Ladies and gentlemen, this is the operator. Today's conference is scheduled to begin momentarily. Until that time, your lines will again be placed on music hold. Thank you for your patience. Continued demand growth in our Nexus portfolio or our data center switching, which predominantly goes into private cloud infrastructure into the enterprise. And then obviously the web scale performance that we saw with five out of the—or I'm sorry, three out of the six growing over 100% year over year, two of the six growing over 50% year over year. So it was very balanced. And so far, I think that despite the geopolitical risk, despite the uncertainty that's going on in the U.S. and in the marketplace around the world, I think the one thing our customers understand is that their need to continue spending on technology is just there. There's so much change going on right now from a technology perspective that there's both excitement about the opportunity, and candidly, there's a little bit of fear of slowing down too much and letting your competition get too much ahead of you. So we saw solid demand. Thank you, Sami. And I just want to remind analysts to ask one question and a follow-up question at the same time. Michelle, we can move to the next analyst. Thank you. Ben Reitzes with Melius Research. You may go ahead, sir. Yeah. Hey, thanks a lot, guys. And congrats on the quarter. It's good to see you guys with the momentum. Chuck, we got a lot of questions very recently about a new switch that you just put out, the Nexus 9300. And this programmable switch market looks like there's a lot of strong prospects there. Just wondering if you could talk a little bit more about that product and maybe why you went with AMD for the product and what that means for your versus your NVIDIA products. And my follow-up just is with regard to the overall comment of just overall demand just sounds so much better than a few quarters ago. I just wanted some, the view that do you still think people are getting ready for AI? Or, I don't know if I heard that from you this time, that you were thinking the last two quarters people were getting ready for AI and it picked up. And this just sounded like a little more firm. But I was just wondering for a little more color on that. Hopefully, that didn't run on too long, Sami. But I'll pass it back to you. Thanks, Ben. No, we got them both. Look, first and foremost, I want to just thank the team and our product organization because the innovation that they've been delivering over the last 12 to 18 months has been at a pace that we haven't seen in a very long time. We've seen a lot in the collab space, in the security space, a lot in the silicon space, and then in the web scale infrastructure and now I think what you referenced, this switch with the DPU in it, is a great example of the innovation that we are going to drive in our core networking portfolio and so I can't speak to exactly why the team chose the AMD DPU other than I'm sure they did an analysis and thought it was the best solution for us. But this is a real, it's a breakthrough product because it allows us to, candidly, we can take security out of these appliances that they come in and put it where it belongs, which is everywhere. Security needs to be deployed everywhere. And this really allows us to integrate security deeply into the network and at the speed of the network. So what this allows us to do is you can run network services or security services on these DPUs in the network at the speed of the ASICs as opposed to moving this traffic to a central place where you're going to be limited by the processing power of a single box. And so the first use case, as you are aware, is Hypershield, which we announced, and we had a couple of big Fortune wins in the prior quarter, even as we're just building out the final capabilities on Hypershield. So that's going to be the first deployment. If you think about the use case, you could put one of these switches sitting between zones in a data center and running all the traffic through it at line speed and doing security inspection via Hypershield to protect different zones from east-west threats. So we think it's got a lot of potential, and this is just the first service or first use case that the teams have come up with. On your second question, we absolutely believe that a lot of this demand is being driven by customers preparing for AI. We even think a lot of the telco demand that we see is, are the telcos building out their networks to be prepared to deliver AI as a service or AI-driven services? And so while I didn't call it out, it's one of the pillars that we talk about relative to our role in AI. And we do think there's an acceleration of companies that are just trying to get prepared for what they're going to need. It's clear that agentic AI workstreams are going to put more capacity onto the network. Thank you, Ben. Michelle, can we move to the next analyst? Thank you. Matthew Niknam with Deutsche Bank. You may go ahead, sir. Hey, guys. Thanks so much for taking the question. Just maybe to dovetail on the prior question, you talked about enterprises investing a little bit more in AI. I'm just wondering, as they come into the new calendar year, what you're seeing and hearing specifically from enterprise customers on the AI front and how meaningful it is for your business today? And then just as a follow-up, maybe for Scott, you did about 68.7% on a gross margin front this past quarter. I think the guide implies a step down to between 67% to 68%. I'm wondering maybe what informs that view. Thanks so much. So I'll say what we're seeing on the enterprise side relative to AI is customers are still in the very early days, and they all realize they need to figure out exactly what their use cases are. We're starting to see some spending, though, on specific AI-driven infrastructure. And we think as we get AI Pods out there, we got HyperFabric coming, we got AI Defense coming, we have Hypershield in the market, and we got this new DPU switch. They're all going to be a part of the infrastructure to support these AI applications. So we're beginning to see it happen. But I think it's also really important to understand that as the enterprises leverage their private data, their proprietary data, and they'll do some training on that, and then they'll run inference, obviously, against that. We believe that opportunity is an order of magnitude higher than what we've seen in training to date. So we're going to continue to innovate and build capabilities to put ourselves in a better position to be a real beneficiary as this continues to accelerate. But as of today, we feel like we're in pretty good shape. And Matthew, on your question on gross margin, the guide at 67%-68% for Q3, and by the way, I think it settles in in that range for the full year. What's built into that and driving the step down from where we were in Q2 is we have, and this was noted in my commentary upfront, we have built in the cost of the proposed tariffs that we've seen so far. So the additional 10% in China, the 25% on Canada and Mexico. Canada has a negligible impact on us. And the steel and aluminum, we've quantified those out again, assuming the March 1 date. I think it's such a fluid environment right now. It's very difficult to say what's actually going to happen. But I wanted to protect the guide and ensure that we built in the 25% that's been proposed. I will tell you, we've got a supply chain team that over the last several years has built a lot of muscle around the tariff that we had in China and how did we work our way around that, and from the time that was first imposed to where we are now, our mitigation activities have reduced our exposure there by about 80%, so we've game planned out several scenarios and steps we can take. Depending on what actually goes into effect, we'll start to take those steps to mitigate the impact of the tariffs, but what I built into the cost of goods sold, that's where the tariffs will hit, is the full effect of 25% in Mexico, Canada, and the additional 10% in China. With no mitigation at this point. With no mitigation built in at this time. Thank you, Matt. Michelle, we can move to the next analyst. Samik Chatterjee with J.P. Morgan. You may go ahead, sir. Hey, thanks for taking my questions. I guess maybe I'll follow up on that tariff question to start off. You do mention you're embedding in the cost of the tariffs, but I think we're getting a lot of questions also in terms of how to think about demand. So Chuck or Scott, I mean, any thoughts in terms of how you've seen enterprise customers respond on a demand basis to previous tariffs? And how does that inform your view in terms of what to expect for demand? And sort of are you seeing any pull forward from customers to avoid some of these tariffs in the first place? And for my follow-up, I think it's more about the hyperscaler and the AI momentum you're seeing there. You're seeing strong momentum in autos, but what is maybe if you can give us some insights on deployments? We can see the strong CapEx numbers or guidance from them, but is there any acceleration or sort of more on track in terms of deployment pace relative to what you expected? Thank you. Yep, so on the first question, we're not seeing any evidence of customer pulling demand ahead. I think the tariff environment is very fluid right now. It's a very dynamic environment, well, everyone is taking note. I think until we know what's actually going to go into effect, it would be very difficult for our customers to decide what to do. I think the other thing that as we look at the steps we would take to mitigate the impact of demand, there are a number of steps we can take to offset the cost. We obviously would have price as a lever, but there's a number of considerations that we'd have to go through before we got there. Right now, I don't envision that. What we would look to do first is make some of the changes we need to make inside the supply chain to mitigate the impact of whatever tariff regime gets put into place. So not seeing any evidence of any pull ahead in demand. Yeah. So Samik, I think on the question relative to the web scale demand versus their deployments, I think the bottom line is that I've sat with all these customers, and they've looked at me and said, "If you can build more, we will buy more." So I think that a couple of them had initial targets for how many units they wanted in 2025, and that number's already gone up by 50%. So I think the deployments are moving very rapidly and on track. And we continue to respond to all of their demand. And frankly, the changes that they make as their strategy evolves on it, it's very dynamic. It's a very dynamic market. Thank you, Samik. Michelle, we can move to the next analyst. Thank you. Tal Liani with BofA Securities. You may go ahead, sir. Hi. Great quarter, but I have a question about maybe the weaker parts. If my math is right, and I'm not sure it's right, so I need clarification. Splunk was down 11% this quarter, year over year. Maybe my numbers are totally wrong. So if you can clarify what's happening with Splunk and give us an update on the trends? And the second question is security and observability. It's supposed to accelerate. It accelerated last quarter. Can you talk about the trends this quarter and kind of the good parts and the bad parts of the growth? Thanks. Okay. I'll take the first one and then Chuck, we can tag team on the second if you want. I'm not sure what math you're doing, Tal. I think one thing that is not visible to you with the math that you've got in front of you is the end of Splunk's quarter, their fiscal, by the way, this would have been the end. The end The end of January was the end of their prior Q4. So as with every enterprise software company, of course, Q4 is the biggest quarter of the year. And in fact, it gets back-loaded so that the week 13 of that Q4 is the biggest week of the quarter. The way the calendar fell this year, our fiscal quarter ended on January 25. So that last week of January that was historically Splunk's Q4 actually is not captured in our Q2 results. It'll flow into our Q3 results. That may be what's throwing you off on the math. Splunk is still growing double digits. It's growing right in line with our expectations, modestly ahead of our expectations on the top line, and is profitable well ahead of when we expected it to be profitable. So Splunk's performing quite nicely for us. Yeah. On the security front, what I would say, Tal, is that we had always said we expected to see the acceleration in the second half of this year. We saw the last four quarters of growth from a demand perspective in organic security, which is a good sign. And what we've launched is all this new innovation that just takes time to ramp. But I can give you a couple of data points. If you just look at two of the products, Cisco Secure Access and XDR, between those two, we now have those deployed at over 1,000 customers, and each of them are actually supporting over 1 million enterprise users each. So we're seeing the success. They just need time to ramp. We've also launched Hypershield. I said earlier we won two Fortune 100 enterprise customers this past quarter, and there's a great deal of excitement. If you look at AI defense, with the AI summit that we did recently, I think there's about 20-some-odd customers who are interested in going to proof of concept with us right now on it. We had almost half the Fortune 100 there for that event. So I feel good about where we are. It'll turn into greater demand as we just continue to scale these products. Thank you, Tal. Michelle, can we move to the next analyst? Amit Daryanani with Evercore ISI. You may go ahead, sir. Okay. Thanks, Michael, for sharing all the comments. Just a quick question on the $700 million AI orders so far this year. Are you mainly switching an optical lens, or are you seeing lenses in other products? And then just curious if you're expecting any of these. You've seen some very strong AI orders. Are we expecting these to start converting into revenue this fiscal year, or is that more of a fiscal 2026? Thank you. Thanks, Amit. I'll take the first one, Scott. You can do the revenue. On the $700 million in AI orders, it's a combination of systems, silicon, optics, and optical systems. And I think if you break it down, it's about half is in silicon and systems. But it continues to accelerate. And I'd say the teams have done a great job on the silicon front. We've invested heavily in more resources there. The team has run in parallel development efforts for multiple chips that are staggered in their time frames. They've worked hard. They are increasing the yield, which is a positive thing. And so we feel good about it. But it's a combination of all those things that we're selling to the customers. Scott, on the revenue side? Yeah. Amit, it's no different than what we've said all along about when we expect this to turn into revenue. We knew the orders would come in well ahead of the actual ship dates. We do expect to see this revenue begin to ramp in the second half of the year, and that's consistent with what we've said from the start. Thank you for the questions, and Michelle, we can move to the next analyst. Thank you. Our next caller is James Fish with Piper Sandler. You may go ahead, sir. Hey, guys. Nice quarter. Working off a few of the things you guys just talked about here, can you just first give us an update as to the actual penetration of the 6,500 large customers you guys expected between Cisco and Splunk to jointly go after and any further bundling plans you have beyond what you just announced? And then secondly, to the last question, what are you guys seeing from where you're winning within the data center between the Silicon One approach versus sort of the systems approach with your AI wins? We'd love additional color there. Thanks, guys. Thanks, Jim. So on the Splunk side, I would say it's still early. These are still long sales cycles, and we're continuing to make progress. We are having wins. I mean, they're clearly out there. We also have seen the benefit of the portfolio coming together with large customers doing our broad-based, what we call WPAs, that are inclusive of Splunk now, the old Cisco WPAs that are inclusive of Splunk. And we talked about the Splunk team that had a deal that they were leading that actually expanded the Cisco footprint. So we are beginning to see that, and we'll continue to see it as we go forward. I think you'll see as we get into the next couple of quarters, you're going to see more and more cross-selling sales incentives that the teams are putting in place that I think will continue to accelerate that. On the second question, I think it was about how they're looking at systems versus silicon. Systems versus silicon. Yeah. I think that by and large, it's systems. Actually, just raw silicon sales are still very small as a percentage of the total business. So the general method of consumption is just to buy the systems. Thank you, Jim. Michelle, we can move to the next analyst. David Vogt with UBS. You may go ahead, sir. Great. Thanks, guys, for taking my questions, so I'll give you both, obviously, at the same time, so I'm just trying to square it up to your comments about the strength that you're seeing across the business because it looks like ex-Splunk enterprise orders maybe decelerated a little bit sequentially, and the strength in, I guess it looks like the Americas was mostly SP and cloud, and then the second question I have is maybe longer term. There's been a high number or a large number of project announcements over the last couple of weeks with some pretty big announcements from maybe the white box ODM space with some big wins as well. Maybe anything you can touch on from a competitive perspective on how you're thinking about maybe these bigger projects that have been announced, maybe the risks out there from some of these other alternatives like DeepSeek, and then some of these wins that have been announced by some of the ODM market and how you're thinking about the landscape. Thanks. Yeah. Okay. So first of all, on the enterprise, we've had four quarters of continued recovery. It was a little slower growth year over year than it was in Q1, but it's important to understand. I think Q2 over Q1 was up 29%. We literally took over $1 billion more in orders in Q2 than Q1. So I don't think there's anything to be overly concerned about right there. And we saw real good strength in Asia in double digits, and I think Europe was close to double digits. And U.S. enterprise just had a bunch of big deals in Q1 that I think just kind of slowed them down a little bit for Q2. On these other deals, I mean, if you look at technology like DeepSeek, we think as not DeepSeek in particular, but we think as we see more of this democratization of the access that it's going to just facilitate a faster advancement of AI applications in the enterprise, first of all. Secondly, I think we ran our AI defense model. I think we did 50 prompts, and the team (this was in 48 hours of this thing being out) and I think they proved every time that they could jailbreak this thing pretty easily. I think we got to be careful as well. And the final thing I'd say on a lot of these unique deals out there, these bigger deals, I think we're having success in the web scale space, and I think if we're being chosen in that space, I think we'll have a real good opportunity to play in these other emerging opportunities as they come about as well. Thank you, David. Michelle, we can move to the next analyst. Antoine Chkaiban with New Street Research. You may go ahead, sir. Hi. Thank you so much for taking my questions. So I'd like to follow up on the question regarding traction from enterprise customers in AI. Could you provide some additional color on where you are seeing Ethernet gaining momentum in the enterprise segment? What kind of cluster size, what use cases, which verticals? And then as a follow-up, I'd love to hear your perspective on what you're hearing from these customers in terms of data center space and, in particular, access to power as potentially being a bottleneck to roll out infrastructure this year. Thank you. Thanks, Antoine. Yeah. I don't think that we're not thinking about it from massive clusters that the enterprises are going to build. They're certainly building clusters to do training on their own models, or they're renting space from one of the major GPU providers to actually do their training and then pulling that back. And the infrastructure we're talking about is really to support the inferencing side of it. And I think, by and large, to be candid, the customers who have bought NVIDIA GPUs so far have just bought the whole stack from them. And so we think that'll be an emerging opportunity in the future. Ethernet under GPUs in the enterprise today hasn't been a major opportunity to date. Now, we believe with the NVIDIA partnership, the Hyperfabric stack, the AI pods, the things that we're building, we think that as we integrate that stack together and they have these reference architectures to build that we think that that will lead to our networking equipment being combined with NVIDIA GPUs, and that's how we'll accomplish that in the future, and candidly, I don't think there hasn't been a lot of concern over the power issue in the enterprise like it has been in the web scale space. Thank you, Antoine. Michelle, can we move to the next question? Aaron Rakers with Wells Fargo. You may go ahead, sir. Yeah. Thanks for taking the question and congrats on the quarter. I'll stick with the AI theme first, and then I'll throw out my quick follow-up. On the AI side, I think in the prepared comments you had mentioned that your 51.2G silicon will come out, I think it was the April time frame. As you think about that 50% of your business on the AI orders being tied to switches and Silicon One silicon, would you say that that is kind of a point of inflection? The majority of your AI wins are tied to that 51.2G silicon or just kind of trying to understand kind of the opening up of this monetization opportunity? And then as a follow-up, I'm just curious, on the campus side, just kind of help us appreciate maybe the Wi-Fi 7 upgrade cycle that you're starting to see or how you're thinking about that. Thank you. Yeah. I think on the comments we made on the 51.2 really was more of an enterprise comment in the Nexus portfolio, but it is Silicon One based. And so those chips will be used in the 8000s as an example. But if you get back to the silicon discussion that we had earlier, that team is designing multiple silicon architectures based on the use cases, on the customer. Do they need deep buffers? Do they not need deep buffers? I mean, it's really, is it a low-latency application? I mean, all of these things come into play as they develop different pieces of silicon for that marketplace. So we'll continue to develop in 51.2 and then beyond, and they're already working on just subsequent chips that will continue to crank up the speeds in these data centers. On the campus side, I think that we're continuing to see the campus switching infrastructure, as I talked about earlier. And it's early days on the Wi-Fi 7. I'd say customers are getting ready to begin deploying. I think we're going to move into that over the next two to three quarters where we'll see a full transition both in the traditional on-prem access points and then also in the cloud-managed. Thank you, Aaron. Michelle, we can move to the next analyst. Karl Ackerman with BNP Paribas. You may go ahead, sir. Thank you. Within enterprise networking, I think a couple of quarters ago, customer lead times bottomed out at just a few weeks. Is the greater visibility and support of your April quarter outlook from enterprises and even telco operators coming from just a return to normal order patterns, or are lead times extending out beyond a quarter across those customers as you begin to introduce AI Pods and Hypershield and perhaps some on-prem service offerings in addition to that? Thank you. It's just normalization of ordering. We haven't had any lead time pressure at all. Yeah. What's behind that question, Karl, is the demand that we're seeing today a function of extended lead times like we saw a couple of years ago. That's not the case. Our lead times are not extending. Thank you, Karl. Michelle, we can move to the last question. Atif Malik with Citi. You may go ahead, sir. Hi. It's Adrienne Colby for Atif. Thank you for taking the question. Earlier this week, you announced some offerings geared towards traditional service providers. I was just wondering if you could help us size this customer segment for Cisco and understand where these customers are in terms of their embrace of AI. What are some of the key issues that Cisco is helping them address? Scott, you want to comment on the size of the telco segment for us? Yeah, so telco had a good quarter in the last quarter. That's actually a continuation of what we saw in Q1, and what we hear from telco, particularly in international, is they are in anticipation of demand on their networks driven by AI doing the same thing that we hear enterprises doing. They know there's increased load coming. In many cases, they've sweated those assets for some time because of the state of the financials in that industry, and they're coming back to the table to build out their networks in anticipation of the increased demand. I think we'll continue to see that for some period of time. Telco, by its nature and the size of the telco customers that we have, can be a little bit episodic, a little bit big deals in one quarter and not in the next. So it's not something that I would expect to see on a steady state, but we're seeing good demand right now as they see the same thing, the same exact trend that enterprises see. There's network load coming. We need to be ready for it. Yeah. I think that's right. And I think the other thing that we see, some of the European operators are looking at delivering AI as a service. We see a lot of them planning for AI edge applications that are sitting at the edge of their networks that they're managing for customers, etc. So they are preparing for sure. Thank you, Adrienne. I want to hand it over to Chuck for some closing remarks. I just want to thank everybody for joining us today, and I want to thank our teams. I'm really proud of these results, and the teams have been doing a really great job both on the innovation front and engaging with our customers. We clearly live in a very dynamic world, and as Scott said earlier, as the impact of these potential tariffs become more clear, our teams will take the appropriate steps to mitigate where we can. I do feel good about our momentum. Again, the product innovation and particularly the innovation in our core, the portfolio and how it's translating through to customer value. Clearly, the AI tailwind as well as the integration that has occurred so far relative to Splunk and just the teams' periodic execution. I'm confident in the steps we've been taking. I think it'll lead to durability of the performance, and we want to just continue to deliver for our customers, deliver the right technology, the right value, and be a trusted partner for them. So thank you for being with us, and we'll look forward to talking to you soon. Cisco's next quarterly call, which will reflect our fiscal year 2025 Q3 results, will be on Wednesday, May 14, 2025, at 1:30 P.M. Pacific Time, 4:30 P.M. Eastern Time. This concludes today's call. If you have any further questions, please feel free to contact the Cisco Investor Relations Department, and we thank you very much for joining the call today. Thank you for participating on today's conference call. If you would like to listen to the call in its entirety, you may call 1-800-395-6236. For participants dialing from outside the U.S., please dial 203-369-3270.