Palo Alto Networks (PANW) 25 Aug 202020 Q4 Earnings call transcript

Good afternoon, and thank you for joining us on today's conference call to discuss Palo Alto Networks' fiscal fourth-quarter and fiscal-year 2020 financial results. I'm David Niederman, Vice President, Investor Relations. This call is being broadcast live over the web and can be accessed on the Investors section of our website at investors.paloaltonetworks.com. With me on today's call are Nikesh Arora, our Chairman and Chief Executive Officer; Luis Visoso, our Chief Financial Officer; and Lee Klarich, our Chief Product Officer. This afternoon, we issued a press release announcing our results for the fiscal fourth quarter ended July 31, 2020.

copy our release, website. a it can like on online you'd of you the access If with certain make XXXX, statements We financial conditions, during of enterprise this for will and opportunity Group, the for those various points billing like COVID-XX guidance position trends. including as features course financial ARR statements, our would to and and our fiscal fiscal-year XXXX, regard and the of and well and the conference products, and operating and Crypsis operating remind in our offerings, cybersecurity, to results metrics call, products from benefits modeling our customers, that industry the our our demand for duration regarding you expectations subscriptions, new business, rates, that forward-looking financial first-quarter impacts subscription competitive including and the run other management and proposed of economic market acquisition timing and global as The our of forward-looking uncertainties, statements. beyond some of could from of risks differ those these statements and anticipated cause materially are control, which by our number which involve These results actual to a forward-looking of These as today. apply statements

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

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

results reconciliations at And them of financial the we provided website to our finally, financial be have located completed financial in GAAP measures that remarks, to and also have XXXX with Conference participating measures like we Investor website the investors.paloaltonetworks.com. Deutsche we information Conference you XX. X our in call on September Bank's Investors in posting the turn non-GAAP of under section we the be supplemental quarterly September be Relations our these Technology formal to periods, can that, historical For I that found section. once virtually on will the the Citi Global will We'd to Technology inform over will Nikesh. And

and we you fiscal made year. we're full-year would thank you, for start over Alto of Thank showed joining has video be our responded celebrate I thought everything and you us about today. how talking everyone, before, enjoyed fourth-quarter the our you David. to Networks hope Palo the fitting a the I course results. afternoon, today to employees Good for it XXXX that

you time and the enough. of As results through difficult cannot to at Alto we're pull find need empathy can extremely This shown experiencing as quarter and we I resilience their tell, that environment. Networks thankful this globally our delighted are want to for the the a in team Palo is with the probably result and acknowledge current navigating I also efforts appreciate to COVID-XX. strengths has that challenges our a it. people get

to platform, for and wanted calls, need shared for from to cloud talked a I two Prisma the applications last are emerging about of setting observations transforming company, Strata, years platform category Before a ML well the on earnings Two way subsequent for I've a first integrated the more with with later, to security industry solutions. become leading and the that with years. network we focus industry. talk talked company cybersecurity the secures and about the and AI, my automation you need about the our over secures about to I quarter, need Cortex. for platform my the ago, we Two journey back remind need AI/ML to company and three-platform the on also I go years and cloud in a single us in product relevant automation. with

We have products progress building make acquiring of new vision businesses been to providing toward integrated solutions. and our

around growth We our we've success The has cybersecurity in years partner, choice; areas to early comprehensive industry-leading the to of results the stages had on the but M&A excited conversations progress last and to transformation able customers. so are in double cybersecurity of over the and aspire solutions approach. partner several our strengthened far. to about providing our journey, our our of be two down integrated, We've been achieve the

of seen, As our part is approach. M&A have successful integral an you

talent, have odds and that for prepare us beat honed for within has ensure fit long-term our build talent and to the productive they require on focus retaining disciplined solutions all look that and companies that our that We We framework investment a and solutions for key tomorrow. strategy. well industry-leading designed integration we tomorrow,

company's We to reviewed by is with into We acquired goal to unlock our acquired increasing networks our rate run companies, see that our the report with to we the recently we technologies accelerate success all business of that follow Palo in acquired have we and pre-acquisition. XX% are the customer aggregate months history times I'm to performance of by incremental have it of businesses. what machines Alto XX achieving activating of them annual we bringing Board. the businesses of Networks been M&A the that our given X first delighted When was internal the family. stated able value a go-to-market analyze plan target the XX%

retain able build the to had company. Just we've been key helped acquired also the talent as important, that

highlights this with financial some in We ago, made closed our approximately years FY look of starting total with billings Let's collective X% representing million XXXX the of from at Two approximately up the NGS. quarter, of $XXX offerings NGS these XX% total. billings.

cloud areas, QX we're any Today, in product than deals years of doing in is Two strong growth. the that XXXX. favorite $XXX ago, security we This the million automation public is space. markets. single products creating companies have of foundation multimillion-dollar approximately slides. my was our in ARR growing the NGS a didn't faster Additionally, these of for future one NGS address newer

take NGS. parts the a piece Let's look of deeper in

and featured recently innovation sorry, Hunting, November, but Cortex. and a cloud Palo and XDR's independent added enterprise. their company product while UI, and needed as delivering Alto industry's were during NGS first by able within momentum onto triaged We of superior We platform. transforming response Cortex Network drive a their gaining that drove energy by journey. Threat analysts, unified new the new to across data. XDR customers. tools number partner XDR alerts. assets. continues major them digital standardizing cloud of be deal with that down XDR, In and to reduce network across firewalls we Turning a to transaction helped operations is gaining transformation Cortex in integrated third-party hunting X,XXX X.X, chose holistic security and Cortex established Managed response is in operating one including threat incredible We accelerate, a across detection endpoints the all to and the Through management key to endpoint the complexity XXXX. powerful category and detection traction, alerts not significantly seven-figure visibility investigated fastest-growing by just features data introduced of which XDR a -- service, EDR ingestion rapidly endpoint X also security XDR, they

customers, aid professionals will a outcomes forensics This services, the As our retail, and respond and trained cyber company. of capabilities them. intention to our consulting important security To bring than cybersecurity across acquisition and healthcare, we allows new get order portfolio. a announced have financial X,XXX e-commerce more across believe important today have serve customers of closes, support broad to expert current transaction Group, strong it consulting fast-growing to to incident response, manage the incident real They products to energy rapidly. that and served a response time, Once organizations we more Crypsis us earlier The To and end, is their becomes XDR it needs. more our to acquire industries. set Crypsis team

to mitigate The customers. Crypsis face, be strengthening breach able will position now may being thus as predict prevent the its and also attacks, to customers will to a impact team, our Networks' that Alto any Cortex CEO, for addition Palo of able speedboat. the choice In Cortex cybersecurity including cyber the of partner join

XSOAR. their customers leading Cortex XSOAR more native over solutions the to the billings turn one making platform last and Let's in two it threat doubled SOAR year, the first management. extended market. intelligence with of than is XSOAR industry's

customers for the both XSOAR opening to are our their automation solutions. recent security up and enable the launch we With of Marketplace, the to platform most partners

to security them government a agency organization respond shift their SOC as proud the most to to XSOAR to focus, security automating rapidly I'm mean capability of XSOAR's was any agency. Cortex was time key chosen XSOAR XX% the eight-figure remote without global across personnel. with initiative, processes entirely by further enabling for on-site One into a allowing the organization. COVID States model, Cortex an of deal, cornerstone an their wins key real-time the reduction elaboration in in their highlight resulting to QX United put operations transformation defend the

container our customers XXXX cloud Let's come capabilities way started and cloud X,XXX over this management the past Prisma. protection list. and of a XX% security security. acquired with year. has long has Cloud, security boast and shift Prisma by serverless with to Prisma Cloud expanded We workload into gears posture now Global

approach with using seven-figure cloud who cloud protection. for We third integrated posture our modules. these management solutions using customers of be company working. a customers Our our Cloud both with a in Prisma multiple signed workload XX cloud and Fortune security security unified cloud platform. platform security a consolidating are are Several Prisma is both Today, will deal Cloud

to a continue data execute and shortly security new in vision our platform. creating allow security, us security security overall Cloud cloud this from to security. modules We preference cloud network cloud to continues to platforms. shift will and will Prisma to security launch serve modules needs. fully customer to on integrated platform We of their These with cloud IAM the for evolve computing intend our work customers the to benefit continue global to

the from in in in combination our two for through market. the last year. SASE CloudGenix solution doubling customers our customer over fiscal up solutions Combined Let's work accounts home Access robust and Prisma Access Prisma years term. the past a as for journey been Access is go comprehensive achieving This been $XX transformation in million long tool the and nearly create billings quarter. a amazing most in the our CloudGenix the through their our with Prisma has with powerful numbers, about is this has showing acquisition, security network talk fourth an Access. recent and Prisma of

sign a provides to effective excited very nearly security a the are quarter, with their for most providing clear needs. winning fourth against the eight-figure for in provider our healthcare by Prisma We Access evidence competitor deal major solution a that

strong very saw X,XXX in their called that up conversion had shifted by COVID out they they users branch This and extend and quickly we of their response data us all a is to secure of existing Wednesday, provider. center running. solution, bandwidth sufficient trials Access because Monday, the users Friday Prisma A Additionally, Prisma enough enterprise launched for replacing that By Access data to now COVID notable on they lacked example looking on first have became all lockdown are of to as And work their remote relieved. major from offices and work-from-home home. center were their pressure employees.

challenging customers the many and companies and have examples we're similar people been remaining to converting more We this to time. able trials, productive Access from have Prisma during help of delighted

part to to our innovate Magic proud NGS pack. While Recognized we important go-forward of stay success continue firewall leader, of equally progress our an of as Quadrant we the eight-time ahead an of our is are and business. strategy, Gartner relentlessly

four software over across last to our doubled We XX consistent which months, customers. capability is believe have our and from has firewall is we to QX was decryption in we've subscription The containerized been offerings continue a customer Security, apart work To more evolve approach deliver hardware, now enable features. are security and to firewall and IoT that to in that offering XXXX, needs firewalls, all PAN-OS subscription and In machine of our essential platform, Access. of and next-generation been have Prisma We first ability learning-based deliver XX% fastest-growing capability needs. industry's recent XX.X worked also rate our to now containers, the secure our example. telemetry capabilities, the the the powered new DNS with subscription most services truly them able introduced the groundbreaking advanced on seamlessly our eight. many in with that platform. to firewall simplified attach launch we features X,XXX over Hence, launched cloud with

firewalls continues environments cloud next-generation VM-Series firewall introduction over containerize we with marketplaces. customers security rapid to in policy. a consumed through customers apply shine. now Our to on-prem consistent new CN-Series, X,XXX the many software with can VM-Series, rate using now and And are or capabilities cloud of and continue to the with capture of next-generation at which

Turning to and early review our met business. COVID-XX results the both global in on the stages. topic we the our still QX in impact and fiscal pandemic of its to May, with was When you economy

by the are Companies early stages cybersecurity and present environment adapting customers, Many the ensure significant our and investment Palo companies with feedback. that more to technologies are the this and industry speak as we is As to several work an hear particular. the and of believe secured. are range very new acceleration accelerating a Networks conscious. next impact dispersed more becoming cost in in we also opportunities I cash and of see that in we years for Alto

action employees to FLEXbenefits choose half a while health efforts For work can FLEXWORK our people launching quickly These we marked indelibly fiscal will home. and including next rapid by the were recognizing tools was of XXXX to of Today, to our being employees, from that in during help announce protocols by to the ensure named range COVID-XX. we're establishing quickly, The initiatives, early gather includes responded of old our FLEXlearn. I'm in and broad FLEXWORK, of program early maintain stages. phase COVID-XX. productivity that own safety We our that employees delighted ensure FLEXWORK it second our the initiatives We plan so the our to taking to most and employees time, benefits for our allowance benefits, us the choice. challenges by I been we sit learning employee Even remotely. their presented cannot and benefits, on and post to the of of manage flexible all personalized additional with an some able adapt teams ahead. choice Alto great intend progress sense over have to allowing designed follow to on environments and far maintain help team an family do know that Networks We jobs make them working individualize paths what Palo them their the $X,XXX, results. to and making give various need focus COVID, focus, achieved the is we and

far. lot mentioned, I our us. we Yet, progress environment, ahead work anticipated, uncertain. As so we macro we have better still than a is of are while pleased of with The

you us Here's XXXX. in what expect from can

our our invest both to subscriptions, and security through organic transformation journey. continue will means in We security next-generation to continue inorganic and

demonstrate. in a we as do prudent able been so will We financially manner to have

industry we challenge line expect this with can You this expect to in has operating a manage margin transition the created us organic continue. in work-from-home trend achieved hardware, around The year. what to our was and

continue to our security do plan and software have been to we so. to delivered shifting We customers

our We of software expect services. and growth from come most to

just not we created our those want some to words are that is contributions. I to be amazing While the are long for our friend, we and stakeholders, years how the Benioff, our generous believe environment. true to value We'll is to FLEXWORK to coming toward savings partners shareholders, there we support our of thank planning savings employees cost responsive to and term. my be the all due will because their in In drive COVID, a more transition Mark this of employees. over reinvest

possible our through Our combined success only efforts. is

joined things been Networks. Amazon's to will and call ago Alto We're executive to want take have that, Luis Luis. an With from to fortunate to us welcome division over organization. all I AWS to learning CFO caliber Luis I opportunity the has months rapidly almost two turn our lead to Now Palo extremely Luis' cybersecurity. the

wasn't only Alto I Palo create the clearly that of you two welcome. the transformation, we're is a I warm events. by encouraged can can forward I'm for you, getting it Networks upcoming Nikesh, started. in I working, see look meeting forward. that And for value going Thank the first When the here years and

like unless Moving growth non-GAAP for our prior-year otherwise. to except are note figures are on the to revenue and rates our stated results. compared to and that financial I'd billings, periods

we Nikesh had of year, an As billings our billion, QX year. indicated, year finish fiscal an XX% extremely increase over strong to with fiscal $X.XX of

year and CloudGenix with strongly, fourth which quarter, Firewall our a Our beat $XXX VM, million, business billings as Access In $XXX.X grew XX% Prisma Next-Generation all NGN year. Total revenue is grew metrics. Platform the million. we physical grew guidance which XX% Security across billings, performing includes XX%. to over guided firewalls, of

For increase the billion, $X.X of fiscal year XX% over year, we reported an total year. revenue

XX%, year. of of Looking QX at grew revenue flat revenue subscription geography, APAC XX%. revenue. million million and XX%. QX for of increased Support $XXX.X subscriptions increased In grew and XX% prior revenue accounted compared increased and total, was $XXX.X QX Americas growth $XXX.X grew of million support in of the by revenue revenue the XX%. to EMEA $XXX product million XX% total XX%

three Turning $X.XX the by revenue, increased success and acquired duration new flexibility our QX dollar-weighted execution continued billings billion, enabling contract to Services in subscriptions and Palo flat billings the net in XX%, The Next-Generation approximately greater to year company, remained year. driven years, work-from-home total billings. customers. Security. support for across of tailwinds strong of quarter by deferred deal, Financial Alto Networks closed additional business We over at offering five

year XX% of of in deferred XX% revenue the quarter, was -- Total of year total total and billings billings over of billion, an and $X.XX subscription decrease QX XX% fourth the billing's and over XX% subscription year we And a of end year up $X.X represented support adding year. sorry, $X.XX XX% over at were billion, $X.XX represented and up billings new X,XXX billings. new add $X.X over total billings. customers customers approximately X% XXXX billion, increase quarter. of an were clip, a total year. represent In XX% were healthy billion, of were the XX% at fiscal Product to billion, billings. increase continued year Our year Support

We also of wallet share existing continue to customers. increase of our

down increase as which was our QX prior-year to QX XX of of required are a a $XX.X to right of which of gross lifetime costs the XXX scale the $XX.X period. Our quarter, have basis a XXXX, higher the margin compared made XX% customers, minimum spent million was through freight products in fiscal the points XX.X%, comparable top structure purchase million and fastest-growing in all last gaining associated COVID. value year, some this end still the with cost over

million We expect QX into the with decline of approximately of continue these of basis $XX headwinds a year margin XXXX. over operating and net was acquisitions. XX.X%, fiscal-year expense points includes XXX to year our recent associated impact

was $X.XX operating associated fiscal-year diluted our GAAP net of acquisitions. points $XX We loss recent or a with quarter, fiscal-year of over year operating to margin For year XXX% XXXX of approximately with a full XX%, ended $XX.X the million the XXXX, million margin the decrease and net over employees. On basis of expense per fourth basic impact quarter to year and year, X,XXX XX.X%, includes share. for basis, compared increased fourth XXX

income net $X.XX to or fourth year basic or XXXX, $XXX over X% quarter diluted million Non-GAAP share. increased per year over XXX% for share. fiscal-year $XXX.X GAAP diluted million year $X.XX per to the net decreased For year full the loss and

year $XXX.X share. XX% per XXXX, income full non-GAAP $X.XX to the fiscal-year or diluted decreased million For over year net

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

will net equivalents QX increased billion. sheet and and offering flow at billion expenditure a million approximately with cash, senior includes days, an period, due flow to margin strong $X of end finished from the of Free the XXXX $XXX.X be XX% XX days million, billings cash year. from over of that raised June quarter of flow XX% $XXX.X July DSO quarter was We XX.X%. reflecting year collected cash operations balance the the in of Turning notes This increase items. XXXX. in XXXX. the Capital cash investments through up was million. at $XX.X $X.X convertible cash XX was cash by prior-year in of

a QX, fiscal completed in billion in February, repurchase retired we $X a Lastly, shares. transaction we announced total of where million share X.X accelerated

fiscal XX% $X.XX the an be of in first billion range year the expect XX% of to For to quarter to we increase $X.XX of XXXX, billion, over billings year.

an expect to to revenue $XXX range XX% the XX% of over million, year be We increase in million of $XXX year. to

We expect expect to Crypsis EPS the material do to to $X.XX million not to of We XX noncash million shares. using XXX have range results. impact QX a $X.XX in

would modeling I additional points. provide Additionally, some like to

approximately rate to expect to XX%. will We $XX be effective tax $XX remain Capex non-GAAP at million million.

full provide would few expect a Turning to fiscal-year how on the markers to to we XXXX, perform. I like

to billings down the revenue over year to slightly high flat expect teens, We in grow and mid-teens product to with grow the revenue year.

the As invest Nikesh mentioned, headwinds income. in flat we continue margins organic in to EPS to our interest from low we and NGS COVID as grow lower as face is operating we mid-teens to employees expect expected times. during

Lastly, strong cash be due that, please be flow questions. 'XX the we to to free margin with higher consistent QX like flow questions. we the With to David, open QX billings. cash year our poll To call than margins. expect margin annual XXXX I'd free note, expect for for to

question instructions] from will from [Operator question Morgan come And Stanley. will Barclays. from Thanks, our Luis. Kalia come Saket second Our from Weiss first Keith

quarter terms upside? subscriptions customers' attached this for can talk question out you to the on Look which lot what appetite welcome, next-gen appliances? security But you firewall in of And my to get way working OK. the the And maybe Nikesh, perhaps taking and guys. a maybe Great. just it on just the surprised touch here. core of Thanks to business, with about Hey, for about forward you. Luis. you saw to side. talk

to not customers about a the very been it's you thank When their in for are very macro customers hardware Saket, Well, now, while their of we've environment are office, a for your talking or not lot much offices. to in and as happen. POCs be hard question. delivered for Look,

are calling to in firewalls more going to the they XX from state because who hardware So who We capacity. appetite expanding next tough getting more saw months. continue are is we need existing their business customers are that be a

don't or there. hardware new You as out there business much see new business out firewall

to So solutions. cautious and more very are but a careful supplemented lot be that around it, we have being we software-based seeing by

So you in saw success and the strength Access. Prisma

You our all in success VMs.

So seeing software to But and people a solve launched getting users, cases. if that they of we are capacity and going DNS, we step problem terms capacity are more more need our XXXX, highlighted, they firewalls are And in X,XXX more. remote life, I using subscriptions, which solutions for a up say, or have in there end firewalls doing cases more in they cycle hit where QX where customers VPNs to refresh or of those mark. has they as are of expanding more in some I are

capability the We the subscription of process firewall allowing format. are future in in software on

to the enterprise continue us with thing believe but need of lot because important of see the from will you that's an have drive subscription a we we perspective. So expectation IoT early priority,

So well. can doing is and to add able on we call. earnings most hope with to have This I'm IoT MLR make that I and hardware, of a firewall, BX as this we enhancements to to be used see recent myself. our more launched success the

Great.

Stanley. Morgan Our from Keith comes from next question

going the wanted there when dollars impressive people to from billings, security a number. terms question. on? the for substitution way that firewall those versus other nice billings the sustaining next-gen substitution growing Cloud impressive on as to And well you XX%, taking and firewalls revenues? we overall better question. platform really some billings as quarter. that tack that's the think a Is any ton very of taking one understand, the And there going could Really Saket's Prisma to in maybe about of guys, side is product a kind effect of you, of momentum. very Thank overall I of And a quantify taking versus equation

for Yeah. Keith, question. Thanks, the

I think substitution on. going yeah, there is

where highlighted live now remote If all -- out in by that one people is to been you next data over the a their live across I running following ago, and going weekend. able have to in secure Access. more Two at the and their -- mean boxes and the sale. go center VPN. of got customers X,XXX look access Access and entire that Prisma our was call, the end box center offices, in example deployed They capacity Prisma state, people and across the be They we got went would to will they're running the more week, put years of data

So clear there's substitution substituting hardware. Prisma going is Access on.

on means Now in A, it because: and update regular a which it's more software like I software form can that factor, upgrade a we basis hardware.

where So comes in. risk do the customer the is which and has to the updates and security upgrades,

cost out our factors amazing on. ownership as for for there us, updating software a keep total not allow customers, form us but of security long-term just benefit, is having us, we go So to

to the we capacity. the center happening. a our significantly AWS. CN-Series providers. So customer cloud our the of We we're case our from cloud in more data It's deploying the Palo as compute the happening at to substitution the Access. when we is have our Networks, Alto of Prisma case software yes, take format basically format in against Or says, future shifted all we're protect centers, Google shrunk VM-Series when our hardware public the actually we're firewalls situations, in that our buying or Cloud hardware in incident. from not happens, And to firewalls or And putting ourselves to those data more cloud own

or what the substituting hardware deployment cloud, own with we're moving because own we're hardware or again, our So our VM that's, a a to firewall. purchases is containerized

cases, to that saying, Firewall firewall number half, solutions, cloud-based happen, that number pitch all those substitution of a the allows whether the the them. both And a industry some these or right to firewall seeing us players having factor Access about because been public this or virtue consistency against look, talking of why all right and have vendors to as attention hardware Platform the can in or cloud you're Prisma substitutions us That's a operate the instance three we've us pay for the happen. partners when in or year last for the and So not of a some some form firewall some that form or factors, situation. allows

from we'll will question from Winslow Pritchard next Then Our Walt Citigroup. Phil Fargo. come from Wells have

if and fiscal about fiscal quarter. update Wanted structure? this the into focuses you Great. a just heading for question, how that And anything feel congrats focus and effort. do give an year, you this just changing also the sales sales my any on incentive Thanks go-to-market year, taking on to priority Wondering you're strong in productivity, 'XX? for capacity can us

we going be to Well, used process, ago, to sure video a into three-day to other. years not is did to and don't year your journey, used and use a physical want what we launching Vegas, people critic going I'm of our other it missing we're turning and everything are learning I unprecedented rate now, don't each that's where too to Vegas, instrumented through through the them often. kickoff. been make upload their each we're and I But go pitches but event, going two question. up learning in six-week platform they're have last do a and the to word think gone because to we're going from which -- right that it's sales We've online,

we of good fiscal our all in happen. sort initialize learning that teams year. terms with job new And and making think go force of sales a a I really are are doing So of to how times the

from concerned not teams. So from and that the perspective, our out sales our go opportunities am create about ability there to I

I said, we momentum. to question that we've do into think I've the far all in maintain the so to year next with how We're investing very And we real is going pleased. security. as continue our intend generation keep done next transformation

$XXX We're just go also My them. us of did integrate billings way we were Day we of was risk asked one somewhat Next-Generation a buy the customers year going we you'd were a at million to good get what two -- to biggest years I because biggest is right and me Security If the to of the to ago, in bought, was? think surprise Analyst way. And cybersecurity. fledgling convince for that million go welcome they're all was businesses $XXX ago, for sort going billings, this can did what risk

Our products. the teams love

Our loving the product. customers are

So going that year. we're to next keep try into and just momentum going

All make are of going that we ourselves. we out our sales go-to-market that or tweaks to aligned to meeting objectives set or weeks toward be the tweaks commission

shown success so not investing that far. hoping in any to teams yet we're and keep shifts doing the in have So make direction the major

fiscal Nikesh. Thanks, expect drop Nir year? flute this electronic Great. should to an And coming we

amazing Nir back even don't And on son thing where to on, so my electric working together, You they me know video That what? worthwhile David? show. and or was was put that of sort the very sent an thought days a was ago, know I when it caught two My by flute. while was to it employee trying jump playing it -- we to

guys. thanks, Well, Awesome.

Great. Can we please? from Walt? to go Citigroup, Walt

I'm Yes. Thanks. Hi. here.

the revenue keeping just relative flat? incremental guess margins take those pretty So And bit to it seen took margin and ramp us dilution. takes those 'XX? margins. Could of understand fiscal are and as into that especially, significant like around question I you a you sounds that acquisitions, in puts on Can dilution you've help understand margins us XXXX. we you help where care quite investments head some a of on the going on

was did what now speedboat team think is in us to, And that Cloud and Yeah. Prisma we trying we keep we're think a, created was doing model, we was dedicated if we're success deployed a helping Well, and Cortex what the sell XSOAR. Cortex sales momentum. I so that helping sell a about us you NGS, which

capability that You us team, saw continue number other And that we some entire across with sales combat XXX%. done of the to it. which and And to grew also what products able team, we compete our core sales done to in hand-to-hand players in invest with the some into of the the go actually that What take requires go can is deploying sure make market. for that we've larger are they the we're deals.

they're much very time to So products are we sell. how spending and our of able carefully new track people how

rise, of direction. teams in But the to that a thing. is that that continues are our sell glad which sales Next-Generation able make Security to to to investments hope continue we're So good proportion we

alluded the gross year and deploy both the as both deployment because the significant services. security in life The expense a this of have the on margin operating other which see part, first amount Luis you that next-generation is that a one-time the compression which cycle in early is sides margin, the we we to, of margin, of when ramp-up we there's see product, deploying consulting us in expense, that expense happens some

Luis, margin to So impact want -- Security. you're add our significant do you of seeing it's the growth really in ramp-up Next-Generation the something? of

No.

covered to you well, add. think Nothing Nikesh. I it

you. Thank

Great.

next come JP we'll following from question Fatima Sterling from Boolani have Morgan. Auty Our Fatima, UBS will from and

question. as sort I Great. for high fiscal is drill in key level wanted growth the NGS Good fifth a But mix. triple-digit which meet your business. of the Luis, to now afternoon, of the triangulate metrics outlook, Nikesh nice my taking your near to I the everyone. into Either you. appreciate of or Thanks portfolio, in between for a 'XX trajectory

to I of conservatism did that contribution I'm business quarter? software and your underpinning wondering Would the your accelerating outlook. takes about XX% you behind process a this be the your puts hardware, and substituting relative some what's mid-teens some may on love outlook As and get of even think to thought

question, the for you meet Thank to you. nice Yeah. and

our two you of see want But and as lot results, I should -- that guidance. we Alto and performance we year -- Palo and there guidance see be take to still in uncertainty in is framework to that our account out our a strong for we Networks, or QX set of think give for So you is performing we strongly, factors. we right? full prudent as very One the there there, we're year. the the

the to So think be prudent as we just uncertainty. we about given want it, just

Great.

Auty next from Morgan. Sterling Our J.P. from comes question

Hi, guys. Yeah. Thanks.

drill of into acquisition to want the I So Crypsis.

Is So is we're an terms I watching it? a it sure, have to the drive looking you're follow make just FireEye there actually separate different with intention their purchasing accomplish product of acquisition through business from that is actually Or with incident their acquisition? to And the products. what response strategy of services this in to want business.

have basis, and almost of incident a customers partnership them set all the you large the I you that it gone our and We've we've But are by those capability a We've noticed of in as on when or protect products, with products around team. breach. in we noticed And during actually incident, without Sterling, it deployed customers scale. are experienced larger it, both in those that's that well even would a question, comes to -- a XDR, comment incident and on in of gone of a on case where and products we've not having an as managed good of customers cases typically, in a if great customers keen certain been FireEye. XDR response invariably, the help many having response, numbers. in on help have you in excited called the diagnose help that deploying case the embraced or case incident times, of the about that have on large XDR reasonably sort

a perspective, has was and or huge. product, to and So instance, this responses upsell asked possibility X,XXX cross-sell had we in XDR, we help if -- the that that that case, from it's right in we such come for an sort and we've canvassed done team is noticed do incident if that, in of the believe think being Crypsis

So -- XDR allow will I success think think we our in this us amplify significantly in the future. to

we'll from Trebnick and Colliers, Colville come from will have question from Patrick Deutsche next Our then Catharine Bank.

you gentlemen, taking question. my quarter, Nice right. All and for thank

a us firewall? spoke you native to, and versus in Microsoft several think they capabilities about are on growth theirs achieving your of quarter, the you. During where the native down their for of through drill the Could lot firewall. attacked IT they executives you Thank

to you he for is can asking that question the whether wearing I cream question. thank shirt be Well, today. there'll point a hoping I And his because nice was Lee

Lee? So

more Cloud and integrated helps Good providers security bringing remove in those they tightly of more multi-cloud, I enterprise-class CN-Series, for capabilities necessarily that to level success Thank that's the the fashion, customers just capabilities capabilities with to well. VM-Series seen important to to really certain What go Prisma customers enterprise and the underpinning true on more And cloud. it's -- have question, the cloud of as obstacles but and is take We're think you, well recently being class. Catharine. cloud, much that a as our going then released of hybrid as to focused set we Nikesh. have to our relative expect able a not and getting them consume very

have almost to in approach And strategies, whereas cloud support one single the the as be our our to of ability key larger are so their differences our going solutions. is providers they customers in by definition, multi-cloud themselves cloud

Great.

Now have Bank. from Deutsche Colville we'll Patrick

the gave world nonetheless great suggestive and products, Can you I is Point. fiscal share 'XX of But gave. market Fortinet is you we appreciate talk color hardware. kind taking on just of world, Check for more to of the congrats about changing. question, Thank quarter. software-driven going guidance you bleed kind the a to my We're and

of more kind be you used any now the to And core matter? around software just that hardware your guess, the help I thinking so Are us, what focused Just guys get around on thoughts business. the side does components? and

Yeah.

Patrick, think, thank get conclusion. you to don't I I for the same question. the

growth as I the think firewalling So as more and capability we a we've with solution, you situation. reason where the when the firewall rate. a at we way and And about share. Prisma a that's industry we like-for-like Access sell talking consider am about a from where if could Firewall Access been And SD-WAN market market see, a we is we Platform firewall half share say, losing so hardware the Prisma think and CloudGenix year selling or platform, last deal have you not situation we're perspective sold than look been the

outcome single-digit I is industry if a the in firewalls of in growth us. as can teens, Platform low think range. the Firewall deliver growth that's And good rates a for the we high

we think it's with a not X%. think Platform to We that probably risk. our us, better took I better XX% which industry the X%, hardware as at in for a dependent took is share. us business So term, grew I software, leave we much And grew customers there's in allows Firewall long also, could situation. share outcome where a more

on get same don't don't we of market loss share. conclusion to -- you the So

at as of a from question, long ranges we an don't in shifting be growing anybody think, what As intention holistically may market. doing. in is what the across to our Zscaler in hardware what you share losing the doing, We firewalls earlier software, Hopefully, doing, Firewall Platform we're share. as I look I the to have, to any share gain I'm think share, what Microsoft Check And have is Point doing, market. more the taking to are that have it we intend are we to but firewalls

very sell hard total the you to at current share hardware are firewall as proof a and concept take growing be environment, of of do of said, to that or in there because we to customers go as the If that that even office market, delivery want pie. it's look them many I've And not hardware deploy even.

them factors be deploy to customers sell this form because what remotely for right to environment and the able software are them now. that's in have we that looking delighted we're So

Thanks for the color.

Goldman Our next Rob Sandler, Sachs. question from Piper Brian from Essex comes and Owens from we'll then

we Cloud those you of be the the products other with Great. network to more exclusively? relative Alto guys you Would security, appreciated. down going in drill to some a IAM. to vendors newer discussed terms some in be Thanks. or to bit color market? Thanks Any from incremental for security and functionality the timing Are Palo partner expect that of Prisma my little taking offerings question. into Wanted data of and

and I'm cloud going security. whether in our it's I'm give deploy best-of-breed next-generation to customers one to solution of the products, taken make jump going talk to as and Lee you or view we we tried to the of we integrated perspective, give the security that a Look, of about we So margin. for points cloud have the Cortex, ask have sure

platform. sure go The So when we and we PureSec a into to one they sell customer we made we Twistlock way credits. integrated we say, bought Aporeto, and bought and is RedLock, were buy it

modules use experience using our we product, product start and introducing within to keeps customers products. And these new which they Our exploring credit. start and decrementing buy these their customers them, the keep as modules new our credits

to best trying scale from perspective the and them go-to-market we're capabilities. So a create provide

that barring the versions, end, have customers versus the opportunity without customers Prisma of cloud modules toward every we our on-prem So X,XXX will of for they have Cloud, these experiencing one already out their it will buy it, have they to use come credits to decrement and choose the would They it And if part from having us. as faster. product. of they

the And sales So as as the we platform. time module launching that true we that because sort for of strategy. for as not are a that believe a fully our role security well go new believe of a we end, that's do toward have developed every to benefit don't economically security solution the is cloud a if customer, us is we

So today, later the and let talk sometime about we functionality. modules future seven Lee have will I'll

Yeah.

depth points cloud Prisma those of one is delivering capability, that an to strong is capabilities strategy as like with they very them resonating. So of feedback set in our Cloud need. the really our breadth we're well from comprehensive security give of the hearing as capabilities both platform, increasingly customers They of ability of integrated

are expect this we So that modules with that out, be in exciting. will mind, these really three quarter new coming fiscal

first The security. is one data

-- customers well with. challenges to storage and to of is So breaches aim will a module as And fix effectively data DOP, one address deal malware as storage. this cloud of Cloud that. lot scanning this basically, the applying is both big

is focused security. application and API on web Second module a

around will focused container us in of the the categories. is challenge those this cloud customers the the credentials already then fully And play leveraging security. and agent that and a and permissioning our and do using So And credentials. have that deployed market sort security, customers integrated, really RASP same IAM on have WAF when exact big serverless overprovisioning of to which

as down Cloud on purchased making using well using simple. able security modules these and from, start this those cash they've the and will will as And give -- are what around new back and Prisma is lock our be to then simply so capacity already available, super security to modules decrementing this policy how them, as turning visibility, to new with tying right the the customers these

Thanks.

Brian Next question is from Goldman from Sachs. Essex

you. weeks I a wondering the customers we you automatically Great. that for was their be ago. out that cycle that how Nikesh, get taking few on a released quick throughout your relative might meaningful it and question this had Thank are rolled expect base? that XX question. And how OS Is you to Thank to with saw I to something be And other subscription? should going installed releases. just

firewall -- release have and a about of begin product. hardware infusing capabilities, into the any the use ML super next-gen excited of really machine able with So powered the device to the obviously, just who core form learning the to all I'd it. or of our factor say the software customers a

However, they of the on platforms. newer some to need be hardware

these will want So still to to capabilities. of older hardware are this on incent get generation who to customers in order some upgrade

talked Second, unlock security. IoT subscriptions that this about, the including we is newer the of some will release

to And so our be order added in new incentive take will XX.X advantage to there to get of subscriptions. those customers for

Great. Thank you very much.

next Jefferies. Our come from will question from Thill Brent

Ho Jonathan Following from Blair. William Brent, have we'll

you of that do in you do maybe the year, to the pieces us, need digest you like feel payback north appreciate the to you're you you point? kind go forward just well of and would give a this this We to like achieve you've expect now pace approximating gave Great. continue? core last million you got now $XXX Nikesh, Or over but have M&A. us what at sense,

remarks, a have we're at highlighted cybersecurity we followed new in disciplined we the approach. capabilities the prepared industry. constantly looking We -- as in look at Brent, very

as try customers. how Antidote next and as that soon out is breach a found the to know way toward hackers to working figure cyber the start you As the tactic, hack

go causes to in which cybersecurity. the don't the very proactive these on what solutions integrate our be So constantly want very, taken chaos we of is lookout. a that customers have have themselves, view And to point we've we

going comprehensive we player up and believe value. said, areas we So become where we've in stepped to more and can more we're add

So to we're get We're see to red get where capability. has to going all oceans platform everything. the evolved to fully not And are cloud we cost doing because trying we be build few the internally there's in product trying will ourselves. we acquire players -- security said, where that that deliver we Lee place enough we And market. all not we've these development a the the our or integration going the organically create in cloud don't place not moving we're some value I've as after old because also but customers solutions. comprehensive to the a to organic entire and is to believe having highlighted some And modules discovering That's across why are higher to chosen next of companies integrate process. than deliver

the with the So we're make customer. to problem lookout we the solving that on constantly just we're -- sure are

stay do on very we Brent. trying a And product to lookout, We all and thoughtful an continue perspective. highlight will is both that look We it -- when we're the we're M&A. economic we're to at not from

that shown go-to-market acquire from we market significantly lens. the a And and that going we're we perspective, looking from capabilities so at the able or continue record our has track accelerate companies, once to to far, these product a are both perspective

Ho, Blair. William Jonathan

Great.

the you're maybe in talk wave of second Strata, products with And terms CN-Series you set? transformation product the little about a security digital fastest Just the of a seeing that whether bit investment in some create around -- growth can of other where and Strata?

Platform cloud we're Jonathan, obviously, has fastest inclusive fantastic of Prisma Cloud, customers I great recent traction Cloud acceleration around really that help our of as available cloud, we're first in [Indiscernible] Cortex to question, shift with Access integrate And and for is a think, Firewall XSOAR both and seeing I the shift. to the security to you've the XDR. and the gaining certainly Prisma platform where your them been so platform. growth across seen, the Prisma as growth. mean newly seeing a CloudGenix,

Great.

final Zelnick, Our comes And next will question. Credit from Suisse. this our be Brad question

me spike and easy I very the got Thanks QX, congratulations in the wanted an so momentum fitting much for you to impressive. in, for just ask on one about I guys. DSOs. into

payment weighted. natural the more heavily completely But it's were this customers with are understand of need normalize much to all? so is out normal because a see you. back-end this So month how of you spread seeing QX, assume you this to payments? quarter extending to why if of their Thank And what at you to terms, if would and being linearity July and

said. QX. be [Indiscernible] That's from we our to changes. No, an Yeah. any We level as you get easy expect don't an this going -- in came but do forward. any a normal is not we structural do question, in issue how back this expect QX, billings to to expect

you all Nikesh Q&A That your closing of our for to the remarks. call. portion concludes Thank Back for questions.

the our employees, to Thank we to We're help striving call. at Be Have in again investor and one drive everyone, suffering of can. the We with encouraged of pandemic us look empathize every before. joining you global to upcoming positive than evening. Thank from and joining and helps networks fuel remains mission this more and to all where day making customers by for worst the our of by forward Alto Networks helping and for our our from challenges display each today. ever Palo virtually safe healthy. you many you, on continue teamwork our a secure our see those again, calls. committed employees, connect stay and with I'm navigate great attitude impacts possible. safer communities I posed way partners and in then committed the

disconnect. You can now