Thanks, Michelle, and welcome everyone to Cisco's Fourth Quarter Fiscal 2021 Quarterly Earnings Conference Call. This is Marilyn Mora, Head of Investor Relations, and I'm joined by Chuck Robbins, our Chair and CEO, and Scott Herren, our CFO. By now, you should have seen our earnings press release. A corresponding webcast with slides, including supplemental information, will be made available on our website in the Investor Relations section following the call. Income statements, full GAAP to non-GAAP reconciliation information, balance sheets, cash flow statements, and other financial information can also be found in the financial information section of our Investor Relations website. Throughout this conference call, we will be referencing both GAAP and non-GAAP financial results, and we'll discuss product results in terms of revenue and geographic and customer results in terms of product orders, unless stated otherwise. All comparisons made throughout this call will be made on a year-over-year basis. The matters we will be discussing today include forward-looking statements, including the guidance we will be providing for the first quarter and full year of fiscal 2022. They are subject to the risks and uncertainties, including COVID-19 that we discuss in detail in our documents filed with the SEC, specifically the most recent reports on Forms 10-K and 10-Q, which identify important risk factors that could cause actual results to differ materially from those contained in the forward-looking statements. With respect to guidance, please also see the slides and press releases that accompany this call for further details. Cisco will not comment on its financial guidance during the quarter unless it is done through an explicit public disclosure. With that, I'll now turn it over to Chuck.

Thank you, Marilyn. And good afternoon, everyone. I hope you're all remaining healthy and staying safe. Our team at Cisco ended fiscal 2021 with an incredibly strong finish. We had an outstanding Q4 performance and fiscal year revenue reflecting strength across our portfolio, customer segments, and geographies. Our product order growth was the highest we've seen in over a decade, and we're continuing to see strong customer reception to the accelerated investments in software and subscriptions. This great momentum is reaffirming our position as the worldwide leader in technology that powers the internet and a digital enterprise. As I think about our achievements over the past year, three things stand out to me: First, the exceptional execution of our teams. We achieved these results through the extraordinary efforts of our leadership team, our partners, and most importantly, our people around the world, who operated with incredible speed and at an unprecedented scale to deliver this growth. Second, our transformation and strategic investments are paying off. The benefits of our shift to software and subscriptions are clear, and they are helping both Cisco and our customers move with greater speed and agility. And third, the power of our portfolio. The groundbreaking innovation we are investing in today will serve as the foundation for our customers' futures. These three factors position us exceptionally well for growth as we enter our next fiscal year, as evidenced by our results this quarter. We're more confident than ever that we are in a strong position to help our customers be successful. As we look forward, we are laser-focused on providing our customers the technologies they will need to successfully navigate highly dynamic environments at an incredibly rapid pace. With the rise of COVID variants and the inconsistent pace of vaccine deployment around the globe, organizations must be resilient and adaptable as we've seen how quickly the world around us can change. While this may impact certain short-term plans, like a return to the office for many, one thing is clear, there's tremendous demand for Cisco's technology. No matter how or when the global recovery takes shape, we are executing on our vision of rebuilding a better world, one that is digital, sustainable, inclusive, and highly secure. I believe we're at a pivotal moment in our company's history as we have a massive opportunity to transform what has been the traditional office and define the future of hybrid work. As our customers look to create safer hybrid workplaces, as well as collaborative and engaging experiences for their customers and employees, we believe they are becoming increasingly reliant on Cisco technologies to help them with their transformation and resiliency. Enterprises are increasingly seeking digital and cloud-enabled services, which is driving demand for our solutions and leading to new and expansive market opportunities for Cisco. We're in a unique leadership position to build and deliver innovative cloud-to-edge infrastructure platforms that our customers need. With the depth and breadth of our hardware, software, silicon, and optics solutions, we are helping companies solve their biggest challenges. Whether it's adopting modern application architectures, shifting to hybrid work and hybrid cloud, securing their enterprise, or meeting their ESG goals, Cisco is helping our customers thrive in a hybrid world. These industry dynamics helped drive our strong fourth-quarter performance. The momentum we saw in Q3 accelerated through Q4 as we delivered robust revenue growth, increased earnings, strong margins, and record operating cash flow. We also generated strong double-digit growth in product deferred revenue, reflecting the success of our transformation around driving subscriptions and recurring revenues, which increases our visibility into future performance. We're seeing IT budgets grow as companies begin to implement their critical future plans and business confidence increases. However, we do recognize that uncertainty remains around COVID-19, and we're closely monitoring the delta variant and its impact on customer spending. Right now, we are not seeing any additional impact on our business, aside from the component shortage we've been facing over the past several months. Moving to the performance of our customer segments. As I mentioned, we delivered the highest product order growth in over a decade with a growth of 31% driven by strength across all of our end markets. This outstanding performance is also up over 17% from our pre-COVID Q4 levels in Fiscal year 2019. We saw double-digit growth in every one of our customer segments. This strength is being driven by stronger customer investment in substantial network upgrades to help modernize and secure their environment to support the new way of working. Specifically, in our enterprise business, we had the best quarter in terms of product orders in over a decade and saw a very strong order growth of 25%. We also had our third consecutive quarter of acceleration in our commercial Service Provider and public sector businesses, with all of these segments showing growth in excess of 20%. In our web-scale business, we saw increased momentum delivering record performance with over 160% order growth. And on a trailing four-quarter basis, orders grew over 80% due to customers adopting products across the portfolio and early traction of our 400-gig Solutions, a huge testament to the investments we have made in accelerating innovation and the differentiated value we're bringing to these customers from a product portfolio perspective. We also had a very balanced performance. As customers prepare for office re-openings and hybrid work, they are increasing their investment across our networking, Cloud Security, and Unified Communications portfolios. In Q4, we saw double-digit revenue growth in campus switching, Catalyst 9000, high-end routing, wireless, and in our Zero Trust solutions, along with strength in our security endpoint portfolio. We also had a very strong adoption of our Acacia optical solutions driven by increasing customer demand for leading-edge technology to address their growing bandwidth requirements. The transformation of our business to more software and subscriptions continues to show tremendous progress, as we achieved over $4 billion in software revenue in Q4, an increase of 7% sequentially and up 6% year-over-year. Within that, subscription revenue grew 9% in Q4 and 15% for the full fiscal year. For perspective, software represented 31% of our business in Q4. And for the full year, when combined with our services business, they represent over 53% of revenue, clearly highlighting the success of our continued business transformation. In addition to delivering strong financial results, our innovation engine continues to accelerate. Over the last year, we introduced an impressive number of new capabilities across our entire portfolio, while also doubling down on more flexible consumption models, including our core networking capabilities as a service highlighted by the recent launch of Cisco Plus. Our new Cisco Plus solutions deliver cross-portfolio technologies to help solve our customers' biggest needs with faster time-to-value network-as-a-service as-a-service offerings that deliver hybrid cloud technologies and will later expand to a broader catalog of services built and delivered with our partner ecosystem. Cisco Plus improved speed, agility, and scale with on-demand solutions that intelligently adapt to our customers' business needs. While still in early days in its launch, Cisco Plus directly aligns with our transformation goals around driving more subscription-based recurring revenue via the cloud. Our unique strengths improvement strategy gives us the confidence to move at a more accelerated pace. You will see us continue to invest in our key growth areas in technology shifts like hybrid cloud, hybrid work, 5G, Wi-Fi 6, Edge, security, and cloud-native architectures to extend our technology leadership positions. You will also see us deliver even more strategic offers to enable our customers to thrive in a Cloud-first digital world. These include full-stack observability to improve their digital experiences by providing visibility and insights across their entire technology stack and Secure Access Service Edge or SASE, designed to enable seamless secure access to applications anywhere their users work. Given the momentum we're seeing in our business, we have more conviction than ever that we are investing in the right areas and will continue to extend our competitive advantages and drive growth. Before I turn it over to Scott for more details on the quarter and our expectations for the next fiscal year, let me give you an update on the supply environment. While we're seeing increasing demand for our technology, we're also continuing to manage through the component shortage challenges that nearly every company is experiencing. Our world-class supply chain team, as always, is doing an incredible job navigating this complex situation by working with our global suppliers to meet customer demand as quickly as possible. Looking ahead, we expect the supply challenges and cost impacts to continue through at least the first half of our fiscal year and potentially into the second half. In summary, demand for our technology is very strong and our strategy is more relevant than ever. This allows us to deliver greater value to our customers, partners, and communities as we all adapt to new ways of living and working. I am very encouraged by the recovery trajectory across the board and with our momentum. I am confident in our strategy and investments. I feel great about the innovation we're driving in our portfolio, and I'm incredibly proud of what our teams and partners have achieved. I look forward to building on these insights with a more comprehensive, deep dive on our multiyear vision and strategic growth drivers at our virtual Investor Day on September 15th and I hope you'll join us. Thank you again for your time. And with that, I'll turn it over to Scott for additional detail.

Thanks, Chuck. Our fourth quarter reflects a strong close to our fiscal year with significant momentum across our business. We saw robust customer demand, demonstrating the third consecutive increase in product order growth and solid execution by our teams. I'll provide some detail on our financial results for the quarter, then cover the full fiscal year, followed by our guidance. Q4 was a very strong quarter and a very dynamic environment. We executed exceptionally well, with greater than 30% product order growth year on year, and more than 17% order growth versus our pre-COVID Q4 fiscal 19 product bookings, driven by strength across our portfolio. In fact, it was the strongest product order growth rate in over a decade. We also had strong results across revenue, net income, earnings per share, and as Chuck said earlier, record operating cash flows. Total revenue increased to 13.1 billion, up 8% year-over-year, coming in at the high end of our guidance range for the quarter. We saw strength in a number of product areas and across all geographies. Our business continues to recover well and build momentum with sequential revenue growth of 3%. Our non-GAAP operating margin was 33.5%, up 50 basis points. Non-GAAP net income was 3.6 billion and non-GAAP earnings per share was $0.84. Both up 5% year-over-year and exceeding the high end of our guidance range. Now let me turn to provide more detail on our Q4 revenue. Total product revenue was 9.7 billion, up 10%. Service revenue was 3.4 billion, up 3%. Infrastructure platforms performed very well with revenues up 13%. All businesses saw double-digit growth with the exception of the Data Center. Switching had strong growth driven by a double-digit increase in Campus Switching, led by our Catalyst 9K and Meraki Switching offerings. We also had solid growth in our Data Center Switching portfolio with the Nexus 9000 products. Routing grew driven by both the Service Provider and Enterprise markets as we saw strong adoption across our portfolio, including a robust uptake of our Cisco 8000 platform. Wireless had a strong growth driven by the continued ramp of our Wi-Fi 6 products and our Meraki wireless offerings. Data Center revenue declined driven primarily by servers as we experienced continued market contraction. Applications were down 1% driven by a slight decline in our collaboration portfolio. However, recurring subscription revenue within our WebEx suite grew 9% in Q4. We also saw solid growth in IoT software, AppDynamics, Cloud Contact Center, and our Cloud Calling platforms. Security was up 1%. Our Cloud security and Zero Trust portfolios performed well with greater than 20% growth as we had continued momentum in our Duo and Umbrella offerings. Our Security recurring subscription revenue grew 13% in Q4 and 18% for the full fiscal year. In both applications and security, we're seeing strong revenue growth in the strategic areas that we and our customers are investing in. We continue to transform our business, delivering more software offerings and driving growth in subscriptions and recurring revenue. Software revenue was 4 billion, an increase of 6%, subscriptions were 81% of total software revenue up 3 points year-over-year. Software subscription revenue grew 9% in Q4 and 15% for the full fiscal year. As we continue to increase our software subscriptions, we're driving higher levels of recurring revenue. Additionally, the strength of our portfolio and transition to more software and services is driving growth in remaining performance obligations or RPO. At the end of Q4, RPO crossed the 30 billion mark at 30.9 billion, up 9%. RPO for the product was up 18% and service was up 3%. Approximately 53% of the total RPO is short-term, meaning it will be recognized as revenue in the next 12 months. As I mentioned, we had exceptionally strong order momentum in Q4 as total product orders were up 31% with strength across the business. Looking at our geographies, the Americas was up 34%, EMEA was up 24%, and APJC was up 29%. Total emerging markets were up 25% with the BRICs plus Mexico up 37%. In our customer segments, the commercial was up 41%, the service provider was up 40%, enterprise returned to growth; it was up 25% while the public sector was up 22%. Non-GAAP total gross margins came in at 65.6%, up 60 basis points year-over-year. Product gross margin was 65%, up 180 basis points and Services gross margin was 67.4%, down 240 basis points, which was in line with our expectations as we do see variability from quarter to quarter. The increase in product gross margin was driven by productivity improvements from lower freight and other costs, partially offset by relatively modest price erosion. As we discussed last quarter, we continue to manage through the supply chain constraints seen industry-wide due to component shortages. We've closely partnered with our key suppliers, leveraging our volume purchasing and extended supply commitments as we address the supply challenges and cost impacts, which we expect will continue at least through the first half of our fiscal year, and potentially into the second half. Our number one rank global supply chain team continues to perform at a world-class level. When you look at the impact of acquisitions on our Q4 results year-over-year, there was a positive 210 basis point impact on revenue and no material impact on our non-GAAP earnings per share. From a cash perspective, operating cash flow for the quarter was a record 4.5 billion up 18% year-over-year, driven by strong cash collections. We ended Q4 with total cash, cash equivalents, and investments of 24.5 billion, up approximately $900 million sequentially. In terms of capital allocation, we returned 2.4 billion to shareholders during the quarter. That was comprised of 1.6 billion for our quarterly cash dividend and 791 million of share repurchases. We continue to invest organically and inorganically in our innovation pipeline. During Q4, we closed 5 acquisitions: Kenna Security, Socio Labs, Slido, Sedona Systems, and Involvio. These investments are consistent with our strategy of complementing our internal innovation and R&D with targeted M&A to allow us to further strengthen and differentiate our market position in our key growth areas. Turning to the full fiscal year results, overall, our financial results were solid in a very challenging global pandemic environment with strong operational execution. Revenue was 49.8 billion, up 1%. The total non-GAAP gross margin was 66.1%, up 10 basis points. And our non-GAAP operating margin was 33.5%, down 30 basis points. From a bottom-line perspective, our non-GAAP net income was flat at 13.6 billion, and non-GAAP earnings per share were $3.22. We delivered an operating cash flow of 15.5 billion, flat compared to fiscal '20. From a capital allocation perspective, we returned 9.1 billion in value to shareholders over the fiscal year, which represents 61% of our free cash flow. That was comprised of 6.2 billion in quarterly cash dividends and 2.9 billion of share repurchases. We also increased our dividend for the 10th consecutive year in fiscal 2021, reinforcing our commitment to return capital to our shareholders, and our confidence in the strength and stability of our ongoing cash flows. We remain firmly committed to maintaining a strong balance sheet to fuel our organic and inorganic growth initiatives, as well as continuing our capital allocation strategy of returning a minimum of 50% of our free cash flow to shareholders annually. To summarize, we had a great Q4 and a solid fiscal year, with strong operational execution. We're seeing returns on the investments we're making in innovation, and driving the continued shift to more software and subscriptions, driving more recurring revenue, delivering growth, and driving shareholder value. Now let me provide forward-looking guidance. We're pleased to initiate the additional practice of providing an annual outlook to complement our regular quarterly look ahead for the fiscal year 2022. The successful transformation we've been executing around driving a higher proportion of our revenues from subscriptions, recurring, and deferred revenue, is affording us additional visibility into our outlook for future growth. Please note our guidance is subject to the disclaimer regarding forward-looking information that Marilyn referred to earlier. Our financial guidance for Q1 is as follows. We expect revenue growth to be in the range of 7.5% to 9.5% year-over-year. We anticipate the non-GAAP gross margin to be in the range of 63.5% to 64.5%, reflecting the continuing increase in supply chain costs we are incurring as we protect shipments to our customers. Our non-GAAP operating margin is expected to be in the range of 31.5% to 32.5%. Non-GAAP earnings per share are expected to range from $0.79 to $0.81. Our financial guidance for the full-year fiscal '22 is as follows. We expect revenue growth to be in the range of 5% to 7% year-on-year. Non-GAAP earnings per share are expected to range from $3.38 to $3.45, also up 5% to 7% year-over-year. In both our Q1 and full-year outlook, we are assuming a non-GAAP effective tax rate of 19%. Looking ahead, we're excited to host a Cisco virtual Investor Day on Wednesday, September 15th, 2021, which we will webcast live, and hope you can join us. I will now turn it back to Marilyn so we can move into the Q&A.

Thanks, Scott. Michelle, let's go ahead and queue up the Q&A line.

Thank you. Samik Chatterjee from JP Morgan, you may go ahead.

Hi. Thank you for taking my question. I wanted to get your thoughts on the timing of releasing a full-year guide. Other companies may have chosen not to provide guidance due to supply chain uncertainties, so I appreciate the existence of the full-year guide. Can you explain what factors are contributing to this increased visibility? You mentioned the transformation, but I'm also interested in how incoming orders play a role in that visibility and how supply chain considerations are included in the full-year guide. Specifically, how much of the guidance accounts for supply chain headwinds? Thank you.

That's a great question. Thank you for asking. It's one of the advantages of the transformation we're undergoing. As we shift more towards software and services with a recurring revenue model, we gain better visibility. One of the figures we mentioned is our remaining performance obligations of 30.9 billion, with 53% expected to convert to revenue in the next 12 months. We also have a clear understanding of upcoming renewals and our renewal rates as we progress. This gives us a solid grasp of a significant portion of our revenue and its expected growth. Additionally, we have a good view of our pipeline, which we've seen grow year-over-year for Q1 at a better rate than in recent years. This contributes to our confidence in providing a full-year guidance. Regarding the supply chain, you can think of the impact as the difference between the high-end and the low-end of our guidance. We anticipate that supply chain issues will affect us in the first half of the year. At the low-end of the guidance, we expect these impacts to continue through most of the second half, with some resolution towards the end. However, at the high end, we believe we've started to resolve supply chain concerns, bringing supply and demand back into balance earlier in the second half. This confidence comes from the visibility we currently have, factoring in some of the ongoing uncertainties related to the supply chain.

Thank you.

Thanks, Samik. We'll take the next question, please.

Meta Marshall from Morgan Stanley Investment Research, you may go ahead.

Great. Thanks. Maybe coupling onto that question, just how should we think about kind of the incremental 150 basis point sequential gross margin decline in the guidance and just how much of that is incremental supply chain impact, and would you expect to abate that through either price changes or supply chain improvement to improve that throughout the year? Thanks.

Thank you, Meta, for that. Looking at the Q4 gross margin, it performed better than we anticipated and guided. This was partly due to a favorable product mix, especially a strong quarter for software as mentioned earlier. Moving forward, we've implemented several measures to ensure we can maintain supply and deliver products to our customers. They are undergoing their own transformations and adapting to a hybrid work environment compounded by the challenges of the delta variant. We recognize that the world will not revert to normal, so we need to be prepared for ongoing flexibility. We are aiming to support that while also facing supply and demand imbalances, particularly concerning semiconductors and memory, similar to what others in our industry are experiencing. This situation leads to increased component costs as we source from suppliers. We are also working to secure additional supply from brokers versus relying solely on our suppliers and qualifying secondary sources when necessary. Each of these steps does incur costs, and it will take time for these costs to be reflected in our standard costing system and impact the cost of goods sold. Additionally, there is some unfavorable product mix headwinds expected in Q1 as we have identified products that are not affected by these issues that we can ship, which is influencing the sequential change. As you know, we did implement a selective price increase on the products where we saw higher component costs, effective August 7th. However, we honor quotes that exist for 30 days beyond that price increase since they were generated prior to the change. Therefore, orders will only start to reflect the new prices about 30 days after August 7th, and it takes time for those orders to be built and shipped to customers before we see any benefit in our top line. We anticipate that the effects of these price increases will be more noticeable in Q2 and Q3 than in Q1.

Great. Thanks.

Thank you. Next question, please?

Paul Silverstein from Cowen, you may go ahead.

I appreciate Scott's pick-up on the previous two questions. If I look at your annual guidance, it's strong revenue; it's almost a billion above the consensus number. The EPS is more in line, it's slightly light but not meaningfully. But the difference obviously is gross margin and or OpEx. I appreciate that COVID has elevated your cost structure, as well as all of your peers. Can you give us any granular insight in terms of translating the revenue upside that you're looking at that you're expecting relatively to the more modest EPS outlook for the year in terms of gross margin versus OpEx?

Yes, Paul, it's really driven by gross margin. There is still uncertainty regarding when supply and demand will realign for many of those components. That's the reason for the range we've provided, which is 5% to 7%, and this affects the bottom line as well. I want to note that I don’t want to break it down into various components at this time, but there remains uncertainty. Since this is the first time we've offered an annual guide, we believe it's wise to be cautious with the outlook we've presented.

Scott, regarding OPEX, is it your intention to increase OpEx at a slower rate than revenue? Given the strong revenue growth you're anticipating this year, will you keep OpEx growth below revenue to achieve some leverage?

I’ll begin, and Chuck may want to add to this. The guidance shows 5% to 7% growth for both the top and bottom lines, indicating that we aim for balanced, profitable growth. This reflects our approach to running the business going forward, focusing on balanced profitable growth. Achieving 5% to 7% on both ends is a solid performance, especially compared to our results over the past few years. I don’t want to delve into the details, but the main idea is balanced profitable growth.

We are focused on balanced, profitable growth, and that's how we plan to operate the business moving forward. Achieving 5% to 7% growth on both the top and bottom lines is a solid performance, especially compared to our results over the past few years. I prefer not to delve into the specifics, but the main principle remains balanced profitable growth.

Can I ask?

Go ahead, Paul. Go ahead.

Is there any reason why your gross margin structure wouldn't return to where it was before COVID, or even improve? I understand there are various factors that can influence it from quarter to quarter, but generally speaking, should we anticipate that the gross margin structure will go back to its pre-COVID levels?

That is our expectation, Paul. Over time, I mean, again, I don't want to predict that for this fiscal year, just given some of the uncertainties in the supply chain, but it is our expectation that it gets back there and over the longer term as we continue to build a bigger mix of software into our revenue stream, that should also provide a bit of a tailwind to our margins.

I appreciate it.

Thanks, Paul. Michelle, next question.

Aaron Breakers from Wells Fargo. You may go ahead.

Yes. Thanks for taking the question, and congrats on a good quarter. I wanted to ask the supply chain question a little bit differently. As you see the order momentum in the pipeline build commentary that you laid out, obviously, is quite positive. How are you assessing the perishability of demand? Are you seeing any signs where customers might be double ordering, or how do you just think about that in the function of the guidance that you've laid out?

Aaron, this is Chuck, thank you for that. Look, we expected to be asked about pull-ahead. I think there's a couple of things that I would say, we obviously can't calculate that directly. We've looked at several indicators; our pipeline analysis, channel orderings, our salesforce opportunity movement, order cancellation rates, future pipeline build, and we don't see any signs of ordering well ahead of needs other than lining up with what our lead times are. And we have customers that are large carriers, large telcos, Cloud players, who have 12, 18, to 24-month capacity plans. And so, they look at our lead times and they are going to order into that based on what they have, but we would not say there was a significant amount of pull ahead other than dealing with the lead times. The other thing that I would just highlight is that Scott pointed out earlier, after the real strong order growth we saw in Q4, we're sitting with the best start from a forecast pipeline perspective that we've had in several years. That would lead us to believe that this is a trend that we should see continue for a little while.

Great, thank you.

All right, great. Next question, please?

Tim Long from Barclays, you may go ahead.

Thank you. Could you just dig into the software angle a little bit? Numbers seem pretty strong, yet the applications and security lines trail a little bit on the product side. So, could you just parse that through for us? And then, second, just did want to follow up on that cloud piece that was so strong in the quarter. Chuck, any other color you can give on that? It sounded pretty broad-based, but I'm assuming some of your peers also, to the last question, saw a little bit more advanced, longer lead time orders, or is there anything else in that huge cloud number? Thank you.

Thanks, Tim. On the Applications front, we anticipated you might have questions, and there are a few points to consider regarding both Applications and Security. The order rates were significantly higher than the revenue rates, which is important to note. The recurring subscription aspects within each of those sectors were also quite positive. As Scott mentioned, in Security within the collaboration segment of the applications WebEx suite, the recurring subscriptions in WebEx suite revenue increased by 9% in Q4 and 16% for the year. We experienced solid growth in IoT, Cloud Contact Center, and Cloud Calling. Additionally, there were phones and handsets along with some on-prem software tied to collaboration, which faced some impact from the supply chain. However, the future growth areas appear promising. In terms of security, Cloud Security and Zero Trust saw growth over 20%. The recurring subscription revenue for Security rose by 13% in Q4 and by 18% for the whole year, which was also strong. Our demand for Next-Generation Firewall was robust, but some legacy products in the supply chain created a slight revenue challenge. Nevertheless, orders remained stronger than revenues, and we expect a normalization over the next few quarters. Regarding Web scale, after reflecting on the past 5 to 6 years, I can now say that it has become meaningful. We made multi-year investments in building the Cisco 8000 with new silicon, optics, and software, and the growth has been remarkable. We saw a 160% order growth this quarter, compared to almost 30% order growth in the same quarter last year. Customers are increasingly adopting our complete portfolio, especially on the enterprise side, with over half of that business landing in their cloud infrastructure. We are also witnessing a significant uptick in 400G, and here are some details: in Q4, our orders for 400G ports increased by 668%, and for the year, orders were up 831%. We have over 400 customers that have deployed, and we’ve taken orders for nearly 180,000 ports. Things are progressing well, and we’ve won several franchises in the cloud Web scale space, continue to conduct proof of concepts, and are in validation and certification stages in others. We recognized that we missed the first transition with these players and aimed to be ready for this next architectural shift, and I believe our teams have positioned us well for that.

Okay, thank you very much for the color.

Thanks, Tim. Next question.

Rod Hall from Goldman Sachs, you may go ahead, sir.

Great. Thanks for the question. A lot of ports, Chuck. A lot of ports. So, I had two questions for you. One is regarding the order growth. I'm curious about linearity there. That last time we talked, the handle on that was back in 2010 when you guys were exiting the GSD, but it seems like those orders could accelerate from here, and I'm curious whether you think that's a possibility or how probable an acceleration is from that 31% growth rate? And then I wanted to come back to this pricing commentary, and I'm curious what the durability of these prices is. What your intention would be once the component cost, these underlying costs go down, will you flex these prices right back down again or do you expect them to sustain themselves a little bit longer? Just curious what your plan on pricing would be as these underlying costs change. Thanks.

Let me begin, and then I'll let Scott address the pricing matter. You raised a couple of questions, Rod. Regarding linearity, the quarter started strong and ended strong. It was consistent from the beginning to the end, rather than having a 5% growth until the last month, followed by an acceleration. The growth was steady throughout the quarter. You talked about the potential for acceleration. I don't foresee 31% order growth becoming the new norm. However, it does seem that our customers are beginning to make decisions about modernizing their infrastructure and technology assets to adapt to this new hybrid work environment. With the Delta variant, they are realizing that returning to the office might not be a one-time event. They need to be resilient and build adaptability for the future, considering that another variant could emerge at any time. This is what customers are contemplating currently. Regarding pricing, in the quarter we just completed, the pricing component of our gross margin was actually at the lower end of our normal range, indicating that we are maintaining pricing with our sales teams, which is encouraging. If this trend continues, we would expect to see the favorable impact we anticipate. Scott?

I agree with that. Rod, I want you to consider the price increases we announced on August 7th. These increases are primarily aimed at offsetting the cost increases we’re experiencing, rather than driving revenue growth. There is a delay, so it will take time for these price adjustments to reflect in our revenue, but that is the main motivation behind them. We will keep evaluating, as we always do, whether we need to adjust prices again, either up or down. However, it’s important to understand that these adjustments are not driven by a desire to boost revenue, but rather to address the higher costs we are facing. Additionally, we have a regular methodology for implementing price increases across different portfolios. We don’t always discuss this during our earnings calls, but it’s something we do regularly when market conditions require it.

Okay. Great. Thank you.

Next question, please.

Sami Badri from Credit Suisse. You may go ahead, sir.

Thank you. My first question is on your gross margins and just the cost of products and the question really is just around how much of these cost inputs can Cisco control versus how many of them are not controllable at all? So that's the first question. And then the second question is, going back to some of your wins with the Series 8000, how much of these wins are completely new deployments versus you going head-to-head with an incumbent or going head-to-head with other competing vendors for those deployments, right? Or existing replacement or new deployments, and that would be great. Thank you.

Sure. Sami, I'll start with the cost of goods sold. This is primarily influenced by component and contract manufacturing costs related to various assembly processes rather than something we can easily adjust. I believe this is largely affected by the imbalance between supply and demand that we’ve previously discussed. Regarding your second question, it’s challenging to distinguish between new deployments and those where we are competing against incumbents. However, I can confirm that we face competition from incumbents in every case, as even new architectures being developed are in competition with established players. The competition is intense, but our teams have developed impressive technology. Additionally, cloud providers prefer a diverse supply chain, and I wanted to reiterate a point from earlier when Tim asked about our cloud business. Web scale made up 30% of our Service Provider segment in orders for the quarter.

Got it. Thank you.

Thanks. Chuck, next question?

Simon Leopold from Raymond James, you may go ahead, sir.

Thank you very much for taking the question. I think you've alluded to 31% order growth not being sustainable. Can you give us some idea of what you see as really the sustainable or more normalized level? And also, if you could comment on your purchase order commitment because I've assumed that the substantial commitments you've made help you lock in and secure pricing when you made those commitments and represents, I guess, a way of controlling the headwind as we think about the full-year model. I want to make sure I'm understanding that correctly. Thank you.

Sure. I'll begin with the second part of your question, and then I'll let Chuck share insights on order growth. As we secured some of the work on supply, particularly focusing on components where there is a significant imbalance between supply and demand, we have locked in various aspects. We evaluated costs and delivery schedules for these components, and we have a clear understanding of this for a portion of our components. There will still be some fluctuations in certain areas; for example, memory prices will continue to vary, and we will keep monitoring that. In the past, we have adjusted prices due to memory cost increases, and I expect this to be an ongoing process. However, for the components we secured, which had the most significant imbalance and highest demand from both us and our competitors, we have successfully locked in our positions.

Yes. And on the side of the order, that's a difficult question to answer. What I would say is that this is the first time we've given long-range guidance or annual guidance on both revenue and EPS. We have Investor Day coming up on the 15th where we're going to talk about the key growth drivers in our business and we're also going to begin to share new metrics that will give you a flavor of the business in a different way. So, I think that's what as we spend time on that day, I think the drivers of growth will be clear to you, and I think that bookings will only be one metric that we'll look at, relative to future performance.

Thank you.

Thanks. Next question, please.

Fahad Najam from MKM Partners. You may go ahead, sir.

Thank you very much for taking my question. In terms of the order strength, do you have any way of parsing out any double ordering or forward pull-in orders from your customers, and have you adjusted for that? And I have a follow-up.

So, Fahad, as I mentioned earlier, we have analyzed our pipeline activities, examined our future pipeline, and assessed order cancellation rates. Currently, we do not observe any concerning trends. It appears that customers are indeed placing orders further in advance due to lead times, which makes sense. The order growth we experienced in Q4, coupled with our forecast for the pipeline moving forward, indicates a substantial amount of demand still exists. We are closely monitoring this situation, as Chuck previously discussed some of the data points we are evaluating. Order cancellations could indicate instances of double ordering from us and other parties, but cancellation rates have decreased slightly. In terms of return rates and pipeline growth, we are not seeing any significant changes. Additionally, we reported a 41% increase in overall order growth within the Commercial segment. If there were to be any issues with double ordering, they would likely be more apparent in the Enterprise segment or EPS. The significant growth we've seen in Commercial suggests that such double ordering is not expected in that customer base.

I appreciate that. Chuck, if I could ask you big picture questions. Before COVID-19 happened, I think you had mentioned that for the first time, virtually every product line in Cisco's family of products had been repriced. To the extent, how much of the strength you're seeing is the function of the product refresh cycle that is taking place across all your product lines versus total new growth? For example, like Edge Cloud, which I think is going to be a totally new network of growth architecture that's never been deployed before, so it's like the new phase of growth. How much of the strength you're seeing in the function of this refresh versus a new phase of growth?

There are several transformations happening across our customer base that we are well-positioned to take advantage of. With the advancements in 5G and WiFi 6, the shift towards hybrid work, and the re-architecting of infrastructure to support Hybrid Cloud, along with the transition to 400 Gig that we've discussed, all of these are initiatives we have been working on in our portfolio. The refreshed products and the new innovation we’ve introduced are timely as we are at the forefront of these significant transitions we've been addressing for years. This is what is driving our current strength. At the Investor and Analysts Day on September 15, our engineering leaders will share insights on their achievements and what's ahead, including our innovation pipeline. I am optimistic about what they have developed, and we have plenty of plans for new technology and capabilities.

I appreciate the answer. Thank you.

Thank you. Next question, please.

Jim Suva from Citigroup Global Markets, you may go ahead, sir.

Thanks very much. It's Jim Suva. I had one question. The long-term full-year outlook of sales and EPS is greatly appreciated, and I noticed that's a big difference and shows a lot of conviction. But on the EPS, normally you also have some stock buyback going in. But some companies include stock buyback in their EPS guide, some don't. So, what I'm wondering is, on your EPS guide, does it include some normal stock buyback? I know this year was different when you bought Acacia for about 4.5 billion, but I wondering how we should think about that EPS. Does it include stock buyback or what are the components of the EPS growth that match sales growth?

Great question, Jim. It only assumes that our share buybacks offset dilution. So, think of that as you're doing your own modeling, think of the share count to be roughly flat to where it ends this year.

Got you. Thank you so much for the clarification. It's great to hear all the details.

Thanks, Jim.

Thanks, Jim. Next question.

Jeff Kvaal from Wolfe Research, you may go ahead.

Thanks very much. I am hoping to get a little bit of clarification into the software growth trajectory. It sounds like it's a great year overall, and the fourth quarter maybe didn't close as well as you'd like, and if we can talk about the trajectory, we should expect for Software growth in 2022, that would be splendid.

I'll start with some color, and then, Scott, you can chime in. I think we continue to add more software capabilities across the portfolio. We continue to transition. We've transitioned a lot of our portfolio to subscription-based even for the hardware side of the business. Most of the acquisitions that we do come in subscription or SaaS software businesses. So, we would expect to continue just this move towards it becoming a greater percentage of our portfolio. In the next couple of years, we think we also will see some of the renewal volumes will start kicking in on top of it as well, but the transformation has already made a big difference. Scott, and I we're looking at last quarter when we did guidance for Q4. having the software revenue that came off the balance sheet significantly altered positively what we were able to guide from a revenue perspective in Q4 versus what we would have done 5 or 6 years ago. It was meaningful. And so, we're going to continue to invest in this capability; we are going to continue to drive software. It's a hugely important part of the business; the teams have done a great job.

Yeah. Jeff, what I'd say is at 4 billion of software revenue over the last 90 days, we're one of the biggest software companies in the world. I mean, annualize that or look at the trailing 12 months, makes us somewhere in the top 10 in software companies in the world. We posted 6% overall growth and 9% growth in subscriptions even off that base. So, I think the software business is actually doing quite well for us. What's underneath your question is that what you saw on applications, I'll go back to what we said earlier about what's happening in Applications. Underneath that, you got to remember that includes the entire collaboration portfolio, so not just the software pieces and not just the recurring software pieces; there are hardware elements there, there are some legacy on-prem elements there, both of those were headwinds. In the subscription software revenue piece of both Applications and Security, we saw double-digit growth. We had nice growth year-on-year for the full year in both of those. So, I actually feel good about where we're headed on that.

Great. And then a quick clarification. Do you all plan to update the annual guidance every quarter for us?

We will evaluate it every quarter and make updates as necessary. The major factor, of course, is the state of the supply chain and when we can expect more balance between supply and demand for some of our key components. This will determine when we feel confident about providing an update.

Thank you both very much.

Thanks, Jeff, and we've got time for one more question.

Ben Bolan from Cleveland Research. You may go ahead, sir.

Thanks for getting me in at the end. I also want to focus a little bit on software. A few specific items. First, I'm curious how you think about your average contract duration and what you're seeing on average invoice duration as you shift more to software and any high-level implications you see for cash flow over time? The second item is I'm curious if you've seen any trends with early renewals from the early DNA customers, what's happened at those renewals? And then the last piece, how do you think about longer-term, making sure you're driving good utilization and consumption of the software licenses within the customer base? Thank you.

You managed to get in three questions, Ben, on the one-question limit. I'll discuss duration first. The total remaining performance obligations of 30.9 billion is a record for us. Within that, the short-term obligations account for about 53%. They're growing fairly evenly, with slightly more growth in the long-term compared to the short-term, which is expected since the short term covers just the next 12 months, while long-term includes everything beyond that. Thus, it’s not surprising to see a bit more long-term growth. We are not witnessing any significant change in duration overall. I’ll also cover the last point, Chuck, and leave the DNA question for you. As we assess our renewal rates and necessary actions, our renewal base is growing and becoming increasingly important. Renewals depend on customer adoption. We've implemented specific processes to monitor customer usage and adoption closely. If we don’t encourage adoption, we won’t achieve renewal. Therefore, we’re tackling this at that level. The team has done well to gain insights into this, providing early warnings and ensuring we achieve the adoption needed.

You want to take the DNA question? We've experienced a modest number of renewals in the first half of this year, with an increased volume expected in the second half. Fiscal '23 will see a more significant figure. Our teams have been diligently refining the processes, metrics, systems, and measurements, and the engineering teams are focused on continuously enhancing our offerings to ensure sufficient innovation, which will maximize our renewal opportunities. It’s still early, but by the second half of this fiscal year, we should be able to provide more details, with fiscal '23 presenting a notable number.

Thank you.

Great. Thanks, Ben, for the question. And Chuck will want to come with some closing remarks or I can close it up?

I'll close it now and head it to you. I'm really proud of our team. I'm really proud of the performance, and we're certainly pleased with the demand that we've seen. I'm super happy with the transformation, we believe our investments are paying off, our software business, the work we're doing with the web-scale and the cloud providers, and across the portfolio. I think our technology will help our customers deal with this emerging focus on resiliency and agility and adaptability, and then most of all, I want to thank our teams for the incredible execution, not only in Q4 but over the last 12 to 18 months during a very complicated time. And I'd like to also just remind you and encourage you all to join us on September 15th for Investor Day. Thank you.

Thanks, Chuck. So, Cisco's next quarterly earnings conference call which will reflect our fiscal 2022 first-quarter results, will be on Wednesday, November 17th, 2021 at 1:30 PM Pacific Time, 4:30 PM Eastern Time. Again, I'd like to remind the audience that in light of Regulation FD, Cisco's policy is not to comment on its financial guidance during the quarter unless it is done through an explicit public disclosure. We will now plan to close the call. If you have any further questions, feel free to contact the Cisco Investor Relations group, and we thank you all very much for joining today's call.

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