In both our Q2 and full year guidance, we are assuming a non-GAAP effective tax rate of 19%. I’d like to thank our teams for their focus and execution this quarter. We remain confident in the strength of the business and our ability to capitalize on the key growth opportunities ahead. I’ll now turn it back to Sami, so we can move into the Q&A.
Sami Badri: Thanks, Scott. Michelle, let’s go ahead and queue-up for questions.
Operator: Thank you. Tal Liani with Bank of America. You may go ahead, sir.
Sami Badri: Tal, you there?
Tal Liani: Yes. Sorry. I was on mute. Now you can hear me. What is your assumption on the growth seasonality after the next quarter? Are we back in your assumptions to normal seasonality? Or do you expect kind of different seasonality than previous years?
Chuck Robbins: Yes, Tal, it’s a great question. As I said in — well, we talked about one quarter to two quarters of basically inventory, but shipped product that’s at our customers, it’s not yet been installed. I expect the impact to be greatest in Q2 and in Q3. But when you look at the order growth, we do see a return to order growth in the second-half of the year, both sequentially and year-on year as we get there.
Tal Liani: So in terms of revenue recognition, you expect 3Q to — the 2Q to 3Q sequentials, that’s — that was my question. Do you expect 3Q to be weaker than previous seasonality? Or do you expect it to be the same as previous seasonality? Or even sequentially?
Chuck Robbins: No, from a revenue standpoint, we don’t guide bookings, Tal, but from a revenue standpoint, I do see sequential increase, Q2 to Q3.
Tal Liani: Okay. Thank you.
Sami Badri: All right. Thank you, Tal.
Chuck Robbins: Thank you, Tal.
Sami Badri: Michelle, next question.
Operator: Meta Marshall with Morgan Stanley Investment Research. You may go ahead.
Meta Marshall: Great. Thanks so much. Maybe just a question on, if you see the investment categories kind of changing maybe free, the orders that you’ve seen, and then when do you see them come back in a couple of quarters. I guess, I’m just trying to get a sense of have much of the orders we’ve seen over the last year been catch-up investments like campus and data center? And then areas of investment will change as we come back or is this really just inventory digestion and the investment categories and kind of investment prioritization will stay the same with customers? Thanks.
Chuck Robbins: Yes, Meta, thanks for the question. I think your latter comment is probably the closest to the truth. We don’t anticipate a big difference. Although, I think with the improvements that we’ve seen in our portfolio and security, we should see security accelerate. Obviously, we’ll continue to update you on the AI opportunity that’s out there. We think that’s going to continue to be a driver over the next couple of years. But in general, I think it will look more normal once we get through this.
Meta Marshall: Great. Thank you.
Sami Badri: Thank you, Meta. Michelle, next question.
Operator: Amit Daryanani with Evercore. You may go ahead.
Amit Daryanani: Yes. Thanks for taking my question. I guess, Chuck, one of the things I think folks will struggle to understand is the conviction you have that this is an implementation pause and not a macro demand-centric weakness. So I’d love to just understand whatever you can talk about it and why you’re so convinced this is a one-quarter to two-quarter implementation rather than enterprise demand is just getting weaker. Anything on that front would be helpful? And then, I just want to clarify the spot. You folks had $1 billion in AI orders that’s two times the number you gave last time is that correct? Thank you.
Chuck Robbins: Yes. Amit, thank you. So if you’ll be patient with me, I’ll give you a few data points and some context around why we think this — this is a — an inventory issue that’s sitting with our customers. First of all, our customers and our sales organizations have been very clear with us over the last 90-days that this is the issue, particularly our large enterprise and our large — and our service providers. We talked about that with the service providers prior, but it shifted into the enterprise space in a big way. The other thing is, we had our Partner Summit last week and some of our largest partners unsolicited began their conversations with me by talking about this very issue, which candidly I knew the customers had talked about it and our sales teams had talked about it.
I was actually surprised to hear. It’s so consistently at that Partner Summit. So, that’s sort of the subjective view and then we’ve done some analysis and there’s three things I’d point out. The first is, in certain parts of our portfolio, we actually can — we can see the timeframe from shipment of a product until the product begins to connect to the cloud, back to the cloud like Meraki/And what we’ve seen is a one-quarter to two-quarter delay versus what historically you would see when these products get shipped, how long it takes for them to be activated and connect to the Meraki cloud. So that’s the first piece. The second is, we had a very strong quarter in federal, U.S. federal, from an orders perspective. And so, we looked into why big customer like the U.S. government, Department of Defense, would not have the same issue.
