Palo Alto Networks (PANW) 20 Feb 242024 Q2 Earnings call transcript

[Audio Gap] corporate development. Please note that this call is being recorded today, Tuesday, February 20, 2024, at 1:30 p.m. Pacific Time. With me on today's call to discuss second 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.

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

on 'XX for QX supplemental presentation. click find results 'XX please QX the information there, the quarterly link to earnings While and the

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

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

to like in now note March. the will management to to participate is also in TMT the I would We turn over call Conference scheduled Morgan Nikesh. Stanley that

significant growth us profitable afternoon, strategy, thank Good successfully quarter driving in another Walter. cash am combination operating you, expansion Thank flow pleased report non-GAAP strong our free our you a today top for and earnings joining for to I margin we growth, generation. line call. in executed and of which

grew XX% value grew capturing full Billings our year-over-year of future RP XX% revenue. and XX%, grew Revenues year-over-year. the

billion and Non-GAAP growth substantial adjusted on basis free flow basis. of profitable expanded operating a in year-over-year nearly generated operating as on cash free we margin we growth, Just $X.X XX-month flow. we focus again and as points trailing XX.X% in XXX margins cash delivered strong leverage important

without onetime drove income to items. and year-over-year even profitability grow our $X.XX, of non-GAAP continues strong GAAP net meaningfully, Our EPS up XX%

our in a spotlighting. number of Beyond milestones achieved financial notable of worthy QX we results,

stream We of with continue to in steady success and deals XX a our the deals $XX quarter. million-plus in $X over million transactions drive larger deals, including largest

Our increased the their by QX in us XX% period. XX customers highest spend spending in with

on X our also business, progress across driving wanted growth. fifth key consecutive XX% continue platforms. growth achievements was SASE ARR In you to Network we business. our our update to ARR Security in of our quarter I QX see

the Networks, Additionally, with market the Palo when XX% we in in our second new head-to-head to we win than more SASE. leading were showing SASE Alto of new customers signed that quarter can

refreshing garnered continue innovation to XXX net network OT drive security new ] in and a capabilities, security, We cities for position which us. leadership our platform new high-end [ investing

made we this customers drive off our quarters. significant QX In saw have new with highest year first in of and investments half the new to in growth Prisma Cloud, the ACV pay X in

to in modules. and continue strong XX% X trends adoption XX% X in approximately multi-module see growth customers approximately or We modules more customers with in more with or but growth

using X/X more modules. customers of X Additionally, about or are our

Wave Forrester Workload with a us continued Research, Cloud Our leader market external recognition positioning in report. in this Security this as

in over than XSIAM in In of a bookings XSIAM Cortex, significant single quarter deals number seen We've XSIAM. adopted growth a yet and than progress million QX again of the Xx evidenced most is who by including not signed large the customers be XSIAM in this have the business. milestone of $XX across ARR of continues significant quarter. that catalyst and being to for customers Cortex It transactions for more higher

under we our looking ] belt, this We've and displacement. systematically vendors already displaced date ] how now on SIM legacy XX different to [ accelerate confidence can SIM [ we're the

the in is perspective, demand market. regional healthy. U.S. We did softness a see federal overall From government

large several towards The were where for government selection, situation end in projects the certifications started our off worsened but not of We did had shortfall significant in had And are federal close. X business. U.S. QX. requisite we these well technical we a result, a QX deals and positioned as

our trend We Fed nonproduct weakness and QX. this shipped this that in will QX expect continue Offsetting billing quarter. into backlog some the we was

building awarded platforms. began With Instead, leader X possible. leadership several Endpoint leadership platform. ago about breed. the in one No was best wasn't years we're as across across our Five quarter, different categories we a strategy, addition our Magic of multiple security the positions a believed the in when including industry talking second of was XX world recognized Quadrant, Protection categories Gartner our leader now

extend has over platform. driven success and to to the in shift We're been Our our the to investing industry innovation position last by years leadership platformization. committed X

This across X driving leadership of our platforms adoption markets. our our strong markets target XXXX in unique is Global

platforms for wins. move in all. consolidation within driving forward, up with compelling XX% least a X. as of QX, major XX% In This X our from us years ago. XX% of and Global our strategy As these right while adopted multiple and X see is and at economics all this we accounts, of on us We most the of products is platforms, they in area we all our early each have are XXXX is XX% of platforms. driving transacted platforms have X This to of from multi-platform know of focus

than have an Our customers customer. times platform average our customer of X lifetime single value that platform X that is more

XXx platform more X our that customers, is larger. than For

form established form ural of should platform, These set we built our driving position by web architecture SD-WAN Not now capabilities in ] of are a security manage these leverage and to significant appliance factors. across across proxies, point subscriptions just through in software consolidate seeing vendors customer our network -- the capabilities. intrusion and [ security we name We've our environments. platform SASE I to but Trust Customers be our faster. include of filtering, platforms then now showing DLP think we our is we're doing a While provided only prevention, progress this can this and [ few. consistent personally policy vendors our ], as factors consistently in statistics, Zero consistent portion up consolidating platformization, security can have deal a

could saw In QX, hardware, that platform our network a a that million right security large manufacturing on Trust leveraging subscription of ]. broad consolidation offerings only standardizing SSE company security their all are Zero footprint. competitor were support these transaction, certifications U.S. in our wins competitive $XX with included company moving in the [ we end point life a that replacing geographic the We across

for part a customer. effort was modernization deal positive across and of consolidation This ROI IT with the

a in the expanding our firm, deal and workforce footprint data expanding center Prisma X-figure hybrid firewall a had with large also with initiatives law Access. new We their

and [ ] consolidate this, part filtering also VPN As competitors and other versus we of and their SSE firewall capabilities. URL won

capabilities In key acquired organically. Prisma Cloud, we we or platform cloud built developed best-of-breed that have have combining a go-to

experience user across and architecture common Our spreads modules. XX

modules, in our amongst adopt as posture or cloud can customers API security, protection, software wide cloud security As a composition consolidate vendors, management, multiple SCA security including code analysis infrastructure workload they others. those variety of and

to X-figure point streamlined displacing financial customer QX, looking deal Prisma CNAPP The journey. and support deployed CNAPP new solution their incumbent several company, Cloud multiple closed logo Cloud Prisma In was multi-cloud The vendors. previously with solutions services for a tools. we a

Cloud They leading value to Prisma intends delivered company, X where the expand the expand North American also customer technology closed modules Cloud. a and through consolidation with use X-figure renew and deal standardization Prisma the of to the and also

a customer stores enabled appropriate people to becoming of drive Finally, integration as establish in cannot our full the Cortex own us their our platform, which A offering, imperative and security is action each platform products context, were accelerate able cost. in operations SOC has proposition complex autonomous Cortex. value point to overly have our with nor with XSIAM, approach we high without data platform platform

transaction. X cost subscription avoid the large ] point the In QX, enable in customer market, other wins added a products SIM The the in include and and time XSIAM choice a [ that that we company support the leading expanse competitors firewalls same stock. consolidation to their XSIAM for insurance EDR at adding $XX of the million the of displays saw capability renew

Additionally, SASE a then security interest are consolidated the DLP and capabilities. QX, in Access expressed our ] in consolidation follow-on further. previously Japanese manufacturing their XSOAR ] QX, an our CASB in added Prisma network with [ customer In The leveraging we success [ in saw across sock XSIAM capabilities, and consolidating company. added mid-X-figure They into deal. they

I know look a had our to guidance. you've if at chance

there. change the in a guidance out outlook demand is Our of consequence a not

the market us Our guidance platformization leadership. to our the wanting accelerate our time in position and us We our leadership a activating to our consolidation consolidation. is driving given our shift and AI is strategy for a in and both position in leadership invest, platformization this consequence across believe and of

as out drive towards to you growth But and accelerate see $XX to market and the how before demand I intend a higher a XXXX, aspiration by prospects more cybersecurity there. I where of in talk ARR view much want candid to we about we give future, of in billion that the our the function

from companies and to impacted. space. those that this. focusing breaches, multiple landscape get drivers stronger. calls by impacted this We're are story bad The well sophistication demand an The margin be peers fueling commitment of we of threat have scale I'm There CEOs with and as that members prior is their and attacks. challenge as had Boards continue incidents in no getting increasing customers working continues quarters with leader from our as different adversely personally the to the seen to increasingly important on continues have

on X,XXX last pre-support Clearly, a signed cybersecurity driving opportunity being industries we XXX for an Successful of the breach. state of days being infrastructure out XX breaches the geopolitical national are help our get as Surprisingly, up been perpetrated many [indiscernible]. never top ransomware is to across topic. customers targeted. tensions see our around customers awareness our a concern repercussions has to activity few X,XXX are quarter, before. significant offered Last attacks there and Heightened with have get during and and this in nation

over we a shut agencies sign. promising which down Although did ], is lock this [ various enforcement see morning weekend law pit the

new succession the grapple often We making done requires SEC are can see in companies some it. in full result or The companies remediate understanding which full incidents they what material assessment with mandate incidents facing. be disclosures incidents, disclosure those they as extent several prompt before a reporting

disclosure You expedited in recognizing see the of [indiscernible]. the visibility and security these action remediation for need mandates results and

seeing, The are part demand the many we're cybersecurity. [indiscernible] new, despite notice customers is new. we're beginning to This is spending drivers that facing

products amongst and for customers. total incremental that. cost not is most This necessarily better on ownership driving driving focus is a adding a point greater security As ROI outcome of

market our in in trends and increases consolidate some a mentioned, I see as the Customers, are gains the key space. or begin footprint their Palo new Alto happening industry and who share because to require product share is or XX% net our be I hardware some introduced for is back. Palo highlighting. security customers our roll with customers that we to From over also firewalls Zero firewalls architecture. customers worth in them the market in give shift time who Alto. SASE had Trust platform. see are to zero-trust seeing network our unique Those consistent ahead consolidating to This favor deployed are them changing into of There within new go point, price in we advantage rapidly our think us Networks competitors seeing

customers trying keen pressure this beginning space in We uneconomic their Along intend legacy see We by strategy this they're the the with They're and customers, some retain for We intend behavior to is on not articulating platformization narrative. space our and see When space vendor trend. vendor with to many transactions this We're primarily startup are challenges accelerate are that to pricing have vendors and platformization promising and the investing to to the able times customers. to is to in in opportunity. having and incremental that road product ROI to in accelerate TCO, also focus value. manner. in consolidation compelling space. the as forced putting combat single that their the on they competitive, convince a resorting who

platforms deployment or strategy all adopting products this viable We're adopted DCR also trends of favor to the increased consolidation. leveraging successful this and happen answer market to Customers ServiceNow industry imperative. or along will trends cybersecurity. for our Putting responsible is faster ] aspiration infrastructure. Workday customers the seeing this AI up to other of force, have our in set that demand in can become leaders our AI the customers them the for to these that want We is conviction technology, asking conditions a to match challenge. that the and with [ AI help in to These cybersecurity. in of intend We bolster together, the inevitably for and across become deploying protect sales big markets drive us platforms AI only

promise in easy always pace. executing the adopt making through is customers. primarily of the at all issues for platformization replacing significant as you've well as contract from exposure points own Customers noticed or well double environments The With adoption friction include their many complex crux our simultaneously Until now, the have customers challenge changes playing changes. in terms. as to working Key while multiple their economic challenge our around of that these platforms assumed not of face risk holds, is around execution. we our products

quietly last even the the share us customer help minimize that programs to our enable months, working been risk Over in base. develop have and we to of X

You platform can before approaching our customers them help have the we benefits. tomorrow expire. gain number to drive customer we obligation platform can will well platforms confidence vendors us where believe their to our rollout build demonstrate launching extended legacy We start see a in contractual point these then platformization offered contracts of offers significant us commitment, we strategy. period paying consolidation of after by and our their an to ends. we Customers deliver product can After this ability

last accelerate gained and platforms across the now friction, platformization. mechanisms realize we the new accelerate our have X All sooner. these to have we programs believe is portfolio to experience our help the to consume time this the right will programs deployment, innovation drive reduce With over customer months, value customers of product

While you an this list, is wanted some to examples. not exhaustive give I

to trade-ins, execution risk estate product that no we Each that and exposure to and the of standardization. that upfront add-ons legacy to dealing mid- In but accelerate these economic through customers. transition reducing convinced term. will bear these with outcomes are elements introductory offers We us have concern incentives programs launch is begun of include the programs lower cost we must sense, our already cost and long amazing for outcomes, the yield of in financial

starting we that in have across these programs to -- X have announce intend have. I mentioned, we to some We of we few addition developed as And all intend platforms. a already more and announced programs we tomorrow expanding the

aggregate you're Given in I this more section have more explain then about much focused elaborately. Dipak all to will and we is an a I expect high-level these term investor want on talk have in this the you and numbers, call, this term. and provide impact and understanding his of medium long eloquently this the will

pay We for of a us typical technology into expect will platformization our entering not for a a customer transaction period time.

and next our year, growth a billings to these XX ramp revenue to months. As the programs the over we over next XX change expect

billing revenue full an to top our see line where acceleration in As metrics. of contribution, and contracts customers move period expect the into we

our us and we incremental top Beyond rates broad customers, can for in growth in next-generation in to goal line we relationships billion sustain by of and platform metrics, acceleration security $XX believe sticky driven XXXX. with aspire higher this longer, dip to allowing

We low operating transformation greater than revenue also the and to business XX% in to our expect to non-GAAP margins a industry-leading mid-XXs. with recurring achieve

do can we this explain, prudent in will and believe we Dipak financially strong manner. As a

ARR aspirations be cannot AI. talking about bigger Talking and platforms without today done about

have We time a AI on for long working been as a company.

a This dozens offerings to their users, bring co-pilots customers a is the AI. likely, personally end vectors state one by total juggernaut several points to from to billion due addressable accelerate $XXX inflection for to be and AI. decade perspective, ranging of Conter in did continues along ] of software. in Furthermore, over AI significantly to security negatively more where the evaluating from with challenges type of technology AI it center. necessarily cybersecurity. [ I in importantly, not and activity on arrival front and the multiple fishing XXXX, to predicts efforts be inflected our increase of with are market believe will AI we going However, is security Generative attacks, malware biggest spent the nation

through or We to additional pen we in stages to cybersecurity growth our see many of in this X we're have discrete drive understand AI beta put these across opportunity and to paper opportunities capabilities. internally and alpha of product

tampering First, about value of AI-driven leakage their AI source, manner. public the applications the concerned organizations users secured XXX volume consequence to models of a the center. other Where currently north their access we across of are data in as an see unintended and users and data We add both employees access to million an to fishing, insecure or we in [indiscernible] opportunity secure. of growing cloud in

deliver $X X is release us AI to billion expect for It of security billion them. next We opportunity sub $X years. these an opportunity for each users a the over an is to

of organizations Secondly, believe need billion the opportunity do AI-related like deploying expeditiously immediate X cloud, estates in the they $X to overall the identify $X to AI-related understand workloads. in their increasingly next They for this cloud security billion are posture workloads in this just and We is itself years. must a issues.

have AI and applications increasingly AI network with between and traffic Lastly, context models. transactions interactions will an

opportunity maintaining Overall, is the next million this firewalls to billion X.X the can $X that our accelerate a in traffic. and AI billion us is $X place perfect our growth than opportunity conviction investing more believe X drives billion XXXX. million by $XX to installed million Our combined $XX our inspect to this this help towards We leadership years. in $XX

share fair large of to uniquely believe opportunity, also TAM. we our the the are Beyond positioned garner we

AI footprint is advantage and significant Our in proprietary outcomes. large driving a data technology

QX, ] this benefits ARR offerings, of Experience IOP XSIAM, Autonomous [ In milestone. We've million Digital Management, RAI in already or which developed [ in crossed newly AI early product ADEM and include our offerings. ] $XXX seen the

cross We above platforms, our security. ARR subscriptions and they advanced our This have are and is possibly including $XXX AI platforms. beyond to in the embedded first cloud security million AI across all capabilities quote our of companies the

are in build the availability. hands we customers [indiscernible] copilots, are feedback leading Our before who to general of us giving

by we of roll year. Looking this to plans the offerings additional out forward, fiscal AI-based aggressive have end

We X the offer talked X I offerings, have each new [indiscernible] of product to to about. plans address

Before I on to summarize. Dipak, up and to wrap pass like it I'd

with our the notion, position platformization our to is and convince our this platforms trends established to be we're on have position of going capitalize early next best focus and which the industry clear cybersecurity, us, in industry on now leadership We consolidation. the trend best-of-breed all about phase

One to do working. is strategy that of things the the to is hardest change

customers We in that a to the accelerate consolidation we allow the total are We mid- us to making much team as understanding are of spent ROI better how drive have long term this to strategy whilst is going and faster our give an to prospects further. today management better time our believe firmly opportunity early and cost giving ownership. stages. changes AI us

seeing for course deliver are to that products we we the prove the start of the significant there and cybersecurity see demand to a as day rest to more inflection be is AI point there. be the security begin an will take where over of inflection as hold we year. signs However, will It marked that today will

growth we for back our in longer talked ahead trajectory August short-term have the line impacts. can growth of about We some despite trajectory higher confidence top absorbing we drive

in financial profitability on cash I that, acceleration, the drive do margin a prudent as pass operating targets. Dipak. will and She continue With will run to we flow our manner. this original business shown have We hitting we to

everyone. and Nikesh, afternoon, you, Thank good

of this Given an I do about QX all abbreviated quarter, talk review that results. our will we have to

for supplemental key to and our financial refer website press information can You numbers. release the our on

billion subscription total For of Product grew while XX% support XX%. QX, revenue revenue revenue growing with $X.XX and grew growing service XX%. grew revenue XX% XX% revenue

growing some puts and GPAC geographies. EMEA the the ] all to [ quarter We XX%. Moving up XX%, related XX%, revenue to our with theaters had growth during also on We across billings. and of growing Americas saw takes consistent

At U.S. U.S. vertical headwind federal the to in we start mentioned, to specific weakness QX a to the backlog, billings. saw our year in a saw federal of than a after federal and slow significant the our our offset weakness term. in which some is contract our revenue are Fed. as decrease deals related was impact shorter saw we The Nikesh programs. As weakness in the meaningful same nonproduct average Fed we relatively This in time, the billings they our

watching quarter, closely which we XX cash expected We played last we deals, continue to out days see this ago. around largely discussed although customers as trend outlays

billion, was obligation, current and was performance $XX.X RPO, $X.X RPO Remaining or billion.

our our a fiscal taxes. that tax-related a also notice net was year and These of EPS a $X.X results. likely onetime billion. does has non-GAAP allowance. been $X.XX of You item GAAP from cash This This adjusted release benefited which not GAAP $X.XX was out our billion in 'XX, amount impact income valuation was

Our years, on with remaining contract X year-over-year average duration approximately new average contracts relatively was at contracts was new down year-over-year. slightly for duration while duration flat total

approach time talking that and platformization perspective of We additional estate approach, to deal-by-deal then larger This platformization by want adoption give in a renewal to results for did lens. new platform customer consolidation and more talked accelerate more and our you to of financial with the expansion spend a programs systematic moving of we consolidation detail framing about can higher faster from by and and the program-based alleviate capture commitment and customers. a strategy platformization some our of and from business about drive with believe our with my the mitigating faster number rates ranging customer us innovations. to base benefits a friction friction. and our Nikesh I with accelerated faster

are risk and total security the consolidate with benefiting lower and deployment ownership platform on execute of lower cost better cost vendors while to the customer, the posture. -- a For able they from

how trajectory we gave in Nikesh level think help term. pipeline, high you about medium you I the As our understand want the to

the contract of for part consolidation drive of commitment. period Our provide their free customers a effectively platformization as offers to

top period growth of XX we months on XX line billings. may We our to pressure notably see of rate, a expect

into which we spoken programs of the Some payments structures, have our past. platformization deferred in embed deal about

through We we in fiscal 'XX below of provided August billings will anniversary and result programs rollout expect persist of we the the XXXX. year target these this as in

period, can August. this expect in targets in Beyond we higher provided these sustain we we than growth

ARR an our impact less or we and year-end to year through for expect growth can meet rate calls perspective, expect on our NGS From we metrics, 'XX. target, which exceed we XX% continue fiscal

a billion of tend offerings to customers' As long-term Nikesh continue set higher be we of easier in adopt innovations. deploys a full platform, 'XX. are These NGS to makeup installed noted, have NGS platforms customer we of target products. of once deploying establishing this Underlying it's and $XX our customers to ARR in fiscal consolidate and trend, year the a new deeply to expect infrastructure vendors our

this increase revenue expect a drive mix We recurring. our to overall in significant that is

growth, in see compared From billings. expect in growth we revenue Generally, to that we well. on will here a less our a as happen billings changes revenue as perspective, lag pressure revenue see we to and our versus expect this

to As part gives now, in Nikesh execute driving and on to especially confidence strategy our of is profitable do growth. mentioned, so the success us what

we will scales our term, on a we from see that strategy short we a business continue operating the negatively confidence and well impact significant in line to but number top leverage of drivers. embark we expect the As can have

support, sales the payoff efficiency G&A. cloud well item to our across internal on the P&L, scale every As across business. all of line focusing from customer marketing and I we've hosting, have of from And times seen we multiple areas the significant before, ranging mentioned

Let give me some specific examples QX. you in

constructed as we drive contract benefits significant This signed primary provider. scale. First, our with in cloud we hosting, margin to enable extension to us cloud is further a

within identifying This the we're analyzing program. channels address G&A, all service responses across needed employee all of significant experience manual to desk all tickets Second, the well than reengineering, a on and automation have our progressing started have and AI XX% of of more requests. but seen is and automating The XXX,XXX target a positive manual still of interventions. savings combination already we progress, in process by

By of our halved end the QX, of the servicing. cost we roughly T&E

lot have this we margin program leveraging That targets still on significant a template opportunities In our beyond that margin maintain we this made gives across we business whilst short, us front. operating other and now confidence can areas. medium-term profitability are a We progress, as of free the cash year.

points operating of of that beyond we line the support can this margin with year medium-term Specifically, operating gave margins plus. basis XX% guidance believe August free And cash can we XX%. our our in target expand continue margin to XXX in XX% we to by flow this

We will prior of cash both have on well absorbing come we as of spending. impact despite billings this as some with we us have our benefit expect that the vendor some the placed payments arrangements efforts deferred dynamics contributing as optimizing

and reiterate we platformization this XX to XX the Nikesh up months. well to ourselves set financially wanted manner, I short, this is manage through acceleration over In in a to to next that said have what prudent it do important for us be able to

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

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

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

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

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

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

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

increase XXX points $X.XX, we an increase in XX% XX%, XX%. range EPS XX.X% an $X.XX to be to margins range operating expect expect of to basis XXX We year-over-year. to non-GAAP of to to And the of be the in

XX%. to to flow We margin free be XX% expect adjusted cash

many earnings will we've the In included to the portion the back that, interest appendix of call. over for your of the questions the our Q&A call time and With to presentation. points of possible, as of as modeling the get in turn Walter I

proceed We'll Q&A. with Thanks. follow-ups. interest of now Please, with only question in X no time, ask

from from ahead Brian question. by please Our Hamza, will go Stanley, first JPMorgan. Fodderwala Hamza from with followed question Essex Morgan come your

Nikesh, the discounting good. was comment were clarify, What of referring to demand you to all? well some And just it given on there, as as wanted to then like function also quantify I that just your cut, bundling said -- a spending just at it's quite exactly way Any seems duration. fatigue. you lower billings

the Thanks, to of no want Yes, there's make I sure confusion Hamza. for think in fatigue. I spending characterization Thanks our question.

our Over ended cybersecurity on few the up more spending IT. customers than last of most years, have

vector, the consequence, to you see trying feeling going every budget I'm digits number continues for a to of As my double breaches in they're cybersecurity rise. because keeps year yet new protect every threat like up against

So and you spend I more that our enterprise? ownership how money, show how get I a if we the better down less to services spend customers are across of And How lower ROI. sitting have do my on do I deploy? saying, cost I get total me can

their So cybersecurity. there optimizing Demand very consolidation being have no continues to platformization the get think demand. to are customers they demanding kicks current cybersecurity where it's I of allocated more strong. money in. more be about as The to budgets opposed That's for to amount

trying In versus... to quantify terms of duration

is in just expect that a Fed platformization up. but So programs. of to we what also like That's as per is related roll like it we out the annual the these billings platform it of perspective, the of just to be initiatives also payments that to we more things part be clear, -- makes talked part part the se, billings, deferred there about initiatives Hamza, is of prepared it remarks, from billings because guidance

Hamza. Great. you, Thank

ahead. followed from Saket Next Essex Barclays. at go by Kalia JPMorgan, question at Brian is Brian,

discounting of that discounting? looking was metrics within maybe we some Hamza's thing And period of of at offering what normal that other a look those up Dipak, Wanted to annualized get the of a what sense about free or Maybe of get to is for billings once to contracts time. period guidance should for TCV headwind normalized sense a follow average Yes. hit a one run like my rate like? would a a growth attributable to And certain upfront that rate, be or caught TCV ear question. on kind comment

Brian. Thanks,

Let me jump in here.

that, a for says, to this another entire What's at expire I when firewalls vendor IPS, going these with to clarify listen, to love got X, to let think platform. customer happen. in this I is and the vendor, not half but the of at X minute, from this vendors happening today I'd Zero replace customer different of going say, just that wait I to notion. I'd like if of point hit this time. the risk, as to "Wait, time, me Trust this so a SD-WAN, The rip economic it's scared I'm and all in estate your deploy is for life, they And end SSC. terms I go my going replace risk." and it's points got execution in take I And create discounting me for years

X-year So the plan. cybersecurity they're consolidation going start you done. let's listen, is, X-year, us out lay propositions and we're implementing today, platformization a to customers We'll go when pay

we'll customers. vendor, keep is, more paying the of our a for that's away it can other economic the the like you exposure risk from of of But a what and there. until sort our execution have taking services So lot is take it you to use

or can can call you a that you call free that discount Now offer.

rolling Our approximately our free estimate works X worth a customers at on about capabilities to of it is out product basis. months'

think our I time at other, right rate And should metric our about. offers the months, think to the I go as back been about talking start lapping is RPO. each in we look growth is XX frame to we've

you, Thank Brian.

Nowinski at Next Gabriela at Andy. Wells Fargo, Goldman question ahead, followed Borges from by Go Andy Sachs.

U.S. the about federal ask spending. to wanted I

in it about the remain it's activity months. comments how X to national nation But QX, said next state soft soft your Nikesh the targeting was I think increasing, for going given comments think You that were you U.S. And the Palo trend? your specific disconnect in do a Alto customers between Fed those was there's to broad-based? why guess, infrastructure more I and are

Look, part is us. of particular it to

in for duration was the the Fed pace number. saw not That -- We early up we aware, there down Remember, are orders. and could program. it make We'd you part have we end to levels As selected QX, to QX spending get it and is an towards we the QX program a you staffed QX. at We and had the glimpse lower saw it only in expected. vendor. materialize of the didn't show implement expected we it could and were staffed at large be we a sure

opposed annualized [ So much basis pays an as to has a basis. because Fed it more an revenue ] significant to on TCV impact

seeing revenue of and billings some the to from we shipping had of QX which QX, our nonproduct that you're So and the up impact QX for miss in to backlog. make with

shy. of the Fed happened bidding, in kind business. that's what So twice One's

or we to cautious it year. come not half the being we're of back about very in second So the expect how

] adopter products. Fed as don't a space. security more to is around on they're that a traditional pediment they it's not the So than forget, general, broader to next-generation services [ usually in And slower are cloud cybersecurity comment on is, federal because opposed

to go ahead, Barclays Gabriela to Thanks, Saket from back from Andy, Kalia going Saket. Borges Goldman. and go We're to then Go Apologies.

on the if the think Great. platformization But ramp and as sort of structure? make bookings at specifically, about shift you off. metrics Nikesh, sort putting I contracts maybe do you feel look of this what little or do your deeper. maybe that's business half, of sense? the tell item ACV bit aside, how touch to these about of demand sort mechanics for ramping the almost me percentage a you, second with like just you of book ramping underlying Does to expect of that to sort you and of as

that makes sense. of a Yes, yes, lot

deals. vendors go competition. you Saket, from like competitive to noticing, platform part I higher best-of-breed and that we're win straight with rate think on of Year or platform a because vendors go that have to New we'd legacy behavior is noticed we what

to I you head and plays on costing end and energy opposed rogue win a as desperately people very, and behavior trying have more see start hold We to ones, up higher it call where best-of-breed consolidation time rate customers. which to

we our So to platform go-to-market in towards and play are a play. trying shift consolidation a

this as strong. the earlier, to context I at look is RPO. number said demand think, right is to The underlying in I

of strong. business book Our is

and on as nothing strong. parts pushing there. consolidation It's more later the and side. out platform There is in we is going demand pipeline the Our get just offers this offers billings that more towards out of see we

run [ POCs right? Is there up. every [ SASE the give To XX give upsell other the the made Talend every and customer, SASE We customer renewal ], for to comes acquired going running next Talend when risk browsers. ] that to secure decided of and the we example, months customer's we free trying you an free to until it away

Now time impact and in that impact. the revenue has a XX-month frame billing

our XX renewed get of aspiration will to at these all months, is customers our to of the be However, enterprise XX% because the end use browser.

on in licensing. if one tremendous part we It's traction. product. products [indiscernible] It's the there just our It's we part of you're market going And customer, were use XXX we've best POCs of When listen, them, at has acquired. It customers. place acquired a of told it, it. the

share You to our being to traction don't us new end that trying free. spend us future. share more don't It's you What would getting Is more, contract. have create rest and market does, great. end pay that it competitive, lives of in to more market have and some which a allows to penetrate a segment do up the we up the

incident We become customers. right? them Fortune us business had response. hours dealing choice. we've us Our an where gave That's of XXX in hours of a days, We incident with XXX,XXX customers future XXXX but a for We for XXX consulting on breach got partner drives XX free they free, cybersecurity offer launched never response XXX offer. that

we consolidation individual that seed into trying keep have fighting deal to customers' to on we're breach a every go best-of-breed our individual to time and strategies so So don't we platform customer. ourselves

Boolani go Borges with Great. Thanks, on next Saket. to from Citi deck. to Gabriela We're Fatima going

are price then Nikesh, you pay willing cannibalizing the risk the as full bundling you of think potentially I implement And wanted you today the how how to do about strategy? to about... ask think customers that

let know. [indiscernible] me

ahead, How please you... do question. go Sorry, ask the

a Yes. It's the longer-term catalyzing maybe pricing question with how a helpful, bottom do about you on think pressure. to race

So now, or today time technology year created $XXX maybe created response. as you from worth or that you think about no the pricing a you've longer a because to you've get renewal, $XXX was is competition deals, ramp by competitive

of I there parts -- answers think the question. X me are answer let X

about to a -- is as a price driving is to Actually, wrong how. about it by it. platformization we're price a think explain approach. I this a I war will way think averting think war

our all, negotiated of First of deals POC. customer discussed, are all

offering. a rarely who customer not So does Because they're we market, have price. of what that we the understand it's a very have competitive the value

price. a Our competitors [indiscernible] normally have rational competitors

a think cannibalizing So full paying possibly. price we're that customer we don't

take time is all I'm you current months little when not if try XX away. to a I'm we're going now I'll I where what left. I with Power customer so God, renew, and think Auto customers to right that my X says, the contract while unintended a a happens and Gabriela deploy get exposure, buy get the no goes renewal. go They we'll avoiding months, to doing, have able intentions from what analyzing are my I'm an months Because going we I'll in consequence oh, they X in to have to say,

for going other When this renewal, their know not trying is long. to the business too vendors they're get to be a

that's early. pricing when early execute they and behavior international So deploy not when It's happens.

by sure to actually, you like bottom the don't last race averting our renewals execution customers months. X about best worry get the to So trying called the the and last and to get making to trying risk minute pricing have it, in

Thanks, Great. Gabriela.

is Fatima from up UBS. Citi. Boyd from Next after And Boolani Roger that,

are drill of for pull on strategy. the was were hoping Nikesh, change. year I to the from the the you could of you you've customers said was taking. the middle you're a X this be when trigger this what to platformization if you where midyear in catalyst hearing got customers you're What months, we've going a into to it's freemium for not get atypical. you are for got free stance then because salespeople how admittedly sort rolling who paying And out, that note, as related compensated

So strategy? go-to-market organization just to it protecting the piece the relates you new as are how the I of guess,

explaining. Thank you. one take so And Dipak me me bit a said. warn little back did what go of -- this Saket to will let

think simplicity a ramp purposes, about For deal.

not We're X-year to deal. right? X-year XX-month deal a doing or get a our deals. TCV, paid X So they're So other sales still still do people on going

in RPO. So you'll see that our

the next us next get deals still sort like X.X paid years salespeople ramp a charged, the first X deals X.X or on That's not will TCV years the not problem. You'll be doing the they may months paid right? see for is our get today, but to

about I that's to I is missed, it another -- the that and think sorry, best way fascinating. impetus, was I'm say Fatima apologize. I'd the part there think I

we go X which into the more we this for about price, discovering, trialing to the said, go win as in platformization to last be been we're out, more, We if strategy, XDR -- have on get to for we been We this while deals with and XX managed we're the play years. to we've often from the when should we had whittled what still got we've best-of-breed fighting the are our strategy X we've selling and did months best-of-breed with we down the X selling where only. realize been and a last SASE do? we to platformization we platform us categories best-in-breed here we Otherwise, to we business double in XDR double months, to back And than SASE. get approach, step say, or realized running

I'm everything risk. at at with of down lot go months. price a doing one When little ROI [ the together. TCO the let's next we of with commit, up XSIAM billed with with don't like that time. XSIAM willing replace on value I got we get time, XSOAR, replacement legacy see I you X they then on But in to not vendor. and down a moment a the go XDR, price a lots the because And get customers to is go go a entire ] one the and

Fatima. Thanks, Great.

William that, Next Roger it after be Boyd, have Blair. and Ho from up, will Jonathan we

Great.

expecting accommodative be the It the see extend contract of duration you see some from to duration economic contract a actually on discounting. you this and follow-up flexibility? more on as perspective? exchange platformization. for you some Another is RPO, expecting of sounds But aggressive more on What offerings, to on to focus are are going get in like but these

question. great a that's think I

still and we regular I best-of-breed. it still X think have is the parts still our the that We'll think business. business, part of way is about competing growing our which have to of

of continue. We parts and Remember, where expect to or There cybersecurity still are who different journey. really customers to the that journey platformization platformize. their have to consolidate in applies the opportunity business are this IT many

So because X- who's to a to willing not to up durations with see dealing we get going the a extent the commitment go we're consolidate with us, to not to because customer you're this are will contract that going you do for if customer deal deals behoove X-year and we because to don't do the products those the commitment it are to does them across multiple consolidating enterprise. long-term not security you us implement with them a see to them going if to working to be

Next question, from Jonathan that, Ho from Borg Stifel. And Adam after got William we've Blair.

very to to a single trying one switch. similar something of to the ability little customers And is a terms platform, play their bundling to guess guess, package to force EX has this to standardize you I'm customers' done platform? customers commit Microsoft terms how out that sort does for vendor give attractive maybe of in I or willingness understand I on to bit with what better thing

do Jonathan. to an basis. to these question. do individualized portfolio much us together a job to having Look, That's a apt it Very great question, each our of on as across better stuff opposed allows putting of deals

and discoloration [ that That's that So you're bang platform us towards faster. us idea much the to drive allows helpful. on ] benefits

And a be firewalls. which of is example, just financial capability also firewalls, a also is for higher to they're going consolidate. lot million. the comes That's allowed when an it was activate terms of the IoT $X $X already buy and to of We deals. I in them phone north to an now them this give [indiscernible], They renew that up X going allowed our to have million. capability. very true. right, Independently, renewal you think on cost gives But IoT important, of I'll in months to very trying morning, us the But able customer them amount. flexibility pricing that IoT our us than I cost less to

don't to go go to and to. degree can yet customers, another vector up our drive of have spending that trying we're have we but they they offer end in that So to future more what consolidate flexibility building is the that

Great. Thanks, Adam.

followed Tal Next by up Liani of Bachman Keith from BofA. is BMO

You confuse me, Walter.

you, trying be I way about think to to impact something there any about? billings of or any billings that for you sort still I the growth spend. XX-month think a anniversary indicated program? QX you for consolidating to should to mean for trough Dipak me, metrics try anniversary going this or on be guide any as excuse was about is And have it we But mentioned certainly XX like of you XX- implied the XX%. thinking you then QX, FY impact X think we kind where you're 'XX? that the -- XX-month Or double-digit how to is and to

of better that is of so XX obviously these the we do. give towards is original point aspiration the back to in us start go experience to to our size lap and high to programs half they some that deals I said, we're But time, 'XX, see to to Yes, they upside in second larger at able have double-digit will But as growth. mid- persist. we our should revert to XX expectations how

sorry, point, this more one make to want just on I context.

said. I that lost think be what not things the has should Dipak of One

year. the absolute cash year. for We have for EPS the and maintained our guidance absolute cuts flow free

flow our we constant. So happen make whilst all and believe can earnings we free this holding cash

Great.

back go going going Adam go Borg, BofA. Next, we're Tal and then for to to to Liani we're to

Maybe good that the Walter. the see opportunity displacement quarter. was just talk it on Thanks, XSIAM, more in about the Maybe to Awesome. saw traction there. you

vendors you talked platformization plan to introduced broader as since being -- and as further about up this different far approach. more penetrate I to think that how you talk XX displacing about replacing

Adam. Thanks,

use So tells of platform SIM us ]. is relevant the [ and of in our has us multiple XX we capability displaced spans replace reason that kind like SIM only [ It's Adam, market. that's different products that cases unique we've different ]vendors. for And that the types X not

kinds best different fastest believe offer that this is customers. which capabilities [ the ], of different able have replace and We And in we to SIM has cybersecurity still our created. been product been

We are north in of XX customers now months. X

deals And larger ] in we TCV. we on number basis, [ deal this of million have a signed $XXX quarter. As said, deal per a did

does really excited with about So resonate This customers. we're it. our

offer We that one is who XSIAM. are our legacy the points back launching are of to being customers to tomorrow end deploy us in replace with able an end which holds points things stuck for

vendors support announced infrastructure. that other have also We've non-legacy of they in their

market. for our So customers we in have capabilities so edge other XDR been leading support asking of the can that the some

are So to be the ] play the other radically [ and in SIMs making a out we of be is choice. different than good able It SOC better marketplace. [indiscernible] most to

So it. about where putting excited we are a we with are concerted effort, very

Thanks a lot, Adam.

Brad Tal Deutsche Zelnick Liani from by at up, Next followed BofA, Bank.

on Cortex? it others? discounting the or should guarification, as see legacy there we you just it product on the it pricing a kind platform? see side? Or First, we SASE spoke or any pricing. discounting for Is do about where of you Or more look than Is firewall at complete

best of certain the the to X. X I is capability, think don't call into More analogy the vendors is want like multiple analogy, things which I Jonathan's of has it more that X a other philosophy. like bundling bundling

I'll I make execution the take you, platform, security [indiscernible] think it's is network of buy [indiscernible] about it product the or if it ROI you cheap to combined it's XT categories be about whole [ that buy more risk. individual if it you if will not you SASE, for commit because my than ] like much and I'll

don't be will remember, why be exit is the exit get the going think the from pricing. end the today. don't customer. The to me up with than You consistent no what ARR different is would that's reduced I word discounting I risk or for taking I today would and it ARR execution like I away

Great. Thank you, Tal.

we up, from Zelnick that, Deutsche RBC. Hedberg have Bank. And from after Brad Matt Next

just execute where Great. extending ] fit function on perspective, to do that, platform LTV. about strategy this day the billings, are then And Nikesh, into platformization a I lose. question. has you've economics practice they strategy. I else real word, ask on [ Fatima's to to win, go-to-market opportunity to you present SIs on to strategic as you. extending for for got And also another of align Where typically a channel how -- somebody the just you do talked platformation wanted not this a their the from question

you, ago I introduced Only believe got know about you us. Thank it's consolidation. we've X a new now worry Brad. years didn't word. But to when

forgetting make when So with I question. start you, your start to fun I

it. It's question. look, a X, of so the your So channel great question, X parts

First of does get on all, compensated TCV. channel

So platforms compared think part we X I is they platform a to deals all of our XX what deal. said are use of times single

Our platforms, more else. that's the than deal of than deals XX X times are with us Our right? And of customers XX% a all function spent north size. top used XX everybody

deal the bigger. going is gets on platformization, the do The to we paid channel get As TCV. size

us to incentive lot a has channel of this platformization. drive So help

I think you around important hit SIs. point a very

to over for actually to months with partners front RFPs. with really in activate help SI been opposed of hard as get have and to our working we're the We last customers engagements wait their X trying the

just SI of out Christy Relic a strong there. every who the our partnerships, Chief Officer. Partnership very ] the relationships We effort. almost been Frederic CEO drive We've It's to with concerted is have hired [ New

positively we're the the about SI. putting on we're lot So a are of attention traction it. focus enthused and getting with we And

partner the focused last they years. the all a large X,XXX have in few on player rather take a would they To companies you large used think are players the and to X with out really cybersecurity over to have down cybersecurity that it, very much X to your gamma there. but practice strong new SI businesses, They can business or are X And security. doubled favorite cyber it, in entire about SIs this they and

their aspirations aspirations. are it It it. ahead our of So getting fits fits

platformization So a actually part offers. a than they approach more lot this these revenue out services because best-of-breed offers critical platform spin are of individual

Thanks. Great.

Gallo Hedberg is Matt Joe from up Jefferies. RBC followed Next by from

Walter. Thanks, Great.

sounds one points, targets, like the free It question important it the sure these think the despite I and the for are I wanted payments. midterm I vendor of unchanged for arrangements that's is, Dipak, just said flow understood made why guess I and prior to optimizing was changes, all cash Nikesh, case. make fiscal you 'XX you margins

or margin into target that, change can level did into guess, I secondly, I confidence when get could that of other that hold we that next potentially we First of And all, right? think year? that variables kind of target are get 'XX, there margin that

year, So in my not prepared going I whilst pretty forward. free in remarks cash we're we're guiding to confident said as our flow next margin,

be operating free clear, thing the margin. flow the to most Just buttresses cash is our margin our that

to of got So off expect We Okay? more that's we contracts that's do continue that like secondly, business kind that we've prior And coming X it. -- we've increase. of part signed. to

know We that. they're when come. to to visibility have going we So

the side. flow that We together, also incremental confident impact all on have that example, payment cash look, when vendor we're some on cash put for focus our pretty factors flow, terms. we But

Jefferies. final from Joe And we'll you. Thank question Gallo take at our Great.

cash can any you in your on given candor the the update X-figure spend wins. an logical. particularly seen large enter discounting give appreciate on SASE. on rates Have metrics I several But vendors it's you're in tracking, market, competitive ] win just several comments, or [ you environment the and noting

but certainly short-term time, and confidence is of gives You've made deals X-figure over you more this what is look easy a hiccup? this competitive, not

in as get cybersecurity. X platform larger years would to we up percentage short-term would I'm X classify moved beat-and-raise know guys nice this in a done where and in become trying love bigger you life all, even quarters the a that I next to was this linearly a I First of basis. not in hiccup. and

in the we've If cybersecurity. in established trying the and At years, of X because wasn't I competitive years. that step in back X this last industry at existed. look believe the we this I product of over to a notion notion It accelerate the X point last notion deployment the done in platform what the I'm you to I space. is which We as advantage the a in product and XX-year-old get SOC the think we quickly our have our that with as space, market and any can go take our across legacy platforms we across in friction largest competitive the XSIAM time, board and believe the starting quickly deploy should we process. advantaging

not the did in we securities, Zero offers security, marketplace. network network On have Trust

million to and our bought replaced make starting X behavior. see that are and months, customers to right? We can the trying firewalls we out the with SASE We're that take $XX customer are friction then last way, of their all came all the seeing they happen. the us show of in So

more it and break down Now categories space can combine. zero in software the the more where to in, do vendors very network today. hardware, trust who see and if few There's I you'll I into in security, we're offers X think that have SASE

the legacy to category. combination hold across So accelerating to that they're trying We're positions. on

your make which as going not can going are benefit, benefit vendors own You to judgments which ones to are to much. as

data AI, SOC. In not option, XX XX matter in right? in technology was That AI. old, ones actually us, are doesn't their new space customers can average doesn't years space, the you an only that space. have made is we're On it's ready beginning cloud deploy SaaS is XSIAM. delivers to that delivering fascinating It the software to a to was important there AI capability our you best for of delivered who SOC And is who gets the for see The cloud, buy, are it lake AI SOC what what's What not the your is acquired. for matter it customers. X is

So cloud the large an need players, we integrated understand have because our platform. platform they they take security use cloud the to

So we green shoots. have

That's the We to we're us and a for have It's double trialed is accelerate. not time this. hiccup. doing. what This down

to Nikesh I'll question. remarks. last over closing that for With Joe, for it that, Thanks, his pass Great.

you even know us. I No, more guys, was for this exciting of for all exciting

all in We way a platformization, industry a right committed. the way want our listen you are the of this the We consolidate you taking is to forward. faster and all employees, our into double years, call. deliver of to our faster this believe partners, this is the believe time to of here. to We platform. thank we can business which for way hope all We allows of that I next X here, to us I'm from is to our say earnings the course, a why