Cisco Q1 Revenue Jumps 7.5% on Strong Networking Demand

TL;DR

**Cisco's Q1 numbers are solid, driven by networking, but watch that deferred revenue dip – it could signal future headwinds.**

AI Summary

Cisco Systems, Inc. reported a robust financial performance for the first quarter ended October 25, 2025, with total revenue increasing by 7.5% to $14.883 billion, up from $13.841 billion in the prior-year quarter. Product revenue saw a significant jump of 9.5% to $11.077 billion, primarily driven by a 15.0% increase in Networking revenue to $7.768 billion. Services revenue also grew by 2.1% to $3.806 billion. Net income rose by 5.5% to $2.860 billion, compared to $2.711 billion in the same period last year, resulting in diluted EPS of $0.72. Operating income surged by 42.6% to $3.363 billion, largely due to a substantial decrease in restructuring and other charges from $665 million to $147 million. The company's cash and cash equivalents stood at $8.400 billion, a slight increase from $8.346 billion at July 26, 2025. Deferred revenue, a key indicator of future performance, decreased from $16.416 billion to $15.801 billion for current liabilities and from $12.363 billion to $12.168 billion for long-term liabilities. The company also repurchased $1.992 billion of common stock during the quarter.

Why It Matters

Cisco's strong Q1 performance, particularly the 15.0% growth in Networking revenue, signals robust demand for its core infrastructure products, which is critical for investors looking for stability in a competitive tech landscape. The significant reduction in restructuring charges indicates improved operational efficiency and potentially higher profitability going forward, benefiting shareholders. For customers, Cisco's continued investment in networking and security solutions, despite a slight dip in security revenue, reinforces its position as a reliable technology partner. This performance could also influence the broader market by setting a positive tone for enterprise IT spending, potentially impacting competitors like Juniper Networks and Arista Networks.

Risk Assessment

Risk Level: medium — While Cisco reported strong revenue and net income growth, the total deferred revenue decreased from $28.779 billion (July 26, 2025) to $27.969 billion (October 25, 2025). This 2.8% decline in deferred revenue could indicate a slowdown in future recognized revenue, despite current strong performance. Additionally, a decrease in Security revenue by 1.8% to $1.980 billion, while minor, warrants attention given the strategic importance of this segment.

Analyst Insight

Investors should hold CSCO, acknowledging the strong current quarter but closely monitoring future deferred revenue trends and the performance of the Security segment. A sustained decline in deferred revenue could signal a need to re-evaluate growth projections, while a rebound in Security revenue would be a positive catalyst.

Financial Highlights

debt To Equity

0.49

revenue

$14.883B

operating Margin

22.6%

total Assets

$121.102B

total Debt

$28.089B

net Income

$2.860B

eps

$0.72

gross Margin

65.5%

cash Position

$8.400B

revenue Growth

+7.5%

Revenue Breakdown

Key Numbers

• $14.883B — Total Revenue (Increased 7.5% from $13.841 billion year-over-year.)
• $11.077B — Product Revenue (Increased 9.5% from $10.114 billion year-over-year.)
• $7.768B — Networking Revenue (Increased 15.0% from $6.753 billion year-over-year.)
• $2.860B — Net Income (Increased 5.5% from $2.711 billion year-over-year.)
• $0.72 — Diluted EPS (Increased from $0.68 year-over-year.)
• $3.363B — Operating Income (Increased 42.6% from $2.358 billion year-over-year.)
• $15.801B — Current Deferred Revenue (Decreased from $16.416 billion at July 26, 2025.)
• $12.168B — Long-term Deferred Revenue (Decreased from $12.363 billion at July 26, 2025.)
• $147M — Restructuring and Other Charges (Decreased significantly from $665 million year-over-year.)
• $1.992B — Common Stock Repurchases (Amount spent on repurchases during the quarter.)

Key Players & Entities

• CISCO SYSTEMS, INC. (company) — registrant
• U.S. Securities and Exchange Commission (regulator) — regulatory body
• FASB (regulator) — accounting standard setter
• The Nasdaq Stock Market LLC (company) — exchange where CSCO is registered
• Juniper Networks (company) — competitor
• Arista Networks (company) — competitor

FAQ

Risk Factors

• Intense Competition [high — market]: The networking and technology markets are highly competitive, with numerous players offering similar products and services. This intense competition could lead to pricing pressures, reduced market share, and impact revenue growth.
• Geopolitical and Trade Tensions [medium — regulatory]: Cisco operates globally and is subject to various geopolitical risks, trade restrictions, and tariffs. These factors can disrupt supply chains, increase costs, and affect international sales, as seen in the company's diverse geographic segments.
• Supply Chain Disruptions [medium — operational]: The company relies on a complex global supply chain for its hardware products. Disruptions due to natural disasters, pandemics, or geopolitical events can impact manufacturing and delivery, as evidenced by past challenges in the industry.
• Deferred Revenue Fluctuations [medium — financial]: A decrease in deferred revenue, both current ($15.801B from $16.416B) and long-term ($12.168B from $12.363B), could indicate a slowdown in future recognized revenue, although this is offset by strong current product revenue growth.
• Cybersecurity Threats [high — operational]: As a provider of security solutions, Cisco is a target for cyberattacks. Breaches could damage its reputation, lead to financial losses, and impact customer trust in its products and services.
• Data Privacy Regulations [medium — regulatory]: Increasingly stringent data privacy regulations globally (e.g., GDPR, CCPA) require significant compliance efforts and can impact how Cisco collects, processes, and stores customer data, potentially leading to fines for non-compliance.
• Technological Obsolescence [medium — operational]: The rapid pace of technological change requires continuous investment in research and development to avoid product obsolescence. Failure to innovate could lead to a loss of competitive advantage.

Industry Context

Cisco operates in the highly competitive and rapidly evolving networking and IT infrastructure market. Key trends include the increasing demand for cloud-based solutions, cybersecurity, and the integration of AI into network management. Competitors range from large technology conglomerates to specialized software and hardware providers, all vying for market share in areas like switching, routing, security, and collaboration tools.

Regulatory Implications

Cisco faces significant regulatory scrutiny related to data privacy (e.g., GDPR, CCPA), cybersecurity standards, and international trade policies. Compliance with these evolving regulations is critical to avoid penalties and maintain customer trust, particularly as the company expands its cloud and software offerings.

What Investors Should Do

1. Monitor deferred revenue trends
2. Analyze the impact of restructuring charges
3. Evaluate growth drivers in product segments
4. Assess competitive positioning

Key Dates

• 2025-10-25: End of First Quarter Fiscal Year 2026 — Reporting period for the financial results discussed in the 10-Q, showing revenue growth and increased operating income.
• 2025-07-26: End of Fiscal Year 2025 — Balance sheet date for comparison, showing total assets of $122.291B and total liabilities of $75.448B.
• 2024-10-26: End of First Quarter Fiscal Year 2025 — Prior year comparable period for revenue and net income, showing total revenue of $13.841B and net income of $2.711B.

Glossary

Deferred Revenue

Revenue that has been received by a company but not yet earned. It represents future obligations to deliver goods or services. (A decrease in deferred revenue ($15.801B current, $12.168B long-term) suggests that revenue recognized in the current period exceeded new deferred revenue bookings, which can be a sign of strong current performance but warrants monitoring for future revenue trends.)

Restructuring and other charges

Costs associated with significant reorganizations, layoffs, or other business restructuring activities. (A substantial decrease in these charges ($147M from $665M) significantly boosted operating income and net income, indicating a less costly period for restructuring compared to the prior year.)

Diluted EPS

Earnings per share calculated by dividing net income by the total number of diluted shares outstanding, including the effect of stock options and convertible securities. (Reported at $0.72, an increase from the prior year's $0.68, reflecting improved profitability on a per-share basis.)

Common Stock Repurchases

The company buying back its own shares from the open market. (Cisco repurchased $1.992B of common stock, indicating a return of capital to shareholders and a potential signal of management's confidence in the company's valuation.)

Gross Margin

The difference between revenue and cost of goods sold, expressed as a percentage of revenue. (Increased to 65.5% ($9,745M / $14,883M) from approximately 65.9% in the prior year, showing strong profitability on product and service delivery.)

Operating Income

Profitability from a company's core business operations before interest and taxes. (Surged by 42.6% to $3.363B, largely due to the significant reduction in restructuring charges.)

SaaS

Software as a Service, a software distribution model where a third-party provider hosts applications and makes them available to customers over the Internet. (Mentioned as a component of revenue recognition for term software licenses and security products, indicating a shift towards subscription-based models.)

Year-Over-Year Comparison

Compared to the prior year's first quarter, Cisco demonstrated robust top-line growth with total revenue increasing by 7.5% to $14.883 billion, driven by a strong 9.5% rise in product revenue, particularly in Networking (+15.0%). Net income also saw a healthy increase of 5.5% to $2.860 billion. A key factor in the substantial 42.6% surge in operating income was the dramatic reduction in restructuring and other charges, which fell from $665 million to $147 million. While cash reserves remained stable, deferred revenue saw a slight decline, suggesting a potential shift in revenue recognition patterns or booking trends.

Key Financial Figures

• $0.001 — ich registered Common Stock, par value $0.001 per share CSCO The Nasdaq Stock Market

Filing Documents

• csco-20251025.htm (10-Q) — 2270KB
• exh101esppq126.htm (EX-10.1) — 74KB
• exh311-q1fy26.htm (EX-31.1) — 9KB
• exh312-q1fy26.htm (EX-31.2) — 8KB
• exh321-q1fy26.htm (EX-32.1) — 4KB
• exh322-q1fy26.htm (EX-32.2) — 4KB
• csco-20251025_g1.jpg (GRAPHIC) — 41KB
• 0000858877-25-000171.txt ( ) — 13647KB
• csco-20251025.xsd (EX-101.SCH) — 81KB
• csco-20251025_cal.xml (EX-101.CAL) — 138KB
• csco-20251025_def.xml (EX-101.DEF) — 418KB
• csco-20251025_lab.xml (EX-101.LAB) — 1001KB
• csco-20251025_pre.xml (EX-101.PRE) — 731KB
• csco-20251025_htm.xml (XML) — 2538KB

Financial Information

Part I Financial Information 3

Financial Statements (Unaudited)

Item 1. Financial Statements (Unaudited) 3 Consolidated Balance Sheets at October 25, 2025 and July 26, 2025 3 Consolidated Statements of Operations for the Three Months Ended October 2 5 , 2025 and October 26 , 2024 4 Consolidated Statements of Comprehensive Income for the Three Months Ended October 25 , 2025 and October 26 , 2024 5 Consolidated Statements of Cash Flows for the Three Months Ended October 25 , 2025 and October 26 , 2024 6 Consolidated Statements of Equity for the Three Months Ended October 2 5 , 2025 and October 26 , 2024 7

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements 8

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 35

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 53

Controls and Procedures

Item 4. Controls and Procedures 54

Other Information

Part II. Other Information 54

Legal Proceedings

Item 1. Legal Proceedings 54

Risk Factors

Item 1A. Risk Factors 55

Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities 70

Defaults Upon Senior Securities

Item 3. Defaults Upon Senior Securities 70

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 70

Other Information

Item 5. Other Information 70

Exhibits

Item 6. Exhibits 72 Signature 73 2 Table of Contents

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements (Unaudited)

Item 1. Financial Statements (Unaudited) CISCO SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS (in millions, except par value) (Unaudited) October 25, 2025 July 26, 2025 ASSETS Current assets: Cash and cash equivalents $ 8,400 $ 8,346 Investments 7,336 7,764 Accounts receivable, net of allowance of $ 62 at October 25, 2025 and $ 69 at July 26, 2025 4,827 6,701 Inventories 3,395 3,164 Financing receivables, net 3,085 3,061 Other current assets 5,833 5,950 Total current assets 32,876 34,986 Property and equipment, net 2,248 2,113 Financing receivables, net 3,719 3,466 Goodwill 59,119 59,136 Purchased intangible assets, net 8,713 9,175 Deferred tax assets 7,314 7,356 Other assets 7,113 6,059 TOTAL ASSETS $ 121,102 $ 122,291 LIABILITIES AND EQUITY Current liabilities: Short-term debt $ 6,725 $ 5,232 Accounts payable 2,418 2,528 Income taxes payable 2,471 1,857 Accrued compensation 3,064 3,611 Deferred revenue 15,801 16,416 Other current liabilities 4,972 5,420 Total current liabilities 35,451 35,064 Long-term debt 21,364 22,861 Income taxes payable 2,172 2,165 Deferred revenue 12,168 12,363 Other long-term liabilities 3,074 2,995 Total liabilities 74,229 75,448 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; 3,938 and 3,960 shares issued and outstanding at October 25, 2025 and July 26, 2025, respectively 48,167 47,747 Retained earnings (Accumulated deficit) ( 364 ) 50 Accumulated other comprehensive loss ( 930 ) ( 954 ) Total equity 46,873 46,843 TOTAL LIABILITIES AND EQUITY $ 121,102 $ 122,291 See Notes to Consolidated Financial Statements. 3 Table of Contents CISCO SYSTEMS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per-share amounts) (Unaudited) Three Months Ended October 25, 2025 October

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 2026 and fiscal 2025 are each 52-week fiscal years. The Consolidated Financial Statements include our accounts and those of our subsidiaries and those of our investments consolidated under the voting interest method. 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 25, 2025 and for the first quarter of fiscal 2026 and 2025, 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 26, 2025 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 26, 2025. In the opinion of management, all normal recurring adjustments necessary to state fairly the consolidated balance sheet as of October 25, 2025, the results of operations, the statements of comprehensive income, the statements of cas

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) our term software licenses, security software licenses, SaaS, and associated service arrangements as subscription offers. Revenue from subscription offers includes revenue recognized over time as well as upfront. We recognize revenue upon transfer of control of promised goods or services in a contract with a customer in an amount that reflects the 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 and the related provision is recorded as a reduction to revenue. Significant Judgments Revenue is allo

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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. The following table presents this disaggregation of revenue (in millions): Three Months Ended October 25, 2025 October 26, 2024 Product revenue: Networking $ 7,768 $ 6,753 Security 1,980 2,017 Collaboration 1,055 1,085 Observability 274 258 Total Product 11,077 10,114 Services 3,806 3,727 Total revenue $ 14,883 $ 13,841 Amounts may not sum due to rounding. Networking consists of our core networking technologies of switching, routing, wireless, and servers. These technologies consist 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. Security consists of our Network Security, Identity and Access Management, Secure Access Service Edge (SASE) and Threat Intelligence, Detection, and Response 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 c

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) The sales arrangements as discussed above are typically made pursuant to customer purchase orders based on master purchase or partner agreements. Cash is received based on our standard payment terms which is typically 30 days. We provide financing arrangements to customers for our hardware, software and service offerings. Refer to Note 9 for additional information. For these arrangements, cash is typically received over time. Subscription revenue includes revenue recognized from our term software licenses, security software licenses, SaaS, and associated service arrangements. Our subscription revenue is recorded in product and services revenue in our Consolidated Statements of Operations as follows (in millions): Three Months Ended October 25, 2025 October 26, 2024 Product $ 4,500 $ 4,419 Services 3,500 3,425 Total $ 8,000 $ 7,844 The majority of our product subscription revenue is recognized over time and the remainder is recognized upfront. Substantially all of our services subscription revenue is recognized over time based on the contract term. (b) Contract Balances Accounts Receivable Accounts receivable, net was $ 4.8 billion as of October 25, 2025 compared to $ 6.7 billion as of July 26, 2025, 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 25, 2025 October 26, 2024 Allowance for credit loss at beginning of period $ 69 $ 87 Provisions ( 4 ) — Write-offs, net of recoveries ( 3 ) ( 9 ) Allowance for credit loss at end of period $ 62 $ 78 Contract Assets and Liabilities Gross contract assets by our internal risk ratings are summarized as follows (in millions): October 25, 2025 July 26, 2025 1 to 4 $ 1,379 $ 1,358 5 to 6 2,001 1,868 7 and Higher 75 73 Total $ 3,455 $ 3,299 Contract assets consist of unbilled receivables and are recorded whe

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) the period of benefit. Capitalized contract acquisition costs were $ 1.5 billion as of each of October 25, 2025

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