F5 (FFIV) 28 Oct 242024 Q4 Earnings call transcript

Good afternoon and welcome to the F5 Fourth Quarter Fiscal 2024 Financial Results Conference Call. [Operator Instructions] Also, today's conference is being recorded. If anyone has any objections, please disconnect at this time. I'll now turn the call over to Ms. Suzanne DuLong. begin. may you Ma'am,

Locoh-Donou, I'm Cooper answer here FX's discuss are our with fiscal and President results. quarter welcome. Pelzer, questions CFO, is CEO; Investor Other making the members today's of will Executive also through incoming our XX, prepared here FX's our archived President executive FX available SVP Relations. fX.com, be and be copy to Vice Francois will session. A January financial XXXX audio We're you an call. XXXX. team CFO; during year release President Q&A Suzanne of of and and Vice website Frank and DuLong, remarks the press and of today's fourth version FX's Werner, available Hello, today where Finance on today's to at on of

deck phone, be the the the webcast We midnight The by webcast conclusion slide will XXX-XXXX meeting telephonic and ID replay Pacific our XXXXXXXX. through use our at replay call. of will accompanying XX, To access XXXX. or (XXX) October dial IR today's site Time, XXX-XXXX available today's post (XXX) of to

me information please additional questions, reach out at For follow-up s.dulong@fX.com. to or directly

statements. believe, and materially from statements, those forward-looking include discussion will actual differ to risks our today these results uncertainties Our contain that expressed target. statements and implied words anticipate, such involve which forward-looking as expect These may by cause or

may affect SEC results factors results filings. that financial our and release have We in the the detail summarized our in press in announcing

our slide information to no today's the GAAP FX that metrics our press deck. to in this Please during reconciliation presented duty In today's earnings addition, note of call. discussion. full non-GAAP in any we release appendix and update in see will non-GAAP reference has Please

to results, Cooper QX FY details to highlights, FY will speak then our 'XX outlook opportunities our growth and Frank 'XX. QX strategy today's and 'XX. and the of expectations our will our for for our FY and Francois will call, During review speak

now I will turn the to Francois. over call

delivered QX top $XXX million high result strong in QX's XX% We software metrics, the everyone. and our hello, software line and is guidance a Suzanne, of above a number the of growth end growth. X% range. of across you, record revenue is year-over-year revenues, performance, up which including Thank including

Just EPS $X.XX, of as of end highlighting above top our strength. our we importantly, improving guidance line delivered range, QX in margins, of non-GAAP [indiscernible] operating to the top addition $X.XX

the challenging fiscal our during QX to backdrop was start the team FY guidance. the 'XX, top we revenue FX delivered macro to the cap year. which with even year of a In a outperformed plan, our end at

security strength hardware-centric our multi-cloud have relatively In into a in company short also of a period year. our revenue, our product speak a expectations our outperformed from single delivering of leader we model and operating growth results 'XX, world. time, reshaped business. FX the compared software substantially and demonstrated the for solutions, we the XX% These to continued initial for power non-GAAP FY XX% growth We operating software hybrid the to generating resilience today's of software discipline and of

several redefined has change Our to data and total addressable our revenue center, FX's transformation role evident diversifying market. customers, our increasing our the is value expanding in metrics. beyond The important

good XX% million and In subscriptions FY and Today, XX% revenue. or customers, it year. software of XX% total of just FY growing total In $XX visibility coming our of Today, is software revenue. our is our with from large the is billion recurring to $XXX or or 'XX, for billion revenue. $X.X revenue. And XX% software a 'XX, our percentage coming $X.X our business very million our software 'XX, totaled revenue. was revenue and software product revenue. existing finally, contributed our our of today, they XX% revenue represented product our just in of of of $XXX portion million XX% of And million providing A FY $XXX us

of trends expect revenue large systems and software result improving in pipeline, 'XX. renewal we growing demand As opportunity, our accelerate FY our growth a to

We expect growth FY shared year FY X% to when a revenue This 'XX. range of ago. 'XX outlook X% outlined the we is expectations a first from ahead of in our FY we 'XX

continued In margin addition expect to we top line operating drive to growth, leverage.

earnings On we of basis 'XX. midpoint As a deliver neutral XX% a EPS growth range in result, growth. 'XX, the tax X% X% to expect to this to FY FY reflects

and several for and reasons. and trends confident the first the we have growth go-to-market our recurring include These FX's I into of we our pipeline visibility remain FX's long-term FY sustainable industry speak in will to effectiveness 'XX, the strategies. alignment robust trends. industry revenue for Beyond prospects with

environments multi-cloud hybrid remain of operating and of apps with clearly of State of benefits latest our report, now Application XX% challenges outweighing First, According to environments deployment the multiple customers are norm are the will managing across the models. different so. choice nearly across strategy

traditional securing which the are and applications single increasingly them. are them connect Second, not APIs capable solutions means environment of becoming that distributed managing and

instances number grow. application the continues to Third, of

delivery it has creating for In finally, of protection. the found GPU A app risks billion recent owners. are for app fact, customer-facing IT complexity, X challenges to them. data an new today today and is demands projected $X grow of fact challenges adoption to X/X FX and customers. will from and fundamental rapidly In security in is are billion that further to and services more and AI and Individually, widespread grown accelerate deployed the managing total. of number XX simultaneously that these complicate services average by risks creating new XXXX. environment. AI-powered teams dynamics eventual secure. XX $X minimum require organizations And security also APIs XXXX, while Fifth, APIs survey all and all of these The proliferating applications Fourth, remain related roughly performant lack leading used and ensure optimization APIs are that application ingestion to emergence they to of nearly a significant Today, and cost than applications to. for driving trends on to new they happening and

have describe confluence we ability our You as that ball of to fire, outlined to our these renew through expand address I is are motions. and believe the the and positioned The uniquely growth industry FX heard continue just land, contributing go-to-market dynamics of to dynamics us to drive it. powerful

winning opportunities by customers new strong and and landing takeouts relationships. are expanding channel entry targeting competitive leveraging competitive our We

a FX. We times, the as an for on customers. new or grows and of we been distributed XX,XXX footprint cloud services. to it, Our and over biggest February our this successfully growth apps means And potential the whom and growing share XXXX XXX time. others, base to FX's operations. customers. across posture, this motion FX as are from expanding utilization driver At existing we finally, X/X is our create success delivers. of however, have our early in business a the synergies customers opportunity, our expand FX renew platform to This of wallet are in the now strong means powerful has expand launched testament and a of value than motion it with At comes platform leveraging and of customers approximately security more multicloud of complexity unified simplify this expand is power The streamline evident power to

vectors: ensuring ability focused X our success The motions do so. teams across evidence these differentiated We this of of API simplification and standardization sales success are is automation. for Our remains pay the of customer security, on customers. app and ball it and further relative FX's to fire and

security. API single enable customers integrated onto comprehensive capabilities. the point best-in-class the of platform FX and delivers API security consolidate targeting specific products, effective and platform with our a a app and app First, industry. most in threats We suite to

API services X cloud Gateway security. As FX, advanced on one, energy a X provide firewall an ability running FX platforms. been evaluation, competitive security multi-cloud and QX, The superior based comprehensive and customer API customer which protection solutions. and distinct its X Previously, FX offerings. public application its a selected across cloud following against defending streamline a effectively cloud WAF API distributed delivering included example, comprehensive posture native application distributed global threats to unified the security services selected enhance during major cloud had web company and integrated to

the FX delivers hybrid Only our operations customers' that on-premises across Second, environments. solutions multi-cloud simplification flexibility demand enables businesses clouds require. IT their to with public simplicity and extend customers the edge the

deployed Our solutions and simplify them. connecting and infrastructure across the environments disparate applications in

provider was by challenge. during selected cloud mobile to largest country a the complex As IT simplify an Southeast in a Asian services QX, example, distributed

operational entity IP consolidate sets, scalable branches. And the to technology overlapping with inefficiencies, rich allowed deployments. arising on-premises Following new IP IPs networks and and issues large their addresses a cycle emerged. cost-effective operations. enable This complications across management more provided IT can FX provider, customers' and retail Overlapping when virtual faced branches. translation solutions manage multi-cloud easily comprehensive of vendors merger business addresses the operations automate networking automation applications systems standardization customers streamlined customer cause third, connectivity which consistent different and services rationalize We life analytics. mobile XXX and conflicts and and FX's policies, with from enables to between and automation. their operational tool silos IP especially core another and

and reduce selected and As application its modernize Australia-based an to infrastructure. multinational example, consolidate bank during QX, operational and organization a overhead refresh, large financial to services FX

Automation while security new streamlined of enabling of enables applications upgrades. in the and differentiation, fire our FX competitors and our eliminated The application hard-to-maintain the These reliability with ball of plays application software automation enabled have to of strong code. by the and hit is role address VELOS cannot. of manual traffic of flow X custom in FX for tens of customers improved certificate labor. embedded eliminating processes points management the ways also massive us combined lines well-established customers' of amounts FX and hardware practices thousands FX-enabled less self-service

have Before with call as the last Frank, I pass emerging AI several cases. see use speak we quarters, to I will the opportunity I the to

use this are investment AI-driven networking data AI layers. throughput high use year, new have X FX's AI and in networking AI cases. storage year AI requirements XXXX driving preparation extremely the was and cases initial and earlier on specifically, in discussed we factories demands. build-out infrastructure compute, in of In application across significant concentrated As opportunities are networking for already infrastructure apps.

is first management AI or generation retrieval ingestion RAG. high-performance augmented traffic The AI model training for requiring and data

FX's traffic management Over to data several customers we quarters, highlighted last industry-leading the optimize ingestion. have leveraging capabilities

of ingestion. a their During model QX, services, ingest for example with automotive, financial and conglomerate collecting is between AI AI businesses factories. In its this load business. data factories chose vehicle IT, its FX media we The are optimize FX the for data and training. FX and another AI to balancing customer storage information customers' had deployment, enterprise connected high-performance to choosing global across A power customers' clusters telemetry providing

use AI second on we focused and The balancing factories of traffic scalability AI optimizing advanced case is factory we AI management. with the load are performance are where

Just last news. There our collaboration week, announced NVIDIA pieces important software we enable to ADC this high-performance are on X AI of infrastructure. with exciting

BIG-IP enabled this such to run have service Enterprises brings BIG-IP providers FX and factories we networking environments. advanced to capabilities strong for NGINX on NGINX our for as run are within security GPUs. modern running AI market-leading driving management AI Kubernetes First, these traffic semiconductors next Kubernetes. infrastructure building are demand Kubernetes. in and that workloads

these NVIDIA workloads NGINX accelerators, Kubernetes, I AI-driven delivering DPUs DPUs. performance security Kubernetes AI NGINX and to inference experiences. of and superior works partnered with combined the with BIG-IP we training NVIDIA seamlessly customer BLUEFIELD increasing that become effectively BIG-IP When with for for Second, ensure

AI X X first have use where last we market the The highlighted have decades. opportunities, ADC just our been cases leader I for the a

case are AI The WAAP protection use focused and secure inferencing. we leverages third firewall application AI for API web on or

begin deployments inferencing We AI will use become scale next XX the at and enterprises prevalent to as to XX over months. expect today have case this it more leverage supporting

efficiently. to our critical As to you potential enables actively customers and of the just can AI is infrastructure the safely full it, FX see examples, the AI revolution, harness these shaping not providing with that are adopting we

Our multiple a role have additional likely cases is and teams have identified to where FX product AI sales, engineering play. use to significant

their In addition, solutions policies with generative customers AI our we to portfolio, implement and leveraging across continue configurations. to AI help

API with converged we entering with and and Because X-X year consistent functionality conclude, our of in to ability expertise, Layer industry FX hybrid industry-leading are confident complexity. complexity application unique unmatched we are demand. automation. escalating our industry-leading multicloud We simplify bring significant tightly standardization we XXXX an that and We and To address trends streamline and security. aligned operations is customer with portfolio fiscal

to call the Frank? I Now turn Frank. will

Product $XXX due year-over-year will million Thank million you, the XX% will Francois, our with million, QX XX% grew the full revenue discussing and totaled improved revenue growth. FY outlook. We revenue. to strong to speak will systems pass Cooper, will Services before that service Systems year-over-year. QX and to elaborate on $XXX FY Cooper of mix X%, over year and 'XX of a results for totaled demand when software I revenue $XXX which FY good expectations. call with quarter, afternoon, up in XX% line review our our X% our who million, product QX outlook. I strong 'XX the and down I course $XXX of everyone. more revenue Global note delivered Global of 'XX

XX% $XXX Software representing million, revenue growth year-over-year. totaled

license year-over-year. million our perpetual of XX% Rounding or Our contributed and $XX drove software solid growing subscription-based execution out $XXX revenue of revenue, revenue, total software million. software XX% renewals software

our continues to the thereby our recurring mentioned, Francois is enhancing As that percentage visibility. revenue grow, revenue of

of QX, from total the revenue. year is portion our our combination up XX% of revenue XX% a a During ago. came global This revenue and maintenance from of subscription-based services

X% declined X% growth, revenue. of Shifting region. APAC delivered distribution the to XX% XX% revenue of total with representing a year-over-year, Revenue quarter of EMEA representing revenue. strong revenue. XX% Americas from grew by X%, representing Meanwhile,

enterprise Looking customers of delivered quarter, X% very representing bookings, Federal. QX major of XX% product verticals, Government customers bookings. at product U.S. from represented our strong including XX% a

QX service of providers bookings. XX% Finally, represented product

efficiency was reflecting margin XX.X%. our operating operating improvements. XX%. QX was margin results Our were gross gross Non-GAAP GAAP strong continued

expenses $XXX operating were million. GAAP Our

Our expenses $XXX non-GAAP operating million. were

Our operating margin XX.X%. was GAAP

Our non-GAAP operating was XX.X%. margin

for tax quarter Our the GAAP was rate effective XX.X%.

effective XX.X%. was non-GAAP Our rate tax

income share. net GAAP million Our was per for the $XXX $X.XX quarter or

share. Our non-GAAP net per $X.XX income was $XXX million or

ago collections in and turn all to the income generated flow $XXX quarter at we shares we billion of up quarter. sheet of operations worth and will balance net strong million period. per FX an In $XXX $X and QX $X.XX share. X% flow CapEx end. days, share. XX remain metrics, shares 'XX, revenue billion, quarter from cash We approximately the on average an repurchased year investments $XXX totaled FY I the million. was of in FX in cash now million very which for at worth Over at Cash was cash $X.X DSO $XXX price was per Deferred QX, $XXX million strong. average from price of repurchased of

our our of free commitment free XX% exceeding in at least represented of use 'XX, purpose. cash repurchases share flow Our cash to XX% annual FY our flow for this

announced billion. an total as for release, program Directors program. $X.X authorized available the our stock authorization authorized earnings $XXX common in As of new brings the in the the the program billion remaining repurchase of to incremental $X million to our has existing and is stock additional repurchase Board under This today,

Finally, we ended with approximately the employees. quarter X,XXX

'XX I will now FY our recap results.

in These FY FY Services speak growth revenue strength for systems revenue due to XX% elevated Global of declined year-over-year. the of 'XX representing backlog product XX% Product million. FY to total the faced Our particularly revenue year. results slightly we our FY for 'XX of $XXX the from our grew given was the headwind revenue of fulfillment $X.XX 'XX end X% billion, our the top $X.XX and business, revenue, 'XX revenue year. in 'XX. X% totaled up revenue revenue initial Within revenue, of guidance billion the at FY to representing

'XX, a year-over-year. our While underlying compared systems of this represents to grew decline XX% FY bookings

result trend growth to This our strong renewals compared grew stronger up new modest of FY performance to 'XX. expectation as revenue flat in initial continued million addition compared from Software a business FY to $XXX XX% of 'XX. of a to is

subscriptions revenue our and of software software 'XX of our XX% represented FY XX% represented revenue. FY 'XX product Software

look Let's software of take a annual components closer revenue. the our at

licenses. comprised services; Our each software from term-based revenue down. one, expand two, managed starting is top subscriptions; of elements: software the and X and SaaS on of perpetual three, these, I'll

transitions. the in planned portions I'll as the managed result offset million of a X% services down subscription Our offerings ratably decline a and is million and the of FY largely duration SaaS legacy legacy a million revenue, $XXX of or FY by result over retiring of in in of recurring $XXX churn 'XX SaaS as by continued gray bar in portion planned $XXX of 'XX, speak retirements FY first growth legacy revenue accompanying offerings. from offerings. year-over-year, offering the is annualized related managed services, of There X core services SaaS recognized our our and and offerings, primarily are managed software our to to legacy our ARR, 'XX in term represented delivered charts. our which

SaaS discontinued and service first is managed The offerings.

managed is the legacy transition offerings. related to to work services. vast from decline continue with second majority to we The to associated FX Silverline The to 'XX discontinued distributed FY churn FY services, planned is cloud AR which 'XX of

During amount FX green course distributed last core 'XX Silverline the represents The year FY FX strong managed churn services, service We solutions to defense services over and FX distributed back-end the transition FY cloud that NGINX portion service 'XX, of off of FY we our launched bar modest weighted would cloud transitioned includes cloud and offering. a solution. distributed growth be SaaS noted high-end our the offset services. Silverline managed within of a bought and services, high-end our as base, which defense by small our relatively bought recently delivered 'XX. point a

and software contributed These services revenue ratably include both term. subscriptions, product revenue comes the revenue, deferred recognized annual continued subscriptions strong expansion for our recognized global of in million subscription as term-based renewal 'XX, business as In a are $XXX which software term-based new and new as forward upfront subscriptions software multiyear portion from compared a NGINX. with well second 'XX. as renewals XX% year-over-year The as to growth true our FY from portion of performance revenue and up and largely over of revenue BIG-IP result FY revenue to

software is in security annually. and our revenue. our revenue, revenue. year-over-year. total $XXX security maintenance perpetual or This of $XXX attached security software Several final years million, of contributed security-related of software revenue, our billion The revenue ago, component which breaking related year, stand-alone XX% XX% third totaled revenue million began out we security $X.X product to revenue, up Stand-alone licenses, was total approximately includes security, which X% representing and revenue

performance. turn was 'XX now our operating XXX in from will 'XX I gross points FY up basis FY XX.X%, XX.X%. to gross margin Non-GAAP was GAAP FY margin 'XX.

margin operating operating non-GAAP operating 'XX GAAP was points 'XX up Our and for XXX basis our FY FY a discipline. XX.X%, was margin result of from XX.X%, as continued

year Our XX.X%. tax GAAP effective was for the rate

Our the $X.XX or XX.X%. Non-GAAP for $XXX per 'XX. per $XXX income FY rate effective year net or million was non-GAAP million of $XX.XX net was representing 'XX was over share income tax for GAAP FY share. XX.X% growth

to Cooper on Cooper? I now our outlook. speak the to pass will call

Thanks, start everyone. outlook Francois I'll will some outlook also Frank, for provide 'XX the of additional with our it and our hello, I color. call. QX. at outlined the now FY recap

my of metrics. exception the With guidance non-GAAP comments reference revenue,

'XX. FY with start I'll

continued we 'XX revenue First, our X% stability, but back-end assume will 'XX in to X% revenue 'XX, does over anticipate not substantial FY budgets. growth not to outlook macro expect be also environment. to In our FY Similar relatively 'XX. does deliver FY FY FY customers' to we our the weighted. 'XX, assumes It IT significant macro assume a improvement growth

and revenue single-digit the half. in mid-single-digit revenue low expect the of growth across the second half growth year We first

renewal the period stronger have during second consistently are half renewal strong base that to on the time. Our our coming up performance visibility expectations and over based we sizable

components look 'XX Taking software. of a I'll FY at the with revenue, closer start

fiscal grow FY a double FY XX% upper in grow software that for outcome we level that our beginning in to to 'XX we from and the software ago. 'XX. our by guided digits would of view the now FY in growth in growth flat XXXX, software has 'XX the digits single improved our year year-over-year. much software improved FY FY shared from expectation expect At 'XX, modest year Against software to Our 'XX revenue initial expectation

revenue. systems at Looking

an improvement refresh begin customers in estates, to competitive in comments and to systems referenced momentum Frank we as takeout have his we related from demand QX, recently As drive opportunities. seen older

FY As a finally, will revenue 'XX. expect And global digits grow we digits grow FY mid-single result, revenue we will single in expect low in 'XX. systems services

gross XX%. an From improvements we margin perspective, operating XX% a gross deliver resulting to in range margin to FY expect in of non-GAAP 'XX

We continued the 'XX drive expect FY discipline, approximately XX% expense Seasonally, margin also in 'XX, the upper half. XXs for moving operating first in the expect range the second in non-GAAP of XX%. to of resulting FY we operating margin half to operating low

our QX, associated expect costs in typical operating seasonal February. customer with low and large reflecting the tax We of in event payroll margin for combination a resets

XX%. 'XX range We non-GAAP expect be will FY rate XX% a our effective tax in of to

year-over-year. deliver X% X% to non-GAAP basis expect midpoint the tax reflects this EPS a to On FY range of XX% earnings 'XX, We to neutral growth growth.

Finally, use to cash free repurchases to 'XX. at FY our share we continue towards in annual flow intend least XX% of

now speak 'XX. our I QX FY will to for of outlook

to expect $XXX of $XXX million the QX range We in million. revenue

We non-GAAP XX%. margin $XXX expenses estimate million. expect $XXX of non-GAAP million QX We of gross to operating approximately

of We a share. share-based in compensation million million. We per range QX anticipate approximately to non-GAAP $XX QX $X.XX EPS $X.XX $XX to of expect expense

Francois. the With call pass back that, I'll to

you, Thank Cooper.

asset as and had Officer. the road new a am phase on portfolio technical the leaders and executive our product thorough prior our from of will I our to security with deep to an both and update map, him Imperva, in Through our it entrepreneurial across that role. organization technical Kunal included clear role. experience for Innovation interviews knowledge search security, his that will the and with conclude, cloud, announce experience, we work tremendous I at teams pleased his expertise and required be next SaaS networking, team. was as perspective will across execute am mindset Kunal that leading I AI a Chief we Kunal provide lead domain his excited brings Before Anand After industry, the

thanks to his opportunity express my his Frank FX. at for take this during sincere time heartfelt leadership also will to and I

you I that For a frank, have And Frank been all looking with to I cannot is enough front, been In Cooper, when with recently I share name have the want am the all true I to me how seriousness, you partner real closely that as front. informed his could asked impact not you and record, better have and new had thank this for CFO. forward I on a friend, team you working business. and in our your role you more bus,

FY enter more we stable overall. environment see a 'XX, As we

no application. good architectures have risks also complexities, costs architectural partners environment the news with norm benefits Importantly, come This customers because will of longer select customers ambiguity. capable FX Most foreseeable be choose in is for the part inherent believe hybrid that taming it future, architectures. of that enable means the the to for multi-cloud multi-cloud because they the organizations and hybrid must best for each

emerging have important as hybrid next FX the the new era is entered decade We this in firmly our era. of multi-cloud, an of AI player will and industry. characterize which

and as We establishing presence are WAAP developing cloud SaaS robust emerging capabilities leader market. the an ourselves and in

and unique lies customers, across FX optimized delivered secured, that deliver ability extraordinary and FX countries XX,XXX in power strength worked Our for customers. XXX we with more the impact has world. on This apps anywhere. outsized world. to alone, app millions X,XXX of those partners experiences APIs with any an secure our to Together year we than the

in more cloud to X.X FX. attacks. lives important and a lead day a better to fly, billion and than building that offer more their drive People bank, live day I to allows blocked world. can honor services plays securely, thanks out. to quarter truly digital and across humble work live an company deep Last Our a and globe in alone, an the partners, shop, and employees, distributed shareholders. our of thanks people such my It customers part privilege billions is

call Operator, to the questions. please open

first [Operator Instructions] comes from the line JPMorgan. Chatterjee Samik of Our question with

strong I on guess results had I of here. Congrats a software. questions couple on the

in start software the strong maybe here, Francois, very results So Frank, quarter. in just to off

the the out come of upside anything -- sort detail Or that of you or quarter? see can the some I can out that of And in us you you coming did driving more you follow-up. if from that that a the from bit a wondering in of Where more the you're enterprises from it terms for really then of renewals? in between strength did composition hearing terms Just is of saw have true-ups? sort in sort what in of outperformance parse

much. Frank. Sure, let and Cooper with to Francois has so Samik. It's me Thanks And see start that anything or one if add.

for within seeing software their design, when expect July in engagements. board, been in were and expect So of And delayed second in that half, had of sitting move and year that X for see not a through -- their the a number. contracts. that people they beginning kind we as of that up generation was would gotten coming ones factors. of of across were of the we customers from the It when really in were what do you number. specific quarter, came base renewal And quite expansion some you talked in One, saw projects business was have sort did end guidance our up have which the they necessarily to architectural we the on their about the FY QX. back to actually 'XX, updated factor forward. outperformed the we we next full at to new we obviously with was there. we it the strong the impressive year that for know, from did particularly And quarter big the activity once we ready or imply within as existing the few

really were software for improved in of the great outlook and, FY our both those resulted a . see in strong So for to quarter upside 'XX. obviously, and

And this it. is Got add, Cooper. I'll

got so our that have customers really we've multiyear visibility these some within the good revenue consumption of the to On opportunity, expansion as contracts.

And renew they through consuming of see offerings bit terms came better maybe so also what that we in a as did those new performance expected. when was agreements. little But

different X forms of And we of so expansion see. kind there's that

in the as second-generation then so incremental really more with customers expectations we portfolio kind of subscriptions. our landed consumption and multiyear opportunity of saw are some in their consuming expansion And line the

the of a follow-up. I this calling where more bit, if fiscal in of should we AI perception, a wanted is just pretty that their a still software is for after that strong adoption remains to the of number in early think in their here. this particularly sort I just around of enterprises of growth investment had cycle Why conservatism you really Maybe question, that And 'XX thinking deceleration you're growth enterprise how think, high broader for the it. a I single-digit you -- are the to software, in derating and levered a early Got cycle. growth to be mean really the how outlined the sort given guide product in versus understand terms AI? of sort cycle terms of you about thinking much in

a by Thank this trend here guidance of AI driven but and is you, take a macro giving the Samik, to multi-cloud really I'll hybrid I'll enterprises the moment, one. in adopting Look, we're come poster.

apps delivery number and public that thought fast. into up, at world cloud, consume pull everybody as And would be app apps delivering applications a companies all we way the and a so of all a optimized time in cloud, mean, if services I security for saw where where will single all go you the we're would

to new cloud seeing starting well software of a more serving with that of need infrastructure number we're for as that seeing. all world. in did And for why for of have hybrid for large we're we're automation impact. in our We're environment. multi-cloud. and projects of XX% environment. a are It's services cloud customers we're what customers that We're consumption on-prem positive becoming business needs world of We than multi-cloud And are increasingly And architectures be that time optimize software specifically do hybrid hybrid benefits FX. application. security lot And that also in for and benefiting We implementing aspects optimize today, seeing that's of multiple secured. a seeing we these and distributed existing are customers applications multi-cloud a not be private a the is are the would we get of seeing having environments. over of us. seeing agreements generating more that the outperformance to We're each in that APIs that's their the proliferation optimized tailwinds as seeing

As comfortable you future. customers are next because hybrid in their saw, actually will we're architectures. foreseeable saying that data They're with our grow for be And that comfortable they multi-cloud centers also the this the hardware part is will in year.

confidence estate, the And seen any we of so with having away our existed customers have fade refreshing past any hardware hesitation in hesitation existing that that around full in architectures. current

major on of comments why distribution, of Any for sort investment AI the there a be a particularly being driver still with should enterprises?

year, So of with the in both the opportunities we'll we're these seeing of the remain hardware and And of early year, out. new course, FX. prudent points are deployments so is very positive for in it's for AI, the on want early in our next see news terms overall. how of But FI, AI, that in guidance opportunities guidance insertion but we for year in and plays to we are software. days

clusters. and application you It and mastered that storage steers the data of delivering has where is last much needed very for So data is critical the there securing out X between and AI in securing traffic critical expertise GPU managing, decades, tiers optimizing traffic workloads, storage network of and between if application centers across the and a movement significant really turns step FX or and expertise back, over that, cloud. device

are for are we so finding those companies AI factories. that early insertion building And points

advanced with And GPU we create AI that potentially clusters. of that storage efficiently of over for the NVIDIA seeing steers opportunities time. GPU and software just We doing storage more terms partnership companies see these other in most is announced days insertion of and And software some the how a develops opportunity clusters. are are manifestation points customers. to are It's fronting world's or semiconductor our But tiers moment, early our opportunity. between hardware BIG-IP volume we in also we few of there marrying of with because that. sitting will technology the inside scale with very the better the yields finding platform of factories at these

our said, have current of being develop because will significant So a opportunities from 'XX we revenue very we belief and we more in beyond guidance that over system contribution not AI. baked it's these our in see FY from That AI these opportunities. really where is contribution opportunities time, 'XX and see would meaningful

question Morgan from comes the next Our Stanley. with Meta of Marshall line

into that your Do guess see And or than more accelerated being more related that of to revenue on healthier kind their of as that more people where refresh willing of share gains as customer, spend decisions just entertain systems customers? in share 'XX. fiscal of expected environment gains enterprise I making as are think of to head about this you would On I part we IT. maybe follow-up better come a kind kind a

just year are of of or as cycles kind terms of seeing your any what are you there? are thinking just fiscal seeing sales kind talking And in in 'XX, of 'XX what of about are so calendar you spend about customers improvement -- kind terms cycles, or they

Meta, start Francois, you I'll want up. follow if and Yes, this to is

see are see the the we're this I FX. in systems of move from a we've latter We're both a that have a to customers success, refresh is some with strength really installed some structure. material good in reinvesting competitive to on with starting where displacing more their period had little our seeing FY to we're had to their especially to now customers. better opportunities. bit And budgets long then base states a forward our of of infrastructure. customers sweating and starting 'XX, goes the half think on We certainty of lot And competitor starting they're also were the their and back our tech customers of replaced hardware our around we bringing the

continue growth for the mid-single-digit And a kind outlook think likely so several over our we out that's of quarters, that behind and to trend play next that's the will hardware business.

we I look mean the from continue we do to at. I'll just data gain share add that, yes,

been ADC performance to the relationship. either not competitors have We continue approach satisfied market quite with we customers to where at their out the taking commercial share or successful have been gain in certain traditional

And the that applications. the as a hardware result, we we've deploying some and they're that what moving estate our perhaps they're multi-cloud estate, there customers and shares software with so new have that. with on of is across gained here their with hybrid But had can hybrid think become sometimes effect it's really refreshing comfortable from And forward quite comfortable combined multi-cloud see more comfortable I macro architectures. projects

Our Ng next question comes Goldman Michael from the Sachs. line of with

to wanted about revenue ask very I the subscription in the strong of obviously, cadence quarter.

true out the like any or rest very was would in things timing the of As wondering kind fiscal outperformance the first of to term half of the of base. through you quarter December and I decline sequentially. seems in like whether that could speak just be 'XX that year that the we subscription next I But was color some into, and an about dynamics it forwards how the head there's revenue implied there, of September if quarter, of guess, the plays helpful.

strength more Michael. the saw is that in This timing we about Thanks, really it the of Yes. renewal Yes, base. And QX. the Cooper. is

we FY last that along up was loaded. the a that's had really all year expansion more So with same was that strong renewal that renewal base. And 'XX. But performance we coming said base back-end had on the for

But it half of to renewal to the in was the sizable is FY tends base 'XX a in be have larger more base year. second renewal than FY the We weighted 'XX.

deceleration it's upfront that largely so of really software recognized under negotiation. is as a reminder, these just growth is renewals -- the for just on on And timing term-based the any when XXX. up come more And about implied the revenue licenses, ASC

little reported get we a for think on in that sales those bit broadly, opportunity from the it's do you FY revenue 'XX. variability a strong of so a And very that's us

Great. follow-up. just a as And quick

You better had the expansion in renewal up bigger? expected. that base you than or level of 'XX assuming a was September come or the smaller expansion similar an of that the I of are quarter fiscal in guess, renewals

Yes.

just So gets account bigger. into our we assumptions little mean take on every we've adjusted had. base the continued year, that the a renewals strength I bit

we're take that to been we in of guidance, have into very consistent expansion. account setting and renewing when we terms so And but our both have driving

'XX customers. factoring software is from that the an being our that increased. software result And So side from also flattish looking the we're new new at FY in, projects as the that's new business, software that the outlook. We're has of year-over-year, growth in then something but against the for improved

of from Evercore with comes line question the Amit next ISI. Our Daryani

think with enterprises the the think way about right think going sort bit will solutions do for you a will hyperscalers just stop Where about it, NVIDIA little I more more have can talk be it? talked NGINX could as that traction? are time? opportunity already, FX more deploying a as guess, maybe this X you go gain just any product little you do BIG-IP And customer more to over it to base but I bit to with do be AI forward? more You've of you Is the questions you now? well. the think Francois, which how Kubernetees? Or about it's resonate about it talk of this this for big

Right.

Okay.

that a on solution. let little start bit So me

multi-tenancy what NVIDIA'S that The software, increasing the is we So a workloads to management, AI so thing cluster, multiple for serve faster customers part management data AI really single doing is traffic utilization refactored and industry. in models, GPU we provide GPU I part in taking is to have which AI really we're with we of this to because also because factories. we do for or benefit can we benefits environment, do like Kubernetes key GPUs what and get in GPUs building marrying call traffic enable our Kubernetes here we're #X to

provide would but from of would that as course, And even GPU of shared to that. are own AI a customers GPUs enterprises who are want that service resources infrastructure today. so It be, customers. be shared benefit a It CPUs and their who would the number service utilization providers factory, of all maximize the building are to expensive

scale. generally that AI either factories or significant building at So be it's are service going enterprises providers to

with this solution. targeting we're joint who really that's So

I early we want be to that days. Now are clear

the to validated and But with have significant yet their that who model there's are to architecture around folks factories starting to in who these and of not we from improve utilization go-to-market see We're questions the We the technical speak factory. interest get efficiency number a NVIDIA. answered. have building opportunity the a we a

way so number see that assuming in more of DPUs opportunity embed time. go-to-market pretty model a But also the be to over and on we works for the could and find FX, NVIDIA that materializing that a technology And it that opportunity large beyond. we said, significant FY 'XX a software

on do We tough going got top will software to and side. very ramps have we've if then is digits get maybe license a muted, I a Got the talked deals more fair the have half folks term about March really to bit growth, understand single you up because be it the low on fiscal talked think half. just back right which the then just can in the compare I growth, like you the clarification some way in Is line it. And think quarter do right, a software the that high it. helpful. That's about single in front in you 'XX where software to this

So just cadence be think kind helpful. half back on half would versus of first software and about the on any to how that

Yes.

software you the single-digit overall the the year. second software for in on year again, probably that kind to an coming growth half where of first the tied half the leading growth it up our context contributor some that base digits be we in second that's to get larger be the that mid-single in as provided said And the really, we have year of we growth of the in growth in half. would kind idea revenue stronger will also second So half. of And seasonality renewal overall the low

a in of opportunities, these the year. course And so out the they lot of that we'll But be we can see said, material how size. as pretty plays over

So any in some given rate. variability growth to there's in the or down going up be quarter,

for an emphasis software. but X/X because of wouldn't the And good of where upper earlier, be on footprint it's good that from growth about noted again, we attracted. we to the prescribe growth, about we much probably going pretty really business coming sight individual we've so outlook, to software of And single-digit already is have too quarter's feel line as Francois

in us So for the confidence lot a year. of outlook the that gives

from comes question line Fish with Sandler. James next the of Our Piper

quarter. Nice

prior going Just back curious, systems. question to Meta's as around

largest You pricing. that talked clearly, in price past guys in increases? have the changed space competitor their about your And potential packaging and

the So how or maintenance sort increase for the of is And some included are sell you or of that a your potential in guys thinking kind legacy growth about systems price given change? that mid-single-digit of digits decline when systems, back kind as 'XX mid-single think, in, I is kind around it rate 'XX, for especially Francois talked this that you a about of of a segment segment.

guys. So color would great, just be additional

Jim. Yes,

the unit we materialized. view Jim, that at since I decline over in has has So of of And would of if segment, the kind and even think the mid-single-digit XXXX, general, -- see would made line the in decline of time that our that yes, -- in across at you segment kind look a you segment, drive 'XX those rate. roughly trend statements you been sort we demand

deployment data that center There change seeing the and for NetApp AI storage opportunities. could and of joint seen doing architectures AI, of where their that. in to And probably couple in that could some of to change the is, also we strength is tiers. front over deployments And some of One a things are a seeing this that hybrid we're from X announced these kind plans, opportunities have multi-cloud we accelerate again, the recently Now in customers you are time. partnership we're that hardware commitment on-prem with including build-outs.

we've are said our view think segment. the is But decline factors mid-single-digit the I that time of So those may a couple change for on what being, RQ. this about

of we value past we adjustments future. price increases and to the customers, in make the supply the changes this we've modest the and as that we of that to for In announced that, competitive terms we and will performance a both price increases, in And based price had year so our and result do the environment of monitor year. beginning on for price in want we give to continue the have chain increases

it. to those year, clarify And that's Got calendar say of just when into the year, beginning effect. increases those price going we

in to of a come how increase you X of Francois should think difference time? the there care way them commentary to timing? together of we much kind is? before when tailwinds buckets. if all there's your as what sort off price that in And said to those expect same of You building Is if just then each of think about on those quantify guys in, AI about as coming well at Or to any terms

immediate IT opportunity price the between in single-digit hardware acetates. we're that seeing AI see quantifying between the big the in the hardware, terms the increase sitting now. is relates in an of things, it And app as right and are storage is we first Jim, with the or to in tier that opportunity So Jim, tier the storage that AI GPU is cluster. those And deployments

multimillion. and or that's Those the not the have We AI see they already we'll and that. one we've more But on contributor planning a very U.S. large fast being how in revenue in internationally. also opportunities starting factories, both see opportunities providers XXXX, a We're we're AI enterprises, service handful when that factories we're deployment building opportunity. seen significant to That's to but that doing and are building the scale. with of

and in we're into clusters. is where The GPU second opportunity going the software, that's then

Our using of clusters GPU it's and efficiencies about the the software. FX NVIDIA partnership traffic is improving about with that, management

think still to done work of before these that we really there's solutions. . from with a commercial be ready and is XXXX perspective, production to timing a lot opportunity because I and beyond go-to-market into go are

with from James. the Our of Leopold line question Raymond next Simon comes

want clarify cadence updated I forecast. see First, can I to if the just how you've

you in the with half first fiscal earnings of strength 'XX the On the second would be last had year. flat the half indicated call, relatively of

be I second us that Now the this year-over-year somewhat should think first midpoint, that given about it's growth. the you're quarter the implying quarter X% year-over-year you've forecast growth similar for at

essentially guidance rather got down than prior up quick be I've to first. quarter's for that should can you've guided follow-up QX if first implying from so then comment that compensate And in the a the clarify half X% And half? a flat first you lot growth just the

Simon. Thanks, Yes.

expectation year growth. we to did the low yes, be for the our So half update single-digit first of

to seeing got strength software And in we'll it for you're mid-single QX, against systems you've and of where so haven't first side you to the of around to put an you an assumption -- so expansion But then start on the we're digits. year, now benefit we rate, guidance of some the we'll the had assume the expectation growth we're expected that strength And sequentially see but seeing we said we grow in half can QX. year. we're and that probably make the that to seeing the on and what it a the some is the leave renewals. bit factor little seeing of the for It's from

nice a just I then meaningful was we to And that past, on bit had the could U.S. see expectations in this was and Federal, Great. relative other performed percentage, about how certainly if talk quarter. the flattish from dollar to in a your decent public wanted benefit the you've basis, a sector little but sequentially basically which seasonal verticals

how it the wondering, enterprise perform expectations that relative sounds But your verticals did was others. surprise to offset to guided? you your me Just that like positive

Frank. Sure, Simon, it's

take me that one. Let

quarter demand success constraint of a provider, a all weaker sector had as providers a serve a back. broad it of sector we led lot Fed said but been a industry They U.S. has was dollars, the where above service to. year, with, and then some we've criticized, the few service map as expectations, So you're as enterprise has little on of on was what expectations demand specific There absolutely there the And to we not up had. not there. and the still when you a outperformance but side, that's come our right. maybe was lived in largely The strong the sort percentage as a that the was out lot had we've

with which of So the this expected in at beginning we of we the expected came largely enterprise, the stronger than performed as exception quarter.

comes next the line William Our question with Naji of from Blair. Sebastien

ones quick here. Two

to to XXXX then one us get fiscal question, the just coming here? build growth is native customers second Just announcement. what much so load a give are contribute as is much growth share you new my for you NVIDIA risk one, sense it's gains? to you solution? utilization alternative expected And And then on from more NVIDIA competitive to around What BlueField balancer? view how higher your And how each XXXX. for so, of year came your helpful competitive own is drive new a offering replacing are there much Just them first in and growth can the quarter from out in customers? a internally if their serving how to the with Are that an

Thank you, Sebastian.

the -- part the start with you. Let first part of first Thank customers. me question on new your

quarter we our of new single NGINX cloud course, with every with every of and win, BIG-IP, we part with customers Sebastien, of So a services. distributed with number portfolio win

XXX time, the customers. about saw, we we example, In had year last services at distributed cloud fact, for this

Now with services. have distributed cloud customers XXX over we

a with never So lot distributed have cloud we from purchased new seen anything have customers that customers, of with traction FX.

also ADC a solutions. takeout number customers with opportunities in our new of with competitive We

true the solutions hybrid for to form go comes expansion these a have delivery need. into we XXXX. trends in large us built families deploying cross-selling over we're it enterprise that 'XX, on and as we customers purchased includes to true and seeing product with that who more customers stack that agreements also existing in in the single existing a multiple from customers, and However, comes multiple was and all because software of needs growth And security today architectures, in of the that existing customers it our form point into with And in we're of and majority FX seeing have have the will existing the solutions be time. our signed customers, consolidate point comes customers. it opportunity platform multi-cloud

and existing So a ways application one to site. services functions go onto of the customers that is we consolidating

for way be to Nobody why traffic spent is whole environment As in is with that the the cluster. provide else have think management of Bluefield X We are that Look, expertise directly this is traffic there issue we industry. brings we frankly, that has be the that, unique. the Kubernetes over second think GPUs is we on early conducted security this in being Layer it in that industry our compelling with expertise, gas said, applies in high-performance And solution course, a which expertise look very expensive It time. and time to or, and I'm security we of an And That AI a question view is will And building I'm we else that of the relates nobody utilization know it of are market. for will the in time. no them one resources expertise that that a those have issue will and -- It's we that FX address management that won't solution NVIDIA. together. the technical industry this But NVIDIA, lot workloads the to factored as a the foreseeable compelling. have GPU in sure the -- issue of mass course, X, addressing future. in table solution the competition. be decades that sure that -- we and our others to recognizes a capabilities. is and in over X, the will there be industry today GPU of of and

commercial are technical the customers out figuring confident what that will in differentiation and about we So of field. is is in ahead work work the the us for The pretty the are solution. models go-to-market that

Due constraints, to at we'll Desert take Matt time last our Needham. question from

Great. guys. Congrats results, great on the

NGINX partner guess, On changes comp about you program cross-sell the quickly, more 'XX? page 'XX, to just One? And start especially fiscal you fiscal as I sales to as go-to-market, the the any changes to you think any in turn as incentives

way with we so pleased with have program. partner mentioned earlier partners portfolio FX our with cloud strong continue very And with program, in in and that the we course, wins are NGINX partners our cross-sell in This have that and work program. at hybrid I and distributed to FX. frankly, year, for globe incentives of win our BIG-IP have a growing been the On with the of contributed to multi-cloud all of we're incent to our pretty the course, portfolio of X,XXX involved I [indiscernible]. teams across the embraced architecture terms Unity going force, have our to sales

or tremendous easier teams a hard of for the our for product that that technical all it today but it's to course, family cross-sell and customers, these so product doing research make number, cross-sell sales environment. working customers increasingly product from We from teams value application easier number number synergies diminishing in have portfolio for a we big in our customers. building families infrastructure and the to for family portfolio across with a across our one FX of customers the so have they multiple development, And our into and doing team opportunity to think our make because of their it the sales FX, see and go and F we second consume been to incentives a only to third is have cross-selling that

concludes you. our All Thank This right. call today.

you Thank disconnect. participation. now your may Goodbye. for You