WEBVTT - Cisco CEO Chuck Robbins Talks Earnings

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, Radio News ed you're looking at

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<v Speaker 1>the company that's adding the most in points upside.

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<v Speaker 2>Yeah. One of the big movers to the upside is

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<v Speaker 2>Cisco shares currently up around four percent. They'd open much

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<v Speaker 2>higher than that. The key bit is they're trading at

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<v Speaker 2>their highest level since the year two thousand, after the

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<v Speaker 2>company raised its outlook and showed progress on capturing more

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<v Speaker 2>of the global AI spend. Let's get the details with

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<v Speaker 2>Cisco's CEO, Chuck Robins. Chuck, in the year two thousand,

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<v Speaker 2>Cisco was one of the original four horsemen of technology.

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<v Speaker 2>Based on the numbers you gave and what you said

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<v Speaker 2>on the call, do you feel like customers, the new

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<v Speaker 2>ones and investors now understand Cisco's place in this new

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<v Speaker 2>AI era.

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<v Speaker 3>Well, first of all, thanks for having me, and you know,

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<v Speaker 3>I'm super proud of what the teams have accomplished. We

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<v Speaker 3>had a record quarter and set ourselves up for what's

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<v Speaker 3>likely going to be the best year we've ever had.

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<v Speaker 4>So it was just a great performance.

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<v Speaker 3>And as I've been asked a lot over the last

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<v Speaker 3>twenty four hours to reflect back on two thousand and

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<v Speaker 3>it's kind of an interesting comparison, but I think that, Look,

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<v Speaker 3>the hyperscalers are some of the most advanced customers in

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<v Speaker 3>the world. They do the deepest analysis of the technology

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<v Speaker 3>before they make decisions, and I think that their decisions

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<v Speaker 3>to continue spending more with us speaks volumes about the

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<v Speaker 3>innovation and the technology that our teams are building right now.

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<v Speaker 3>So I'm really proud of them, and I think it'll

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<v Speaker 3>just extend into the enterprise over time.

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<v Speaker 2>Chuck, who are some of those new customers that you've

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<v Speaker 2>been able to sign in the air context.

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<v Speaker 3>Well, we're just talking about the major hyperscalers, primarily in

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<v Speaker 3>the United States, but we've also announced these sovereign deals

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<v Speaker 3>in the Middle East with G forty two and the

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<v Speaker 3>Emirates as well as Humane in Saudi There's a lot

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<v Speaker 3>of work going on in the neo cloud space. We're

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<v Speaker 3>seeing sovereign players start pop up now in parts of

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<v Speaker 3>Europe as well as Southeast Asia and India. So it's

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<v Speaker 3>a broad swath of customers. But the one point three

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<v Speaker 3>billion that we talked about is strictly the top hyperscalers

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<v Speaker 3>that we're doing business with.

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<v Speaker 4>So you're talking about five companies and.

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<v Speaker 1>They're good for the money, as you can tell from

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<v Speaker 1>the cash flow that they have chuck not two hundred

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<v Speaker 1>million dollars. That you are expanding into sovereign, you are

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<v Speaker 1>expanding into enterprise and neoclouds. How do you bake in

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<v Speaker 1>some of the risks that the market just cannot get

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<v Speaker 1>enough of talking about this circular economy.

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<v Speaker 3>Well, so we did talk about the fact that we

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<v Speaker 3>have over two billion dollars now in our pipeline through

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<v Speaker 3>the end of the fiscal years, over the next three

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<v Speaker 3>quarters in neo cloud, sovereign cloud, enterprise, and we just

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<v Speaker 3>we see that continue to accelerate. We took two hundred

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<v Speaker 3>million dollars in orders in Q one, and it's just

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<v Speaker 3>it's a natural way the technology technologies have been evolving

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<v Speaker 3>over the last decade or more. They start in the hyperscalers,

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<v Speaker 3>they moved through the telco space in this in this

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<v Speaker 3>case the neo clouds and the sovereign players, and then

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<v Speaker 3>into the enterprise, and it's happening exactly that way. And

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<v Speaker 3>our bread and butter over the years has been in

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<v Speaker 3>the enterprise. And we have lots of technolo knowlogy, we

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<v Speaker 3>have a partner ecosystem, we have full stack solutions, we

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<v Speaker 3>have security, we have all the things that they're looking

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<v Speaker 3>forward to actually build out AI workloads and deal with

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<v Speaker 3>AI with confidence.

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<v Speaker 1>Let's just go to that security a little bit of

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<v Speaker 1>a fly in the ointment. Let's say, I know you've

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<v Speaker 1>talked clearly about perhaps how the booking of revenue can

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<v Speaker 1>be misinterpreted, but how are you going to sell that

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<v Speaker 1>more holistically? How do you think the security part of

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<v Speaker 1>the offering can really start firing on all cylinders.

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<v Speaker 3>Well, I started by saying clearly we're not pleased with

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<v Speaker 3>where we are yet, but I will say over the

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<v Speaker 3>last two to three years, we've made a lot of progress.

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<v Speaker 3>It's a major decision for customers to make big platform decisions.

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<v Speaker 3>In security, We've had a lot of great wins. I'm

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<v Speaker 3>proud of what the teams have built. And we saw

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<v Speaker 3>our next generation firewalls, we saw mid teens growth and

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<v Speaker 3>orders there.

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<v Speaker 4>We saw double arr growth and Splunk.

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<v Speaker 3>We saw our new and refreshed products on the security

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<v Speaker 3>side continue to show growth. And the issue we had

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<v Speaker 3>in the quarter was really it's an accounting issue around

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<v Speaker 3>how cloud delivered Splunk versus on prem delivered Splunk. The

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<v Speaker 3>cloud stuff is ratable and realize revenues realized over the

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<v Speaker 3>life of the term, and the on prem stuff gets

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<v Speaker 3>recognized immediately, and we just had a major shift in

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<v Speaker 3>how our customers consume it, which is great for us

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<v Speaker 3>in the long term that they're buying more cloud based solutions,

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<v Speaker 3>but it creates a little bit of a challenge on

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<v Speaker 3>revenue during the quarter. The good news is the networking

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<v Speaker 3>business is doing incredibly well and can cover that for us.

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<v Speaker 2>Chug it is fair to say at a minimum that

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<v Speaker 2>the Cisco of today isn't the same as the Cisco

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<v Speaker 2>of two thousand. What you've done is kind of been

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<v Speaker 2>open about the product lineup and you've used M and

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<v Speaker 2>A to change the footprint of the company. What's your

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<v Speaker 2>latest thinking on that, the products that you offer and

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<v Speaker 2>what you need to do, either organically or inorganically to

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<v Speaker 2>offer what the world of once.

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<v Speaker 3>I think the big things that we did we obviously

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<v Speaker 3>introduced a lot more software into our portfolio in areas

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<v Speaker 3>that are strategic, like security, and this Plunk acquisition has

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<v Speaker 3>been a great one. I think the other thing that's

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<v Speaker 3>worth calling out is this investment that we started in

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<v Speaker 3>twenty sixteen. To be clear on our silicon strategy that

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<v Speaker 3>is absolutely the reason that we're having success today in

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<v Speaker 3>the hyperscaler space. If we did not have our silicon

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<v Speaker 3>and develop and design our own silicon, we wouldn't be

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<v Speaker 3>participating at all.

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<v Speaker 4>It's just black and white.

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<v Speaker 3>And so as we as we look at both internal

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<v Speaker 3>innovation as well as or inorganic opportunities. We're very focused

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<v Speaker 3>on security, We're very focused on AI. We've made some

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<v Speaker 3>tech and talent deals. Anything that can help us accelerate

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<v Speaker 3>our solutions in those areas, we're open to look at Shuck.

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<v Speaker 2>I do not apologize for this next question. We or

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<v Speaker 2>are we not in an AI bubble?

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<v Speaker 3>Oh, it's just it's so funny. Look, the customers that

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<v Speaker 3>are buying the predominant amount of this technology have incredible

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<v Speaker 3>balance sheets, have incredible cash flow, have incredible profitability. I

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<v Speaker 3>think Caroline said that they actually pay their bills and

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<v Speaker 3>and so, and they view it as an existential issue

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<v Speaker 3>for them. That's that's a really key element. They don't

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<v Speaker 3>view this as something that's nice to have. They don't

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<v Speaker 3>view it as something that is okay, if we if

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<v Speaker 3>we if we're successful.

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<v Speaker 4>Great, if we're not great.

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<v Speaker 3>They view it as existential, which you see with the

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<v Speaker 3>level of spending that they're putting into it.

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<v Speaker 4>So it's it's a lot and it's moving fast.

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<v Speaker 3>And but the difference between now in two thousand is

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<v Speaker 3>that these are massive companies with strong financial performance and

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<v Speaker 3>they believe in this one hundred percent. So I don't

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<v Speaker 3>think it's going to change. We haven't gotten into physical AI.

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<v Speaker 3>We have, we're just getting into synthetic training. We haven't

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<v Speaker 3>gotten into robotics. We haven't gotten into the enterprise in

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<v Speaker 3>a big way yet, and so there's a there's a

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<v Speaker 3>huge opportunity ahead for all of us.

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<v Speaker 4>I believe.

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<v Speaker 1>Chuck Bluemberg Intelligence Analysis says your projections are conservative. Briefly

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<v Speaker 1>are the conservative?

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<v Speaker 3>Well, I think you said that last quarter, so you

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<v Speaker 3>proved to be correct ninety days ago. But look, I

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<v Speaker 3>think based on what we know today we're ninety days

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<v Speaker 3>into the year, were taking what we have in our backlog,

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<v Speaker 3>what we see in the forecast. But again, we have

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<v Speaker 3>three more quarters to play out. Lots of things can change.

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<v Speaker 3>The World's very dynamic, but we're very confident in the

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<v Speaker 3>numbers that we put up yesterday.

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<v Speaker 1>Cisco CEO Chuck Robins, was a joy to catch up

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<v Speaker 1>with you.