 38 countries, including the United States, has made changes, including a Pillar Two framework that imposes a minimum tax rate of 15% in each taxing jurisdiction, and is contemplating additional changes to numerous long-standing tax principles. There can be no assurance that these changes and any contemplated changes if finalized, once adopted by countries, will not have an adverse impact on our provision for income taxes. As a result of certain of our ongoing employment and capital investment actions and commitments, our income in certain countries was subject to reduced tax rates. Our failure to meet these commitments could adversely impact our provision for income taxes. In addition, we are subject to the continuous examination of our income tax returns by the Internal Revenue Service (IRS) and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. There can be no assurance that the outcomes from these continuous examinations will not have an adverse impact on our operating results and financial condition.

CISCO SYSTEMS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

RESULTS OF OPERATIONS

Revenue

The following table presents the breakdown of revenue between product and services (in millions, except percentages):

						Three Months Ended
						October 25, 2025						October 26, 2024						Variance in Dollars						Variance in Percent
Revenue:
Product						$	11,077					$	10,114					$	963					10		%
Percentage of revenue						74.4		%				73.1		%
Services						3,806						3,727						79						2		%
Percentage of revenue						25.6		%				26.9		%
Total						$	14,883					$	13,841					$	1,042					8		%

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

We manage our business primarily on a geographic basis, organized into three geographic segments. Our revenue, which includes product and services for each segment, is summarized in the following table (in millions, except percentages):

						Three Months Ended
						October 25, 2025						October 26, 2024						Variance in Dollars						Variance in Percent
Revenue:
Americas						$	8,989					$	8,252					$	737					9		%
Percentage of revenue						60.4		%				59.6		%
EMEA						3,784						3,588						196						5		%
Percentage of revenue						25.4		%				25.9		%
APJC						2,111						2,001						110						5		%
Percentage of revenue						14.2		%				14.5		%
Total						$	14,883					$	13,841					$	1,042					8		%

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

Three Months Ended October 25, 2025 Compared with Three Months Ended October 26, 2024

Total revenue increased by 8%. Product revenue increased by 10% and services revenue increased by 2%. Our total revenue reflected growth across each of our geographic segments.

In addition to the impact of macroeconomic factors, including the IT spending environment and the level of spending by government entities, revenue by segment in a particular period may be significantly impacted by the timing of revenue recognition for complex transactions with multiple performance obligations. In addition, certain customers tend to make large and sporadic purchases, and the revenue related to these transactions may also be affected by the timing of revenue recognition, which in turn would impact the revenue of the relevant segment.

CISCO SYSTEMS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Product Revenue by Segment

The following table presents the breakdown of product revenue by segment (in millions, except percentages):

						Three Months Ended
						October 25, 2025						October 26, 2024						Variance in Dollars						Variance in Percent
Product revenue:
Americas						$	6,706					$	6,002					$	704					12		%
Percentage of product revenue						60.5		%				59.3		%
EMEA						2,846						2,686						160						6		%
Percentage of product revenue						25.7		%				26.6		%
APJC						1,525						1,426						99						7		%
Percentage of product revenue						13.8		%				14.1		%
Total						$	11,077					$	10,114					$	963					10		%

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

Three Months Ended October 25, 2025 Compared with Three Months Ended October 26, 2024

Americas

Product revenue in the Americas segment increased by 12%, with growth across each of our customer markets, led by the Service Provider and Cloud customer market which was largely driven by revenue from our AI Infrastructure solutions. From a country perspective, product revenue increased in the United States and Mexico by 13% and 25%, respectively, partially offset by declines in Brazil and Canada of 28% and 3%, respectively.

EMEA

Product revenue in the EMEA segment increased by 6%, with growth across each of our customer markets. From a country perspective, product revenue increased in the Netherlands, United Kingdom and Saudi Arabia by 35%, 6% and 9%, respectively.

APJC

Product revenue in the APJC segment increased by 7%, with growth across each of our customer markets. From a country perspective, product revenue increased in Japan, Singapore and China by 12%, 50%, and 15%, respectively, partially offset by a decline in Australia of 11%.

CISCO SYSTEMS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Product Revenue by Category

In addition to the primary view on a geographic basis, we also prepare financial information related to product categories and customer markets for various purposes.

The following table presents product revenue by category (in millions, except percentages):

						Three Months Ended
						October 25, 2025						October 26, 2024						Variance in Dollars						Variance in Percent
Product revenue
Networking						$	7,768					$	6,753					$	1,015					15		%
Security						1,980						2,017						(37)						(2)		%
Collaboration						1,055						1,085						(30)						(3)		%
Observability						274						258						16						6		%
Total						$	11,077					$	10,114					$	963					10		%

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

Three Months Ended October 25, 2025 Compared with Three Months Ended October 26, 2024

Networking

The Networking product category consists of our core networking technologies of switching, routing, wireless, and servers. Revenue from the Networking product category increased by 15%, or $1.0 billion. The increase was primarily driven by double digit revenue growth in Service Provider Routing, particularly within our AI Infrastructure solutions, Data Center Switching, and Enterprise Routing. We also experienced revenue growth in Campus Switching.

Security

The Security product category consists of our Network Security, Identity and Access Management, SASE and Threat Intelligence, Detection, and Response offerings. Revenue in our Security product category decreased by 2%, or $37 million. The decline was driven in part due to a change in how our customers consumed Splunk offerings, shifting from fewer on-premise deals to more cloud subscriptions. We also experienced a revenue decline in our prior generation products. These declines were partially offset by growth in Secure Firewall, Duo, and SASE offerings.

Collaboration

The Collaboration product category consists of our Webex Suite, Collaboration Devices, Contact Center and CPaaS offerings. Revenue in our Collaboration product category decreased by 3%, or $30 million, primarily driven by declines in our Devices and Webex Suite offerings.

Observability

The Observability product category consists of our network assurance, monitoring and analytics and observability suite offerings. Revenue in our Observability product category increased by 6%, or $16 million, primarily driven by growth in ThousandEyes.

CISCO SYSTEMS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Services Revenue by Segment

The following table presents the breakdown of services revenue by segment (in millions, except percentages):

						Three Months Ended
						October 25, 2025						October 26, 2024						Variance in Dollars						Variance in Percent
Services revenue:
Americas						$	2,283					$	2,249					$	34					2		%
Percentage of service revenue						60.0		%				60.3		%
EMEA						938						903						35						4		%
Percentage of service revenue						24.6		%				24.2		%
APJC						586						575						11						2		%
Percentage of service revenue						15.4		%				15.5		%
Total						$	3,806					$	3,727					$	79					2		%

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

Services revenue increased 2% in the first quarter of fiscal 2026 compared with the first quarter of fiscal 2025, with the growth driven by higher revenue from professional and support services. Services revenue increased across all of our geographic segments for the first quarter of fiscal 2026.

Gross Margin

The following table presents the gross margin for products and services (in millions, except percentages):

						Three Months Ended
						AMOUNT												PERCENTAGE
						October 25, 2025						October 26, 2024						October 25, 2025						October 26, 2024
Gross margin:
Product						$	7,143					$	6,588					64.5		%				65.1		%
Services						2,602						2,533						68.4		%				68.0		%
Total						$	9,745					$	9,121					65.5		%				65.9		%

Product Gross Margin

The following table summarizes the key factors that contributed to the change in product gross margin percentage for the first quarter of fiscal 2026, as compared with the corresponding prior year period:

						Product Gross Margin Percentage
Fiscal 2025						65.1		%
Productivity (1)						1.7		%
Product pricing						(1.1)		%
Mix of products sold						(2.2)		%
Amortization of purchased intangible assets						1.1		%
Others						(0.1)		%
Fiscal 2026						64.5		%

(1) Productivity includes overall manufacturing-related costs, such as component costs, warranty expense, provisions for inventory and the liability related to the purchase commitments with contract manufacturers and suppliers, freight, logistics, shipment volume, and other items not categorized elsewhere.

CISCO SYSTEMS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Three Months Ended October 25, 2025 Compared with Three Months Ended October 26, 2024

Product gross margin decreased by 0.6 percentage points primarily driven by negative impacts from product mix and pricing, partially offset by productivity improvements and lower amortization of purchased intangible assets.

Supply Chain Impacts and Risks

We regularly enter into purchase commitments with contract manufacturers and suppliers and in recent periods have increased such commitments related to manufacturing Cisco Silicon One and other products to meet demand from hyperscalers and other customers. We expect to continue entering into these additional purchase commitments in fiscal 2026. These purchase commitments have in turn significantly increased our supply chain exposure. This exposure includes potential material excess and obsolete or other charges if product demand significantly decreases for a sustained duration, we are unable to generate demand for certain products, or we are otherwise unable to mitigate this exposure. Additionally, while we are exposed to new and proposed tariffs and other trade policies, the extent of such exposure is uncertain but could be significant if the exposure remains and we are unable to mitigate it.

Services Gross Margin

Three Months Ended October 25, 2025 Compared with Three Months Ended October 26, 2024

Our services gross margin percentage increased by 0.4 percentage points primarily due to cost efficiencies.

Our services gross margin normally experiences some fluctuations due to various factors such as the timing of contract initiations in our renewals, our strategic investments in headcount, and the resources we deploy to support the overall service business. Other factors include the mix of service offerings, as the gross margin from our advanced services is typically lower than the gross margin from technical support services.

Gross Margin by Segment

The following table presents the total gross margin for each segment (in millions, except percentages):

			Three Months Ended
			AMOUNT												PERCENTAGE
			October 25, 2025						October 26, 2024						October 25, 2025						October 26, 2024
Gross margin:
Americas			$	6,001					$	5,740					66.8		%				69.6		%
EMEA			2,722						2,522						71.9		%				70.3		%
APJC			1,413						1,328						66.9		%				66.4		%
Segment total			10,136						9,590						68.1		%				69.3		%
Unallocated corporate items (1)			(391)						(469)
Total			$	9,745					$	9,121					65.5		%				65.9		%

(1) The unallocated corporate items include the effects of amortization and impairments of acquisition-related intangible assets, share-based compensation expense, significant litigation settlements and other contingencies, charges related to asset impairments and restructurings, and certain other charges. We do not allocate these items to the gross margin for each segment because management does not include such information in measuring the performance of the operating segments.

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

Three Months Ended October 25, 2025 Compared with Three Months Ended October 26, 2024

We experienced a gross margin percentage decrease in our Americas segment due to negative impacts from product mix and pricing, partially offset by positive impacts from productivity improvements.

Gross margin percentage in our EMEA segment increased primarily due to productivity improvements, partially offset by negative impacts from pricing and product mix.

The increase in the APJC segment gross margin percentage was primarily due to productivity improvements, partially offset by negative impacts from pricing and product mix.

CISCO SYSTEMS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Research and Development (“R&D”), Sales and Marketing, and General and Administrative (“G&A”) Expenses

R&D, sales and marketing, and G&A expenses are summarized in the following table (in millions, except percentages):

			Three Months Ended
			October 25, 2025						October 26, 2024						Variance in Dollars						Variance in Percent
Research and development			$	2,400					$	2,286					$	114					5		%
Percentage of revenue			16.1		%				16.5		%
Sales and marketing			2,871						2,752						119						4		%
Percentage of revenue			19.3		%				19.9		%
General and administrative			733						795						(62)						(8)		%
Percentage of revenue			4.9		%				5.7		%
Total			$	6,004					$	5,833					$	171					3		%
Percentage of revenue			40.3		%				42.1		%

Three Months Ended October 25, 2025 Compared with Three Months Ended October 26, 2024

R&D Expenses

R&D expenses increased primarily due to higher headcount-related expenses reflecting our investments in AI and higher share-based compensation expense, partially offset by lower acquisition-related costs.

Sales and Marketing Expenses

Sales and marketing expenses increased primarily due to higher share-based compensation expense, higher contracted services spending, higher headcount-related expenses, and higher discretionary spending.

G&A Expenses

G&A expenses decreased primarily due to lower acquisition-related costs and lower headcount-related expenses.

Effect of Foreign Currency

In the first quarter of fiscal 2026, foreign currency fluctuations, net of hedging, increased the combined R&D, sales and marketing, and G&A expenses by approximately $36 million, or 0.6%, compared with the first quarter of fiscal 2025.

Amortization of Purchased Intangible Assets

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

						Three Months Ended
						October 25, 2025						October 26, 2024
Amortization of purchased intangible assets:
Cost of sales						$	240					$	325
Operating expenses						231						265
Total						$	471					$	590

For the first quarter of fiscal 2026, the decrease in amortization of purchased intangible assets was primarily due to certain purchased intangible assets that became fully amortized.

Restructuring and Other Charges

In the first quarter of fiscal 2025, we announced a restructuring plan in order to allow us to invest in key growth opportunities and drive more efficiencies in our business. This restructuring plan is expected to impact approximately 7% of our global workforce with estimated pre-tax charges of approximately $1 billion. In connection with this restructuring plan, we incurred charges of $147 million in the first quarter of fiscal 2026. We expect this plan to be completed by the end of the second quarter of fiscal 2026.

CISCO SYSTEMS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Operating Income

The following table presents our operating income and our operating income as a percentage of revenue (in millions, except percentages):

						Three Months Ended
						October 25, 2025						October 26, 2024
Operating income						$	3,363					$	2,358
Operating income as a percentage of revenue						22.6		%				17.0		%

Three Months Ended October 25, 2025 Compared with Three Months Ended October 26, 2024

Operating income increased by 43%, and operating income as a percentage of revenue increased by 5.6 percentage points. These changes primarily resulted from lower restructuring and other charges and revenue growth in the first quarter of fiscal 2026.

Interest and Other Income (Loss), Net

Interest Income (Expense), Net The following table summarizes interest income and interest expense (in millions):

						Three Months Ended
						October 25, 2025						October 26, 2024						Variance in Dollars
Interest income						$	222					$	286					$	(64)
Interest expense						(350)						(418)						68
Interest income (expense), net						$	(128)					$	(132)					$	4

Three Months Ended October 25, 2025 Compared with Three Months Ended October 26, 2024

The decrease in interest income was driven by a lower average balance of cash and available-for-sale debt investments and lower interest rates. The decrease in interest expense was driven by a lower average balance of debt outstanding and lower effective interest rate on commercial paper during the period.

Other Income (Loss), Net The components of other income (loss), net, are summarized as follows (in millions):

						Three Months Ended
						October 25, 2025						October 26, 2024						Variance in Dollars
Gains (losses) on investments, net:
Available-for-sale debt investments						$	(4)					$	(25)					$	21
Marketable equity investments						31						24						7
Privately held investments						163						74						89
Net gains (losses) on investments						190						73						117
Other gains (losses), net						(34)						(32)						(2)
Other income (loss), net						$	156					$	41					$	115

Three Months Ended October 25, 2025 Compared with Three Months Ended October 26, 2024

The change in our other income (loss), net was primarily driven by higher unrealized gains on privately held investments.

Provision for (Benefit from) Income Taxes

Three Months Ended October 25, 2025 Compared with Three Months Ended October 26, 2024

The provision for (benefit from) income taxes resulted in an effective tax rate of 15.7% for the first quarter of fiscal 2026, compared with an effective tax rate of (19.6)% for the first quarter of fiscal 2025. The increase in the effective tax rate was primarily due to a $720 million tax benefit related to the U.S. Tax Court opinion issued during the first quarter of fiscal 2025 regarding the U.S. taxation of deemed foreign dividends in the transition year of the Tax Cut and Job Act (“Tax Act”) (our fiscal 2018).

CISCO SYSTEMS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

LIQUIDITY AND CAPITAL RESOURCES

The following sections discuss the effects of changes in our balance sheet, our capital allocation strategy including stock repurchase program and dividends, our contractual obligations, and certain other commitments and activities on our liquidity and capital resources.

Balance Sheet and Cash Flows

Cash and Cash Equivalents and Investments The following table summarizes our cash and cash equivalents and investments (in millions):

			October 25, 2025						July 26, 2025						Increase (Decrease)
Cash and cash equivalents			$	8,400					$	8,346					$	54
Available-for-sale debt investments			6,942						7,381						(439)
Marketable equity securities			394						383						11
Total			$	15,736					$	16,110					$	(374)

The net decrease in cash and cash equivalents and investments in the first quarter of fiscal 2026 was primarily driven by cash returned to stockholders in the form of cash dividends of $1.6 billion and repurchases of common stock of $2.0 billion, and capital expenditures of $0.3 billion. These uses of cash were partially offset by net cash provided by operating activities of $3.2 billion and the release to us of approximately $0.6 billion of restricted cash previously held in escrow.

We maintain an investment portfolio of various holdings, types, and maturities. We classify our investments as short-term investments based on their nature and their availability for use in current operations. We believe the overall credit quality of our portfolio is strong, with our cash equivalents and our available-for-sale debt investment portfolio consisting primarily of high quality investment-grade securities. We believe that our strong cash and cash equivalents and investments position allows us to use our cash resources for strategic investments to gain access to new technologies, for acquisitions, for customer financing activities, for working capital needs, and for the repurchase of shares of common stock and payment of dividends as discussed below.

Securities Lending We periodically engage in securities lending activities with certain of our available-for-sale debt investments. These transactions are accounted for as a secured lending of the securities, and the securities are typically loaned only on an overnight basis. We require collateral equal to at least 102% of the fair market value of the loaned security and that the collateral be in the form of cash or liquid, high-quality assets. We engage in these secured lending transactions only with highly creditworthy counterparties, and the associated portfolio custodian has agreed to indemnify us against collateral losses. We did not experience any losses in connection with the secured lending of securities during the periods presented. As of October 25, 2025 and July 26, 2025, we had no outstanding securities lending transactions.

Free Cash Flow and Capital Allocation As part of our capital allocation strategy, we target to return a minimum of 50% of our free cash flow annually to our stockholders through cash dividends and repurchases of common stock.

We define free cash flow as net cash provided by operating activities less cash used to acquire property and equipment. The following table reconciles our net cash provided by operating activities to free cash flow (in millions):

			Three Months Ended
			October 25, 2025						October 26, 2024
Net cash provided by operating activities			$	3,212					$	3,661
Acquisition of property and equipment			(323)						(217)
Free cash flow			$	2,889					$	3,444

We expect that cash provided by operating activities may fluctuate in future periods as a result of a number of factors, including fluctuations in our operating results, the rate at which products are shipped during the quarter (which we refer to as shipment linearity), the timing and collection of accounts receivable and financing receivables, inventory and supply chain management, deferred revenue, and the timing and amount of tax and other payments. For additional discussion, see “Part II, Item 1A. Risk Factors” in this report.

CISCO SYSTEMS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

We consider free cash flow to be a liquidity measure that provides useful information to management and investors because of our intent to return a stated percentage of free cash flow to stockholders in the form of dividends and stock repurchases. We further regard free cash flow as a useful measure because it reflects cash that can be used to, among other things, invest in our business, make strategic acquisitions, repurchase common stock, and pay dividends on our common stock, after deducting capital investments. A limitation of the utility of free cash flow as a measure of financial performance and liquidity is that the free cash flow does not represent the total increase or decrease in our cash balance for the period. In addition, we have other required uses of cash, including repaying the principal of our outstanding indebtedness. Free cash flow is not a measure calculated in accordance with U.S. generally accepted accounting principles and should not be regarded in isolation or as an alternative for net cash provided by operating activities or any other measure calculated in accordance with such principles, and other companies may calculate free cash flow in a different manner than we do.

The following table summarizes the dividends paid and stock repurchases (in millions, except per-share amounts):

						DIVIDENDS												STOCK REPURCHASE PROGRAM
Quarter Ended						Per Share						Amount						Shares						Weighted-Average Price per Share						Amount						TOTAL
Fiscal 2026
October 25, 2025						$	0.41					$	1,617					29						$	68.28					$	2,001					$	3,618
Fiscal 2025
July 26, 2025						$	0.41					$	1,625					19						$	64.65					$	1,252					$	2,877
April 26, 2025						$	0.41					$	1,627					25						$	59.78					$	1,504					$	3,131
January 25, 2025						$	0.40					$	1,593					21						$	58.58					$	1,236					$	2,829
October 26, 2024						$	0.40					$	1,592					40						$	49.56					$	2,003					$	3,595

On November 12, 2025, our Board of Directors declared a quarterly dividend of $0.41 per common share to be paid on January 21, 2026, to all stockholders of record as of the close of business on January 2, 2026. Future dividends will be subject to the approval of our Board of Directors.

The remaining authorized amount for stock repurchases under this program is approximately $12.2 billion, with no termination date.

Accounts Receivable, Net The following table summarizes our accounts receivable, net (in millions):

			October 25, 2025						July 26, 2025						Increase (Decrease)
Accounts receivable, net			$	4,827					$	6,701					$	(1,874)

Our accounts receivable net, as of October 25, 2025 decreased by approximately 28%, as compared with the end of fiscal 2025, primarily due to timing and amount of product and service billings in the first quarter of fiscal 2026 compared with the fourth quarter of fiscal 2025.

CISCO SYSTEMS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Inventory Supply Chain The following table summarizes our inventories and balances with contract manufacturers and suppliers (in millions):

			October 25, 2025						July 26, 2025						Variance vs. July 26, 2025
Inventories			$	3,395					$	3,164					$	231
Inventory purchase commitments			$	8,321					$	7,599					$	722
Inventory deposits and prepayments			$	1,023					$	825					$	198

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

			October 25, 2025						July 26, 2025						Variance vs. July 26, 2025
Less than 1 year			$	7,879					$	7,202					$	677
1 to 3 years			396						320						76
3 to 5 years			46						77						(31)
Total			$	8,321					$	7,599					$	722

Inventory as of October 25, 2025 increased by 7% and inventory purchase commitments with contract manufacturers and suppliers increased by 10% from our balances at the end of fiscal 2025. The combined increase of 9% in our inventory and inventory purchase commitments as compared with the end of fiscal 2025 was primarily related to commitments with contract manufacturers and suppliers related to manufacturing Cisco Silicon One and other products to meet the demand from hyperscalers and other customers. We expect our inventory balances may increase in future quarters as we work to fulfill this demand.

In recent periods, we have increased our levels of inventory and purchase commitments with contract manufacturers and suppliers primarily related to Cisco Silicon One. The increases were primarily due to arrangements to secure supply and pricing for certain product components and commitments with contract manufacturers to meet customer demand and help manage lead times. Our risks of future material excess and obsolete inventory and related losses are further outlined in the Result of Operations—Product Gross Margin section.

We purchase components from a variety of suppliers and use several contract manufacturers to provide manufacturing services for our products. During the normal course of business, in order to manage manufacturing lead times and help ensure adequate component supply, we enter into agreements with contract manufacturers and suppliers that allow them to procure inventory based upon criteria as defined by us or that establish the parameters defining our requirements and our commitment to securing manufacturing capacity.

Our inventory purchase commitments are for short-term product manufacturing requirements as well as for commitments to suppliers to secure manufacturing capacity. Certain of our inventory purchase commitments are entered into directly with suppliers and relate to fixed-dollar commitments to secure supply and pricing for certain product components for multi-year periods. A significant portion of our reported purchase commitments arising from these agreements are firm, noncancelable, and unconditional commitments. In certain instances, these agreements allow us the option to cancel, reschedule, and adjust our requirements based on our business needs prior to firm orders being placed.

Inventory and supply chain management remain areas of focus as we balance the need to maintain supply chain flexibility to help ensure competitive lead times with the risk of inventory obsolescence because of supply constraints, rapidly changing technology and customer requirements. We believe the amount of our inventory and inventory purchase commitments is appropriate for our current and expected customer demand and revenue levels.

Financing Receivables and Guarantees The following table summarizes our financing receivables (in millions):

			October 25, 2025						July 26, 2025						Increase (Decrease)
Loan receivables, net			$	5,789					$	5,591					$	198
Lease receivables, net			1,015						936						79
Total, net			$	6,804					$	6,527					$	277

CISCO SYSTEMS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Financing Receivables Our financing arrangements include loans and leases. Our loan receivables include customer financing for purchases of our hardware, software and services (including technical support and advanced services), and also may include additional funds for other costs associated with network installation and integration of our products and services. Lease receivables include sales-type leases. Arrangements related to leases are generally collateralized by a security interest in the underlying assets. Financing receivables increased by 4% as compared with the end of fiscal 2025.

Financing Guarantees In the normal course of business, third parties may provide financing arrangements to our customers and channel partners under financing programs. The financing arrangements provided by third parties are related to leases and loans and typically have terms of up to three years. In some cases, we provide guarantees to third parties for these lease and loan arrangements. The financing arrangements to channel partners consist of revolving short-term financing provided by third parties, with payment terms generally ranging from 60 to 90 days. In certain instances, these financing arrangements result in a transfer of our receivables to the third party. The receivables are derecognized upon transfer, as these transfers qualify as true sales, and we receive payments for the receivables from the third party based on our standard payment terms.

The volume of channel partner financing was $6.7 billion and $6.0 billion for the first quarter of fiscal 2026 and 2025, respectively. These financing arrangements facilitate the working capital requirements of the channel partners, and in some cases, we guarantee a portion of these arrangements. The balance of the channel partner financing subject to guarantees was $1.5 billion and $1.3 billion as of October 25, 2025 and July 26, 2025, respectively. We could be called upon to make payments under these guarantees in the event of nonpayment by the channel partners. Historically, our payments under these arrangements have been immaterial. Where we provide a guarantee, we defer the revenue associated with the channel partner financing arrangement in accordance with revenue recognition policies, or we record a liability for the fair value of the guarantees. In either case, the deferred revenue is recognized as revenue when the guarantee is removed. As of October 25, 2025, the total maximum potential future payments related to these guarantees was approximately $134 million, of which approximately $17 million was recorded as deferred revenue.

Borrowings

Senior Notes The following table summarizes the principal amount of our senior notes (in millions):

			Maturity Date						October 25, 2025						July 26, 2025
Senior notes:
Fixed-rate notes:
4.90%			February 26, 2026						$	1,000					$	1,000
2.95%			February 28, 2026						750						750
2.50%			September 20, 2026						1,500						1,500
4.80%			February 26, 2027						2,000						2,000
4.55%			February 24, 2028						1,000						1,000
4.85%			February 26, 2029						2,500						2,500
4.75%			February 24, 2030						1,000						1,000
4.95%			February 26, 2031						2,500						2,500
4.95%			February 24, 2032						1,000						1,000
5.05%			February 26, 2034						2,500						2,500
5.10%			February 24, 2035						1,250						1,250
5.90%			February 15, 2039						2,000						2,000
5.50%			January 15, 2040						2,000						2,000
5.30%			February 26, 2054						2,000						2,000
5.50%			February 24, 2055						750						750
5.35%			February 26, 2064						1,000						1,000
Total									$	24,750					$	24,750

Interest is payable semiannually on each class of the senior fixed-rate notes, each of which is redeemable by us at any time, subject to a make-whole premium. We were in compliance with all debt covenants as of October 25, 2025.

CISCO SYSTEMS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Commercial Paper We have a short-term debt financing program in which up to $15.0 billion is available through the issuance of commercial paper notes. We use the proceeds from the issuance of commercial paper notes for general corporate purposes. We had $3.5 billion in commercial paper notes outstanding as of each of October 25, 2025 and July 26, 2025.

Credit Facility On February 2, 2024, we entered into an amended and restated 5-year $5.0 billion unsecured revolving credit agreement. The interest rate for the credit agreement is determined based on a formula using certain market rates. The credit agreement requires that we comply with certain covenants, including that we maintain an interest coverage ratio (defined in the agreement as the ratio of consolidated EBITDA to consolidated interest expense) of not less than 3.0 to 1.0. As of October 25, 2025, we were in compliance with all associated covenants and we had not borrowed any funds under our credit agreement.

Remaining Performance Obligations The following table presents the breakdown of remaining performance obligations (in millions):

			October 25, 2025						July 26, 2025						Increase (Decrease)
Product			$	21,904					$	21,572					$	332
Services			20,969						21,961						(992)
Total			$	42,873					$	43,533					$	(660)
Short-term RPO			$	20,971					$	21,723					$	(752)
Long-term RPO			21,902						21,810						92
Total			$	42,873					$	43,533					$	(660)

Total remaining performance obligations as of October 25, 2025 decreased 2% compared to the end of fiscal 2025. Remaining performance obligations for product increased by 2% compared to the end of fiscal 2025, of which long-term product RPO was $11.8 billion, up 3%. Remaining performance obligations for services decreased 5%.

Deferred Revenue The following table presents the breakdown of deferred revenue (in millions):

			October 25, 2025						July 26, 2025						Increase (Decrease)
Product			$	13,252					$	13,490					$	(238)
Services			14,717						15,289						(572)
Total			$	27,969					$	28,779					$	(810)
Reported as:
Current			$	15,801					$	16,416					$	(615)
Noncurrent			12,168						12,363						(195)
Total			$	27,969					$	28,779					$	(810)

Total deferred revenue decreased 3% compared to the end of fiscal 2025. Within total deferred revenue, deferred product revenue decreased by 2% and deferred services revenue decreased by 4%. The decrease in deferred services revenue was driven by lower business volume and ongoing amortization of deferred services revenue.

CISCO SYSTEMS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Contractual Obligations

The impact of contractual obligations on our liquidity and capital resources in future periods should be analyzed in conjunction with the factors that impact our cash flows from operations discussed herein. In addition, we plan for and measure our liquidity and capital resources through an annual budgeting process. Our contractual obligations consist of operating leases, purchase commitments with contract manufacturers and suppliers, other purchase obligations, long-term debt, the transition tax payable, and other long-term liabilities. For additional information on our contractual obligations see our Annual Report on Form 10-K for the fiscal year ended July 26, 2025.

Transition Tax Payable

The income tax payable outstanding as of October 25, 2025 for the U.S. transition tax on accumulated earnings for foreign subsidiaries was $2.3 billion and is payable in the second quarter of fiscal 2026.

Other Commitments

In connection with our acquisitions, we have agreed to pay certain additional amounts contingent upon the continued employment with us of certain employees of the acquired entities. See Note 4 to the Consolidated Financial Statements.

Of the total carrying value of our investments in privately held companies as of October 25, 2025, $0.8 billion of such investments are considered to be in variable interest entities which are unconsolidated. We have total funding commitments of $0.5 billion related to privately held investments. The carrying value of these investments and the additional funding commitments, collectively, represent our maximum exposure related to privately held investments. See Note 10 to the Consolidated Financial Statements.

We provide financing guarantees, which are generally for various third-party financing arrangements extended to our channel partners. We could be called upon to make payments under these guarantees in the event of nonpayment by the channel partners. See the previous discussion of these financing guarantees under “Financing Receivables and Guarantees.”

Liquidity and Capital Resource Requirements

Based on past performance and current expectations, we believe our cash and cash equivalents, investments, cash generated from operations, and ability to access capital markets and committed credit lines will satisfy, through at least the next 12 months, our liquidity requirements, both in total and domestically, including the following: working capital needs (including inventory and other supply related payments), capital expenditures, investment requirements, stock repurchases, cash dividends, contractual obligations, commitments, principal and interest payments on debt, pending acquisitions, future customer financings, and other liquidity requirements associated with our operations. There are no other transactions, arrangements, or relationships with unconsolidated entities or other persons that are reasonably likely to materially affect the liquidity and the availability of, as well as our requirements for, capital resources.