Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2: Delighted to say that we're joined now by Cisco, CEI,
Speaker 2: Chuck Robins, and actually, Chuck, I'm going to ask you
Speaker 2: something that I felt like the analyst community didn't really
Speaker 2: get to, and that is that there is this big
Speaker 2: products refresh happening near term overcoming years. And I feel
Speaker 2: like you've been trying to talk about Cisco as a
Speaker 2: platform offering for a while and if we look at
Speaker 2: that fiscal twenty six outlook is that baked into that
Speaker 2: where Cisco is a platform offering and you folded security
Speaker 2: into it. That's kind of what I think people want
Speaker 2: to know.
Speaker 3: Yes, well, first of all, thanks for having me and
Speaker 3: I do. I want to thank the team and all
Speaker 3: of the Cisco folks for just a great year. We
Speaker 3: obviously had good order growth in Q four, we had
Speaker 3: the great performance in the AI infrastructure orders. We actually
Speaker 3: reported that we had taken down a approximately a billion
Speaker 3: dollars revenue from those orders, which was something and that
Speaker 3: everybody wanted to talk about. We talked through how we
Speaker 3: fill the progress kicking in on security, and then to
Speaker 3: your point, this product refresh cycle that we are beginning
Speaker 3: will happen over years, and honestly, we just turned on orderability.
Speaker 3: Large customers take a lot of time to evaluate put
Speaker 3: these things in labs before they put it in their
Speaker 3: critical infrastructure. But the points you make about the platform
Speaker 3: is really important because as we get into agentic AI,
Speaker 3: with the low latency costant communication that's going to occur,
Speaker 3: we're going to have to do security in the network.
Speaker 4: There is no other alternative.
Speaker 3: You cannot introduce latency by sending it to a security appliance,
Speaker 3: and we are the only company that has both networking
Speaker 3: and security technology to fuse it together to create that
Speaker 3: platform effect that you're describing.
Speaker 2: AI is a double edged sword. Chuck, it's margin dilutive.
Speaker 2: How do you think about that?
Speaker 3: Well, I think we have always had a portfolio of
Speaker 3: products that had various margin profiles. I mean, we had
Speaker 3: a point in our history where the telco and the
Speaker 3: service provider world was as much as thirty five thirty
Speaker 3: six percent of our business, and that was a different
Speaker 3: margin profile than the enterprise. And so we just manage
Speaker 3: it the same way we have all all along, So
Speaker 3: I'm not too worried about that.
Speaker 1: Meanwhile, Chuck, that massive opportunity ahead that you articulate with
Speaker 1: AI infrastructure. They're bringing in of two billion of orders,
Speaker 1: the billion dollars of revenue already. Is it the platform
Speaker 1: offering that helps you push out and fend against some
Speaker 1: of the other competitors that want in on that. Of
Speaker 1: course HPE is trying to get in.
Speaker 4: You've got broad Com. Is that how you set yourself apart? Well?
Speaker 3: I think the key to remember with this is that
Speaker 3: it's networking systems and it's optics. That's primarily what we're
Speaker 3: selling for AI infrastructure, And there's really only three companies
Speaker 3: on the planet that can deliver the networking silicon that
Speaker 3: these customers require, and we're one of them. And so
Speaker 3: you know, they're looking for low power requirements, they're looking
Speaker 3: for meeting their dates, they're looking for speed bandwidth deployments,
Speaker 3: you know, and we're hitting that right now with them.
Speaker 4: And we've really built great relationships.
Speaker 3: If you if you go back five or six years ago,
Speaker 3: I had to try to convince people that we were
Speaker 3: rebuilding relationships here. And even if you go back fifty twelve,
Speaker 3: fourteen months ago when we gave them the target of
Speaker 3: one billion dollars in orders, I think there were a
Speaker 3: lot of skeptics, and the team actually delivered really well
Speaker 3: and we have great relationships with these customers.
Speaker 1: Now we are joined by Chuck Robins, Cisco CEO, and
Speaker 1: you know, you beat your things that previously others were
Speaker 1: cynical of, but the market moves with you. Many wanted
Speaker 1: even more in terms of your full year revenue guidance.
Speaker 1: Some are even going as far as to say that
Speaker 1: maybe you're suggesting a little bit of a cautious it
Speaker 1: spend for the next fiscal year.
Speaker 4: Do you abide by that, Chuck, No, we don't see that.
Speaker 3: We see we haven't seen any sort of slowdown at all.
Speaker 3: The only place we've seen that challenge, as has been reported,
Speaker 3: was in US Federal. You know, our order our product
Speaker 3: order growth was seven percent. If you take out US Federal,
Speaker 3: we grew ten percent. And if you think about security,
Speaker 3: same thing. If we take out a US Federal we
Speaker 3: grew double digits and security on orders. And I also
Speaker 3: talked about the fact that if we look at the
Speaker 3: fiscal year that we just entered, our US Federal team
Speaker 3: is actually forecasting a return to growth, so hopefully that
Speaker 3: won't be a headwind in the next year. So we
Speaker 3: haven't seen anything meaningful, but we're also cognizant that we
Speaker 3: were operating in a pretty complex and dynamic environment.
Speaker 2: Chuck, We love to talk about the big projects on
Speaker 2: Bloomberg Tech, the big data center projects. Are there any
Speaker 2: specific examples of projects you're involved in that do you
Speaker 2: think are really needle moving for Cisco?
Speaker 3: Well, all the cloud providers are needle moving, and over
Speaker 3: time the neo cloud segment as well as the sovereign
Speaker 3: clouds we think are going to will be a big
Speaker 3: part of our business. Also, we're just getting started in those.
Speaker 3: If I hit on a few of those. The sovereign
Speaker 3: AI data centers that we talked about in UAE as
Speaker 3: well as in Saudi are the early ones. We're having
Speaker 3: discussions and their Asian countries in Africa, in Europe, you
Speaker 3: have this push for on PRIM sovereign applications, So from
Speaker 3: geopolitical perspective and a risk perspective, they want more control
Speaker 3: over the tech stack that they have in their countries.
Speaker 3: So that's more of a sovereign play, and we're one
Speaker 3: of the unique companies who can actually deliver say Splunk
Speaker 3: on PRIM or they're asking for WebEx on PRIM, which
Speaker 3: we can do so, and then the neo clouds we
Speaker 3: could talk about as well, but that's another emerging opportunity
Speaker 3: for US.
Speaker 2: I don't think many appreciate the scale of Cisco.
Speaker 4: Sometimes.
Speaker 2: You've got a lot of credit, by the way, on
Speaker 2: this program, at least about how you've communicated tariff's impact.
Speaker 2: But you're basically one of the biggest and leading network
Speaker 2: chip producers globally, and this is an administration that wants
Speaker 2: more US manufacturing. So you have the volume of gear,
Speaker 2: you design your own chips, TSMC makes them for you.
Speaker 2: The economics kind of works in your favor. Have you
Speaker 2: made some commitment to do what this administration is trying
Speaker 2: to do, which is that process that you've mastered, but
Speaker 2: just bring it to the States in some form.
Speaker 3: Well, I think that much like you in Nvidia, AMDUS others,
Speaker 3: there are a lot of companies that actually rely on
Speaker 3: TSMC the for the fabrication of the silicon, and they've
Speaker 3: obviously made commitments on their side to actually build out
Speaker 3: capacity in the United States, and so we're happy to
Speaker 3: see that happening. The thing that people don't really realize
Speaker 3: is that we've maintained a US manufacturing footprint all along,
Speaker 3: and so we have a footprint in the US today
Speaker 3: that we can look at expanding. But I think it's
Speaker 3: just important for us right now to wait and see
Speaker 3: exactly where all this stuff lands. If you go back
Speaker 3: to twenty eighteen when the China tariffs hit, our teams
Speaker 3: have made moves and mitigated roughly eighty percent or so
Speaker 3: of those, and so we just continue to look at
Speaker 3: these things as they come out, figure out what the
Speaker 3: best plan of action is, and then we act.
Speaker 1: When you think about planning ahead and business continuity, Chuck,
Speaker 1: when you see what's happened with AMD and video and
Speaker 1: the deal they've cut to access China, when you think
Speaker 1: about exporting more broadly, you thinking that might come your
Speaker 1: way of pay to play in the future.
Speaker 4: I have no idea.
Speaker 3: We wake up every day and we try to figure
Speaker 3: out what's transpired and what's happening in the world, and
Speaker 3: how do we react to it. I've talked about over
Speaker 3: time that the current crop of CEOs in the United
Speaker 3: States have basically been operating in times of uncertainty or
Speaker 3: crisis or certainly very dynamic environments, and so we're all
Speaker 3: used to just dealing with whatever changes are.
Speaker 4: Coming our way.
Speaker 3: You know, there's the old saying that you can deal
Speaker 3: with the world as it is or how you'd like
Speaker 3: it to be, and just we just wake up and
Speaker 3: we deal with what comes at us and try to
Speaker 3: plan accordingly, try to do scenario planning, but then deal
Speaker 3: with it as it is.
Speaker 1: And when you're controlling your own destiny. You've been doing
Speaker 1: a bit of M and A and you mentioned the
Speaker 1: Sprung coffering and how that helps you access the Lexi
Speaker 1: view up for example. Anymore M and A on the
Speaker 1: rise of particularly when it comes to AI.
Speaker 3: We're always looking Our strategy hasn't changed. Obviously, valuations are
Speaker 3: quite frothy in that space. But if there's something that
Speaker 3: helps us advance our strategy more effectively, then we're always
Speaker 3: willing to take a look at it. I would say
Speaker 3: that M and A is not the strategy. We have
Speaker 3: our product strategy and our solution strategy for our customers,
Speaker 3: and if there's an acquisition that helps us accelerate that,
Speaker 3: then that's what we're really interested in. And you think
Speaker 3: about places like AI, infrastructure or security or observability.
Speaker 4: In those kind of areas, they're always interesting to us.
Speaker 2: Chuck, how's the relationship with Nvidia evolving since it was
Speaker 2: all announced.
Speaker 4: It's great.
Speaker 3: Our team and their team's execs had dinner last night,
Speaker 3: and we're working on architectures for neocloud, architectures for the enterprise.
Speaker 3: We're working on go to market joint go to market together.
Speaker 3: So I'd say it just continues to get stronger. And
Speaker 3: we're really on the front end now of a lot
Speaker 3: of the technology integrations that we've been working on, and
Speaker 3: we're on the front end of the real enterprise wave
Speaker 3: of this AI. If you think about it, it started in
Speaker 3: the back end networks of the cloud providers.
Speaker 4: It's movement.
Speaker 3: It's obviously going to have an impact on the front
Speaker 3: end networks. It's going to have an impact on the
Speaker 3: enterprise and even the telco business that we saw this quarter.
Speaker 3: We had telco and cable our orders were up greater
Speaker 3: than twenty percent, and a lot of that was attributed
Speaker 3: to their preparation for AI.
Speaker 1: Chuck Robins, Cisco CEO, been fantastic to speak with you today.
Speaker 4: Thank you very much, and be