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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 
_____________________________________
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 29, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
          
For the transition period from              to             
Commission file number 001-39940 
_____________________________________
csco-20221029_g1.jpg
CISCO SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware   77-0059951
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification Number)
170 West Tasman Drive
San Jose, California 95134
(Address of principal executive office and zip code)
(408) 526-4000
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and formal fiscal year, if changed since last report.)
_____________________________________ 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $0.001 per share CSCO The Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes    No    
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes     No    
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer  
Non-accelerated filer Smaller reporting company  
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  No 
Number of shares of the registrant’s common stock outstanding as of November 17, 2022: 4,108,103,063
____________________________________ 
1

Cisco Systems, Inc.
Form 10-Q for the Quarter Ended October 29, 2022
INDEX
Page
Part I
3
Item 1.
3
3
4
5
6
7
8
Item 2.
Item 3.
Item 4.
Part II.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

2

PART I. FINANCIAL INFORMATION 
Item 1. Financial Statements (Unaudited)
CISCO SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except par value)
(Unaudited)
October 29, 2022 July 30, 2022
ASSETS
Current assets:
Cash and cash equivalents $ 7,292  $ 7,079 
Investments 12,492  12,188 
Accounts receivable, net of allowance of $88 at October 29, 2022 and $83 at July 30, 2022
5,439  6,622 
Inventories 2,664  2,568 
Financing receivables, net 3,683  3,905 
Other current assets 4,571  4,355 
Total current assets 36,141  36,717 
Property and equipment, net 1,972  1,997 
Financing receivables, net 3,618  4,009 
Goodwill 38,160  38,304 
Purchased intangible assets, net 2,360  2,569 
Deferred tax assets 4,891  4,449 
Other assets 5,912  5,957 
TOTAL ASSETS $ 93,054  $ 94,002 
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt $ 1,249  $ 1,099 
Accounts payable 2,316  2,281 
Income taxes payable 890  961 
Accrued compensation 2,907  3,316 
Deferred revenue 12,578  12,784 
Other current liabilities 4,956  5,199 
Total current liabilities 24,896  25,640 
Long-term debt 7,629  8,416 
Income taxes payable 7,835  7,725 
Deferred revenue 10,441  10,480 
Other long-term liabilities 1,981  1,968 
Total liabilities 52,782  54,229 
Commitments and contingencies (Note 14)
Equity:
Cisco stockholders’ equity:
Preferred stock, $0.001 par value: 5 shares authorized; none issued and outstanding
—  — 
Common stock and additional paid-in capital, $0.001 par value: 20,000 shares authorized; 4,103 and 4,110 shares issued and outstanding at October 29, 2022 and July 30, 2022, respectively
42,984  42,714 
Accumulated deficit (594) (1,319)
Accumulated other comprehensive loss (2,118) (1,622)
Total equity 40,272  39,773 
TOTAL LIABILITIES AND EQUITY $ 93,054  $ 94,002 
See Notes to Consolidated Financial Statements.
3

CISCO SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per-share amounts)
(Unaudited) 
Three Months Ended
October 29, 2022 October 30, 2021
REVENUE:
Product $ 10,245  $ 9,529 
Service 3,387  3,371 
Total revenue 13,632  12,900 
COST OF SALES:
Product 4,179  3,673 
Service 1,107  1,174 
Total cost of sales 5,286  4,847 
GROSS MARGIN 8,346  8,053 
OPERATING EXPENSES:
Research and development 1,781  1,714 
Sales and marketing 2,391  2,261 
General and administrative 565  551 
Amortization of purchased intangible assets 71  84 
Restructuring and other charges (2)
Total operating expenses 4,806  4,615 
OPERATING INCOME 3,540  3,438 
Interest income 169  121 
Interest expense (100) (89)
Other income (loss), net (134) 187 
Interest and other income (loss), net (65) 219 
INCOME BEFORE PROVISION FOR INCOME TAXES 3,475  3,657 
Provision for income taxes 805  677 
NET INCOME $ 2,670  $ 2,980 
Net income per share:
Basic $ 0.65  $ 0.71 
Diluted $ 0.65  $ 0.70 
Shares used in per-share calculation:
Basic 4,108  4,218 
Diluted 4,116  4,243 
See Notes to Consolidated Financial Statements.
4

CISCO SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
(Unaudited)
Three Months Ended
October 29, 2022 October 30, 2021
Net income $ 2,670  $ 2,980 
Available-for-sale investments:
Change in net unrealized gains and losses, net of tax benefit (expense) of $78 and $28 for the first quarter of fiscal 2023 and 2022, respectively
(251) (83)
Net (gains) losses reclassified into earnings, net of tax (benefit) expense of $(1) and $2 for the first quarter of fiscal 2023 and 2022, respectively
(4)
(246) (87)
Cash flow hedging instruments:
Change in unrealized gains and losses, net of tax benefit (expense) of $(8) and $(1) for the first quarter of fiscal 2023 and 2022, respectively
24 
Net (gains) losses reclassified into earnings, net of tax (benefit) expense of $5 and $0 for the first quarter of fiscal 2023 and 2022, respectively
(14) (1)
10 
Net change in cumulative translation adjustment and actuarial gains and losses net of tax benefit (expense) of $22 and $9 for the first quarter of fiscal 2023 and 2022, respectively
(260) 25 
Other comprehensive income (loss) (496) (56)
Comprehensive income $ 2,174  $ 2,924 
See Notes to Consolidated Financial Statements.


5

CISCO SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited)
Three Months Ended
October 29, 2022 October 30, 2021
Cash flows from operating activities:
Net income $ 2,670  $ 2,980 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and other 415  533 
Share-based compensation expense 496  453 
Provision (benefit) for receivables
Deferred income taxes (366) (98)
(Gains) losses on divestitures, investments and other, net 131  (211)
Change in operating assets and liabilities, net of effects of acquisitions and divestitures:
Accounts receivable 1,119  427 
Inventories (108) (275)
Financing receivables 556  672 
Other assets (316) (170)
Accounts payable 42  (93)
Income taxes, net 20  17 
Accrued compensation (384) (585)
Deferred revenue (78) (95)
Other liabilities (242) (129)
Net cash provided by operating activities 3,962  3,427 
Cash flows from investing activities:
Purchases of investments (1,943) (2,951)
Proceeds from sales of investments 407  580 
Proceeds from maturities of investments 971  1,856 
Acquisitions, net of cash and cash equivalents acquired and divestitures —  (336)
Purchases of investments in privately held companies (48) (101)
Return of investments in privately held companies 10  53 
Acquisition of property and equipment (176) (122)
Proceeds from sales of property and equipment — 
Other (20) — 
Net cash used in investing activities (799) (1,020)
Cash flows from financing activities:
Repurchases of common stockrepurchase program
(556) (273)
Shares repurchased for tax withholdings on vesting of restricted stock units (108) (133)
Short-term borrowings, original maturities of 90 days or less, net (602) — 
Repayments of debt —  (2,000)
Dividends paid (1,560) (1,561)
Other (29) (3)
Net cash used in financing activities (2,855) (3,970)
Effect of foreign currency exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents (95) — 
Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents 213  (1,563)
Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period 8,579  9,942 
Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period $ 8,792  $ 8,379 
Supplemental cash flow information:
Cash paid for interest $ 114  $ 124 
Cash paid for income taxes, net $ 1,150  $ 758 


See Notes to Consolidated Financial Statements.
6

CISCO SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(in millions, except per-share amounts)
(Unaudited)
Three Months Ended October 29, 2022 Shares of
Common
Stock
Common Stock
and
Additional
Paid-In Capital
Accumulated Deficit Accumulated
Other
Comprehensive Loss
Total
Equity
Balance at July 30, 2022 4,110  $ 42,714  $ (1,319) $ (1,622) $ 39,773 
Net income 2,670  2,670 
Other comprehensive loss (496) (496)
Issuance of common stock —  — 
Repurchase of common stock (12) (118) (384) (502)
Shares repurchased for tax withholdings on vesting of restricted stock units (2) (108) (108)
Cash dividends declared ($0.38 per common share)
(1,560) (1,560)
Share-based compensation 496  496 
Other —  (1) (1)
Balance at October 29, 2022 4,103 $ 42,984  $ (594) $ (2,118) $ 40,272 

Three Months Ended October 30, 2021 Shares of
Common
Stock
Common Stock
and
Additional
Paid-In Capital
Retained Earnings (Accumulated Deficit) Accumulated
Other
Comprehensive Loss
Total
Equity
Balance at July 31, 2021 4,217  $ 42,346  $ (654) $ (417) $ 41,275 
Net income 2,980  2,980 
Other comprehensive loss (56) (56)
Issuance of common stock —  — 
Repurchase of common stock (5) (46) (210) (256)
Shares repurchased for tax withholdings on vesting of restricted stock units (2) (133) (133)
Cash dividends declared ($0.37 per common share)
(1,561) (1,561)
Share-based compensation 453  453 
Other (2) (1)
Balance at October 30, 2021 4,217 $ 42,621  $ 553  $ (473) $ 42,701 










7

CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.Organization and Basis of Presentation
The fiscal year for Cisco Systems, Inc. (the “Company,” “Cisco,” “we,” “us,” or “our”) is the 52 or 53 weeks ending on the last Saturday in July. Fiscal 2023 and fiscal 2022 are each 52-week fiscal years. The Consolidated Financial Statements include our accounts and those of our subsidiaries. All intercompany accounts and transactions have been eliminated. We conduct business globally and are primarily managed on a geographic basis in the following three geographic segments: the Americas; Europe, Middle East, and Africa (EMEA); and Asia Pacific, Japan, and China (APJC).
We have prepared the accompanying financial data as of October 29, 2022 and for the first quarter of fiscal 2023 and 2022, without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (GAAP) have been condensed or omitted pursuant to such rules and regulations. The July 30, 2022 Consolidated Balance Sheet was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States. However, we believe that the disclosures are adequate to make the information presented not misleading. These Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended July 30, 2022.
In the opinion of management, all normal recurring adjustments necessary to state fairly the consolidated balance sheet as of October 29, 2022, the results of operations, the statements of comprehensive income, the statements of cash flows and the statements of equity for the first quarter of fiscal 2023 and 2022, as applicable, have been made. The results of operations for the first quarter of fiscal 2023 are not necessarily indicative of the operating results for the full fiscal year or any future periods.
Our consolidated financial statements include our accounts and investments consolidated under the variable interest and voting models. The noncontrolling interests attributed to these investments are not presented as a separate component in the equity section of the Consolidated Balance Sheets as these amounts are not material for any of the fiscal periods presented. The share of earnings attributable to the noncontrolling interests are not presented separately in the Consolidated Statements of Operations as these amounts are not material for any of the fiscal periods presented.
Certain reclassifications have been made to the amounts in prior periods in order to conform to the current period’s presentation. We have evaluated subsequent events through the date that the financial statements were issued.

2.Recent Accounting Pronouncements
(a)Recent Accounting Standards or Updates Not Yet Effective
Reference Rate Reform In March 2020, the FASB issued an accounting standard update and subsequent amendments that provide optional expedients and exceptions to the current guidance on contract modification and hedging relationships to ease the financial reporting burden of the expected market transition from the London InterBank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. This accounting standard update was effective upon issuance and may be applied prospectively through December 31, 2022. We do not expect this accounting standard update will have a material impact on our Consolidated Financial Statements.

3.Revenue
We enter into contracts with customers that can include various combinations of products and services which are generally distinct and accounted for as separate performance obligations. As a result, our contracts may contain multiple performance obligations. We determine whether arrangements are distinct based on whether the customer can benefit from the product or service on its own or together with other resources that are readily available and whether our commitment to transfer the product or service to the customer is separately identifiable from other obligations in the contract. We classify our hardware, perpetual software licenses, and software-as-a-service (SaaS) as distinct performance obligations. Term software licenses represent multiple obligations, which include software licenses and software maintenance. In transactions where we deliver hardware or software, we are typically the principal and we record revenue and costs of goods sold on a gross basis. We refer to our term software licenses, security software licenses, SaaS, and associated service arrangements as subscription offers.
8

CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

We recognize revenue upon transfer of control of promised goods or services in a contract with a customer in an amount that reflects the consideration we expect to receive in exchange for those products or services. Transfer of control occurs once the customer has the contractual right to use the product, generally upon shipment, electronic delivery (or when the software is available for download by the customer), or once title and risk of loss has transferred to the customer. Transfer of control can also occur over time for software maintenance and services as the customer receives the benefit over the contract term. Our hardware and perpetual software licenses are distinct performance obligations where revenue is recognized upfront upon transfer of control. Term software licenses include multiple performance obligations where the term licenses are recognized upfront upon transfer of control, with the associated software maintenance revenue recognized ratably over the contract term as services and software updates are provided. SaaS arrangements do not include the right for the customer to take possession of the software during the term, and therefore have one distinct performance obligation which is satisfied over time with revenue recognized ratably over the contract term as the customer consumes the services. On our product sales, we record consideration from shipping and handling on a gross basis within net product sales. We record our revenue net of any associated sales taxes.
An allowance for future sales returns is established based on historical trends in product return rates. The allowance for future sales returns as of October 29, 2022 and July 30, 2022 was $47 million and $43 million, respectively, and was recorded as a reduction of our accounts receivable and revenue.
Significant Judgments
Revenue is allocated among these performance obligations in a manner that reflects the consideration that we expect to be entitled to for the promised goods or services based on standalone selling prices (SSP). SSP is estimated for each distinct performance obligation and judgment may be required in their determination. The best evidence of SSP is the observable price of a product or service when we sell the goods separately in similar circumstances and to similar customers. In instances where SSP is not directly observable, we determine SSP using information that may include market conditions and other observable inputs.
We assess relevant contractual terms in our customer contracts to determine the transaction price. We apply judgment in identifying contractual terms and determining the transaction price as we may be required to estimate variable consideration when determining the amount of revenue to recognize. Variable consideration includes potential contractual penalties and various rebate, cooperative marketing and other incentive programs that we offer to our distributors, channel partners and customers. When determining the amount of revenue to recognize, we estimate the expected usage of these programs, applying the expected value or most likely estimate and update the estimate at each reporting period as actual utilization becomes available. We also consider the customers’ right of return in determining the transaction price, where applicable.
We assess certain software licenses, such as for security software, that contain critical updates or upgrades which customers can download throughout the contract term. Without these updates or upgrades, the functionality of the software would diminish over a relatively short time period. These updates or upgrades provide the customer the full functionality of the purchased security software licenses and are required to maintain the security license’s utility as the risks and threats in the environment are rapidly changing. In these circumstances, the revenue from these software arrangements is recognized as a single performance obligation satisfied over the contract term.
9

CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)


(a)Disaggregation of Revenue
We disaggregate our revenue into groups of similar products and services that depict the nature, amount, and timing of revenue and cash flows for our various offerings. The sales cycle, contractual obligations, customer requirements, and go-to-market strategies differ for each of our product categories, resulting in different economic risk profiles for each category. The following table presents this disaggregation of revenue (in millions):
Three Months Ended
October 29,
2022
October 30,
2021
Product revenue:
Secure, Agile Networks $ 6,684  $ 5,968 
Internet for the Future 1,310  1,373 
Collaboration 1,086  1,109 
End-to-End Security 971  895 
Optimized Application Experiences 193  181 
Other Products
Total Product 10,245  9,529 
Services 3,387  3,371 
Total $ 13,632  $ 12,900 
Amounts may not sum due to rounding. We have made certain reclassifications to the product revenue amounts for prior period to conform to the current year presentation.
Secure, Agile Networks consists of our core networking technologies of switching, enterprise routing, wireless, and compute products. These technologies consist of both hardware and software offerings, including software licenses and SaaS, that help our customers build networks, automate, orchestrate, integrate, and digitize data. Our hardware and perpetual software in this category are distinct performance obligations where revenue is recognized upfront upon transfer of control. Term software licenses are multiple performance obligations where the term license is recognized upfront upon transfer of control with the associated software maintenance revenue recognized ratably over the contract term. SaaS arrangements in this category have one distinct performance obligation which is satisfied over time with revenue recognized ratably over the contract term.
Internet for the Future consists of our routed optical networking, 5G, silicon, and optics solutions. These products consist primarily of both hardware and software offerings, including software licenses and SaaS. Our hardware and perpetual software in this category are distinct performance obligations where revenue is recognized upfront upon transfer of control. Term software licenses are multiple performance obligations where the term license is recognized upfront upon transfer of control with the associated software maintenance revenue recognized ratably over the contract term. SaaS arrangements in this category have one distinct performance obligation which is satisfied over time with revenue recognized ratably over the contract term.
Collaboration consists of our Meetings, Collaboration Devices, Calling, Contact Center and Communication Platform as a Service (CPaaS) offerings. These products consist primarily of software offerings, including software licenses and SaaS, as well as hardware. Our perpetual software and hardware in this category are distinct performance obligations where revenue is recognized upfront upon transfer of control. Term software licenses are multiple performance obligations where the term license is recognized upfront upon transfer of control with the associated software maintenance revenue recognized ratably over the contract term. SaaS arrangements in this category have one distinct performance obligation which is satisfied over time with revenue recognized ratably over the contract term.
End-to-End Security consists of our Network Security, Cloud Security, Security Endpoints, Unified Threat Management and Zero Trust offerings. These products consist of both hardware and software offerings, including software licenses and SaaS. Updates and upgrades for the term software licenses are critical for our software to perform its intended commercial purpose because of the continuous need for our software to secure our customers’ network environments against frequent threats. Therefore, security software licenses are generally represented by a single distinct performance obligation with revenue recognized ratably over the contract term. Our hardware and perpetual software in this category are distinct performance obligations where revenue is recognized upfront upon transfer of control. SaaS arrangements in this category have one distinct performance obligation which is satisfied over time with revenue recognized ratably over the contract term.
10

CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Optimized Application Experiences consists of our full stack observability and cloud-native platform offerings. These products consist primarily of software offerings, including software licenses and SaaS. Our perpetual software in this category are distinct performance obligations where revenue is recognized upfront upon transfer of control. Term software licenses are multiple performance obligations where the term license is recognized upfront upon transfer of control with the associated software maintenance revenue recognized ratably over the contract term. SaaS arrangements in this category have one distinct performance obligation which is satisfied over time with revenue recognized ratably over the contract term.
In addition to our product offerings, we provide a broad range of service and support options for our customers, including technical support services and advanced services. Technical support services represent the majority of these offerings which are distinct performance obligations that are satisfied over time with revenue recognized ratably over the contract term. Advanced services are distinct performance obligations that are satisfied over time with revenue recognized as services are delivered.
The sales arrangements as discussed above are typically made pursuant to customer purchase orders based on master purchase or partner agreements. Cash is received based on our standard payment terms which is typically 30 days. We provide financing arrangements to customers for all of our hardware, software and service offerings. Refer to Note 9 for additional information. For these arrangements, cash is typically received over time.
(b)Contract Balances
Accounts Receivable
Accounts receivable, net was $5.4 billion as of October 29, 2022 compared to $6.6 billion as of July 30, 2022, as reported on the Consolidated Balance Sheets.
The allowances for credit loss for our accounts receivable are summarized as follows (in millions):
Three Months Ended
October 29, 2022 October 30, 2021
Allowance for credit loss at beginning of period $ 83  $ 109 
Provisions (benefits) 11  19 
Recoveries (write-offs), net (6) (14)
Allowance for credit loss at end of period $ 88  $ 114 
Contract Assets and Liabilities
Gross contract assets by our internal risk ratings are summarized as follows (in millions):
October 29,
2022
July 30,
2022
1 to 4 $ 356  $ 414 
5 to 6 898  814 
7 and Higher 87  158 
Total $ 1,341  $ 1,386 
Contract assets consist of unbilled receivables and are recorded when revenue is recognized in advance of scheduled billings to our customers. These amounts are primarily related to software and service arrangements where transfer of control has occurred but we have not yet invoiced. Our contract assets for these unbilled receivables, net of allowances, was $1.3 billion as of each of October 29, 2022 and July 30, 2022, and were included in other current assets and other assets.
Contract liabilities consist of deferred revenue. Deferred revenue was $23.0 billion as of October 29, 2022 compared to $23.3 billion as of July 30, 2022. We recognized approximately $4.4 billion of revenue during the first quarter of fiscal 2023 that was included in the deferred revenue balance at July 30, 2022.
11

CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

(c)Capitalized Contract Acquisition Costs
We capitalize direct and incremental costs incurred to acquire contracts, primarily sales commissions, for which the associated revenue is expected to be recognized in future periods. We incur these costs in connection with both initial contracts and renewals. These costs are initially deferred and typically amortized over the term of the customer contract which corresponds to the period of benefit. Deferred sales commissions were $1.1 billion and $1.0 billion as of October 29, 2022 and July 30, 2022, respectively, and were included in other current assets and other assets. The amortization expense associated with these costs was $176 million and $170 million for the first quarter of fiscal 2023 and 2022, respectively, and was included in sales and marketing expenses.


4.Acquisitions and Divestitures
Total transaction costs related to acquisition and divestiture activities were $2 million and $19 million for the first quarter of fiscal 2023 and 2022, respectively. These transaction costs were expensed as incurred in general and administrative expenses (“G&A”) in the Consolidated Statements of Operations.

5.Goodwill and Purchased Intangible Assets
(a)Goodwill
The following table presents the goodwill allocated to our reportable segments as of October 29, 2022 and during the first quarter of fiscal 2023 (in millions):
Balance at July 30, 2022 Foreign Currency Translation and Other Balance at October 29, 2022
Americas $ 23,882  $ (90) $ 23,792 
EMEA 9,062  (34) 9,028 
APJC 5,360  (20) 5,340 
Total $ 38,304  $ (144) $ 38,160 
(b)Purchased Intangible Assets
The following tables present details of our purchased intangible assets (in millions): 
October 29, 2022 Gross Accumulated Amortization Net
Purchased intangible assets with finite lives:
Technology $ 2,642  $ (1,250) $ 1,392 
Customer relationships 1,332  (819) 513 
Other 40  (15) 25 
Total purchased intangible assets with finite lives 4,014  (2,084) 1,930 
In-process research and development, with indefinite lives 430  —  430 
       Total $ 4,444  $ (2,084) $ 2,360 
July 30, 2022 Gross Accumulated Amortization Net
Purchased intangible assets with finite lives:
Technology $ 2,631  $ (1,102) $ 1,529 
Customer relationships 1,354  (769) 585 
Other 41  (16) 25 
Total purchased intangible assets with finite lives 4,026  (1,887) 2,139 
In-process research and development, with indefinite lives 430  —  430 
       Total $ 4,456  $ (1,887) $ 2,569 
12

CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Purchased intangible assets include intangible assets acquired through acquisitions as well as through direct purchases or licenses.
The following table presents the amortization of purchased intangible assets, including impairment charges (in millions):
Three Months Ended
October 29, 2022 October 30, 2021
Amortization of purchased intangible assets:
Cost of sales $ 158  $ 202 
Operating expenses 71  84 
Total $ 229  $ 286 
The estimated future amortization expense of purchased intangible assets with finite lives as of October 29, 2022 is as follows (in millions):
Fiscal Year Amount
2023 (remaining nine months) $ 677 
2024 $ 777 
2025 $ 406 
2026 $ 65 
2027 $

6.Restructuring and Other Charges
In the second quarter of fiscal 2023, we announced a restructuring plan (the “Fiscal 2023 Plan”), in order to rebalance the organization and enable further investment in key priority areas. This rebalancing will include talent movement options and restructuring. Additionally, we will optimize our real estate portfolio, aligned to the broader hybrid work strategy. The total pretax charges are estimated to be approximately $600 million and is expected to impact approximately 5% of our global workforce. These aggregate pretax charges will be primarily cash-based and will consist of severance and other one-time termination benefits, real estate-related charges, and other costs. We expect the plan to be substantially completed by the end of the first quarter of fiscal 2024.
The following tables summarize the activities related to the restructuring and other charges (in millions):
FISCAL 2020 AND PRIOR PLANS FISCAL 2021 PLAN
Employee
Severance
Other Employee
Severance
Other Total
Liability as of July 30, 2022 $ —  $ $ $ $
Charges —  —  —  (2) (2)
Cash payments —  —  (1) —  (1)
Liability as of October 29, 2022 $ —  $ $ $ $
FISCAL 2020 AND PRIOR PLANS FISCAL 2021 PLAN
Employee
Severance
Other Employee Severance Other Total
Liability as of July 31, 2021 $ —  $ 10  $ 16  $ $ 34 
Charges —  (1)
Cash payments —  (1) (8) —  (9)
Non-cash items —  —  —  (4) (4)
Liability as of October 30, 2021 $ —  $ $ 12  $ $ 26 

13

CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

7.Balance Sheet and Other Details
The following tables provide details of selected balance sheet and other items (in millions):
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents
October 29,
2022
July 30,
2022
Cash and cash equivalents $ 7,292  $ 7,079 
Restricted cash and restricted cash equivalents included in other assets 1,500  1,500 
Total $ 8,792  $ 8,579 
Our restricted cash equivalents are funds primarily related to contractual obligations with suppliers.
Inventories
October 29,
2022
July 30,
2022
Raw materials $ 1,458  $ 1,601 
Work in process 165  150 
Finished goods:
Deferred cost of sales 79  86 
Manufactured finished goods 850  631 
Total finished goods 929  717 
Service-related spares 99  90 
Demonstration systems 13  10 
Total $ 2,664  $ 2,568 

Property and Equipment, Net
October 29,
2022
July 30,
2022
Gross property and equipment:
Land, buildings, and building and leasehold improvements $ 4,193  $ 4,219 
Computer equipment and related software 751  779 
Production, engineering, and other equipment 4,588  4,647 
Operating lease assets 161  185 
Furniture, fixtures and other 334  335 
Total gross property and equipment 10,027  10,165 
Less: accumulated depreciation and amortization
(8,055) (8,168)
Total $ 1,972  $ 1,997 
14

CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Remaining Performance Obligations (RPO)
October 29,
2022
July 30,
2022
Product $ 14,013  $ 14,090 
Service 16,897  17,449 
Total $ 30,910  $ 31,539 
Short-term RPO $ 16,380  $ 16,936 
Long-term RPO 14,530  14,603 
Total $ 30,910  $ 31,539 
Amount to be recognized as revenue over the next 12 months
53  % 54  %
Deferred revenue $ 23,019  $ 23,264 
Unbilled contract revenue 7,891  8,275 
Total $ 30,910  $ 31,539 
Unbilled contract revenue represents noncancelable contracts for which we have not invoiced, have an obligation to perform, and revenue has not yet been recognized in the financial statements.
Deferred Revenue
October 29,
2022
July 30,
2022
Product $ 10,404  $ 10,427 
Service 12,615  12,837 
Total $ 23,019  $ 23,264 
Reported as:
Current $ 12,578  $ 12,784 
Noncurrent 10,441  10,480 
Total $ 23,019  $ 23,264 
Transition Tax Payable
Our income tax payable associated with the one-time U.S. transition tax on accumulated earnings for foreign subsidiaries as a result of the Tax Cuts and Jobs Act is as follows (in millions):
October 29,
2022
July 30,
2022
Current $ 727  $ 727 
Noncurrent 5,456  5,456 
Total $ 6,183  $ 6,183 

15

CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

8.Leases
(a)Lessee Arrangements
The following table presents our operating lease balances (in millions):
Balance Sheet Line Item October 29, 2022 July 30, 2022
Operating lease right-of-use assets Other assets $ 929  $ 1,003 
Operating lease liabilities Other current liabilities $ 308  $ 322 
Operating lease liabilities Other long-term liabilities 667  724 
Total operating lease liabilities $ 975  $ 1,046 
The components of our lease expenses were as follows (in millions):
Three Months Ended
October 29, 2022 October 30, 2021
Operating lease expense $ 96  $ 95 
Short-term lease expense 17  17 
Variable lease expense 58  49 
Total lease expense $ 171  $ 161 
Supplemental information related to our operating leases is as follows (in millions):
Three Months Ended
October 29, 2022 October 30, 2021
Cash paid for amounts included in the measurement of lease liabilities — operating cash flows $ 96  $ 98 
Right-of-use assets obtained in exchange for operating leases liabilities $ 35  $ 120 
The weighted-average lease term was 4.6 years and 4.7 years as of October 29, 2022 and July 30, 2022, respectively. The weighted-average discount rate was 2.3% and 2.2% as of October 29, 2022 and July 30, 2022, respectively.
The maturities of our operating leases (undiscounted) as of October 29, 2022 are as follows (in millions):
Fiscal Year Amount
2023 (remaining nine months) $ 254 
2024 262 
2025 183 
2026 106 
2027 63 
Thereafter 181 
Total lease payments 1,049 
Less interest (74)
Total $ 975 
(b)Lessor Arrangements
Our leases primarily represent sales-type leases with terms of four years on average. We provide leasing of our equipment and complementary third-party products primarily through our channel partners and distributors, for which the income arising from these leases is recognized through interest income. Interest income was $12 million and $15 million for the first quarter of fiscal 2023 and 2022, respectively, and was included in interest income in the Consolidated Statement of Operations. The net investment of our lease receivables is measured at the commencement date as the gross lease receivable, residual value less unearned income and allowance for credit loss. For additional information, see Note 9.
16

CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Future minimum lease payments on our lease receivables as of October 29, 2022 are summarized as follows (in millions):
Fiscal Year Amount
2023 (remaining nine months) $ 461 
2024 329 
2025 182 
2026 90 
2027 63 
Thereafter
Total 1,129 
Less: Present value of lease payments 1,074 
Unearned income $ 55 
Actual cash collections may differ from the contractual maturities due to early customer buyouts, refinancings, or defaults.
We provide financing of certain equipment through operating leases, and the amounts are included in property and equipment in the Consolidated Balance Sheets. Amounts relating to equipment on operating lease assets held by us and the associated accumulated depreciation are summarized as follows (in millions):
October 29, 2022 July 30, 2022
Operating lease assets $ 161  $ 185 
Accumulated depreciation (97) (111)
Operating lease assets, net $ 64  $ 74 
Our operating lease income was $21 million and $32 million for the first quarter of fiscal 2023 and 2022, respectively, and was included in product revenue in the Consolidated Statement of Operations.
Minimum future rentals on noncancelable operating leases as of October 29, 2022 are summarized as follows (in millions):
Fiscal Year Amount
2023 (remaining nine months) $ 23 
2024 17 
2025
Total $ 45 

9.Financing Receivables
(a)Financing Receivables
Financing receivables primarily consist of loan receivables and lease receivables. Loan receivables represent financing arrangements related to the sale of our hardware, software, and services (including technical support and advanced services), and also may include additional funding for other costs associated with network installation and integration of our products and services. Loan receivables have terms of one year to three years on average. Lease receivables represent sales-type leases resulting from the sale of Cisco’s and complementary third-party products and are typically collateralized by a security interest in the underlying assets. Lease receivables consist of arrangements with terms of four years on average.
17

CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

A summary of our financing receivables is presented as follows (in millions):
October 29, 2022 Loan Receivables Lease Receivables Total
Gross $ 6,277  $ 1,129  $ 7,406 
Residual value —  70  70 
Unearned income —  (55) (55)
Allowance for credit loss (101) (19) (120)
Total, net $ 6,176  $ 1,125  $ 7,301 
Reported as:
Current $ 3,144  $ 539  $ 3,683 
Noncurrent 3,032  586  3,618 
Total, net $ 6,176  $ 1,125  $ 7,301 
July 30, 2022 Loan Receivables Lease Receivables Total
Gross $ 6,842  $ 1,176  $ 8,018 
Residual value —  76  76 
Unearned income —  (54) (54)
Allowance for credit loss (103) (23) (126)
Total, net $ 6,739  $ 1,175  $ 7,914 
Reported as:
Current $ 3,327  $ 578  $ 3,905 
Noncurrent 3,412  597  4,009 
Total, net $ 6,739  $ 1,175  $ 7,914 
(b)Credit Quality of Financing Receivables
The tables below present our gross financing receivables, excluding residual value, less unearned income, categorized by our internal credit risk rating by period of origination (in millions):
October 29, 2022 Fiscal Year Three Months Ended
Internal Credit Risk Rating Prior July 27, 2019 July 25, 2020 July 31, 2021 July 30, 2022 October 29, 2022 Total
Loan Receivables:
1 to 4 $ 33  $ 146  $ 451  $ 1,265  $ 1,542  $ 656  $ 4,093 
5 to 6 10  96  263  555  768  325  2,017 
7 and Higher 19  40  38  66  167 
Total Loan Receivables $ 45  $ 261  $ 754  $ 1,858  $ 2,376  $ 983  $ 6,277 
Lease Receivables:
1 to 4 $ 16  $ 72  $ 124  $ 189  $ 112  $ 30  $ 543 
5 to 6 32  90  106  124  146  505 
7 and Higher 10  26 
Total Lease Receivables $ 24  $ 107  $ 224  $ 297  $ 240  $ 182  $ 1,074 
Total $ 69  $ 368  $ 978  $ 2,155  $ 2,616  $ 1,165  $ 7,351 
18

CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

July 30, 2022 Fiscal Year
Internal Credit Risk Rating Prior July 28, 2018 July 27, 2019 July 25, 2020 July 31, 2021 July 30, 2022 Total
Loan Receivables:
1 to 4 $ $ 49  $ 173  $ 536  $ 1,458  $ 2,287  $ 4,505 
5 to 6 17  115  345  709  1,030  2,217 
7 and Higher 22  45  39  12  120 
Total Loan Receivables $ $ 67  $ 310  $ 926  $ 2,206  $ 3,329  $ 6,842 
Lease Receivables:
1 to 4 $ $ 25  $ 74  $ 124  $ 176  $ 152  $ 553 
5 to 6 10  67  146  165  151  540 
7 and Higher —  12  10  29 
Total Lease Receivables $ $ 36  $ 145  $ 282  $ 343  $ 313  $ 1,122 
Total $ $ 103  $ 455  $ 1,208  $ 2,549  $ 3,642  $ 7,964 
The following tables present the aging analysis of gross receivables as of October 29, 2022 and July 30, 2022 (in millions):
DAYS PAST DUE
(INCLUDES BILLED AND UNBILLED)
October 29, 2022 31-60 61-90  91+ Total
Past Due
Current Total 120+ Still Accruing Nonaccrual
Financing
Receivables
Impaired
Financing
Receivables
Loan receivables $ 143  $ 26  $ 118  $ 287  $ 5,990  $ 6,277  $ 16  $ 60  $ 60 
Lease receivables 17  14  27  58  1,016  1,074  10  10 
Total $ 160  $ 40  $ 145  $ 345  $ 7,006  $ 7,351  $ 23  $ 70  $ 70 
DAYS PAST DUE
(INCLUDES BILLED AND UNBILLED)
July 30, 2022 31-60 61-90  91+ Total
Past Due
Current Total 120+ Still Accruing Nonaccrual
Financing
Receivables
Impaired
Financing
Receivables
Loan receivables $ 98  $ 62  $ 129  $ 289  $ 6,553  $ 6,842  $ 14  $ 60  $ 60 
Lease receivables 26  40  1,082  1,122  11  11 
Total $ 106  $ 68  $ 155  $ 329  $ 7,635  $ 7,964  $ 21  $ 71  $ 71 
Past due financing receivables are those that are 31 days or more past due according to their contractual payment terms. The data in the preceding tables is presented by contract, and the aging classification of each contract is based on the oldest outstanding receivable, and therefore past due amounts also include unbilled and current receivables within the same contract.
19

CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)


(c)Allowance for Credit Loss Rollforward
The allowances for credit loss and the related financing receivables are summarized as follows (in millions):
Three Months Ended October 29, 2022 CREDIT LOSS ALLOWANCES
Loan Receivables Lease Receivables Total
Allowance for credit loss as of July 30, 2022 $ 103  $ 23  $ 126 
Provisions (benefits) (1) (3) (4)
Other (1) (1) (2)
Allowance for credit loss as of October 29, 2022 $ 101  $ 19  $ 120 
Three Months Ended October 30, 2021 CREDIT LOSS ALLOWANCES
Loan Receivables Lease Receivables Total
Allowance for credit loss as of July 31, 2021 $ 89  $ 38  $ 127 
Provisions (benefits) (13) (5) (18)
Allowance for credit loss as of October 30, 2021 $ 76  $ 33  $ 109 


10.Available-for-Sale Debt and Equity Investments
(a)Summary of Available-for-Sale Debt Investments
The following tables summarize our available-for-sale debt investments (in millions):

October 29, 2022 Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized and Credit
Losses
Fair
Value
U.S. government securities $ 1,545  $ —  $ (70) $ 1,475 
U.S. government agency securities 171  —  (6) 165 
Non-U.S. government and agency securities 275  —  (1) 274 
Corporate debt securities 7,808  —  (492) 7,316 
U.S. agency mortgage-backed securities 2,071  —  (273) 1,798 
Commercial paper 798  —  —  798 
Certificates of deposit 421  —  —  421 
Total $ 13,089  $ —  $ (842) $ 12,247 
July 30, 2022 Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized and Credit
Losses
Fair
Value
U.S. government securities $ 1,287  $ —  $ (49) $ 1,238 
U.S. government agency securities 142  —  (4) 138 
Non-U.S. government and agency securities 272  —  —  272 
Corporate debt securities 8,127  (311) 7,818 
U.S. agency mortgage-backed securities 2,134  —  (158) 1,976 
Commercial paper 255  —  —  255 
Certificates of deposit 250  —  —  250 
Total $ 12,467  $ $ (522) $ 11,947 
Net unsettled investment purchases were $42 million and net unsettled investment sales were $70 million as of October 29, 2022 and July 30, 2022, respectively, and were included in other current assets and other current liabilities.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

The following table presents the gross realized gains and gross realized losses related to available-for-sale debt investments (in millions):
Three Months Ended
October 29, 2022 October 30, 2021
Gross realized gains $ —  $
Gross realized losses (6) — 
Total $ (6) $
The following tables present the breakdown of the available-for-sale debt investments with gross unrealized losses and the duration that those losses had been unrealized at October 29, 2022 and July 30, 2022 (in millions):
  UNREALIZED LOSSES
LESS THAN 12 MONTHS
UNREALIZED LOSSES
12 MONTHS OR GREATER
TOTAL
October 29, 2022 Fair Value Gross
Unrealized
Losses
Fair Value Gross
Unrealized
Losses
Fair Value Gross 
Unrealized 
Losses
U.S. government securities $ 530  $ (12) $ 944  $ (58) $ 1,474  $ (70)
U.S. government agency securities 101  (2) 64  (4) 165  (6)
Non-U.S. government and agency securities 257  (1) —  —  257  (1)
Corporate debt securities 5,065  (252) 2,090  (206) 7,155  (458)
U.S. agency mortgage-backed securities 651  (76) 1,136  (197) 1,787  (273)
Commercial paper 45  —  —  —  45  — 
Total $ 6,649  $ (343) $ 4,234  $ (465) $ 10,883  $ (808)
  UNREALIZED LOSSES
LESS THAN 12 MONTHS
UNREALIZED LOSSES
12 MONTHS OR GREATER
TOTAL
July 30, 2022 Fair Value Gross
Unrealized
Losses
Fair Value Gross
Unrealized
Losses
Fair Value Gross 
Unrealized 
Losses
U.S. government securities $ 1,110  $ (44) $ 120  $ (5) $ 1,230  $ (49)
U.S. government agency securities 114  (2) 24  (2) 138  (4)
Non-U.S. government and agency securities 264  —  —  —  264  — 
Corporate debt securities 6,920  (240) 422  (37) 7,342  (277)
U.S. agency mortgage-backed securities 1,305  (96) 615  (62) 1,920  (158)
Total $ 9,713  $ (382) $ 1,181  $ (106) $ 10,894  $ (488)
The following table summarizes the maturities of our available-for-sale debt investments as of October 29, 2022 (in millions): 
Amortized Cost Fair Value
Within 1 year $ 4,483  $ 4,399 
After 1 year through 5 years 6,478  6,002 
After 5 years through 10 years 56  47 
After 10 years
Mortgage-backed securities with no single maturity 2,071  1,798 
Total $ 13,089  $ 12,247 
Actual maturities may differ from the contractual maturities because borrowers may have the right to call or prepay certain obligations.
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CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

(b)Summary of Equity Investments
We held marketable equity securities of $245 million and $241 million as of October 29, 2022 and July 30, 2022, respectively. We recognized a net unrealized loss of $20 million and a net unrealized gain of $5 million during the first quarter of fiscal 2023 and 2022, respectively, on our marketable securities still held as of the reporting date. Our net adjustments to non-marketable equity securities measured using the measurement alternative still held was a net loss of $12 million and a net gain of $2 million for the first quarter of fiscal 2023 and 2022, respectively. We held equity interests in certain private equity funds of $1.0 billion and $1.1 billion as of October 29, 2022 and July 30, 2022, respectively, which are accounted for under the NAV practical expedient.
In the ordinary course of business, we have investments in privately held companies and provide financing to certain customers. These privately held companies and customers are evaluated for consolidation under the variable interest or voting interest entity models. We evaluate on an ongoing basis our investments in these privately held companies and our customer financings, and have determined that as of October 29, 2022, there were no significant variable interest or voting interest entities required to be consolidated in our Consolidated Financial Statements.
The carrying value of our investments in privately held companies was $1.8 billion and $1.9 billion as of October 29, 2022 and July 30, 2022, respectively. Of the total carrying value of our investments in privately held companies as of October 29, 2022, $1.1 billion of such investments are considered to be in variable interest entities which are unconsolidated. As of October 29, 2022, we have total funding commitments of $0.3 billion related to privately held investments, some of which may be based on the achievement of certain agreed-upon milestones or are required to be funded on demand. The carrying value of these investments and the additional funding commitments, collectively, represent our maximum exposure related to privately held investments.

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CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

11. Fair Value
(a)Assets and Liabilities Measured at Fair Value on a Recurring Basis
Assets and liabilities measured at fair value on a recurring basis were as follows (in millions):
  OCTOBER 29, 2022 JULY 30, 2022
FAIR VALUE MEASUREMENTS FAIR VALUE MEASUREMENTS
  Level 1 Level 2 Total
Balance
Level 1 Level 2 Total
Balance
Assets:
Cash equivalents:
Money market funds $ 3,144  $ —  $ 3,144  $ 3,930  $ —  $ 3,930 
Commercial paper —  1,017  1,017  —  72  72 
Certificates of deposit —  215  215  —  32  32 
U.S. government securities —  47  47  —  12  12 
Corporate debt securities —  52  52  — 
Available-for-sale debt investments:
U.S. government securities —  1,475  1,475  —  1,238  1,238 
U.S. government agency securities —  165  165  —  138  138 
Non-U.S. government and agency securities —  274  274  —  272  272 
Corporate debt securities —  7,316  7,316  —  7,818  7,818 
U.S. agency mortgage-backed securities —  1,798  1,798  —  1,976  1,976 
Commercial paper —  798  798  —  255  255 
Certificates of deposit —  421  421  —  250  250 
Equity investments:
Marketable equity securities 245  —  245  241  —  241 
Other assets:
Money market funds 1,500  —  1,500  1,500  —  1,500 
Derivative assets —  97  97  —  78  78 
Total $ 4,889  $ 13,675  $ 18,564  $ 5,671  $ 12,142  $ 17,813 
Liabilities:
Derivative liabilities $ —  $ 138  $ 138  $ —  $ 89  $ 89 
Total $ —  $ 138  $ 138  $ —  $ 89  $ 89 
Level 1 marketable equity securities are determined by using quoted prices in active markets for identical assets. Level 2 available-for-sale debt investments are priced using quoted market prices for similar instruments or nonbinding market prices that are corroborated by observable market data. We use inputs such as actual trade data, benchmark yields, broker/dealer quotes, and other similar data, which are obtained from quoted market prices, independent pricing vendors, or other sources, to determine the ultimate fair value of these assets and liabilities. We use such pricing data as the primary input to make our assessments and determinations as to the ultimate valuation of our investment portfolio and have not made, during the periods presented, any material adjustments to such inputs. We are ultimately responsible for the financial statements and underlying estimates. Our derivative instruments are primarily classified as Level 2, as they are not actively traded and are valued using pricing models that use observable market inputs. We did not have any transfers between Level 1 and Level 2 fair value measurements during the periods presented.
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CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

(b)Assets Measured at Fair Value on a Nonrecurring Basis
Our non-marketable equity securities using the measurement alternative are adjusted to fair value on a non-recurring basis. Adjustments are made when observable transactions for identical or similar investments of the same issuer occur, or due to impairment. These securities are classified as Level 3 in the fair value hierarchy because we estimate the value based on valuation methods using the observable transaction price at the transaction date and other unobservable inputs such as volatility, rights, and obligations of the securities we hold.
(c) Other Fair Value Disclosures
The fair value of our short-term loan receivables approximates their carrying value due to their short duration. The aggregate carrying value of our long-term loan receivables as of October 29, 2022 and July 30, 2022 was $3.0 billion and $3.4 billion, respectively. The estimated fair value of our long-term loan receivables approximates their carrying value. We use unobservable inputs in determining discounted cash flows to estimate the fair value of our long-term loan receivables, and therefore they are categorized as Level 3.
As of October 29, 2022, the estimated fair value of our short-term debt approximates its carrying value due to the short maturities. As of October 29, 2022, the fair value of our senior notes was $8.8 billion with a carrying amount of $8.9 billion. This compares to a fair value of $9.7 billion and a carrying amount of $8.9 billion as of July 30, 2022. The fair value of the senior notes was determined based on observable market prices in a less active market and was categorized as Level 2 in the fair value hierarchy.

12.Borrowings
(a)Short-Term Debt
The following table summarizes our short-term debt (in millions, except percentages):
  October 29, 2022 July 30, 2022
  Amount Effective Rate Amount Effective Rate
Current portion of long-term debt $ 1,249  2.44  % $ 499  2.68  %
Commercial paper —  —  600  2.05  %
Total $ 1,249  $ 1,099 
We have a short-term debt financing program of up to $10.0 billion through the issuance of commercial paper notes. We use the proceeds from the issuance of commercial paper notes for general corporate purposes.
The effective rates for the short- and long-term debt include the interest on the notes, the accretion of the discount, the issuance costs, and, if applicable, adjustments related to hedging.
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CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

(b)Long-Term Debt
The following table summarizes our long-term debt (in millions, except percentages):
  October 29, 2022 July 30, 2022
  Maturity Date Amount Effective Rate Amount Effective Rate
Senior notes:
Fixed-rate notes:
2.60% February 28, 2023 $ 500  2.68% $ 500  2.68%
2.20% September 20, 2023 750  2.27% 750  2.27%
3.625% March 4, 2024 1,000  4.04% 1,000  2.69%
3.50% June 15, 2025 500  4.61% 500  3.20%
2.95% February 28, 2026 750  3.01% 750  3.01%
2.50% September 20, 2026 1,500  2.55% 1,500  2.55%
5.90% February 15, 2039 2,000  6.11% 2,000  6.11%
5.50% January 15, 2040 2,000  5.67% 2,000  5.67%
Total 9,000  9,000 
Unaccreted discount/issuance costs (73) (75)
Hedge accounting fair value adjustments (49) (10)
Total $ 8,878  $ 8,915 
Reported as:
Current portion of long-term debt $ 1,249  $ 499 
Long-term debt 7,629  8,416 
Total $ 8,878  $ 8,915 
We have entered into interest rate swaps in prior periods with an aggregate notional amount of $1.5 billion designated as fair value hedges of certain of our fixed-rate senior notes. These swaps convert the fixed interest rates of the fixed-rate notes to floating interest rates based on the London InterBank Offered Rate (LIBOR). The gains and losses related to changes in the fair value of the interest rate swaps substantially offset changes in the fair value of the hedged portion of the underlying debt that are attributable to the changes in market interest rates. For additional information, see Note 13.
Interest is payable semiannually on each class of the senior fixed-rate notes. Each of the senior fixed-rate notes is redeemable by us at any time, subject to a make-whole premium. The senior notes rank at par with the commercial paper notes that may be issued in the future pursuant to our short-term debt financing program, as discussed above under “(a) Short-Term Debt.” As of October 29, 2022, we were in compliance with all debt covenants.
As of October 29, 2022, future principal payments for long-term debt, including the current portion, are summarized as follows (in millions):
Fiscal Year Amount
2023 (remaining nine months) $ 500 
2024 1,750 
2025 500 
2026 750 
2027 1,500 
Thereafter 4,000 
Total $ 9,000 
(c)Credit Facility
On May 13, 2021, we entered into a 5-year credit agreement with certain institutional lenders that provides for a $3.0 billion unsecured revolving credit facility that is scheduled to expire on May 13, 2026. As of October 29, 2022, we were in compliance
25

CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

with the required interest coverage ratio and the other covenants, and we had not borrowed any funds under the credit agreement.
Any advances under the 5-year credit agreement will accrue interest at rates that are equal to, based on certain conditions, either (a) with respect to loans in U.S. dollars, (i) LIBOR or (ii) the Base Rate (to be defined as the highest of (x) the Bank of America prime rate, (y) the Federal Funds rate plus 0.50% and (z) a daily rate equal to one-month LIBOR plus 1.0%), (b) with respect to loans in Euros, EURIBOR, (c) with respect to loans in Yen, TIBOR and (d) with respect to loans in Pounds Sterling, SONIA plus a credit spread adjustment, plus a margin that is based on our senior debt credit ratings as published by Standard & Poor’s Financial Services, LLC and Moody’s Investors Service, Inc., provided that in no event will the interest rate be less than 0.0%. We will pay a quarterly commitment fee during the term of the 5-year credit agreement which may vary depending on our senior debt credit ratings. In addition, the 5-year credit agreement incorporates certain sustainability-linked metrics. Specifically, our applicable interest rate and commitment fee are subject to upward or downward adjustments if we achieve, or fail to achieve, certain specified targets based on two key performance indicator metrics: (i) social impact and (ii) foam reduction. We may also, upon the agreement of either the then-existing lenders or additional lenders not currently parties to the agreement, increase the commitments under the credit facility by up to an additional $2.0 billion and, at our option, extend the maturity of the facility for an additional year up to two times. The credit agreement requires that we comply with certain covenants, including that we maintain an interest coverage ratio as defined in the agreement.

13.Derivative Instruments
(a)Summary of Derivative Instruments
We use derivative instruments primarily to manage exposures to foreign currency exchange rate, interest rate, and equity price risks. Our primary objective in holding derivatives is to reduce the volatility of earnings and cash flows associated with changes in foreign currency exchange rates, interest rates, and equity prices. Our derivatives expose us to credit risk to the extent that the counterparties may be unable to meet the terms of the agreement. We do, however, seek to mitigate such risks by limiting our counterparties to major financial institutions and requiring collateral in certain cases. In addition, the potential risk of loss with any one counterparty resulting from this type of credit risk is monitored. Management does not expect material losses as a result of defaults by counterparties.
The fair values of our derivative instruments and the line items on the Consolidated Balance Sheets to which they were recorded are summarized as follows (in millions):
  DERIVATIVE ASSETS DERIVATIVE LIABILITIES