Palo Alto Networks (PANW) 24 Feb 202020 Q2 Earnings call transcript

Good day, everyone. Welcome to the Palo Alto Networks Fiscal Second Quarter 2020 Earnings Conference. Today’s call is being recorded.

At this time, I’d like to turn things over to Mr. David Niederman, Vice President of Investor Relations. sir. ahead, go Please

over thank at discuss joining second Palo This section broadcast financial and accessed can conference the on quarter on call results. Investors live being is to Alto our call Web you afternoon, and us be website for of today’s XXXX the investors.paloaltonetworks.com. Good Networks fiscal

Chief me today’s call Officer; and Kathy Officer; Executive Chief on are Financial Chairman With Bonanno, Lee and Product our Klarich, Chief Nikesh Arora, Officer. our our

a issued fiscal January XXXX. we This announcing the release afternoon, results for press second our quarter XX, ended

you’d release, website. it If like can a the copy our you on of online access

modeling We would accelerated competitive third trends operating quarter, timing for and fiscal for this products and forward-looking of proposed three will subscriptions, the marketing metrics. and year years, offerings, demand our like course full products make next opportunity our XXXX to and and share remind results statements, our including during our and in points the certain call, new regarding management financial that fiscal conference statements subscription and our repurchase benefits you position, guidance the in of financial and

which statements to by are risks of of These beyond These a forward-looking actual statements. differ these of cause and some our as uncertainties, involve forward-looking materially today. number from anticipated control, could results which those apply statements

them our to in views representing the on we as statements update these obligation not undertake after and rely no You this should future, call.

a the XX, website the minutes of report November Form our XXXX, and Form differ, refer annual please a on on factors on release our on filed could earnings ago to results with filed to more that with X-K. posted and For detailed SEC cause few description actual XX-Q our SEC

exclude call please a expressed charges. on basis that been financial this on are certain measures non-GAAP note and adjusted certain use have to we Also,

investors.paloaltonetworks.com. information supplemental measures GAAP For non-GAAP these that our in the financial historical to at the provided have we found in measures can Investors of financial periods, financial be located section reconciliations of website

completed be Morgan conference under we remarks, Quarterly San the also to to be finally, will will attending TMT formal Relations Francisco we website on We’d Results our like section. that our Stanley And inform we the March Xth. once you them in have posting Investor

And with over that, to call I’ll Nikesh. turn the

you, seen you, and excited he was adding Thank strategic the earlier Amit conversations launching David. He integrated world. that started is Singh more our a joining sales strategy since resonating call. around to Palo the around cloud securing our He excited finished and well Good our we with our him just before, afternoon, I than excited for ever thank are talked customers He the capability are They our and everyone, review was than I've our Alto ever our And today. Networks. of responding capability teams than more firewalls two-day security, most with to customers. around ever were world. President, stock efforts.

offerings up billings of which call. this strong our thinking about grew a year-over-year, including from present in And security that in the performance was our next-generation definitely are all I contrast. XXX% QX. enthusiasm, It's XX% earnings

know leg to do. to on want talk and thing relevant I to hardest security that but about second We more the all transformation, to and is building executing our customers products. you which a our are becoming business third But well do our

the to chase. cut let's So

which this some quarter, correct we all take last expecting that problem changes arrived. quarter. last product were I of balance will and year, as sales fairness, happened that Am had our we the on focus. of disappointed We sales In We knew their with what the Yes. team's course about improvement focus Security. our impacted We the discussed incentive talked time to Next-Generation which product with corrected impact towards revenues? hasn't

improve because going will partly, the because longer expected. sales take about quarter. feel to the we inspection, And did were a closing the than I that Upon time. partly, change performance some deep take little is softness incentive in of more the deals Product too optimistic

place. So will what and Elder entrepreneurial our have and are Alan First, momentum. we joined the energy comfort The do us speedboat. this firewalls are who we going created and is speedboats from who who We've people will and in what us following for speedboat be Boswell success gives joined to Andy to and leadership drive new of that with this about this a leading performance Prisma from Cisco improve? now Riverbed up hired us Cortex

vision combined we are seeing heightened solution. recently and interest this when with Secondly, believe deals We're Prisma great still SASE early across we some And stages, is state. entire Access, have volition on our but and feedback the we our a and in simplicity power closed positive launched customers solution. SD-WAN from

have branch our partners, a our solution Along about we to architecture good capability technology feel compete. the and bring with full to ability

we some in signs our fourth quarter. fiscal the we growth indicators are business product where track Finally, likely resumed that seeing early we're and across to see

its let to to Networks. So of revisit me means what product that terms our Palo outlook forward in and going impact on it Alto

the and QX. improve half turned product of in second XXXX growth positive expect in We fiscal fiscal to

be below still our internal will expectations. products However,

product growth We return expect year market next in fiscal XXXX. to will that

to our into details And our give expectations. We have more will put cost-containment you with forecast. versus profitability match this Kathy measures investment around EPS our trajectory place

Lower impact that two still the Only guidance team year. will course three-year have at deep upon I metric growth is of our inspection Firewall fiscal XXXX. in outlook our revisited gave that growth guidance Analyst long-term this to in management Day. we as our double-digit quarters a confidence and for Platform product in The a

the working. seen let's issue financials, and met what's this and about product customers quarter. Now that over talked line impact I the we've about talk I of have XXX

a transformation. undergoing digital profound everywhere are resonating. Organizations Our strategy is

power QX, transformations the need connect drive reshaping customer people serve. In they for Finally, way innovate comprehensive including, These Cortex. will and helping a Alto Firewall. our a illustrate few Prisma expanded another retailer Prisma with the share in including eight-figure the Prisma of who and operate, approach SaaS each security three like to the fiscal our and an the Network's pillars they Access deal quarter I'd are and of next-generation Cloud, large this details footprint quarter. with spanning key the Palo to our Cortex U.S.

quarter. goal true our of following Prisma how management cost the of times in a the for of example for great building one opened that also example our security I major NPL. company with Access and was a and services account love by client this expanded Firewalls is next-generation support will fiscal a This significant one of network pursuing transition purchases. of Demisto the The door future the platform multinational and a Firewall. away deals employees purchase Cortex number Prisma the also next-generation a of largest recent because travel It's last and firewall

only being Cloud automotive significant we purchased wins provides customers to to Our cloud customers. force model. our company will value our savings increased in known of and of critical -- to also large compared our These demonstrate proposition are success with got vision to Prisma substantial architecture solution and excellent able our Prisma also who visibility, move pillar a as Compute Prisma. prior a less articulating formerly German drive flexibility a shift security examples We not deal architectures. customers be XXX% the and security of

company's indication a deals history. the top our momentum As in closed largest the in XXXX, final of we of fiscal our XX half first of two

largest record-setting another had Cloud earlier, of the an deal quarter retailer Prisma Prisma Additionally, U.S. with history eight-figure and Cloud. in deal the the I highlighted closed

we next-generation we the this firewalls. During the their offering Customers also for our feedback positive vision solution. drive and they continued products, innovation time across appreciate are quarter, currently this In firewall. and SD-WAN is to our December, as launched our getting

subscription firewall We will continue labels IoT here. including to in XXXX, add new

XSOAR, extended by more we natively today, believe platform we the significant XSOAR of orchestration the category intelligence it integrates response threat will at security actionable Demisto SOAR Cortex evolution and making Cortex automation tech much platform intelligence the that Earlier scale. redefine management. an announced

take In workload to short leverage to including develop work the have we container of we deploy and capability modules. version both base over where XX% our four this launched integrated of who Prisma we product of Cloud the Prisma security A have at the customers are launched is -- customers capacity seamlessly for This year the SaaS our it up secured. cloud, and modules of first integrated of is seen using Aporeto. hard deployed, exciting are because course integration

you to will look Palo you marketing new our be likely feel that the will efforts, Turning of Alto attending fresh if a Network branding. and RSA, notice

business firewall launched brand a stand-alone our Additionally, we have Strata. for

brands firewall premier their we Over also launched it read the back Alto several a our and took in Prisma When do which supports were the months, needed two brand. the we local. Cortex. brands have step new clear became built cybersecurity, and a that up Network, three the Palo updated to All and of position, own past

in on where best continuing a workplace prioritize place and to equality. Rights the also Best to Place of the We're XXXX designation Work for Campaign Alto our Palo front, to On people work. highly Corporate we perfect We're their culture Human score of LGBTQ and pleased are making the Equality environment. to our inspired focused Index do everyone extremely a Networks feels Foundation's

achievement. very very, this We are proud of

we believe addition that February ASR release. authorization achieve announced proposed to to us flexibility The $X capital and of to highlight billion today third we press want expected earnings is repurchase proposed in allowing allocation is repurchase in or value $X earlier transaction sufficient XXXX. was billion while our ASR The strategy fiscal the represents in quarter to our accelerated I announced Finally, to ASR still shareholders, our we the amount the our share that that goal. returns in proposed occur

$XXX approximately for the available million authorization. share under today, of February As purchases future remain

cybersecurity continue three-platform territory we chart to closing, new strategies shape. In taking our with

do, heartening our a a in but have see to strategic lot us customers to with more manner. of it's partnering We work

to they transforming go customers largest We company protect providing as transition. the business through this growth, industry-leading our are while cybersecurity our

customers least, we be to center or AI press Last, in but our startup. in data their not need technology -- automation. of centers and ML customers frontier beside security and data cloud and definitely new new will not the in there the Prisma, we Firewall our will the our in Cloud The customers will will Cortex for be be a with there the continue and

I'll the that, Kathy. to call turn With over

you, Nikesh. Thank

and to except financial and revenue stated I non-GAAP otherwise. for year compared figures are all unless billings to start, Before figures, like I'd period that growth prior rates are note the

we we sales and clip QX business of product be overall add to remains revenue indicated, quarter, offerings As In to a next-gen performance. believe our our despite strong. continued continue healthy the at new Nikesh healthy second our customers security

million. In $XXX.X grew QX, total revenue XX% to

EMEA XX%, grew XX%. declined XX% of $XXX.X $XXX.X grew of X% Americas the million million and $XXX.X subscription subscription a SaaS-based total, geography, million by grew and revenue to growth In increased revenue XX% revenue. XX% of $XXX.X increased and increased QX million revenue XX%. at Support the Looking compared revenue support share accounted XX%. QX product APAC year. of for of total prior

$XXX.X the quarter three remained revenue Turning QX total acquired new to duration year-over-year. approximately XX%. contract dollar-weighted by support billings; for of at million approximately increased deferred up net in subscription and years, The one of month billings billings

billings $XXX.X accounted the million, X% XX% for XX% half and XXXX billings. fiscal billings year-over-year. of first For total were increased $X.X Product of of billion down

of an XX%. were $XXX.X billion, QX end million, up of were billings up at million, $XXX.X billings XX%. the $X.X was Total XX% Support year-over-year. increase deferred revenue Subscription

to our customers existing new wallet In customers. continued share quarter, addition increase we to over with the in adding XXXX

made XXXX. top the of Our XX end minimum through a increase million spent which XX QX over this This purchase $XX.X comparable year a $XX.X customers, million period. in is the in of prior XX% a lifetime of value quarter the

to QX our the was of X,XXX a ended quarter margin a expense $X last recent basis basis of XX.X%, headwind decline with which We associated XXX XX QX operating gross points up year-over-year was million with acquisitions. XX.X%, approximately compared employees. margin points includes was and second net year. of

$X.XX net increased the loss to Non-GAAP million income basis share. per a million or per second $X.XX XX% to diluted $XXX.X for or quarter for GAAP $XX.X declined the net basic On second diluted and quarter, share.

QX was for Our effective rate tax XX%. non-GAAP

cash Turning billion. flow with cash was was $XXX.X of margin Santa at margin of increased balance items. XX% in XX.X%, free to by up finished cash and X% of million, in investments flow Adjusted a Clara. year-over-year. QX $XXX.X of million January operations Free flows from cash and representing cash, We a sheet cash $X.X $XXX.X quarter our cash equivalents headquarters the XX.X%. flow with charges excluding million, associated

were our days, seven headquarters was period. year an quarter increase XX prior Clara. the in from days $XX.X million, Santa associated with expenditures of Capital was the of million which DSO $XX.X in

guidance to Turning now points. and modeling

noted remain half Nikesh we As initial XXXX, second improve fiscal earlier, below the growth revenue of our expectations. product that anticipate will in but will

are fiscal we guidance year. for the such, our As modifying full

Please our global from which result our does in carefully potential disruptions that monitoring. that, any we note could guidance not supply reflect are the chain coronavirus,

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

We expect billings of of range be in XX% $XXX billion, year-over-year. $X increase to to the to XX% million an

QX be to the million shares. XXX.X million approximately XX.X in $X.XX range expect non-GAAP to to XXXX $X.XX EPS We of using

XX%. XX% range the $X.XXX For range billion year, be XX% the to to representing revenue of growth be to in the $X.XXX to full of $X.XXX $X.XXX XX% fiscal billion of we representing to to year-over-year. of in billion, billion, growth Billings year-over-year expect

to representing be range $XXX of million, XX% of year-over-year in $XXX billings million Security to growth the to Next-Gen XX%.

XXXX to of fiscal in shares. the expect non-GAAP range $X.XX EPS be million $X.XX to approximately million We XX XXX using to

free turning to cash flow. Finally,

For of XX%. margin year, approximately flow the we free cash an adjusted full expect

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

non-GAAP We XXXX XX%. at tax QX to remain our fiscal effective rate and expect

expansion $XX CapEx Santa in million with real accommodate to estate $XX to be million approximately of related Clara. QX will future approximately $XX in purchased headquarters our million to

headquarters. CapEx As with to expected to full we million a are approximately our million $XXX result, $XXX million increasing related year our approximately $XXX to

costs and million associated described our just for settlement. $XX cash as estate expansion the as fiscal exclude will flow I Finally, a in our payment the QX real with of adjusted XXXX including headquarters, purchase free well litigation-related cash

I'd questions. Operator, that, With like open poll please questions. for for to call the

Instructions] first hear today [Operator Weiss you. Thank with from Keith Stanley. We'll Morgan

in my This Weiss. questions. for Hamza you Keith Thank for is Fodderwala taking

of couple ones Just a me. for

seeing that any on Nikesh you're else is revenue within the terms side, in product challenges First there of unforeseen anything business? Firewall the

change all? launching that's any vendor been to the strong there's had there. at SD-WAN. competitive landscape traction there another Has Obviously, some pretty You mentioned

helpful. So any more be really would color

as there's I Prisma -- first quarter, line year product because incentives very security the trying our to sales companies Thanks made to building a question. third enterprise prior for we and Yes. second Look when few changes of last line. Cortex to in highlighted honestly in came we the or drive product examples

That the how terms related to automation lot we acquisitions were salespeople changed going driving pivot on of on machine can because and to and selling and the in Cortex. cloud, appreciate, to get make a bets caused We team them of did. things learn, some Cortex resources a of spent we effort learning hard, of and and related and lot these trying and trying to figure out where significant build opportunities money made Prisma Prisma understand in to they they're both and sell

much And only on you its What a as takes demand. to discovered has realized Firewall doors is QX, results. in success we're later with delighted to saw a that QX the which systematically rolling why our pipeline that have Cortex of the into was motion enough resources, cycle time. create which closure focused knock own this they're been is from Prisma while on didn't they demand year, did we in because on opportunity we us and go And and to have they there's we finite large going know you QX, the

a to is accelerate to get optimistic there that sooner. in deals product effort and We that's Hence, cycle, tape be customers unfortunately, it and was is we were revise had our a to are us. But able closed there what it efforts. of the front that fight and motion would our we hard and used to is try

in going yes SD-WAN. a SD-WAN are who it. terms with with what's of are the there dealing trend as In out people you market, see is SD-WAN on There There out there companies other are SD-WAN. well doing

get either our people internet own SD-WAN we think SD-WAN part and package. we people as choose of a cloud, off MPLS we SaaS-based time go SD-WAN will SD-WAN of starts capabilities. see Definitely, our leverage to trend. SD-WAN go solution, network other or we architectures is change, have We to partners. sell as Prisma more new Access pulled And as a network, becomes customers the now use Every the

is focus. I an we've to excited in progress of is market that the that, the don't area by Other a think it remain made focus. see of So an issue. December continues interest we're in I terms It customer is And since solution. changing. this our honestly getting execution than

So and we've and ahead going to take got to skip. go our medicine

some I it that question like announcement earlier one ask the the do been today half what really to that that Cortex, next-gen year? for seems side. there? And there. know that curious to translate made strong How follow-up the Just there's on trends product. traction of you was into me. On early second the to it further seeing expect some you on of are this to that's pipeline you're And

Yes.

the have you products applying and know larger of category on security AI as Cortex we learning. in So two automation machine

have XDR, data competes our sort the form injection the sources the And of more endpoint XDR category, simplest some adding We there vendors we the is into Cortex product next-generation keep capability. of category which have EDR which migrated. of the newest where in a in of

well. doing is XDR So

capability will management firewall to of we on Our announced customers. is the got have business automate this And Demisto. which track and have new was from be past, primary who the will this and XSOAR, we feedback the mostly in the we some it customers what was stitch the Cortex we to capabilities Palo from morning our on. well. playbooks of capabilities that would our is come next it Demisto to to perspective. customers be XDR sold want top our doing customers Alto without go What evolution our part And of constant and In our of terms amazing endpoint

and capability management calling for the been XSOAR. calling They've this. that was defined Demisto team and industry for analysts The we the the trend. So, the rest been in have this has merged valued hence

launching are capability. an that should is in to Demisto perspective, first who capability. of So we a from Purely want a upgrade this customer mechanical every customer

up the Additionally, think is of size a us with so for it market about Demisto open excited we should which market probably same it. the very market, Intel SOAR larger

you. Thank

a asking call. that end But Cortex until thank of was towards thinking question. I wouldn't the for you come the question

Citi. from hear Walter with Pritchard We'll next

cash you sales all that about is Firewall for the you're how two, not from behavior years industry this a just we Thanks. -- I But in demand that guess, flat is question do I understand think I driving, we're think you Nikesh, hear Firewall on just a but perspective it the think if or about demand thinking what up. perspective, now customer a ago. and incentive slightly spend certainly, was what customers maybe on three we from

two did the year holding off from buyer to their it buy and customer now. future? the they're wondering, purchases they're think I'm last we purchases? they And in as their Are perspective. here Firewall your I'm customers with base holding wondering Or relates quarters it -- revenue how down about just

I think you've of the from understand sales from sort side side. the everything done incentive we well supply

or to adding traffic infrastructure. sort trying from their their and to go trying think whether build infrastructure cloud a tomorrow, to I both where more that’s replace some plus is they're perspective, good or they're coming Yes question. buyer thanks of on hybrid where going a is different of home a the today terms and cloud back life center to customer of Walter, data data trying in cycle a every Look, sort centers

we as the trend asked that, being seeing for. highlighted the last answer I SD-WAN are and So, is

We SD-WAN SD-WAN looking with Access buyers cloud. solution. We a some can some allows In the that a from involves seeing give the box We In box Prisma we a cases the In deliver you to for security. opportunity that can cases into capability. that have gives case, the software deploy now solution. both. SD-WAN you you to SD-WAN time you involves are give solutions our with

that on from perspective, the there's definitely activity net. So

to trying cycle. go So, re-architecting their who Customers get the large network sort evolution that of have data underway. centers own refresh more through and

we're that So not a us anything shifting. to believe are give things seeing big would reason that

solutions have in nothing On our the difference versus given margin, but boxes we point caused some cloud see probably, time. would this at by

anticipating term what you Great. as think I But number term? know seen goals, And those can mean on there? given sales that growth of firewall product talked you maybe here. three-year product the or here of sensitivity you level know revisiting then Kathy, around you've not you CAGR in you're of about overall just provide us performance And any help don't near the I the we can about, long color I sort on understand the side were

obviously We guide growth our question. Yes historically guidance. explicitly projecting seen the I thanks analysts on Walter, appropriate than were But the did on was reflected product for part, think we for that not less the and which most products. in have line

in still changed this about obviously longer-term to we've but a we'll correct great Nikesh our be as still of -- the quarter next-gen feel issue situation we security. bit definitely so think what And that how especially and our have able that the an to adjust execution compete view, given growth is we we mentioned the really that performance we to sales well. And little feel and had and and we that guidance we firewall as believe that know improve that

for taking Thanks Okay. the questions.

to And Auty. from Sterling we'll JPMorgan, next move

that run Sterling. it revenue you flat If product my here on How for taking revenue guys at Thanks. guys. from assuming for Thanks rate? next-gen that long on think do This would to is looking product Hi, Matt security get just to parity we're take the revenue, question. out. with is

by tough let we get the be to pipeline at looked you its we've QX and growth in indicators but won't to to to Kathy early product to answer tell we revenue QX. parity but able that our from question going at positive looked the the be going think I continue should forecast, I'm

work trends market we that and make that teams back these to sure in the at firewall to our we're next hard or growth year reverse space. And that above-market are

for how I NGS, problem. In long takes parity a terms for math of it think that's

our given you derive going should forecast NGS that our forecast firewall able you answer that you let we've look be case. Kathy look at for question answer. and at I'm If you in to to

to a don't That much great was more have answer. really I add. And

Thanks. great. just Geographically, one there like geographically? in are And Great, that then you to can or there follow-up. Are looks macro guys any year. the impacts point anything issues it some

a No no again, I on thing. basis, trend there geographic is think

As you know that architectures. Europe about U.S. hybrid seeing about talk and Asia companies generally have slowly solutions, lagged about the Europe the cloud onboard. network getting changing context. also generally cloud trend in that talk in globally but of We're they're lagged thinking They some companies

different the parts So we're degrees. in traction seeing varying world of of

no, the an And on look only market coranavirus we're as I think basis. So all watching to bigger international said, is the going market think you get Kathy all I the at today.

less impact compared to I whatever company be not specific some industry others any be might think because will of the exposure have we impact – that will that global that one a happens trend. but to around have will across I happen think more we but

the Appreciate guys. Thanks, Great. color.

Keirstead We'll move Bank. next Karl Deutsche to with

Kathy. product growth attention that I side on sure the Thanks, outlook to revenue for given second said improve. the should you half the just the wanted the product revenue just make understand I where

better So clear, be in year-over-year but than should there'd negative be to just So XQ decline nine I still less would negative say. you nine? – a anticipate the than decline

could you positive. year-over-year in be floor Is product negative that then correct? for want being to the say? move I the that growth rate quarter let's clear And the think you is anticipate just nine fourth

that's correct Karl. Yes

Okay got one… it. And then other maybe my Nik

both. one expect We We two. that. Not both just or

was clear Kathy? I'm related And $XX just Okay. Great. what litigation-related settlement the so to million

details an – settlement this lot the related are in be of Yeah. is call, but pretty or was settlement industry. the a which common describing IP we won't it so the our to We Q confidential, in on

Okay. Got it.

Thank you. Terrific. Okay.

Turits. James, Raymond we'll From to move Michael

Hey, guys. Good evening.

questions the two So and then one incentives. competitive on

losing not what's because on in specifically have the Zscaler don't more you're or called of about the whether you market for delivery you in what's competitively? And just is can you security going any So for cloud against play actually coming Zscaler be cash into SD-WAN now? specific

let I the transformation understand color I generally understand SD-WAN give the some as Well, with right. companies, require customers network about ours. businesses But we architecture me the market. All try I on as front about don't can on other question, to you are talk prefer start SD-WAN because SD-WAN. their and seeing and not much talk I

set complex he you that I remember seen customers is on out the customers best you're we've to for to is the their a firewall going in in of it are specialist across because a an available vendor, product And configure market. solution. have read has much either a taking sites a of which SD-WAN complexity the you of deploy which whole XX,XXX sites, and market or get X,XXX taking SD-WAN, part up, more players which to go SD-WAN as independent that bunch integrated choice stuff depending that want deploy, the offer of to needs

and we're we and we too our architecture for SD-WAN to Sometimes firewalls. And is firewall their will and address this evolution we customer's want with with that that in a that the capability market the the simpler to just capability able launched. do max capability our seeing of our be – of market end a has up

I've Alto going large to to are seen where go says, cannot Palo I'm we've firewall. in. customer problem this the that Honestly, are doing elsewhere. the I seen where competitive clearly, situation, deals many not solve So come the other yes, people a But we need market, in seeing well.

in seen the Now that large much enterprise that I issue, maybe of segment space. some market haven't the

inroads say over hard Lee let's great the lot and transformation in that resources product we months. earlier Remember, market. of In And that does a and the Alto GPCS with a we some we quarters. with Palo time was that network team We've a quarter this last had the to customers of frame, confident of against his Access large a for XX of did in my had remarks delivering terms huge what deployed three we really the Access it market the which to almost worked that I prepared some highlighted deals. when I have deal. and came Prisma three it. very called in deals deployed large only large and product Prisma very Networks, job made launching

where in So us pie. probably they people in Other of market us market our share strongest had seeing that we get people of get see pipelines more a space. less where one weren't deals. that It's and a they

We have a space. that lot from of expectations

continue believe in to to your aggressive there third Southeast space, there because we most to part the have solutions. Was question? us the comprehensive one be a expect of So we

Yes. off from is incentive cash. this taking make did quarter? My things are changes any incremental the you you that structures additional longer That saw was as to follow-up the

Look, we capable the to when did math intelligent them sales requested have sell responsible a in them terms we did as the and they we math the last gave in do. And there. year they team understood out very go and Cortex multiples we of taking the Prisma to

those. balanced have We

a lot have of We scrutiny.

And judgment cycle It's honestly Firewall a teams to. in takes that them than lot the inspections less away. the we optimistic when we deal The space, gone look been our too has being and this it on deals able element the just time. We're we close have of -- of a more have time Firewall going quarter last to quarter it. We pipeline. haven't could at call lot in a it in are responding.

expectations our giving no just They're both to team. longer the -- time. setting setting forecast to take closing in and a that sure pipeline are right right trying make we're our to And of deals unrealistic expectations from going you just and reasonable we

Okay. Thanks, Nikesh.

next Jefferies. move Thill with Brent We'll to

Howard remarks you for the from Nikesh questions. in Hi. requests for share customer even you around taking prepared gathered about This some on product Brent. the details I feedback your key is or Thanks guess for pricing additional or XXX on mentioned flexibility functionality Could any more either had customers. -- you side.

for there firewalls? subscription any for So model for is example, on-prem a demand pricing

a got Alto I curiosity you Palo did funny Yes, story. to who's thank new of question. me. because I customer talk into know tell the come lot I'll people Look to this you cybersecurity guy When tour when for to the who's a wanted want meetings started I Networks,

XX there of And But I nicely and been CCS have subscriptions about might years. for top that many it told to their the it and of our but buying are they've exciting And new firewalls of and buying were CIs and went been and for for a firewalls been I bow listen me. them time. was on And talked long and heads. about this mind. me all They've polite interested,

data secured is data. is about Prisma that of how months talk What more their then in expense and the transformation cloud stock much about Prisma the their to talk able getting transformation has how XX has cloud to Cloud. too with be last that the to be we stock secure. in changed Access and We be And

we're now So this about to want having transformation. conversations real talk where they

them and further about committing slowly are would that these show steadily have the is talking else industry out of to those we're there customers with developing market. anybody companies else than who products emerging customers. us our it's challenge with topics to in the I our And and one And which few the

really, So are meaningful. the conversations They're really actually good.

are of seeing our a in transformation. conversation We network lot

clouds. lot instances cloud. they is with found parts be later, have a year of was year were seeing of a they used are by multiple going they We customers to the single cloud One A different being of organization. in want -- ago different we infrastructure to it conversation

solution. So they want a multi-cloud security

are changing what terms are conversations about. in people talking the of So

In available and anytime them. players the I going firewalls space way a capitalizing things think of are terms there on-prem want, many see buying have these and of soon customers and in you're a don't motion what they because to

solution it, demand So can to to creativity them sure for we that for a if construct them financial wants I'm somebody way. firewalls. not seeing that buy honestly, we're But allows buy financial

hard can and do or I in that our are if I data conversations there things working time center I'm make is to how have make between these that teams a cloud a to to need if going about future fungible understand any think I that install direction. fungibly trying going some to the them. how sure and in architectures need see we move forays to over And need be be

by like billings really I Thanks, color. subscription strong Cortex great Kathy. seems Okay. That's lot XDR. and were had a It for the related Nikesh. follow-up a driven very that's

line million, get only the rev down we guys the your of year is guide overall actually billings have if because guided $XX -- million. so towards And billings revenue actually to in were -- high-end product you down, the $XX billings And the performed it was the despite expectations number with your full guidance. --

-- could we with actually a total have product billings in was expectations line have seen we raise? billings if -- would So

very to as remarks beginning your let highlight a are numbers my on the and the that's our in a in wrong delivering teams think just We're excited. have per I this respond but is in question second, billing a We're Kathy tried the expectations. that point them delivering of good really to I I think I'm we Well, box going tap.

and than them seeing delivering Cortex we're we on So mix. Prisma aggressively and expected product more a

is it So, this which and which financial term. a changes phenomenal for But short-term long our term. impact, we're news is very the in is which making the short hold, EPS interesting, revenue

We revenues past. the it have rising deferred has in than better

add let will I So, Kathy that. to color more

as a just also And NGS, been obviously we've subscription subscriptions new. performance, thrilled some well. product growing but are SDN in strong cash is DNS we've We've addition, which introduced with Yes. subscriptions the very And our really support platinum and nicely. new introduced not just

those terrific of all which to obviously. So, strong contribute really helping we about growth feel subscription are

to really and is change year of of decline NGS look the move same. We guidance that time. numbers. our And those So, we But all product all terrific certainly about are full revenue we the guidance. our billings this of the feeling driver the left didn't

Okay. Thanks a lot.

Nehal Maxim to with on Moving Group. Chokshi

like Yes. -- repurchase thinking timing? repurchased $X the about deployed accelerated to only million to you. repurchase on been original share you Thank what share $XXX billion far? ask the I'd purchase have so why And also, has

which management billion Look, looked of the for authorization XXbX-X we the buy us plan look when filed our stock a allow have thanks the -- certain to at $X question. a would execution we not levels. to take that very in we in trajectory of anticipated you and look We kindly We the the and comfort product the team long the the good issue. growth Yes, term. And to our back our billings, out strength at company think we is product this at company of thing.

to the levels. can attractive So, we is best think thing at we buying do they're our back these very we for shares because, by return capital very, feel shareholders

place -- will QX take QX. it And in in

billion look to as on we've that to $X.X you opposed if of cash our big product outlined balance says and which tuck-ins sheet, And so at try any do M&A. M&A go be going doing strategy already we're to strategy our

cash to $X So, this year, given free that financial at from gives perspective, do flow billion in felt of enough us we time. that flexibility be point that to every this close generate to able

Shaul We'll hear Oppenheimer. next from Eyal with

Thank for is This Yi Shaul. in taking you Lee for my question.

have We questions. two quick

First Nikesh. one for

talked think remarks side. you the I positively Nikesh, help firewall on expecting us? indicators prepared that about in you key the certain tracking can

you. hard a hearing having time We're

time a up? speak hearing you. can you hard We're Sorry, having

tracking I are looking what are of is Sorry, Lee the key prepared remarks indicators Shaul. there on some side. thank positively metrics Can your think you you you about taking for talked This on some my firewall Yi at? you're Nikesh on elaborate that's for question. the [ph]

to pipeline, capabilities, you in like look have have conversion to organization, at as of look any to your at deals, you sales progress. the stages at look Yes you to good deals look have you have that your

look customers are are how to customers for refresh. your firewalls at have many up versus many evaluating how You

we pipeline And all those seeing robust. of those So indications track we're positive metrics. metrics our is that – seeing

sooner think are And we to plus optimistic are confidence take QX our going normal lot quarter QX But indicators trend and is as a market – seeing year. this of much us trough, – which in have earlier a as be those our we QX and to up still some we I market And of yes more earlier we than next it's able expectations had not we back a revive that they're we territory product least we'll as hopefully At close that in gives said, time. revival been we'll trough. believe believe from apps as normal about by we to the expected we but business. growth X% have believe but positive minus

one that a you And then for Thank Kathy. for Nikesh. quick

On the right now. geographic

And lagged EMEA the bit individual give mentioned U.S. could a think the comment for quarter. the little I us pipeline APAC? going forward? and for distribution growth Any rate you and maybe on APAC that you regions, the chance the EMEA

growth really for I'm is by I struggling sorry. hear you that I'm think revenue you our Yes. to geography but asked correct?

going the little feedback year-over-year color and some we could well traditional growth Kathy. U.S. on comment on the channels EMEA that's correct, get bit as If Whether And a Yes, the distribution rate. APAC. maybe now forward? as

Yes.

was by our XX% growth in was growth So XX%. and the theater was Americas, APAC EMEA's XX%

Thanks Kathy Nikesh. and

you. Thank

Guggenheim Koujalgi. from to And Partners, we'll Taz move next

your question guys. taking question. a Hey, Thanks I had for guidance on my revision.

guided my do about billings down revenues your but are here, $XX year right being million the down math I for If by guiding by you're Kathy So only XX.

even $XX down the guide. up you're you're revenues by what's next-gen thing your million? guiding not raising park So given offset And that

decline So billings the revenues? versus what is for the in offset product

Yes.

in our also mentioned in question, that are but growth. just And seeing Not in our the will strong yes subscriptions the including of launch last I we've As future. in some NGS subscriptions we newer response subscription subscriptions which are the to launched the attached contributing.

it. And Got second then one question.

if growth mentioned revenues revenues, typical to support math year to right? it obviously be XQ, leads full negative for QX do seasonality you on your and also guide on positive Just your would and revenue still subscription clarify product that in and the then part QX. Because I assume

QX growth? to be should QX clarify we just should expect – you be product can positive So

Yes growth. expecting year-over-year product positive we positive are revenue in QX growth

Got it. Thanks, Kathy.

Bachman Bank of has our Montreal with Keith question. And next

you have to Thank Hi. questions much. you currently. going ask two I'm very I

targets. Palo is Alto establishing and hitting first The then had trouble

the subscription The different. been gone things have quite on side well. very products while has so And performance of

the in a haven't QX. guiding more to either then you So process or But in crewed upon decline growth very you're will you have if QX information lesser product that what's hitting targets. because at you've candidly effective been think that and

process or speak a terms of that higher gives discount the rates a so confidence targets on different in that established? now So you what's to you

and internal than down growth are at the between is, this I look rate know you're external. revenue you And that saying But more product are if growth corollary you double-digit X%. Fortinet growth question is

a there. competitive that, there's So meaningful that not on share hard activities to causing loss. are XX% growth lots It's spread rates. are There it's your product believe just

you. this So just that gives me. that's it external? I is more corollary Thank what confidence one and you're not question the is, share of internal you and losing for actually the And

thank repeat growth you be did of delighted some growth will to Last forecast, All for right. we Security when product majority your our Well, I think we Look would and some of with Next-Generation the I we happened. I of what expect said. question. And year, that Yeah. – continue.

the a billings. But in in in Security we absolute we slowdown. generating of up, absolute. QX, And themselves. because focusing we for we delivering the Next-Generation indicated take saw been teams lot on saw for number And commissions And our have look product analysts as are to

cybersecurity. other We numbers There's are still company in size our growth delivering no the delivering are. of and that we industry-leading scale

focus piece know on but that. the are focused on product that's so you're we I very let's So

activity. You competitive the talked about

unfair spreads. are different. look at I to think These it's numbers

in Fortinet They seeing SD-WAN. different strength revenue And we still than in segments. is yes, operate has there absolutely, operate spread. do. different been segments a we different in They've

the inspect They've people end We've we're deal every other where market competing the every where market. price. been seeing now. entire and at in computer strength deal the looked low with We

with So we're based part on if customer-by-customer they're competing of our who not. competitive data is and understanding,

One So giving is – things. two – – sorry

next forecast. think you Have conservatism a in quarters? the last look terms more in the we of Jump a two but product higher the out bit put two though Nikesh. you as forecast

say to want something? you Kathy,

if haven't that where think, there we Yeah. be find are be guess. at compared many quarters you to I want you And really sure revenue. we probably, when don't we've well to back our would to guided history And companies just look actually go do I and of missed. pretty my we product missed, those

right. All

would Okay. you. Thank before. seek I

Patrick Research. now from We'll Arete hear with Colville

to is dead any the stuff. in last anecdotes if for any taking that on early want launch great. to kind back factor? could that I you you big SD-WAN just flog share Thank talk And a about not there. was year. wondering there product because question. But SD-WAN feedback? December Hi, horses contributing the would be Or color just the I just of And guess

why as a an And down to look do looking SD-WAN of back my installed are my I the as all very mentioned, market Yes, lot of base I out data Because of are they remember center? at fact journey, there people perspective. the MPLS. there from a home large need is traffic interest cloud is the to going bring

to they can't MPLS happen. security. SD-WAN, Why remote offices, It's straight Interac centers send the then data other just that replace SD-WAN will my the I as with causing solution from And it conversation is but my to cloud. branches, well standard that that need my pretty now people

the call as on talk a since Lee So can more SD-WAN you here on the is has the that earn fee call. I Lee feel a to like that with market? about background, he

Sure, Nikesh. mentioned But you Patrick December. released was Happy Keith. SD-WAN as earn to in

days, a are of of but very reaction still a lot it's we early positive So interest, seeing from customers. very lot

deployed. are already that customers of dozens have We

of deployments customers in variety, even had I sassy our the while in additional of say exciting the dollar of do-it-yourself a hearing operated are these really how as the and kind our of ability what SD-WAN gives deals solution. which lot to us would SD-WAN Access In the multimillion deployment, Prisma a combine variety kind quarter, we more that perhaps has this through of from more market that, is to well. they coming excitement a larger And with like of which the deals we're past, is see more is

network of that Where from security to these from deployments about transformation branch happen. the asking. how of is of cloud. good we're should promise networking feedback is future the very a that providing weight the these lot very and lighter architectures, cloud and to network and the customers the the getting We're connect That's

late speaking been threats. segmentation. the one is increasing become to the can work of I internal of Great. talk it's internal up use do the been of picking way it trends prevalent And I bit ransomware I've of a And increasingly segmentation. Because about to that has And combat CISOs.

was you've segment to wondering seen are I buying And So if as networks boxes people well? internally? of kind what their that

Yes.

devices, designed but move separate a two a number on with. building broader that, problem. be actually mobile leads deployments, that's backstop into have things. generally a Segmentation Zero increasingly initiative from ransomware a we is Ransomware customer's as a ways to So And more can is of is and trust do focused the and much around cloud of to a solvable begin an to needing those architectures, segmentation I of me segmentation right getting are trust of where preventing points down cloud to the better architecture of part have deployments, to number their then devices, customers increased looking increasing the transformed locations to workforce, enforcement they SaaS to public path the in architecture, which have network. zero increasingly enterprise right enterprise

in just been and suited not everywhere many being have a well this device. about very about we We're ability to policy location It's requirement. are for an that meet context unique years able for build unique because architecture, it's oriented And that consistently. and to

much. very Thank you Great.

we'll from hear Moskowitz. Mizuho, from And Gregg

Okay. good very much Thank you and afternoon.

growing in I significantly been the above realize that all 'XX. as I And growth years taking from Nikesh, many rate. that we think mentioned know, some So you're on medium Alto you like about for rate market has to market market do time. to what And shed return basis? would you earlier that think also, product Palo revenue out But But fiscal you're longer-term issues. will period Firewall then look growth a of go-to-market how share Firewall thinking your over light you can the market over

had perspective firewall growth than not want we're to grow the we a better That's I the market. share you Look, to market believe to taking thought because question. good I be I or faster share. market will because saying reason didn't a we're you. very going we expecting by predict Thank from

We taking form share factor. will software be in the

solution. by a a We these VM. Access container we We VM. way solve competitors, sold by our some of can in the do things by not the as report. sold that by is delivered up things in solution cloud by we product by a -- Prisma sold Every security. sold All that these All next-generation end classify box revenue

the recognize companies you terms sales ours so. into go trap, is to the box and of we like software fall sales So, how versus transition in this have

to SD-WAN else. customers recommending yes, that VMs s taking share our for with we'll think So container to solutions for We with from expect be the with definitely everybody be we market software containers. VMs cloud,

they're But product not to going follow the box.

Yes, means which the factors believe in I form I growth and boxes box at share software are on new and the market my box transitions B. sustain So, I replace and most share A software not lot will because straightforward can take as of a form with factors being I market levels? have product discussed and

pushback was that, helpful. appliance comment there to at customers then rates That's any Can all how channel And quarter? Nikesh. Thanks, were Kathy. Thank or Okay. discounting from on the follow-up price this a related increases? you on just recent you. just And the from for

were what rates about? me the Sorry you asked

Kathy? Sorry

asked Sorry, you rates? me about discount

just from And customers price on pushback appliance any if the there's increases? recent Correct.

little the like maybe rates price least the we took small on We off a bit uptick increase. were at see our did we quarter. Yes, with a that on with discount product, the better this increase still in balance price par feel on -- the we price

Okay. Thank you.

will Our Gray final be question from today with BTIG. Powell

a in. had quick Great. Yes, one. just marking I Thanks for me

about Thanks. on drive do see we attached rate the product you key going component So, how subscriptions in think side? what growth business of to the as should of that the the given what's forward? And going then, levers

and have time agreements in of sold about. as recent buy buy our talked strike the NGS of growth agreement well customers reality enterprise advance the goes the product already which Yes. is, that's that Well, then The attach sort with as I've part tend quarter really performed to subscriptions number them. obviously on we subscriptions subscription we've more they a along with in most of

the continue that to obviously with and will strong return growth attach adding And higher rates. with continued then growth help new as we're subscriptions with levels, that subscription strong subscriptions expecting product we to are attached to the we be so, well. as general And

be I faster subscriptions guess to was the online, with attach subscription trying what Got than should it. be would get maintenance? at new coming I

Yes Yes, definitely. historically. Yes. And sure. we've for seen that

you. Thank Okay.

bet. you Yes,

further Anything Powell? Mr.

I'm sorry. good. I am

all everyone, And the you. to closing remarks. for you I'll turn Thank back conference

Thank you.

would the I joining partners want investor at to many close, world again But like most I worked and I who look RSA to thank seeing to evening. everyone. Have forward an around customers, of everybody also hard to our conferences. thank you for great Before us. deliver our importantly, the a quarter. our you and upcoming Thank We employees

conference. conclude Again today's that Thank you all does us. joining for