Cisco Systems Inc at Goldman Sachs Communacopia & Technology Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Mike King - Goldman Sachs - Analyst : That's very kind of you to say. Maybe you can start with a big picture question. Cisco, obviously, the leading networking technology company in the world with leading market share positions in nearly every market and products that it operates in. Can you just talk about some of the networking trends that are shaping technology demand today and how you think Cisco is positioned to address some of these trends?

Question: Mike King - Goldman Sachs - Analyst : No, that's great to hear. And as you mentioned we went through this period of inventory digestion and you're clearly seeing an inflection lot of your products, customer types and regions. And is it too early to say that, you know, inflected off the bottom and we're back to a more normal level of growth, or are there any nuances that you would call out as it relates to whatever the segment, maybe products, verticals, regions?

Question: Mike King - Goldman Sachs - Analyst : That's great, as we kind of start at the onset. And Cisco has a very strong market position in nearly every product that it participates in. And that's an admirable position to be in. But there's also Challenger companies or competitors that seek to gain some of that share. Maybe you can talk a little bit about Cisco's competitive moat, its differentiation. How is it positioning itself to defend and continue to gain market share in some instances?

Question: Mike King - Goldman Sachs - Analyst : That's great segue into maybe just talk a little bit more about security. And to your point, Scott Cisco's securities business has seen a lot of success in the last couple of quarters, the growth rates have certainly improved. Maybe you can provide a little bit of background of that where we've been and where we are now you started talking a little bit about that asked earlier, but maybe you can just lay the groundwork for why security is doing so well now.

Question: Mike King - Goldman Sachs - Analyst : And that's a good place to start talking about Splunk. Splunk, naturally, I believe, is part of the security and observability segments within Cisco. So could you just recap strategic rationale for Splunk now that we're five to six months in a provide a mark-to-market on where we are today, things that may have and better than expectations, things that may need a little bit of work.

Question: Mike King - Goldman Sachs - Analyst : And I didn't cover Splunk or look at Proofpoint, but the investor feedback that I've got on Gary has only been positive. So maybe you can talk about Gary's expanded role as a head of go-to-market, like what's the secret sauce that Gary is going to bring to the rest of the organization.

Question: Mike King - Goldman Sachs - Analyst : It's got the track record of success to prove it. Maybe one last one on security. To your point, Cisco is pursuing security with more of a platform-based approach it feels like that's a little bit different than what's been in the market in terms of best-of-breed working with like most multiple security point products. And I think that's led to some customer frustration and we are managing so many different vendors and security. So is it your view or moving towards the platform world and Cisco the leading vendor to be able to deliver that?

Question: Mike King - Goldman Sachs - Analyst : One product category. I wanted to touch on also is a wireless plan. Obviously, there's a lot happening in the space from some of the M&A that's in process right now, but also AI and cloud innovation to support wireless land. Could you talk a little bit about Cisco's positioning here? Are you seeing opportunities because of HPE and Juniper?

Question: Mike King - Goldman Sachs - Analyst : I wanted to ask about some of the financial guidance points before talking about AI, but it is encouraging to hear Cisco's fiscal '25 revenue guidance of $55.5 billion to $56.2 billion, which is about 3% to 4% revenue growth. Could you talk about some of the trends that you're seeing in Cisco's business and industry writ large that give you confidence in this fiscal '25 outlook?

Question: Mike King - Goldman Sachs - Analyst : Oh, sorry, offline?

Question: Mike King - Goldman Sachs - Analyst : Yeah. And the trajectory seems interesting where we'll have one more quarter of tough comps because we're going back to where they were a year ago and then we'll see revenue growth accelerate. At Cisco live earlier this year a Cisco outlined fiscal '26 in fiscal '27, revenue growth targets of 46%, and you gave a lot of detail at the segments as well. Could you talk about why 46% was the right growth outlook for those two years?

Question: Mike King - Goldman Sachs - Analyst : And just to follow up on that hyperscale point, maybe you can talk about AI. During last quarter's earnings Cisco talked about achieving $1 billion of orders from web scalers to date, and they and you reiterated the additional $1 billion of AI orders in fiscal '25. And maybe you could just clarify like what are you doing with AI orders? Is it primarily Bakken networking? Is it mostly webscale?

Question: Mike King - Goldman Sachs - Analyst : Yeah, there's a pull on the fact that people make an infrastructure investment. And just on the hyperscaler piece, I mean, Cisco has been very candid that it's a customer segment that they had not done much with no last several years. And this is a notable change trade and then an improving of that customer relationship. And maybe you can speak to a little bit about that and where we are in the hyperscale opportunity.

Question: Mike King - Goldman Sachs - Analyst : And can you talk about AI infrastructure demand among enterprise customers? And Cisco has a partnership with NVIDIA to help service some of these customers. I think there is a little bit of a debate in the market, whether or not that enterprise AI infrastructure demand will materialize and REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 10, 2024 / 3:10PM, CSCO.OQ - Cisco Systems Inc at Goldman Sachs Communacopia & Technology Conference win. And obviously, Cisco is going to be in a very good position to service those customers because of the channel footprint, sales footprint and everything like that.

Question: Mike King - Goldman Sachs - Analyst : And let's talk about capital allocation. Cisco returned, I think over $12 billion of cash to investors last year through repurchases and dividends, more than 100% of free cash flow. And what is Cisco's shareholder capital return and other capital allocation strategies. The company has historically operated at a net cash position, given you've got some net debt because of Splunk. And does that kind of preclude you from doing any additional M&A at this?

Question: Mike King - Goldman Sachs - Analyst : And in the last minute that we have. Maybe you can talk a little bit about your vision for Cisco over the next three years. But could you also just touch on your efficiencies, cost savings, which has been something that you guys have done a good job of?

Question: Mike King - Goldman Sachs - Analyst : Great place to capital off. Scott Herren, everybody.