AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-2: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 6/6 · 18/10/2026
Moat31
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 1/4 · Contractual commitments and critical software updates provide limited protection, but Cisco explicitly discloses low entry barriers and interoperability. Integrated-security differentiation remains a management claim without demonstrated exclusion of rivals.
durability · 1/4 · Some contracted revenue extends beyond three years, but this does not establish durable renewal advantages. Experienced pricing competition and rapid technological change make protection fragile.
customer dependency · 2/4 · Noncancelable subscriptions, critical security updates and payment obligations on early lease termination demonstrate dependency during existing arrangements. Post-contract switching costs and renewal behavior remain unestablished.
erosion resilience · 1/4 · Revenue and RPO growth demonstrate continuing demand, but pricing already reduced product gross margin and supply-chain exposure caused realized damage. Growth alone does not establish resistance to competitive erosion.
Pricing power44
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
realized pricing · 1/4 · Product pricing reduced gross margin by 0.1 percentage point in the third quarter and 0.5 percentage point over nine months of fiscal 2026. This is observed weak pricing, reinforced by experienced price-focused competition; it does not establish uniform price cuts across products.
retention · 2/4 · Growing services RPO and deferred services revenue, critical updates and approximately stable annual services revenue support continuing demand indirectly. These measures include contractual commitments and do not establish renewal rates or retention after price changes.
margin resilience · 2/4 · Services margins improved modestly through efficiencies, while product and total margins declined in the nine-month comparison. Productivity partly offset pricing and mix pressure, but realized supply-chain damage limits resilience; high absolute margins are not treated as moat evidence.
contractual freedom · 2/4 · Noncancelable subscription arrangements and full remaining lease payments on early termination provide enforceable terms. Contractual penalties and customer incentive programs create offsets. The evidence supports mixed contractual protection, without establishing unilateral repricing rights.
Predictability89
Five consecutive annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 75.00
- Revenue growth volatility (pp)
- 6.86
- Positive FCF years (%)
- 100.00
- FCF margin volatility (pp)
- 5.08
Financial strength63
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, or reported pretax profit plus reported interest expense when operating income is unavailable. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 81.24
- netDebtEbitGrade
- 70.96
- interestCoverageGrade
- 85.95
- currentRatioGrade
- 14.49
- Debt / FCF (x)
- 2.31
- Net debt / operating income (x)
- 1.45
- Interest coverage (x)
- 10.45
- Current ratio (x)
- 0.93
Capital allocation90
Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income or, if unavailable, EBIT calculated from reported pretax profit plus reported interest expense; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. Nonpositive invested capital has no defined return and remains unavailable. Does not establish acquisition quality or buyback timing.
- 3-year pre-tax operating return (%)
- 20.43
- 3-year average dilution (%)
- -1.15
- 3-year average SBC / revenue (%)
- 6.06
- cashConversionGrade
- 100.00
Management56
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · Fiscal 2026 operating cash flow of $14.177 billion exceeded $12.659 billion of dividends and program repurchases, and inventory-related provisions declined. However, debt increased and inventory purchase commitments rose from $7.599 billion to $17.165 billion, with realized margin damage. Returns on those commitments and repurchase value creation remain unproven.
incentive alignment · 2/4 · Approved fiscal 2025 awards combined performance-based equity with a three-year operating-income goal and relative TSR adjustment. Alignment is tempered by a disclosed prior performance-calculation modification that increased the multiplier and a fiscal 2025 annual operating-income target only 0.4% above prior actual performance. Ownership balances and completed outcomes for the three-year awards are absent.
execution · 2/4 · Revenue and RPO grew, the operating-expense ratio improved and the fiscal 2025 restructuring was substantially completed. Execution remains mixed because services revenue was approximately flat, the fiscal 2025 product ARR incentive result slightly missed target, and supply-chain commitments caused margin damage. This assessment uses operating outcomes indirectly rather than management's descriptions of successful execution.
governance · 3/4 · Disclosed independent Audit Committee membership, financial expertise, oversight responsibilities and independent-director executive sessions demonstrate substantial governance practices. The combined Chair and CEO role and lack of evidence of exceptional long-term oversight outcomes prevent an exceptional grade. Committee details principally describe fiscal 2025.
Evidence
Notes to Consolidated Financial Statements (Continued) Property and Equipment, Net July 25, 2026 July 26, 2025 Gross property and equipment: Land, buildings, and building and leasehold improvements $ 4,093 $ 4,045 Production, engineering, computer and other equipment and related software 5,441 5,178 Operating lease assets 51 51 Furniture, fixtures and other 287 316 Total gross property and equipment 9,872 9,590 Less: accumulated depreciation and amortization (7,112) (7,477) Total $ 2,760 $ 2,113 Remaining Performance Obligations (RPO) July 25, 2026 July 26, 2025 Product $ 23,436 $ 21,572 Services 23,298 21,961 Total $ 46,734 $ 43,533 Short-term RPO $ 22,776 $ 21,723 Long-term RPO 23,958 21,810 Total $ 46,734 $ 43,533 Deferred revenue $ 29,781 $ 28,779 Unbilled contract revenue 16,953 14,754 Total $ 46,734 $ 43,533 RPO is comprised of deferred revenue plus unbilled contract revenue.
Note 7: Remaining Performance Obligations · Filed 02/09/2026
Unbilled contract revenue represents noncancelable contracts, primarily subscription arrangements, for which we have not invoiced, have an obligation to perform, and revenue has not yet been recognized in the financial statements.
Note 7: noncancelable unbilled contract revenue · Filed 02/09/2026
As of July 25, 2026, we expect to recognize approximately 49% of total remaining performance obligations as revenue over the next 12 months, approximately 39% between one year and three years, and approximately 12% thereafter.
Note 7: expected RPO recognition timing · Filed 02/09/2026
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.
Revenue accounting: critical security-software updates · Filed 19/05/2026
If a customer chooses to terminate their lease prior to the original end of lease term, the customer is required to pay all remaining lease payments in full.
Lease accounting: early termination payments · Filed 02/09/2026
Deferred Revenue July 25, 2026 July 26, 2025 Product $ 13,817 $ 13,490 Services 15,964 15,289 Total $ 29,781 $ 28,779 Reported as: Current $ 16,988 $ 16,416 Noncurrent 12,793 12,363 Total $ 29,781 $ 28,779 74 Table of Contents CISCO SYSTEMS, INC.
Note 7: Deferred Revenue · Filed 02/09/2026
The inherent nature of networking requires interoperability.
Business: competition and interoperability · Filed 02/09/2026
Barriers to entry are relatively low, and new ventures to create products that do or could compete with our products are regularly formed.
Risk factors: relatively low entry barriers · Filed 02/09/2026
In particular, we have experienced price-focused competition from competitors in Asia, especially from China, and we anticipate this will continue.
Risk factors: experienced price-focused competition · Filed 02/09/2026
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Product Gross Margin The following table summarizes the key factors that contributed to the change in product gross margin percentage for the third quarter and first nine months of fiscal 2026, as compared with the corresponding prior year periods: Product Gross Margin Percentage Three Months Ended Nine Months Ended Fiscal 2025 64.4 % 64.4 % Productivity (1) 1.2 % 1.7 % Product pricing (0.1) % (0.5) % Mix of products sold (4.4) % (3.3) % Amortization of purchased intangible assets 0.7 % 1.0 % Others 0.1 % 0.1 % Fiscal 2026 61.9 % 63.4 % (1) Productivity includes overall manufacturing-related costs, such as component costs (including memory), 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.
MD&A: product gross-margin change attribution · Filed 19/05/2026
Our differentiated security strategy is based on three pillars: moving from point solutions to a platform comprehensively integrated with the infrastructure; infusing security into the fabric of the network; and harnessing the depth and breadth of telemetry data to prevent, detect, and respond to sophisticated attacks at machine speed.
Business strategy: integrated security and telemetry · Filed 02/09/2026
The following table presents revenue for groups of similar products and services (in millions): Years Ended July 25, 2026 July 26, 2025 July 27, 2024 Revenue: Networking $ 34,668 $ 28,304 $ 29,229 Security 8,232 8,094 5,075 Collaboration 4,300 4,154 4,113 Observability 1,095 1,055 837 Total Product 48,295 41,608 39,253 Services 15,030 15,046 14,550 Total $ 63,325 $ 56,654 $ 53,803 Amounts may not sum due to rounding.
Note 18: revenue by product and services group · Filed 02/09/2026
These past efforts and additional purchase commitments and prepayments significantly increased our supply chain exposure, which resulted in negative impacts to our product gross margin in recent periods and may result in further negative impacts in future periods.
Risk factors: realized supply-chain gross-margin impacts · Filed 02/09/2026
Our sales of AI infrastructure solutions to cloud and hyperscaler customers may similarly involve large and concentrated purchases, and demand may depend on a limited number of customers' capital spending levels, the timing and scale of AI infrastructure deployments, technology and network architecture decisions, and decisions regarding whether to purchase solutions from us or other vendors or develop certain technologies internally.
Risk factors: hyperscaler concentration and internal technology development · Filed 02/09/2026
The industry in which we compete is subject to rapid technological developments, evolving standards, changes in customer requirements, and new product introductions and enhancements.
Risk factors: technological developments and evolving standards · Filed 02/09/2026
Gross Margin The following table presents the gross margin for products and services (in millions, except percentages): Three Months Ended Nine Months Ended AMOUNT PERCENTAGE AMOUNT PERCENTAGE April 25, 2026 April 26, 2025 April 25, 2026 April 26, 2025 April 25, 2026 April 26, 2025 April 25, 2026 April 26, 2025 Gross margin: Product $ 7,504 $ 6,686 61.9 % 64.4 % $ 22,084 $ 19,795 63.4 % 64.4 % Services 2,576 2,592 69.2 % 68.7 % 7,713 7,715 68.6 % 68.5 % Total $ 10,080 $ 9,278 63.6 % 65.6 % $ 29,797 $ 27,510 64.7 % 65.5 % 45 Table of Contents CISCO SYSTEMS, INC.
MD&A: product and services gross margins · Filed 19/05/2026
Our services gross margin percentage increased by 0.3 percentage points primarily due to cost efficiencies.
MD&A: services gross-margin improvement · Filed 02/09/2026
Variable consideration includes potential contractual penalties and various rebate, cooperative marketing and other incentive programs that we offer to our distributors, channel partners and direct sale customers.
Revenue accounting: contractual penalties, rebates and incentives · Filed 19/05/2026
Business.” Other Key Financial Measures The following is a summary of our other key financial measures for fiscal 2026 compared with fiscal 2025 (in millions): Fiscal 2026 Fiscal 2025 Cash and cash equivalents and investments $15,918 $16,110 Cash provided by operating activities $14,177 $14,193 Remaining performance obligations $46,734 $43,533 Repurchases of common stock—stock repurchase program $6,106 $5,995 Dividends paid $6,553 $6,437 Inventories $5,694 $3,164 Total debt $29,533 $28,093 32 Table of Contents CISCO SYSTEMS, INC.
MD&A: cash generation, distributions, inventory and debt · Filed 02/09/2026
Inventory Supply Chain The following table summarizes our inventories and balances with contract manufacturers and suppliers (in millions): July 25, 2026 July 26, 2025 Increase (Decrease) Inventories $ 5,694 $ 3,164 $ 2,530 Inventory purchase commitments $ 17,165 $ 7,599 $ 9,566 Inventory deposits and prepayments $ 1,104 $ 825 $ 279 Inventory deposits and prepayments represent amounts paid to suppliers in advance of delivery, principally under arrangements to secure supply and pricing for memory and certain components.
Liquidity and Capital Resources: inventory supply-chain commitments · Filed 02/09/2026
Our total provisions for inventory and the liability related to purchase commitments with contract manufacturers and suppliers were $387 million, $493 million, and $819 million in fiscal 2026, 2025, and 2024, respectively.
MD&A: inventory and purchase-commitment provisions · Filed 02/09/2026
Fiscal 2025 Awards In September 2024, the Compensation Committee approved fiscal 2025 equity awards for the CEO to be comprised of approximately 60% PRSUs and 40% time-based RSUs (based on grant date target value) and for each of the other named executive officers to be comprised of approximately 50% PRSUs and 50% time-based RSUs (based on grant date target value) as set forth in the table below.
Executive Compensation: approved fiscal 2025 equity awards · Filed 28/10/2025
The fiscal 2025 PRSUs were granted using a three-year performance period with a multi-year performance metric covering the performance period from the beginning of fiscal 2025 through the end of fiscal 2027, subject to adjustment higher or lower by up to 20% based on the achievement of a relative TSR performance goal.
Executive Compensation: fiscal 2025 PRSU performance period and TSR modifier · Filed 28/10/2025
(4)During fiscal 2024, the Compensation Committee modified the adjustments used to determine operating cash flow and diluted EPS under the PRSUs to exclude impacts from the acquisition of Splunk, which was completed earlier than initially anticipated, resulting in a Financial Goal Multiplier of 90%, an increase from a Financial Goal Multiplier of 81% without the modification.
Executive Compensation: fiscal 2024 performance-calculation modification · Filed 28/10/2025
The fiscal 2025 operating income target exceeded actual fiscal 2024 performance by 0.4%.
Executive Compensation: operating-income target versus prior-year performance · Filed 28/10/2025
Harris II Sarah Rae Murphy Responsibilities and Duties Include: lDirectly responsible for the appointment, determination of the compensation for, retention, and oversight of the performance of the independent registered public accounting firm lReviews the financial information which will be provided to stockholders and others, including the quarterly and year-end financial results lReviews the system of internal controls which management and the Board have established lReviews the financial and risk management policies (including cybersecurity and data protection, insurance, currency, interest rate and equity risk management policies and programs) lReviews policies and programs for addressing cybersecurity and data protection lOversees accounting and financial reporting processes and the audits of Cisco's financial statements lPre-approves audit and permissible non-audit services provided by the independent registered public accounting firm lReviews the hiring policies for any employees or former employees of the independent registered public accounting firm lOversees and reviews related party transactions lEstablishes procedures for the receipt, retention, and treatment of complaints received by Cisco regarding accounting, internal accounting controls, or auditing matters, and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters lReviews annually the responsibilities and activities for the prior and upcoming fiscal year of each of our internal audit and compliance functions, including the internal audit charter, risk-based internal audit plan, and the audit functions’ budget and staffing lReviews activities related to coordinating, developing, and maintaining our enterprise risk management program lMeets separately in periodic executive sessions with each of management, the head of our internal audit function, and the independent registered public accounting firm lReviews and approves the global investment policy lReviews Cisco's capital structure and capital allocation strategy, including dividends and the stock repurchase program lReports to the Board on a regular basis on the major events covered by the Audit Committee and makes recommendations to the Board and management concerning these matters Composition of the Committee lEach member of this committee has been determined by the Board to be an "audit committee financial expert" as defined in Item 407(d) of Regulation S-K under the Securities Exchange Act of 1934, as amended (the "Exchange Act") lEach member of this committee is an independent director and meets each of the other requirements for audit committee members under applicable Nasdaq listing standards The members of the Audit Committee during fiscal 2025 were: Mark Garrett (Chair), John D.
Governance: Audit Committee responsibilities and independence · Filed 28/10/2025
The Lead Independent Director chairs regularly scheduled executive sessions of the independent directors, without Cisco management present, during which Cisco’s business strategy is reviewed and other topics are discussed.
Governance: independent-director executive sessions · Filed 28/10/2025
Robbins Chair and CEO 59 2015 1 Daniel H.
Board nominees: combined Chair and CEO roles · Filed 28/10/2025
We incurred cumulative charges of $926 million and substantially completed this plan in fiscal 2026.
MD&A: substantial completion and cost of fiscal 2025 restructuring · Filed 02/09/2026
As a percentage of revenue, research and development, sales and marketing, and general and administrative expenses, collectively, decreased by 5.1 percentage points driven by the revenue growth and disciplined expense management.
MD&A: operating-expense ratio improvement · Filed 02/09/2026
Fiscal 2025 Goals Fiscal 2025 Result Threshold Target Maximum Product ARR $15.4 billion $17.1 billion $19.7 billion $17.037 billion (90% of target) (115% of target) (99.6% of target) The Company’s performance relative to the above goals resulted in a Transformational Financial Goal Multiplier for fiscal 2025 of 98%, reflecting achievement below target levels.
Executive Compensation: fiscal 2025 product ARR outcome · Filed 28/10/2025
Notes to Consolidated Financial Statements (Continued) The following summarizes our revenue and gross margin by segment and the significant expenses by each segment for fiscal 2026, 2025, and 2024 (in millions): Years Ended July 25, 2026 July 26, 2025 July 27, 2024 Revenue: Americas $ 37,799 $ 33,656 $ 31,971 EMEA 16,613 14,824 14,117 APJC 8,914 8,174 7,716 Total $ 63,325 $ 56,654 $ 53,803 Gross margin: Americas $ 24,625 $ 22,962 $ 21,372 EMEA 11,835 10,545 9,755 APJC 5,933 5,431 5,187 Segment total 42,392 38,938 36,312 Unallocated corporate items (1,532) (2,148) (1,484) Total $ 40,860 $ 36,790 $ 34,828 Supplemental information about our significant expenses: Americas: Cost of sales — product $ 10,712 $ 8,206 $ 8,077 Cost of sales — services 2,463 2,487 2,523 Segment total $ 13,174 $ 10,694 $ 10,600 EMEA: Cost of sales — product $ 3,621 $ 3,138 $ 3,264 Cost of sales — services 1,158 1,140 1,098 Segment total $ 4,778 $ 4,279 $ 4,362 APJC: Cost of sales — product $ 2,270 $ 2,010 $ 1,838 Cost of sales — services 711 734 690 Segment total $ 2,982 $ 2,743 $ 2,529 Amounts may not sum due to rounding.
Note 18: annual revenue and gross margin · Filed 02/09/2026
