Matt Niknam: Hey, guys, thank you for taking the question. Maybe just to dovetail one follow-up to the prior question, I have just another one on margins. Just on the prior one, is the expectation for a second-half improvement in a one-quarter to two-quarter digestion, does that vary at all across the three different customer sets you outlined? And then just on the margins, 36.6% on op income margins this quarter, I think the guide implies a 400 basis point to 500 basis point dip. Is that due to just the sheer revenue decline sequentially? Or are there other cost items we should consider on either the gross margin or OI margin line? Thanks.
Scott Herren: Yes. To your second question, it is just based on how the revenues are flowing through the second half of the year. I think gross margins, we’ve said will settle in somewhere in this 65% to 66% range. I think at this point, it looks like it will be closer to the higher end of that range for the second part of the year. So that’s the way I see the year flowing out. Remind me, Matt, what was the first part of your question.
Matt Niknam: Just around the expectation for second-half improvement in orders one quarter to two quarters worth of installation, is that broad across the three customer sets? Or does it vary across service provider, enterprise and federal?
Scott Herren: Yes, right. I think, we expect — I certainly would expect service provider to continue to be difficult through the second-half of the year. Within service provider, we’ve got both telco and cable, which has one set of market dynamics going on. I think that will be — continue to be a difficult space. On the other side, we have web scale, and we do see the web scale orders while they’ve got also inventory to work their way through. We do see line of sight to them beginning to increase their orders again in the second half of the year. So, SP is a bit of a mixed bag, but I think it will continue to have probably the greater impact.
Matt Niknam: Thank you.
Sami Badri: All right. Thank you, Matt. Michelle, next question.
Operator: George Notter with Jefferies. You may go ahead.
George Notter: Hi. Thanks a lot, guys. Just continuing on, on that last question. If I look around the space, companies have been dealing with excess inventories for really three quarters now. And I guess, I’m just curious why is this now becoming more evident at Cisco versus a few quarters ago? And then also you mentioned that the issue is spreading more to enterprises. We don’t typically think about enterprises is inventorying infrastructure. So I guess, the question for you is, has something changed there or is this more distribution channel inventory? Any insight would be great. Thanks.
Chuck Robbins: Thanks, George. I think that the reason it’s become relevant now is because if — I mean, we really unloaded our backlog in the last six months. I mean — and it was billions of dollars more than what we would normally ship to customers during that time period. So they — I think it’s just — and we know that the cloud providers, as an example, had been buying ahead and they had been doing it for sure to your point. And all along, we have very sequenced purchasing cycles with those players. So we kind of know when they are going to start placing their next orders. I think on the enterprise, we’re talking about the top 200 customers, right. These are the big customers who actually — if they’re doing a refresh of their infrastructure, they might order 400, 500 switches, as an example.
Or they may be doing a branch rollout. And in some cases, to your point, it could be sitting with them or they could have a partner who’s doing the staging, and the partner may be backed up with resources to try to get the staging done. So it varies, but it could be a — either one of those or a combination of both.
Scott Herren: And George, just to put some data to that. And you have this data, but I’ll repeat it. Our revenue growth, obviously, the quarter we’re announcing now, product revenue growth was 9%. But if you go back to Q4, product revenue growth was 20%. And in Q3, it was 17%. So obviously, we get revenue when we can complete a shipment and get it out the door. It gives you a sense of just how much has been pushed out and as Chuck said in the last two or three quarters.
George Notter: Alright. Thank you.
Sami Badri: Thank you, George. And then Michelle, we have time for one last question.
Operator: Michael Ng with Goldman Sachs. You may go ahead.
Michael Ng: Hey, good afternoon. Thanks for the question. I just have two. First, on the AI orders, $1 billion. What’s the feedback from the hyperscalers on your improving position with these customers relative to a few years ago? Is it selling in a more disaggregated fashion with Silicon One? Is it a desire for silicon diversification? And then the second question just as a follow-up on the order slowdown. Was that more concentrated in the campus with wireless LAN and wired or data center or both, just within enterprise specifically?
Chuck Robbins: Thanks, Michael. On the AI question relative to the cloud players, I think that — look, I think early on, we regained our footing there because we listened and we showed flexibility with our willingness to disaggregate if they wanted to do so. And we’re in — I can’t even remember, but numerous use cases across the large web scale players. And I think we added over 10 new use cases last quarter alone, where we had been designed in. And I think it’s — so I think that the disaggregation and the flexibility and us listening to them and understanding what they wanted was the reason that we got back in. And now the feedback is as long as we’re performing, I think they like our products, they like the power savings of Silicon One.
