Palo Alto Networks (PANW) 15 Nov 232024 Q1 Earnings call transcript

Good day, everyone, and welcome to Palo Alto Networks Fiscal First quarter 2024 earnings conference call. I am Walter Pritchard, Senior Vice President of Investor Relations and Corporate Development. Please note that this call is being recorded today, Wednesday, November 15, 2023 at 1:30 p.m. Pacific Time. With me on today's call to discuss first quarter results are Nikesh Arora, our Chairman and Chief Executive Officer; and Dipak Golechha, our Chief Financial Officer.

Following our prepared remarks, Lee Klarich, our Chief Product Officer, will join us for the question-and-answer portion.

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

and QX While link there, earnings the for the presentation XXXX events and please presentations to click supplemental information. on find

could the a press forward-looking these and and presentations results make and forward-looking recent statements. number no operations forward-looking release to financial of our description projections we today made risks that and business statements performance. These in today. company's risks of statements call, cause the are filings During review course and these obligation from uncertainties. a for the will differ statements our today's made any SEC actual regarding Please subject assume to uncertainties to of update We

measures comparable refer accordance and non-GAAP and financial be unless results financial will fiscal comparisons not measures. substitute the investor all directly These in reconciliations are year-over-year specifically measures in the as press prepared presentation, noted We most GAAP financial considered otherwise, The should a release a on and basis. for the appendix metrics of are GAAP. to with also

also in Conference XX. I over the now is management November call note to turn UBS the that will Nikesh. We participating

the we afternoon, plan you I presented call. today would for in QX Thank If everyone, our quarter, and you, X-year for August. Walter. were earnings of say quarter was Good thank joining summarize to our us the the following. I first

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journey, strong X-year QX [indiscernible]. So our in but confidence summary, Early days, is start in towards a

the in take Let's details.

at would by plan versus grew particular billings RPO to pay capabilities. explain XX%, of both revenue Our the XX% and future difference I grew might Street the growth these QX security our Deepak our like will exceeded our and of talk to be next-generation and you why billings XX%, driven confused while our guidance. about RPO billings, was with attention

per driving adjusted X.XX billion XXX share, flow free QX. by non-GAAP generated in expanded margins we in in operating cash record non-GAAP QX and points, earnings Our basis $X.X

seen never from this to on going we expect quarter. as have and consistent don't much we we as have abate If you what's soon. first in at at Unfortunately, seen look overall the adversarial anytime an scale activity perspective, cybersecurity

we consequence response at to providing strategic at increasing all a damage activity of frequency XX the a additional week, That landscape. Ransomware in are commitment amounts of and this aimed time. rapid Unit As customers, support this shorter during increased to announced threat retainer severity, and acts our attacks no of cost recognition incident escalating amount doing ransom increasing. paid being in of this are us, in our also much customers'

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duration to variability PFS before, or than environment. our business sheet, contracts. I impact this financing. create includes annual navigate demand revenue total Given or depending of we balance our does billings am partner financing annual on This Whilst strong more concern not financing cybersecurity it and not fact see that use concerned to impact about use of demand billing strategies customers, mix can the upcoming business. is about does for the continue billings pure metrics, validated a we're low the our RPO annual or on the by through plans, this that having ability to The to is quarters is execute. to we this consequence and of our conversations a churn impact nor and suggesting quarter I'm variability and this strong the the for our with a payment cosmetic

of a as cross-platform interest on security few our strong see progress diversity geographical opportunity well to portfolio, distribution highlight journey. I buys about making we're the continue to want deals platformization next-generation as our and to deals. the talk our across We of

is their and large a is transaction, SaaS of A XSIAM, of competitive adding us customer million a Cortex been modules This a customer platform. security expanding its spent lastly, million $XX a customers. Prisma already and lifetime Cloud $XX our its on both now across Prisma Access out over $XXX The in signed our represents quarter a its security including signed our organization, expansion a security agencies government federal $XX our platformization. million playing educational signed over a million $XX across this expanded highly for provider nation relationship to in kind, across to situations transaction large is example, deals The XDR first footprint. these network network in the cycle adding and has has XSIAM, expansion For SaaS and and systematic network sales story approach portfolio. platforms. large consume first its global deal. A an long standardizing with million state Prisma footprint. And cortex transaction, and the Cloud an customer That

QX, a XX% fueled XXXXs and has [indiscernible] Global This through across with transformation this the we milestone. in cyber $X of Cortex. of us NGSARR has transacted customer growth report the XX% continued we As billion focus broke as on quarter

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turn Let's our success. driving that platforms from X our are the updates engine on to

security. First, in network

in seen SASE, the XX.X policies, SASE services security we XX% management ARR form We network XXX million invest We're we ago. Today and On analyze in form include XX% momentum is also platform our drive manager, security the our less X our The than having called single factors, XX% network gain greater month, configurations to to towards continued network Of up SASE all leadership continue AI $X invest reduce factors disruptions. Customers security more approximately average, XX% innovation grow and industry seeing XX%. day to our strong see in start prevent of converge, first by our rest SASE, we customers, unifying cloud a saw on of customers similar second continue QX, with the purchased event all we've recognitions across from in and momentum year our customer form of of a our security XX% of all growth of from our ago. SASE build top to deploying leveraging to Zero in X customers Trust where up have half several in factors platform fiscal who unveiled This and the architecture. story portfolio our spend glass of all a up than predict was security pane a risk rapidly, and XXx just and of spend. PAN-OS multiple our innovations or year enhancements. [indiscernible] drive these unveiled or X of in also as year, position. transaction

to faster have lead. applications access applications with performance We interconnected AI inerorgently SaaS SASE isn't and tools the added safe than Internet. control data ensure We and over enabled to access visibility Gen enable to

strategy. intent always solve part see We added for an Last our an technology we to market extra an layer acquire SASE been week, customer has the announced isolation and important of cybersecurity. we to expand talent browser an of important opportunity our addressable Lastly, problem. remote security. M&A for

As many workers for devices as who work. often use unmanaged as themselves classified of XX% workers, independent

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to Prisma Cloud. on Moving

We continue traction a strong our the integrated This of to in platform evident of our is see multi-module strong customers. strategy. growth endorsement

of benefits understood. This conviction and particular years. XXX-plus customers launch quarter last and new has consistent growth these broadly through in our including modules modules, strong here of for driven new the some new X.X has seen key seeing released first rapid been with pattern the the as adoption adding success have over that modules full modules after enthusiastic a acquisitions. We There of are

which ACV and last This the code. accelerate deep Darwin release crew Cider and unveiled our position applications, scanning CICD capability, new assets, Bridge view quarters. In services, we IAC with API Darwin. across contract including business such differentiates help Cloud the workloads, cloud runtime. all new acquisitions security, real infrastructure overlay module code, is in came unique X across Prisma near active helping also Darwin new QX, a cloud through Our risks understand time. endpoints, examples. further a which major traction came Cloud can through and elements are Prisma attempts cloud customers also of Darwin compute to enables cloud and in attack data infrastructure

sprawl in intention of from fixes coverage enables vulnerability weeks internal to new the access data AI, management measures almost in be this passed. to cloud, data, applied of data to our X we data which security versus effectively posture With most access increased user integrated capability to XX% the to be and months capabilities real-time [indiscernible] DIG ago, stored Our robust public Security, to Generative an close stored services and Prisma sensitive Dick's cloud. After About external bring cloud acquisition, an identify organizations prevent platform data will manage of unauthorized Cloud. stake the immediately near Cloud of announced award-winning be the having full in adoption protection data we cloud. acquire implement see the this the security to Prisma need to will code and provide cloud from proposed

Moving on to Cortex.

X evaluation. continue only We XDR, XXX% production achieve was In our XSOAR, product Mitra in count several of across detection continued industry see and industry adoption the as customer to QX, Cortex have XDR expand our in we Round our portfolio, of to XSIAM. recognitions Expanse the innovation. invest and product the we

third quarter. We over customers. Cortex leaders and Additionally, XSOAR, by named customer by active all XX% count this parties to our XSIAM, Expanse grew were X,XXX

direct strong deal their was significantly essential date overall saw with $XXX XXX,XXX start in over an incidents. our security product us customer QX. We're of a with a X-figure a to and FY we had sell transformational improve included in includes is reductions deployed XSIAM endpoints. release, meantime expansion first significant year transform as traction over followed operations After purchase This million year secured XSIAM the outcomes. resolve we largest the in XSIAM. our to in offering, released QX We bookings, it XSIAM first XSIAM since security up 'XX a XSIAM seeing allows customer which very Cortex strong Our just ago. has and our to fast and over

billion million was of which just about back the On early for of our potential XSIAM customers this $X is pipeline past hearing created success, $XXX over in XSIAM quarter.

my Palo changes attacks, cyber cybersecurity responded security in go-to-market scrutiny on plan on was we began Networks. in the investing first innovation, to paramount the organization. At I the increasing We're the the of the risk. industry's X-year to time, same next-generation given for security driving of and growth Demand QX macro conditions focus us scale of to presented Alto quarter in dedicated August. As remarks, profitable we adapt leveraging will strong, the delivering and the be and is backdrop continue given ever the Execution continues be around largest environment.

predictably. flow and business long-term for continue and margin we operating transform free to growth We and will ensure cash the manage build revenue

will this RPO. RPO You most through current and still importantly our see

a deliver long-term expect we forecast thesis I ability remains impact we Our targets. With will to whilst that, on X-year expect variability to short-term intact, in billings, turn don't this over Dipak. meaningful our to our have it

and results, our Thank behind you, the guidance. QX and drivers details the afternoon, I'll everyone. good of our QX year on fiscal and cover additional Nikesh, specifics XXXX results

or X%. RPO, across and subscription saw the theaters. half XX%. ARR, of XX%, increasing all was EMEA and RPO The billion up grew and NGS revenue grew strong time our an just Product revenue was growing We drive delivered QX, billings was contribution million, For revenue of was RPO. across XX%, $X.XX with our billion, portfolio $XXX service APAC and grew grew revenue deferred Remaining obligation, X% our exceeding revenue growing results capabilities XX%. next-generation of XX% saw XX% to X%. first with $X.XX $X grew in continues We with billion, performance XX%, Total QX strength of XX%. We billion, million for XX% consistent support current in this of revenue Total $XXX revenue billion up increase Americas total $X.X contributions of under $XX.X growing QX.

in customer saw money and important rising incremental the As an on have behavior cost impact Nikesh we QX. of mentioned,

billing and We have billings. responding a ways in our this financing through using negative discussed had the previously, this financing. we annual including to plans, QX, are [indiscernible] partner In on impact

Although strength saw revenue. as ARR can you in and we see, NGS

increase operating basis by per driven ahead non-GAAP guidance non-GAAP primarily share year-over-year. was margins, growing our which XXX earnings the points Our our significantly significant This expanded was XX%. of in

again We margins inherent security trailing flow in flow from QX cash cash scale. cash strong next-generation our $X free flow trailing XX-month delivered some We of offerings especially XX%. of with scale adjusted as free our at billion achieving continue benefit to business in the of XX-month

Moving margins basis scale. increased the again XX% beyond line. newer product margin at year-over-year. XX% for of gain improvements with to improved QX the saw supply XXX margin to the We offerings Gross top in points continued year-over-year our normalization gross environment. Service chain as

we points QX operating operating expense higher Our basis margin as gross and XXX margins in lines. by efficiencies expanded our across saw X

our our against with progress pleased efficiency are We medium-term targets. operating

including support engineering, supporting top and make We and ecosystems organization. expectations, growth go-to-market capability in to line our continue our to and investments our product sales investments building significant

cash ended Turning cash billion $X.X $X.XXX equivalents total free to $X.XXX the flow cash with of QX statement. billion flow balance with of sheet QX quarter. investments and this and billion. operations from was We cash adjusted flow

our this of collections prior was bookings. on As is performance typical cash QX primarily by driven the strength the based our for in flow quarter QX, strong

based the bookings. Sorry, collections quarter, in on the our of but QX strength

awards. announced value we closing. sheet the cash several Cybersecurity Talon that our Dig million to inclusive intent approximately in into October Solutions have excluding on of agreements definitive acquire our awards November value and acquire X, for X we the On announced intent companies. to at Security approximately XX, the we cash, to balance Over $XXX $XXX for replacement replacement of million, last we Talend's acquire equity announced of equity weeks, excluding entered On

'XX. transactions of will year close quarter We expect both second fiscal in our

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

basis and to to term. year-over-year. revenue expense medium reminder, shareholders the a compensation XXX of is our as As Stock-based a returning program share declined cash percent by over points committed opportunistic, we're repurchase

stock-based a expected, up to of our of compensation of ticked revenue manage fiscal SBC with grounds. On quarter-over-quarter revenue, with year-over-year a we basis, our slightly of issuance plans. a portion year the long-term our continue As percent percent as a as in 'XX line down

on we're some guidance, want to frame to that turning seeing our I the Before impacts of billings.

As Nikesh financing our external demand see a deferred billings, annual make customers payment in offerings portfolio. for technical asking terms we noted, here, and From see selection see to continue pursuing more market or of with we PANFS, across strong either through the financing. customers

grapple for they discounts looking are with cost payments as customers of additional for Some upfront money. the

CRPO Our with equivalents our cash, $X low gives in position, this and billings dynamic options through the we're combined this account end we many quarters, the we've RPO includes more trends with the with the flexibility. This cash guidance last over range on of and trends several fiscal financial duration year significant impact to billion a seen which and impact quarter-to-quarter, our billings investments, us future towards in direct revenue in for strong saw have our dealing XXXX. quarter, CRPO. strong this can of reducing

see As RPO we growth continue we customer ambitions. specific contract revenue can we're of independent grow that churn, low at to length, our forward billing support confident terms levels that and

for Now and the to our QX moving year. on guidance

the expect billion, For to an billion to XX% to second of quarter $X.XXX of the XXXX, $X.XXX in we XX%. of be billings increase range

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

EPS be $X.XX an We to a XX% expect range increase to to XX%. the of $X.XX, in non-GAAP of share,

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

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

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

XX.X%, the fiscal our XXX basis expect be year fiscal versus to points operating 'XX. year to margins in XXX We 'XX range up

to be we of our XX%. to flow in XX% increase XX% expect to adjusted And We to margin to EPS range $XXX an be expect cash of the free XX%. $XXX, non-GAAP

of points, second year please expect fiscal to consider tax tax remain our to rate Additionally, we the the and XX% future following legislation. for XXXX, the non-GAAP outcome modeling subject at quarter

range taxes the cash $XXX million. in $XXX of expect million also We to

interest of net other quarter XXX For to we million shares diluted expect to we outstanding XXX second and the of million million, second $XX expect income quarter, shares. million $XX

diluted shares XXXX year XXX million to XXX shares. million of fiscal outstanding expect We

We to $XXX million for it million expect $XXX fiscal that, the back and the to of expenditures year in $XX QX. With I'll Walter XXXX call. pass of capital $XX to Q&A portion million million

broad Thank participation you, a possible, provide yourself question. to as Deepak. limit as please X To

Kalia followed Stanley. ahead, Our Morgan will by Fodderwala Saket. from with up Barclays first question Saket be from Go Hamza

the cost maybe like been we with comfortable billings billings the I just curious question revised the I'm pipeline, your as backdrop year, is of appreciate very maybe of much derisked? rest close for Deepak, this macro for guide money. to try maybe like how guide factors duration you've and thought higher you. how rates about importantly, and that in the to billings the has get point,

to X take Saket, this thanks question. function. for demand your it's because I'm more going about

prayer, X years finance me bigger discount. pay want to to pay a to us I want think you with a X-year will it for a you upfront? The function negotiations do a a so billings change the is on billings to spoil I you not -- me customer not Do or difference for at got the consequence of The repetition got you to the is go deal in customers pipeline. repeat. [indiscernible]. doesn't change me that give me and demand our you of says,

my But collect My money rates okay. on year. every animal direction, an do could pipeline, If go function could I'll does changes. close I not that. at Now some change in pay I basis. or anything say, my me billings demand I in in my just that It point. my I'm

get where we're just a to negotiations very because my giving deals low churn. across PCVs a category. held about I'm concerned keeping billings TCV is if ourselves flexibility We more topics. we that negotiations churn lot those finance around have because want those go just don't important metric. to to hostage this to So TCV can quarter, have be in product -- we saw I

I me get to to get on I my of give lot I don't don't money retain larger having annualized flexibility. I make the this on collect do flexibility. that that's sure on a very pressure discounts. So what's pressure lot allows to needed I I'm but an do financing, happy PCV a of teams. that basis financing,

want forecast. to no is sure no in in the is market. there change I our function in There So the change make is demand revenue

followed up Brian go JPMorgan. next is to Fodderwala from The Essex Hamza by Hamza, ahead. Stanley going Morgan be from

your want to if your the in offering just start similar peers many context I [indiscernible]. your by sustain to is all. mean, bad guidance and billings at of growing not is question, thoughts my of single all for to the growth vein kind To of digits, Saket's certainly I in condolences still full I'm growth because just will curious that assuming year. employees

you can the the cost that market? you digestion of billings teens what growth what's seeing the money, given So in that given that high hardware giving you're confidence sustain given

to pipeline, visibility Saket as mentioned Hamza, have our pipeline. our we So to

there's business know there. we out So

expectations on We from hardware walk the our very to not want and consistent deals customers last do It's hardware have We've away XX seen business. in not people don't been months. QX. for like

on our retaining hardware. or expect consistent up movements We We don't are expectations down. any lumpy

We going in as grow to expect talking it's we've about. range been X% the always to X% steadily

to. think So what's pipeline, out I reasonably quarter visibility have first future. -- there Saket's of the derisked we we lots in is have the think QX to from that we allows us use on perspective, I feel word,

get not for billing flexibility Nothing my a is it finance have having to better It's Street them. of don't my can, mathematic, CRPO, forecast year. you'll still to I year I think get revenue buildings. still flexibility. bad get billings I reiterate can year through NFS see $X don't which it's the the changes it. of your go and I to annual it's to I interesting total finance retaining my still billion This I are deal cosmetic, Can give cosmetic cash to impact But me finance how -- but that year. finance of deals. we or allows for want do I I billings. the I what go interprets just course, again, or the changes. you giving want of my X kind I X

Thank you, Hamza.

Essex Next Gabriela Brian, from JPMorgan, up, we Brian ahead, Borges from Sachs. please. go by Goldman followed have

know, next, longer-term trend little wonder Thanks, years? through if Pretty dig and How a for Akash, you dollar that great a platform? a M&A guess, M&A from you investors describe a the would platform meaningful maybe this you, I not How to M&A do done quarter would perspective some scale the hire Walter. of the as level in IP that to over something this on terms bit. having I message of you over more volume might even saw over Or I overall don't be a or of might sales Is spent in couple of your one-off both there this up? them of actual after pick could while. of meaningful a opportunity put your or your pipeline you scale environment?

for have point of changed question. we not view. Look, thanks the Brian, So our

to always $X M&A going maintained we're to year. at have We billion a sustain a that level close

that X, capability So cloud rough $XXX you if to market as range we while, security range see, in in million we if the $XXX too. we've cloud pretty And one, and adding a of haven't the done X for million you we in consistent did split see been the a evolve. terms

So saw more of and a workers get I mentioned, think SASE that's We saw more kind we consistent where I don't as unique of They opportunities, access remote independent workers. are or solution. have we for were security. all The that discussion use don't and RBI phones mobile mobile happened covering last management in not the to not every devices case where your hacks was managed few market devices. XX%

solution, and deploy the is now what of companies. to We were we space solution that pay was didn't to had go-to-market to overall have will market. the tech in customers go do, my we the yet go about to exposure always asking the So from attention to sort a and are to our like do from want is other -- disconnected they capability. And is [indiscernible] best be or figure just inclusion important that which SaaS what we perspective, another to independent

from great us perspective, and the we solution. opportunity, It most we a SASE and that -- think actually saw comprehensive So fit. makes it's an

are Access them to RBI SASE our be will Prisma into to client. going customers able our We integrate or use deeply enterprise solution browsers where

are I the think -- one-off, X again. sounds it's will time don't that one-off So want But never it to it happens at to be call we we where a did I happen just They're digest. have so to time. to But overhead X can platforms, our integrating in cautious same eating towards organization. we're different X the what keep not approach teams we the it's going them,

we've off sort anything pattern So time the now. shown is I shouldn't expect of about we've regular that

Brian. you, Thank

Next going at Borges to deck. Roger Go Goldman UBS question is Sachs with ahead, Gabriela from be at Gabriela. on Boyd

want X do year get talking connected, mix think to on the about also the is from before dynamics that billings about think you impacting dynamics the The an duration through go of the meaning guide having solution? about product dynamics how billing you cost for full that in And cycle these hand, again business. the actually impact worse get thereby are How we of on money the billings other. money they risk better, the as cost your impacting year. I ask and do X potential firewall the X about you're that

business is a So firewall one-shot thank you, actually a is Gabriela. business. Look, the

for You subscriptions it. and piece hardware The paid It's get our sell ratability of not a ratable right? you from and there. a services. usually comes business, It's

from an look to it at NGS perspective. have We

reduced. lower was took took our end contract we It down customers. went billing with this quarter of deals because or It's duration Our more duration shorter duration. on we annual the

having debate for flexibility. we that for think keep guiding where going to the I calling rest then So ourselves flexibility year from billings. it delay, that of we've keep on we're comfortable I feel our visibility calling down the perspective, to to you want keep this created on given pipeline the it

You're going I on calling to keep guiding it numbers. it keep my down change billings. telling doesn't you

So we the agree that for -- just to I Palo Alto changed be of X has we're ago. don't months prospects saying that going because nothing

your right. All question,. for Thanks

area on build also other recognize to on that, front. you our which not we're be guidance, would concerned just we're the just cash Maybe say concerned that that Walter, where may get I'd maintaining

Thanks, Great. Gabriela there.

at Deutsche Boyd Roger. followed Zelnick by UBS, Roger from question Next Bank. Brad is at

pretty pipeline, Just is looking mark. billion at the that impressive a $X XSIAM

on color of any from as ARR you've Just know perspective. think I of we the over And how But the or the that size an fiscal talked ARR should about the and you provide length about kind deals can of potential. those expansion color we deals of Xx about it flowing into on of opportunities any those upsell think 'XX? size course just the

I'm some sure to answer to guess questions trying Lee at. make

we're -- sort over customers time. quarters, up to last strong, is we've few the we've talk the of been and that we're interest from a show growth about the I it's Want seen. next XSIAM will. Yes, and fastest new seeing very ever the look, obviously, of product

a of speaks through the to in Nikesh transformation. to market better is is the things relative and things. the a have number obviously, AI of interest. different how a the attacks, attacks just couple That's driven exactly that. And SOC technology One solution, going the exam go by the simply And and think well. solution when I that's up talked was requirements about fueling as and need it to what's of increasing customers built, from that the automation. need like to speed the disclosure driving

we're is, replace The able legacy part the the this to of XSIAM, point [indiscernible]. customers' several in with solutions second of

they independent with in long-term their base each a not with because us, So the some a we third, fund us. this making. they're deployment are they investment is XSIAM decision stock consolidating want short-term so are And in new runway is or X-year investments XSIAM, standardizing a of multiple cases, with that significant is on making This single parts a customer investment very piece deployment.

that customer we're So early those pipeline success saying. that factors having strong the fueling shared are the we all with and are of what

followed Next from Bank, Fatima at Zelnick Brad Citi. question Deutsche by Bolani at

I to noticed wanted the new advanced prevention. and hardware wildfire ask features newer of Security your XX.X. I like Quantum the of an about patient release PAN-OS Zero some lineup

to take Just product look compare extent if versus us advantage wanted help customers of try cycles? take demand can to prior maybe contrast could your catalyze the you the new And get platform on to which innovation? as to the

firewall about I excited always releases. get the NextGen

Of chassis. course, -- we was friend new look, what made a high-end a big the -- announced

a So per that second. X beyond terabit scales

same degrees plus there highest can The is service XX there's out to need harsh sort that Obviously, largest, also right? there large -- performance provider go platforms that there, degrees the of are And enterprise out are some Celsius, networks environments. not protected, minus this Celsius in cases, and so be we XX environments platforms, because ruggedized to

this firewalls. So support with our is hardware that expanding the use can cases next-gen we

there's that in is companies perspective. prepare pieces potential also starting Quantum advent ways for launch are The happens cryptography equally a likely computers of to that, still about and lot what the you off, mentioned software of mean. what but that a in from a other post-quantum are will thinking exciting

-- security And launching of customers. a the is quantum capabilities so we're start for set that our this of

proxy customers time, capabilities. be a in added or mentioned our architectures Wildfire. AM Gen to There's what We release. look means capabilities. harbor latest added to this You generally hardware refreshes on lot newer which, innovation in is of over X upgrades. drives that's We Advanced this and

get of all customers state. most helps and the secure so is that to And good our

Boolani followed question from Next Fatima. for Fishbein Joel is Truist. Fatima at ahead Go Citibank by

for Either some I is Depak, to of your cash pipeline in or what wanted unpack. commentary

As product NGS penetrated but not are some year. than for And ARR of of maturity, others. going about pillars the the certainly, the in mind you more I'm they're of your to composition bearing think remainder say

pillars extent sense So changed. there to the the distinction. your I I But of for get by love about to any your you product ARR recognize contribution And wanted equally. all anything year you're a thinking pillars has that and how expectations

I hardware, Given view cloud. that remarks, in give to see where of this prior steady but tried and where to very our kind in endpoint we execution continue free a of prepared to answers, said you remember I

expected coming have So And out SASE cycles. said months to out trajectory. We from excitement large deals the transformation the see and anywhere see following is XX which are we pipeline. network upside these there, months and they're I closing there things that X And XSIAM. an SASE of

what's the some sense pipe have in we rest comfort. have of the for know to would So of the year to

first We cannot We enough far. said XX% as about business the SASE. grew know, in you quarter we brush already also XSIAM, so that of

close faster than SASE to shows So the at. X in pipeline for us the XSIAM we'll pipeline X we're months, next pipeline, hoping deals $X billion interesting closed

feature comparisons competitive, putting So XSIAM, companies. out very other because incumbent. of In case often SASE's X or you're POCs the in their X really There involved. are competing the with

Jefferies. Next Truist, Joel at question Fishbein at with followed Joe your from by question. . ahead Joe, go is Gallo

the unique one, for be requirements. new of you curious, of Alto in essentially there you're ransomware -- Lee. issues? some recent sort to out and Nikesh a of and SEC position would number is sort to I'm also Nikesh, is address helping And attacks is that driving business? called Palo This why products that what drive and these

Yes.

Joe, to announced connect me yesterday. interesting, that it's So we let something

So all, you ransomware an attacks. is first said the activity I high. at of read day, about all-time every

Now the SEC regulations actually in are kicked not yet.

in they're kick they out think some there seeing of you start anticipation I course. go to of all self-report get in When But and you're attacked. companies December. sort because petrified

activity it's and trying more or parse you're a been That's to So more think it disclosure going question. we've I to more and disclosure. so more good see

activity. I We've more and activity. seen more think more it's

number of in does month maximum to had we team before. last a incident team the our inbounds had the than Our response research. We've

come that anecdotally clearly, this true is of it's So sort also, what's happening.

the everywhere vantage happened go when still suite analytics typically, protection sure our in to customer's we we we of get and deploy from for be in go of bad resident actions of infrastructure. and incident in us, we the and make where may the go is what a an attack Now and that we'll where anchor put we sort understand typically, point, XDR engaged anatomy response, sort

to back more our Now with guys we back. don't stuff stuff. when and leave do us come in case they that typically, to us believe want be They want

have perspective, incident transformation. us need, unfortunately, deploy down times that cybersecurity they the transformation they cybersecurity from need upgrade and that need they X that So becomes a should whether we you, of lead to in because of upgraded firewalls attack, creates or in around a becomes a changed a product that of to going it or bunch I'll out those of we're stuff conversations whole go because a their to XX, for but that end or the every the whether points. ends customers X have of up lot tell discover process. they

customers. that's in are kind typically what products those the of Those which end So up happens.

a sort attacks encryption-only normal call it, key being companies And of attacks. have just I'll add rise, X lot become ransomware the multi-exportion increase. on used to, the point. maybe Nikesh is XX% described that of The ransomware to

So invested they in had backup.

from happens, steal backup These they're actually the data that in So just multi-exporton a operational. back up when export attacks that and back then clean target. they and

attacks simply need and can't this And backups. this And the a be the and side. recovery greater is not so just of investment driving with for in better double prevention the

the sophistication And so lease as well. the connects that to investment

question at Gallo Joe Powell of from Joe Next Jefferies go ahead. Gray by followed BTIG,

currently all? feels the Congrats further module. think at as like acquisitions, platform environment Nikesh, cloud. that it itself that pricing the when made message has truly and stabilized market you the XX several You've then West there on in do cements -- bolstering Wild

the of whatever year few do pricing in were takes willing the We with to or stabilized. platforms pressure try to and questions. Yes, pricing a Great has tremendous fiscal our emergence competitors solutions. last who saw our the dislodge it

I that fair to is beginning So think say it's to pricing stabilize.

we seeing come start I time looking think around second the are the customers platform. and what's is interesting at

that and the first the of think that so there's I wave part far, way. still customers still

is I want want I solution wave SPM and solution. a SCA. still look want to First very to module-driven. I Snap see at

us. they SaaS large together. which start platform they able look are a having breeds a enterprise don't end trying from million big deployments who replicating the deal needs have for what of a an you every at have have We best company scale for told X pieces $XX large that stitch not and kind, start of for different putting a in like every there organization are happened company. large responsible SaaS the lot up find kind just for security. We you'll to that soon But different of any they're people SaaS to so tools ion platform. At security they different company had to platform the cloud customer's in we because So as pie of as

some be people each So sort of I has we'll through customers show and of their to customers that a journey eventually, with other those some land sort will it's platform conversation. recursive going customers, we'll a where go but to think modules, in of land

of them at was sort of on we're a more platform focused So our robust. There make bought story. into things other our making XX CIO there. X went we was, first this on are before more things We're I focused morning. running and management, this sure have the security we platform guys talk X or each DIG following how you. a question it is for well, will like, following and the interesting, integrated the posture to that was did And you

Joe. question, for Thanks the

of Next Gray at followed Ben Research. Powell question by Cleveland from BTIG, Bollin

Yes. you Great. Okay. much. very Thank

about But you're So maybe still space or question. that clear this is appliance that space across XX% firewall guiding broader billings a growth. there's the impacting everyone. to pretty firewall the It's headwinds year QX

guiding X%. fairly is closest you've been them. Your Historically, minus competitor to with correlated

those insulated? speak it talk your So can dynamics? gains? about on why what's I you're it can't know Is NGS the think Is can portfolio? of data center different through Is Is side exposure? there more us anything you their just share to more you it help business but -- kind you to

Yes, all the of above.

for in we talking X% diligent refresh Sorry normalize that I multiple achieved the to the XX see we mean is say, that on about, you but months, that business, process X% see been which that making numbers. business, that our last, achieved okay. -- said, supply market we where thinking about of to our in and being people's I'm businesses. effects In as of expanding firewall the chain and some and we he's are hardware competitor own I'd to or very as on so we that Look, that of we can't sure We I in the we've trying backlog through in customers the guidance achieved firewalls. other replacement we

variability just much our us. other impact of I billing billing think variability. comment numbers going for don't change people's I We that's on So to saw quarter. to can't the this

variability. they the of I'm reasons have building sure So

different there people. told people, set In of category gives is the terms and of of rest said, the there. We XSIAM, be pipeline as growth We set is we saw a is a have business a with hardware SASE, which different we're of not which that management XX% soft us for you more had visibility comfort which on this we the the quarter compete I which in competitors. again to year, the about is with space,

the It's set our competitors difference about And talking XDR. You're cloud of startup. competitors. then where more security,

us look growth in rates the allows to I different different So at think pipelines, spectrum. portfolio across the

market, the say, I'll down cybersecurity thing across As I'll is going you're think board. the that people categories. are changing certain you only figure demand in around for that's I it X-year for a all growth in pay deal, you is do X-year out the rates X-year strong year-over-year. confusion or deal if can the a only not finance The you people I do you the function some underlying That's said, later, a seeing X-year or

Bollin by Research, ahead, Kidron at comes Ben. Oppenheimer. question Go Ben Cleveland next Our from followed from Itai

customers over at your it. time product revenue, in physical of the that's of SaaS is much how scale you look piggyback looks adopt I that a interested factor. thoughts on trajectory appliance get follow-on more wanted underlying the be When And to -- how Gray's to bit. branch and then that a little question versus software would form VMs the firewall as

Yes.

take when firewalls is product then. that's to another about first hardware, actually a across that talked virtual Nikesh We in mean, the question. part our revenue. lot software and of X% me let counted talked X product the So I last time about revenue

very it's their terms in specific needs think customer of actual what are. I

pretty So ? is than XX% aggregate at this or the X% to think comfortable X% Right it's of I or each software rather through again, to about X% trying quarter. feel pass them, about that XX% -- looking so we in

you the And margins. see in can gross that

obviously higher to margin for improve software continue us. product a because gross is gross product margins Our for

the is all which about to the security really to That impact cloud SASE is -- for branch. often deployments. built-in there's I The into typically think the SD-WAN the models is around connected And or the -- what firewall connectivity, branch. for still model be branches branch, tends all was your only global primarily question is with of branch security second just et nextgen back moves a the network for then X of this is a SASE And delivered. SD-WAN where second on smaller One cetera.

customer's and have the shift so way. the network software extension posture, branch SASE ultimately, the every to network an zero-cost intelligence security local need posture doesn't be the in of the to and the of replace to extension the for So that

from followed Thank you.Next ahead, up, Go by Ittai Kidron from Patrick Colville Ittai. Oppenheimer Scotiabank.

hardware, some just deployed Depik that is reported a much X, got actually also I view of that of Cisco sold that My visibility actually lot field. results, tell Ben's hardware, digestment not conjunction when there'll do guidance Walt. and down of for gets sell how quite question the goes installed much into so not you I On sit you, Thanks, how quarters, answer can us significantly in hardware sure was right. revenue X and to but be in the is in and what you period can on have you the there. now firewalls, percent -- quarter exactly for in last the and took the is their they've to next you they've -- question about right talked shelf

here. catch business up Where or -- And could you and not blind know might as so firewall is a exactly somehow that handling there customers there hardware with are your is well. hardware a how risk our spot

Okay.

and I wouldn't. listen -- don't I did here I So time, because call had not the if I Cisco to we're the even

understand, part I ship and our the we we a hardware it's small customer. business. don't is of in a, So business, what revenue very only b, report large sell Remember, a other to

perspective. on at still it's customer a it's So -- nothing there's sold the if shelf than sitting from our

have to interact. Yes, any but color visibility installed. don't especially But I again you have

Yes, every be [indiscernible] registered that us. has is deployed to with

it's I fair there there's because out -- to say sold have are issues or extra the specific to visibility we been a good activity the have say, reasonably would where into and that any I we firewalls the from are but customer away see there's uncharacteristic normal. deployed. no may [indiscernible], say different -- And firewalls has no So months X in that last

last the suddenly have going firewalls. lot don't of quarter, we So customers of a lot a

going think And this to because try but have I to bought prices I'm people continue. now and problem where situation. situation that they chain of sitting things was get and may supply don't chain order around down backlog. supply there ahead backlog we is don't past our expecting lot whole a got stuff -- ordered didn't we're guess, We of in they that shipped they've that We shipping never never -- we of we bot can more, XX went product. that a deploy, have went bunch

know I X -- to did in we the So backlog. year shipping that are terms some up people industry, in of

weeks XX X to We X to weeks. have or back

that really it perspective. impact So not is us an from for

is. what the spread of sense better some you give should that think I So

reasonably have pipeline Yes, from margin? visibility can up the what into seen We have our but down be as substantive people. might you decent nothing as or other

take last We'll ahead. Patrick, our go Thanks, Coville Patrick Scotiabank. question at from

low sound is operating standout -- watermark. me on your metric of and All kind me but of right. high was for margin a a I've watermark To was which me, the a non-GAAP the XQ quiet. got guidance, it's to bit for so being Walter, Statens based in, actually the be margin, XX%. throat, like like the Typically, a Thank predicted sore squeezing you, bit forgive bit Jason for

Dipak I should that around other [indiscernible] takes puts are So we operating consider any presume margin? I be dilutive, guess there but and [indiscernible] to and

we talked that in talent the annual of the just areas some later would different did had of as explains No. have is a I expected mean, the I normalized to And which terms think it's of the business. around come a that well. year, more rationale say how normal the comparison, we obviously for expenses I fundamentally, We the hiring I year, of the hiring this Dig will marketing it's thing. rest. activity I did in year-on-year say we're Talen lot ramping. you will have course on just incur that But a in majority and, part think about of level operating some and now

So base a nothing calculation bit of in just to. little there, there's added factor but really

participating. your for Thank his question. with for that, over you, it for right. Thanks, comments. And I'll closing Patrick, pass to everybody, Nikesh All

the much Well, thank our to I would the if our thank not the in use especially remiss the the across for in our [indiscernible], wanted employees ones you to all Networks. did given partners of world. trusting time what's thank attend also world and very and I earnings taking part again, everyone, opportunity all I of call. for to happening that be of Palo customers Alto