CSCO · 10-K · 2025A · Full report
Supply Chain Impacts and Risks
CISCO SYSTEMS, INC. · 2025-09-03 · Importance 70 · Surprise 42
Cisco states that in past periods it secured long-term supply to mitigate component shortages, which increased inventory supply chain balances compared to historical levels, and that in fiscal 2025 it entered into additional purchase commitments with contract manufacturers and suppliers related to manufacturing Cisco Silicon One and other products to meet webscale and other customer demand. The company's provisions for inventory and liabilities related to purchase commitments were $493 million in fiscal 2025 (versus $819 million in 2024 and $730 million in 2023), and Cisco expects to continue entering additional purchase commitments in fiscal 2026. Cisco warns these actions have significantly increased supply chain exposure, have had negative impacts to product gross margin (including a supplier-related legal charge), and could lead to material excess, obsolete or other charges if demand decreases or mitigation is unsuccessful. Additionally, Cisco notes exposure to new and proposed tariffs and other trade policies, the extent of which is uncertain but could be significant if not mitigated.
Key facts
- In fiscal 2025, Cisco entered into additional purchase commitments with contract manufacturers and suppliers related to manufacturing Cisco Silicon One and other products to meet webscale and other customer demand and expects to continue such commitments in fiscal 2026.
- Cisco stated that the combined increase of 26% in inventory and inventory purchase commitments compared with the end of fiscal 2024 was primarily related to commitments to manufacture Cisco Silicon One and other products to meet demand from webscale and other customers.
- Cisco expects its inventory balances may increase in future quarters as it works to fulfill demand for Cisco Silicon One and other products.
- Charge to product cost of sales in fiscal 2025 resulting from settlement of a legal dispute with a supplier (settlement occurred August 26, 2025 per text).
- Cisco began increasing inventory supply chain balances starting in fiscal 2021 to address significant supply constraints seen industry-wide at the time.
Impact estimates
| metric | direction | stage | expected | basis |
|---|---|---|---|---|
| liability | negative | committed | — | In fiscal 2025, Cisco entered into additional purchase commitments with contract manufacturers and suppliers related to manufacturing… |
| assets | negative | realized | — | Cisco stated that the combined increase of 26% in inventory and inventory purchase commitments compared with the end of fiscal 2024 was… |
| liability | negative | realized | — | Cisco stated that the combined increase of 26% in inventory and inventory purchase commitments compared with the end of fiscal 2024 was… |
| assets | negative | probable | — | Cisco expects its inventory balances may increase in future quarters as it works to fulfill demand for Cisco Silicon One and other products. |
| operating_income | negative | realized | — | Charge to product cost of sales in fiscal 2025 resulting from settlement of a legal dispute with a supplier (settlement occurred August… |