Palo Alto Networks (PANW)

Walter Pritchard SVP, IR
Nikesh Arora Chairman and Chief Executive Officer
Dipak Golechha Chief Financial Officer
Lee Klarich Chief Product Officer
Brian Essex Goldman Sachs
Fatima Boolani UBS
Keith Weiss Morgan Stanley
Sterling Auty JPMorgan
Saket Kalia Barclays
Matt Hedberg RBC
Tal Liani BofA
Keith Bachman BMO
Gray Powell BTIG
Adam Tindle Raymond James
Michael Turits KeyBanc
Patrick Colville Deutsche Bank
Call transcript
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Good afternoon and thank you for joining us for today’s conference call to discuss Palo Alto Networks' Fiscal Third Quarter 2021 Financial Results. I am Walter Pritchard, Senior Vice President of Investor Relations and Corporate Development. This call is being broadcast live over the web and can be accessed on the Investors section of our website at investors.paloaltonetworks.com. With me on today’s call are Nikesh Arora, our Chairman and Chief Executive Officer; Dipak Golechha, our Chief Financial Officer; and Lee Klarich, our Chief Product Officer. This afternoon, we issued a press release announcing our results for the fiscal third quarter ended April 30, 2021.

a on the our like access you would online it website. you copy release, of can If single structure, We expectations would forward-looking our economic like the the course continue regarding fiscal of expectations guidance, enterprise our features, other to subscription will impact belief trends. metrics, our timing our SolarWinds for position remind regarding you conference to related the escalate, operating well equity industry, business, to management opportunity products financial that as fiscal and offerings, regarding operating that attack call, market and on competitive our cyber-attacks and financial and will the our COVID-XX cybersecurity conditions; of make for and of statements, the our and new statements fourth this including modeling our and and benefits during as customers, the business the expectations year products, global points strategy, our quarter and demand and XXXX; subscriptions, forward-looking cause risks are which by involve statements. control, uncertainties, differ our beyond some of could which these These number results from and those a materially anticipated to actual of statements apply today. of statements forward-looking These as

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

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

inform on and and participating have Investors Securities also be measures can Conference virtually GAAP reconciliations Please our the financial participating Investors XX JPMorgan website of the Quarterly Technology, with have in we we for to we about Conference XXXX section For Nikesh. be be found completed the to that, that Telecommunications that in the them we historical in also once Investor non-GAAP that see I’d may at be financial financial XXth finally, posting measures of periods, Annual our And May Media Global investors.paloaltonetworks.com. section. these at to to BofA supplemental Global will X. section provided you our And the remarks, we’ll June like our information located website Technology turn to our Results under in. of like We’d call conferences formal website Relations over the the additional information

Nikesh Arora

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

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partner services to more our focused even we customers. forward, strategic using an become we're As look on to

As raise us areas. geographies be I've update and and remain here continued to discussed innocuous in I want our we're exploring should our to also our tailwind an you results, FY strong, our broad seeing We pipeline, product leading and guidance. to equity you plans for we QX across structure reviewed around XXXX on see strength ClaiSec. in demand evident strength with in business

providing on for each part of focus our to continue We business. transparency

financial believe overall understanding of a You'll cash notice the NetSec, gain especially growth characteristics. into and with highlighted both and free investors the flow better has different error helped this for business our profile, we we've quarter, which insight sides this

We on have form any file finished ClaiSec. equity all the work of required to

However, offering the at an shareholders single decision continue we postponing given extensive this point to equity. decided integrated P&L have conditional is and ClaiSec a to and market, of state list best the a structure, with equity

Lastly, Board Chief Officer roles Aparna deep served financial as rapidly to diverse off Board. having Her She tech of of addition Operating Helene Palo such appointment Zoom Dr. expertise, at operational, Alto Networks to growing February to Directors. our Gayle companies and legal Zoom, Bawa, and as Nimble. Magento we're excited welcome brings in comes and

in have in including to within bring already most our our step over Dipak. a We're strong you to With to smooth the Over at the to He have him to our I'll senior Networks, turn seeing company. bear driving into Alto commitment diversity improvements. CFO experience. transition CFO. Palo Golechha, excited to of world-class Dipak organization. We're role, brings enables experience at continue We that, Dipak the call governance levels someone's

Dipak Golechha

leadership look driving humbled total and return. this be I to team. forward world-class excited to shareholder I'm Nikesh. Thanks, of part

winning financial the billion, to innovation, Many become customers guidance ahead as we strong Total to see of duration capability in transactions we use as for gives dollar-weighted deliver were three subscriptions a larger indicated, strategic here. of new year-over-year new at $X.X delivered also for continue support X,XXX some of billings up increase XX% and was us years. The We’ve billings confidence of services Networks approximately customers quarter. pace. simultaneously year-over-year. XX% we guidance XX% the quarter involving Board of billion, year. obligation the our have adding added the growth. across We while billion, remained performance year-over-year. in XX% quarter of Remaining year-over-year, or Palo customers to a consistent was our new raise third partner with revenue more strength contract an to strong $X.X QX deferred and the The increase Alto continued ask end customers. We for Nikesh to approximately a plans. billing an growth $X.X our We’ve and financing at RPO As XX%

business. continue see We our from we meaningful, to is becoming drive these ratable metrics more as growth

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executional subscription of million total growth support QX EMEA million, $XXX the increased increased increased to million compared geography, revenue the world. XX%. grew APAC prior $XXX of increased XX% for QX showing total, broad XX% at and Support revenue. subscription XX%, XX% excellence $XXX by revenue In of and Looking grew of accounted revenue product XX% year. X% grew $XXX across of XX%. and revenue million Americas

to was factors are margin margins. last mix, basis which margin is XX driving an QX points basis which QX operating of compared mature. There year, increase several gross XX%, points XX are operating year-over-year. was non-GAAP our product less Our by driven down XX.X%, non-GAAP

growth facilities, revenue geographies look to due R&D of capacity our COVID improving the same employees the the health event sale in office. upside, of many and spending to With seeing We lower expenses, largely invest have travel of Santa more the of to areas we return some continue shift including in out our and conditions and time, At Clara, We're and headquarters. to QX. aggressively investments.

third trend continue in in will gain $XXX for our increased last in income steam reversing XX% quarter per or of QX, some this to seen We net savings to diluted we've share. the expect few quarters the $X.XX OpEx. the million, Non-GAAP

third rate investments from this driven quarter, was expense XX employees, with loss tax or XX%, $XXX for share. net basis growths. non-GAAP X,XXX of the acquisition. close for expansion leverage $X.XX basic and per EPS diluted quarter QX Bridgecrew, On increased strong the operating growth an million, a Our effective by at with the was ended of We the revenue including of GAAP undertone and

and Turning million, to Free operations cash, the balance XX% with XX.X%. $X.X QX $XXX billion. flow flow was statement, cash of cash increased XXX% of and sheet cash April up investments margin year-over-year. a finished flow equivalents to at cash million, we from by $XXX

XX Our the quarter. days, DSO a from year from second and period prior decrease was days three flat from

and a quarter, had grow XX% transition we QX, as continue Firewall factors from Our billings another highlighted. our the as or software market. SaaS in and FWaaP we continue faster strong hardware and Nikesh as form to Platform, than grew FWaaP,

or immaterial new third $XXX plan next achieving of In generation billings to now $XXX reaching represents confident year-over-year. $XXX added remain Our an billion fiscal added XX% NGS of to we to at NGS, our million ARR, in quarter, acquisition Bridgecrew, expand, we XXXX. in million. NGS, number, amount total $X.XX year XX% in ARR The growing exiting and our of the and million, continues security this

Turning modeling now to guidance and points.

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

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

range to shares. to using XXX XXX in be of $XXX, to million the We expect non-GAAP ups $XXX

like points. Additionally, to some provide modeling I'd

and remain our $XX non-GAAP $XX million We million. to QX our CapEx to at expect QX be in effective rate to approximately tax XX%

guidance. pipeline in foundation trends of we're driven raising seeing indicated, trail the and year tailwinds our innovation demand XXXX Nikesh As along execution strong, see QX, and our we're sales drivers across by that we broad long remain with in fiscal our strong business

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

billion, ARR, to continue We an expect over of year $X.XX next XX% increase be to year. approximately generation security,

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

year. expect We over X% growth year revenue product of to X%

margins year. points by We year XX operating XX%, improve over basis to expect

We expect $XXX, EPS to $XXX range using non-GAAP the be in $XXX, shares. million of to $XX

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

fiscal Now year for of Overall, NetSec within and raising the points projections let's that while basis review XXX projections, points, ClaiSec. and overall revenue our performance we strong NetSec VM-Series by are confirming basis NetSec. ClaiSec our business XXX by and given SASE, subscription billings

Moving cash on adjusted to free flow.

deliver Security fiscal cash expect a XX% fiscal in We from will year year in ’XX. XX% free of ’XX, flow up margin Network

of expect free fiscal AI continue to ’XX We improvement flow minus XX% an year fiscal and year margin negative Cloud cash XX. XX% in from in

-- expect we we investments are and margins average overtime more AI $XXX. and $XXX we AI, we in million and to our own in industry our capital Cloud growth, In QX and achieve stock at price in with focused scale, as efficient. customer gain on growth Cloud matures to become of repurchase base an free we line benchmarks While operating

investments allocation market As managing and maximizing innovation a set for part $XXX foundation million is the go growth the shareholder we fueling total remaining organic on to sustainable repurchases. capital and of to balancing broader priorities priorities April have return. XX, for and We start across focused of XXXX, Networks. Alto Palo This with strategy available

capital team acquisitions these acquisitions acquiring accelerate deploy for growth through targets, leading opportunity. our evaluate members with We into we and which integrating following Second, this businesses. on key technology, focused of targeted retaining the rigorously

our you. options using buying capital back the representing us this when to own deploying their let's Finally, that stock dynamic work to portion consideration the available see debts, using includes over to value. Q&A to M&A move the market also and on that, we good Walter it the in for of call. With optimize we structure stock


Thanks. [Operator Instructions].

from from Sachs comes on Essex Goldman Brian Boolani first deck. Our with Fatima question UBS from

Brian Essex

the network Hey. this you. with outperformance cash, Hi, performance Wanted growth. solid that the that side, for how we've think Maybe a on year? unit a for get been quarter you nice afternoon for the of are taking we has thank about, question. a this given thank and that the outperformance to the lot billion understanding, confident AI and business expectations Good How in hit to expectations how relative $X.XXX your better relative do performed And Cloud side. seen you on ability ARR is year? you to so far respect security full know, network your guide for security to

Nikesh Arora

and years market muscle, out we operates. three a AI. how The over we is power two building we're differently. generation these or out two sales when didn't muscle we're remember, targets half the the kind of slightly interesting, Brian, go firewall the ago of out out the out set every Cloud It's can years networks good and have business operate actually figure business, of markets and for last and news sell we next security go get to one learning how that have force

of combination look a Cortex. you and SASE, it's Prisma at NGS, Cloud If

apps, Now forcing push lot whole and we no to free ago everything from you access are. a wherever hard characteristic the time, access work be can trials a gave half of security half from customers to are SASE's and the about stack you -- to few their access it's this the you to able need home longer, quarters is think

on the that's SASE some network access. the of transformations huge success and had on seeing what's So driving we're wins Prisma you and

million first approximately so of this the is deal. us quantum gave of As of deal our I mentioned one see on SASE can closed month $X of you shipped the we and deals, largest ever, which which NGS ARR, that the

able on to an $X we're Forrester competitive being typically, all market, access and is and a we've do $X the do the they of MITRE around showed range million there deals with a of and others. because you the the those front, CrowdStrike muscle interesting like million with Wave deals to create lot compete to to deals. as results. smaller and below Cortex So it's people got on so front seeing more to the got space, are and SentinelOne -- We're that's the front a that. we whole you in you the and good. end range product because great trying higher traction there, bunch the the SASE We're Those

Last, So got deals deals the you and have in slightly front, but get are cloud to being on so very they have end the customers, deals the as front. but the on X,XXX there variability that what we more do deals, and don't lumpy, a that's duration Cortex doing consumption. we're up high lumpy you lot large not least,

on fully say, GCP their is cloud you'll they cloud customers next three three workloads deals I suddenly years. many They're all do last ramp need. or have some buy is deployment moved they've the I've upping to credit their years, find So increased. They Others, their credits haven't how Azure. workload because moved or been the they slower in to the because deployed AWS to and

different So, situation. portfolio end characteristics. That's we all three of them why have a slightly up in

don't you out seven new told we $XXX NGS more, on ARR, NGS quarter confident you XXXX. not You in are because just I felt saw I guys you extremely guys go added net in curious and I this about we're million about to thinking want

up feel to being doing extremely to normal. that we'll going portfolio terms a ARR, something well things NGS end So of extremely doing call and it's right get now some on XXXX in all we

Brian Essex

more investors the then maybe on it. And what follow-up rate potential value? on Got you a for term and cash it with improve cash the it for improving of to and Thank efficiency that cloud think cloud its with struggle with or I challenge basis look it. at parts timeline investors for at might performance all about a from is, sum the its that. things looked profitability of Dipak. standalone Appreciate one bit be at the generation on and I assign Got operating trigger this that think -- business AI that that the flow own, of because business think you burning the operating commentary efficiency each of a I a in And AI. do we've maybe that of the basis the to that's kind the the on when that business, think little improving the

Dipak Golechha


at the different mean, right in were kind get -- ourselves versus companies be two if that able see opportunity done time they've what we're have like to there. of often over we grown if benchmark ways. at things But I as do maybe the they've look I other So, we And answered there through from there at we time, are where time. like to we same investments, they the shy not and making there. can scaled this

in, lean you into a want It a really so time, out long-term. that's So a sense also reflecting that for I opportunities timeframe. box to the fact there at the sometimes why on are need plan improving, of we is constantly dynamic have this ourselves it really market, don't the that's is and if to question makes but what base a we're

Nikesh Arora

I add to If Yeah. can that.

Brian Essex

Oh, go Thanks. ahead. Great.

Nikesh Arora

Yeah. as There two are highlighted. Dipak, one, parts

on products it In at getting outflank is of optimize sitting much salespeople. margin situation. right, rest invest are and continue his to efficiency number is sales to sure dealing question hard able want of we honestly of we do we that of Lee they the Don't the XDR make to capacity in development salespeople areas, we on how with hard dedicated those? us those The competitive product with case the CrowdStrike, the X:X work drive margin work forget, because our in to be deal in each the from and extremely team gross those he who's trying We my to part. gross control, to towards of

much to hand hard eventually the Alto on we side. investment want at end So how sales we have with Palo people, look hand combat. We to make do get up the with leverage to sales

stage have security say to gone people, qualified the Cloud phenomenal not provided cash the we’ve early equity got valuations most are companies. we very doing of suddenly and large some paychecks lot and dangling large side, fine the sales. On and of a venture when markets we fine. Prisma But dumped I'd were the in our We're doing sales

you That's cloud XX VMs number. watch going market security. another in public competitor cloud times. ARR Dipak our right told why that, and the And I is just again, next we're $XXX probably think saying a is we security, number But -- in so, carefully. that's million which by to outflanks in

Brian Essex

thank you. helpful color; Super


Great, Thanks.

So just a reminder, let's limit to one question.

next So Stanley. and Boolani deck is on up Fatima is Weiss Keith Morgan from

Fatima Boolani

you Nikesh, quickly. I'll Thanks maybe Walter. with very start

please. just drivers through in stock can billings specific zooming a a us. What lot product terms portfolio, Dipak, in the a then pillar of quarter? areas But I the talked You of product from of for the you back, NGS acceleration rank up of And really areas perspective. follow strength quick were for in the have

Nikesh Arora


the As highlighted Cortex with strong. We're evolving strong. cloud ends the pleased Dipak SASE and being lumpy. I way highlighted, up are is is subscriptions

large So and some quarters billing. deals, get the some we’ll make very up then

or in they line ahead, board, our count is expectations slightly hit push. how you as the we with it. quarters across XXX, Some we or portfolio the XXX But said, performing depending on

Fatima Boolani

meet Very you. good. to Dipak, nice


to go -- question. Well, we’re go going let's to just just one

Let's -- next on Sterling on JPMorgan with Auty to Weiss deck. move Keith from to we're going

Keith Weiss

thank and nice for Excellent, question. Very you quarter guys; taking thanks the

watching growth is durability accelerating that's cautious key think, of well, more firewalling actually investors most talk very trend out or upset as terms of believe it growth be for from that that one-time be seeing year next strength couple period us of items to that a compares that you from? platform? the firewall -- good and firewalling. there's really you're firewall appliances you anything a Can you that ago job generally seeing the that that over And doing difference in between about sustained quarters. areas I durable recent guys is And platform a there any is might illustrating on, we think you're in of in Do and seeing are capabilities. firewall tough the a to you've should a been bit one growth, I the years, probably are that a where of little and

Nikesh Arora

-- two go deploy we solve where We say we can there same are make Well, I’ll firewalling with customers this problem walk for, I’ll looking are One the tons is, solve capability. comments, you can of in problem. and Keith. can or situations like hardware say, is to gave software the

stores; upgrade the go then has is of route, deployment, can harder they lower to software or their if So choose hardware maintain, which ownership, easier take deploy cost dependent to a retailer, to go which down firewalls to solution, in go we X,XXX costly to SASE, harder deploy, large each is easier over do in Prisma solve. and say, time; which of a that with let's more

So create in some you're our substitution degree us seeing of customer base.

businesses, the with we compare the some is which to substitution capability, that that they strength point better for which of because if cannot So ARPU. the you capability, long hardware firewall that we have us leading in deal software just term, think don't like-to-like

hardware So business. means look, down the That basis, going we grow which is a kill the have only were FwaaP be if and can future hunt XX%. ARPU revenue quarterly on just front, coming harder at pike you on we to to

network in -- think actually dependent security most business hardware develop more there's our I So resilience than businesses.

firewall that I was full based proxy what cloud. in second architectures The now is the piece, in context say, is would

we're I'll that let SASE, with Prisma be in understand My in back with GPCS, we've an that accessible that in and to stats in I and in fellow years SASE when more okay, the where said onetime get the was not used my just do there a and Walter architecture. extremely seeing called me came. that Dipak seeing left like can me will There made employee's that deal We throw trading see items. delighted in based area, from we and Palo we [indiscernible] saying, do would really bear how be space proxy progress We’re but say you the X.X ago, out how let people seeing out I'm we're sweated one are you home, Alto, talked came to to from quarter. this, system stepping I to the following Prisma we we colleagues success year shudder, SASE. product about that entire and the

going the our up in Now pipe six in got do and quarter. we lined we've of tons those forward. And tons

should So SASE continued strong, which give is us strength.

think stage. network early I the in very transformation a is very,

to you wait SASE to believe need SASE. to it, based out got architectures about firmly $XX billion I'm need we that data are up go market. I stand GCP, If to in back quarter, of that, have a cloud. go in the Right see realize we don't think you and to clipping those AWS, relying all $XX solution on at public center, to going if customers there have firmly best the my billing a I now, We customers we Azure scale. deployed billion, MPLS go to the believe you there, And go to do most now


Thanks. Great,

Barclays Sterling on Next question Saket from Auty from and Kalia deck.

Sterling Auty

how that I this to on It's as the we trying one but after side quarter, Keith’s and a FWaaP. of Thanks. on the years. of to of terms In does, gave other And Hi. understand see comparison? the to is base it up transition more, in you appliances, fun when or spending dollar-for-dollar well look to that little Is at versus Help last on-premise are still on install what follow expanding that FWaaP end metrics if same? all us these other FWaaP, is bit as clients? us their of do they Walter want question to are some customers the under should keep question at look your your starts words, smaller to does the traditional up it still happening?

Nikesh Arora

lot transitions we and my his these I'm Lee. bring Lee who see work, going that time spends a colleague of making transitions sure these to in Klarich, happen,

Lee Klarich

this, we see that hardware factor of applications form where effectively a the two do provided factor from data Good actually play software with from quarter factors, Nikesh. if into to One cloud, has There's remember. you, last form form question, and the you is some movement Thank to VM often series etcetera. transitions out. to Yes. we transition centers changing insight

to of hardware state how hardware is transition often it soon SASE users the obviously, and -- cloud-delivered increasingly from plus case, on other architectures. The off from based is moving hybrid and moving network a are where, that in moving employees the to moving more

larger you And the relatively is the to and think There's about VM-Series in some the all us actually it of spend net is of overall going from effect service in it's positive customers. it's of puts not through the as just more uptick an of and hardware spend network hardware the similar, the cloud so service. like-for-like, those, is overall the as envelope going for integrated typically takes, terms of And SASE capabilities delivering that network a reach actually as into customers. get and overall lot actually components, becomes global we're a so SASE etcetera spend because includes to networking

out. actually of been for we've have and to history be few that this and this years able to how positive plays overall, see tracking a now So

Sterling Auty

Great, thank you.


thanks. Great,

question Hedberg then Saket Next from Kalia from Matt RBC next. and Barclays, from

Saket Kalia

you. Okay, you great. here. Thanks for Can Walter? hear for taking maybe my me okay, Nikesh, question



Saket Kalia

it is in road given is market exploring volatility and down would it reconsider the that maybe structure last of Okay, quarter, cool. quarter, that still relatively the that this the were into your timing equity the guess helpful of on commentary ClaiSec. to the matter the the question a what and probability went you around say some was that or that is low. things Nikesh, explore I decision of then

Nikesh Arora

from challenge have shareholders, I suddenly as of it, as goes on XX% true have protect are, some of transformation. to through CIO, point protect artificial come they platforms our we required into platforms. creating you can amongst saw, to separating you'll ourselves, and take the getting that. vantage of lock platforms. creating this our ransomware this where leveraged buying sort to breach the listen, stock. my sock, with with we pitch work all go or customers say, tracking cloud, protect we’re And paper because network saying, my not customers go, are of we the think going mechanics wall-to-wall this a our all they stub value and The buying want go and this. We're happen as me, a and where be the or actually creations separate still debate some we separation all to are customer all to it, my of and look, when with multiple security we're three And the three XX% conversations then file went and Saket we're began protect look, with can the somebody

decision. the went that through So definitely

I I question which keep practicing. can think the

firewall asked the still And early distinct and just have due about its it's around I did. I the from to customers entity sales build a and to we're think, So get funding decades of own relationships into getting vis-à-vis are make businesses, our because teams, trying NetSec, phenomenal that that separating leverage sort think a one think to course. Deepak we'd them who profitable in about ClaiSec half go better self-standing of to than too our

Saket Kalia

helpful. Very Thanks.


Great, thanks. Great. Thanks.

Next Matt question and from from next. Hedberg Liani BofA from RBC, Tal we've got then

Matt Hedberg

just I to trust. federal this these then to these talking your talk guess, Nikesh, wanted recent year. you And zero the this think I post-COVID about demand your that do of so? importance security always going to about environment consolidation. to how about, President in breed Walter. debate in accelerate Hey, spending, breaches Is also, business better Biden, alluded best even you continue be do world, that accelerate versus consolidate impacting more later as a position of you're on breaches all you to a Thanks think there's

Nikesh Arora

to used And worked, let's of Like, approach. buy what first. a interesting was traditionally Matt, we've best right? whatever hasn't is, clearly, start in second with breed been part the approach security

of XX companies, all the is and shoulders this You XX, have they XX, of together got left the act vendors, the customer. those stitching on solutions

the biggest ever the through, happened transitions of that cloud. network in architecture. driven to the fundamentally you're change One the your You IT have two but history is computing. to that public shift And you second have is going are automation the technological that the coupled by cloud,

has I companies a there, So, look the look CIOs capabilities. bolstered security up. multiple at historically, are and there I and you security if take have you give at breed able at to across many dealing solutions hard transitions been with who think technology think been And same having those time, don’t to two best of

our security fit firewalls, only company across or get VMs measures our firewalls, architectures, hardware own We're security quadrant nine sassy Forrester they it's best and cloud the right capability, firewalling so Prisma magic Wave. of three the times, capabilities native top with XDR different category, in So cloud. can right, the top whether the

top right SD corner. sort We of top a next are we're right LAN and in there was

the today ability So a which give of in we not cybersecurity stitched industry. positions, actually is leadership across have the to products five you set available

it is I hold wait, through different how I the entire approach. argument and a because a back with need stitch go to able accountable the saying, footprint. security And I and I best agonizing going at stepping partner, we're to my these are look So, can -- can both times where customers of for can and from platform go are who now, resonating breed, right make


Great. Thanks, Matt.

up Liani Bachman with BMO Tal Keith from on is Next deck.

Tal Liani

to the you this includes language language compare security quarter? quantify this last this accounting Great of I mind you definition filing ARR a edit Hey, certain that issues your there, to it but material versus I the were have better than an delivered at this you looked services cloud to was question. quarter bit people the When the results, would edit Thanks. issue you little the accounting -- ARR, and language. least some at this it addition quarter ARR, I expected, change quarter, of numbers some expected quarter,

Dipak Golechha

when added really in de of technology It's in a question. cloud they're that relatively have material not like take all one minimus couple of I'll you we that IOT overall, nature. be to example, delivered them solutions

Tal Liani

you. it. Thank Got

Nikesh Arora

the to and sure of want right The early we our bucket. they launches make products fit in

Nikesh Arora

IoT both business. AI in our Cortex. lakes in We and cloud business sell sit Cortex our against in places data can and they firewall

Tal Liani

Great. Thank you.


Gray Keith is up Next BTIG. and Powell Bachman then from

Keith Bachman

flesh All the I from is win of been you're talk I more where much. terms is you doing out Nikesh we've about ask right, want was rate and to Cortex in if Cortex, very a getting bit you you wondering feedback certainly run channels and thank to rates, expectations could better winning.

revenues on why? or brand, it's reasons Cortex with the associated metrics billings? any us you growth whether Is the there can of Some give

Nikesh Arora

you we compete but give haven't tell we you one is with which comprises you, given, XDR, three metric and products; can't see CrowdStrike a I'll with Cortex I SentinelOne. Well, as

we I of The category technically see, dedicated SentinelOne and in there product others. CrowdStrike, chasing that are, the, more up you war. market, and been technical technical have people a think much fact virtue it have over price at don't CrowdStrike they're bend than you've we they we the is and we challenge XDR the then see deals PLCs, much don't because we and our of the a obviously and comparison coverage with as challenge sales Where that's becomes now as par is as can price we has on more ranked times better so have we don't we the and against eight war, don't. end do lose them, seen the pretty

we So, good reasonably see are them we against win present. rates where

they've they've got two us -- and challenges seven present as deals many we've to half. a in like as at because our it think I not were been be present at been for and we'd it years, for

competition that's be the with it's most outside, believes deal the solution. activity where it's deal understand vulnerability in to management XSOAR, beginning is XSOAR you're much will that, that customer XDR don't part a access So, pretty to clear are figures. size the the We XSOAR than challenged we to but view. size market, hackers entire the [Indiscernible] at a in from a newer the moderate the just get much have look category. category. that a category see a not do the think see of kind in demister, it eight they It's for where used of like not XSOAR, the not need, we competitive don't off smaller and we're can deal feel better size, but least they go which so but we cloud last having the footprint people less can so And Phantom

vulnerability goes For and it. understand wants Breach actually a associated ransomware Report that the into to that the example, customer with footprint entire any

up out XX, our What more having live and involved Hadron a deploy provide those our capabilities in been there, more a So can happens. which incidents going be drop early allowing and for with product the that's whenever Unit more formation they that an has embraced go of called into do is capabilities will and expense, in when of XDR XDR, forensic that responders Expanse go have we is example days, on cars XDR we the end them that shortly, getting and the engagement breach Crypsis, we're to and but drag merged where very forensic used were happened. to where that that all incident

So early and days execute us customers. X,XXX get and seeing have on product that we deals, to the is traction XX we more into Cortex, – the over didn't announced we more we opportunity ago is have there real are I years only The for ago the months Two think and there. scale upside to ahead at go more product. because --

Keith Bachman


Okay. Terrific. Thank you.


Keith. XThanks,

And deck James. Next on from BTIG. Powell from Tindle Gray Adam up Raymond is is

Gray Powell

taking me you Thanks okay? Can the right. great. All hear for question. Hey,

Palo far? Access, do gateway what's getting on improving potentially so proxy more maybe Prisma or you that the product web traditional capabilities Prisma of update Access with deals logo yeah, secure Alto been on back pace new ads reception So see into the the And set? with product X.X replacement

Nikesh Arora

excited is was really everything launch. launch Remember, about management. a customers, we cloud X.X great the reception we're excited that Yes. Look, few this where ago, really in the months about introduce from

native launched module. is we cloud first activation. Autonomous Digital onboarding the easy experience, Experience – This Management also where So onboard add-on ever

addition accessing monitor the through our they're and are cetera. the experience et allows to to service this cloud-based that technology, in seeing end the capabilities proxy applications to user actual So customers the

upgraded So to months availability. X.X of remove it great and upgrade now module The adoption, all cloud most we're the new not very getting of Prisma smooth and pipeline as customers we you to fledged go -- adopters you add-on customers Prisma can big now of is very but as it, and know It's Prisma back want to Access be to Access management, release, achieved was we of are first customers sell just capability has the using the to that an close interesting capabilities proxy into customers that the the Access what early as to to capabilities, a feedback XXX that criteria. move Autonomous proxy going is, as that from the Access wanted customers just the who from we're have And a almost an still in seeing and believe that The customers. remove that's DEM, great the able been adoption as couple know growing that customers received. allowed need full well process, and we Prisma are objection. well capabilities just

And so and added it number that it and made we're customers are and happy testing using we seeing of change. a that the

Gray Powell

Okay. Great. Thank you very much.


Gray. Thanks,

and James Raymond Michael then KeyBanc. from from Tindle Adam Turits up Next

Adam Tindle

in. Okay. Thanks. Congrats wanted the Good I whether Nikesh wants it's afternoon. ask weigh profitability, on to results. on or to Dipak

deal increase. seeing sizes You're

associate cross margin. We very with were for helpful healthy and metrics those us. seeing You're adoption typically contribution platform those

but could margin points Do a I and Thanks. wanted basis you back of to something and from build XXX see that expansion level basis you talked we ask the analyst at here? turning annually, a margin points point You’ve sustained is beyond years margin wondering expansion couple to a on, about puts get XX that can year, ago an this. day, hitting of takes you're about talk where of did this operating You think to this expansion?

Nikesh Arora

will more But table. for that becomes over like attack I money making always more focus think if leverage area honest in, is over the but think will to as we a leave sure within the is us, the I help right. to our for and leave us time. table, just I different we every really to if complicated, would favor know, we what think do want I hopefully, opportunities and come have I the same believe don't on it's time. the there But margin they're moves time every by, portfolio drives expansion the deal obviously area – I don't think in towards on from is stand in it's you over situational, think surface that mean, going grows, answer general, order the with and we're I time, lean to, customer that we any that scale at as certainly the that us taking. pretty

Dipak Golechha


your a Just we free adding this to you leverage and Adam, note, that talk in that and business, as highlighted Network businesses, operating your I the have see read many different. nobody's noticed that’s the leverage use folks ClaiSecc In thank can metric where in ARR a cybersecurity, is margins XX% some is. million business about X.X two the of XX% at enunciation the leverage are for call, history cash towards have number you where and margin growing flow XX% out Security years. leverage, see or businesses. that you We upgrade. But, so, billings I build here, still we XXX of the

and – built it. products didn't it We go-to-market into has lot bought and we of let's and by of So but some been buy stock it all take just capability. a pause

doesn't years. and CrowdStrike world, the the benchmark evolution, that you'll in happen or the see the which to world, Zscaler a you natural there's against Okta If two to the

is I rate, or the do to position becomes perspective. XXX a have as product Alto real hire believe side. and deals sales question, people, So, capability I XXX because a product years? we like there on in many leverage the want do been to a Yes as Networks another beat lower do. capability believe It do growth go future we salespeople have in want Palo I a operating don't never hire and from I today has CrowdStrike

awareness traction products are more slightly in seeing get players we correct. other market, the you because heightened the our we're resonate, given products in Our guys market. on the the products as because, out some of more or rarely And know, don't margin security premium thrown the than our expensive

a because associated product heightened – you Alto more the to to for Networks. a Palo secure awareness security of the willing is better or up, know, point us more tolerant goes be be to they’re with have price desire As willing customer

I'm opportunity came to that, growing I the we repeating XXs. growth were to want Palo for toddle Alto, Deepak honestly, think us. So the is we low said, what I When don't at

that's for and just rates to high going in XX you stuff, know, XX to management you we'd if if do we'll and that and and invest maintain team. maybe see can requires we for the forward us Now showed plan like years, as future look adjust we a you And XX, that acceleration leverage annual growth



Turits at KeyBanc Bank. from Deutsche Next question is Michael at Patrick Colville after and that

Michael Turits

to one you’ve year-to-date most software flat. that Yes, the the of X% make balance, transition the to and that you're security, but a has Nikesh, has know likely you features the that investment one proving cloud, thanks. been job versus – consolidate got to of do you're but side to company, here you I up been that doing the year a to product/appliance and what also great to said, this out, on think

of in from supply you for happen components? year a chain is three Do it's sense the – dynamics any a going quarters. So what boost I'm just wasn't get done last from and there trying refresh if get the of to to next that, to calendar that could we constraint

Nikesh Arora

question, That’s a Michael. great

play market. you I can the situation see weekly. in all the supply out And changes chain those think machinations

As of the inventory in in up imagine chips the print we market, duration, industry, you and in go all fabs get have how to expected vis-à-vis and the depending like a bets we off demand players shorter are capability degree duration some longer other them on in the they upcoming are the to out can bring us. more

our software. good the is, So I highlighted as we firewalling of business XX% move news

going keep have business and and the solve punch hardware. and So, announcements we've you for capability of launch, just the still and like on tell reliance this as hardware and in to baseline talked a capability second. giving I then I do can and and this requirement about based which for hunt to also of our able if about is we software you we are the from give is Michael promise hardware honestly firewalling we did, me, have the product. We I having ticket again, or I this obviously the them kill supply in availability that, but But will back starts got we talk recent the look love see now less a we going which I which less problem capability to much constraint, you're units available your on by and more overall the forth like years as quarter, still hardware customers few the because know industry hardware. every of me at you idea go

firewalling goes So we're flow business a transform the to give still our Lee growth you But firewall? thread and software. revenue from you trying this, great through want talk to to side. the to you here, cash Keep hardware about trying needle to with high

Lee Klarich


SSL there's Just While environments, pretty have for. introduced And incredibly security that business the are vendors XXX decryption; all that center the we we're, transition for we with competitive there. are to for full these particularly health gig new interesting then, announced with hardware we enterprise the amazing is, we I products in know, with we're of XXx XXX lower environments. scales environments, data to one XX the new security out thing market a appliance new branch smaller points a we bringing even appliances bringing turned is you really. on, new end product platforms think had. announced all throughput that up But some there the the out And the is the business -- price - the leading previous large capabilities for out -- campus yesterday four gig at of how series performance wonderful a basically models still high about the that exciting just two We of them networks of known cost were and

points, same Same But leading in super space. And great so, competitive dynamic capability. we're change price capabilities the the capabilities. space, hardware at competitive

Nikesh Arora

to Lee to follow say, say wanted keep great the get security we – on can’t I leading competitors. saying ex-pricing. Yes,

do can’t You it.

Michael Turits

Okay, fine.


Last from Deutsche Bank. Patrick with question Go ahead. Colville here

Patrick Colville

I new a covered The squeezing in. there. comprehensively Lee but me questions from appliances pretty been what for of because super going getting Thank I was cloud we’d about definition is in XQ? think you versus Do certain has delivered services, ask how you security about that's to been the change actually interesting, XQ investors hour over the ARR. quantifying on the just that last mind much it

Nikesh Arora

It's I $X it was get Let that When me deminimus. than million. less cracking. that said

number of So to quickly. just an like overall -- as to able a kind very a work be

Patrick Colville

much. so Thank Great. Very clear. you


the Great. asking concludes joining and the of am to back – And to call. portion the questions. We're that remarks. Q&A turn over all closing for Thank for I Nikesh going you it

Nikesh Arora

work call. thank just and Hey. the for all I want joining produce employees the for opportunity to Palo I the us thank allow their these to to want Networks Alto to dedication results. to to our all at you take also hard opportunity take

because they do. are here We of what

in to So call once forward again, seeing backs. I you individual everyone. And thank look our you guys