Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News ed you're looking at
Speaker 1: the company that's adding the most in points upside.
Speaker 2: Yeah. One of the big movers to the upside is
Speaker 2: Cisco shares currently up around four percent. They'd open much
Speaker 2: higher than that. The key bit is they're trading at
Speaker 2: their highest level since the year two thousand, after the
Speaker 2: company raised its outlook and showed progress on capturing more
Speaker 2: of the global AI spend. Let's get the details with
Speaker 2: Cisco's CEO, Chuck Robins. Chuck, in the year two thousand,
Speaker 2: Cisco was one of the original four horsemen of technology.
Speaker 2: Based on the numbers you gave and what you said
Speaker 2: on the call, do you feel like customers, the new
Speaker 2: ones and investors now understand Cisco's place in this new
Speaker 2: AI era.
Speaker 3: Well, first of all, thanks for having me, and you know,
Speaker 3: I'm super proud of what the teams have accomplished. We
Speaker 3: had a record quarter and set ourselves up for what's
Speaker 3: likely going to be the best year we've ever had.
Speaker 4: So it was just a great performance.
Speaker 3: And as I've been asked a lot over the last
Speaker 3: twenty four hours to reflect back on two thousand and
Speaker 3: it's kind of an interesting comparison, but I think that, Look,
Speaker 3: the hyperscalers are some of the most advanced customers in
Speaker 3: the world. They do the deepest analysis of the technology
Speaker 3: before they make decisions, and I think that their decisions
Speaker 3: to continue spending more with us speaks volumes about the
Speaker 3: innovation and the technology that our teams are building right now.
Speaker 3: So I'm really proud of them, and I think it'll
Speaker 3: just extend into the enterprise over time.
Speaker 2: Chuck, who are some of those new customers that you've
Speaker 2: been able to sign in the air context.
Speaker 3: Well, we're just talking about the major hyperscalers, primarily in
Speaker 3: the United States, but we've also announced these sovereign deals
Speaker 3: in the Middle East with G forty two and the
Speaker 3: Emirates as well as Humane in Saudi There's a lot
Speaker 3: of work going on in the neo cloud space. We're
Speaker 3: seeing sovereign players start pop up now in parts of
Speaker 3: Europe as well as Southeast Asia and India. So it's
Speaker 3: a broad swath of customers. But the one point three
Speaker 3: billion that we talked about is strictly the top hyperscalers
Speaker 3: that we're doing business with.
Speaker 4: So you're talking about five companies and.
Speaker 1: They're good for the money, as you can tell from
Speaker 1: the cash flow that they have chuck not two hundred
Speaker 1: million dollars. That you are expanding into sovereign, you are
Speaker 1: expanding into enterprise and neoclouds. How do you bake in
Speaker 1: some of the risks that the market just cannot get
Speaker 1: enough of talking about this circular economy.
Speaker 3: Well, so we did talk about the fact that we
Speaker 3: have over two billion dollars now in our pipeline through
Speaker 3: the end of the fiscal years, over the next three
Speaker 3: quarters in neo cloud, sovereign cloud, enterprise, and we just
Speaker 3: we see that continue to accelerate. We took two hundred
Speaker 3: million dollars in orders in Q one, and it's just
Speaker 3: it's a natural way the technology technologies have been evolving
Speaker 3: over the last decade or more. They start in the hyperscalers,
Speaker 3: they moved through the telco space in this in this
Speaker 3: case the neo clouds and the sovereign players, and then
Speaker 3: into the enterprise, and it's happening exactly that way. And
Speaker 3: our bread and butter over the years has been in
Speaker 3: the enterprise. And we have lots of technolo knowlogy, we
Speaker 3: have a partner ecosystem, we have full stack solutions, we
Speaker 3: have security, we have all the things that they're looking
Speaker 3: forward to actually build out AI workloads and deal with
Speaker 3: AI with confidence.
Speaker 1: Let's just go to that security a little bit of
Speaker 1: a fly in the ointment. Let's say, I know you've
Speaker 1: talked clearly about perhaps how the booking of revenue can
Speaker 1: be misinterpreted, but how are you going to sell that
Speaker 1: more holistically? How do you think the security part of
Speaker 1: the offering can really start firing on all cylinders.
Speaker 3: Well, I started by saying clearly we're not pleased with
Speaker 3: where we are yet, but I will say over the
Speaker 3: last two to three years, we've made a lot of progress.
Speaker 3: It's a major decision for customers to make big platform decisions.
Speaker 3: In security, We've had a lot of great wins. I'm
Speaker 3: proud of what the teams have built. And we saw
Speaker 3: our next generation firewalls, we saw mid teens growth and
Speaker 3: orders there.
Speaker 4: We saw double arr growth and Splunk.
Speaker 3: We saw our new and refreshed products on the security
Speaker 3: side continue to show growth. And the issue we had
Speaker 3: in the quarter was really it's an accounting issue around
Speaker 3: how cloud delivered Splunk versus on prem delivered Splunk. The
Speaker 3: cloud stuff is ratable and realize revenues realized over the
Speaker 3: life of the term, and the on prem stuff gets
Speaker 3: recognized immediately, and we just had a major shift in
Speaker 3: how our customers consume it, which is great for us
Speaker 3: in the long term that they're buying more cloud based solutions,
Speaker 3: but it creates a little bit of a challenge on
Speaker 3: revenue during the quarter. The good news is the networking
Speaker 3: business is doing incredibly well and can cover that for us.
Speaker 2: Chug it is fair to say at a minimum that
Speaker 2: the Cisco of today isn't the same as the Cisco
Speaker 2: of two thousand. What you've done is kind of been
Speaker 2: open about the product lineup and you've used M and
Speaker 2: A to change the footprint of the company. What's your
Speaker 2: latest thinking on that, the products that you offer and
Speaker 2: what you need to do, either organically or inorganically to
Speaker 2: offer what the world of once.
Speaker 3: I think the big things that we did we obviously
Speaker 3: introduced a lot more software into our portfolio in areas
Speaker 3: that are strategic, like security, and this Plunk acquisition has
Speaker 3: been a great one. I think the other thing that's
Speaker 3: worth calling out is this investment that we started in
Speaker 3: twenty sixteen. To be clear on our silicon strategy that
Speaker 3: is absolutely the reason that we're having success today in
Speaker 3: the hyperscaler space. If we did not have our silicon
Speaker 3: and develop and design our own silicon, we wouldn't be
Speaker 3: participating at all.
Speaker 4: It's just black and white.
Speaker 3: And so as we as we look at both internal
Speaker 3: innovation as well as or inorganic opportunities. We're very focused
Speaker 3: on security, We're very focused on AI. We've made some
Speaker 3: tech and talent deals. Anything that can help us accelerate
Speaker 3: our solutions in those areas, we're open to look at Shuck.
Speaker 2: I do not apologize for this next question. We or
Speaker 2: are we not in an AI bubble?
Speaker 3: Oh, it's just it's so funny. Look, the customers that
Speaker 3: are buying the predominant amount of this technology have incredible
Speaker 3: balance sheets, have incredible cash flow, have incredible profitability. I
Speaker 3: think Caroline said that they actually pay their bills and
Speaker 3: and so, and they view it as an existential issue
Speaker 3: for them. That's that's a really key element. They don't
Speaker 3: view this as something that's nice to have. They don't
Speaker 3: view it as something that is okay, if we if
Speaker 3: we if we're successful.
Speaker 4: Great, if we're not great.
Speaker 3: They view it as existential, which you see with the
Speaker 3: level of spending that they're putting into it.
Speaker 4: So it's it's a lot and it's moving fast.
Speaker 3: And but the difference between now in two thousand is
Speaker 3: that these are massive companies with strong financial performance and
Speaker 3: they believe in this one hundred percent. So I don't
Speaker 3: think it's going to change. We haven't gotten into physical AI.
Speaker 3: We have, we're just getting into synthetic training. We haven't
Speaker 3: gotten into robotics. We haven't gotten into the enterprise in
Speaker 3: a big way yet, and so there's a there's a
Speaker 3: huge opportunity ahead for all of us.
Speaker 4: I believe.
Speaker 1: Chuck Bluemberg Intelligence Analysis says your projections are conservative. Briefly
Speaker 1: are the conservative?
Speaker 3: Well, I think you said that last quarter, so you
Speaker 3: proved to be correct ninety days ago. But look, I
Speaker 3: think based on what we know today we're ninety days
Speaker 3: into the year, were taking what we have in our backlog,
Speaker 3: what we see in the forecast. But again, we have
Speaker 3: three more quarters to play out. Lots of things can change.
Speaker 3: The World's very dynamic, but we're very confident in the
Speaker 3: numbers that we put up yesterday.
Speaker 1: Cisco CEO Chuck Robins, was a joy to catch up
Speaker 1: with you.