Q2 2025 Nutanix Inc Earnings Call
Yeah.
Speaker Change: Good day and thank you for standing by welcome to the New Times second quarter 'twenty 25 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one one.
Speaker Change: Your telephone you will then hear an automated message sizing your hand this race to withdraw your question. Please press star one one again.
Speaker Change: Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Rich Valera Vice President of Investor Relations. Please go ahead.
Rich Valera: Good afternoon, and welcome to today's conference call to discuss second quarter fiscal year 2025 financial results.
Rajiv Ramaswami: Joining me today are Rajiv Ramaswami, photonics, as president and CEO and Rick many Super Robyn mechanics as CFO.
Rajiv Ramaswami: After the market closed today <unk> issued a press release announcing second quarter fiscal year 2025 financial results.
Rajiv Ramaswami: If you'd like to read the release. Please visit the press releases section of our IR website.
Rajiv Ramaswami: During today's call management will make forward looking statements, including financial guidance.
Rajiv Ramaswami: These forward looking statements involve risks and uncertainties.
Rajiv Ramaswami: Some of which are beyond our control, which could cause actual results to differ materially and adversely from those anticipated by these statements.
Rajiv Ramaswami: For a more detailed description of these and other risks and uncertainties.
Rajiv Ramaswami: Please refer to our SEC filings, including our most recent annual report on Form 10-K, and quarterly reports on Form 10-Q.
Rajiv Ramaswami: Well as our earnings press release issued today.
Rajiv Ramaswami: These forward looking statements apply as of today and we undertake no obligation to revise these statements. After this call.
Rajiv Ramaswami: As a result, you should not rely on them as predictions of future events.
Please note unless otherwise specifically referenced all financial measures we use on today's call except for revenue are expressed on a non-GAAP basis and have been adjusted to exclude certain charges.
Rajiv Ramaswami: We have provided to the extent available reconciliations of these non-GAAP financial measures to GAAP financial measures.
Rajiv Ramaswami: IR website and in our earnings press release.
Rajiv Ramaswami: <unk> will be participating in the Keybanc emerging technology summit in San Francisco on March 4th and the Morgan Stanley TMT Conference in San Francisco on March six.
Rajiv Ramaswami: We hope to see some of you at these events.
Rajiv Ramaswami: Finally, our third quarter fiscal 2025 quiet period will begin on April 17th and.
And with that I'll turn the call over to Rajiv Rajiv.
Rajiv Ramaswami: Thank you rich and good afternoon, everyone.
Rajiv Ramaswami: We're happy to report second quarter results that came in ahead of our guidance.
Rajiv Ramaswami: Against the dynamic backdrop.
Rajiv Ramaswami: Results benefited from the strength of the leukemic stock platform.
Rajiv Ramaswami: Demand from businesses looking for a drastic long term partner committed to innovation and customer care.
Rajiv Ramaswami: And go to market leverage from our partnerships and programs.
Rajiv Ramaswami: Taking a closer look at the second quarter, we once again exceeded all of our guided metrics.
Rajiv Ramaswami: We grew our IRR, 19% year over year to $2.06 billion.
Rajiv Ramaswami: And deliver strong free cash flow.
Rajiv Ramaswami: We also saw our second quarter in a row up year over year, new logo growth exceeding 50%.
Rajiv Ramaswami: With strength across.
Rajiv Ramaswami: Across all of our customer segments, including the global 2000.
Rajiv Ramaswami: Finally, we strengthened our balance sheet and increase our financial flexibility by issuing convertible notes at attractive terms and putting in place a revolving credit facility.
Rajiv Ramaswami: Mechanics recently published the results of our seventh annual Enterprise Cloud Index survey.
Rajiv Ramaswami: The report shows that implementing journey, it's top of mind for enterprises.
With over 80% of those surveyed had it.
Rajiv Ramaswami: Got it implementing that Jenny I Scott.
Rajiv Ramaswami: Reported view infrastructure modernization as key to deploy in Guinea.
Rajiv Ramaswami: Challenges with respect to data security.
Rajiv Ramaswami: Clients and performance remain priorities.
Rajiv Ramaswami: We believe the new desktop platform, including <unk> Kubernetes platform and enterprise AI our NII.
Rajiv Ramaswami: It's well suited to helping enterprises quickly and efficiently deploy and run that didn't AI applications and real life use cases.
Rajiv Ramaswami: Wherever the data side.
Rajiv Ramaswami: As one example in Q2, our financial services provider in the EMEA region.
Rajiv Ramaswami: Adopted mechanics enterprise AI platform to deploy their internal DNA applications.
Rajiv Ramaswami: These include multilingual translation had a multilingual chatbot.
Rajiv Ramaswami: And AI enabled them to deploy their DNA apps on their existing mechanics truck platform.
Rajiv Ramaswami: While benefiting from the automation and AI provides in scaling and running of influencing endpoints for large language models.
Rajiv Ramaswami: Our largest wins in the quarter demonstrated our ability to land and expand within some of the largest and most demanding organizations in the world.
Rajiv Ramaswami: As they look to modernize their it footprint, while also managing through disruption from industry M&A.
Rajiv Ramaswami: One of these events was a new logo.
Rajiv Ramaswami: With a north American based global 2000 energy Technology company.
Rajiv Ramaswami: This is motivated to seek alternative due to a 200% price increase from their incumbent vendor.
Rajiv Ramaswami: They were looking for an alternative solution that could also be that cyber security requirements and desire for improved operational efficiency.
Rajiv Ramaswami: The Charleston mechanics third platform.
Speaker Change: <unk> the <unk> manager.
Speaker Change: It will enable them to streamline their operations through increased automation.
Speaker Change: And reduce that existing IV footprint by over 30%.
Speaker Change: Another significant win in the quarter was an expansion with a global 2000 provider of it consulting services based in the <unk> region.
Speaker Change: I'm happy with the changes they have experienced with their other incumbent infrastructure vendor.
Speaker Change: This customer decided to transition a portion of their estate.
Speaker Change: By just other vendor.
Speaker Change: Two the tax to our platform.
Speaker Change: Enabling them to improve their total cost of ownership.
Speaker Change: While also addressing their concerns about pricing and support.
Speaker Change: They also designated mechanics, as the preferred partner for future expansion opportunities.
Speaker Change: Finally.
Speaker Change: I'd like to highlight a significant new logo win with the National Health Ministry in the EMEA region.
Speaker Change: That highlights our progress in supporting modern application natively on our platform.
Last our support for hybrid multi cloud environments.
Speaker Change: This customer was looking to deploy a national stellar medicine platform using container based applications in a multi cloud environment.
Speaker Change: Clothing, both private and public clouds.
Speaker Change: They chose the organic third platform, including mechanics cloud clusters are <unk> are running on AWS.
Speaker Change: They also chose mechanics kubernetes platform, our NK P and mechanics cloud manager.
Speaker Change: We're deploying and managing their container based applications in a standardized self service manner right.
Speaker Change: While also enabling centralized observer ability and policy management.
Speaker Change: In closing.
Speaker Change: I am pleased that the strength of our cloud platform and the solid execution of our team produced strong second quarter results.
Speaker Change: And enable us to raise our outlook for our fiscal 2025 year.
Speaker Change: We remain focused on delivering on our vision of becoming the leading platform for running apps and managing data anywhere.
Speaker Change: And capturing the multiyear growth opportunity in front of us.
Speaker Change: And with that I'll hand, it over to Rick many silvana.
Speaker Change: Company.
Speaker Change: Thank you Rajiv and thank you everyone for joining us today.
Speaker Change: I will first discuss our Q2 fiscal 'twenty five results followed by our guidance for Q3 fiscal 'twenty five and an updated outlook for the full fiscal year 2025.
Speaker Change: Results in Q2 came in above the high end of our ranges across all guided metrics.
Speaker Change: In Q2, we reported record quarterly revenue of $655 million.
Speaker Change: Within the guided range of $6 $35 million to $645 million.
Speaker Change: Representing a year over year growth rate of 16%.
Speaker Change: At the end of Q2 was 2.06 billion, surpassing the 2 billion, mark and representing year over year growth of 19%.
Speaker Change: We continue to see strength in landing new customers onto our platform from the various programs. We have put in place to incentivize new logos from a general increase in engagement from customers looking at us as an alternative in the wake of industry M&A and helped by more leverage from our OEM and channel partners.
Speaker Change: Expand ACB bookings also improved in Q2 and relative to the challenging expansion we saw in Q1.
Speaker Change: Renewals continue to perform well with improved on time performance and continued discipline on economics.
Speaker Change: And Arad, our net dollar based retention rate at the end of Q2 was 110% flat quarter over quarter.
Speaker Change: In Q2, while we continue to see modestly elongated average sales cycles compared to historical levels as discussed previously we believe this to be the continuing norm in the current macroeconomic environment with continuous scrutiny on spend.
Speaker Change: We also continue to see more variability in timing outcome and the instructor with the larger deals in our pipeline, but we did start to see more of these closed in Q2.
Speaker Change: Thank you Joe average contract duration, which we define in the aggregate across land expand and you'll notice was three years slightly higher than our expectations and down slightly quarter over quarter.
Speaker Change: non-GAAP gross margin in Q2 was 88.3%.
Speaker Change: non-GAAP operating margin in Q2 was 24, 6%.
Speaker Change: Alright, then our guided range of 20% to 21% due to higher revenue and slightly lower operating expenses.
Speaker Change: non-GAAP net income in Q2 was $165 million.
Speaker Change: Fully diluted EPS of <unk> 56 cents per share based on fully diluted weighted average shares outstanding of approximately 293 million shares.
Speaker Change: GAAP net income and fully diluted GAAP EPS in Q2 were $56 million.
Speaker Change: <unk> 19 cents per share respectively.
Speaker Change: Free cash flow in Q2 was $187 million.
Speaker Change: Representing a free cash flow margin of 29%.
Speaker Change: Moving to the balance sheet, we ended Q2 with cash cash equivalents and short term investments of 1.743 billion.
Speaker Change: Up from $1.075 billion at the end of Q1.
Speaker Change: I will now launched in December we completed the issuance of 862 $5 million in convertible notes due 2029, what's 50 basis points of coupon.
Speaker Change: Net proceeds from that transaction were you still wouldn't retire a portion of our outstanding 2027 convertible notes.
Speaker Change: <unk> repurchased $200 million in shares and Tony and add cash to our balance sheet.
Speaker Change: No flexibility and general corporate purposes, including working capital capital expenditures and potential acquisitions.
We also closed earlier this month.
Speaker Change: $500 million revolving credit facility that was announced back in December and which provides us with additional flexibility.
Speaker Change: Moving to capital allocation in addition to the $200 million in shares that way.
Speaker Change: We purchased using a portion of the net proceeds from the convertible notes offering we used about $69 million of cash in Q2 to retire shares related to our employee's tax liability for that quarterly audits new investing.
Speaker Change: Moving into Q3 25, our guidance for Q3 is as follows.
Speaker Change: Revenue of $620 million to $630 million.
Speaker Change: non-GAAP operating margin of 17% to 18%.
Speaker Change: Fully diluted weighted average shares outstanding of approximately 296 million shares.
Speaker Change: Moving to the full year the updated guidance for fiscal year 'twenty fives is as follows.
Speaker Change: Revenue of 2.495 to 2.515 billion representing.
Speaker Change: Representing a year over year growth rate of approximately 17% at the midpoint and an increase from our previous guidance.
non-GAAP operating margin of approximately 17, five to 18, 5% an increase from our previous guidance.
Speaker Change: And free cash flow of $650 million to $700 million.
Representing a free cash flow margin of approximately 27% at the midpoint and an increase from our prior guidance.
Speaker Change: I will now provide some commentary and assumptions regarding our updated fiscal year 'twenty guidance.
First the updated guidance assumes continued strength in landing new logo customers onto our platform journey.
Speaker Change: Steady performance of our expansion into our existing customer base and continued good renewal performance.
Speaker Change: Second we as you aggregate contract duration for the full year to be more or less flat relative to last year.
Speaker Change: Sure.
Speaker Change: Discussed in prior earnings calls, we expect to continue to increase our investment in sales and marketing and research and development in the second half of the fiscal year. These.
Speaker Change: These investments are directed towards addressing our large market opportunity and I would expect it to continue to ramp in Q3 and Q4.
Speaker Change: In closing we are pleased that our Q2 results exceeded the high end of our guidance ranges and to raise our full fiscal year guidance across all metrics.
Speaker Change: We would like to thank our employees customers partners investors and stakeholders for their continued trust in us.
Speaker Change: We remain committed to continued progress aligned with our stated philosophy of sustainable profitable growth both through durable top line growth and expanding margins.
Speaker Change: With that operator, please open the lines for questions.
Speaker Change: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Speaker Change: Of time, we ask that you. Please limit your questions to one question and one follow up please standby, while we compile the Q&A roster.
And our first question comes from meta Marshall of Morgan Stanley. Your line is open.
Meta Marshall: Great Thanks, and congrats on a really strong quarter.
Meta Marshall: It seems like you're finally, starting to see some momentum kind of an end customers kind of coming over.
Meta Marshall: You know from from competitive platforms, I guess, just getting a sense of that you know is that.
Meta Marshall: At this time and it was going to always take time is that kind of targeting a you know what kind of finding the right customer type is it finding the right use case, just kind of what do you attribute to kind of more success. There and then I'll just get into the second question now just kind of any commentary that youre seeing kind.
Meta Marshall: Kind of about the federal vertical thank you yes.
Speaker Change: Maybe I'll take the first part of <unk> you can comment on the second.
Meta Marshall: The second part I think.
Speaker Change: The market continues to be quite dynamic.
Speaker Change: In terms of your question around new logos.
Speaker Change: Yes.
Speaker Change: Is this a multi year opportunity in terms of gaining share now.
Speaker Change: Now clearly you've seen our new logo ads growth of 3%.
Speaker Change: Year over year for the last couple of quarters now and.
Speaker Change: It's driven by I would say a couple of things.
Speaker Change: The plan has matured over time.
Speaker Change: And we see the impact from some of our recent go to market initiatives.
Speaker Change: Seeing the benefit from our customer and our sales and partner incentive programs. We're also seeing more leverage from our OEM and channel partners, who are contributing to our new logo growth as well.
Speaker Change: So I'd say those are the factors now the overall dynamics haven't changed much in the sense that it's still a multiyear opportunity we still have.
Speaker Change: From a competitive perspective to deal with the fact.
Speaker Change: Many customers have multiyear elas with Vmware and.
Speaker Change: Hardware I appreciate that needed in many cases to convert them over but.
Speaker Change: <unk> seen the results in terms of your the passage of time here with the pipeline and all of these go to market efforts.
Speaker Change: <unk> you want to comment further.
Speaker Change: Yes, Hi, Tom So yes to your question on the U S. Federal government. So in Q2 as expected our U S fed business did improve and return to solid year over year growth now I should say that while we don't report our U S. Federal separately as a percent over the last three fiscal years fed has been.
Speaker Change: <unk>.
Speaker Change: 10% or less of our annual revenue with seasonal strength seen in our fiscal Q1, which happens to coincide with the fed's fiscal year end. So just to give you a sense of relative magnitude there, but yes Q2 was an improved performance and then when I think about outlook for the balance of the year and what we're seeing there. We currently have a good pipeline of opportunities, but it is.
Speaker Change: Too early to tell.
Speaker Change: As for how those opportunities may be affected by what's happening within the U S government under the new administration, which remains quite dynamic.
Speaker Change: However, our platform is and always has been about modernization and helping to lower the total cost of ownership for our customers, which may make it attractive to those looking for productivity gains or efficiencies, so still pretty dynamic from a spread perspective, and we factored in this overall uncertainty into our updated fiscal year 'twenty five.
Speaker Change: Guidance.
Speaker Change: Great.
Speaker Change: Yes.
Speaker Change: I would also say that we.
Speaker Change: We don't while we don't talk about how big federal as a percentage of our business, but over the last three fiscal years, it's been 10% or less about annual revenue better.
Speaker Change: Best of course, Q1 beat the big quarter.
Thanks, so much.
Speaker Change: Jimmy Jo.
Speaker Change: Thank you.
Speaker Change: And our next question comes from Jim Fish with Piper Sandler Your line is open.
Hey, guys nice quarter nice acceleration.
Speaker Change: Also working off of my first question is it's good to hear about some of these larger wins come in here just on some of these global two thousands that are out there what's given the confidence in the pipeline for the upper part of the market. In particular is there any sense of how much of it is waiting for.
Speaker Change: Sort of that HD standalone readiness with with the stores they have versus looking to move to hyper converged.
Speaker Change: The feedback been thus far on power flex and potential buildup of other OEM relationships.
Speaker Change: Yes domestic.
Speaker Change: Crack at that one so.
Speaker Change: So, yes, I think the <unk> case lesser ball in many cases, it's a second vendor opportunity for us.
Speaker Change: Versus the wholesale migration.
Speaker Change: And it's a mix as you can imagine.
Speaker Change: There is going to be some mix of <unk> and some.
Speaker Change: Some of the tier we can convert to HCI, we've talked about some large examples in the past.
Speaker Change: We've done that customers have adopted.
Speaker Change: Los Angeles I was discussing we're running all the database workloads for example.
Speaker Change: Moving from legacy Tcf to head Ci, bringing unison, that's the second vendor in that kind of an environment.
Speaker Change: So it's going to be mix of ECS and sit here now to your question on the past XP specifically.
Speaker Change: We do expect that the biotech solutions come to market.
Speaker Change: In the second calendar quarter this year and we have some good early interest and.
Speaker Change: Again, I think we look at that as a market expansion opportunity for us the ability to insert faster into these existing environments, rather than trying to way to convert everything over.
Speaker Change: So I think it is going to remain a mixed demand.
Speaker Change: We continue to focus on our core motion of converting customer the ultra hei.
Speaker Change: And at the same time.
Speaker Change: Also focus on expanding our market opportunity by being able to uncertainties execute cost.
Speaker Change: So starting with Bowflex and hopefully over time to more of these.
Speaker Change: Makes sense and then maybe for you you talked about.
Speaker Change: Seeing better renewals, obviously, I think mathematically the dollar basis for the renewal piece moved up this quarter, but what's what's giving you confidence that that 110% net retention rate can be stable for the remainder of the year.
Speaker Change: And how do we think about.
Speaker Change: The other aspects of net retention rate in terms of what you guys are trying to drive beyond just existing workload expansion.
Jim Fish: Yeah, there's a lot there Jim So let me try and break that down so first John said.
Jim Fish: I should clarify that when we were referring to fed business performance, improving in Q2, and but a solid year over year growth. It was supposed to be talking about land and expand for Q2. So why don't I want to clarify that and then I think.
Speaker Change: What are your question was around <unk> and how to think about that so first NR did stabilize is flat quarter over quarter was 100 and 110%.
Speaker Change: And we did see some overall improvement in Q2, but both land and expand.
Speaker Change: Two things to note on <unk> and I'll get to the last part of your question Jim after that so assay or our growers every quarter. The ACB dollars required to offset the same percentage share.
Speaker Change: It does grow which makes it increasingly challenging to achieve the same IRR just mathematically and then over the last year. If you look at our expansion within existing customers. It has been affected as we've discussed in previous quarters by variability, we've seen around timing and deal structures of these larger deals in the pipeline and the overall environment have elongated sales.
Speaker Change: So that does have an effect on current period IRR.
Speaker Change: All in all is a function of expansions over the past year with the same group of customers that we had at the beginning of the 12 month period.
Speaker Change: Some mechanics that are on an IRR that I wanted to clarify for everybody and I think to the rest of your question, Jim which is on what about the other aspects of expansion. So I would have you talked about three vectors. One is selling more of the same workload to customer selling more workloads.
Speaker Change: And around.
Speaker Change: Selling more of the portfolio. So look we think we remain focused on both retention and expansion across all of those three vectors.
Speaker Change: Jim and we've said in the past that we hired more portfolio of solutions specialists for example towards the end of last fiscal year and into this year and those folks are ramping now that would call them fully ramped yet.
Speaker Change: And so some of that is still ongoing.
Speaker Change: <unk> focused on both retention and expansion with existing customers across all of those three vectors.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: And our next question comes from <unk>.
Speaker Change: J P. Morgan your line is open.
Speaker Change: Oh, great. Thank you for taking the questions and congrats on a very solid quarter here Rajeev I wanted to.
Speaker Change: I heard a couple of instances, where youre talking about the <unk> platform, which I think is.
Speaker Change: I guess not well understood by investors.
Speaker Change: I wanted to ask you if you if the Vmware.
Speaker Change: Customer.
<unk> is kind of choosing not to stay on premise.
Speaker Change: And kind of decide to move to the cloud.
Speaker Change: Are they considering the mechanics kubernetes platform as a platform of choice when when they kind of going through that App modernization.
Speaker Change: <unk> is that coming up in those Vmware related conversations at this point.
Speaker Change: I mean I think.
Speaker Change: There's two parts to that answer that.
Speaker Change: If you look at migrating a BMS workload.
Speaker Change: One is as you said, which is modernizing the workload itself onto kubernetes.
Speaker Change: And we are very much a part of that equation right rather than choosing to run it.
Speaker Change: Yes.
Speaker Change: <unk> are in the public cloud.
Speaker Change: As part of that application modernization.
Speaker Change: That is one other option there to pay the limited.
People, who are looking to migrate workloads as if in fact, we have a partnership with Amazon for example had migrators Vmware workloads from on Prem directly into the public cloud assets on our <unk> platform and a lot of that migration is also automated. So so we have two options for these customers. One is of course with our kubernetes platform per workload modernization.
And if theyre going to redo the application if theyre going to re factor the application.
Speaker Change: And then Thats an option if they want to go run the application assets and migrate up we can offer them a path to migrate it to the public cloud or run it on Prem.
Speaker Change: Also say that our kubernetes platform.
Speaker Change: Fully standards compliant.
Speaker Change: So cloud native compute foundation fully standards compliant and we also had a lot of flexibility with that to the ability for example for a customer who's monetizing that worked out to be able to use a native kubernetes substrate on a public cloud, but also use us on top to be able to manage all their cluster wherever they may be fitting.
And simplify the orchestration of those clusters, so many different options for customers here, but.
Speaker Change: The MTA feedback on the equivalent of this platform is very much in the center of modernization of the assets.
Speaker Change: Understood very helpful. Once we're a <unk> company.
Speaker Change: Speak specifically on federal would you say the underperformance that you had in federal last quarter did you.
Speaker Change: Recover all of it or partial recovery there trying to understand obviously the guidance looks extremely solid.
Speaker Change: Much more than the beat I think if I did my math right.
Speaker Change: To understand what kind of gives you confidence in the guidance going forward for the rest of the year.
Speaker Change: Yes, hi, pendulum so on the first of a b's right I would say that.
Speaker Change: As we said in our last fall that we expect a good quarter for us.
Speaker Change: Thank you.
Speaker Change: We saw that what we didn't say that it would necessarily be a catch up quarter, presumably I think as part of your question because Q1 is our seasonally strongest quarter for <unk>.
Speaker Change: As you would expect given the fact fiscal year ended September.
Speaker Change: So that's on fed and then more generally I think to your point on the rest of the year and our updated outlook for the full year.
Speaker Change: Look we think that we're happy with the first half performance on Sunday, the Q2 performance and our increased outlook for the full year incorporates our current view our best view that we have at this time around a.
Speaker Change: Continued strength in landing new logos.
Speaker Change: Steady performance within our expansion into existing customers and continued good performance.
Speaker Change: Performance and specifically I think just to go back I think part of your question is.
Speaker Change: Perhaps what are we assuming about fed pendulum I think is embedded in your question.
Speaker Change: And what I'd say is.
Speaker Change: As I said earlier it is too early to tell us.
Speaker Change: What the impact is going to be of some of the actions that the new administration may choose to undertake.
But we do think that there is uncertainty out there that it could be a.
Speaker Change: A net positive for us because our platform is about modernization and reducing the total cost of ownership.
Speaker Change: Unclear in terms of what the overall approach might be of the of the new administration. So we have factored in some of that overall uncertainty into the updated fiscal year 'twenty five guidance as well.
Speaker Change: Understood. Thank you very much.
Angela: Thank you Angela.
Speaker Change: Thank you.
Speaker Change: And our next question comes from Ben Vaughan, Our Cleveland Research Company. Your line is open.
Speaker Change: Good afternoon, everyone and thank you for taking the question Rukmini you discuss variability.
Speaker Change: Large deal timing I'm interested in how you think about <unk>.
Speaker Change: Variability or flexibility or incentives that you're offering to these larger projects.
Speaker Change: Could you talk about how you think about the willingness to.
Speaker Change: Maybe subsidize or discount for take outs are.
Speaker Change: For flexibility around timing of billing just any high level thoughts or approach that you're taking to these larger projects and then I have a follow up for Rajiv.
Speaker Change: Sure Hi, Ben So a few things so we always talked about how in this moment, we want to make sure that one we are articulating our value proposition to customers, especially to new new customers, who are not our clients existing customers to make sure. They understand the value proposition in a holistic way so means.
Speaker Change: They understand our approach at all being a hybrid multi cloud platform around our approach to both virtualized machines, and containerized applications around our philosophy, and our customer service and how we value that with our net promoter score being 90 for a decade now so that's always where we really start Ben and to your point on structure.
Speaker Change: Yes, Youre right, we have talked about that and we have seen more variability with some of our larger transactions. So what well continue to do there is to make sure that we're being thoughtful about that right where people are looking to migrate for example, you might give them some one times.
Speaker Change: Incentives to do so.
Speaker Change: And and things like that and then more generally I think your question around.
Speaker Change: Billings and things like that our standard practice is to collect multiple years of cash upfront from our customers as we mentioned before.
Speaker Change: And it's worth noting that many of our customers. We believe purchase our software along with third party hardware.
Speaker Change: Which we believe is typically part of their capex plans and therefore generally pay us for those multiple years upfront. However.
Speaker Change: However, we do make exceptions based on special circumstances, but all that said, we factored that's weighted impact of any of these deal structures.
Speaker Change: And maybe non standard terms into our range.
Speaker Change: Fiscal year, 'twenty, five guidance bought across topline and Bottomline.
Speaker Change: Okay, that's great.
Meta Marshall: Rajiv bigger picture when you think about the opportunity historically you've.
Speaker Change: You've talked about.
Speaker Change: More customers, having having spent three tier overall, having kind of a bigger.
Speaker Change: Dressed up opportunity there, hence some of these partnerships but could.
Speaker Change: Could you speak to what youre seeing from customers and their willingness to.
Speaker Change: Migrate more towards hyper converge youre seeing more refresh youre talking about modernization does it feel like you're seeing a bigger tipping point, where theyre more willing to make this migration or how do you think about or what are they saying about the incremental costs and the willingness to make those transitions. That's it for me. Thank you.
Speaker Change: Ben that's a very good question in fact, I think what's happening here.
Speaker Change: Visit competitive.
Speaker Change: Situation is that customers are now rethinking the entire stack, because if they're being forced to look at an alternative and migration.
Speaker Change: It's also a good time for them to reexamine the overall stack what do they want to do and at a big picture that means okay. Maybe I should take some of these applications put them in the cloud maybe actually modernize some portion of it by state.
Speaker Change: And maybe I should move to a new stack.
Speaker Change: It's actually creating the bigger picture longer term architectural mind chip that's felt to.
Speaker Change: So what we see is as a result customers are moving more towards okay, I need a modern stack I need something that can handle Watson machine entertainers.
Speaker Change: It's something that can work on Prem, but also in the public cloud.
Speaker Change: And that's the kind of platform that we are providing today in the market right. So from that perspective.
Speaker Change: If there is an impetus for a customer to migrate away from BMS and it's also an impetus for them to look at what is their long term architecture the endgame.
Speaker Change: And that's exactly what we are positioning with them.
Speaker Change: Thank you very much.
Matt: Thank you Matt.
Speaker Change: Our next question comes from Aaron Rakers of Wells Fargo. Your line is open.
Jake: Hi, This is Jake on for air and congrats on the quarter.
Jake: Was just hoping you can maybe give an update on the momentum youre seeing around GPT in a box any changes you've seen in enterprise adoption, there more broadly and maybe if there's been any material change over the last quarter or two given the proliferation of reasoning models.
Speaker Change: Yes, let me cover that Jake it's a pretty broad question overall as you as you know today, we have a solution for inferencing.
Speaker Change: That makes interesting very easy to deploy and the enterprise that's understanding AI platform.
Speaker Change: By the way is a component in the overall <unk> in a box solution.
Speaker Change: Now an interesting point here is.
Speaker Change: Yes, it was deeply coming on board it shows that.
Speaker Change: Very powerful models can be trained and operated with a lot fewer resources than previously thought.
Speaker Change: We think that this equity is going to lead to broader and more rapid adoption of DNA.
Speaker Change: In comparison, we Havent <unk> paradox.
Yes, I mean, you have increased the efficiency of something then that leads to increased consumption of that resource.
Speaker Change: And we think the same will happen here for AI, because what happens here is now companies and organizations can actually deploy more complex.
Speaker Change: <unk> use cases with more more effectively.
Speaker Change: Stimulate the demand for both compute and storage resources.
Speaker Change: When it comes to us in our platform, we have been very focused on being the platform for inferencing and Ria, but AI use cases, that's what deepening about with NII delivered.
Speaker Change: And with Openreach leasing models coming in it makes the whole thing better and more broadly available. So what we are seeing at this point as we've suddenly seen a lot of our customers interested in looking at how they can get productivity efficiency gains out of deploying.
Speaker Change: In some cases they have deployed is where the data is presented which can be in the data centers are at the edges and sometimes in the public cloud as well.
Speaker Change: And we continue to see.
Speaker Change: Increasing adoption.
Speaker Change: For example on this call we talked about how <unk>.
Speaker Change: In EMEA <unk> financial services provider is using us.
Speaker Change: On top of the new genetics platform, adding NII to the existing <unk> platform to help them do things like multilingual translation automatically.
Speaker Change: Of course that box, which is the most obvious use case. So we are seeing more of these develop across the enterprise and more and more companies looking at starting to go from say initial experimentation with NII to driving towards real life production deployments and I think that will happen over the next few years.
Speaker Change: Great. Thanks, and then maybe just a follow up I was wondering if maybe you could add some color around the investment in sales and marketing and R&D in the back half of the year and just maybe some color around how that's being allocated.
Speaker Change: When do you want to take that.
Speaker Change: Sure sure.
Speaker Change: Hi, Jake so as we said in our prepared remarks, we are continuing to increase our investment in both sales and marketing and R&D and I will say that we do expect that to ramp yard.
Speaker Change: In Q3, and Q4 and then to your question, specifically, where we're investing it so within sales. It just took off a few different areas, both frontline and inside sales.
Speaker Change: We've talked about how our overall.
Speaker Change: Frontline sales rep headcount perspective, we're fairly close to where we'd like to be but we're probably out of seeing more folks here in the second half and then it's also the folks everybody to supporting team that surrounds the rep. So sales engineers channel sales customer success and so on.
Speaker Change: And then in marketing, we're spending more to drive increased awareness of our of our platform.
Speaker Change: R&D.
Speaker Change: We're investing across one strengthening our core platform, but also supporting more moderate obligations and AI in order to you've talked here about just how we think more about that and then also support things like third party storage, which as we've announced in a power flex will be the first platform Thats coming on board here in the second calendar quarter. So those are some of the areas, we're investing in and all of those.
Speaker Change: We think of as directed and targeted towards addressing our large market opportunity and in areas, where we where we see line of sight to the return on those investments.
Speaker Change: Great. Thank you so much.
Speaker Change: Thanks, Jay Thank you.
Speaker Change: Our next question comes from.
Cohen of Bank of America. Your line is open.
Speaker Change: Alright, Thanks, it's rupal filling in for <unk> today.
Speaker Change: Two questions one for Rajeev, one for Rukmini Rajiv you had strong revenue growth and Youre guiding higher for the year have you seen any quantifiable benefit from the partnership with AWS, and then providing promotional credits to migrate customers to <unk> and how much are your partnerships with Cisco and Dell contributing.
Speaker Change: The strong new logo growth and revenue growth this year.
Speaker Change: Can I have a follow up yes, great.
Speaker Change: Take each of those one at a time briefly so AWS, we've seen early traction with some customers migrating already from Vmware cloud on AWS over to our offering.
Speaker Change: And also some back from on Prem into the public cloud and so we've seen some of these customers actually move fairly quickly.
Speaker Change: Whether were to being able to be running on our new <unk> platform within a matter of a month.
Speaker Change: Because one of the things that we don't have to worry about in a cloud to cloud migration is the hardware refresh that's not an issue anymore right. It was pretty much on the same hardware instance that AWS provides whether it would be.
Speaker Change: And so that portion of it actually is a much easier migration and our automated tooling tests. So that so we've seen examples of customers moving their it's still fairly early now, but we're seeing more of the public cloud we have a customer that's been a some on prem to public cloud migration happening that Cisco.
Speaker Change: Cisco has been a good contributor for us.
Speaker Change: New logos.
Speaker Change: Actually this quarter as well as over the last couple of quarters, and we expect to see that partnership continuing to grow and are working very closely with them as we go to market.
Speaker Change: <unk> is still pretty early there are two parts to that Dell relationship actually notably the first one is them selling our new <unk> platform in the market. Now. This is the second quarter they've had that in the market and we saw a small contribution from that.
Speaker Change: And the other big one of course is the park flex availability, which took many and I covered earlier.
Speaker Change: It will be available next quarter, and we'll start to see customers trialing, those and starting to adopt that but that benefit for that we're really only happen in the next fiscal year.
Speaker Change: Got it thanks for the details there rukmini as a follow up last quarter, you had expected the seasonality between <unk> and <unk> to be similar to fiscal 'twenty, three where revenue was down 8% sequentially, but your guidance for <unk> is much better than that that's about half of that sequential decline. So what is <unk>.
Speaker Change: Driving that and if the demand environment is improving and land and expand is also improving to retake the seasonality change is permanent or is there something specific to this year that is driving better seasonality.
Speaker Change: Thank you.
Speaker Change: Yeah. So I think on the seasonality comment for Q3, I would say Q2, we did see guard both land and expand as we talked about and are happy to be able to guide to Q3, where we did.
Speaker Change: I think it's too early for us to comment on how next year's Q3 might be relative to Q2, <unk> and as you know there is also this.
Speaker Change: It does.
Speaker Change: This mechanism of.
Speaker Change: But our lowest cohorts and how they are.
Speaker Change: Spread out over the quarters and so yeah I'd be happy to dive Q3 to where we are guiding right now we did see strength in both land and expand and renewables as we talked about in Q talks, but I'd say, it's too early to extrapolate anything beyond this fiscal year at this point and of course, we will make sure to update you all at the right time about seasonality.
Speaker Change: For next fiscal year.
Speaker Change: Okay. Thanks for all the details appreciate it.
Pablo: Thank you Pablo.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Mike Needham.
Speaker Change: Needham <unk> company your line is open.
Mike Needham: Hey, Thanks for taking the questions guys and congratulations on a strong quarter in and raise to the guidance that we have today.
Mike Needham: Wanted to circle up on some of the go to market questions that have been asked here, but.
Mike Needham: Maybe from a different angle when we think about the partners that you guys have run campaigns for.
Mike Needham: And how they are coming over to you.
Mike Needham: Potentially as a result of this industry M&A.
Mike Needham: Could you.
Mike Needham: Provide some color or maybe qualitative commentary on the different size of these partners or maybe the different sort of size deals that they were originating on your behalf.
Speaker Change: Yes, I was just wondering if we can get some sense of how the.
Speaker Change: They differ versus where new taxes historically been so Mike I think the way to think about it is if you look at our.
Speaker Change: Sentiment of customers, we have of course, the very big customers at the top and we've got the smaller customers.
Speaker Change: Volume customers.
Speaker Change: What I would say is with these partners coming on board.
Speaker Change: The channel partners they cover the entire spectrum all the way from the top to the bottom of the pyramid right across the board.
Speaker Change: At the very bottom of what we have.
Speaker Change: The lower portion of that here as well.
Speaker Change: What we call it 10 or less that we led the channel do all the work there and we just support the channel we don't have direct sell us engaged in that area.
Speaker Change: And that has seen a nice uptick over the last year or so and again, that's where some of these channel partners are doing most of the lifting and we are supporting the channel partners. As you go to the top of the pyramid. What they do is they are more healthy right. It's very much much more of our core selling motion that we and our folks are very much involved in these bigger account bigger large enterprise accounts looking with the customer.
Speaker Change: With the partner being a big presses data had a big slug of that.
Speaker Change: But we might do some proof of concept of the partner that Dave will bring us and they will engage as they have lapse in their present in these accounts.
Speaker Change: What I would say the engagement varies depending on the kind of customer for the large customer that is of course out for the smaller customer this module partners coming in and driving a good chunk of the business.
Speaker Change: Excellent. Thank you and just another follow up with the success in that.
Speaker Change: Upper end of the pyramid those global 2000, new logo wins that you had cited earlier.
Speaker Change: Is there a way to think about maybe specific features or capabilities as part of the more mature <unk> cloud platform that are resonating today versus where we were a year or two ago.
Speaker Change: Definitely Mike I think we've been doing a lot of work on the core platform.
Speaker Change: From a scalability perspective from a broader support of the ecosystem.
Speaker Change: Perspective.
Speaker Change: And also in terms of integrating with some of these big customers.
Speaker Change: In terms of how.
Speaker Change: All of the integrations they need within their own environment.
Our security our automation platforms. So we've been doing a lot of work along those over the last few years with the core platform itself.
Speaker Change: And so now when we go into a big ticket account.
Speaker Change: We are able to be we can get through all of those fairly quickly.
Speaker Change: Other of course part of this is that we are also and have used to very much how the prosecuted.
Speaker Change: This is not a product capability set but it's more about how we tackle these opportunities and we've gotten better at understanding the full picture of what's needed here to go from the beginning to the roof.
Speaker Change: Proof of concept to commercial negotiations at the end, but in between secondary qualification being qualified at the render all of those processes.
Speaker Change: We have these deal teams that are in place to handle those opportunities. So we become I would say more streamlined and efficient at being able to work with these larger customers even beyond having the product features.
Great. Thank you again.
Speaker Change: Yes.
Speaker Change: Thank you Mike.
Speaker Change: Our next question comes from Jason Ader of William Blair. Your line is open.
Jason Ader: Yes, thanks, good afternoon.
Speaker Change: And our channel checks.
Speaker Change: Rajeev, we heard from a few folks that your sales cycles are actually shortened by a little bit.
Speaker Change: Customers feel greater urgency to get off Vmware.
There's a lot of aging call. It three tier hardware that's been pushed out over the last couple of years because of the macro environment.
Speaker Change: First of all I wanted to just get a sense is that is that not maybe that's just sort of anecdotal but is that something that you've heard from your reps at all and then secondly, we also heard.
Speaker Change: So more disillusionment from partners about Broadcom squeezing them on margins. So is it helping you sort of in that when you talked about channel engagement channel Leverages It helping you that.
Speaker Change: Channels are feeling squeezed, a little bit there and make more money selling new tactics.
Speaker Change: A good question, Jason So on the first one I would say it's more anecdotal I don't think we can point to a systematic shortening of sales cycles.
Speaker Change: At this point.
Speaker Change: And in fact, what I would say is the <unk>.
Speaker Change: So I'll start with some of the other one other end of that spectrum.
Speaker Change: And maturity of the pipeline and some of these larger deals that we've been talking about in the pipeline for a while closing this quarter. So one of it is we see certainly more of those close and not necessarily with shorter sales cycles.
Speaker Change: So that maybe have been some anecdotal feedback that you heard on.
Speaker Change: On the second of the partner I think that's very real.
Speaker Change: Through that we have we are a very partner centric company all our business pretty much goes through the partner community and we have continued to make enhancements to our channel.
Speaker Change: Programs and the incentives for example, we have a new logo incentives for these partners to bring us business Dave.
Speaker Change: There will be new logos for them, but the new logos to <unk> and <unk>.
Speaker Change: And so we've been working very hard to make it worthwhile for the channel to do business with us and that's certainly helping and contributing.
Speaker Change: Okay, and then one quick follow up Rick maybe.
Speaker Change: I know youre, not giving guidance for FY 'twenty six but.
Speaker Change: Just given the strength in.
Speaker Change: Operating margins this year in non-GAAP operating margins.
Speaker Change: I know the business.
Speaker Change: This particular quarter is probably not.
Speaker Change: Replicable at least for the next couple of quarters based on the guidance, but.
Speaker Change:
Speaker Change: Can you can you give us a sense of where you're thinking about.
Speaker Change: If you take our operating margins will expand next year.
Speaker Change: Or.
Speaker Change: Do you think that.
Speaker Change: These levels are sort of appropriate right now.
Speaker Change: Yeah.
Speaker Change: Thank you Jason So first of all you are correct that our acute care, we're happy with the margin performance, but as you rightly point out and as we said in the prepared remarks, we are investing more in the second half. So our margins in the second half are expected to be lower than first half and I'm still happy to raise the full year op margin guide like we like.
Speaker Change: For fiscal year 'twenty five now.
Speaker Change: We are not waiting for him.
Speaker Change: Six at this one Jason.
Speaker Change: I'll say that we have always sort of been consistent about this idea that we are continuing to drive towards a sustainable dollar 40, Clos and trading off growth in margins.
Speaker Change: Thoughtful and appropriate way and that approach is sound.
Speaker Change: The case and I expect to remain to be you may have to be the case. So I'll leave it there Jason I think we'll continue to watch that and of course, we'll update you when we do provide guidance for fiscal year 'twenty six.
Speaker Change: Alright. Thank you good luck.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: And our next question comes from parents of Oppenheimer <unk> Company. Your line is open.
Speaker Change: Great. Thank you and I really appreciate you taking my question.
Speaker Change: Firstly wanted to get a sense.
Speaker Change: If you were to breakdown the strength in the quarter.
Speaker Change: How much would you if you wanted to quantify it is coming from the share gain due to the price hikes that vmware versus increased spend in existing workloads.
Speaker Change: Better penetration and customers across the board that would've come without the price hike, if there's any way to disaggregate. Those I really appreciate that I'm going to have a follow up question.
Speaker Change: Yeah.
Speaker Change: I can start and does you Peter and welcome you to add your thoughts as well, so but I mean, it's really hard to do that because as we've said before we have competed with.
Speaker Change: Vmware for a long long time for many years and of course with <unk> acquisition of Vmware that suddenly been some some changes there and so on but no.
Speaker Change: We actually don't think of it that way internally either in terms of saying well can we parse this out of the way you did.
Speaker Change: So we don't think of it that way, we've talked about kind of how we run our go to market programs and some of the incentives we put in place and so those at all as you saw here that some of those starting to pay off and therefore <unk> backed out but yes short answer is we're not able to kind of parse that out that that level of specificity.
Speaker Change: And if you have anything you would add to that no I think you've covered it.
Speaker Change: Alright.
Speaker Change: I can ask a different question then.
Speaker Change: Okay.
Speaker Change: As you look to more displacement of Vmware Cloud Foundation.
Speaker Change: What are some of the challenges that your customers have come back to you with.
Speaker Change: Do they want more of a price delta with Vmware is it a better and easier.
Speaker Change: EBIT migration.
Speaker Change: Is that more integration between the legacy applications and operating systems.
Speaker Change: Cause both off all of the challenges that the channel seems to talk about but I want understand from your perspective, what are some of the headwinds are issue that you're facing now and that you hope to address in the back half with your R&D and sales and marketing spend.
Speaker Change: So then I can take that question in front of them. It's a good one.
Speaker Change: First of all I think that is the timing of the <unk> license renewals.
Speaker Change: Renewables, Okay. That's of course, a big factor in that.
Speaker Change: Mitigated customers assign these multiyear contracts with Vmware and so theyre not necessarily in an urgent situations, where they have to migrate. So there's a timing element of that the hardware is there certainly is a key element of this which is in many cases and in fact in most cases today.
Speaker Change: Broadcom is selling Vmware cloud foundation really a lot of the customers are only using the hypervisor <unk> along with Cts storage.
Speaker Change: That's what they have today and so when they haven't converted over to <unk> for the most part it's a hardware refresh.
Speaker Change: And so they've got new hardware, then we have to they're not typically ready to go replace that immediately it's going to take them. A few yesterday appreciate that and so there is the timing of that.
Speaker Change: Hardware refresh cycle that comes into play when we are replacing are migrating.
Speaker Change: The second the third of course is something that we've gotten fairly good at it.
Speaker Change: Help me migrate reduce the risk you have automation to migrate those things I think we have actually gotten quite good at over the last.
Speaker Change: Many years of work in terms of BMS migration, so we have automated tooling.
Speaker Change: Lot of the migration actual migration work along with some in some cases progress will serve us as needed.
Speaker Change: And what are what is needed to integrate with their current.
Speaker Change: Automation systems et cetera, and I don't think we know how to do they do require some work and they do require a.
Speaker Change: Proper project plan and timing and so forth, but we know how to do those things and the last is just an overall thing around I would just say in Asia. They have something in place and now should I keep that thing in place how should I move to something else and so these are the challenges they've actually been the challenges for quite a while and nothing has really changed their parameters right.
Speaker Change: We've always characterized this as a multiyear journey.
Speaker Change: It's going to be in a steady way, we do expect that we will win more customers and you've seen that now all these new customers coming to us over the last few quarters. As you can see are partly a result of the broadcom situation.
Speaker Change: Got it.
Speaker Change: Really helpful. Maybe one other quick one if I could you mentioned M&A as part of the cash usage from the convert.
Speaker Change: Want to get a sense of where do you see technical gaps in your portfolio today.
Speaker Change: And is it ready to fill the technical gap or to expand into.
Speaker Change: Some of the newer opportunities here that you would consider in M&A.
Speaker Change: As I say, historically, if you're not going to comment on future M&A problem, but.
Speaker Change: But historically, what we've done is largely focused on smaller tuck ins.
Speaker Change: Areas there.
Speaker Change: Complementing what we have are filling some gaps in terms of what we have in our portfolio.
Speaker Change: And we will probably continue to do those as we go forward.
Speaker Change: And look at for example, we did buy a.
Speaker Change: <unk> is used to become unnecessary at about a year ago right.
Speaker Change: <unk>.
Speaker Change: Our kubernetes portfolio quite substantially so those are the kind of acquisitions and that.
Speaker Change: Those are things that we're always continuously looking at then.
Speaker Change: And we'll continue to do.
Speaker Change: No. That's really helpful. Thank you Rajeev I appreciate that.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Jeff <unk> of UBS. Your line is open.
Speaker Change: Hi, everyone. Thank you so much for taking the question building off of a lot of questions here on just partners in general really healthy.
Speaker Change: New logo acquisition growth.
Speaker Change: I'm thinking about just the comments.
Speaker Change: You just talked about a lot of customers on Vmware that are really just using the hypervisor as you put more R&D investments and your leverage more of these channel partners.
Speaker Change: Should we think about the potential for increased customer adds moving forward as more come on line as we get the power flex capabilities.
Speaker Change: Capabilities turned on as it's something that we could actually see even further.
Speaker Change: Most acceleration thinking into next year or.
Any any color commentary would be helpful.
Speaker Change: Yes, I think look it's hard for me to predict the future.
Speaker Change: These things, but we are focused on expanding our overall EBITDA.
Speaker Change: The ability to go after the broader portions of the Tam in some of these portions of the dam are locked up with TCA right and.
Speaker Change: The most <unk>.
Speaker Change: Offerings that we bring to the table the more we have the ability to easily insert assets in there.
Speaker Change: Now what I will say, though is when we set out us into a <unk> environment.
Speaker Change: It's going to be with a small portion of our portfolio right. So from a revenue or a <unk>.
Speaker Change: Selling defense perspective, they are only sending a component of our portfolio rather than the full portfolio, which we would sell it it was a wholesale monetization into hyper converged. So there are some puts and takes there.
Speaker Change: But it's hard for us to talk about new logos.
Speaker Change: We are happy with the success, we are getting and will continue to focus on growing those.
Speaker Change: Those comps.
Speaker Change: And the only thing that's helpful. I guess it yes, sorry, if I can add one thing.
Speaker Change: We are happy with our strong level of performance the comparisons do doctors do start to become a bit more challenging starting in Q4, just because last Q4 is when we saw the nice increase and so the compares start to get tougher in Q4 of this year.
Speaker Change: Got it well keep that in mind and then one follow up for you.
Speaker Change: Is there anything we should be conscious about it.
Speaker Change: You had flat MLR this quarter at 110%.
Speaker Change: Is there any color you could share how we should think about maybe.
Speaker Change: I would just die.
Speaker Change: Urgent Susan Expansionary trends you see from customers that have migrated over from competitors like Vmware versus one set of bandwidth new tenants for a long time or is it such a broad customer set that there really isn't a difference that we should see it that way.
Rajiv Ramaswami: Yes, well firstly I know, we don't guide to NR and we continue to be focused on driving expansion and retention and then to your question on divergent I'd say look I think as Rajiv said, we typically will land.
Rajiv Ramaswami: New customer only for a portion of that portfolio up their footprint or their wallet share, especially in the larger customers right now with some more mid sized customer then they might just choose to come with us even already on ready to give us more all of their footprint, but certainly in the larger customers. We only get a portion grow overtime. So I think it's and I'm not sure if any.
Rajiv Ramaswami: Particular difference again, we've competed with Vmware for a long time and so yes, I haven't we wouldn't say, there's any been any difference in terms of the expansion.
Rajiv Ramaswami: Potential necessarily other than what I said I think in one of the earlier questions on the call with regards to just the mechanism of NR.
Speaker Change: Got it that's very helpful. Thank you both and congrats.
Rajiv Ramaswami: Thank you thank.
Thank you.
Conference Operator: Our next question comes from George Wang of Barclays. Your line is open.
George Wang: Thanks for taking my question and squeezing me in just two quick ones.
Conference Operator: Richard.
Conference Operator: Laughter again.
Speaker Change: Over the last three months have you seen any pickup in private cloud and repatriation.
Speaker Change: I wouldn't I would not say so George I don't think it's a systematic trend in private cloud reputation that a lot of people talking about it and we see some examples of that happening, but I wouldn't call. It a trend.
Speaker Change: What I think what I would say this is the trend I see is that people are being more careful about whether to go to the public cloud in the first place that does.
Speaker Change: More I would say I would tend to modernize their on Prem infrastructure will be ready for the future and look at applications, including things like AI and running on Prem and not just simply take everything to the public cloud. So that's the trend that I see more of them people, bringing back there are examples of people, bringing back workloads in the public cloud, but I would say there's more.
Speaker Change: Let me take a much more measured approach to what I'm going to go put in the public cloud in the first place.
Speaker Change: Oh God I, just just a follow up maybe you kind of talk briefly on it already just in terms of go to market kind of maybe hiring more technical sales versus January sales are kind of flu.
Speaker Change: Solution oriented sales can you kind of unpack, maybe gave a little bit more color just whether that's a C. Moore.
Speaker Change: The direction going forward in terms of kind of go to market approach.
Speaker Change: As always are balancing approach, Doug we have to have both <unk> and from a sales perspective as well as technical engineers to support them and then the bigger accounts, we need a higher ratio of technical engineers to the sellers.
Speaker Change: Because those are products of cyclical that tends to require highly technical selling.
Speaker Change: <unk>.
Speaker Change: This proof of concept in law that understanding of the customer in mind methanol. So so whenever we see a frontline salesperson. We also have to look at everything that it takes to make that successful and that includes technical sell us perhaps inside salespeople, we need to make sure there's enough people to do adoption and renewals also along with that so it's a whole we have to look at this.
Speaker Change: Holistically across the entire ecosystem and then on top of that for specialist special product portfolio of products. Some of the newer one flight global native AI.
This requires a more specialized selling skills to so we have a small specialist team with some of these products as well. So we have to look at our fifth investments across the entire length and <unk>.
Speaker Change: Invest appropriately in all of these.
Speaker Change: Okay, great. Thank you.
Speaker Change: Thanks George.
Speaker Change: Thank you.
Conference Operator: The question and answer session and also our conference today. Thank you for participating you may now disconnect.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: [music].