Palo Alto Networks (PANW) 23 Feb 222022 Q2 Earnings call transcript

Good day everyone and welcome to Palo Alto Networks’ Fiscal Second Quarter 2022 Earnings Conference Call. I am Clay Bilby, Head of Palo Alto Networks Investor Relations. Please note that this call is being recorded today, Tuesday, February 22, 2022, at 2:00 p.m. Pacific Time. With me on today's call are Nikesh Arora, our Chairman and Chief Executive Officer; and Dipak Golechha, our Chief Financial Officer.

Lee the join prepared Officer, Q&A in Product following Session remarks. Chief Klarich, us will the Our

You can investors.paloaltonetworks.com. find supplement today's the press release on investor and our website at discussion information to

based statements on other for differ no a and While as factors of and click projections information forward-looking to you find actual in presentation and conference provided from the investor in there, the to statements our call, uncertainty available that statements and cause of cause made the In provided could and and as to identified results actual results information. our of filings. on link assumes and will earnings our supplemental management Networks please current presentation in that Palo course beliefs Alto forward-looking Presentations that differ could presentation. the obligation and uncertainties, materially harbor today. SEC part this statements the update we where safe risk These presentation. Events Risks, to involve are are information today's make will the today's in forward-looking

considered with We and measures are in accordance accordance non-GAAP will should financial financial to discuss prepared for in not financial also These not or substitute performance prepared non-GAAP measures. as be superior of a GAAP measures with GAAP.

basis Morgan which the that over delay noted required of by our also release, on in note in GAAP Investor in our now the scheduled can the website. that comparisons turn to I measures earnings financial Appendix our and be the have included start have specifically would year-over-year XX like We to for is to and the delaying call found presentation the management that on reconciliations which technical in Please the We tables, and a the issue non-GAAP minutes. We our Investor to note a are also filed section will I'd March. SEC Conference time. in experienced participate apologize unless between provide to like all with Stanley Nikesh. otherwise. call we

afternoon for joining earnings you Thank us you, call. thank today our Clay. Good for everyone and

As our released, we QX. an by had exceptional you've results, we seen

to growth with line continue our business accelerate of direction XXXX, year our fiscal of execution. year the We the being in of stated focused

about First, and let's we're talk the trends seeing. market the

a to we Firstly, strong for see security. continue cyber demand

not to IT slowdown seen a have in IT patterns changes investing in advantage. our We any drive the customers systems in spending companies competitive of or

associated redefine we underpin factors cloud, the On continued as a the to from has here. the innings efforts anywhere, the continue we cybersecurity by the continued which still to these believe enable to pandemic as in and work trends with are contrary, shift around effectively for early to we demand trend Both well bolstered acceleration to see network been architectures, employees services.

continue evolving an see and landscape. complicated Secondly, threat we to

the to become We nation area an cyber-attacks, relevant increased that With that as of is an systems and conversations in cybersecurity levels. will and and and have all front of focused companies highlighted there state more We the investment. more continue on in making will and past at threats disrupt and technology center to continued important. need risks well alliance cybersecurity ability is critical businesses prevalence cybersecurity at around believe as the

Alto a seeing trend we're Networks. to is trends, specific industry to Palo that unique addition In

differentiation breed the which best provides that works. Networks of Networks this relevance Given having continued that we're Alto the areas partnership is and offering. our Whilst customers, entire Palo we and more security the conversations, needs platforms encompass significant and across of both early, Alto Palo in and believe investments more multiple integrated our true

Execution we teams from as Thirdly, delivery. pace focus our business. means platform is our This continuing execute dimensions execution. our continued focus fruit product bearing and of across our rapid multiple integrated

comparison talk them the deliver means price innovation this balance but go-to-market in highlight product, increases suppliers to is security offset, on We multi-platform our with increased to we teams posture. broader our which able costs increases we our work the of an to talent, our today, to our great have security customer-driven resolve large Execution the just commitments is focusing hot our real priority we're retain to means XSIAM their been the from of poised despite from supply in improve in as significantly deploy see. of and to beginning unveiled deal time. from cyberattacks to We cybersecurity. and chain attract appliances able but we're this helping about critical minds operation means leaders people in keep tough able by to best our had demonstrated platforms, a these are environment cybersecurity some technology market to for Execution customers. the modest This centers to across truly peers. our will to team Execution being we reimagine

Program Welcome in employees saw you to launched call, the of As that the had back Home welcome left we opening a our company.

initial good here. success seen have We

predictable and at take by and the XX% was RPO We're outcomes metrics caused Let's building look revenue QX, some model. the XX% the up execution. In business a while of leading respectively. up quick focus more a and billing XX%

significant us XX balance revenue. gives our months billion CRPO of visibility next $X.X into Our

NGS or finished QX security at $X.XX billion. ARR Next-generation

mix we billings the We a Operating up free As in driving working, greater points make Firewall expenses to We is profitability non-GAAP we non-GAAP a investments business transform to incremental EPS by while XX% confidence midpoint as cash $X.XX. absorbed our these we challenges. to year. outperformed and XX%. some within grew guidance our five strong balancing further even is time, which drove our supply Platform we grew At network versus last hit our top-line from chain at XX% came our businesses. us midyear continue in adjust strategy core these results same with as that have software point, security income

With momentum. drive efficiency talked results in are deals sustaining BJ Alto deal for year. role we half we portfolio large seen we've the leadership our elevate of the Singh, on fiscal We're platforms, signaling these products opportunities. of trajectory. management Jenkins, networks an the CBO. as Palo and core sales of in with for focus a customers. the to about our broader on had To growing deal results we accelerated and increase strategy have selling largest win-win our across first our number These XXXX, largest of relationships sales our is exited our multi-platform repeatable process pleased large With a our to Amit making growth the form accelerate layered a For quarters to ability deeper you the the organization, attention in and

of In of closed including QX, seven-figure from our Testament to Global QX, year over all use of XXX platforms our a products a the customers transactions, this, three XXXX we As XX% end ago. up three million. $XX XX% at transactions from

Our millionaire in year-over-year. XXXX were customers QX, up XX%

quarter, Our to customers, millionaire last for business both Driving of an of these our us global combined size balanced quarters. has capturing growth their on rate well teams strengths next-generation in I firewall in were all, in and the the want our In security. the results are our our strong the well across level we've for helped our transformation these. in several deals as growth the particular focus of quarter seen sustain large execution thank increase of accelerated over as board. strong this growth the of In

quick review platforms. do our a across Let's progress of our three

releases year, years, over full products few integrated the We had i.e. are with releases, Palo pleased of our customers with three-platform adding a had have is of initiate Networks, development Alto secure more with our of one developer in strategy platforms, have tools continue you know, fuel current so especially platforms their is cycle. to them their a also the all ten across partnership In on in the XXXX, modularly, receive year our XX journey now At last where But our we web in product life can Even now first integrations of early the of work expand we their heart were them. As organic fiscal and the in play of with security other to work next-generation in we of businesses the their industry we other our marks in impressive for quarter, is leadership any can this innovation. adopt plants. and markets that design awards, categories. equal half need also all both and our all, which is. are in new XXXX. security, is fiscal have seamlessly the them end major time, to We them growth, in position acquired we to line This whatever gateway. one that over two

new similar refresh firewall and Focusing business, platform. X industry-leading and with last is we performance our X And faster two generation world to first just in single more new that Gen encrypted real the week, performance PA-XXXX. traffic families have These four platforms our our using on pass PA-XXXX architecture continuing we’re announced appliances. times than

integrated subscription. new to as PAN-OS AIOps significant rolled DNS current the industries highly our XX.X prevention significant the machine recently powers capability also capability stop brings We new generation and malicious of in firewalls. We subscriptions, release, of URL out generation enhancements the our attacks Nebula This to which line. security released advanced well in using capability as advanced learning first next our to threat added adds

be to added Our at networks. our we performance guided capability issues product and for family. our the proactively impact and ability pleased the to before of customers revenues to our This prevent This to will revenue the full our was which with firewall assists growth raising. customer addresses the misconfigurations year, grow head upside We were XX subscription firewall XX%. contributed mid-teens QX

bringing is work while RPO as as next growing gives We strong year release navigating as our we quickly ensure to about as I our us and product customers X tirelessly well earlier. spoke as XXXX. Gen refresh. Strong to to X Nebula could see ship and the customers during demand reflected Gen such into appetite Our generation Gen the our fiscal possible firewall this X for innovations for customer in demands quarter product ability demand, security our teams demand are sustained to conviction through we didn’t fulfill to outstrip QX in appliances also

is done spend done to before. This industry some is Networks in in personally believe have our our what has not business. the work, Alto want which NGS time I where And I this Palo one Next, teams makes cybersecurity special. been

have stream a and best-of-breed ARR delivering billings of outcomes. to challenges, NGS. cloud with solutions customers. billion services security are whilst XX% fashion in set formidable driven into This with strong contributor our to first, us us which has by an This anticipate is truly building by $X.XX NGS, deeper in success in to our a are their these focus working built driven of Diving SASE, to services, We continuing resonating customers resulted on which has been an NGS. growth integrated

We continue customers. strong existing see uptake from our to

our which is mirrored also begun of or conversations are XX,XXX, implementations. this industry planning are strategy We’re new and way customer companies up these wins, work customer the in our hybrid enterprise organizations report where SASE future the have XX%. seeing which of planning that from supporting analyst now work. many reflected current the IT of We marque is XX% are see group customer recent count noted in A

solutions. leading report, provider We a pleased identified at Business of Okta’s Work were on to stand where are as access against remote we

seeing We’re emerge our as platform customers. a SASE key for

We CASB around particular With SaaS, X.X, out within and SASE including in Prisma collaboration Prisma a these customers, capabilities. DLP deploy rolled to capability Access DG inline applications. for looking new and to integrated

autonomous as attaching experience Access an as ADEM or on digital success a customers see foundation the to continue network Prisma as SASE upsell of management more in We rely architecture.

or cloud front, a a seeing from multiple we’re of be mover going. an believe as we Cloud. is conscious in bets of cloud proactively adoption seeing we’re to with base, to made customer driving the well workflows. and was acceleration mainstream the sustained Four it strategy security strength Prisma production big as invest public This future hyperscale On first ago, our years

of targeting with the offering. We part several to market with acquisitions integrated unique a promote an us companies technologies. Our as developed future go-to approach, pivot allowing began best modules

We’re seeing success approach. with this tremendous

security saw and consumptions adoption adoption active XX% the XX% on QX, Prisma of both While more Cloud. and increased modules driven we our our customers their in by to customers cloud growth grew credit by in continued of X,XXX north

While security management protection base. our and workload cloud most of two mainstream posture are core modules, our within cloud customer

support. like There We’re seeing adoption Cloud I and an in two would to areas Prisma three more increased to of modules. highlight are

of acquired the part early First, the security to security which of its and up code in momentum cloud production. has closed, year-over-year. Building scanning. QX, launch technology, with code; enabling we vulnerabilities attraction in events shifted each be our launch left Approximately since security, year downloads Cloud Bridgecrew, the of code acquisition DevSecOps strong multiple software efficient. X.X could even open-source Bridgecrew Prisma had traction our security, agentless production one tool, significantly accelerated pillar, in problems and can checkout times are the release. security deployment of second, is X propagated in we has Bridgecrew on development its hundreds which once deployment to create and released addresses A cloud is created the significant in This into deployments that There single template times. they hundreds life of before cycle. are be are far more ago, fifth

XX customers. has Our stand-alone Bridgecrew product about

see building our We’re after pleased integrated security to cloud its weeks customer code Prisma adopt DevSecOps into releases as several to customers momentum Cloud platform.

about scanning. Let’s talk agentless

seen of which we security, You’ve security want approach from customer security, flexibility in a hear cloud both agent the and on providing clearly focused offers on depending number a of small agentless architecture provider a initiatives agentless smaller platform their that them. of needs. they and What is cloud-native one scanning, is to scanning only

time. end, via customers teams in the This delivered Prisma scanning record either rallied Cloud. is platform sure that Towards our our that this can integrated agentless and deploy approach makes

automation Cortex, security Now our solutions. security, to analytics turning endpoint and

volume significant security keeping to at responding grow interpreting as data events pace. customer rates. We human-only exponential not and The events security approach continue threat to for see and and automation to data is demand

are Pro X,XXX and customer strong XSOAR new to over cross-sells for market-leading strong also Cortex. seeing that We’re both Networks technologies customers, Xpanse. and XSOAR adoption across Alto Palo of QX XDR customers and to was our increased those XDR, reached across quarter XX%. Total brand-new and a

launched security strength program, opportunity event partners XX the continue join a Ignite partnership portfolio. last of We of We November, Cortex there partners also saw our interest acute the further across our align pipeline geographies we XMDR, have to strong and and At now our see we intelligence visibility all morning, of related our and railroad and for our also Cortex. managed program release to have for to times be seconds urgent we Cortex remediation QX a natively down our discover end-to-end families SIEM by problem, only cloud to or insights. provide to asset incidents. an extended and marked – automation attack platform, have the This days that malware will from solution to XSIAM, across through each. QX in success cloud with XDR X.X last working process. is detection over Core campaigns shared partners growing we after familiar the modern intelligence made in or providing – of QX and X.X leasing alternative to innovation and Xpanse teams able techniques certification believe and response, into are market-leading Cortex our in capabilities announced XDR new the XSOAR minutes. certain security with XSOAR have we years operations to platform detection we modules intelligence management, in our bring Shortly investments and further enable the or identify release an X.X enhance AI-driven to our vision XDR, response to a hours solutions. to and autonomous threat as cybersecurity We security leaning

pleased this will benefit our very growth. continue summary, next-generation how limited in doing with to long-term automation is significant is We from currently durable be is growth area. of customers drive a in prospects, am this of XSIAM a available QX This been research performance security year. to of firewall mission business to our We’re development and strength later a on portfolio. we’ve and years results. of a number revolutionize that across is core future available to product In broadly and our both XSIAM a strong our of and I next-generation balanced our data is cybersecurity, leveraged analytics in strategy strength hallmark sign

in heading trend product of confidence guidance given the and total of the in execution what pipeline back fiscal on the our billings our pipeline line, we the second our are revenue seeing revenue, into we’re On for XXXX, sales NGS based year we’re Within this NGS, year. our year. raising our and this top for both half raising total also and ARR

hybrid for see spend only we’re fueled cloud-native near-term not trends Lastly, in and line continue while cybersecurity, future top to delivering growth. this secular adoption. underlying in our but significant business to in like by trends strong also investments continue strong work demand IT We we spending make and medium-term

EPS investments sales chain-related well to fiscal to for These this, our in year investments costs medium-term our capacity year. turn building unexpected resulting I guidance. have year. we of this supply will go non-GAAP We're absorbing been We in performance have investments have QX made of XXXX so capability. both the more QX. also as non-GAAP that, product forecast aligned to EPS Dipak upside able call far With guidance much while Despite the upside here, the to our detail reflecting as lifting and been this over deliver into

in We differentiated by everyone. we strength Thank all our business. of our and Supported continue year metrics to strength security product our the growth across results and generation our raising especially offerings delivered good our next as including transform guidance QX you, line Top our Nikesh portfolio, with across remains we're again strong in guidance. balance in ahead afternoon, full offerings.

QX We the XX%. platforms. saw was geographies of the finished supported the up all By we EMEA across JPAC ARR XX% each $X.XX ARR end was range. grew continue strong year-on-year grew to rate XX%. total an up In of and Total XXXX, markets geography see here, is broad our XX% all deliver grew guidance grew of and quarter was and high above working talk in the strong Prisma billion, billion growth strength of $X.XX especially in our Product $X.X end guidance driving our QX, we from and by revenue guidance more gives high shortly. growth billion, that approach – at $X.XX Access about than demonstrates by I XX%, This the our will For which quarter our of revenue range. of services and us above billings XDR and growth portfolio our XX%. total billion XX% high in and raise our platforms. Prisma grew also across NGS Cloud. more to second doubled XX% increase what of and Americas growth confidence to deferred

reminder a total plus As acquired the total deferred of billings net as in revenue revenue. revenue change deferred

Our grew NGS XX% year-over-year. billings

we this metric on as to forward is of NGS underlying this encourage we of our business. Going view indicative more ARR investors measure being the drivers focus

in RPO We updating or total will largely not RPO. increasing Remaining billion, RPO in growing was be XX% the with NGS line obligation $X.X current billings performance future. with

believe from our commitments mentioned quarters meaningful effectively includes head it we The customers. revenue, provides and a adds start confidence contractual a RPO both prepaid us in our into future previously our it future from As gives RPO perspective. growth as insight revenue strength of us as

we fiscal growth to XX%. what firewall business, strong customer outlet growth Within XX% points over have XX% to purchased as was for Within chain our quarter XXXX continue strong growth We're saw the year teams seen raised seen software QX as in and have product customer revenue and we this we supply to we demand year Our last a for mid-teens. forces platform outlook the our software, our very software line demand growth as we offerings. reflecting with billing and product hardware, customers appliance in height balance historically, factors. of the increased Last form to our SASE mix constraints. X and FWaaP, raising above

of $XXX subscription support revenue $XXX details increased revenue million $XXX the of due of $X.XX and XX% Non-GAAP Turning XX%. XX% Support million, with product the to growing Subscription revenue. and basis the gross ongoing XX%. margin points XX% associated was total revenue counted increased to in our was down XXX chain. revenue in cost supply part million XX% was billion for increased of our of results, total

done growing customers. have keeping in outstanding Our focused demand job priority production the enabling the fulfilling teams to on an shipments and

to and product We posture of continue margin will Non-GAAP year-over-year $X.XX support that track. or with quarter year-over-year for operating net Non-Gap XX.X% costs diluted higher per at as down income the impacting million XX% forward. $XXX again moving was expected share. and second sequentially the up grew

non-GAAP rate share. million was our and GAAP effect diluted $XX basic was XX%, $X.XX per Our loss or net tax

a both million; to million, underlying cash to We balanced to profitability billion. as the $X.X non-GAAP statement. a sheet operations we in cash balance again unchanged financial was ourselves of conversion. Days now Cash order scale important of line, margin adjusted flow we with outstanding finished robust January and into when from top is priorities multiple Turning We cash days QT from XX.X%. to of XX in equivalents flow was company. best-in-class hold and with growth ago. model a drive $XXX financial sales strength in it generated investments In $XXX this believe year larger discipline is a cash we even and free

Analyst on priorities our execute to our that Day. September allocation outlined in continue We capital

share During total for of QX for average approximately million $XXX a market approximately open the per on price we million. X repurchased $XXX at consideration share an

continue We used of expect our purchase. cash be flow part a to to large for share

share million XXXX. on our purchases future We expiring December have $XXX approximately authorization, for remaining XXst,

On not acquisitions the in close we M&A did QX. front any

at percentage we focus based Analyst down revenue. on of noticed a continue managing to As as Day, compensation our stock we

about whilst process, look we Similarly, rule reduced XX We achieving our growth for revenue talked the we by for this cash discipline talent. we the to adjusted of cyber about This year, two quarter ready forward combining an to zero and points apply aspiration market as margin. continuing current balancing overall over free this SBC trend.

aspirational this now goal. revised expecting the our year midpoint guidance, with achieve that we once see will to are of You fiscal

guidance point. Lastly, moving to modeling and

continue demand ability our we from demand. portfolio. our that includes outstrips see in the as highlighted, short-term, generation to appliance our next factors balanced form them to strengthen well very as This Nikesh fulfill security As

the strong picture information and Our guidance as demand chain best takes into we have today on other as well factors. QX the supply account

third $X.XX increase for guidance our to XX% expect of to XX%. an $X.XX of we range billion, fiscal Turning quarter the of in to billings to be XXXX, the

We expect revenue of count to $X.XXX XX% be million range billion, range to to in $X.XX a in the a $X.XXX of XX%. increase to to EPS expected of $X.XX based shares. an XXX on billion be Non-GAAP of is the approximately million to diluted weighted average XXX

For range to in $X.X fiscal we an year to of XX%. be million XXXX to expect billions the billion, of XX% increase X.XX

increase to We $X.XXX of revenue $X.XXX of to XX% in an range be expect billion, XX%. to the

expect XX% of ARR billion increase XX%. to billion, to $X.XXX NGS be $X.XXX to We an

weighted revenue grow the the high have teens in product we to to QX seen expect seasonality We in as with prior years.

weighted to expect to the diluted flow to of expected to cash $X.XX be of Non-GAAP XX.X% range on range in free average XX%. EPS XX%. continue to count margin the is to of is operating XXX of XX% million range to expected $X.X in in a million XXX shares. We be Adjusted margins be the to based approximately

the Additionally, additional modeling consider following points. please

rate tax of and tax to for year non-GAAP our future outcome to remain legislation. fiscal QX expect XXXX, XX% at We subject XXXX the

and interest $X of other net We expect quarter. million $X per million to expenses

For expenditures $XX capital expect we million of QX, $XX to million.

in Santa the call for that, related of $XXX With the our Clay to includes which million expenditures capital to call. Q&A of over $XXX back Clara headquarters. Thank outlaid XXXX, will to million, million I fiscal turn year we you. portion QX the For $XX expect

question of Tal Kalia with Great. Barclays Saket coming Thank to Instructions] you, Dipak. follow. BofA from first [Operator Liani is of The

Thanks Again, a product talk this a with Clay. was the press bit since little announcement wondering into is, the do brand team. about Okay. Great. if you to morning. the bit. existing product start the I'll market? customer today, cross-sell maybe And can the SIEM Thanks, off the portfolio leverage your could you maybe question how XSIAM a new off question little hot given it's you disrupting envision how base? Nikesh, I maybe but

takes for the Thanks Alto Look, somebody little measured if Saket. out work you're is doing security time who after Alto the did mean you, and when found respond gone. to days. a closing been you've Networks thank our I breached industry, came the flabbergasting someone of into it was Palo that tens Networks, is Palo I for to to in not And that Well, because at figure days question. door all

So less customers us or down the that XX in coupled we to to a within with protect but phenomenal job time you as XX can north infrastructure one-minute says, Alto to LogXj we future. SolarWinds in just automation, that and because mean That under play analytics; our from look, resolve resolution, required Networks able even are into than chance at data you that in XX to But challenged which minutes areas, you he add is of, cybersecurity. I just say having how our I'd our don't down vendors that's have in be lane with And internally to did team company there revamp within customers security take we we're other and the Palo just some take as a a only had we can where or internally, video his to park car control, adaptive seconds And company. assist. need. think capability you the said going that's turn we're because way a that ourselves, our not our

old is doesn't car, a XX years doors new You to car an vehicle. or features add that make around between but an all autonomous those it an

start scratch. from have You to

our later The analyzing being think on to able about to days the to to to depend analyze it. and for what happened. data wait kind that's build software You have of and say right immediate back build will to of customers analogy have the fly, future data know fly, humans on on the it and XX I not analyze now come the protecting

infrastructure So to with launched align done and build design to to of but to us a is that allow end us. release with the we've handful way is an have can Palo and security with it we will working easy a you're towards really Alto them go partners in do it Palo early learn our Alto product what to do to Palo at work we XSIAM, expect Alto Prisma is with them, Alto that replace Cloud GA-ed be this thing endpoints. portfolio Alto leverages We Palo do excited. using appliances, firewalls, an later year, for The Palo quickly can it we if

of more on other more vendors and integrate quality legacy data but the to obviously also keep security suspect security going you with We technologies becomes as

Thanks. Great.

And from next. Tal Essex of question Bank Brian our Please Liani comes with proceed. next of America,

it's trend. that $X.X you're big. into if profitable Also, Can account Hi. I quarter hope will a go probably. one the magnitude not been into has balance $XXX I you note no have was I'll sheet to so this? take I – convertible explain is There hear me. the and you It's to number back, It's short-term SBC; big I'll ask SBC, that a ask question. else question, just is one the I'm limited ask if sheet getting billion. this I'm long-term and your a the looking question rolled I liabilities, balance million that almost. historical can into

a basis? going And company? the going first to explain you can We plan to account? profitability trend the are on Thanks. the with SBC know outlook? what's the GAAP What's turn – you how and the this for So be when

on of we the add answer from the balance and founders talent a them with Dipak I'll bought when Look, way the companies. my the start That to equity to we over these with me Alto And the bought sheet the we second. of answer. came, hand their question your to of the we way revested years. bunch stock a over I founders and was all bought. four was their period secure Palo could companies only we them unvested and companies of Let

So founders. embedded cost a significant our SBC of part of the retaining M&A is

last As or any noticed, not we have two in significant you've three M&A done the quarters.

rollout. another six acquisitions months. or X.X start off, a to our off. years, roll in then off As see down that change see earliest next year ones will will begins Obviously, those when you'll significant SBC And the about in over so, all rolling to you the begin step roll

So that. that you should show

down. as In a the to make know, course, of keeps of sure also SBC going a benefit towards revenue as as normal that revenue, working Dipak percent to if we are up, addition acts it to as managed hard that, continues highlighted be And direction. you that

sheet So let lap that more QX as we the item. this talk to on our I stuff, GAAP the but we as about achieve will we'll forecast year more visibility and about balance what have Dipak will because profitability talk well M&A add to

Yes.

the is I thing I on only in we opportunities. when the find found that is company would something, what we add like think focus really we

on. now seen that on that we're another want focus becomes balance talent. that focusing much metric metric You've I just we with to every going to need to say This that the on. we're retain pretty that our

the from XXXX, that's question, SBC. XXXX notes current long-term But a best of Home XXth, to couple were as early we balance February that QX. really conversion get be April a QX, as liability. points. The from the notes and Tal, thresholds. your the On for XXXX XXXX current sheet due notes the the on make well. classified In sheet from video, saw talent liability, unchanged to you as in eligible were the the want different liabilities to to XXXX like Just Welcome balance share sure as notes Those and QX, the on price Xst classified exceeding price continue we

on they're sheet that hopefully, of balance question on answers all how events just a the question. So trigger based it's But notes. your the classified the on

Thank comes from Fodderwala the up please next. question Brian, of Hamza Sachs And with Essex next Goldman right. proceed. Brian you. All Great.

touch question afternoon that product have the you you. question. hardware And and updates for hardware on business the platform and B – to PAN-OS going forward? the Thank want think adoption? you then just question; side adjusted how sales about, I ability refresh. maybe leverage to thank you is Good Nikesh, consolidation incentives do incentives of to the your of of the of better of Great. the the or of drive guess, drive the I business. share to taking X guess I innovation the first side I Gen on see What Yes. hardware with the part Part

Brian. question, Great

it who's a the supply, So do two the you demand expectations. has from at parts; up partly inflation one, I suspect to has go in is hardware with industry probably everyone partly in volumes as heard business, to supply. going outstripping pandemic,

lot So to a do we have don't to with more hardware. on sales die incentives

We have customers later. who would like their hardware delivered sooner than

And you outstrip to our which XX% ability seeing to that demand continuing is RPO supply So demand. why our we rise. number, still said, see XX% are despite I as growth, the

to part. So answer first that's I the think your

quarter. are for In new last terms shared Alto we SASE hardware, of to to customers a I'll Palo our of metric were last ability XX% leverage in the that highlight time, and us – net

further their those We but still to to Brian, of but a networks typically, this Palo that hardware end security expectation going sense. time, two, now replacement consolidate. have to in sure their environment. In hey, a your firewalls go. opportunity your Trust I with way vendors love already other only consistent consolidates one. that its customers hardware is a security some from an And up to quarter, policy, Palo that while do Zero terms security a users two customer doing platform, hardware, In remote From deploy execution haven't three to Alto right conversations, end-to-end and be SASE customers perspective, deal I some to policies hardware the they like years take vendor cases declared that more SASE that that in Zero deployed your I'd some because your the love and it Trust In cases, you see all number with its cloud your when Alto, over firewall, are we to are my case, around, used. it, are of and gets make gives because they we with

the filtering, or all And cetera, consistently monitoring et we one Security both beautiful our So or subscriptions DNS some that autonomous features happen platforms. laid the it's customers AIOps of across we of or I happening. out, whether for of see that can make

in benefits So, they see the on already deploying basis. consistent a that of that perspective,

Morgan next to Stanley you. Winslow of with question Hamza Great. follow-on. Phil from Thank And our Fodderwala comes

guys question. thanks Hey taking for my

and ARR inflection the usual, normally strategic of you in NGS that the raised nicely, help guide Cloud ARR year maybe Cortex. well, quarters year. just doing mix? you of NGS seems. the The then really too, about Prisma through in SASE, percentage full that couple can understand driving you you on the us which stuff for as talk between and last going some be grew midway the to Dipak, some maybe particular? on NGS that, of it an the don't of appears Prisma gap really the forward Can lower-duration a So the do growth initiatives But And higher are there billings becomes as

for this quarter an whether or strength Thanks, Hamza. across NGS every Cortex. SASE it's Thanks was the Look, all-out question. category, think I cloud,

something do an from provider, with cover do cloud as honestly, I from I who an integrate or sliver. a providers AWS more Prisma got lacking deployed to capability, give next But that I and they're point I'm can well tools the because More using like have modules capability they're it's if replace Azure, capability. you going Cloud. if cloud GCP It's to to just a Cloud. GCP not ten capability the coming was to I their you'd security with to think Because perspective. I had conversations start-up of Prisma get or security with inflection multiple security one whether both AWS, cloud-native example, one Azure, you that cannot comprehensive. already guys this in or in there's are point start-up one saying, two it, customers the started where and this Cortex as are need that's I've more cannot around yes, with dealing

integration do have yourself. You the work to

done just not we've cloud providers. that So, all within across their tools, also already public

that why capabilities the seeing We're consolidation Prisma makes Cloud of that's So, in sense. security inflection.

It's You the of customers. see of in on closing the X,XXX Fortune number XXX. customers, XX

deploying dealing We're in environment dealing So with features to type trying Prisma people scenarios who small are Cloud. with complex some production we're now are and replace not enterprises they CSPs. from

seeing that XX% we've So growth inflection consumption. credit seen that you're there. And with in

in adopting benefiting multiple seeing production our we from only Networks, Alto of outstripped people from because workloads are up. consumption not modules, our the of cloud at portfolio. the also I public native but are always our benefiting sort tell NGS will seeing forecast we're Palo of And has you, that fact You're their going success

didn't ago, selling busy at years We I'd were of Networks. one Alto any part. say, we these that's So have In Cortex, remember again, three products Palo firewalls.

it. technical most would XDR part the think fares getting in I there, on the sales it understanding So, behind you space. know of than of out names most it, force better is tests And XDR the

for Networks our XDR? this of Lee, ago. you in market. have And both look, know are we XDR. time technical I down to don't It's deploy that able to try we add Palo those. Why real perspective, renew. It's I time You're Alto for to want seeing differentiation do something? know, did to for have So, advantage the years From we to go product you you two it base. didn't

fine. No. It's

not way. like your Thanks, balance Hamza. don't feel any he coming Lee sheet answering make is I a Because It's questions. is want Excel to question.

a often. versus question. quite me want comes answer you it's good to Hamza, the Do up ARR? billings It

your way the oranges little here. fundamentally, and at you're is comparing think it recurring I apples is I bit revenue. ARR really annual at look a looking

at billings looking Your duration is the for is out whatever there. what's

a get you And right, ARR happened that. that be and have so that one if deal we've like quarter. within more had will duration, billings Previous you to long times,

quarter-to-quarter the probably on some on ARR. in that the than Nikesh we But last and I'm think mentioned. focus I – which camp quite variable source of that's our It's of is deals why happening. billings NGS on. grew quarter, ARR, will more the less the truth all let's that based It's the larger of So, the one that's NGS focus just

Great. is with follow. Please And to Phil next Suisse Brent right. precede Phil. Thill All up Credit of Winslow

how Alto. Palo customers functions changing my attached in adoption? terms early Thanks What you question. of Cloud, a mentioned just at inflection wanted the Prisma your into with terms quarter. on to fleece. head focus great are we in as environments that taking consolidation, are just production here? point? And hearing guys Congrats But being question you for the to increased Nikesh, dynamics at just in I that my maybe competitive as of from also, inception on well Are

want is will hand I'm an say going also, call. come answer the question, it to I you he a want a the a are to next because the to I over Lee said in intake is customers fine doesn't give I'm way. platform. to high-end on security Cloud to cloud months, say to thing. seeing option before We've one won't – to Lee phenomenal adoption to go I right and with if cloud-native are. six because I But either ourselves fully tools. But team against earnings rather which outcomes. Prisma my And last ready deployed I him, my DIY integrated we stay quality, where or not plus production It's the don't it run Competitively, POC usually, they somebody customer the into lose with we compete else. would

on we I'm talk based or going competitive But what Lee of case Now see from what cloud typically about customer to it's of customers XDR we in does needs. But the It's let environments. trick? cloud, the compete. don't case usually have the SASE, in the like not

Yes.

interesting. on to – that of talked following there their what built they that with, used lot it more “No, are We're a and probably I coming covered. a us saying, Nikesh. number out, of from say, and tools. no, think It's own we're understand. lot built years integrate were was.” each turns them.” own many to it couple companies, There's happy tooling, couple this thought you “Actually, to a exist in data And think, now we would them source. open is early many cloud ago surprising it's a this products saying, APIs cloud, just different of, we've and Nikesh of our thanks, of have One, to distinct I key the to back pull how And we got was trends adopters A of than work of of seeing. them maintain when no, We've that

right? of seeing example is of one Just challenge we're as yourself. that many, using So doing it that that's the one trend

we to what understand saw accomplished. on, I across And need and ability have, in needs gotten that actually all the The on deliver fairly each our adoption we're good, we actually of and in-product the of pillars on to lastly, and different work cloud. the importance was, I the second early of And customers five continue fully needs those. of to capability. now And I'd those is, think, say, understanding again, just we've compliance it this seeing be we building

So, the lot adoption. and to we're order about on We're most of natively, success that into our seeing customers to just product adoption talking people, modules. drive what dependent in a customer adoption they need that folks not the suggesting to customer building we're of new secure, be and

in how got product that released just couple in on metrics production. adopting it XX of was into You just to a weeks and saw the we've customers integration since Bridgecrew the quickly

trend. adoption So, more there's but think we're point. to a this that we're inflection love see the I lot in to see future, that do going Obviously, seeing

you. thank Great,

All right.

comes Thill follow, Jefferies question right. proceed. Our Brent next from Please with Owens Rob of to

in seeing a your hear perspective? a demand and just curious not? is ago. pipeline has Nikesh, strength on to just relative that the a address this are questioning why what has been everyone to in been on of your there pull-forward pull-forward not you're environment, or you this pipeline of ultimately view demand of the the year many – And Can the

Brent; think be a everyone pull-forward will rate. demand it this posting at if numbers saw I you

in the in players low firewalls. other are some single industry digit seeing are who You

into must else, it's the anybody going a of to deploy demand is from or it, So, us clearly, did we're Look, the away because go taking some somebody was demand away taking to where somebody firewall taking office. not from and else. Fortinet demand be taking have pent-up it whether people some we nobody go office

back people coming deploy. Now people steadily. are slowly There and go to are

as refresh, that. Part of So know. part a is it of it you is as

months than still portfolio, now have our three that's in. of only XX% We and refreshed more

Palo still Networks. created at products we're So, seeing demand for being X Gen Alto

won't degree, in we some to to posted. ordering the a I fiscal are I XXXX this people fear see time, that. I least, to there's at and you firewall going we’re of of bit get think But couple think, them. still that they we’ll think year as And said, little will get a into keep I – so

Great. of ask And with next Gregg comes right. Piper Owens our question Rob, please All your to Moskowitz Sandler question. from follow. Rob

very Thank much. you

the can of seeing that how any? longer-term, channel success cloud, in potential talk guys go-to-market in you are economic about With you the if and terms implications, model currently you there the are

Look, from channel to enterprise the the perspective. fair I in customers, model changed think large it’s a say, hasn’t

slowly cloud as On cybersecurity you appreciate, and listed marketplaces. are margin, all on being steadily public the will almost products

cases, be marketplaces. In accessing public marketplace are us, it that deploy unused of because security it some some all credits some buy to firewall got a feature people you can So the sense. native including Alto, seeing cases, embedded marketplace, We’ve makes it offered. than to will. GCP, we’re on In you customers cloud marketplaces using cloud on that’s those public have by an Palo to and able buy

more people. I But think interesting the that’s what’s tell I’ll you about margin. on

that use from cloud a There’s get very We’re likely shifting that specific the adoption because customers and amongst specific your start portfolio person more firewalls. sales get in of channel channel for to where seeing there. it building and them to teams you to race is always – the savvy it’s arms people are a see partners the themselves, qualified because bit a buy are our more and to and direction they teams market not

Thanks.

question Securities please to Gregg, follow. Adam from next is with Gregg Borg Mizuho Our Moskowitz of proceed.

QX? Nikesh, at Okay. congrats or follow-on of either a XX% about of little a partner product And any net terrific sized is impact of pull-forward the Thank the you there evidence ordering then at for double a of to sort this the of the on about quarter. do you the How level? a and you think bit maybe orders. as quarter, question, Brent’s customer last

fulfill. a I So ability lack there’s of a there’s but Gregg, There’s to – a pull-through, on the it’s net think first part, wash.

a product I I’ve not that’s able of kind what within of of the to ship exceeded because seeing revenue range seeing you’re So pull-through, not whilst in be the might demand. because been my

So balance. seeing in numbers, a my you’re

see you ship – a build. in haven’t you the had it if been probably not wouldn’t seeing revenue and you You’re the booking, because visibility I you in have able to see been but –

a So about I And least don’t that question. think you that’s the We for two work this order for us. of there – last is the for or been order shadow seen ordering first the question’s a canceled asked know way. quarters When firewall quarters. yet double us, I two asked and I you refund answer at on terms last haven’t the pay being in for a ordering. And to

where it. So end in our will not numbers. be the channels, may and to people at lower true have it’s channel on preorder And distribution where hold that

that stocking goes don’t is on. order distribution seen in have and So we that you Dipak? any in beginning, basically where see haven’t end purchase in may We not end you distribution the refund. the canceled do – order, there, customer stocking. every where start customer have you record We a or customers

orders months just If on all are cycle, our to like non-cancelable. of purchase months, nine and sales to build our six I that,

it, So to it’s point that are just non-cancelable. finer put on a they

Helpful. Thank you, guys.

next All Patrick of Adam Stifel followed Adam, from right. question Borg please by proceed. Colville. The coming

question. the given like importance area the Maybe attack bit traction minute, down on little a just there. Cortex just It more maybe just drill so can that’s about for much service environment. breach you the talk a taking Great. to for the seems just management. Thanks given And of interesting

So the going traction I more could there was and talk hoping about you forward. Thanks. opportunities

Lee?

a little is one we proactive this it, you over of so so the acquired more year number have Yes. we why important. And can attacker tools, and finds before a talked thought issue Look, when attackers it side fix automated so becomes increasingly was ago, it. it even important. And about Xpanse bit the an we an finding

saw up for we LogXj, that building kind of example, vulnerable to to find servers, scripts against. to LogXj so find what fix a it cetera. are the the Apache if you try it, right? after look basically lot makes customers challenge And information shortly available, And – that’s that easy was automated very of at Xpanse et customers proactively attackers became For

where in a first. is customers exposure those become where to order issues Second publicly, has have they something our in reactive known find helps state, Xpanse address

in of quarters we’ve base embrace customer examples so operations. that customer important of the their And base. of and this as And our over become both sort why Xpanse last better are couple a a have understand so has of these seen security our to product really must really

Thanks Great. much. so

And question Bank. come for Patrick from your you today our last Colville may question. will Patrick, of Deutsche ask

you me for in. Thank squeezing

companies Is philosophy congrats quite ago. us that CEO start was that question, Valuations guess the going moderation changed a public as may. that your does going months of than have so be the roughly versus excellent quarter. months might numbers mean Nikesh, about as on I if think are when to your I clean we’re to M&A the spoke around companies, So really three cheaper last I private The mean valuations I we tenure, messaging ago? philosophical acquisitive. for ask a are M&A. you six XX% gave in It’s well,

private no quite I think have, valuation markets there’s change, markets don’t Patrick. and foremost. the first in the public So normalized the like have

no mark-to-market to the of the are markets So think still private devaluation. enjoying liquidity lack reason the I as

M&A has these companies those to correlated I’d some so purely the been said, Take we of Alto companies areas coming had years important, up to years. realize the the more trying Look, there that that attract for behind Palo not were were the come to late I acquisitive right? we We said, we’re many change. reason having mark-to-market, existence going be of just been to no like get people beginning, and pick be my or things because them cloud six ball, are I an three Networks were go philosophical were security. seven analogy, that X that’s as can as it work to party. for the and of in were cloud answer, not So Each ready we talent there you there them and for But in have security, cybersecurity and four a point, like right? would to hadn’t to market. or done needed to in We of been in bought which down.

Prisma clear So platforms. first. have to that’s four to have time SD-WAN. Zscaler, in we We We years abundantly a were we an we did didn’t didn’t from automation Take XSOAR, did endpoint that. didn’t in compete workflows why of it’s That’s we XDR. SASE, market years the to stuff Today, we With development we We would able market player. Cloud, monitoring. need that. a seven would to Take benefit In We have didn’t – be that we that everyone takes SASE. and with build. Netskope. four Otherwise, go in have build years the not the compete to have market. not be with been it. CrowdStrike We

have or don’t a not a forward, where you on we product if cybersecurity of I don’t Today, see sense. product many made leading areas that’s that look So leading development.

oh, my where to cycle, which in innovation. Because at go customers. there don’t to going firewalls anything a player they time cybersecurity getting look need integration out is for you forces, three this. creating because I multiple so, perspective, valued has when can I think I take there’s leading is accretive categories. think spent I company to buy the do buy I’d make in minute, play industry-leading And you a you want space. now to continues couldn’t any customers XX look need this everything a to nothing that player to I at old? So I innovation competing in compete place to acquiring don’t years "Wait merging the have years from something, of If at say be delivering with SIEM to because XSIAM changed. trying And two technologies. much why Palo we to a looked that could is is merging I sales innovate, snuff god, up XSIAM, Alto’s we where customers from cost now run spend technology." we’re mediocre too said, you

that’s So not our playbook.

part and our would were door line that, buy open of Our saying technology in midsize make go-to-market find which be go if use to acquisitions product we we’ve more absorb, to companies, can on to in you more you the anything category, we’ve to done playbook it the will be else. And and motion good which smaller is with the those made left founders.

So that philosophy hasn’t Patrick. changed,

Thank Nikesh turn right. With you. All that, over final his to call. we’ll remarks. the close Great. I’ll for it

apologize we to partners, events upcoming of XX-minute some thank the for again, you as us. of for you world I and thank like seeing Have said, our once Well, the and customers, great forward helping And investor at just, employees delay. this. on We Clay you, great after our around to most joining day. for look a everybody, quarter. deliver us once importantly, our want calls a again, many