PR Newswire | May 19, 2021 04:06PM EDT

05/19 15:05 CDT

Cisco Reports Third Quarter Earnings SAN JOSE, Calif., May 19, 2021

SAN JOSE, Calif., May 19, 2021 /PRNewswire/ --

News Summary:

* Overall performance: $12.8 billion in revenue, up 7% year over year with broad-based strength across the business; GAAP EPS $0.68 and Non-GAAP EPS $0.83, each up 5% year over year * 10% year-over-year total product order growth representing the strongest demand in nearly a decade * Continued momentum in transforming business to software and subscriptions: 81% of software revenue sold as a subscription, up from 76% last quarter

Q3 Results:

* Revenue: $12.8 billion * Increase of 7% year over year

* Earnings per Share: GAAP: $0.68; Non-GAAP: $0.83 * GAAP EPS increased 5% year over year * Non-GAAP EPS increased 5% year over year

Q4 Guidance:

* Revenue: 6% to 8% growth year over year * Earnings per Share: GAAP: $0.64 to $0.69; Non-GAAP: $0.81 to $0.83

Cisco today reported third quarter results for the period ended May 1, 2021. Cisco reported third quarter revenue of $12.8 billion, net income on a generally accepted accounting principles (GAAP) basis of $2.9 billion or $0.68 per share, and non-GAAP net income of $3.5 billion or $0.83 per share.

"Cisco had a great quarter with strong demand across the business," said Chuck Robbins, chairman and CEO of Cisco. "We are confident in our strategy and our ability to lead the next phase of the recovery as our customers accelerate their adoption of hybrid work, digital transformation, cloud, and continued strong uptake of our subscription-based offerings."

"We executed well with strong product orders, and solid growth in revenue, net income, and EPS," said Scott Herren, CFO of Cisco. "Our investments in innovation and accelerated shift to more software offerings and subscriptions led to double-digit growth in deferred revenue, remaining performance obligations and higher levels of recurring revenue."

GAAP Results



Q3 FY 2021 Q3 FY 2020 Vs. Q3 FY 2020

Revenue $12.8 billion $12.0 billion 7%

Net Income $2.9 billion $2.8 billion 3%

Diluted Earnings per Share$0.68 $0.65 5% (EPS)





Non-GAAP Results



Q3 FY 2021 Q3 FY 2020 Vs. Q3 FY 2020

Net Income $3.5 billion$3.4 billion4%

EPS $0.83 $0.79 5%

The third quarter of fiscal 2021 had 14 weeks compared with 13 weeks in the third quarter of fiscal 2020.

Reconciliations between net income, EPS, and other measures on a GAAP and non-GAAP basis are provided in the tables located in the section entitled "Reconciliations of GAAP to non-GAAP Measures."

Financial Summary

All comparative percentages are on a year-over-year basis unless otherwise noted.

Q3 FY 2021 Highlights

Revenue --Total revenue was up 7% at $12.8 billion, with product revenue up 6% and service revenue up 8%. Revenue by geographic segment was: Americas up 2%, EMEA up 11%, and APJC up 19%. Product revenue performance was broad-based with growth in Security, up 13%, Infrastructure Platforms up 6%, and Applications up 5%.

Gross Margin -- On a GAAP basis, total gross margin, product gross margin, and service gross margin were 63.9%, 62.6%, and 67.4%, respectively, as compared with 64.9%, 63.7%, and 67.7%, respectively, in the third quarter of fiscal 2020.

On a non-GAAP basis, total gross margin, product gross margin, and service gross margin were 66.0%, 64.9%, and 68.7%, respectively, as compared with 66.6%, 65.8%, and 68.9%, respectively, in the third quarter of fiscal 2020.

Total gross margins by geographic segment were: 66.5% for the Americas, 65.6% for EMEA and 64.7% for APJC.

Operating Expenses -- On a GAAP basis, operating expenses were $4.7 billion, up 8%, and were 36.9% of revenue. Non-GAAP operating expenses were $4.1 billion, up 9%, and were 32.4% of revenue.

Operating Income -- GAAP operating income was $3.5 billion, up 1%, with GAAP operating margin of 27.1%. Non-GAAP operating income was $4.3 billion, up 3%, with non-GAAP operating margin at 33.6%.

Provision for Income Taxes -- The GAAP tax provision rate was 20.3%. The non-GAAP tax provision rate was 19.0%.

Net Income and EPS -- On a GAAP basis, net income was $2.9 billion, an increase of 3%, and EPS was $0.68, an increase of 5%. On a non-GAAP basis, net income was $3.5 billion, an increase of 4%, and EPS was $0.83, an increase of 5%.

Cash Flow from Operating Activities --$3.9 billion for the third quarter of fiscal 2021, a decrease of 8% compared with $4.2 billion for the third quarter of fiscal 2020.

Balance Sheet and Other Financial Highlights

Cash and Cash Equivalents and Investments --$23.6 billion at the end of the third quarter of fiscal 2021, compared with $29.4 billion at the end of fiscal 2020.

Deferred Revenue --$20.9 billion, up 12% in total, with deferred product revenue up 20%. Deferred service revenue was up 7%.

Remaining Performance Obligations--$28.1 billion at the end of the third quarter of fiscal 2021, up 10%.

Capital Allocation --In the third quarter of fiscal 2021, we returned $2.1 billion to stockholders through share buybacks and dividends. We declared and paid a cash dividend of $0.37 per common share, or $1.6 billion, and repurchased approximately 10 million shares of common stock under our stock repurchase program at an average price of $48.71 per share for an aggregate purchase price of $510 million. The remaining authorized amount for stock repurchases under the program is $8.7 billion with no termination date.

Acquisitions

In the third quarter of fiscal 2021, we closed the following acquisitions:

* Acacia Communications, Inc., a public fabless semiconductor company that develops, manufactures and sells high-speed coherent optical interconnect products that are designed to transform communications networks through improvements in performance, capacity and cost. * IMImobile PLC, a United Kingdom-based publicly-traded cloud communications software and services company. * Dashbase, Inc., an enterprise software company.

In the fourth quarter of fiscal 2021, we closed the acquisition of Slido s.r.o, a privately held company that provides an audience interaction platform.

Guidance for Q4 FY 2021

Cisco expects to achieve the following results for the fourth quarter of fiscal 2021:

Q4 FY 2021

Revenue 6% - 8% growth Y/Y

Non-GAAP gross margin rate 64% - 65%

Non-GAAP operating margin rate32% - 33%

Non-GAAP tax provision rate 19%

Non-GAAP EPS $0.81 - $0.83

Cisco estimates that GAAP EPS will be $0.64 to $0.69 in the fourth quarter of fiscal 2021.

A reconciliation between the Guidance for Q4 FY 2021 on a GAAP and non-GAAP basis is provided in the table entitled "GAAP to non-GAAP Guidance for Q4 FY 2021" located in the section entitled "Reconciliations of GAAP to non-GAAP Measures."

Editor's Notes:

* Q3 fiscal year 2021 conference call to discuss Cisco's results along with its guidance will be held on Wednesday, May 19, 2021 at 1:30 p.m. Pacific Time. Conference call number is 1-888-848-6507 (United States) or 1-212-519-0847 (international). * Conference call replay will be available from 4:00 p.m. Pacific Time, May 19, 2021 to 4:00 p.m. Pacific Time, May 26, 2021 at 1-866-461-2738 (United States) or 1-203-369-1354 (international). The replay will also be available via webcast on the Cisco Investor Relations website at https://investor.cisco.com. * Additional information regarding Cisco's financials, as well as a webcast of the conference call with visuals designed to guide participants through the call, will be available at 1:30 p.m. Pacific Time, May 19, 2021. Text of the conference call's prepared remarks will be available within 24 hours of completion of the call. The webcast will include both the prepared remarks and the question-and-answer session. This information, along with the GAAP to non-GAAP reconciliation information, will be available on the Cisco Investor Relations website at https://investor.cisco.com.

CISCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per-share amounts)

(Unaudited)



Three Months Ended Nine Months Ended

April 25, April 25, May 1, 2021 May 1, 2021 2020 2020

REVENUE:

Product $ 9,139 $8,597 $ 26,298 $27,146

Service 3,664 3,386 10,394 10,001

Total revenue 12,803 11,983 36,692 37,147

COST OF SALES:

Product 3,422 3,120 9,672 9,770

Service 1,196 1,092 3,470 3,378

Total cost of sales 4,618 4,212 13,142 13,148

GROSS MARGIN 8,185 7,771 23,550 23,999

OPERATING EXPENSES:

Research and development 1,697 1,546 4,836 4,782

Sales and marketing 2,317 2,192 6,811 6,951

General and administrative 603 457 1,631 1,431

Amortization of purchased 61 34 136 108 intangible assets

Restructuring and other 42 128 878 354 charges

Total operating expenses 4,720 4,357 14,292 13,626

OPERATING INCOME 3,465 3,414 9,258 10,373

Interest income 153 218 488 733

Interest expense (111) (130) (336) (466)

Other income (loss), net 84 (58) 117 24

Interest and other income 126 30 269 291 (loss), net

INCOME BEFORE PROVISION FOR 3,591 3,444 9,527 10,664 INCOME TAXES

Provision for income taxes 728 670 1,945 2,086

NET INCOME $ 2,863 $2,774 $ 7,582 $8,578



Net income per share:

Basic $ 0.68 $0.66 $ 1.79 $2.02

Diluted $ 0.68 $0.65 $ 1.79 $2.01

Shares used in per-share calculation:

Basic 4,219 4,230 4,224 4,239

Diluted 4,238 4,243 4,237 4,258

CISCO SYSTEMS, INC.

REVENUE BY SEGMENT

(In millions, except percentages)



May 1, 2021

Three Months EndedNine Months Ended

Amount Y/Y %Amount Y/Y %

Revenue:

Americas$7,262 2% $21,430 (3)%

EMEA 3,483 11% 9,654 1%

APJC 2,057 19% 5,608 2%

Total $12,803 7% $36,692 (1)%

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

CISCO SYSTEMS, INC.

GROSS MARGIN PERCENTAGE BY SEGMENT

(In percentages)



May 1, 2021

Three Months EndedNine Months Ended

Gross Margin Percentage:

Americas 66.5% 67.1%

EMEA 65.6% 65.5%

APJC 64.7% 64.2%

CISCO SYSTEMS, INC.

REVENUE FOR GROUPS OF SIMILAR PRODUCTS AND SERVICES

(In millions, except percentages)



May 1, 2021

Three Months EndedNine Months Ended

Amount Y/Y % Amount Y/Y %

Revenue:

Infrastructure Platforms$6,832 6% $19,564 (5)%

Applications 1,426 5% 4,160 (1)%

Security 876 13% 2,559 9%

Other Products 6 (34)% 15 (44)%

Total Product 9,139 6% 26,298 (3)%

Services 3,664 8% 10,394 4%

Total $12,803 7% $36,692 (1)%

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

CISCO SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)



May 1, 2021July 25, 2020

ASSETS

Current assets:

Cash and cash equivalents $7,350 $11,809

Investments 16,229 17,610

Accounts receivable, net of allowance for doubtful accounts of $110 at May 1, 2021 and $143 at 4,425 5,472 July 25, 2020

Inventories 1,579 1,282

Financing receivables, net 4,648 5,051

Other current assets 2,829 2,349

Total current assets 37,060 43,573

Property and equipment, net 2,367 2,453

Financing receivables, net 5,068 5,714

Goodwill 37,690 33,806

Purchased intangible assets, net 3,716 1,576

Deferred tax assets 4,070 3,990

Other assets 3,925 3,741

TOTAL ASSETS $93,896 $94,853

LIABILITIES AND EQUITY

Current liabilities:

Short-term debt $2,000 $3,005

Accounts payable 2,440 2,218

Income taxes payable 753 839

Accrued compensation 3,327 3,122

Deferred revenue 11,492 11,406

Other current liabilities 4,250 4,741

Total current liabilities 24,262 25,331

Long-term debt 9,532 11,578

Income taxes payable 8,247 8,837

Deferred revenue 9,397 9,040

Other long-term liabilities 2,253 2,147

Total liabilities 53,691 56,933

Total equity 40,205 37,920

TOTAL LIABILITIES AND EQUITY $93,896 $94,853

CISCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)



Nine Months Ended

May 1, April 25, 2021 2020

Cash flows from operating activities:

Net income $7,582$8,578

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation, amortization, and other 1,373 1,364

Share-based compensation expense 1,337 1,170

Provision (benefit) for receivables (4) 60

Deferred income taxes (89) 103

(Gains) losses on divestitures, investments and other, (201) (185) net

Change in operating assets and liabilities, net of effects of acquisitions and divestitures:

Accounts receivable 1,250 774

Inventories (260) 143

Financing receivables 1,160 380

Other assets (233) 145

Accounts payable 24 324

Income taxes, net (828) (700)

Accrued compensation 145 (220)

Deferred revenue 263 333

Other liabilities (569) (645)

Net cash provided by operating activities 10,950 11,624

Cash flows from investing activities:

Purchases of investments (7,855)(6,880)

Proceeds from sales of investments 2,724 4,737

Proceeds from maturities of investments 6,445 5,708

Acquisitions, net of cash and cash equivalents acquired (6,333)(237) and divestitures

Purchases of investments in privately held companies (138) (143)

Return of investments in privately held companies 96 213

Acquisition of property and equipment (530) (562)

Proceeds from sales of property and equipment 14 175

Other (56) (10)

Net cash (used in) provided by investing activities (5,633)3,001

Cash flows from financing activities:

Issuances of common stock 307 335

Repurchases of common stock - repurchase program (2,096)(2,659)

Shares repurchased for tax withholdings on vesting of (419) (519) restricted stock units

Short-term borrowings, original maturities of 90 days or - (3,470) less, net

Repayments of debt (3,000)(5,220)

Dividends paid (4,601)(4,491)

Other 39 (3)

Net cash used in financing activities (9,770)(16,027)

Net decrease in cash, cash equivalents, and restricted (4,453)(1,402) cash

Cash, cash equivalents, and restricted cash, beginning of11,812 11,772 period

Cash, cash equivalents, and restricted cash, end of $7,359$10,370period

Supplemental cash flow information:

Cash paid for interest $377 $519

Cash paid for income taxes, net $2,862$2,683

CISCO SYSTEMS, INC.

DEFERRED REVENUE

(In millions)



May 1, January 23,April 25, 2021 2021 2020

Deferred revenue:

Product $8,698 $ 8,332 $7,225

Service 12,191 12,514 11,423

Total$20,889$ 20,846 $18,648



Reported as:

Current $11,492$ 11,552 $10,710

Noncurrent 9,397 9,294 7,938

Total$20,889$ 20,846 $18,648

CISCO SYSTEMS, INC.

REMAINING PERFORMANCE OBLIGATIONS

(In millions, except percentages)



May 1, 2021 January 23, 2021April 25, 2020

Amount Y/Y%Amount Y/Y%Amount Y/Y%

Product$11,90315%$ 11,66617%$10,38725%

Service16,235 7 %16,512 10%15,141 3 %

Total $28,13810%$ 28,17813%$25,52811%

CISCO SYSTEMS, INC.

DIVIDENDS PAID AND REPURCHASES OF COMMON STOCK

(In millions, except per-share amounts)



DIVIDENDS STOCK REPURCHASE PROGRAM TOTAL

Weighted- Quarter Ended Per ShareAmount SharesAverage PriceAmountAmount per Share

Fiscal 2021

May 1, 2021 $ 0.37 $1,56010 $48.71 $510$2,070

January 23, $ 0.36 $1,52119 $42.82 $801$2,3222021

October 24, $ 0.36 $1,52020 $40.44 $800$2,3202020

Fiscal 2020

July 25, 2020 $ 0.36 $1,525- $- $- $1,525

April 25, 2020 $ 0.36 $1,51925 $39.71 $981$2,500

January 25, $ 0.35 $1,48618 $46.71 $870$2,3562020

October 26, $ 0.35 $1,48616 $48.91 $768$2,2542019

CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES



GAAP TO NON-GAAP NET INCOME

(In millions)



Three Months Ended Nine Months Ended

May 1, April 25,May 1, April 25, 2021 2020 2021 2020

GAAP net income $2,863$ 2,774$7,582 $8,578

Adjustments to cost of sales:

Share-based compensation expense 75 60 208 176

Amortization of acquisition-related 184 154 499 454 intangible assets

Acquisition-related/divestiture costs1 1 3 3

Legal and indemnification settlements- - 43 4 /charges

Total adjustments to GAAP cost of 260 215 753 637 sales

Adjustments to operating expenses:

Share-based compensation expense 383 322 1,103 975

Amortization of acquisition-related 61 34 136 108 intangible assets

Acquisition-related/divestiture costs86 66 179 191

Significant asset impairments and 42 128 878 354 restructurings

Total adjustments to GAAP operating 572 550 2,296 1,628 expenses

Adjustments to interest and other income (loss), net:

Acquisition-related/divestiture costs6 - 4 -

(Gains) and losses on equity (96) 1 (131) (99) investments

Total adjustments to GAAP interest (90) 1 (127) (99) and other income (loss), net

Total adjustments to GAAP income 742 766 2,922 2,166 before provision for income taxes

Income tax effect of non-GAAP (95) (172) (503) (547) adjustments

Significant tax matters - - 83 67

Total adjustments to GAAP provision (95) (172) (420) (480) for income taxes

Non-GAAP net income $3,510$ 3,368$10,084$10,264

CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES



GAAP TO NON-GAAP EPS



Three Months EndedNine Months Ended

May 1, April 25,May 1, April 25, 2021 2020 2021 2020

GAAP EPS $0.68$ 0.65 $1.79$ 2.01

Adjustments to GAAP:

Share-based compensation expense 0.11 0.09 0.31 0.27

Amortization of acquisition-related 0.06 0.04 0.15 0.13 intangible assets

Acquisition-related/divestiture costs 0.02 0.02 0.04 0.05

Legal and indemnification settlements/- - 0.01 - charges

Significant asset impairments and 0.01 0.03 0.21 0.08 restructurings

(Gains) and losses on equity (0.02)- (0.03)(0.02) investments

Income tax effect of non-GAAP (0.02)(0.04) (0.12)(0.13) adjustments

Significant tax matters - - 0.02 0.02

Non-GAAP EPS $0.83$ 0.79 $2.38$ 2.41

Amounts may not sum due to rounding.

CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES



GROSS MARGINS, OPERATING EXPENSES, OPERATING MARGINS, INTEREST AND OTHER INCOME (LOSS), NET, AND NET INCOME

(In millions, except percentages)



Three Months Ended

May 1, 2021

Interest Product Service Total and other Operating Operating Net Gross Gross Gross Y/Y Y/Yincome Y/Y Expenses Income Income Margin Margin Margin (loss), net

GAAP amount $5,717 $2,468 $8,185 $4,720 8% $3,465 1% $126 $2,863 3%

% of revenue 62.6 %67.4 %63.9 %36.9 % 27.1 % 1.0 %22.4 %

Adjustments to GAAP amounts:

Share-based compensation 26 49 75 383 458 - 458 expense

Amortization of acquisition-related184 - 184 61 245 - 245 intangible assets

Acquisition/ divestiture-related1 - 1 86 87 6 93 costs

Significant asset impairments and - - - 42 42 - 42 restructurings

(Gains) and losses on equity - - - - - (96) (96) investments

Income tax effect/ significant tax - - - - - - (95) matters

Non-GAAP amount $5,928 $2,517 $8,445 $4,148 9% $4,297 3% $36 $3,510 4%

% of revenue 64.9 %68.7 %66.0 %32.4 % 33.6 % 0.3 %27.4 %





Three Months Ended

April 25, 2020

Interest and Product Service Total GrossOperatingOperatingother Net Gross Gross Margin Expenses Income income Income Margin Margin (loss), net

GAAP amount $5,477 $2,294 $7,771 $4,357 $3,414 $ 30 $2,774

% of revenue 63.7 %67.7 %64.9 %36.4 %28.5 %0.3 % 23.1 %

Adjustments to GAAP amounts:

Share-based compensation 23 37 60 322 382 - 382 expense

Amortization of acquisition-related154 - 154 34 188 - 188 intangible assets

Acquisition/ divestiture-related- 1 1 66 67 - 67 costs

Significant asset impairments and - - - 128 128 - 128 restructurings

(Gains) and losses on equity - - - - - 1 1 investments

Income tax effect/ significant tax - - - - - - (172) matters

Non-GAAP amount $5,654 $2,332 $7,986 $3,807 $4,179 $ 31 $3,368

% of revenue 65.8 %68.9 %66.6 %31.8 %34.9 %0.3 % 28.1 %

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

CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES



GROSS MARGINS, OPERATING EXPENSES, OPERATING MARGINS, INTEREST AND OTHER INCOME (LOSS), NET, AND NET INCOME

(In millions, except percentages)



Nine Months Ended

May 1, 2021

Interest and Product Service Total Operating Operating other Net Gross Gross Gross Y/Y Y/Y Y/Y Expenses Income income Income Margin Margin Margin (loss), net

GAAP amount $16,626 $6,924 $23,550 $14,292 5% $9,258 (11)%$269 $7,582 (12)%

% of revenue 63.2 %66.6 %64.2 %39.0 % 25.2 % 0.7 % 20.7 %

Adjustments to GAAP amounts:

Share-based 75 133 208 1,103 1,311 - 1,311 compensation expense

Amortization of acquisition-related 499 - 499 136 635 - 635 intangible assets

Acquisition/ divestiture-related 2 1 3 179 182 4 186 costs

Legal and indemnification 43 - 43 - 43 - 43 settlements/charges

Significant asset impairments and - - - 878 878 - 878 restructurings

(Gains) and losses on - - - - - (131) (131) equity investments

Income tax effect/ - - - - - - (420) significant tax matters

Non-GAAP amount $17,245 $7,058 $24,303 $11,996 -% $12,307 (3)% $142 $10,084 (2)%

% of revenue 65.6 %67.9 %66.2 %32.7 % 33.5 % 0.4 % 27.5 %





Nine Months Ended

April 25, 2020

Interest and Product Service other Total Gross Operating Operating Net Gross Gross income Margin Expenses Income Income Margin Margin (loss), net

GAAP amount $17,376 $6,623 $ 23,999 $13,626 $10,373 $ 291 $8,578

% of revenue 64.0 %66.2 %64.6 % 36.7 %27.9 %0.8 % 23.1 %

Adjustments to GAAP amounts:

Share-based compensation 69 107 176 975 1,151 - 1,151 expense

Amortization of acquisition-related454 - 454 108 562 - 562 intangible assets

Acquisition/ divestiture-related- 3 3 191 194 - 194 costs

Legal and indemnification 4 - 4 - 4 - 4 settlements

Significant asset impairments and - - - 354 354 - 354 restructurings

(Gains) and losses on equity - - - - - (99) (99) investments

Income tax effect/ significant tax - - - - - - (480) matters

Non-GAAP amount $17,903 $6,733 $ 24,636 $11,998 $12,638 $ 192 $10,264

% of revenue 66.0 %67.3 %66.3 % 32.3 %34.0 %0.5 % 27.6 %

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

CISCO SYSTEMS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES



EFFECTIVE TAX RATE

(In percentages)



Three Months Ended Nine Months Ended

April 25, April 25, May 1, 2021 May 1, 2021 2020 2020

GAAP effective tax rate 20.3 %19.4 %20.4 %19.6 %

Total adjustments to GAAP (1.3) %0.6 %(1.4) %0.4 %provision for income taxes

Non-GAAP effective tax rate 19.0 %20.0 %19.0 %20.0 %

GAAP TO NON-GAAP GUIDANCE FOR Q4 FY 2021



Gross MarginOperating MarginTax ProvisionEarnings per Q4 FY 2021 Rate Rate Rate Share ^(1)

GAAP 62% - 63% 25.5%- 26.5% 19% $0.64 - $0.69

Estimated adjustments for:

Share-based compensation 0.5% 3.5% - $0.07 - $0.08expense

Amortization of acquisition-related intangible assets 1.5% 2.5% - $0.07 - $0.08and acquisition/ divestiture-related costs

Significant asset impairments and - 0.5% - $0.00 - $0.01restructurings

Income tax effect of non-GAAP - adjustments

Non-GAAP 64% - 65% 32% - 33% 19% $0.81 - $0.83

^(1) Estimated adjustments to GAAP earnings per share are shown after incometax effects.

Except as noted above, this guidance does not include the effects of any futureacquisitions/divestitures, asset impairments, restructurings and significanttax matters or other events, which may or may not be significant unlessspecifically stated.

Forward Looking Statements, Non-GAAP Information and Additional InformationThis release may be deemed to contain forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among other things, statements regarding future events (such as continued execution of our strategy, our ability to lead the next phase of the recovery as our customers accelerate their adoption of hybrid work, digital transformation, cloud, continued strong uptake of our subscription-based offerings, our investments in innovation, and accelerated shift to more software offerings and subscriptions) and the future financial performance of Cisco (including the guidance for Q4 FY 2021) that involve risks and uncertainties. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results due to a variety of factors, including: the impact of the COVID-19 pandemic; business and economic conditions and growth trends in the networking industry, our customer markets and various geographic regions; global economic conditions and uncertainties in the geopolitical environment; overall information technology spending; the growth and evolution of the Internet and levels of capital spending on Internet-based systems; variations in customer demand for products and services, including sales to the service provider market and other customer markets; the return on our investments in certain priorities, key growth areas, and in certain geographical locations, as well as maintaining leadership in routing, switching and services; the timing of orders and manufacturing and customer lead times; changes in customer order patterns or customer mix; insufficient, excess or obsolete inventory; variability of component costs; variations in sales channels, product costs or mix of products sold; our ability to successfully acquire businesses and technologies and to successfully integrate and operate these acquired businesses and technologies; our ability to achieve expected benefits of our partnerships; increased competition in our product and service markets, including the data center market; dependence on the introduction and market acceptance of new product offerings and standards; rapid technological and market change; manufacturing and sourcing risks; product defects and returns; litigation involving patents, other intellectual property, antitrust, stockholder and other matters, and governmental investigations; our ability to achieve the benefits of the restructuring and possible changes in the size and timing of the related charges; cyber-attacks, data breaches or malware; vulnerabilities and critical security defects; terrorism; natural catastrophic events; any other pandemic or epidemic; our ability to achieve the benefits anticipated from our investments in sales, engineering, service, marketing and manufacturing activities; our ability to recruit and retain key personnel; our ability to manage financial risk, and to manage expenses during economic downturns; risks related to the global nature of our operations, including our operations in emerging markets; currency fluctuations and other international factors; changes in provision for income taxes, including changes in tax laws and regulations or adverse outcomes resulting from examinations of our income tax returns; potential volatility in operating results; and other factors listed in Cisco's most recent reports on Forms 10-Q and 10-K filed on February 16, 2021 and September 3, 2020, respectively. The financial information contained in this release should be read in conjunction with the consolidated financial statements and notes thereto included in Cisco's most recent reports on Forms 10-Q and 10-K as each may be amended from time to time. Cisco's results of operations for the three and nine months ended May 1, 2021 are not necessarily indicative of Cisco's operating results for any future periods. Any projections in this release are based on limited information currently available to Cisco, which is subject to change. Although any such projections and the factors influencing them will likely change, Cisco will not necessarily update the information, since Cisco will only provide guidance at certain points during the year. Such information speaks only as of the date of this release.

This release includes non-GAAP net income, non-GAAP gross margins, non-GAAP operating expenses, non-GAAP operating income and margin, non-GAAP effective tax rates, non-GAAP interest and other income (loss), net, and non-GAAP net income per share data for the periods presented. It also includes future estimated ranges for gross margin, operating margin, tax provision rate and EPS on a non-GAAP basis.

These non-GAAP measures are not in accordance with, or an alternative for, measures prepared in accordance with generally accepted accounting principles and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Cisco believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with Cisco's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Cisco's results of operations in conjunction with the corresponding GAAP measures.

Cisco believes that the presentation of non-GAAP measures when shown in conjunction with the corresponding GAAP measures, provides useful information to investors and management regarding financial and business trends relating to its financial condition and its historical and projected results of operations.

For its internal budgeting process, Cisco's management uses financial statements that do not include, when applicable, share-based compensation expense, amortization of acquisition-related intangible assets, acquisition-related/divestiture costs, significant asset impairments and restructurings, significant litigation settlements and other contingencies, gains and losses on equity investments, the income tax effects of the foregoing and significant tax matters. Cisco's management also uses the foregoing non-GAAP measures, in addition to the corresponding GAAP measures, in reviewing the financial results of Cisco. In prior periods, Cisco has excluded other items that it no longer excludes for purposes of its non-GAAP financial measures. From time to time in the future there may be other items that Cisco may exclude for purposes of its internal budgeting process and in reviewing its financial results. For additional information on the items excluded by Cisco from one or more of its non-GAAP financial measures, refer to the Form 8-K regarding this release furnished today to the Securities and Exchange Commission.

About Cisco

Cisco (Nasdaq: CSCO) is the worldwide leader in technology that powers the Internet. Cisco inspires new possibilities by reimagining your applications, securing your data, transforming your infrastructure, and empowering your teams for a global and inclusive future. Discover more at newsroom.cisco.com and follow us on Twitter at @Cisco.

Copyright (c) 2021 Cisco and/or its affiliates. All rights reserved. Cisco and the Cisco logo are trademarks or registered trademarks of Cisco and/or its affiliates in the U.S. and other countries. To view a list of Cisco trademarks, go to: www.cisco.com/go/trademarks. Third-party trademarks mentioned in this document are the property of their respective owners. The use of the word partner does not imply a partnership relationship between Cisco and any other company. This document is Cisco Public Information.

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