Cisco CEO Robbins Says AI Demand Behind Strong Forecast

Bloomberg

Watch Cisco CEO Robbins Says AI Demand Behind Strong Forecast - Bloomberg on Dailymotion

Transcript

00:00In the year 2000, Cisco was one of the original four horsemen of technology.

00:06Based on the numbers you gave and what you said on the call, do you feel like customers,

00:11the new ones, and investors now understand Cisco's place in this new AI era?

00:19First of all, thanks for having me. I'm super proud of what the teams have accomplished. We

00:23had a record quarter and set ourselves up for what's likely going to be the best year we've

00:28ever had. It was just a great performance. I've been asked a lot over the last 24 hours to reflect

00:35back on 2000. It's kind of an interesting comparison. I think that, look, the hyperscalers

00:42are some of the most advanced customers in the world. They do the deepest analysis of the technology

00:49before they make decisions. I think that their decisions to continue spending more with us

00:55speaks volumes about the innovation and the technology that our teams are building right

00:59now. So I'm really proud of them, and I think it'll just extend into the enterprise over time.

01:04Chuck, who are some of those new customers that you've been able to sign in the AI context?

01:09Well, we're just talking about the major hyperscalers, primarily in the United States. But we've also

01:15announced these sovereign deals in the Middle East with G42 and the Emirates, as well as Humane and

01:21Saudi. There's a lot of work going on in the neocloud space. We're seeing sovereign players

01:26start popping up now in parts of Europe, as well as Southeast Asia and India. So it's a broad swath

01:33of customers. But the 1.3 billion that we talked about is strictly the top hyperscalers that we're

01:39doing business with. So you're talking about five companies. And they're good for the money,

01:44as you can tell from the cash flow that they have, Chuck. That $200 million that you are expanding

01:49into sovereign. You are expanding into enterprise and neoclouds. How do you bake in some of the

01:53risks that the market just cannot get enough of talking about, this circular economy?

01:58Well, so we did talk about the fact that we have over $2 billion now in our pipeline through the

02:04end of the fiscal year. So over the next three quarters in neocloud, sovereign cloud, and enterprise.

02:10And we see that continue to accelerate. We took $200 million in orders in Q1. And it's just,

02:17it's a natural way the technologies have been evolving over the last decade or more.

02:23They start in the hyperscalers. They move through the telco space. In this case, the neoclouds and

02:28the sovereign players, and then into the enterprise. And it's happening exactly that way. And our bread

02:33and butter over the years has been in the enterprise. And we have lots of technology. We have a partner

02:38ecosystem. We have full stack solutions. We have security. We have all the things that they're

02:43looking for to actually build out AI workloads and deal with AI with confidence.

02:48Let's just go to that security. A little bit of a fly on the ointment, let's say. I know you've

02:52talked clearly about perhaps how the booking of revenue can be misinterpreted. But how are you

02:57going to sell that more holistically? How do you think the security part of the offering can really

03:01start firing on all cylinders?

03:02Well, I started by saying, clearly, we're not pleased with where we are yet. But I will say

03:09over the last two to three years, we've made a lot of progress. It's a major decision for customers to

03:13make big platform decisions in security. We've had a lot of great wins. I'm proud of what the teams

03:19have built. And we saw our next generation firewalls. We saw mid-teens growth in orders there.

03:25We saw double-digit ARR growth in Splunk. We saw our new and refreshed products on the security side

03:31continue to show growth. And the issue we had in the quarter was really it's an accounting issue

03:36around how cloud-delivered Splunk versus on-prem-delivered Splunk. The cloud stuff is routable

03:42and revenues realized over the life of the term. And the on-prem stuff gets recognized immediately.

03:48And we just had a major shift in how our customers consume it, which is great for us in the long term,

03:53that they're buying more cloud-based solutions. But it creates a little bit of a challenge on

03:59revenue during the quarter. The good news is the networking business is doing incredibly well

04:03and can cover that for us. Chuck, it is fair to say at a minimum that the Cisco of today isn't the

04:09same as the Cisco of 2000. What you've done is kind of been open about the product lineup. And you've

04:15used M&A to change the footprint of the company. What's your latest thinking on that, the products that

04:21you offer and what you need to do either organically or inorganically to offer what the world of AI

04:27wants? I think the big things that we did, we obviously introduced a lot more software into

04:33our portfolio in areas that are strategic, like security. And the Splunk acquisition has been a

04:38great one. I think the other thing that's worth calling out is this investment that we started in

04:432016, to be clear, on our silicon strategy. That is absolutely the reason that we're having success

04:50today in the hyperscaler space. If we did not have our silicon and develop and design our own silicon,

04:57we wouldn't be participating at all. It's just black and white. And so as we look at both

05:04internal innovation as well as inorganic opportunities, we're very focused on security.

05:11We're very focused on AI. We've made some tech and talent deals. Anything that can help us accelerate

05:18our solutions in those areas, we're open to look at. Chuck, I do not apologize for this next

05:24question. Are we or are we not in an AI bubble? Oh, it's just, it's so funny. Look, the customers

05:35that are buying the predominant amount of this technology have incredible balance sheets,

05:41have incredible cash flow, have incredible profitability. I think Caroline said it, they actually

05:46pay their bills. And so, and they view it as an existential issue for them. That's a really key

05:54element. They don't view this as something that's nice to have. They don't view it as something that

05:58is okay if we're successful, great. If we're not, great. They view it as existential, which you see

06:05with the level of spending that they're putting into it. So it's a lot and it's moving fast.

06:12And, but the difference between now and 2000 is that these are massive companies with strong

06:18financial performance and they believe in this 100%. So I don't think it's going to change. We

06:23haven't gotten into physical AI. We have, we're just getting into synthetic training. Yeah. We

06:28haven't gotten into robotics. We haven't gotten into the enterprise in a big way yet. And so there's

06:33a, there's a huge opportunity ahead for all of us, I believe. Well, Chuck, Blue Meg intelligence

06:38analysis says your projections are conservative briefly. Are they conservative?

06:44Well, I think you said that last quarter. So you proved to be correct, uh, 90 days ago,

06:49but, um, look, I think based on what we know today, we're 90 days into the year. Uh, we, we,

06:55we're taking what we, what we have in our backlog, what we see in the forecast. But again, we got,

07:00we have three more quarters to play out. Lots of things can change. The world's very dynamic,

07:03but we're, we're very confident in the numbers that we put up yesterday.

07:07We're very confident in the numbers that we put up yesterday.

Category

Transcript

Be the first to comment

Recommended