WEBVTT - Cisco CEO Chuck Robbins Talks Earnings

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, Radio News.

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<v Speaker 2>Delighted to say that we're joined now by Cisco, CEI,

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<v Speaker 2>Chuck Robins, and actually, Chuck, I'm going to ask you

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<v Speaker 2>something that I felt like the analyst community didn't really

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<v Speaker 2>get to, and that is that there is this big

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<v Speaker 2>products refresh happening near term overcoming years. And I feel

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<v Speaker 2>like you've been trying to talk about Cisco as a

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<v Speaker 2>platform offering for a while and if we look at

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<v Speaker 2>that fiscal twenty six outlook is that baked into that

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<v Speaker 2>where Cisco is a platform offering and you folded security

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<v Speaker 2>into it. That's kind of what I think people want

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<v Speaker 2>to know.

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<v Speaker 3>Yes, well, first of all, thanks for having me and

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<v Speaker 3>I do. I want to thank the team and all

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<v Speaker 3>of the Cisco folks for just a great year. We

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<v Speaker 3>obviously had good order growth in Q four, we had

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<v Speaker 3>the great performance in the AI infrastructure orders. We actually

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<v Speaker 3>reported that we had taken down a approximately a billion

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<v Speaker 3>dollars revenue from those orders, which was something and that

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<v Speaker 3>everybody wanted to talk about. We talked through how we

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<v Speaker 3>fill the progress kicking in on security, and then to

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<v Speaker 3>your point, this product refresh cycle that we are beginning

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<v Speaker 3>will happen over years, and honestly, we just turned on orderability.

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<v Speaker 3>Large customers take a lot of time to evaluate put

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<v Speaker 3>these things in labs before they put it in their

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<v Speaker 3>critical infrastructure. But the points you make about the platform

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<v Speaker 3>is really important because as we get into agentic AI,

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<v Speaker 3>with the low latency costant communication that's going to occur,

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<v Speaker 3>we're going to have to do security in the network.

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<v Speaker 4>There is no other alternative.

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<v Speaker 3>You cannot introduce latency by sending it to a security appliance,

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<v Speaker 3>and we are the only company that has both networking

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<v Speaker 3>and security technology to fuse it together to create that

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<v Speaker 3>platform effect that you're describing.

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<v Speaker 2>AI is a double edged sword. Chuck, it's margin dilutive.

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<v Speaker 2>How do you think about that?

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<v Speaker 3>Well, I think we have always had a portfolio of

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<v Speaker 3>products that had various margin profiles. I mean, we had

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<v Speaker 3>a point in our history where the telco and the

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<v Speaker 3>service provider world was as much as thirty five thirty

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<v Speaker 3>six percent of our business, and that was a different

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<v Speaker 3>margin profile than the enterprise. And so we just manage

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<v Speaker 3>it the same way we have all all along, So

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<v Speaker 3>I'm not too worried about that.

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<v Speaker 1>Meanwhile, Chuck, that massive opportunity ahead that you articulate with

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<v Speaker 1>AI infrastructure. They're bringing in of two billion of orders,

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<v Speaker 1>the billion dollars of revenue already. Is it the platform

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<v Speaker 1>offering that helps you push out and fend against some

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<v Speaker 1>of the other competitors that want in on that. Of

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<v Speaker 1>course HPE is trying to get in.

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<v Speaker 4>You've got broad Com. Is that how you set yourself apart? Well?

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<v Speaker 3>I think the key to remember with this is that

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<v Speaker 3>it's networking systems and it's optics. That's primarily what we're

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<v Speaker 3>selling for AI infrastructure, And there's really only three companies

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<v Speaker 3>on the planet that can deliver the networking silicon that

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<v Speaker 3>these customers require, and we're one of them. And so

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<v Speaker 3>you know, they're looking for low power requirements, they're looking

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<v Speaker 3>for meeting their dates, they're looking for speed bandwidth deployments,

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<v Speaker 3>you know, and we're hitting that right now with them.

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<v Speaker 4>And we've really built great relationships.

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<v Speaker 3>If you if you go back five or six years ago,

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<v Speaker 3>I had to try to convince people that we were

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<v Speaker 3>rebuilding relationships here. And even if you go back fifty twelve,

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<v Speaker 3>fourteen months ago when we gave them the target of

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<v Speaker 3>one billion dollars in orders, I think there were a

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<v Speaker 3>lot of skeptics, and the team actually delivered really well

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<v Speaker 3>and we have great relationships with these customers.

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<v Speaker 1>Now we are joined by Chuck Robins, Cisco CEO, and

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<v Speaker 1>you know, you beat your things that previously others were

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<v Speaker 1>cynical of, but the market moves with you. Many wanted

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<v Speaker 1>even more in terms of your full year revenue guidance.

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<v Speaker 1>Some are even going as far as to say that

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<v Speaker 1>maybe you're suggesting a little bit of a cautious it

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<v Speaker 1>spend for the next fiscal year.

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<v Speaker 4>Do you abide by that, Chuck, No, we don't see that.

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<v Speaker 3>We see we haven't seen any sort of slowdown at all.

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<v Speaker 3>The only place we've seen that challenge, as has been reported,

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<v Speaker 3>was in US Federal. You know, our order our product

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<v Speaker 3>order growth was seven percent. If you take out US Federal,

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<v Speaker 3>we grew ten percent. And if you think about security,

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<v Speaker 3>same thing. If we take out a US Federal we

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<v Speaker 3>grew double digits and security on orders. And I also

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<v Speaker 3>talked about the fact that if we look at the

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<v Speaker 3>fiscal year that we just entered, our US Federal team

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<v Speaker 3>is actually forecasting a return to growth, so hopefully that

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<v Speaker 3>won't be a headwind in the next year. So we

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<v Speaker 3>haven't seen anything meaningful, but we're also cognizant that we

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<v Speaker 3>were operating in a pretty complex and dynamic environment.

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<v Speaker 2>Chuck, We love to talk about the big projects on

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<v Speaker 2>Bloomberg Tech, the big data center projects. Are there any

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<v Speaker 2>specific examples of projects you're involved in that do you

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<v Speaker 2>think are really needle moving for Cisco?

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<v Speaker 3>Well, all the cloud providers are needle moving, and over

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<v Speaker 3>time the neo cloud segment as well as the sovereign

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<v Speaker 3>clouds we think are going to will be a big

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<v Speaker 3>part of our business. Also, we're just getting started in those.

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<v Speaker 3>If I hit on a few of those. The sovereign

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<v Speaker 3>AI data centers that we talked about in UAE as

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<v Speaker 3>well as in Saudi are the early ones. We're having

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<v Speaker 3>discussions and their Asian countries in Africa, in Europe, you

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<v Speaker 3>have this push for on PRIM sovereign applications, So from

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<v Speaker 3>geopolitical perspective and a risk perspective, they want more control

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<v Speaker 3>over the tech stack that they have in their countries.

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<v Speaker 3>So that's more of a sovereign play, and we're one

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<v Speaker 3>of the unique companies who can actually deliver say Splunk

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<v Speaker 3>on PRIM or they're asking for WebEx on PRIM, which

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<v Speaker 3>we can do so, and then the neo clouds we

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<v Speaker 3>could talk about as well, but that's another emerging opportunity

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<v Speaker 3>for US.

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<v Speaker 2>I don't think many appreciate the scale of Cisco.

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<v Speaker 4>Sometimes.

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<v Speaker 2>You've got a lot of credit, by the way, on

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<v Speaker 2>this program, at least about how you've communicated tariff's impact.

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<v Speaker 2>But you're basically one of the biggest and leading network

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<v Speaker 2>chip producers globally, and this is an administration that wants

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<v Speaker 2>more US manufacturing. So you have the volume of gear,

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<v Speaker 2>you design your own chips, TSMC makes them for you.

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<v Speaker 2>The economics kind of works in your favor. Have you

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<v Speaker 2>made some commitment to do what this administration is trying

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<v Speaker 2>to do, which is that process that you've mastered, but

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<v Speaker 2>just bring it to the States in some form.

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<v Speaker 3>Well, I think that much like you in Nvidia, AMDUS others,

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<v Speaker 3>there are a lot of companies that actually rely on

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<v Speaker 3>TSMC the for the fabrication of the silicon, and they've

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<v Speaker 3>obviously made commitments on their side to actually build out

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<v Speaker 3>capacity in the United States, and so we're happy to

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<v Speaker 3>see that happening. The thing that people don't really realize

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<v Speaker 3>is that we've maintained a US manufacturing footprint all along,

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<v Speaker 3>and so we have a footprint in the US today

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<v Speaker 3>that we can look at expanding. But I think it's

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<v Speaker 3>just important for us right now to wait and see

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<v Speaker 3>exactly where all this stuff lands. If you go back

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<v Speaker 3>to twenty eighteen when the China tariffs hit, our teams

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<v Speaker 3>have made moves and mitigated roughly eighty percent or so

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<v Speaker 3>of those, and so we just continue to look at

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<v Speaker 3>these things as they come out, figure out what the

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<v Speaker 3>best plan of action is, and then we act.

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<v Speaker 1>When you think about planning ahead and business continuity, Chuck,

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<v Speaker 1>when you see what's happened with AMD and video and

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<v Speaker 1>the deal they've cut to access China, when you think

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<v Speaker 1>about exporting more broadly, you thinking that might come your

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<v Speaker 1>way of pay to play in the future.

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<v Speaker 4>I have no idea.

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<v Speaker 3>We wake up every day and we try to figure

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<v Speaker 3>out what's transpired and what's happening in the world, and

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<v Speaker 3>how do we react to it. I've talked about over

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<v Speaker 3>time that the current crop of CEOs in the United

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<v Speaker 3>States have basically been operating in times of uncertainty or

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<v Speaker 3>crisis or certainly very dynamic environments, and so we're all

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<v Speaker 3>used to just dealing with whatever changes are.

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<v Speaker 4>Coming our way.

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<v Speaker 3>You know, there's the old saying that you can deal

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<v Speaker 3>with the world as it is or how you'd like

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<v Speaker 3>it to be, and just we just wake up and

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<v Speaker 3>we deal with what comes at us and try to

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<v Speaker 3>plan accordingly, try to do scenario planning, but then deal

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<v Speaker 3>with it as it is.

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<v Speaker 1>And when you're controlling your own destiny. You've been doing

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<v Speaker 1>a bit of M and A and you mentioned the

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<v Speaker 1>Sprung coffering and how that helps you access the Lexi

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<v Speaker 1>view up for example. Anymore M and A on the

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<v Speaker 1>rise of particularly when it comes to AI.

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<v Speaker 3>We're always looking Our strategy hasn't changed. Obviously, valuations are

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<v Speaker 3>quite frothy in that space. But if there's something that

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<v Speaker 3>helps us advance our strategy more effectively, then we're always

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<v Speaker 3>willing to take a look at it. I would say

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<v Speaker 3>that M and A is not the strategy. We have

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<v Speaker 3>our product strategy and our solution strategy for our customers,

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<v Speaker 3>and if there's an acquisition that helps us accelerate that,

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<v Speaker 3>then that's what we're really interested in. And you think

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<v Speaker 3>about places like AI, infrastructure or security or observability.

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<v Speaker 4>In those kind of areas, they're always interesting to us.

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<v Speaker 2>Chuck, how's the relationship with Nvidia evolving since it was

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<v Speaker 2>all announced.

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<v Speaker 4>It's great.

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<v Speaker 3>Our team and their team's execs had dinner last night,

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<v Speaker 3>and we're working on architectures for neocloud, architectures for the enterprise.

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<v Speaker 3>We're working on go to market joint go to market together.

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<v Speaker 3>So I'd say it just continues to get stronger. And

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<v Speaker 3>we're really on the front end now of a lot

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<v Speaker 3>of the technology integrations that we've been working on, and

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<v Speaker 3>we're on the front end of the real enterprise wave

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<v Speaker 3>of this AI. If you think about it, it started in

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<v Speaker 3>the back end networks of the cloud providers.

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<v Speaker 4>It's movement.

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<v Speaker 3>It's obviously going to have an impact on the front

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<v Speaker 3>end networks. It's going to have an impact on the

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<v Speaker 3>enterprise and even the telco business that we saw this quarter.

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<v Speaker 3>We had telco and cable our orders were up greater

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<v Speaker 3>than twenty percent, and a lot of that was attributed

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<v Speaker 3>to their preparation for AI.

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<v Speaker 1>Chuck Robins, Cisco CEO, been fantastic to speak with you today.

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<v Speaker 4>Thank you very much, and be