Palo Alto Networks (PANW) 26 Feb 192019 Q2 Earnings call transcript

Good day, and welcome to the Palo Alto Network's Fiscal Second Quarter 2019 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Jeff True. Please go ahead, sir.

Good afternoon, and thank you for joining us on today's conference call to discuss Palo Alto Networks' Fiscal Second Quarter 2019 Financial Results. broadcast the the website Investors being be and at is on accessed section call live web over can investors.paloaltonetworks.com. This of our Chairman Kathy on Chief our Officer; Chief me today's are Klarich, Arora, With Officer. call and Lee Executive our Bonanno, our Officer; Product Chief Financial Nikesh and release issued for our the XX, fiscal afternoon, we announcing January This second XXXX. a press results quarter ended

remind demand can and These would and We our forward-looking the access certain new our copy trends of management risks release, opportunity XXXX; financial that to and timing our to it would of quarter points and modeling on a of operating position call, and If subscriptions, guidance the like shift involve financial course and you and you statements, outsized the fiscal and website. metrics, online our products seasonality. our subscription like conference offerings; a drive regarding in uncertainties. of third you number forward-looking during results, products fiscal the statements ability full and for and for benefits rates; market growth competitive including this statements make mixed will year

future which which on them differ as cause are of these we you not call. statements rely control, statements no today, and should after the and undertake update beyond these from apply our representing results forward-looking Some views to those These actual could obligation materially statements. this by anticipated as to in of our

SEC have we and certain on and on Form the a use adjusted certain filed this measures minutes to financial factors X-K. a XX-Q to on our Also, ago non-GAAP charges. on earnings are basis XXXX, call to more actual please description filed on refer results few please been and XX, Form of posted on exclude note a our that cause expressed report could November release detailed For website SEC with the that quarterly our differ, with

Morgan I For in that we located have and reconciliations of the San presenting And to can them provided posting our February completed to Nikesh. will financial finally, Telecom the financial would Relations Media at measures Results. supplemental be we Technology on will will our these Investor website Stanley call the information the of Wednesday, at in in we remarks, We historical Francisco you Quarterly investors.paloaltonetworks.com. that non-GAAP like over turn Conference with website GAAP also our Section found inform periods, be financial Investors once that, we XX. measures to And under formal have to be

Thank second you, you, go our color like And and financials. this our finally, focus another I'll quarter. this give of Starting more QX for non-GAAP has you year-over-year few growth to $X.XXX number fiscal big earnings that briefly $X.XX. Jeff, our the Fiscal quarter a - for securing the Demisto of through securing I'm pleased $XXX team to I'd have revenues XX% million report share our been a to XX% with outstanding delivered of the wins acquisition. There by per There increased highlight. of represents are sorry, quarter. a Application cloud the XXXX areas provide on update enterprise, everyone, and afternoon securing and through three financials, us joining a little progress results. I'll our on thank Framework.

expansion note, largest quarter, of during world, did and our next-generation world in business. security firewall online the We more at as are the to subscription. as the our one large had hardware footprint, a deal in To Europe's one the one the firewall see in getting prestigious well world. to and gaming most want of manufacturers, center success of in largest with Europe around we with the significant attached car retailers our People companies in continue a the a conscious, deploy data

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First, let me enterprise. the about talk securing

market having XX%. stop the this security DaaS of XXXX. new to security first service new ones to continues of effective. helps policy and announced be since network utilizes attached and products Earlier deliver X.X, and predictive is block malicious over of great point the better, attach rates our disparate intuitive We practice month, proactively optimizer, successful attacks making subscriptions, easier number easier domains in next-generation plus PAN-OS and of version as more manage. integrated legacy policies subscription to rules to which XX the subscription. about new subscription features, to with I'm replace our integrated tightly This the the which The release security better most with last only excited years, we transformed XX including the firewall. our security our provide teams firewall added we This with analytics the of security level success with use the about our and capability progress, reducing are firewall. learning Over services. DNS had with machine platform the a We've

releases, hard solutions software a next-generation to as cybersecurity We enterprise. working firewall will continue our security the for enterprise. in win serve in on with services integration believe our customers subscription more the We platform the providing are to future

have also family. our We expanded hardware

competitor, series and capabilities with throughput useful high be encrypted features traffic. data will Our large Xx at customers nearest new especially of to PA-XXXX the and centers volumes

our KX-Series. availability Additionally, of we announced the

adoption service the and XG, market primary concern. advent the a provider us interesting call, conference has of become quarter's with IoT more lot of will last on be where discussed we a As security the to

and Our Advanced Traps Traps arc, the to to of later. prevent to X.X, new endpoint this operations today, continue earlier we proud KX protection. attacks more Trap allows this Endpoint behavior just threat visibility, whom and about security The based behavior. I'll also introduces manage finally, which engine almost on unprecedented announced Traps container prevention in consistent the Traps automation their talk And market, got close offering with we Protection half security cloud. a We're collection better. new investments series aggressive serve simplifying X,XXX customers, our protections, predicts lot from by X.X data which

second cloud. are, Turning focus the to our

and be that by configurations. the our set focused delivering technology delivering laser across to customers continue on capabilities broadest We in all clouds the enables security cloud cloud of journey

As X,XXX are of is RedLock our results. last positive of showing acquisition customers quarter The the quarter, approximately offering. we speedboat using the and cloud already created cloud second around

have RedLock power forecast for best-in-class combining exceeded and product We with a Palo the a execution business original example Network's than of Alto more by the our is XX%. of great This distribution.

with and environments. progress very and enhanced VM-Series new cloud to product trials private for our and in-line security continued with initial We're both pleased was customers. we're cloud capabilities by improved Alibaba cloud support of the They the for X.Xx the and up and Oracle the added include our Additionally, operating of to with seeing many recently in performance public cloud. expanded VM-Series success

reduces analyst. endpoint XDR integration is available be of is is before product evolution the of adapt platform. It has which to proud down legacy this area leverage public to Application attacks accurately to is in the is a that investigation integrated of and future security the cloud threats its cloud, XDR. of X.X, endpoint in third machine response launched natively using silos strategy and XX defenses Built only to ever deployed in announce product Framework It network, Framework points. and power rapidly their Trap I Cortex being for Cortex. Cortex believe Cortex integrates The Cortex future. announcing stops called is drive attacks beyond endpoint than strategy learning. enables threats. offer breaks with learning, simplifies EDR first noise managed Framework. the security X.X, AI. portion plagued created are months the prevent machine announcement will industry's that Cortex It focus signal by stock our detection, ago We stop We open to and done is now this XDR We're with allowing being significant the AI and traditional us only mentioned harnessing before. continued conjunction technologies AI-based features new how advanced been ratio uncovers works the our started scale, and Cortex Application on goes with Application also first empower analysts, XDR in security the and deployed Cortex the data. called data. existing to teams to automation and and far the damage sophisticated It that investigations is application

as, Cortex can have protection critical. X.X that data they of now Cortex managed real We Cortex Now this, collection XDR. our comprehensive true across a endpoint threat advanced partners help deliver to with response our combined full the digital that collecting to to powerful when attacks in protection, we're digital ultimate as of purchased with When stitching can Yes, engine, to can across as who prevents, to also detection behavioral partnerships will sure developed security and free if Traps product, in the Cortex include industry. customers. free, using agent protection XDR, investigational partners, to chain response the it most Traps advanced endpoint prevention even confident Traps Cortex uniqueness acts use approach, its services so infrastructure malicious new data XXxX advantage customers agent. threats make responds as in is attacks, center entire customers service declaring us by advanced capabilities, spot extend an deploy more detects single XDR. believe out is five announcing XDR, is and we're The and Traps activity. time single today of roll enhanced data XDR, better endpoint a for Cortex include from the well Customers events the our product stops with charge in our together monitoring And to comprehensive take purchase their infrastructure. threat the decided entire we to detection for of We're one

They excited Cortex the Start, Trustwave. ONXIT, challenge to changes We Pricewaterhouse, demonstrate and of enough partnerships our industry to cannot problems. I service product Critical BDO these These customers' exciting in our platform. for about are integration are all and in solving our and team will provide and confidence important thank up with customers stepping our speed

Last Demisto. in and Cortex. a has SOAR. ML and of acquisition we on CEO, of Klarich million I the color and unique Demisto separate projections operation me billings the plan, is time, Cortex, space we on same next achievement Networks orchestration customers announced evolving of engine. step allow million. significant Markovitch, the more Slavik AI Demisto. $XX week facilitate for with even Demisto's approximately their customer leveraging turn to ambitious will partner a proposed and an multivendor our now facilitate Lastly, that the Demisto have and to believe the of to analytics tightly leader like would help as provide more XXXX, will At solving Palo Demisto leadership operate and solutions. and of $XX distribution parts capabilities, called Slavik support further the will playbooks their plans to integrate their complex To automate them attention speedboat into work plan this threats. already Demisto, for with security unique closely broader will Alto to of our Lee for We under

we on last a acquisitions we six week, made the over Demisto, the last I with the addition months. As couple call of mentioned have of had now

disconnected data, these results. automating about machine manage debate for about security and debate orchestrating this data. struggling It's looking mind, firewall learning the reaction many that While it's believe closing, of about data customers making from products, RSA initial about center focus In are we and responses. that narrow In next robust lens. who to to And we endpoint security acquisitions point our are is call customer too of in the primary And over pros approach to with delighted Cortex believe security. I'll know security, the the successful, on both continue of that, the a we week, automation We our security. future. as companies, integration, are whether we answer levels is security through evaluate with we my turn a to analytics high platform our there'll be the for a future is of the We future with sure is too at and and Kathy. is believe is of

Nikesh. you, Thank

under revenue unless stated and I new like prior we all August are as XXXX. and again are discussed I'd that a figures, to reflected growth note while once the at to quarter, we Before non-GAAP X, compared figures added year financial period are and XXX the rates ASC second standard the start, of as expansion new otherwise. except also financials for period driving All robust adopted business. In rapid current prior pace customers billings

in QX and XX% revenue QX XX% In million QX subscription a increased grew and second year. Americas, in $XXX.X $XXX.X a in XX% XX geography, total, for a lifetime XX% XX% grew product XX%. made top $XXX.X Support In revenue million total customers, to in minimum same support compared last the $XX.X accounted of the of year. Our value, million to XX% QX, increased $XXX.X XX% increase revenue purchase total compared XX%. to of By the revenue. APAC. spent subscription XX% $XXX.X quarter, increased of in all revenue revenue of million of EMEA, million million. prior of SaaS-based which grew period revenue the

for years. continued approximately and dollar-weighted increased the offerings year-over-year. new approximately million, $XXX.X exited show quarter billings The billings Our contract total momentum to QX nonattached subscription rate with and the million run growing three approximately duration in was second year-over-year. strong support of we XX% billings XX% quarter $XXX of

increased billings. $X.X billings margin million, XX% deferred XX to year-over-year. was XX.X%, Subscription point XXX QX second Total basis For with half XX%. for of increase $XXX year. XXX revenue, million last Support was million, up $X.X XX.X%, of billion at expenses basis $XXX.X grew quarter were XX%. the of ended second points. gross XXXX, million, increase up and operating increase million Non-GAAP $XXX.X of which We were basis were were billings of billings billion, end Product first $X.XX net X,XXX QX the a share. an was fiscal per quarter $XXX.X an of points or the XX.X% billings compared XX%. XX% XX% revenue $XXX.X accounted income an year-over-year. margin total the to employees. represents or up of improvement XX% Operating of for diluted QX

or loss Our and the basis tax for non-GAAP by QX effective XX% was On XX%. $X.X diluted rate a GAAP for per basic second million declined share. quarter, to $X.XX net

to and and cash with Turning of We investments flows January billion. cash equivalents balance cash, items. finished $X.X sheet

repurchase The on program, stock On repurchase During completed Directors We approximately December authorization $X shares was new XXXX. of XXXX. billion XX, will Board repurchased the effective share December price which $X average billion new XX, we an share common approved XX, X.X program. of our repurchase quarter, our at million share. per a approximately through $XXX of February expire

was Turning flow figure XX.X%. expense for million, other a of $XXX.X up of from were million by cash $XX.X Free imputed of increased prior XX this flow XXXX quarter was quarter the was decline million. for $XX Adjusting of XX% margin million. free $XXX.X from the DSO flow. period. the approximately to a debt. and cash a with This XX%. QX the during at impacted expenditures million days quarter charges, $XXX.X nine was operations Capital associated flow of redemption in year cash days, cash interest convertible cash

guidance to now and modeling Turning points.

'XX, XX% year-over-year. an range we increase of $XXX revenue to to $XXX the expect XX% to QX fiscal of For million, in be million

the in Demisto the expenses $X.XX to expect non-GAAP EPS proposed includes using XXX of range which related $X.XX, to million be to XX acquisition approximately million We to shares.

Before I provide like to points. additional conclude, modeling some I'd

months acquisition, increase $XX non-GAAP of approximately QX a the attributable Our first million. or million $X per expense the acquisition. net billings following EPS to Demisto guidance $XX Demisto XX share approximately $X.XX of the In M&A expect includes to proposed we in million

Our Chinese an includes on expected origin to impact due EPS goods. tariffs also $X.XX guidance U.S.

at rate we operating including help expenses, the half that, communicated of XXXX with comfortable second CapEx the for of we year. cash to questions. with for of will billings remain debt poll acquisition-related tax margin to to the are $XX million. current approximately consensus for million in XX%. for settlement model our number approximately be of $XX questions. Operator, $XX remainder fiscal for XX%. the call XXXX million for to million please This flow year, Santa And To fiscal expect open associated of the the between adjusted items non-GAAP you $XX previously We of expect our With flow an effective cash the XXXX, Clara. million $XX consisting adjusted convertible I'd and new related is headquarters one-time like to free

[Operator Instructions].

comes from Walter Our first question Pritchard, Citi.

update Can an what express pretty a that, know an that or you're as on about had sounds service percent opportunity. and to us don't not, then excited a still of it if just on you're willing provider? you follow-up. give I product-related curious, It like update but revenue

been providing their case Hi they not concerned a much last way to bunch and we consumers the the there's for phones be launched comes of when unique And to in customers talked bandwidth going them Walter, health a XG or ability talking the were is cases, as as their the question. edge, we tunnel is cloud. problem talking at as or whatever from, for we use as telcos hack opportunity mentioned or are devices cared KX where very all space. BXB they but, KX, thanks opportunity the focus we solve eye to security. I have XG, service them choose that of provide that BXB start they whole to about positioned there. a devices But care would are say or shouldn't focused it implement twinkle the their And their and well, providers in cars BXB not out the firewall in sure if for for treats when the their believe your they back our to uniquely that on about I'd IoT, believe making to to whole use it the to we quarter, have Look, you a from or and secure rigged, firewall have and individual

happy a we're integrating that seeing of with start with very some beginning we're conversations So of We're requests lot for testing having. sort to them. in

all can direction say I conversations we're So days, is, the happy the early but taking. are with

Kathy. for maybe then, And

the those side, now. the is have product, ramp some On think market think pretty Should we second Or half that your fiscal until you of more seeing too new forth? the have guess that going complete endpoint about had as year, you where, so a relationships, XXXX haven't fiscal solution, that significant should you of in complete really here I a into revenue arguably to that's a maybe you we go and given and driver? of about ambitious as

the we customers. that solution very look, course, be our we're compelling XDR, Cortex very Trap excited think X.X, Well, is going and leverage will for Trap to X.X about of new which a

obviously a our of have so drive in And confidence that the ability marketplace. of product to lot we in acceptance

about we're not very excited and I'm offers our drive us of get going for things X.X that to details. revenue those into Traps that But potential future. to the really performance, start going what's of terms In we, to overall great it kinds

Instructions]. [Operator

Bank. from Keirstead, comes question next Deutsche Our Karl

where if XX% family maybe. Nikesh, either appliance wondering super think comment acceleration for revenue one to by Maybe growth Kathy. one or for could the Nikesh, you saw perhaps, was you just vertical strength on I I'm impressive. product

think else a any driver a something expenses is really could any you occurred line. modeling there then, the of little of if Kathy, out Just whether color is anybody sales in improvement. I anything deferred give or as XXX marketing on Maybe XQ question don't into particular the that? margin basis And was to margin there's assuming the out and unusual. offer if that on point were you color XQ, for some performance. I'm

level for question. Karl, to out say the activity Hey but thing one we're marketplace. the thanks specific seeing I a driver, Look, have there's that, of general no of

security, we're been more people gets more a organizations for this something tell care for getting where in about a done customer heightened or of talked financial preparedness more seeing beat, in we've we've but can the up the security. always that strong From perspective, strong All conversations sense Fed terms and I that in awareness for a into where we time better there's happens about gets has peer past, the are every services market us, vertical security. you in more is the security leveled As are and a that breached somebody for of consciousness. and have other been down verticals. us, seeing more

generally, trends and say this front the quarter. board, So across I'd driven the just this that's product the has and revenue what probably

we I'll strong revenue just very the mix Yes. higher product quarter in saw related. by they're And that yield. drives address comment obviously saying margin the The

obviously as is that QX, that basis you're in for last right, And saw mentioned we've that we quarters, points, is by leverage of been operating the and decline the leverage and marketing number driving seen And and good our expense seeing. And a marketing my that we expense in I several sales remarks. in of XXX in margins. have terms in revenue sales helping we're that percentage leverage as So driving addition, business. overall. the But

UBS. Fatima next comes question Our Boolani, from

ensure entire One one the better focusing years, over expanded the dramatically quite for sure which that couple last portfolio of sort have is things integrated. has on steps in your entire and you've portfolio, the also of solutions way of cloud about packaging taking a Nikesh, Nikesh and and better talked one been to for making the Kathy.

customer And deal I grow progress extent influencing to Kathy, the then trends markers and that lifetime a value follow-up that to of wanted that I to So may. if what for especially has mile made front. apace? on understand sizes, And continues deal metric sort and you've been that

Sure, months Fatima, we've able highlighted, that focus I'm question. around three and I for in thanks the your that areas been question your excited eight expanding real create think the very Look, enterprise side to phenomenal I a a I job subscriptions our building as side, and more, of prepared bit said had I on this little firewall in think the in company on putting a enterprise firewalls. done remarks top

basically, now put attached incumbent I customer's at our be really and after is their solutions because so is to a another our it hard customers piece delivered once firewall, that XX,XXX is firewall, the you're the us can you by infrastructure, So we've you infrastructure, charged to off more about which firewall more a in think which in decision introducing first a And triggered eight and we have It's more to upon cybersecurity rallied product, provide customers and vendor. last sorry, the team service. the our security DNS months, XXXX the building nonattached really - firewalls. built in capability subscription of

you management and give we more that's and firewall to works and way deploy, - So more me ability Networks' from you that customers need the you say that - in capability exciting. need you don't very of, another of solution, you look, don't infrastructure, Palo to it's kind all the it pane and you to your Alto another pane, can give our a off take appliance

for integration enterprise on a us and that's the integration it, point you side. a marker of So for like called mile

the excited better these our we're us excited side, I to we're progress, GPCS the these cloud have of RedLock and to and go more is for more wins capability steadily excited, working integration, solutions. out across we deploying sure we're about our slowly offering we're team there getting the highlighted, the On progress more big of and and ability are make people the with the compete regions, towards sort as people

last marketing Application the Framework a X.X. our us You network planned you be We proof Cortex to data in Cortex anything integration. us It a quarter, done provide the in the half the points done data as only further industry, was to able of integration quarters. cloud a will side is we has expect I points, true think phenomenal proof morning, show phenomenal of of integration this is XDR team's and which in to have multiple job, being in job It just I the don't yet, and a point more deploying announce a endpoint, service have that. think team announced the across cloud product can what and point

So we aspiration believe of acquire services, integrated towards our can are we more do making you tremendous and that. to and progress us more expect more to

Kathy, a may Certainly looking we gross margin. little question than for the a on were you be better for.

those headwind to wanted Just of understand that persist? consequence we supply well? investment about And as me. we the should how a should been about it the margins to as constraints the how time, chain And impacting longer cloud solution think impacting build-out gross the as we and how you've expect you probably navigating of And have think at some tariff. should much same greater scale, for - that's how

Yes, sure.

with to improvement that, the do over improvement a quarter, concerted and that we've terms during the yes, those been to we've gross we're in that our gross improve almost years made so products and of time, margins ensure time. introduced now, in we the margin that able able on So margins new said we've ago, products over to effort two we've their seen definitely some product

tariff. impact commoditized due issues to also memory than the seen being now. some more $X.XX have quarter an of terms to have of do terms talked more stabilizing in improvement about, we've past. $X.XX which the We indicated to pricing, we been some in We in expensive they have still be memory seems pricing parts in of overall, just But this

some increase points also we So have pleased it's environment. some we're XX kind did of very given and which we're the an current obviously a mixed about bag. of influences. see we seeing improvements also, negative We're Overall, year-over-year, about, basis

for We us terms cloud those you've we our for in businesses. in that been to nicely and the In that there's as a in sized really build also great of a see going, big, there's margin, and have cloud declines businesses services lot potential think where opportunity we some investing us. investments of obviously the, seen

those So that the we're investing in ensure market can opportunity. definitely areas order we to in capture

question John Jefferies. comes from next DiFucci, The

is Lee. question actually first My for

I think have that Lee, that's I PA-XXXX. the coming telco the with, So assume you the it appliance mentioned, new call or on out been might last you're class Nikesh

guess market, been replacing is, we I products? know then if launches guess you to that's could in in address or a let the that just much past? very is, another right, this Just, it I market one further us is should haven't And really expect if you other

good question. Yes,

for high-value me So platform series the to advent the with just earlier modules were mobile providers release series. coming targeted of we But sensitive the as broader networks specifically in XG KX security. those start is And see XG, and from the and KX optimized specifically part by much The those transitioning the the X.X hardware service launched new devices for need is the that series PA-XXXX that an let particular, XG. IoT and then month, onto of IoT as clarifying. and introduced this basis that and

providers. space to and we So been are service overall, this but have selling provider in different in this market, they to they're service related offerings. Relative

and portfolio. seen have The built the there. market, capture though of that opportunity specifically success specialized go We to series the the parts designed across product we've first exists is time KX that really a different for

or... waiting it still is series, on we're the KX And correct,

as earlier of series this month. The now is available No. KX

are I especially all across board, And the in a but the categories, area. perfect. revenue results clarification. product the strong Okay, just Kathy, mean

I in in ASC and want of in line just it of I there treated subscription due make that all line? all remarks, prepared we is mean, subscription is the to So that on-premise something, Nikesh that is the you think in under the detached about license Or I correctly. sure both your XXX way the talked any standard? understand to subscription's

in series A VM which beginning series, we when Yes. of talked ASC regarding category. the QX, recognized our at XXX, we portion of is the portion of the upfront about that VM and talked

Okay.

the so line? in item the, on income license And in that statement, it's line in the

That's correct. That's correct.

would what the shift or more any of subscription Okay, was license subscription, that there on is to more revenue, be kind and continuing on-premise there line? have you'd like on, where shift, more a

and growth In mean, this rest adjustment, obviously, both of growth, not driving series. our year's growth not the we're big And of made as obviously, seeing business there, driver a terms there, no. portion of of while series a I last significant in what's the revenues in respect. are. we've recognition of VM driver as growth our that's any VM of really of No, the year's the recognition not the product it's It's a

of rest seeing real impact category. the the so of the what And terms product is we're in

Instructions]. [Operator

Our next Stifel. from Talpaz, comes question Gur

and on app these Congrats we vision product-centric initiatives? are Demisto ultimately around for results. One, conjunction And the intertwined A in should few about here. questions XDR how with your framework? Cortex, think the speaking, efforts the and how

the that the an using useful. can can overview give and sure the We handle me big a jump perhaps cloud we and platform and public for amounts we you lot making is the deal. on massive the underlying Let Lee Look, is tools, then in spent to the, a of become, real it answers. of needing us, in being deploying get with where very Cortex by and features that think leverage able eye data We right. time

is provide of I a kind service, think is XDR start-ups XDR bunch very think service. out there critical, there, whole trying I which that is a to of

are from when collect where you and the who leverage deployed can many we service deploy Palo from you us. sensors, I where different there it's cloud you data all that our firewalls, from Traps to Alto from security customers actually, think X and

have and in that not to can tool real near help that stuff - the was will past. we rehabs, you that as option solve, not a be the of deal with them, here to whole bunch available So silica go a

I ago, think solve cybersecurity I wasn't we going analysts many Xx was went solutions, and so than got didn't getting to XXx figure how that, our more Demisto But was have to more I I've is I'm think and years to I'm I I because out to the others challenge X figured alerts we big getting alert. we'd it, it customer's when about X we until hire to talked you you out something to about to much talk and about to the talk going customers, I and it. even out want to this, think more

The feel, to want people you more that damage. products to I punitive deploy, to me. a be solve hire guys more secure the I cannot want this So need I the the to more alerts send

across vendors from is the Application Alto a but people in Palo take fits opportunity that part can able we pun Demisto's Demisto I be the industry, leverage no in that there generating, across where of that entire sore just where help solving So this other And that that art. you that mastered need Framework the that we squarely crescendo leverage spot data intended. is already to Networks, realized more not and are saying, I then think on to and alert, going have

Yes, to said. and piggyback top what just Nikesh of on

investigating like that the think responses. is sort we large an if think for and ability where good together to sources, to understand different need customers of understanding actually with that really XDR more this some can in, majority in. I present that the more to ways to about the but is And automated want more one it the deal provides attacks, where data of with only initiating then and stitch and automatically we a and that, playbooks analyst to fit time it you do soft that, analytics from is of have the data sophisticated alerts always is, to volume it alerts, that, for spend proactively Demisto actually it, to coming encourage will thing, deal of analyst

of soft how think hand-in-hand a sort of do analyst the terms they very will capabilities. of So in work

if And the Demisto. to gotten actually for a and I with going from Demisto chance past But Nikesh, acquisition they vendors you've you've yet. integration that's any really want helpful. and that customer in of talked sort how the viewed Yes, directly integrated forward? response have And worked to yet those with response any you had if know then strong talk a about

an had have opportunity. We

understand their from fair think that to out belongs to their deployed is the be a I of infrastructure. built connectors that available access explicit into open because it's from Demisto on process infrastructure And to able the customer, customer it biggest are product remediate in with they the the there. data role back permission, every back the this the customer's to vendor and in

So question there's that going proprietary where is connectivity leverages, no Demisto to if that headed. change is by your acquisition, the that's

In Cortex. which to anywhere a else impossible addition, but have Demisto lot us access will of Palo for just is in deploy Alto also data,

Gabriella comes Sachs. Goldman question from next Your Borges,

you that. include takes bit a around monetization on the Framework just Application XDR. you opportunities to just the on maybe could about thought bundle, little on Nikesh, I hoping the broadly, within about was Traps puts and specifically expand monetization decision with the talked We've And broader how some more XDR.

opposed more one Sure, a Lee hopefully. and as company had perspective, it consistently thank in take thesis little already tools thesis, you. to overview give From the more how an I with figured all and to was out Maybe provide the been acquisitions working in it think on infrastructure. going way of to data jump while I'm for the [indiscernible]. XDR Look, this a going against and deploying something integration, is that you again, our and of in, the will into

critical which important end I sensors is us for our integrates XDR actually first mentioned. data the all three very is because So it that from the application very, from

sophisticated important get multiple analysts more it's also, becomes tools. and observation is tools had the into to get we've And impossible So the that soft for customers as soft developed, we it very train business. across more as part their of

manage to So it notice, believe, is we've across we've as who but actually the this, I will utilize because true collected, are want soft, data gets to be is deployed XDR. this, the us help in product from that leverage for the fully going or collecting if we partners that, partnered you highlight with mentioned the all able five we to being

of in agent two importantly, more and sure ubiquitous stated most features, do leverage endpoint of the agent decision, be the a who stakes, advanced you set a And back how the and eight a that them of have provide if provide should one of about we've used other it and thought over back I as as I certain a customer in also the lot will, of the endpoint mind, every at at data do have endpoint endpoint the if could new major Traps but last - new sort endpoint. but terms to features. the vendors over form, least months, turn think, into hard which realized has, to in table lot able look my should it. is data we there's is vendors its But become endpoint, we industry, at you in In Traps, to security to protection to features to vendors go to it behavior to cloud production, make both market. that set able becomes cloud across And be turn time, sat database, allows solutions, and the there's

on bundling probably they're which as can and endpoint just not Traps, well, in it. anything. coached - can want sure product we to our So leverages replace multiple they you to they deploy, allows because agents customers, free And leverage their a customers we deploy Traps that XDR and he be And thinks have we know, available the want up, effectively more outcome. ubiquity customer. running thought a that anything, free right infrastructure, me me that's would to doesn't he's which XDR I've to required for Lee this has which add is - giving us thumbs means he make

Lee. for is follow-up The

effort? for X.X you help in standardized I deployment firewall extent customers firewall, have versus you have you Palo the on at next-gen's can what Then, think Alto or standardization he sourcing, When features a that policy the maybe firewall, have some do multiple look on still you the that dual your of this. might to you're know for vendors? base rules with have in sense customer the answer to new

kind to purchase in obviously initially that often Yes, that of will more of to accelerate is us like become it of as customer and success policies depends great perspective. better, lot from on parts a success across such they moving depends. project, optimizer, into our both is ease-of-operation they a then that for when we think things they high out capabilities customers, number We answer infrastructure where a the over question. time. policy Obviously, by leverage initially their use level a that the be, allow other security quickly accelerate as of and deploy, well going customer an we of a in Palo and help them particular how The see, they the Alto It try are large perspective are as certainly gain that, of Networks to think journey. security actually to

of X.X, filtering, now drives us more their that DNS out broader consume the that's to service service, their the on to firewall see also consumption they with often they more The second additional whether and top able URL in GlobalProtect security and the the primary infrastructure, usage. using value and or value of as value subscription then prevention that, the see aspect are is, subscription, WildFire, fire of the which

is journey, to utilization it continue so both what expand. terms does a but of And footprint as we as well see in

from Auty, JPMorgan. comes question next Our Sterling

about moving for growth overall within total the revenue. need product forward think the of curious growth how I'm you guys

model, of started a as a razorblade subscription. now razor you substantial nonattached amount have and You

goals? So for grow how you fast product does your growth on have to moving forward deliver to

good a That's question.

I we think, our more deploy to more and firewalls there. customers look, like

being uptake we yes, every increase there point that to services, why the perspective, offer because to our want multiple today, subscriptions like that deployed growth. can infrastructure. those to our a we've the of both in But just are we'd many we subscription depth we see are want breadth, that's and customers. a subscription, that rejuvenation and product found products deployed And to we in because good still So believe on subscriptions firewall new and see embarked success intensity we yes, time on

as you, need don't as as the as, said, an so. to more platform in-line things, as a, more services that more able firewall just like not also where that I to firewall plug and a customers the be see we deploy see So but we to protects

breadth important for on product the growth both side. and our plan, us get depth For it's to

look But does Makes the we you flowing billings contract gave of sense. sense into the think And about - aspirations the a us I have billings one front. and do Demisto, how the how On how follow-up. structure does on revenue?

that? want did Kathy, not you to answer

model, ratable Demisto the a operates most part. for with Well,

would that expect we ratable question, your with Does the acquisition. model so answer a revenue And Sterling? Demisto

Well, sort of.

but So to words, be we contribution expect in it initially other should in. layer for the small to revenue

four way So bigger to half is first half? in that than quarter wrong Or look, the that second at the the be should substantially look it?

of I does right lag bookings lag Well, the track, the think you're in terms in on - revenue does revenue model. a that ratable revenue

got that you've correct. So

Stanley. Wise, Our comes Morgan Keith from next question

Hamza is This Keith in Fodderwala, for Wise.

a from quick my questions couple Just end. of

it Looking unlike and at the the we've seen guidance fiscal versus is in sequential implies what in past. QX QX, a slight down which tick revenue

the the whether from be guidance? shutdown federal effects extent what tariffs related or to it is just your government spillover conservatism or in to forward environment, that typical caution So macro

sort year. guidance. Look, our into We're last growth XX% compare a wouldn't any pretty on Yes. tough macro very year-over-year XX% read respectable comment of to range revenue guiding I a

very So terms comfortable we in guidance. are where our feel of with we

margin. cash free And it. the on flow just Got follow-up a question

of that? flow year. does that the does Does the full margin You mentioned cash roughly free a XX% - that that include or exclude for payments onetime

margin. cash cash free an the year adjustments, that free XX% that's we flow margin full So guided the includes to adjusted

Oppenheimer Eyal, question and next Our comes from Shaul Company.

I with growth Kathy, at Is What's Help improvement? the this driving think been the work EMEA, biggest doing has us quarter I ongoing year-over-year. shown demand in that XX% or distributors? of think understand. level trends? around Nikesh Is the that you've strongest this

think that, time a spend lot company Alto Networks as country a we has as Palo globally, I we in grown more in have robust making teams speaking, we've generally expanded Europe. every and sure

leadership very We strong have there.

penetrating it's customers mind, really I market. getting and of in think it's just, front in and our my presenting there solutions the out

U.S. very expanding we experience, tries all So of from a the it team the good continuing America. company, over think time, parts markets, more we prior starts our to and U.S. is, in EMEA in say as have it's execution and of U.S.-based Pacific we're is focused focus our not in we've can I room, going in where the various and shown, part on just execution, just and and international be to on but globally, and Asia EMEA Latin a lot

if a Linearity I at fair few follow-up, if That's quarters, past prior out I of trends, improving ones. I'm you'd the And think loaded looking the may. as enough. back-end slightly be

Just specific point. some on if looking that possible for color

Yes.

ended, bookings depending fairly for example, of the come our consistent quarter, when obviously as month. Our see, - We linearity do is, is over in just December a in, in the year-end time. quarter terms on remains

quarter time. but do see And so another than over different very quarters, linearity that we that's we in been consistent

or So yes, anything wouldn't new particularly there. call different really I out

Our question Wells Philip next Fargo. comes from Winslow,

you first said through which On X,XXX, just if the ahead XX,XXX the look half you it's of customers. site this you had year, that And at is enterprise of the versus morning, 'XX. it with the launch actually end up fiscal about, I call of where were the

product just going customers. So sort you land sort at about like, between to are portfolio obviously upsell, thinking net growing existing think just it, start add versus go-to-market new pace. healthy even of medium-term how in to very you customers planning, an of about obviously, new When install to what of guidance, base so prioritization is you're a forward continuing

chew to given at team and gum the to walk think this challenge able is, Well, I sales time. same got to we've part of be the

- of both. bit to have we'll So a

to growth think and expand I in out to sustain to we have able go base. aspirations existing have, be our the you

We products a customers new be of new land have deploy, and able deployed lot we to that newer which will to existing also we're both be because customers, have to trying our customers. in

we our products, are in deploying in the So receptive which to maybe space, more cloud space. the Cortex new

and trying them of to the product, already on both. on our course, sell have The focus both teams products, have new, products, experience and and of bit them experienced to we're go they to the new a great because really customers existing are have our existing is challenging we ends. but is, opportunity So to training do try products deployed and the

terms of just in that, customer that great. you're of new cetera, in in those versus healthy sort Any that net just deals, be those the terms deals et obviously win competition, on on seeing adds. of follow-up the pricing to just And any rates color just it. your would changes in Got

changed eight last XX I've the haven't rates here. months been months substantially since over at win or least, last Our

I pretty think consistent across been it's the board.

are products, as newer in in mentioned. our past, seeing XX%, which haven't seen sustaining lower obviously growth better Kathy hence we traction some the We the of rates

traction So teams we are seeing there, are around beginning we seeing our to form it.

landscape area. expect perspective, one have we across expectations the we're of in So more high - EMEA. from seeing in the you teams But highlighted success from that a generally

that's penetration a clearly, of So strategy. more

So processes. we I our execution we fronts in effort, to all go by that across we more it's wherever create do and think and just inspecting feel constantly need steady step in

Our last Ken from question comes Talanian, Evercore.

thus you purchases, land-and-expand Or most Are opportunity? customers the a far representative more GlobalProtect enterprise-wide of cloud? seeing make of most deals

management I used them we our service competitor, forget. to a panorama become they're GlobalProtect deployed GlobalProtect understand of product, and a product But I wins are believe we've we they have up so then security cloud's situations and to name, there pane, cannot than and have Look, other walked the as who where customers they I seen network had, which highlighted more posture. secure has in, we've the seen, two customer is already policies, firewalls cloud how which also how deployed it's because work, extension make also set to an policy their

make changes compensation or or And you the Okay. you any question, year have to compensation this last do made to terms? plan sales force

be the set sales based different adapting feedback it plan our ourselves. that force's But seems meets changed substantive also expectations there's our it year, because constantly nothing take what transpired course we so make in quarter, working. our we we has We're the from objectives of compensation change sure have on In we were or to the where market. during the for to to far,

out, at I the thank to big for out our As want done a you there give of to all questions, shout the just attending they've are phenomenal call. company, I shout to no a want job. team also more

much, to weeks very the of and thank in with look Thank So you you at meeting forward the you. many upcoming of conference. and you some Stanley Morgan I

disconnect. conference, Thank and today's may This you, ladies you concludes gentlemen. now