Q3 2025 Palo Alto Networks Inc Earnings Call

May 20, 2025

Your techniques.

You need to work with the security vendors, who can keep pace with.

The attackers and the coupon constantly making sure that they evolve the solution.

Yeah introduces an entirely new threat vector.

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When it comes to securing our products through prompt injection attacks through content moderation through hallucinations and a bunch of these other things that did not exist and awards.

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Palo Alto networks correctly has the strongest solution in the market.

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And a very compelling.

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The most exciting thing for us is ensuring that our customers have access to the more secure AI assistant inside the enterprise.

And with our partnership with Palo Alto networks, the prospect of continuing to lead in terms of providing the most secure and performing to our system for our customers that are some of the biggest organizations operating in 100 plus countries that is what excites us.

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Good day, everyone and welcome to Palo Alto networks.

Fiscal third quarter 2025 earnings conference call.

I am Hamzah firewall senior Vice President of Investor Relations and strategic finance.

Please note that this call is being recorded today Tuesday may 20th 20 twenty-five at 130 P M Pacific time.

Speaker Change: With me on today's call to discuss our fiscal third quarter results, our Niqash Aurora, our chairman and Chief Executive Officer.

Deepak Lecher: And Deepak Lecher.

Deepak Lecher: Our Chief Financial Officer.

Speaker Change: Following our prepared remarks.

Speaker Change: Lee Klarich.

Lee Klarich: Our chief product officer will join us for the question and answer portion.

Lee Klarich: You can find the press release and other information to supplement today's discussion on our website at investors Dot Palo Alto networks Dot com.

Lee Klarich: While there please click on the link for quarterly results to find the Q3 twenty-five supplemental information in Q3 25 earnings presentation.

Lee Klarich: During the course of today's call, we'll be making forward looking statements and projections regarding the company's business operations and financial performance.

Lee Klarich: These statements made today are subject to a number of risks and uncertainties that could cause our actual results to differ from these forward looking statements.

Lee Klarich: Please review our press release and recent SEC filings for a description of these risks and uncertainties.

Lee Klarich: We assume no obligation to update any forward looking statements made in the presentation today.

Lee Klarich: This presentation contains non-GAAP financial measures and key metrics relating to the company's past and expected future performance.

non-GAAP financial measures should not be considered a substitute for financial measures prepared in accordance with GAAP.

Lee Klarich: The most directly comparable GAAP financial measures and reconciliations are in the press release and the appendix of the Investor presentation.

Lee Klarich: Unless specifically noted otherwise all results and comparisons are on a fiscal year over year basis.

Lee Klarich: We also note that management is scheduled to participate in the Bank of America Technology Conference. This quarter I will now turn the call over to the cash.

Speaker Change: Thank you Hamzah good afternoon, everyone and thank you for joining us for our earnings call.

Speaker Change: I'm delighted with our Q3 results.

Speaker Change: We continue to make progress on our platform Ization strategy, while releasing a number of unique innovations in Q3 that set the base for our industry.

Unknown Executive: attackers are coming up with newer techniques so you need to work with a security vendor who can keep pace with you know the attackers and they keep on constantly making sure that they evolve the solution AI introduces an entirely new threat factor when it comes to securing our products through prompt injection attacks, through content moderation, through hallucinations, and a bunch of these other things that did not exist in a world pre-AI.

Speaker Change: It is becoming increasingly clear that his organization to aspire to simplify and modernize their security architectures in the age of AI with data at the center our strategy is resonating resulting in larger deals.

Palliations or in the press release and the appendix of the Investor presentation.

Unless specifically noted otherwise all results and comparisons are on a fiscal year over year basis.

Speaker Change: Most notably we crossed an important milestone of $5 billion. In next generation security are are up 34% ear delivering industry leading growth at scale.

We also note that management is scheduled to participate in the Bank of America Technology Conference. This quarter I will now turn the call over to the cash.

Speaker Change: Our net unit growth also showed positive momentum in the third quarter.

Thank you Hamzah good afternoon, everyone and thank you for joining us for our earnings call.

Nikesh Arora: Palo Alto Networks currently has the strongest solution in the market and a very compelling roadmap when it comes to The most exciting thing for us is ensuring that our customers have access to the most secure AI system inside the enterprise.

Speaker Change: We believe we reached an inflection point in our next generation security story.

I'm delighted with our Q3 results.

We continue to make progress on our platform Ization strategy, while releasing a number of unique innovations in Q3 that set the pace for our industry.

Speaker Change: A growing majority of our incremental growth. This year is derived from our AI powered X I am SaaS and software firewalls.

Unknown Executive: of Unique Innovations in Q3 that set the base for our industry.

Speaker Change: These offerings was large Tam should help underpin your confidence in the sustainability of our Engie S. A our growth as we march towards that $15 billion at our target for a 530.

Nikesh Arora: It is becoming increasingly clear that as organizations aspire to simplify and modernize their security architectures in the age of AI, with data at the center, our strategy is resonating, resulting in larger deals.

It is becoming increasingly clear that as organizations aspire to simplify and modernize their security architectures in the age of AI with data at the center our strategy is resonating resulting in larger deals.

Nikesh Arora: And with our partnership with Palo Alto Networks, the prospect of continuing to lead in terms of providing the most secure and performant AI system for our customers that are some of the biggest organizations operating in 100 plus countries, that is what excites us.

Speaker Change: On the profitability front.

Nikesh Arora: Most notably, we crossed an important milestone of $5 billion in next-generation security ARR, up 34% year-to-year, delivering industry-leading growth at scale. Our net new ARR growth also showed positive momentum in the third quarter. We believe we've reached an inflection point in our next-generation security story, as a growing majority of our incremental growth this year is derived from our AI-powered XIM, SASE, and software firewalls. These offerings with large TAMs should help underpin your confidence in the sustainability of our NGS AR growth as we march towards our $15 billion ARR target for F530. On the profitability front, Q3 continues to show the leverage in our business model as we drive efficiencies from our scale and benefit from the economies of larger multi-product deals, in addition to continuing to drive AI efficiency benefits slowly and steadily.

Speaker Change: Q3 continues to show the leverage in our business model.

Speaker Change: Most notably we crossed an important milestone of $5 billion in next generation security or are up 34% ear delivering industry leading growth at scale.

Speaker Change: As we dive efficiencies from our scale and benefit from the economies of larger multi product deals. In addition to continuing to drive efficiency benefits slowly and steadily.

Our net or gross.

It also showed positive momentum in the third quarter.

Speaker Change: We also generated healthy free cash flow, while continuing to manage our transition from a billing focus to our P. L. As such we remain confident in achieving our adjusted free cash flow margin targets over the next few years.

Speaker Change: We believe we reached an inflection point in our next generation security story.

Hamza Fodderwala: Good day, everyone, and welcome to Palo Alto Network's Fiscal Third Quarter 2025 Earnings Conference. I am Hamza Fodderwala, Senior Vice President of Investor Relations and Strategic Finance. Please note that this call is being recorded today, Tuesday, May 20th, 2025, at 1.30 p.m. Pacific time. With me on today's call to discuss our fiscal third quarter results are Nikesh Arora, our Chairman and Chief Executive Officer, and Dipak Golechha. Our Chief Financial Officer.

Speaker Change: As a growing majority of our incremental growth. This year is derived from our AI powered X I am SaaS and software firewalls. These.

Speaker Change: Let's be clear you can walking on a street corner a conference without hurting hearing the words AI.

Speaker Change: These offerings was large Tam should help underpin your confidence in the sustainability of our N. G. S. A our growth as we march towards that $15 billion out of our target four 530.

Speaker Change: The urgency adopt AI is omnipresent in all of our customers.

It's no longer seems to be a choice.

Speaker Change: On the profitability front Q3 continues to show the leverage in our business model as we drive efficiencies from our scale and benefit from the economies of larger multi product deals. In addition to continuing to drive efficiency benefits slowly and steadily.

Speaker Change: It is becoming a strategic imperative for every customer.

Speaker Change: Has the risk of an action is too high.

Speaker Change: During every conference every customer conversation on the topic of AI transformation is more and more frequent and now the conversation is shifting to adjourn take AI.

Nikesh Arora: We also generated healthy free cash flow while continuing to manage our transition from billing-focused to RPO. As such, we remain confident in achieving our adjusted free cash flow margin targets over the next few years.

Speaker Change: What's fascinating is this is actually creating a higher sense of urgency amongst our customers to undertake their technology transformation.

Hamza Fodderwala: Following our prepared remarks, Lee Klarich, our Chief Product Officer, will join us for the question and answer portion. You can find the press release and other information to supplement today's discussion on our website at investors.paloaltonetworks.com. While there, please click on the link for quarterly results to find the Q3'25 Supplemental Information and Q3'25 Earnings Presentation.

Speaker Change: We also generated healthy free cash flow, while continuing to manage our transition from a billing focus to our P. O as such we remain confident in achieving our adjusted free cash flow margin targets over the next few years.

Speaker Change: Transformation that require a fundamental change in our infrastructure.

Speaker Change: Traditional idea architectures, one bill for the scale speed or complexity of AI to truly capitalize on the highest potential enterprises need modern cloud delivered platform that can ingest vast amounts of data and operate in real time at scale.

Nikesh Arora: Let's be clear, you can't walk around a street corner or conference without hearing the words AI. The urgency to adopt AI is omnipresent in all of our customers. It no longer seems to be a choice. is becoming a strategic imperative for every customer as the risk of inaction is too high. During every conference, every customer conversation, the topic of AI transformation is more and more frequent, and now the conversation is shifting to agentic AI. What's fascinating is this is actually creating a higher sense of urgency amongst our customers to undertake their technology transformation. Transformation that require a fundamental change in your infrastructure.

Speaker Change: Let's be clear you can walk around a street corner a conference without hurting hearing the words AI.

Speaker Change: The urgency adopt AI is omnipresent in all of our customers.

Speaker Change: It's no longer seems to be a choice.

Speaker Change: We've seen customers who were previously delaying their cloud migrations are now re accelerating their investment.

Speaker Change: It is becoming a strategic imperative for every customer.

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

Speaker Change: Has the risk of an action is too high.

Speaker Change: This is good news for cybersecurity.

Speaker Change: During every conference every customer conversation the topic of AI transformation is more and more frequent and now the conversation is shifting to adjourn take AI.

Speaker Change: As the eye becomes more deeply integrated into our customers' businesses the need to protect the underlying data models and infrastructure will become paramount.

Speaker Change: What's fascinating is this is actually creating a higher sense of urgency amongst our customers to undertake their technology transformation.

Speaker Change: Over the next year and estimated more than 300 billion will be spent on AI infrastructure alone that kind of spend does just.

Speaker Change: Transformation that require a fundamental change in their infrastructure.

Speaker Change: It doesn't just power models you.

Speaker Change: You saw the video of your open with glean or hotter work, enabling secure adoption of this next wave of AI powered applications.

Nikesh Arora: Traditional IT architectures weren't built for the scale, speed, or complexity of AI. To truly capitalize on AI's potential, enterprises need modern, cloud-delivered platforms that can ingest vast amounts of data and operate in real-time at scale. We've seen customers who were previously delaying their cloud migrations are now re-accelerating their investment.

Speaker Change: This is precisely why industry must change the paradigm shifting away from today's fragmented security landscape and towards consolidation.

Hamza Fodderwala: This presentation contains non-GAAP financial measures and key metrics relating to the company's past and expected future performance. Non-GAAP financial measures should not be considered a substitute for financial measures prepared in accordance with GAAP. The most directly comparable GAAP financial measures and reconciliations are in the press release and the appendix of the investor presentation. Unless specifically noted otherwise, all results and comparisons are on a fiscal year-over-year basis.

Speaker Change: We've seen customers who were previously delaying their cloud migrations are now re accelerating their investments.

Speaker Change: So fragmentation as friction friction caused the latency latency is the enemy of real time, cyber security now more than ever bringing data together into a unified platform is critical at a score security is a data problem.

Nikesh Arora: This is good news for cybersecurity. And as AI becomes more deeply integrated into our customers' businesses, the need to protect the underlying data, models, and infrastructure will become paramount. For the next year, an estimated more than $300 billion will be spent on AI infrastructure alone. That kind of spend doesn't just power models. You saw the video we opened with Glean, our harder work enabling secure adoption of this next wave AI powered application.

Speaker Change: This is good news for cyber security and.

Speaker Change: As the eye becomes more deeply integrated into our customers' businesses the need to protect the underlying data models and infrastructure will become paramount.

Speaker Change: We believe our depth and breadth of data is amongst the largest in the industry and it's something that point solutions simply cannot access this leads to severe threat detection efficacy reduce false positives and faster incident response times, all critical metrics for our customers and key drivers of our market leadership.

Speaker Change: Over the next year and estimated more than $300 billion will be spent on AI infrastructure alone that kind of spend dusk just.

Speaker Change: It doesn't just power models you.

Speaker Change: You saw the video of the open with glean or harder work, enabling secure adoption of this next wave of AI powered applications.

Hamza Fodderwala: We also note that management is scheduled to participate in the Bank of America technology conference this quarter.

Speaker Change: The volume and complexity of threats are not slowing down either bad actors are using AI to move faster than ever recently, a unit forty-two team was able to assimilate and entire ransomware attack and under 25 minutes using AI at every stage of the vaccine.

Nikesh Arora: This is precisely why industry must change the paradigm, shifting away from today's fragmented security landscape and towards consolidation. The cost of fragmentation is friction. Friction causes latency. Latency is the enemy of real-time cybersecurity. Now more than ever, bringing data together into a unified platform is critical. At its core, security is a data problem. We believe our depth and breadth of data is amongst the largest in the industry, and is something that point solutions simply cannot access. This leads to superior threat detection efficacy, reduced false positives, and faster incident response times, all critical metrics for our customers and key drivers of our market leadership.

Speaker Change: This is precisely why industry must change the paradigm shifting away from today's fragmented security landscape and towards consolidation the cost of fragmentation as friction friction caused the latency latency is the enemy of real time cybersecurity now more than ever bringing data together into a unified platform is critical at a score security is.

Hamza Fodderwala: I will now turn the call over to Nikesh. Thank you, Hamza.

Nikesh Arora: Good afternoon, everyone, and thank you for joining us for our earnings call. I'm delighted with our Q3 results. We continue to make progress on our platformization strategy, while releasing a number of unique innovations in Q3 that set the pace for our industry. It is becoming increasingly clear that as organizations aspire to simplify and modernize their security architectures in the age of AI, with data at the center, our strategy is resonating, resulting in larger deals. Most notably, we crossed an important milestone of $5 billion in the next generation security ARR, up 34% year-over-year, delivering industry-leading growth at scale.

Speaker Change: That's a staggering increase in speed powered entirely by AI.

Speaker Change: Over a year ago.

Speaker Change: Double down on our platform Ization strategy.

Speaker Change: The data problem.

Speaker Change: We're pleased with the large deal momentum we've had since and the endorsement of our strategy broadly across the industry.

Speaker Change: Our platform approach is working well customers slowly and steadily.

Speaker Change: Our approach, which favors better and a speedier security outcomes and lower cost of ownership is being adopted by more and more of our customers.

Nikesh Arora: The volume and complexity of threats are not slowing down either. Bad actors are using AI to move faster than ever. Recently, our Unit 42 team was able to simulate an entire ransomware attack in under 25 minutes using AI at every stage of the attack. That's a staggering increase in speed powered entirely by AI.

Speaker Change: The volume and complexity of threats are not slowing down either.

Speaker Change: In Q3, we delivered over 19 net new platform Ization deals now have a total of approximately 250 of 1200 and 50 Bucks organizations within our top 5000 customers.

Speaker Change: Bad actors are using AI to move faster than ever recently, a unit forty-two team was able to assimilate and die ransomware attack and under 25 minutes using AI at every stage of the vaccine.

Nikesh Arora: Our net new ARR growth also showed positive momentum in the third quarter. We believe we've reached an inflection point in our next generation security story, as a growing majority of our incremental growth this year is derived from our AI-powered XIM, SASE, and software firewalls. These offerings with large TAMs should help underpin your confidence in the sustainability of our NGS AR growth as we march towards our $50 billion ARR target for F530. On the profitability front, Q3 continues to show the leverage in our business model, as we drive efficiencies from our scale and benefit from the economies of larger multi-product deals, in addition to continuing to drive AI efficiency benefits slowly and steadily.

Speaker Change: Deeper number of customers with multiple black from physicians grew nearly 70% of our near in Q3.

Speaker Change: That's a staggering increase in speed powered entirely by AI.

In particular, the number of customers platform is an arm cortex, <unk> up nearly three times, reflecting strong momentum with Exxon.

Nikesh Arora: Over a year ago, we doubled down on our platformization strategy. We're pleased with the large deal momentum we've had since and the endorsement of our strategy broadly across the industry. Our platform approach is working well with customers, slowly and steadily. Our approach, which favors better and speedier security outcomes and lower cost of ownership, is being adopted by more and more of our customers. In Q3, we delivered over 90 net new platformization deals, now have a total of approximately 1,250 platformizations within our top 5,000 customers. Digging deeper, the number of customers with multiple platformizations grew nearly 70% year on year in Q3.

Speaker Change: Over a year ago.

Speaker Change: Double down on our platform Ization strategy.

Speaker Change: We're pleased with the large deal momentum we've had since and the endorsement of our strategy broadly across the industry.

Speaker Change: The overall growth of our largest customers also reinforces our success, we had 130 customers with over $5 million and Engie S. A IRR in Q3 up over 40% year over year, and 44 customers with over $10 million and then yes, they are up over 60%.

Speaker Change: Our platform approach is working well with customers slowly and steadily.

Speaker Change: Our approach, which favors veterans speedier security outcomes and lower cost of ownership is being adopted by more and more of our customers.

Speaker Change: To give more color on what is black Friday should look like I want to take a look at a few examples from Q3.

Speaker Change: In Q3, we delivered over 19 net new platform Ization deals now have a total of approximately 250 of 1200 and 50 Bucks organizations within our top 5000 customers digging deeper the number of customers with multiple black for musicians grew nearly 70% of our near in Q3 in.

Speaker Change: Particular note beyond the size and scope of our deals is the customer's ability to consolidate a significant number of products with Palo Alto networks.

Nikesh Arora: We also generated healthy free cash flow while continuing to manage our transition from a billing focus to RPO. As such, we remain confident in achieving our adjusted free cash flow margin targets over the next few years. Let's be clear, you can't walk around a street corner or conference without hearing the words AI. The urgency to adopt AI is omnipresent in all of our customers. It no longer seems to be a choice. is becoming a strategic imperative for every customer, as the risk of inaction is too high. During every conference, every customer conversation, the topic of AI transformation is more and more frequent.

Speaker Change: <unk> global consulting firm sign a transaction worth over $90 million in Q3. This customer platform is on cortex, Rex I am replacing a legacy incumbent Sim providers.

Nikesh Arora: In particular, the number of customers platformized on Cortex was up nearly three times, reflecting strong momentum with XIM. Pure World Growth and Largest Customers also reinforces our success. We had 130 customers with over $5 million in NGS ARR in Q3, up over 40% year-over-year, and 44 customers with over $10 million in NGS ARR, up over 60%.

Speaker Change: In particular, the number of customers platform is an arm cortex <unk>.

Speaker Change: <unk> up nearly three times, reflecting strong momentum with excellent.

Speaker Change: Our differentiated value was centered in our ability to materially reduce mean time to respond.

Speaker Change: The overall growth of our largest customers also reinforces our success, we had 130 customers with over $5 million and Engie S. A our or in Q3 up over 40% year over year, and 44 customers with over $10 million and then yesterday are up over 60%.

Speaker Change: We also reduced costs by consolidating a total of four products in this deal as a result, our NDS are just customer nearly doubled year over year.

Speaker Change: A leading financial services company signed a 46 million dollar transaction with us the customer recognized the value of X I am and consolidated four products with us, including the displacement of their well established edr and Sim vendors.

Nikesh Arora: To give more color to what these platformizations look like, I want to take a look at a few examples from Q3. Of particular note, beyond the size and scope of our deals, is the customer's ability to consolidate a significant number of products with Palo Alto Networks. A leading global consulting firm signed a transaction worth over $90 million in Q3. This customer platformized on Cortex Rex IAM, replacing a legacy incumbent SIEM provider. Our differentiated value was centered in our ability to materially reduce mean time to respond. We also reduced costs by consolidating a total of four products in this deal.

Speaker Change: To give more color on what these platform additions look like I want to take a look at a few examples from Q3.

Nikesh Arora: And now the conversation is shifting to agentic AI. What's fascinating is this is actually creating a higher sense of urgency amongst our customers to undertake their technology transformation. Transformation that requires a fundamental change in your infrastructure. Traditional IT architectures weren't built for the scale, speed, or complexity of AI. To truly capitalize on AI's potential, enterprises need modern, cloud-delivered platforms that can ingest vast amounts of data and operate in real-time at scale. We've seen customers who were previously delaying their cloud migrations are now re-accelerating their investment.

Speaker Change: Particular note beyond the size and scope of our deals is the customer's ability to consolidate a significant number of products with Palo Alto networks.

Speaker Change: <unk> signed the customer also expanded and extended their platform Ization on our network security platform in the quarter.

Speaker Change: <unk> global consulting firm sign a transaction worth over $90 million in Q3. This customer platform is on cortex, Rex I am, replacing a legacy incumbents and provider.

Speaker Change: Our U S financial services firm signed a $32 million transaction with US. This customer platform is on network security and consolidated cloud security vendors driven by accompany mandate to consolidate their security tools and reduce complexity in their cyber security stack and this deal and consolidated four products.

Speaker Change: Our differentiated value was centered in our ability to materially reduce mean time to respond.

Speaker Change: We also reduced costs by consolidating a total of four products in this deal as it was.

Nikesh Arora: As a result, our NGS ARs as customer nearly doubled year over year. A leading financial services company signed a $46 million transaction with us. The customer recognized the value of XIM and consolidated four products with us, including the displacement of their well-established DDR and SIM vendors. Beyond XIM, the customer also expanded and extended their platformization on our network security platform in the quarter.

Speaker Change: Now moving on to.

Walt: Walt our NDS are just customer nearly doubled year over year.

Speaker Change: For an update on cortex.

Nikesh Arora: This is good news for cybersecurity. And as AI becomes more deeply integrated into our customers' businesses, the need to protect the underlying data, models, and infrastructure will become paramount. Over the next year, an estimated more than $300 billion will be spent on AI infrastructure alone. That kind of spend doesn't just power models. You saw the video we opened with Glean, our harder work enabling secure adoption of this NextWave AI-powered application. This is precisely why industry must change the paradigm, shifting away from today's fragmented security landscape and towards consolidation. The cost of fragmentation is friction. Friction causes latency.

Speaker Change: As you can tell from earlier comments I am, particularly excited about the momentum we're seeing with X I am that's all accelerating growth in Q3.

Walt: A leading financial services company signed a 46 million dollar transaction with us the customer recognized the value of X I am and consolidated four products with us, including the displacement of their well established edr and Sim vendors.

Speaker Change: Exxon is not only our fastest growing product ever it is now more impactful to our overall growth rate.

Walt: Bionic sight, the customer also expanded and extended their platform Ization on our network security platform on the in the quarter.

Speaker Change: I believe that from a strategic perspective ex Iowa has the potential of being the game changer for both the industry and Palo Alto networks.

Nikesh Arora: A U.S. financial services firm signed a $33 million transaction with us. This customer platformized on network security and consolidated cloud security vendors, driven by a company mandate to consolidate their security tools and reduce complexity in their cybersecurity stack. In this deal, they consolidated four products.

Walt: Our U S financial services firm signed a 32 million dollar transaction with US. This customer platform is on network security and consolidated cloud security vendors driven by a company mandate to consolidate their security tools and reduce complexity in their cyber security stack and this deal the consolidated four products.

Speaker Change: In the first innings of baseball not cricket.

Speaker Change: Transforming the cyber security industry with Exxon.

Speaker Change: By consolidating security data into a single AI driven soft platform X sight is modernizing and disrupting the traditional Sim market, we're continuing to see amazing milestones, including customers meantime to respond from weeks to minutes.

Unknown Executive: Now moving on...

Walt: Now moving on.

Nikesh Arora: to an update on Cortex. As you can tell from my earlier comments, I'm particularly excited about the momentum we're seeing with XIM. We saw accelerating growth in Q3. Exxon is not only our fastest growing product ever, it is now more impactful to our overall growth. I believe that from a strategic perspective, XIM has the potential of being the game changer for both the industry and Palo Alto Network.

Nikesh Arora: Latency is the enemy of real-time cybersecurity. Now more than ever, bringing data together into a unified platform is critical. At its core, security is a data problem. We believe our depth and breadth of data is amongst the largest in the industry, and it's something that point solutions simply cannot access. This leads to superior threat detection efficacy, reduced false positives, and faster incident response times. All critical metrics for our customers and key drivers of our market leadership. The volume and complexity of threats are not slowing down either. Bad actors are using AI to move faster than ever.

Walt: So an update on cortex.

Speaker Change: As security in his face growing complexity and talent shortages, we believe <unk> is well positioned to be operating system Award at Gulf.

Walt: As you can tell from earlier comments I am, particularly excited about the momentum we're seeing with X I am it's all accelerating growth in Q3.

Speaker Change: The numbers speak for themselves. We now have Roxanne really torn 70 customers in exile and the average IRR per customer is over $1 million.

Walt: Exxon is not only our fastest growing product ever it is now more impactful to our overall growth rate.

Walt: I believe that from a strategic perspective ex I am has the potential of being the game changer for both the industry and Palo Alto networks for the first innings of baseball not cricket, while transforming the cyber security industry with Exxon.

Speaker Change: This already makes it one of the most successful products in the history of job security.

Speaker Change: What's even more remarkable is that we've generated reached this level of adoption and impact just 30 months. After Exxon was made generally available to customers.

Nikesh Arora: for the first innings of baseball, not cricket, of transforming the cyber security industry with XIM. By consolidating security data into a single AI-driven SOC platform, Exime is modernizing and disrupting the traditional SIEM market. We're continuing to see amazing milestones, including customers' mean time to respond from weeks to minutes. As security teams face growing complexity and talent shortages, we believe Exime is well-positioned to be the operating system for modern seconds.

Walt: By consolidating security data into a single AI, driven soft platform X simas, modernizing and disrupting the traditional Sim market, we're continuing to see amazing milestones, including customers mean time to respond from weeks to minutes.

Speaker Change: Some are argue over 200% area in Q3, nearly twice as fast as that closes next generation Sim competitor.

Nikesh Arora: Recently, our Unit 42 team was able to simulate an entire ransomware attack in under 25 minutes, using AI at every stage of the attack. That's a staggering increase in speed, powered entirely by AI.

Speaker Change: On a trailing 12 month basis axon bookings are now approaching $1 billion.

Walt: As security in his face growing complexity and talent shortages, we believe Exxon is well positioned to be operating system award in cycles.

Speaker Change: About three our ears into our exciting journey, our sustained strong momentum bolsters our confidence in a long growth runway as we increasingly tap into this estimated 40 billion dollar second off staff.

Nikesh Arora: Over a year ago, we doubled down on our platformization strategy. We're pleased with the large deal momentum we've had since and the endorsement of our strategy broadly across the industry. Our platform approach is working well with customers, slowly and steadily. Our approach, which favors better and speedier security outcomes and lower cost of ownership, is being adopted by more and more of our customers. In Q3, we delivered over 90 net new platformization deals, now have a total of approximately 1250 platformizations within our top 5,000 customers. Taking deeper, the number of customers with multiple platformizations grew nearly 70% year-on-year in Q3.

Nikesh Arora: The numbers speak for themselves. We now have approximately 270 customers on XIM, and the average AR per customer is over $1 million. This already makes it one of the most successful products in the history of cybersecurity. What's even more remarkable is that we've generated, reached a level of adoption and impact just 30 months after Exxon was made generally available to customers. ExxonMairor grew over 200% year-over-year in Q3, nearly twice as fast as our closest next-generation sim company. On a trailing 12-month basis, Exxon bookings are now approaching $1 billion. About three years into our Ex-Im journey, our sustained strong momentum bolsters our confidence in a long growth runway as we increasingly tap into this estimated $40 billion SECOP stamp.

Walt: The numbers speak for themselves. We now have Roxanne really torn 70 customers. The next time and the average IRR per customer is over $1 million.

Speaker Change: Last quarter, we unveil cortex cloud our breakthrough in unifying cloud crusher and sock operations.

Walt: This already makes it one of the most successful products in the history of cyber security.

Speaker Change: Last few months, we are seeing strong early customer interest in <unk> crowd, the nine figure pipeline spanning hundreds of customers.

Walt: What's even more remarkable is that we've generated reached this level of adoption and impact just 30 months. After Exxon was made generally available to customers.

Speaker Change: This quarter, we also announced two products that will enhance our ability to further expand excitements capability.

Walt: Some are argue over 200% area in Q3, nearly twice as fast as that closes next generation Sim competitor.

Speaker Change: Next time once deployed has become the foundational security data that our platform for our customers.

Walt: On a trailing 12 month basis axon bookings are now approaching $1 billion.

Speaker Change: We now understand the data we're capturing and this is the dairy actually need for a whole variety of use cases in April we launched advanced email security to help stop threats before they reached inbox and our exposure management capability was launched as well designed to cut through the noise and focus security in the on the risks that really matter.

About three our ears indoor Exxon journey, our sustained strong momentum bolsters, our confidence in a long growth runway as we increasingly tap into this estimated 40 billion dollar cycle off staff.

Nikesh Arora: In particular, the number of customers platformized on Cortex was up nearly three times, reflecting strong momentum with XIM. The overall growth of the largest customers also reinforces our success. We had 130 customers with over $5 million in NGS ARR in Q3, up over 40% year-to-year, and 44 customers with over $10 million in NGS ARR, up over 60%.

Nikesh Arora: Last quarter, we unveiled Cortex Cloud, our breakthrough in unifying cloud cluster and SOC operations. For the last few months, we have seen strong early customer interest in Cortex Cloud, the nine-figure pipeline spanning hundreds of customers. This quarter, we also announced two products that will enhance our ability to further expand X5M and its capabilities. Exxon once deployed has become the foundational security data data platform for our customers. We now understand the data we're capturing in this is the data you actually need for a whole variety of use cases. In April, we launched advanced email security to help stop threats before they reach the inbox.

Walt: Last quarter, we unveiled cortex cloud our breakthrough in unifying cloud crusher and sock operations.

Speaker Change: That's not all think of X times, our data to market engine every bite on nearly 12 petabytes of telemetry a ingest daily around cloud identity endpoints in email and more act as high octane fuel.

Walt: Last few months, we are seeing strong early customer interest and go to cloud the nine figure pipeline spanning hundreds of customers.

Nikesh Arora: To give more color on what these platformizations look like, I want to take a look at a few examples from Q3. Of particular note, beyond the size and scope of our deals, is the customer's ability to consolidate a significant number of products with Palo Alto Network. A leading global consulting firm signed a transaction worth over $90 million in Q3. This customer platformized on Cortex-3x IAM, replacing a legacy incumbent SIEM provider. Our differentiated value was centered in our ability to materially reduce mean time to respond. We also reduced costs by consolidating a total of four products in this deal.

This quarter, we also announced two products that will enhance our ability to further expand excitements capability.

Speaker Change: This massive data stream isn't just powering X I am it's igniting our ability to identify and accelerate our entry into entirely new markets unlocking additional tam in the tens of billions, we're now uniquely positioned to address.

Walt: X time once deployed has become the foundational security data that our platform for our customers.

Walt: We now understand the data we're capturing and this is the data you actually need for a whole variety of use cases in April we launched advanced email security to help stop threats before they reach the inbox and our exposure management capability was launched as well designed to cut through the noise and focus security in the on the risks that truly matter.

Speaker Change: So a comprehensive understanding of data sources and broad data ingestion capabilities, we're beginning to deliver our solutions is a multiple content capabilities of science.

Nikesh Arora: And our exposure management capability was launched as well, designed to cut through the noise and focus security on the risks that truly matter.

Speaker Change: Every piece of telemetry, we ingest it makes our platform smarter the more data people and the further our engine can go and the smarter it gets the.

Nikesh Arora: That's not all. Think of XRM as our data to market engine. Every byte, or nearly 12 petabytes of telemetry we ingest daily around cloud identity endpoints in email and more, act as high octane fuel. This massive data stream isn't just powering XIM, it's igniting our ability to identify and accelerate our entry into entirely new markets, unlocking additional time in the tens of billions we're now uniquely positioned to address. to our comprehensive understanding of data sources and broad data ingestion capabilities for bringing together solutions using the multiple content capabilities of Excel. Every piece of telemetry we ingest makes our platform smarter.

Walt: That's not all think of X times, our data to market engine every bite of nearly 12 petabytes of telemetry a ingest daily around cloud identity endpoints in the email and more act as high octane fuel.

Nikesh Arora: As a result, our NGS ARs' customer nearly doubled year-over-year. A leading financial services company signed a $46 million transaction with us. The customer recognized the value of XIM and consolidated four products with us, including the displacement of their well-established DDR and SIM vendors. Beyond XIM, the customer also expanded and extended their platformization on our network security platform in the quarter. A U.S. financial services firm signed a $33 million transaction with us. This customer platformized on network security and consolidated cloud security vendors, driven by a company mandate to consolidate their security tools and reduce complexity in their cybersecurity stack.

Speaker Change: The faster, we can build and trailing your capabilities on top of it.

Speaker Change: We're encouraged by the early customer feedback and look forward to continuing to discuss this more in the future.

Speaker Change: Now shifting our focus to network security.

Walt: This massive data stream isn't just powering X I am it's igniting our ability to identify and accelerate our entry into entirely new markets unlocking additional tam in the tens of billions, we're now uniquely positioned to address.

Speaker Change: We continue to lead the market in an inbox security and gained share across all three of our best of breed form factors.

Speaker Change: As enterprises look to securely and increasingly secure hybrid workforces in 19 environment spanning headquarters branch offices data centers. The cloud, we're uniquely positioned with a consistent security architecture.

Walt: Through a comprehensive understanding of data sources and broad data ingestion capabilities. We're beginning to deliver solutions is a multiple content capabilities are excellent.

Speaker Change: Three our product revenue grew 16% year over year. This growth was broad based the software continuing to increase in the overall mix. We also saw stable demand in the appliance market.

Walt: Every piece of telemetry, we ingest it makes our platform smarter the more data people and the further our engine can go as a smarter it gets the.

Nikesh Arora: The more data we pull in, the further our engine can go and the smarter it gets. The faster we can build entirely new capabilities in public. They're encouraged by the early customer feedback and look forward to continuing to discuss this more in the future.

Nikesh Arora: In this deal, they consolidated four products.

Nikesh Arora: Now moving on... to an update on Cortex. As you can tell from my earlier comments, I'm particularly excited about the momentum we're seeing with XIM. We saw accelerating growth in Q3. Exxon is not only our fastest growing product ever, it is now more impactful to our overall growth. I believe that from a strategic perspective, XIM has the potential of being the game changer for both the industry and Palo Alto Network. for the first innings of baseball, not cricket, of transforming the cyber security industry with XFAM. By consolidating security data into a single AI-driven SOC platform, Exime is modernizing and disrupting the traditional SIEM market.

Walt: The faster, we can build and trialing your capabilities on top of it.

Speaker Change: Silver firewall AOR grew approximately 20% area in Q3 with public cloud deployments continuing to be the primary driver.

Walt: We're encouraged by the early customer feedback and look forward to continuing to discuss this more in the future.

Speaker Change: AI is accelerating cloud adoption and we believe this trend will expand the long term need for sulfur firewalls that scale of modern workloads.

Walt: Now shifting our focus to network security.

Walt: We continue to lead the market in an inbox security and gained share across all three of our best of breed form factors.

Speaker Change: Shifting to sassy, which continues to be our fastest growing form factor in network security and a strong contributor to our overall growth.

Walt: As enterprises look to securely and increasingly secure hybrid workforces in 19 environment spanning headquarters branch offices data centers and the cloud we're uniquely positioned with a consistent security architecture.

Speaker Change: As customers transform their networks to keep pace with delivering first class security capabilities for remote users or branch offices, we continue to see robust growth for Safi.

Nikesh Arora: In Q3, our product revenue grew 16% year-to-year. This growth was broad based, the software continuing to increase in the overall mix. We also saw stable demand in the appliance Software firewall ARR grew approximately 20% year-over-year in Q3 with public cloud deployments continuing to be the primary driver. AI is accelerating cloud adoption. And we believe this trend will expand the long term need for software firewalls that scale with modern work Shifting to SASE, which continues to be our fastest growing form factor in network security and a strong contributor to our overall growth. As customers transform their network to keep pace with delivering first-class security capabilities for remote users and branch offices, we continue to see robust growth for SAF.

Walt: Q3, our product revenue grew 16% year over year. This growth was broad based the software continuing to increase in the overall mix. We also saw stable demand in the appliance market.

Speaker Change: When he says he projects are large and comprehensive which is well suited to a rich offering an enterprise focused sales expertise in Q3, our SaaS Sierra grew 36% year over year more than twice as fast as the overall market and ahead of our key sassy competitors. Furthermore.

Nikesh Arora: We're continuing to see amazing milestones, including customers' mean time to respond from weeks to minutes. As security teams face growing complexity and talent shortages, we believe Exime is well-positioned to be the operating system for Warnecker. The numbers speak for themselves. We now have approximately 270 customers on XIM, and the average AR per customer is over $1 million. This already makes it one of the most successful products in the history of cybersecurity. What's even more remarkable is that we've generated, reached a level of adoption and impact just 30 months after Exxon was made generally available to customers.

Walt: So if a firewall AOR grew approximately 20% area in Q3 with public cloud deployments continuing to be the primary driver.

Speaker Change: 40% of new chassis customers were net new to Palo Alto networks in Q3.

Walt: AI is accelerated cloud adoption and we believe this trend will expand the long term need for sulfur firewalls that scale of modern workloads.

Speaker Change: We now have approximately 6000 classic customers up 22% year over year.

Walt: Shifting to sassy, which continues to be our fastest growing form factor in network security and a strong contributor to our overall growth.

Speaker Change: Yeah.

Speaker Change: Meanwhile.

Speaker Change: The drivers of our SaaS the momentum our broadening this quarter, we saw particularly particular strength in Prisma access browser, which again accounted for a third of our Prisma access seats sold in the quarter and just 18 months since our talent acquisition. We have now sold approximately similar in license seats on Prisma access browser up more than 10 X from a year ago and they have a healthy nine figure.

Walt: As customers transform their networks to keep pace with delivering first class security capabilities for remote users or branch offices, we continue to see robust growth for Safi.

Nikesh Arora: Many SASI projects are large and comprehensive, which is well suited to our rich offering and enterprise-focused sales economy. In Q3, our SaaSy era grew 36% a year, more than twice as fast as the overall market and ahead of our key SaaSy competitors. Furthermore, 40% of these SaaSy customers were net new to Palo Alto Networks in Q3. We now have approximately 6,000 FASI customers of 22% year-over-year. Meanwhile, the drivers of our SaaSy momentum are broadening. This quarter, we saw particular strength in Prisma Access Browser, which again accounted for a third of our Prisma Access seats sold in the quarter.

Walt: Many sassy projects are large and comprehensive which is well suited to a rich offering an enterprise focused sales expertise in Q3, our SaaS Sierra grew 36% year over year more than twice as fast as the overall market and ahead of our key sassy competitors. Furthermore.

Nikesh Arora: Exxon Mayer Argo over 200% year-over-year in Q3, nearly twice as fast as our closest next-generation sim company. On a trailing 12-month basis, Exxon bookings are now approaching $1 billion. About three years into our Ex-Im journey, our sustained strong momentum bolsters our confidence in a long growth runway as we increasingly tap into this estimated $40 billion SECOP stamp.

Speaker Change: Pipeline.

Speaker Change: As the IDE drives more data and applications to cloud the browser is becoming the primary interface to accessing these resources acting as the application runtime environment.

40% of new SaaS customers were net new to ball Aten networks in Q3.

Speaker Change: The operating system of the scenario becomes less about local resources more about securely connecting to and managing cloud based services.

Walt: We now have approximately 6050 customers up 22% year over year.

Speaker Change: And as more and more critical application in the data decide within the browser environment. It naturally becomes a target for cyber cyber attacks.

Nikesh Arora: Last quarter, we unveiled Cortex Cloud, our breakthrough in unifying cloud, cluster, and SOC operations. For the last few months, we have seen strong early customer interest in Cortex Cloud, the nine-figure pipeline spanning hundreds of customers. This quarter, we also announced two products that will enhance our ability to further expand X5M and its capabilities. Exime, once deployed, has become the foundational security data platform for our customers. We now understand the data we're capturing in this is the data you actually need for a whole variety of use cases. In April, we launched advanced email security to help stop threats before they reach the inbox, and our exposure management capability was launched as well, designed to cut through the noise and focus security on the risks that truly matter.

Walt: Yeah.

Walt: Meanwhile, the drivers of our SaaS the momentum our broadening this quarter, we saw particularly particular strength in Prisma access browser, which again accounted for a third of our Prisma access seats sold in the quarter and just 18 months since our talent acquisition. We have now sold approximately similar in license seats on Prisma access browser up more than 10 X from a year ago.

Speaker Change: Prisma access browsers native controls and real time visibility are designed to help ensure that sensitive data means they've got it during browsing sessions, regardless of the use of the location or the application, they're accessing and we believe prisma access browser is strategically positioned to be the future of OS and then maybe they can secure and productive work in an evolving AI driven world.

Nikesh Arora: In just 18 months since our talent acquisition, we have now sold approximately 3 million licensed seats on Prisma Access Browser, up more than 10x from a year ago. And they have a healthy 9-figure As AI drives more data and applications to the cloud, the browser is becoming the primary interface to accessing these resources. Acting as the Application Runtime Environment. The operating system in this scenario becomes less about local resources and more about securely connecting to and managing cloud-based services. And as more and more critical applications of data reside within the browser environment, it naturally becomes a target of cyber attacks.

Walt: And they have a healthy nine figure pipeline.

Walt: As the I drives more data and applications to cloud the browser is becoming the primary interface to accessing these resources acting as the application runtime environment.

Speaker Change: Shifting to our newly launched Prisma Ayres, our AI runtime security.

Speaker Change: As I mentioned earlier is more important than ever to bring data together in order to leverage AI enabled customers to stay ahead of the attackers were also seeing customers demand for us to help them secure the AI transformation journey and this mad rush for AI and industry. Many of our customers are experimenting with it.

Walt: The operating system of the scenario becomes less about local resources more about securely connecting to and managing cloud based services and as more and more critical application in the data decide within the browser environment. It naturally becomes a target for cyber cyber attacks.

Nikesh Arora: That's not all. Think of XRM as our data to market engine. Every byte, or nearly 12 petabytes of telemetry we ingest daily around cloud identity endpoints in email and more, act as high octane fuel. This massive data stream isn't just powering XIM, it's igniting our ability to identify and accelerate our entry into entirely new markets, unlocking additional time in the tens of billions we're now uniquely positioned to address. to our comprehensive understanding of data sources and broad data ingestion capabilities for beginning to deliver solutions using the multiple content capabilities of Excel. Every piece of telemetry we ingest makes our platform smarter.

Nikesh Arora: Prisma Access Browser's native controls and real-time visibility are designed to help ensure that sensitive data remains safeguarded during browsing sessions, regardless of the user's location or the application they're accessing. And we believe Prisma Access Browser is strategically positioned to be the future OS in enabling secure and productive work in an evolving AI-driven world.

Walt: Cause Max's browsers native controls and real time visibility are designed to help ensure that sensitive data I mean, they've got it during browsing sessions, regardless of the use of the location or the application, they're accessing and we believe prisma access browser is strategically positioned to be the future of S. And then maybe they can secure and productive work in an evolving AI driven world now.

Speaker Change: At Palo Alto networks itself. Our teams are leveraging over 35 models across multiple products, each of which and the artifacts need to be discovered scanned constantly tested and protected against prism Air's allows for just that it helps enterprises discover scan and test all the artifacts to ensure they are safe.

Nikesh Arora: Now shifting to our newly launched Prisma Air or AI Runtime Security. As I mentioned earlier, it's more important than ever to bring data together in order to leverage AI and enable customers to stay ahead of the attack. We're also seeing customers demand for us to help them secure the AI transformation. In this mad rush for AI in the industry, many of our customers are experimenting with AI. Networks. Itself, our teams are leveraging over 35 models across multiple products, each of which and the AI artifacts need to be discovered, scanned, constantly tested and protected against. Prisma AIRS allows for just that.

Walt: Shifting to our newly launched Prisma airs or are on time security.

Speaker Change: It allows for a world class data security posture deployment and once in production. It ensures that applications using AI are constantly monitored and any securities laws are both protected against as well as immediately across the enterprise because my heirs extends our existing capability and Boston management run time security.

As I mentioned earlier is more important than ever to bring data together in order to leverage AI enabled customers to stay ahead of the attackers were also seeing customers demand for us to help them secure their AI transformation journey and this mad rush for AI and industry. Many of our customers that are experimenting with yeah.

Nikesh Arora: The more data we pull in, the further our engine can go and the smarter it gets. The faster we can build and traveling new capabilities in public.

Speaker Change: Add security for agents in the future.

Speaker Change: And we recently announced the intent to acquire predict out AI and early innovator leader in security for your eye, providing air motto scanning their red teaming.

Walt: At Palo Alto networks itself. Our teams are leveraging over 35 models across multiple products, each of which and the artifacts need to be discovered scanned constantly tested and protected against Prisma Air's allows for just that it helps enterprises discover scan and test all the artifacts and ensure they are safe.

Nikesh Arora: We're encouraged by the early customer feedback and look forward to continuing to discuss this more in the future.

Speaker Change: To further bolster our capabilities.

Nikesh Arora: Now shifting our focus to network security. We continue to lead the market in network security and gain share across all three of our best-of-breed form factors. As enterprises look to securely and increasingly secure hybrid workforces and IT environments spanning headquarters, branch offices, data centers, and the cloud, we're uniquely positioned with a consistent security architecture. In Q3, our product revenue grew 16% year-to-year. This growth was broad based, the software continuing to increase in the overall mix. We also saw stable demand in the appliance Software firewall ARR grew approximately 20% year-over-year in Q3 with public cloud deployments continuing to be the primary driver.

Speaker Change: Customer interest has been strong. We currently are in conversation with hundreds of prospects and already have an eight figure pipeline since making the announcement last month.

Nikesh Arora: It helps enterprises discover, scan and test all the AI artifacts to ensure they're safe. It allows for world-class data security posture deployment. And once in production, it ensures that applications using AI are constantly monitored and any security flaws are both protected against as well as remediated against.

In summary.

Speaker Change: We see strong momentum heading into our fiscal year and driven by continued transformation and we look for all of our first north of $4 billion quarter.

Walt: It allows for World class data security posture and deployment and once in production. It ensures that applications using AI are constantly monitored and any securities laws are both protected against as well as immediately across the enterprise because my heirs extends our existing capability and Bossier management runtime security will add security for agents in the future.

Speaker Change: We see strong desire for consolidation and the desire to implement AI securely, including robust Q4 pipeline.

Nikesh Arora: Prisma Airs extends our existing capability in posture management, runtime security, and will add security for AI agents in the future.

Speaker Change: We continue to take share across multiple security categories driving strong growth in N. G. S air are at an industry leading scale.

Nikesh Arora: And we recently announced the intent to acquire Protect.AI, an early innovator leader in security for AI, providing AI model scanning and AI Red teaming. for the Bolster Archive book. Customer interest has been strong. We currently are in conversation with hundreds of prospects and already have an eight-figure pipeline since making the announcement last week.

Walt: And we recently announced the intent to acquire predict out AI and early innovator leader in security for your eye, providing air model scanning their red teaming.

Speaker Change: Apart from Ization strategy translates into tangible business benefits for customers, including a strong security posture and improve operational efficiencies throughout through vendor consolidation.

Walt: To further bolster our capabilities.

Nikesh Arora: AI is accelerating cloud adoption. And we believe this trend will expand the long term need for software firewalls that scale with modern work. Shifting to SASE, which continues to be our fastest growing form factor in network security and a strong contributor to our overall growth. As customers transform their network to keep pace with delivering first-class security capabilities for remote users and branch offices, we continue to see robust growth for SAS. Many SASI projects are large and comprehensive, which is well suited to a rich offering and enterprise-focused sales economy. In Q3, our SaaSy era grew 36% a year, more than twice as fast as the overall market and ahead of our key SaaSy competitors.

Walt: Customer interest has been strong. We currently are in conversation with hundreds of prospects and already have an eight figure pipeline since making the announcement last month.

Speaker Change: Is that a relentless focus on innovation, we believe Palo Alto networks is the ideal partner to help organizations achieve and secure their AI transformation goals.

Nikesh Arora: In summary, We see strong momentum heading into our fiscal year-end, driven by continued transformation, and we look forward to our first north of $4 billion quarter. We see strong desire for consolidation and the desire to implement AI securely, including a robust Q4 pipeline. We continue to take share across multiple security categories, driving strong growth in NGS ARR at an industry-leading scale. Our optimization strategy translates into tangible business benefits for customers, including a strong security posture and improved operational efficiency throughout through vendor consolidation.

Walt: In summary.

I am, particularly proud of our teams for driving can almost success in a Q3, which was fraught with geo political discussions that are discussions yet our teams kept our heads down and continue to execute setting us up for what we hope will be a great Q4.

Walt: We see strong momentum heading into our fiscal year and driven by continued transformation and we look for all of our first north of $4 billion quarter.

Walt: We see strong desire for consolidation and the desire to implement AI securely, including a robust Q4 pipeline.

Walt: We continue to take share across multiple security categories driving strong growth in N. G. S. A R at an industry leading scale.

Speaker Change: Let me hand, it over to Deepak to review the quarterly results in detail.

Deepak Lecher: Thank you and our cash and good afternoon, everyone to.

Walt: Apart from Ization strategy translates into tangible business benefits for customers, including a strong security posture and improve operational efficiency throughout through vendor consolidation.

Speaker Change: To maximize our time spent on Q&A I will provide you with highlights of Q3, you can review the detailed results in our press release and the supplemental financial information on our website.

Nikesh Arora: Furthermore, 40% of new SaaSy customers were net new to Palo Alto Networks in Q3. We now have approximately 6,000 FASI customers of 22% year-over-year. Meanwhile, the drivers of our SaaSy momentum are broadening. This quarter, we saw a particular strength in Prisma Access Browser, which again accounted for a third of our Prisma Access seats sold in the quarter. In just 18 months since our talent acquisition, we have now sold approximately 3 million licensed seats on Prisma Access Browser, up more than 10x from a year ago, and we have a healthy nine-figure pipeline. As AI drives more data and applications to the cloud, the browser is becoming the primary interface to accessing these resources.

Nikesh Arora: With our relentless focus on innovation, we believe Palo Alto Networks is the ideal partner to help organizations achieve and secure their AI transformation goals.

Walt: Is that a relentless focus on innovation, we believe Palo Alto networks is the ideal partner to help organizations achieve and secure their AI transformation goals.

Speaker Change: In Q3 total revenue was $2 two $9 billion and grew 15% at the high end of our guided range.

Nikesh Arora: I'm particularly proud of our teams for driving phenomenal success in a Q3, which was fraught with geopolitical discussions, data discussions, yet our teams kept our heads down and continued to execute, setting us up for what we hope will be a great Q4.

Walt: I'm, particularly proud of our teams for driving can almost success in a Q3, which was fraught with geo political discussions that have discussions yet our teams kept our heads down and continue to execute setting us up for what we hope will be a great Q4.

Speaker Change: Within total revenue product revenue grew 16%, while total services revenue grew 15%.

Speaker Change: Within total services subscription revenue grew 18% and support revenue rose 10%.

Dipak Golechha: Let me hand it over to Dipak to review the quarterly results. Thank you, Nikesh. And good afternoon, everyone.

Speaker Change: On a trailing 12 month basis, the proportion of our product revenue from software is approaching 40% driven by our growth in our virtual form factors and SD Wan.

Let me hand, it over to Deepak to review the quarterly results in detail.

Deepak: Thank you and our cash and good afternoon, everyone to.

Dipak Golechha: To maximize our time spent on Q&A, I will provide you with highlights of Q3. You can review the detailed results in our press release and the supplemental financial information on our website. In Q3, total revenue was $2.29 billion and grew 15% at the high end of our guided range. Within total revenue, product revenue grew 16%, while total services revenue grew 15%. Within total services subscription revenue grew 18% and support revenue rose 10%. On a trailing 12-month basis, the proportion of our product revenue from software is approaching 40%, driven by our growth in our virtual form factors and SD-WAN.

Deepak: To maximize our time spent on Q&A I will provide you with highlights of Q3, you can review the detailed results in our press release and the supplemental financial information on our website.

Speaker Change: We continue to see stable demand for firewall appliances with market growth in the zero to 5% range as we have discussed previously.

Nikesh Arora: Acting as the Application Runtime Environment. The operating system in this scenario becomes less about local resources and more about securely connecting to and managing cloud-based services. And as more and more critical applications of data reside within the browser environment, it naturally becomes a target of cyber attacks. Prisma Access Browser's native controls and real-time visibility are designed to help ensure that sensitive data remains safeguarded during browsing sessions, regardless of the user's location or the application they're accessing. And we believe Prisma Access Browser is strategically positioned to be the future OS in enabling secure and productive work in an evolving AI-driven world.

Speaker Change: Moving on to geographies, we saw double digit growth across all theaters with the Americas growing 12%, EMEA up 20% and Japan growing 23%.

In Q3 total revenue was $2 two $9 billion and grew 15% at the high end of our guided range.

Deepak: Within total revenue product revenue grew 16%, while total services revenue grew 15%.

Speaker Change: Our remaining performance obligation or a P. O grew 19% to $13 $5 billion or current <unk> was $6 $2 billion growing 16% year on year.

Deepak: Within total services subscription revenue grew 18% and support revenue rose 10%.

On a trailing 12 month basis, the proportion of our product revenue from software is approaching 40% driven by our growth in our virtual form factors and I see one.

Speaker Change: The average duration of new contracts remained at approximately three years.

Speaker Change: Contract duration decreased slightly.

Dipak Golechha: We continue to see stable demand for firewall appliances with market growth in the 0% to 5% range, as we have discussed previously.

Deepak: We continue to see stable demand for firewall appliances with market growth in the zero to 5% range as we have discussed previously.

Speaker Change: On both a year over year and quarter over quarter basis.

Speaker Change: Customers continue to make significant commitments to Palo Alto networks to our platform Ization deals, particularly when adopting X I am the transform their security Operation Center.

Dipak Golechha: Moving on to geographies, we saw double-digit growth across all theaters, with the Americas growing 12%, EMEA up 20%, and JPAC growing 23%. Our remaining performance obligation, or RPO, grew 19% to $13.5 billion. Our current RPO was $6.2 billion, growing 16% year-on-year. The average duration of new contracts remain that approximately three years. Contract duration decreased slightly on both a year-over-year and quarter-over-quarter basis. Customers continue to make significant commitments to Palo Alto Networks through our platformization deals, particularly when adopting XIAM to transform their security operations center. We continue to see increasing demand for annual payments, particularly deals over $1 million.

Deepak: Moving on to geographies, we saw double digit growth across all theaters with the Americas growing 12% EMEA up 20% and Jay Pat growing 23%.

Speaker Change: We continue to see increasing demands of annual payments, particularly deals over $1 million, but we were absorbing this transition while maintaining the high end of our fiscal year 'twenty five annual adjusted free cash flow margin guidance.

Deepak: Our remaining performance obligation or a P. O grew 19% to $13 $5 billion. Our current IPO was $6 $2 billion growing 16% year on year.

Speaker Change: As well as reiterating confidence in our adjusted free cash flow margin targets of 37% plus in fiscal year, 'twenty six and 'twenty seven.

Deepak: The average duration of new contracts remained at approximately three years.

Deepak: Contract duration decreased slightly on.

Speaker Change: In line with what we talked about earlier in the year, we saw a year over year increase in bookings that went into annual billings in Q3, and a decrease in deals leveraging panna fast with a neutral impact on cash flow.

Deepak: On both a year over year and quarter over quarter basis custom.

Deepak: Customers continue to make significant commitments to Palo Alto networks to our platform Ization deals, particularly when adopting X I am the transform their security Operation Center.

Nikesh Arora: Thank you. Prisma Airs extends our existing capability in posture management, runtime security, we'll add security for AI agents.

Nick: Turning to next generation security Ara as Nick has highlighted we surpassed the $5 billion Mark in Q3 and ended the quarter up 5.09 billion and Engie S. A L or a growth of 34%.

Deepak: We continue to see increasing demands of annual payments, particularly deals over $1 million, but we were absorbing this transition while maintaining the high end of our fiscal year 'twenty five annual adjusted free cash flow margin guidance.

Nikesh Arora: And we recently announced the intent to acquire Protect.AI, an early innovator leader in security for AI, providing AI model scanning and AI Red teaming. and further bolster our capability. Customer interest has been strong.

Dipak Golechha: But we are absorbing this transition while maintaining the high end of our fiscal year 25 annual adjusted free cash flow margin guidance. as well as reiterating confidence in our adjusted free cash flow margin targets of 37% plus in fiscal year 26 and 27.

Nick: Within <unk>, we continue to see significant momentum around our cortex platform and AI era is now approximately $400 million in Q3 up over two and a half times year over year.

Deepak: As well as reiterating confidence in our adjusted free cash flow margin targets of 37% plus in fiscal year 'twenty six 'twenty seven.

Nikesh Arora: We currently are in conversation with hundreds of prospects and already have an eight-figure pipeline since making the announcement last In summary, We see strong momentum heading into our fiscal year-end, driven by continued transformation, and we look forward to our first north of $4 billion quarter. We see strong desire for consolidation and the desire to implement AI securely, including a robust Q4 pipeline. We continue to take share across multiple security categories, targeting strong growth and NGS ARR at an industry leading scale. Our optimization strategy translates into tangible business benefits for customers, including a strong security posture and improved operational opportunity throughout through vendor consolidation.

Dipak Golechha: In line with what we talked about earlier in the year, we saw a year-over-year increase in bookings that went into annual billings in Q3 and a decrease in deals leveraging PANFS with a neutral impact on cash flow.

Deepak: In line with what we talked about earlier in the year, we saw a year over year increase in bookings that went into annual billings in Q3, and a decrease in deals leveraging panna fast with a neutral impact on cash flow.

I'm, particularly excited about the trends driving.

Nick: The Engie S. A R R and I wanted to provide some additional insights around the evolution of our net new <unk> era.

Nick: We've made a number of significant investments over the last several years to both continue to leave the network security market as well as build leadership positions in new markets, you've seen the results of the fit and Rins, Yes L O.

Dipak Golechha: Turning to Next Generation Security ARR, as Nikesh highlighted, we surpassed the $5 billion mark in Q3 and ended the quarter at $5.09 billion in NGS ARR, a growth of 34%. Within NGS ARR, we continue to see significant momentum around our Cortex platform. And our AI ARR is now approximately $400 million in Q3, up over 2 and 1 1⁄2 times year over year.

Deepak: Turning to next generation security a era as Nick has highlighted we surpassed the $5 billion Mark in Q3 and ended the quarter up 5.09 billion and Engie S. A L a growth of 34%.

Nick: Over the last several years in network security, we invested in advanced cloud delivered versions of our subscriptions that are attached to our appliances.

Deepak: Within <unk>, we continue to see significant momentum around our cortex platform and AI era is now approximately $400 million in Q3 up over two and a half times year over year.

Nikesh Arora: With our relentless focus on innovation, we believe Palo Alto Networks is the ideal partner to help organizations achieve and secure their AI transformation goals.

Nick: We saw strong adoption of these advanced subscriptions as customers saw the value of adding needs to their existing network security deployments and this is meaningful and this has driven meaningful engie S. A our outgrowth.

Dipak Golechha: I'm particularly excited about the trends driving the NGS ARR, and I wanted to provide some additional insights around the evolution of our net new NGS ARR. We've made a number of significant investments over the last several years to both continue to lead the network security market, as well as build leadership positions in new markets. You've seen the results of this effort in our NGS ARR. Over the last several years in network security, we invested in advanced cloud delivered versions of our subscriptions that attach to our appliances. We saw strong adoption of these advanced subscriptions, as customers saw the value of adding these to their existing network security deployments.

Deepak: I'm, particularly excited about the trends driving.

Deepak: The Engie S. A R R and I wanted to provide some additional insights around the evolution of our net new <unk> era.

Nick: In addition, we have NGF product offerings beyond those advanced subscriptions in new markets across network security cloud security and security operations, we refer to those as our new market offerings as they have also fueled our ngls are all growth.

We've made a number of significant investments over the last several years to both continue to leave the network security market as well as build leadership positions in new markets you've seen the results of this effort and Orange F. L O.

Dipak Golechha: Let me hand it over to Dipak to review the quarterly results. Thank you, Nikesh. And good afternoon, everyone.

Nick: We continue to see momentum from our advanced subscriptions in fiscal year, 'twenty, five driving a healthy and relatively consistent level of net new <unk> compared to prior years at.

Dipak Golechha: To maximize our time spent on Q&A, I will provide you with highlights of Q3, you can review the detailed results in our press release and the supplemental financial information on our website. In Q3, total revenue was $2.29 billion and grew 15% at the high end of our guided range. Within total revenue, product revenue grew 16%, while total services revenue grew 15%. Within total services, subscription revenue grew 18% and support revenue rose 10%. On a trailing 12-month basis, the proportion of our product revenue from software is approaching 40%, driven by our growth in our virtual form factors and SD-WAN.

Over the last several years in network security, we invested in advanced cloud delivered versions of our subscriptions that are attached to our appliances.

Nick: At the same time, we've seen on net new and yes are off from new market offerings grow significantly and these are becoming a larger proportion of our total net new Ngls are all dollars.

Deepak: We saw strong adoption of these advanced subscriptions of customers saw the value of adding needs to their existing network security deployments and this is meaningful and this has driven meaningful engie S. A our outgrowth.

Dipak Golechha: And this is meaningful, and this has driven meaningful NGS ARR growth. In addition, we have NGS product offerings beyond those advanced subscriptions in new markets across network security, cloud security, and security operations. We refer to those as our new market offerings as they have also fueled our NGS ARR growth. We continue to see momentum from our advanced subscriptions until school year 25, driving a healthy and relatively consistent level of net new ARR compared to prior years. At the same time, we've seen our net new NGS ARR from new market offerings grow significantly, and these are becoming a larger proportion of our total net new NGS ARR dollars.

Nick: This is a result of our strengthening position in these markets a large sales team, becoming more adept at selling these offerings and part from Ization, taking hold with our customers and in the industry.

Deepak: In addition, we have NGF product offerings beyond those advanced subscriptions in new markets across network security cloud security and security operations, we refer to those as our new market offerings as they have also fueled our ngls are all growth.

Nick: As we look forward, we expect to see the new market business to be the stronger driver of net new a are all dollars. It is this dynamic that gives us confidence in our long term targets.

Deepak: We continue to see momentum from our advanced subscriptions in fiscal year, 'twenty, five driving a healthy and relatively consistent level of net new <unk> compared to prior years at.

Dipak Golechha: We continue to see stable demand for firewall appliances with market growth in the 0 to 5% range, as we have discussed previously. Moving on to geographies, we saw double-digit growth across all theaters, with the Americas growing 12%, EMEA up 20%, and JPAC growing 23%. Our remaining performance obligation, or RPO, grew 19% to $13.5 billion. Our current RPO was $6.2 billion, growing 16% year-on-year. The average duration of new contracts remain that approximately three years. Contract duration decreased slightly on both a year-over-year and quarter-over-quarter basis. Customers continue to make significant commitments to Palo Alto Networks through our platformization deals, particularly when adopting XIM to transform their security operations center.

Moving down the income statement total gross margin was 76% product gross margin was 78, 4% in the quarter.

Deepak: At the same time, we've seen on net new and yes are often new market offerings grow significantly.

Nick: As a reminder, we have been transitioning to a contract manufacturing facility in Texas as our primary manufacturing and fulfillment center to benefit from scale and innovation as well as to take advantage of a foreign trade zone that can help us mitigate tariffs and products that we ship to international destinations.

Deepak: And these are becoming a larger proportion of our total net new Ngls are all dollars.

Dipak Golechha: This is a result of our strength and position in these markets, our large sales team becoming more adept at selling these offerings, and platformization taking hold with our customers and in the industry.

Deepak: This is a result of our strengthening position in these markets.

Deepak: Large sales team, becoming more adept at selling these offerings and part from Ization, taking hold with our customers and in the industry.

Nick: As we said on our previous call. We continue to believe that we differentiate ourselves by being the only pure play cyber security firm at scale to assemble all of our hardware in the USA.

Dipak Golechha: As we look forward, we expect to see the new market business to be the stronger driver of net new ARR dollars. It is this dynamic that gives us confidence in our long term target. Moving down the income statement, total growth margin was 76%, product gross margin was 78.4% in the quarter. As a reminder, we have been transitioning to a contract manufacturing facility in Texas as our primary manufacturing and performance center to benefit from scale and innovation, as well as to take advantage of a foreign trade zone that can help us mitigate tariffs in products that we ship to international destinations.

Deepak: As we look forward, we expect to see the new market business to be the stronger driver of net new a are all dollars. It is this dynamic that gives us confidence in our long term targets.

Nick: As a result tariff impact to our business as being immaterial.

Deepak: Moving down the income statement total gross margin was 76% product gross margin was 78, 4% in the quarter.

Nick: We expect product gross margins to remain in the high Sevens low 80% margins in Q4.

Deepak: As a reminder, we have been transitioning to a contract manufacturing facility in Texas as our primary manufacturing and fulfillment center to benefit from scale and innovation as well as to take advantage of a foreign trade zone that can help us mitigate tariffs and products that we ship to international destinations.

Nick: Our total services gross margin was 75, 4%. We are excited to see continued strong adoption of our SaaS offerings.

Dipak Golechha: We continue to see increasing demand for annual payments, particularly deals over $1 million, but we are absorbing this transition while maintaining the high end of our fiscal year 25 annual adjusted free cash flow margin guidance. as well as reiterating confidence in our adjusted free cash flow margin targets of 37% plus in fiscal year 26 and 27. In line with what we talked about earlier in the year, we saw a year-over-year increase in bookings that went into annual billings in Q3 and a decrease in deals leveraging PANFS with a neutral impact on cash flow. Turning to Next Generation Security ARR, as Nikesh highlighted, we surpassed the $5 billion mark in Q3 and ended the quarter at $5.09 billion in NGS ARR, a growth of 34%.

Nick: We continue to execute on cloud cost efficiencies, including engaging with our key cloud service providers to negotiate favorable procurements arrangements as the scale of our cloud hosted products continues to increase.

Dipak Golechha: As we said in our previous call, we continue to believe that we differentiate ourselves by being the only pure play cybersecurity firm at scale to assemble all of our hardware in the USA. As a result, tariff impact to our business has been immaterial. We expect product growth margins to remain in the high 70 or low 80% margins in Q4. Our total services gross margin was 75.4%. We are excited to see continued strong adoption of our SaaS offerings. We continue to execute on cloud cost efficiencies, including engaging with our key cloud service providers to negotiate favorable procurement arrangements as the scale of our cloud-hosted products continues to increase.

Deepak: As we said on our previous call. We continue to believe that we differentiate ourselves by being the only pure play cybersecurity firm at scale to assemble all of our hardware in the USA.

Nick: Encompassing those gross margin dynamics, we continue to focus on executing our operating margin targets, which delivered year over year improvements in operating margin.

Deepak: As a result tariff impact to our business as being immaterial, we expect product gross margins to remain in the high 70 L O 80% margins in Q4.

Nick: As I have often said our business scales well across every single line item of the P&L.

On an operating expense as a percentage of revenue basis, we sold 340 basis points of year over year leverage this quarter as we drove scale and efficiencies across sales and marketing R&D and G&A.

Deepak: Our total services gross margin was 75, 4%. We are excited to see continued strong adoption of our SaaS offerings.

Deepak: We continue to execute on cloud cost efficiencies, including engaging with our key cloud service providers to negotiate favorable procurements arrangements as the scale of our cloud hosted products continues to increase.

Nick: We delivered 80 cents diluted non-GAAP, EPS and diluted GAAP EPS of <unk> 37 up.

Dipak Golechha: Within NGS ARR, we continue to see significant momentum around our Cortex platform, and our AI ARR is now approximately $400 million in Q3, up over two and a half times year over year.

Nick: 12th consecutive quarter of positive GAAP, EPS, we generated $578 million and adjusted free cash flow in Q3.

Dipak Golechha: Encompassing those gross margin dynamics, we continue to focus on executing our operating margin targets, which delivered year-over-year improvements in operating margin. As I have often said, our business scales well across every single line item of the P&L. On an operating expense as a percentage of revenue basis, we saw 340 basis points of year-over-year leverage this quarter as we drove scale and efficiencies across sales and marketing, R&D, and G&A.

Deepak: Encompassing those gross margin dynamics, we continue to focus on executing our operating margin targets, which delivered year over year improvements in operating margin.

Nick: Turning to the balance sheet, you'll see that our debt balance came down by $151 million as we continued to see early conversion of our convertible debt, which occurred at the discretion of the debt holders and will settle by offering cash and equity.

Dipak Golechha: I'm particularly excited about the trends driving the NGS ARR, and I wanted to provide some additional insights around the evolution of our net new NGS ARR. We've made a number of significant investments over the last several years to both continue to lead the network security market, as well as build leadership positions in new markets. You've seen the results of this effort in our NGS ARR. Over the last several years in network security, we invested in advanced cloud-delivered versions of our subscriptions that attach to our appliances. We saw strong adoption of these advanced subscriptions, as customers saw the value of adding these to their existing network security deployments, and this has driven meaningful NGS ARR growth.

Deepak: As I have often said our business scales well across every single line item of the P&L.

Deepak: On an operating expense as a percentage of revenue basis, we sold 340 basis points of year over year leverage this quarter as we grow scale and efficiencies across sales and marketing R&D and G&A.

Nick: As a reminder, our convertible notes reached final maturity in June and our convertible notes can no longer be early converted we will settle the remaining convertible debt in cash and equity in Q4.

Dipak Golechha: We delivered $0.80 of diluted non-GAP EPS and diluted GAP EPS of $0.37, our 12th consecutive quarter of positive GAP EPS. We generated $578 million in adjusted pre-cash flow in Q3. Turning to the balance sheet, you will see that our debt balance came down by $151 million as we continued to see early conversion of our convertible debt, which occurred at the discretion of the debt holders and was settled by us in cash and equity. As a reminder, our convertible notes reach final maturity in June, and our convertible notes can no longer be early converted.

Deepak: We delivered 80 cents diluted non-GAAP, EPS and diluted GAAP EPS of <unk> 37 cents up 12th consecutive quarter of positive GAAP EPS.

Nick: As in the cash mentioned, we announced our intention to put.

Nick: To acquire protect AI for total consideration of $700 million in cash and replacement equity awards, we expect the transaction to close by our first quarter of fiscal year 2026.

Deepak: We generated $578 million and adjusted free cash flow in Q3.

Deepak: Turning to the balance sheet, you'll see that our debt balance came down by $151 million as we continued to see early conversion of our convertible debt, which occurred at the discretion of the debt holders and with subtle by offering cash and equity.

Nick: We did not repurchase any shares in Q3, and our buyback strategy remains opportunistic we have $1 billion in authorization remaining through December 2025.

Dipak Golechha: In addition, we have NGS product offerings beyond those advanced subscriptions in new markets across network security, cloud security, and security operations. We refer to those as our new market offerings as they have also fueled our NGS ARR growth. We continue to see momentum from our advanced subscriptions until school year 25, driving a healthy and relatively consistent level of net new ARR compared to prior years. At the same time, we've seen our net new NGS ARR from new market offerings grow significantly. And these are becoming a larger proportion of our total net new NGS ARR dollars.

Nick: With that let me turn to guidance.

Deepak: As a reminder, our convertible notes reached final maturity in June and our convertible notes can no longer be early converted.

Nick: For the fiscal year 2025, we expect <unk> to be in the range of $5 five two to $5 $57 billion, an increase of 31% to 32%.

Dipak Golechha: We will settle the remaining convertible debt in cash and equity in Q4.

Deepak: We will settle the remaining convertible debt in cash and equity in Q4.

Dipak Golechha: As Nikesh mentioned, we announced our intention to acquire Protect AI for a total consideration of $700 million in cash and replacement equity awards. We expect the transaction to close by our first quarter of fiscal year 2026.

Deepak: As Nick has mentioned, we announced our intention to put.

Nick: Remaining performance obligation of $15 two to $15 $3 billion, an increase of 19% to 20%.

Speaker Change: To acquire protect AI for total consideration of $700 million in cash and replacement equity awards, we expect the transaction to close by our first quarter of fiscal year 2026.

Revenues to be in the range of $9, one seven to $9, one $9 billion an increase of 14%.

Dipak Golechha: We did not repurchase any shares in Q3 and our buyback strategy remains opportunistic. We have $1 billion in authorization remaining through December 2025.

Speaker Change: We did not repurchase any shares in Q3, and our buyback strategy remains opportunistic we have $1 billion in authorization remaining through December 2025.

Nick: Operating margins to be in the range of $28 two to 28, 5%.

Dipak Golechha: This is a result of our strengthened position in these markets, our large sales team becoming more adept at selling these offerings, and platformization taking hold with our customers and in the industry. As we look forward, we expect to see the new market business to be the stronger driver of net new ARR dollars.

Nick: Our diluted non-GAAP EPS to be in the range of $3 two six to $3 to $8 per share an increase of 15%.

Dipak Golechha: With that, let me turn to guidance. For the fiscal year 2025, we expect NGS ARR to be in the range of $5.52 to $5.57 billion, an increase of 31 to 32 percent. remaining performance obligation of $15.2 to $15.3 billion, an increase of 19 to 20%. Revenue to be in the range of $9.17 to $9.19 billion, an increase of 14%. Operating margins to be in the range of 28.2 to 28.5%. I've diluted non-GAAP EPS to be in the range of $3.26 to $3.28 per share, an increase of 15%. Adjusted free cash flow margin in the range of 37.5% to 38%.

Speaker Change: With that let me turn to guidance.

Nick: Adjusted free cash flow margin in the range of 37, 5% to 38%.

Speaker Change: For the fiscal year 2025, we expect Ngls are ought to be in the range of $5 five two to $5 $57 billion, an increase of 31% to 32%.

Dipak Golechha: It is this dynamic that gives us confidence in our long-term target. Moving down the income statement, total growth margin was 76%, product gross margin was 78.4% in the quarter. As a reminder, we have been transitioning to a contract manufacturing facility in Texas as our primary manufacturing and performance center to benefit from scale and innovation, as well as to take advantage of a foreign trade zone that can help us mitigate tariffs in products that we ship to international destinations. As we said in our previous call, we continue to believe that we differentiate ourselves by being the only pure play cybersecurity firm at scale to assemble all of our hardware in the USA.

Nick: As we noted last quarter, we do expect the higher Q4 contribution to our annual free cash flow.

Nick: For Q4, specifically, 80% of the collections from deals that have already been booked.

Speaker Change: Remaining performance obligation of $15 two to $15 $3 billion, an increase of 19% to 20%.

Nick: Our annual cash flow seasonality is more second half and Q4 weighted this year influenced by the timing of deferred payments from customers that signed deals in prior periods and the timing of bookings within the year.

Speaker Change: Revenue to be in the range of $9, one seven to $9, one $9 billion an increase of 14%.

Speaker Change: Operating margins to be in the range of $28 two to 28, 5%.

Nick: For the fourth fiscal quarter of 2025, we expect Ngls are ought to be in the range of five five to $5 five 7% an increase of 31% to 32% remaining performance obligation of $15 2 million to $15 three an increase of 19% to 20% revenue to be in the range of $2 four 9% to 251.

Speaker Change: Our diluted non-GAAP EPS to be in the range of $3 two six to $3 to $8 per share an increase of 15%.

Speaker Change: Adjusted free cash flow margin in the range of 37, 5% to 38%.

Dipak Golechha: As we noted last quarter, we do expect a higher Q4 contribution to our annual free cash flow. And for Q4 specifically, 80% of the collections are from deals that have already been booked. Our annual cash flow seasonality is more second half and Q4 weighted this year, influenced by the timing of deferred payments from customers that signed deals in prior periods and the timing of bookings within the year.

As we noted last quarter, we do expect the higher Q4 contribution to our annual free cash flow.

Dipak Golechha: As a result, tariff impact to our business has been immaterial. We expect product growth margins to remain in the high 70% or low 80% margins in Q4. Our total services gross margin was 75.4%. We are excited to see continued strong adoption of our SaaS offerings. We continue to execute on cloud cost efficiencies, including engaging with our key cloud service providers to negotiate favorable procurement arrangements as the scale of our cloud-hosted products continues to increase. Encompassing those gross margin dynamics, we continue to focus on executing our operating margin targets, which delivered year-over-year improvements in operating margin.

Nick: Billion dollars, an increase of 14% to 15% and diluted non-GAAP EPS to be in the range of 87 to 89 and.

Speaker Change: And for Q4, specifically, 80% of the collections from deals that have already been booked.

Speaker Change: Our annual cash flow seasonality is more second half and Q4 weighted this year influenced by the timing of deferred payments from customers that signed deals in prior periods and the timing of bookings within the year.

Nick: An increase of 16% to 19%.

Nick: We've included our tripling our typical modeling points in the presentation for your review.

Nick: With that I will turn it back to Hamzah for the Q&A portion.

Dipak Golechha: For the fourth fiscal quarter of 2025, we expect NGS ARR to be in the range of 5.52% to 5.57%, an increase of 31% to 32%, remaining performance obligation of 15.2% to 15.3%, an increase of 19% to 20%, revenue to be in the range of 2.49% to 2.51 billion dollars, an increase of 14% to 15%, and diluted non-GAAP EPS to be in the range of 87 cents to 89 cents, an increase of 16% to 19%. We've included our typical modeling points in the presentation for your review.

Speaker Change: For the fourth fiscal quarter of 2025, we expect Ngls are ought to be in the range of five five to $5 five 7% an increase of 31% to 32% remaining performance obligation of $15 two to $15 three an increase of 19% to 20% revenue to be in the range of $2 four 9% to 251.

Nick: Okay, great. Thank you.

Speaker Change: To allow for broad participation I would ask that each analyst to ask only one question. The first question will come from soccer Calia, followed by Brian Essex shifting Morgan.

Soccer Calia: Okay, Great Hey, guys. Thanks for taking my questions here and congrats hamzah on the move over.

Speaker Change: $1 billion, an increase of 14% to 15% and diluted non-GAAP EPS to be in the range of 87 to 89 cents, an increase of 16% to 19%.

The cash the cash maybe for you lots of things there is life. After you can see.

Dipak Golechha: As I have often said, our business scales well across every single line item of the P&L. On an operating expense as a percentage of revenue basis, we saw 340 basis points of year-over-year leverage this quarter as we drove scale and efficiencies across sales and marketing, R&D, and G&A. We delivered $0.80 of diluted non-GAP EPS and diluted GAP EPS of $0.37, our 12th consecutive quarter of positive GAP EPS. We generated $578 million in adjusted pre-cash flow in Q3. Turning to the balance sheet, you will see that our debt balance came down by $151 million as we continued to see early conversion of our convertible debt, which occurred at the discretion of the debt holders and was settled by us in cash and equity.

Soccer Calia: [laughter] absolutely.

Speaker Change: We've included our tripling our typical modeling points in the presentation for your review.

Soccer Calia: Nick maybe for you lots of things to be excited about with <unk> am I wanted to dig into one part of that opportunity in particular, which is the queue radar on premise customer base clearly a big base. There that you can upgrade maybe the question is how our customers think.

Unknown Executive: With that, I will turn it back to Hamza for the Q&A portion. Okay, great. Thank you.

Hamzah: With that I will turn it back to Hamzah for the Q&A portion.

Speaker Change: Okay, great. Thank you.

Unknown Executive: To allow for broad participation, I would ask that each analyst ask only one question.

Speaker Change: To allow for broad participation I would ask that each analyst to ask only one question. The first question will come from soccer Calia, followed by Brian Essex ship you Morgan.

Unknown Executive: The first question will come from Saket Kalia, followed by Brian Essex, Shafi Morgan. Okay, great.

Soccer Calia: About that upgrade and how big of an AOR opportunity could that be for Palo Alto networks on that path to $15 billion.

Saket Kalia: Hey, guys, thanks for taking my questions here and congrats Hamza on the move over.

Speaker Change: Okay, Great Hey, guys. Thanks for taking my questions here and congrats hamzah on the move over.

Soccer Calia: Well, if I could first of all thank you for the question.

Nikesh Arora: Nikesh, Nikesh, maybe for you, lots of things, there's life after, you can say. Absolutely. Nikesh, maybe for you, lots of things to be excited about with XIM.

The cash the cash maybe for you lots of things there's life. After you can see.

Soccer Calia: I think we had this debate last quarter you know how big is X I am gonna be worse. The Suezmax is browser because we believe they're both.

Speaker Change: [laughter] absolutely.

Speaker Change: New trends in the industry, primarily driven by the area, we're seeing around us and whilst we've started the Exxon journey.

Speaker Change: [laughter], Nick maybe for you lots of things to be excited about with <unk> am I wanted to dig into one part of that opportunity in particular, which is the queue radar on premise.

Dipak Golechha: As a reminder, our convertible notes reach final maturity in June, and our convertible notes can no longer be early converted.

Saket Kalia: I wanted to dig into one part of that opportunity in particular, which is the QRadar on-premise customer base. Clearly a big base there that you can upgrade. Maybe the question is how are customers thinking about that upgrade and how big of an ARR opportunity could that be for Palo Alto Networks on that path to $15 billion?

Speaker Change: And then when you did the deal with IBM, where the first set of conversion of Utah solver from Q rock, where people who are already adapted SaaS already in the sort of cloud delivered Sim market. We saw that conversion, but we've had a phenomenal partnership with IBM, where we have been able to go with them to many of their large customers.

Dipak Golechha: We will settle the remaining convertible debt in cash and equity in Q4.

Speaker Change: Customer base.

Speaker Change: Nearly a big base there that you can upgrade maybe the question is how are customers thinking about that upgrade and how big of an AOR opportunity could that be for Palo Alto networks on that path to $15 billion.

Nikesh Arora: Saket, first of all, thank you for the question. I think we had this debate last quarter, you know, how big is XIM going to be versus RISM Access Browser, because we believe they're both new trends in the industry, primarily driven by the AI way we're seeing around us. And whilst we started the XIM journey, and then we did the deal with IBM, where the first set of conversion we saw were from QRock, were people who were already adapted SAS, already in the sort of cloud delivered SIM market, we saw that conversion. But we've had a phenomenal partnership with IBM, where we have been able to go with them to many of their large customers, and work them through the transformation of going from an on-premise SOC, to what is effectively now a cloud delivered SOC.

Speaker Change: And work them through the transformation of going from an on premise song to what is effectively in our cloud delivered socks. So that your share or on Prem transition and not just you know with computer like sign but is also moving from an on Prem delivered solution to cloud based solution.

Speaker Change: Well first of all thank you for the question.

Dipak Golechha: We did not repurchase any shares in Q3 and our buyback strategy remains opportunistic. We have $1 billion in authorization remaining through December 2025.

Speaker Change: I think we had this debate last quarter you know how big is X I am gonna be worse. The Suezmax is browser because we believe they're both.

Dipak Golechha: With that, let me turn to guidance. For the fiscal year 2025, we expect NGS ARR to be in the range of $5.52 to $5.57 billion, an increase of 31 to 32 percent. remaining performance obligation of $15.2 to $15.3 billion, an increase of 19 to 20%. Revenue to be in the range of $9.17 to $9.19 billion, an increase of 14%. Operating margins to be in the range of 28.2 to 28.5%. are diluted non-GAP EPS to be in the range of $3.26 to $3.28 per share, an increase of 15%. Adjusted free cash flow margin in the range of 37.5% to 38%.

Speaker Change: New trends in the industry, primarily driven by the area, we're seeing around us and whilst we've started the Exxon journey.

Speaker Change: Clearly you've seen the Ara uplifts, we announced the large deal one of the largest deals not even Linda audio which had an exciting component to it. The second largest deal. We had also had an excellent component. So clearly large deals and Exxon where possible I mean think about it being covering security for a long time, which was the last product that came out where the average error was a million dollars here.

Speaker Change: Right there are companies out there in security to start and that they claim they have 10 million dollar customers or you can say every customer excitement among our customers. So I think the opportunity is huge if you go back historically and I've said this in cyber security.

Speaker Change: And work them through the transformation of going from an on premise song to what is effectively in our cloud delivered socks. So that you're all here on Prem transition and not just you know what was going on there.

Nikesh Arora: So the QRock on-prem transition is not just, you know, moving QRock to XIM, but also moving from an on-prem delivered solution to cloud-based solution. And, you know, clearly you've seen the IR uplifts. We announced the large deal, one of the largest deals, $90 million deal, which had an XIM component to it. The second largest deal we had also had an XIM component. So clearly, large deals on XIM are possible. I mean, think about it, you've been covering security for a long time, which was the last product that came out where the average AR was a million dollars a year.

Speaker Change: Certain swim lanes reach inflection points, where the next set of products are so much better that everybody has to be shaken out of their super and they're all solutions to go replace them anything that you saw that happen in the endpoint market, where we had players who had to be replaced over time you saw that historically when we came out with a next generation firewall and I think this is the moment of this.

But it also moving from an on Prem Denver solution to cloud based solution and.

Speaker Change: Clearly you've seen the Ara uplifts, we announced the large deal one of the largest deals name and Linda All day, which had an exciting component to it the second largest deal. We had also had an exon competence. So clearly.

Speaker Change: Large deals and Exxon, where possible I mean think about it being covering security for a long time, which is the last product that came out where the average error was a million dollars here.

Speaker Change: Send market, it's a $40 billion Tam I think in the next three to five years it'll get replaced it would be replaced by new age players.

Dipak Golechha: Our annual cash flow seasonality is more second half and Q4 weighted this year, influenced by the timing of deferred payments from customers that signed deals in prior periods and the timing of bookings within the year. For the fourth fiscal quarter of 2025, we expect NGS ARR to be in the range of 5.52 to 5.57, an increase of 31 to 32%, remaining performance obligation of 15.2 to 15.3, an increase of 19 to 20%, revenue to be in the range of 2.49 to 2.51 billion dollars, an increase of 14 to 15%, and diluted non-GAAP EPS to be in the range of 87 cents to 89 cents, an increase of We've included our typical modeling points in the presentation for your review.

Speaker Change: Legacy players will try their doubt darnedest to hang onto it but the architecture is a fundamentally different and the architectures of yesteryear then it's not their fault. It's redesigned the product 17 years ago. It was designed where data was expensive to store.

Nikesh Arora: Right. There are companies out there in security who start and say claim they have $10 million customers or we say every customer excise a million dollar our customers. So I think the opportunity is huge. If you go back historically, and I've said this in cybersecurity, certain swim lanes reach inflection. where the next set of products are so much better that everybody has to be shaken out of their stupor and their old solutions to go replace. I mean, you saw that happen in the endpoint market where we had players who had to be replaced over time.

Speaker Change: Latency was high things went on offline today, we live in Nevada, with low latency and so youll see hyperscale announcing real time translation. This morning. So you can see that we can process data item in speeds and delivers us immensely if you concatenate that'll that I said, we were able to regenerate decided in ransomware attack in 25 minutes.

Speaker Change: To be shaken out of their super and they're all solutions to go replace I mean, even though you saw that happened in the endpoint market, where we had players who had to be replaced over time you saw that historically when we came out with a next generation firewall and I think this is the moment of the Sim market. It's a $40 billion Tam I think in the next three to five years it'll get replaced it would be replaced by new age players.

Nikesh Arora: You saw that historically when we came out with the next generation firewall.

Nikesh Arora: And I think this is the moment of the SIM market. It's a $40 billion TAM. I think in the next three to five years, it'll get replaced. It'll be replaced by new age players. The legacy players will try their darndest to hang onto it. But the architectures are fundamentally different and the architectures of yesteryears, and it's not their fault. If you designed a product 17 years ago, it was designed where data was expensive to store. Latency was high. Things were done offline. Today we live in a world with low latency, as you see hyperscalers announcing real-time translation this morning.

Speaker Change: If that's the base of the bad guys. The pace of the good guys has to be faster. So theres no way to get to the other side from an incident response to the management perspective, if you don't transform what is fundamentally and legacy technology. So I think Exxon has huge potential one and I apologize for taking longer than you should for your answer.

Speaker Change: The legacy players will try their doubt darndest to hang onto it but the architecture is a fundamentally different and the architectures of yesteryear isn't it's not their fault. It's redesigned the product 17 years ago. It was designed where data was expensive to store.

Hamza Fodderwala: With that, I will turn it back to Hamza for the Q&A portion. Okay, great. Thank you.

Speaker Change: But.

Speaker Change: I said this in my prepared remarks, I want to make sure I emphasize is that what we've discovered is once we ingest all the data in an enterprise you can actually go and make peace time products better.

Speaker Change: Latency was high things went on offline today, we live in Nevada with low latency is do you see hyperscale is announcing real time translation. This morning. So you can see that we can process data item in speeds and delivers us immensely if you've concatenate that what I said, we were able to regenerate decided ransomware attack in 25 minutes right. If that's the.

Hamza Fodderwala: To allow for broad participation, I would ask that each analyst ask only one question.

Saket Kalia: The first question will come from Saket Kalia, followed by Brian Essex of Chippy Morgan. Okay, great. Hey, guys, thanks for taking my questions here and congrats Hamza on the move over.

Nikesh Arora: So you can see that we can process data at immense speeds and deliver results immensely. If you concatenate that with what I said, we are able to regenerate asylums and somewhere to attack in 25 minutes, right? If that's the pace of the bad guys, the pace of the good guys has to be faster. So there's no way to get to the other side from an incident response and management perspective if you don't transform what is fundamentally a legacy technology.

Speaker Change: So our launch of E mail is actually a multi context launch you know email security Paris are traditionally swim lane products I look at your email I protect you were able to look past the email and the Sim and say wait when somebody clicked on that email link what happened. So we have the entire organization contextual data we have that allows us to go back and make the EMA.

Nikesh Arora: Nikesh, Nikesh, maybe for you, lots of things, there's life after you can. Absolutely. Nikesh, maybe for you, lots of things to be excited about with XIM. I wanted to dig into one part of that opportunity in particular, which is the QRadar on-premise customer base. Clearly a big base there that you can upgrade. Maybe the question is how are customers thinking about that upgrade and how big of an ARR opportunity could that be for Palo Alto Networks on that path to $15 billion? Well, Saket, first of all, thank you for the question. Look, I think we had this debate last quarter, you know, how big is XIM going to be versus RISM Access Browser?

Speaker Change: The pace of the bad guys. The pace of the good guys has to be faster. So theres no way to get to the other side from an incident response to the management perspective, if you don't transform what is fundamentally at legacy technology. So I think Exxon has a huge potential one and I apologize for taking longer than you should for your answer but.

El product spectacularly better.

Speaker Change: So we think there are many many new swim lanes, usually get discovered as we deploy some of our customers. We've seen early examples of exposure management and E Mail management, which you can go to the first two use cases, but there's many use cases behind the da Vinci XI, we think something like Exxon becomes the underlying security fabric of enterprises.

Nikesh Arora: So I think XIME has a huge potential one, and I apologize for taking longer than I should for your answer. But, you know, I said this in my prepared remarks, I want to make sure I emphasize is that what we've discovered is once we ingest all the data in an enterprise, we can actually go and make peacetime products better. So our launch of email is actually a multi-context launch. You know, email security products are traditionally swim lane products. I look at your email, I protect you. We're able to look past the email in the sim and say, wait, when somebody clicked on that email link, what happened?

Speaker Change: I said this in my prepared remarks want to make sure I emphasize is that what we've discovered is once we ingest all the data in an enterprise you can actually go and make peace time products better.

Speaker Change: Very helpful. Thanks.

Speaker Change: So our launch of E mail is actually a multi context launch you know email security products are traditionally swim lane products I look at your email I protect you were able to look past the email into Sim and say wait when somebody clicked on that email link what happened. So we have the entire organization contextual data we have that allows us to go back and make the EMA.

Speaker Change: All right next we have Brian Essex from J P. Morgan followed by Keith Weiss of Morgan Stanley.

Speaker Change: Great. Thank you. Thank you Hamzah and congrats on the move from me as well.

Speaker Change: Thank you for taking the question.

Nikesh Arora: So we have the entire organizational context and data that we have that allows us to go back and make the email product spectacularly better. So we think there are many, many new swim lanes which will get discovered as we deploy XIM on our customers. We've seen early examples of exposure management and email management. We think those are the first two use cases, but I think there's many use cases behind it.

Speaker Change: I was wondering if you can impact the cash that the.

Nikesh Arora: Because we believe they're both new trends in the industry, primarily driven by the AI we're seeing around us. And whilst we started the XIM journey, and then we did the deal with IBM, where the first set of conversions we saw were from QRock, where people who were already adapted SAS, already in the sort of cloud delivered SIM market. We saw that conversion. But we've had a phenomenal partnership with IBM, where we have been able to go with them to many of their large customers and work them through the transformation of going from an on-premise SOC to what is effectively now a cloud delivered SOC.

Speaker Change: The details behind the product revenue growth really strong quarter of growth there and I heard your tax comment.

Speaker Change: Product spectacularly better. So we think there are many many new swim lanes, usually get discovered as we deploy some of our customers. We have seen early examples of exposure management and email management between the first two use cases, but two there's many use cases behind it eventually we think something like Exxon becomes the underlying security fabric of enterprises.

Speaker Change: Approaching 40%.

Speaker Change: Software in terms of mix, but was wondering if maybe you can shed some light on how much of that is share shift how much of that is pricing increase and how much of that might be refreshed.

Nikesh Arora: Eventually we think something like XIM becomes the underlying security fabric of enterprise.

Speaker Change: Well, Brian as you know that our product revenue growth is a combination of hardware and software at.

Saket Kalia: Very helpful. Thanks.

Speaker Change: Very helpful. Thanks.

Speaker Change: Not just the hardware part I think the core hardware business still continues to go up.

Brian Essex: Alright, next we have Brian Essex from J.P. Morgan, followed by Keith Weiss from Morgan Stanley. Great, thank you. Thank you, Hamza. And congrats on the move for me as well. Thank you for taking the question. I was wondering if you can unpack, Nikesh, the, you know, the details behind the product revenue growth, really strong quarter of growth there.

Speaker Change: All right next we have Brian Essex from J P. Morgan followed by Keith Weiss of Morgan Stanley.

I sound like a broken record I've always maintained five 8% and I think the core hardware business is still growing at 5% to 8%.

Speaker Change: Great. Thank you. Thank you Hamzah and congrats on the move from me as well.

Nikesh Arora: So the QRock on-prem transition is not just, you know, moving QRock to XIM, but also moving from an on-prem delivered solution to cloud based solution. And, you know, clearly you've seen the IR uplifts. We announced the large deal, one of the largest deals, $90 million deal, which had an XIM component to it. The second largest deal we had also had an XIM component. So clearly large deals on XIM are possible. I mean, think about it. You've been covering security for a long time. Which was the last product that came out where the average AR was a million dollars a year?

Speaker Change: We highlight as software firewalls in our prepared remarks for a reason we think are.

Speaker Change: Thank you for taking the question.

Speaker Change: I was wondering if you could impact free cash the.

Speaker Change: The sulfur firewall business is going to inflect.

Speaker Change: The details behind the product revenue growth really strong quarter.

Nikesh Arora: And I heard, you know, Dipak's comment that approaching 40% software in terms of mix, but was wondering if maybe you can shed some light on how much of that is share shift, how much of that is pricing increase, and how much of that might be refreshed? Brian, as you know, that our product revenue growth is a combination of hardware and software. So it's not just the hardware part. I think the core hardware business still continues to grow. I sound like a broken record. I've always maintained five to 8%. And I think the core hardware business is still going at five to 8%.

Speaker Change: And and I said, this and I would reemphasize that in the last six months. He always ask what changed this quarter with <unk>. This quarter is there is so much buzz about AI that even the people who are reluctant to deploy AI are dipping their toes and it now what's fascinating is if you want to stay on the bleeding edge of AI innovation.

Speaker Change: Both there and I heard detached Thomas.

Speaker Change: Approaching 40%.

Speaker Change: Well, Brian as you know that our product revenue growth is a combination of hardware and software. So it is not just the hardware part I think the core hardware business still continues to go up.

Nikesh Arora: Right, there are companies out there in security who start and say claim they have $10 million customers or we say every customer excise a million dollar our customers. So I think the opportunity is huge. If you go back historically, and I've said this in cybersecurity, certain swim lanes reach inflection. where the next set of products are so much better that everybody has to be shaken out of their stupor and their old solutions to go replace them. And you saw that happen in the endpoint market where we had players who had to be replaced over time.

Speaker Change: All coming cloud delivered.

Speaker Change: Right. If you want to do an on premise implementation, it's about six months behind because tyndall Gemini for on Prem Theres No open AI for on Prem Theres, no lambda or on or we can deploy landon on brand, but you have to be very smart technically to go put all the bells and whistles required so.

Speaker Change: It sounded like a broken record I've always maintained 5% to 8% and I think the core hardware business is still growing at 5% to 8%.

Nikesh Arora: We highlighted software firewalls and are prepared to mark for a reason. We think the software firewall business is going to inflect. And I said this, and I want to reemphasize that, in the last six months, you always ask, what changed this quarter? What changed this quarter is there is so much buzz about AI that even the people who are reluctant to deploy AI are dipping their toes in it. Now, what's fascinating is if you want to stay on the bleeding edge of AI innovation, it's all coming cloud delivered. Right, if you want to do an on prem AI implementation, it's about six months behind, because there's no Gemini for on prem, there's no open AI for on prem, there's no lambda for on prem, we can deploy lambda and on prem, but you have to be very smart, technically, to go put all the bells and whistles required.

We highlight as software firewalls in our prepared remarks for a reason we think.

Speaker Change: The sulfur firewall business is going to inflect.

Speaker Change: And the most reluctant of organizations are going to have to move to the cloud to be able to leverage the air model that are coming out fast and furious.

Speaker Change: And and I said, this and I would reemphasize that in the last six months of you always ask what changed this quarter with <unk>. This quarter is there is so much buzz about AI that even the people who are reluctant to deploy AI are dipping their toes in it and what's fascinating is if you want to stay on the bleeding edge of AI innovation.

Speaker Change: Now a moment you say I have to go into the cloud I have to go deploy real time in the cloud you have secured.

Nikesh Arora: You saw that historically when we came out with the next generation firewall. And I think this is the moment of the SIM market. It's a $40 billion TAM. I think in the next three to five years, it'll get replaced. It'll be replaced by new age players. The legacy players will try their darndest to hang onto it. But the architectures are fundamentally different and the architectures of yesteryears, and it's not their fault. If you designed a product 17 years ago, it was designed where data was expensive to store. Latency was high, things went on offline. Today we live in a world with low latency, as you see, hyperscalers announcing real-time translation this morning.

Speaker Change: And today we.

Speaker Change: We have the best technology in a multi cloud basis for our cloud network traffic and our sulfur firewall. So part of what we're seeing is a software for our business is beginning to inflect, which is underpinning both the transformation from hardware to software, but also bolstering our product revenue.

Speaker Change: It's all coming cloud delivered.

Speaker Change: Right. If you want to do an on premise implementation, it's about six months behind because tyndall Gemini for on Prem There's no open AI for on Prem, There's no lambda or on probably can deploy landon on Brent, but you have to be very smart technically to go put all the bells and whistles required so.

Speaker Change: I apologize.

Speaker Change: Alright, thank you.

Our next question will be Keith Weiss from Morgan Stanley followed by Joe Gallo Jefferies.

Nikesh Arora: So even the most reluctant of organizations are going to have to move to the cloud, to be able to leverage the AI model that are coming out fast and furious. Now, the moment you say, I have to go in the cloud, I have to go deploy real time in the cloud, you have to secure it. And today. We have the best technology in a multi-cloud basis for cloud network traffic in our software firewalls. So part of what we're seeing is a software firewall business is beginning to inflect, which is underpinning both the transformation from hardware to software, but also bolstering our product revenue at Palo Alto Network.

Speaker Change: Moving the most reluctant of organizations are going to have to move to the cloud to be able to leverage the air model that are coming out fast and furious now.

Speaker Change: Excellent.

Speaker Change: Thank you Keith why did you pick your third.

Speaker Change: I know this is a good question what do you get.

Nikesh Arora: So you can see that we can process data at immense speeds and deliver results immensely. If you concatenate that with what I said, we were able to regenerate a siren and somewhere attack in 25 minutes, right? If that's the pace of the bad guys, the pace of the good guys has to be faster. So there's no way to get to the side from an incident response and management perspective, if you don't transform what is fundamentally a legacy technology.

Speaker Change: [laughter].

Speaker Change: Now a moment do you say I have to go in the cloud I have to go deploy a real time in the cloud you have to secure it.

Hamzah: That being said Hamzah, if you ever realize you made the wrong decision and there's always room beyond that.

Speaker Change: And today.

Speaker Change: It never truly never too late.

Speaker Change: We have the best technology in a multi cloud basis for a cloud network traffic and our software firewall. So part of what we're seeing is a software for our business is beginning to inflect, which is underpinning both the transformation from hardware to software, but also bolstering our product revenue.

Speaker Change: Congratulation guys on a really solid quarter I wanted to kind of expand on.

Speaker Change: That last question on what you were talking about in terms of the Nike AI inherited.

Nikesh Arora: So I think XIM has a huge potential one, and I apologize for taking longer than I should for your answer. But I said this in my prepared remarks, I want to make sure I emphasize is that what we've discovered is once we ingest all the data in an enterprise, we can actually go and make peacetime products better. So our launch of email is actually a multi-context launch. You know, email security products are traditionally swimlane products. I look at your email, I protect you. We're able to look past the email in the sim and say, wait, when somebody clicked on that email link, what happened?

Speaker Change: And what that opportunity means for Palo Alto networks.

Speaker Change: Apologize.

Unknown Executive: Thank you.

Speaker Change: When you're talking to customers that are looking to secure these new AI infrastructures is this just about errors or is there a wider opportunity what is the pull through from the Colorado portfolio. When people are looking to secure this new surface area and to what degree does this help give you guys confidence in the growth in next gen.

Speaker Change: Thank you.

Keith Weiss: Next question will be Keith Weiss from Morgan Stanley, followed by Joe Gallo, Jefferies. Thanks a lot.

Speaker Change: Our next question will be Keith Weiss from Morgan Stanley followed by Joe Gallo Jefferies.

Keith Weiss: Keith, why did he pick you third? I know that's a good question. What do you get? That being said, Hamza, if you ever realize you made the wrong decision, there's always room for you. It's never too late, never too late to come back.

Speaker Change: Excellent. Thank you guys.

Speaker Change: Keith why don't you pick your third.

Speaker Change: I know this is a good question.

Speaker Change: Did you get.

Speaker Change: Yeah.

Hamzah: That being said Hamzah, if you ever realize you made the wrong decision, there's always room beyond that.

Speaker Change: In addition, the IRR into next year.

Speaker Change: Hey here are the most concerns from it.

Speaker Change: Right.

Speaker Change: It's never truly never too late.

Speaker Change: Is it too aggressive for next year is it AI is it platform position like what are the elements that give you confidence in that how you forecast. That's a great question. So I think if you take the software Firewall example, extended so our conversations now are beginning with what we've got to secure this AI implementation and I highlighted you know we had a board meeting last week and our info SEC team.

Keith Weiss: But congratulations guys on a really solid quarter. I wanted to kind of expand on that last question and what you were talking about in terms of the like the AI imperative, and what that opportunity means for Palo Alto networks. When you're talking to customers that are looking to secure these new AI infrastructures, is this just about errors? Or is there a wider opportunity? What does it like pull through from the Palo Alto portfolio when people are looking to secure this new surface area? And to what degree does this help give you guys confidence in the growth in like the next generation ARR into next year?

Speaker Change: Congratulation guys on a really solid quarter I wanted to kind of expand on.

Nikesh Arora: So we have the entire organizational context and data that we have that allows us to go back and make the email product spectacularly better. So we think there are many, many new swimlanes which will get discovered as we deploy XIM on our customers. We've seen early examples of exposure management and email management. We think those are the first two use cases, but there's many use cases behind it.

Speaker Change: That last question on what you were talking about in terms of the Nike AI inherited.

Speaker Change: And what that opportunity means for Palo Alto networks.

Speaker Change: When you're talking to customers that are looking to secure these new AI infrastructures is this just about errors or is there a wider opportunity what is it like pull through from the Colorado portfolio. When people are looking to secure this new surface area and to what degree does this hope gives you guys confidence in the growth in next gen.

Speaker Change: <unk> how much are we using within Palo Alto I was amused in EMEA is to find we have 35 models under evaluation.

Nikesh Arora: Eventually we think something like XIM becomes the underlying security fabric of enterprise.

Saket Kalia: Very helpful. Thanks.

Speaker Change: The evaluation and deployment right now I'll follow up with US on one model is 35 models because these very small or a different theme how mommy talking about 35 models, our board size getting worried about Oh My God. How are you securing these models because they could be from anywhere and once you discover is that to be able to secure those models you actually effectively have to envelope them, where they run time firewall our AI firewall.

Brian Essex: Alright, next we have Brian Essex from JP Morgan followed by Keith Weiss from Morgan Stanley. Great, thank you. Thank you, Hamza. And congrats on the move for me as well. Thank you for taking the question. I was wondering if you can unpack, Nikesh, the, you know, the details behind the product revenue growth, really strong quarter of growth there. And I heard, you know, Dipak's comment that approaching 40% software in terms of MIPS, but was wondering if maybe you can shed some light on how much of that is share shift? How much of that is pricing increase?

Speaker Change: In addition, the IRR into next year.

Keith Weiss: That's where I hear the most concerns from investors. Are they too aggressive for next year? Is it AI? Is it platformization? Like what are the elements that give you confidence in that value?

Speaker Change: Hey here are the most concerns from the truth.

Speaker Change: Through aggressive for next year is it AI is it platform position like what are the elements that give you confidence in that how you forecast. That's a great question. So I think if you take the software Firewall example, extended so our conversations now are beginning with while we've got a security. This AI implementation and I highlighted we had a board meeting last week and our info SEC team.

Nikesh Arora: Great question, Keith. So I think if you take the software firewall example and extend it, so our conversations now are beginning with, well, we've got to secure this AI implementation. And I highlighted, you know, we had a board meeting last week, and our InfoSec team presented how much AI are we using within Palo Alto. I was amused and amazed to find we have 35 models under evaluation and deployment right now at Palo Alto. It's not one model, it's 35 models, because we use various models for different things. Now, the moment we talk about 35 models, our board starts getting worried about, oh my God, how are you securing these models?

Speaker Change: Which is actually an extension of our sulfur firewall capabilities.

Speaker Change: So what's going to happen the air firewall is going to do a pull through on the software firewall.

Speaker Change: And customers are going to lose the distinction between AI traffic and traditional cloud traffic.

Speaker Change: How much are we using within Palo Alto I was amused in EMEA is to find we have 35 models under evaluation and deployment right now of policy. We don't sell one model is 35 models because he is very small of a different theme now mostly talking about 35 models. Our board. So I was getting worried about my God. How are you securing these models.

Speaker Change: Calling traditional cloud traffic.

Nikesh Arora: And how much of that might be refreshed? Brian, as you know, that our product revenue growth is a combination of hardware and software. So it's not just the hardware part. I think the core hardware business still continues to grow. I sound like a broken record. I've always maintained 5 to 8%. And I think the core hardware business is still going at 5 to 8%. We highlighted software firewalls in our prepared remarks for a reason. We think the software firewall business is going to inflect. And I said this, and I'll reemphasize that, in the last six months, you always ask what changed this quarter?

Speaker Change: What's happening is we are beginning to see the.

Speaker Change: Faster adoption of cloud firewalls, because of the item, which is what I highlighted Brian in terms of how that is driving some of the hardware to software transformation. So the transformation, where you've sort of been slowly chugging along for the last five six years moving to a more balanced portfolio between the hardware and software is getting accelerated which will cause the N. G. S air our shift from hardware to software because that.

Nikesh Arora: Because they could be from anywhere. And what you discover is that to be able to secure those models, you actually effectively have to envelope them with a runtime firewall or AI firewall, which is actually an extension of our software firewall capability. Right, so what's going to happen, the AI firewall is going to do a pull through on the software firewall, and customers are going to lose the distinction between AI traffic and traditional cloud traffic. calling traditional car traffic. So what's happening to see is we are beginning to see the a faster adoption of cloud firewalls because of the AI trend, which is what I highlighted to Brian in terms of how that is driving some of the hardware to software transformation.

Because they could be from anywhere and once you discover is that to be able to secure that the models, you're actually effect that we have to envelope them, where they run time firewall, our AI firewall, which is actually an extension of our sulfur firewall capabilities.

Speaker Change: Depletes, our traditional IRR and increases our and yesterday I also this sort of tailwind associated with that on the Ngls and waterfront for Osaka for load perspective in Q1 of the other things I'll say is that we learned our lesson in cloud and cloud security, we dwell too long on the peacetime capabilities cloud security or the posture capabilities of Prisma cloud, but.

Speaker Change: Right, so what's going to happen the firewall is going to do a pull through on the software firewall.

Speaker Change: And customers are going to lose the distinction between AI traffic and traditional cloud traffic.

Nikesh Arora: What changed this quarter is there is so much buzz about AI that even the people who are reluctant to deploy AI are dipping their toes in it. Now, what's fascinating is if you want to stay on the bleeding edge of AI innovation, it's all coming cloud delivery. Right, if you want to do an on-prem AI implementation, it's about six months behind, because there's no Gemini for on-prem. There's no OpenAI for on-prem. There's no Lambda for on-prem. We can deploy Lambda and on-prem, but you have to be very smart, technically, to go put all the bells and whistles required.

Speaker Change: Calling for traditional cloud traffic.

Speaker Change: So what's happening to see as we are beginning to see the.

Speaker Change: In the firewall side of the AI business, we've actually doubled down on our production capabilities. So we are aggressively starting with one time security, which actually it was 18 months later in the cloud security industry.

Speaker Change: Faster adoption of cloud firewalls, because of the item, which is what I highlighted Brian in terms of how that is driving some of the hardware to software transformation. So the transformation, where you've sort of been slowly chugging along for the last five six years moving to a more balanced portfolio of hardware and software is getting accelerated which will cause the engie S. A our shift from hardware to software because the.

Nikesh Arora: So the transformation we've sort of been slowly chugging along for the last five, six years, moving to a more balanced portfolio, but in hardware and software is getting accelerated, which will cause the NGS ARR shift from hardware to software because that depletes our traditional ARR and increases our NGS ARR. So there's sort of tailwinds associated with that on the NGS ARR front from a software firewall perspective.

Speaker Change: We are out of the gate with a run time capability and as you can see with our acquisition of protect Doughty I, we're not going to let this one go we will relentlessly innovate and make sure that we don't get sideswiped by any vendor in the market.

Nikesh Arora: So even the most reluctant of organizations are going to have to move to the cloud to be able to leverage the AI models that are coming out fast and furious. Now, the moment you say, I have to go in the cloud, I have to go deploy real-time in the cloud, you have to secure it. And today... We have the best technology in a multi-cloud basis for cloud network traffic in our software firewalls. So part of what we're seeing is a software firewall business is beginning to inflect, which is underpinning both the transformation from hardware to software, but also bolstering our product avenue at Palo Alto Network.

Speaker Change: Depletes, our traditional IRR and increases our and yesterday, so there's sort of a tailwind associated with that on the Ngls are our front from a soccer furlough perspective, and Keith one of the other things I'll say is that we learned our lesson in cloud and cloud security, we dwell too long on the peacetime capabilities cloud security or the posture capabilities of Prisma cloud, but.

Speaker Change: Excellent. Thank you guys.

Speaker Change: Thank you Heath next.

Speaker Change: Next up we have Joe Galla from Jefferies, followed by Gabriela Borges from Goldman Sachs.

Nikesh Arora: And Keith, one of the other things I'll say is that we learned our lesson in cloud. In cloud security, we dwelled too long on the peacetime capabilities of cloud security or the posture capabilities of Prisma Cloud. But in the firewall sort of AI business, we've actually doubled down on the production capability. So we are aggressively starting with runtime security, which actually was 18 months later in the cloud security industry. Right, we are out of the gate with a runtime capability. And as you can see, with our acquisition of protect.ai, we're not going to let this one go, we will relentlessly innovate, and make sure that we don't get sideswiped by any vendor in the market.

Speaker Change: Hey, guys. Thanks for the question and congrats on the neuro the cash you briefly alluded to executing through geopolitical volatility youre. The first off quarter Sirena to report can you just elaborate on your conversations with Cio's Dsos is it back to business as usual after the first couple of weeks of April or is there still a lot of uncertainty maybe just kind of talk through.

Speaker Change: In the firewall so the AI business, we've actually doubled down on the production capability. So we are aggressively starting with one time security, which actually it was 18 months later in the cloud security industry.

Speaker Change: Right. We are out of the gate with run time capability and as you can see with our acquisition of protect Doughty I, we're not going to let this one go we will relentlessly innovate and make sure that we don't get sideswiped by any vendor in the market.

Speaker Change: The pipeline conversations and what's embedded in your guide that's a great question Jordan I don't the reason I didn't dwell on it in our prepared remarks is because April was an anomalous month I think we're back to normal in a way, but there was as you can imagine not too far long ago. There was conversations around tariffs around the world there were all kinds of supply chain.

Keith Weiss: Thank you.

Keith Weiss: Next question will be Keith Weiss from Morgan Stanley, followed by Joe Gallo, Jefferies. Excellent.

Keith Weiss: Thank you.

Speaker Change: Yes.

Unknown Executive: Thank you, Keith.

Speaker Change: Thank you Keith next.

Joe Gallo: Next up, we have Joe Gallo from Jeffrey's followed by Gabriela Borges from Goldman Sachs. Hey, guys, thanks for the question. And congrats, Hamza, on the new role. Nikesh, you briefly alluded to executing through geopolitical volatility. You're the first off-quarter cyber name to report. Can you just elaborate on your conversations with CIOs, CSOs? Is it back to business as usual after the first couple weeks of April? Or is there still a lot of uncertainty? Maybe just kind of talk through the pipeline conversations and what's embedded in 4Q Guide? That's a great question, Jordan. I don't, you know, the reason I didn't dwell on it in our prepared remarks is because April was an anomalous month.

Speaker Change: Next up we have Joe Galla from Jefferies, followed by Gabriela Borges from Goldman Sachs.

Speaker Change: <unk> said were anticipated, which did cause some of our customers to think Oh, my God, what's going to happen in the next time I ship a car across the border. It's gonna be twice as expensive or I can't ship anything what am I doing over there. So you saw that little sort of uncertainty in the market, which happened to be in the last month of our quarter. So that's why I'm, particularly delighted that our teams got their heads down and execute it was not.

Joe Galla: Hey, guys. Thanks for the question and congrats Hamzah on the neuro Niqash you briefly alluded to executing through geopolitical volatility youre. The first off quarter Siren aimed to report can you just elaborate on your conversations with <unk> is it back to business as usual. After the first couple of weeks of April or is there still a lot of uncertainty maybe just kind of talk through.

Keith Weiss: But congratulations, guys, on a really solid quarter. I wanted to kind of expand on that last question, what you were talking about in terms of the like the AI imperative, and what that opportunity means for Palo Alto Networks. When you're talking to customers, and they're looking to secure these new AI infrastructures, is this just about errors? Or is there a wider opportunity? What is like pull through from the Palo Alto portfolio, when people are looking to secure this new surface area? And to what degree does this help give you guys confidence in the growth in like the next generation ARR into next year?

Speaker Change: An easy quarter to execute you know had we not had the tariff conversation that due to the geopolitical tensions and a much easier to sell through it but we had our lessons from the pandemic, we had a lessons from the supply chain crisis. So we had to go back and pull up our shorts and executed the same practices that we did then and we're kind of like on the same sort.

Joe Galla: The pipeline conversations and what's embedded in your guide that's a great question Jordan I don't the reason I didn't dwell on it in our prepared remarks is because April was an anomalous month I think we're back to normal in a way, but there was as you can imagine not too far long ago. There was conversations around tariffs around the world there were all kinds of supply chain.

Nikesh Arora: I think we're back to normal in a way. But there was, as you can imagine, not too far long ago, there was conversations around tariffs around the world. There were all kinds of supply chain shocks that were anticipated, which did cause some of our customers to think, oh, my God, what's going to happen? Next time I ship a car across the border, it's going to be twice as expensive. Or I can't ship anything. What am I doing over here? So you saw that little sort of uncertainty in the market, which happened to us in the last month of our quarter.

Speaker Change: Sort of cadence now in Q4, because we are trying to stay ahead of the curve because I don't think many of our customers change their plans from a transformation perspective, but there was a pause for a few days, where they were trying to figure out where the market goes and thankfully as you see that we seem to have overcome that.

Joe Galla: <unk> said were anticipated, which did cause some of our customers to think Oh, My God, what's going to happen next time I ship a car across the border. It's gonna be twice as expensive or I can't ship anything what am I doing over there. So you saw that little sort of uncertainty in the market, which happened to be in the last month of our quarter. So that's why I'm, particularly delighted that our teams got their heads down and execute it it was not.

Keith Weiss: That's where I hear the most concerns from guys, are they too aggressive for next year? Is it AI? Is it platformization?

Nikesh Arora: Like, what are the elements that give you confidence in that Great question, Keith. So, I think if you take the software firewall example and extend it. So, our conversations now are beginning with, well, we've got to secure this AI implementation. And I highlighted, you know, we had a board meeting last week, and our InfoSec team presented how much AI are we using within Palo Alto. I was amused and amazed to find we have 35 models under evaluation and deployment right now at Palo Alto. It's not one model, it's 35 models, because we use various models for different things.

Speaker Change: As the global economy, So theres, a little more I would say stability in the business climate than there was towards the sort of I'll say the early to mid part of April but our teams did execute through it so I'm very proud of that.

Nikesh Arora: So that's why I'm particularly delighted that our teams got their heads down and executed. It was not an easy quarter to execute. Had we not had the tariff conversation, the geopolitical tensions, it would have been much easier to sail through it. But we had our lessons from the pandemic. We had our lessons from the supply chain crisis. So we had to go back and pull up our shorts and execute the same practices that we did then. And we're kind of like on the same sort of cadence now in Q4, because we are trying to stay ahead of the curve.

Joe Galla: An easy quarter to execute you know had we not had the tariff conversation that you did a geopolitical tensions it a much easier to sell through it but we had our lessons from the pandemic, we had our lessons from supply chain crisis. So we had to go back and pull up our shorts and execute the same practices that we did then and we're kind of like on the same sort.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: Next up we have Gabriela Borges from Goldman Sachs, followed by Matt Hedberg from RBC.

Joe Galla: Sort of cadence now in Q4, because we are trying to stay ahead of the curve because I don't think many of our customers change their plans from a transformation perspective, but there was a pause for a few days, where they were trying to figure out where the market goes and thankfully as you see that we seem to have overcome that.

Nikesh Arora: Now, the moment we talk about 35 models, our board starts getting worried about, oh my God, how are you securing these models? Because they could be from anywhere. And what you discover is that to be able to secure those models, you actually effectively have to envelope them with a runtime firewall or AI firewall, which is actually an extension of our software firewall capability. Right, so what's going to happen, the AI firewall is going to do a pull through on the software firewall, and customers are going to lose the distinction between AI traffic and traditional cloud traffic.

Matt Hedberg: Hey, good afternoon. Thank you my question I wanted to follow up on your comment on letting Alex from cloud and maybe just talk a little bit more on how you think about the AI product.

Nikesh Arora: Because I don't think many of our customers changed their plans from a transformation perspective. But there was a pause for a few days where they were trying to figure out where the market goes. And thankfully, as you see, that we seem to have overcome that as a global economy. So there's a little more, I'd say, stability in the business climate than there was towards the early to mid part of April. But our teams did execute through it. So I'm very proud of that. Thank you.

Speaker Change: Portfolio evolving from here, how do you think about what that looks like a couple of years that the mix between organic and inorganic and cladding.

Joe Galla: As the global economy, So theres, a little more I'd say stability in the business climate than there was towards the sort of I'll say the early to mid part of April but our teams did execute through it so I'm very proud of that.

Matt Hedberg: How do you think about integrating it.

Matt Hedberg: Being late in AI technology, I think like given how quickly the technology combined.

Yeah. Thanks for the question I think in the cloud World. If you go back five years ago, which was when I'd say five or six years ago, when the whole cloud security evolution started.

Nikesh Arora: calling traditional cloud traffic is so what's happening to say is we are beginning to see the Thank you, everyone. We've put together a diagram of how, let's say implementation. It should look like it's been unequaled for the past about two or three days. It should be promising and feel like no one's driven environmental change out of us, which is a killer.

Joe Galla: Thank you.

Nikesh Arora: Great.

Gabriela Borges: Next up, we have Gabriela Borges from Goldman Sachs, followed by Matt Hedberg from RPC. Hey, good afternoon. Thank you. Nikesh, I wanted to follow up on your comment on learning your lesson from cloud. Maybe just a little bit more on how you think about the AI product portfolio evolving from here. How do you think about what this looks like a couple years out, the mix between organic and inorganic? And on your plan being site-spiked, how do you think about including us all from being leapfrogged in AI technology specifically, given how quickly the technology is evolving?

Speaker Change: Next up we have Gabriela Borges from Goldman Sachs, followed by Matt Hedberg from RBC.

Matt Hedberg: There was an over indexation and focus on cloud posture.

Hey, good afternoon. Thank you my question I wanted to follow up on your comment on letting Alex coming from cloud and maybe just talk a little bit more on how you think about product portfolio evolving from here. How do you think about what that looks like a couple of years that the mix between organic and inorganic.

Matt Hedberg: And to understand what's going on trying to understand where the miss configurations that are trying to understand how do you configure GCB highly considered configure AWS et cetera, and there was a whole flurry of company's adult nine evident Red law Swiss law, all the companies with some of his board and turned into our sort of core cloud portfolios, but theres a lot less focus on run time.

Nikesh Arora: So thanks all our sound engineers, and all our staff for participating. And thanks to all the people wording this community and joining us on June 25th for One of the things I'll say is that we learned our lesson in cloud. In cloud security, we dwelled too long on the peacetime capabilities of cloud security or the posture capabilities of Prisma Cloud. But in the firewall sort of AI business, we've actually doubled down on the production capability. So we are aggressively starting with runtime security, which actually was 18 months later in the cloud security. Right, we are out of the gate with a runtime capability.

Speaker Change: Yes.

Speaker Change: Like how do we think about spreading it.

Speaker Change: Being late.

Matt Hedberg: Because everybody was experimenting everybody is trying to figure out what to do with cloud and deploying it. So clearly that's where the market was that's where all of the focus but I think we did ourselves a disservice by not indexing harder on the run time scenarios, which is where eventually the market has evolved as you can see now we see more action in cloud protection and responds and cloud since then we see in blockbuster.

Speaker Change: Got it.

Speaker Change: And how quickly the technology goodbye.

Nikesh Arora: Thanks. Thanks, Gabriella, for the question. I think, you know, in the cloud world, if you go back five years ago, which is when I'd say five or six years ago, when the whole cloud security evolution started, there was an over-indexation and focus on cloud boss trying to understand what's going on, trying to understand where the misconfigurations are, trying to understand how do you configure GCP, how do you configure AWS, et cetera. And there was a whole flurry of companies, the Dome9, Evident, Redlock, Twistlock, all the companies that some of us bought and turned into our sort of core cloud portfolios.

Speaker Change: Thanks, everybody for the questions I think in the cloud World. If you go back five years ago, which was one I'd say five or six years ago, when the whole cloud security evolution started.

Speaker Change: There was an over indexation and focus on cloud posture.

Matt Hedberg: I am glad posture is getting Commoditized every vendor in our industry has a cloud posture module, whether youre in SaaS, Sierra and endpoint detection. It also getting better. So it's a very commoditized industry and I know you've seen pricing sort of get rationalized because of many players in the market and it would be an extension of many existing categories.

Speaker Change: And to understand what's going on trying to understand where the mis configuration without trying to understand how did you configure GCB hardly considered configure AWS et cetera, and there was a whole flurry of company as adult nine evident Red law twist lock all the companies with some of his board and turned into our sort of core cloud portfolios, but there's a lot less focus on run time.

Nikesh Arora: And as you can see, with our acquisition of protect.ai, we're not going to let this one go, we will relentlessly innovate, and make sure that we don't get sideswiped by any vendor in the market.

Keith Weiss: Thank you. Thank you, Keith.

Matt Hedberg: In AI I think we're.

Nikesh Arora: But there was a lot less focus on runtime because everybody was experimenting. Everybody was trying to figure out what to do with cloud and deploying it. So clearly that's where the market was, that's where all of us focused. But I think we did ourselves a disservice by not indexing harder on the runtime scenarios, which is where eventually the market has evolved. As you can see, now we see more action in cloud detection and response and cloud SIMs than we see in cloud posture. And over time, cloud posture is getting commoditized. Every vendor in our industry has a cloud posture module, whether you're in SaaS, you're in endpoint detection, or you're a cloud security vendor.

Joe Gallo: Next up, we have Joe Gallo from Jeffries, followed by Gabriela Borges from Goldman Sachs. Hey, guys, thanks for the question. And congrats, Hamza, on the new role. Nikesh, you briefly alluded to executing through geopolitical volatility. You're the first off-quarter cyber name to report. Can you just elaborate on your conversations with CIOs, CSOs? Is it back to business as usual after the first couple weeks of April? Or is there still a lot of uncertainty? Maybe just kind of talk through the pipeline conversations and what's embedded in 4Q Guide?

Matt Hedberg: You're going to see an accelerated version of that because yeah. It's moving a lot faster than any other technology transformation that has happened and we are set up you know.

Speaker Change: Because everybody was experimenting everybody is trying to figure out what to do with cloud and deploying it. So clearly that's where the market was that's where all of the focus but I think we did ourselves a disservice by not indexing harder on the runtime scenarios, which is where eventually the market has evolved as you can see now we see more action in cloud protection and responds and cloud. Since then we see in cloud posture.

Matt Hedberg: Is it better be lucky than good sometimes than we were lucky that we deployed native firewalls in every public cloud provider that allows us to expand that capability, because we want to watch a transactions midstream in line you have to be where the traffic is the traffic is in the cloud service providers right. If you think about it 90% of AI implementations that are running through cloud service providers.

Speaker Change: Over time glad posture is getting Commoditized every vendor in our industry has a cloud posture modular whether youre in SaaS ear and endpoint detection or cloud security better. So it's a very commoditized industry and I know you've seen pricing sort of get rationalized because of many players in the market and it would be an extension of many existing categories.

Nikesh Arora: That's a great question, Joel. And I don't, you know, the reason I didn't dwell on it in our prepared remarks is because April was an anomalous month. I think we're back to normal in a way. But there was, as you can imagine, not too far long ago, there was conversations around tariffs around the world. There were all kinds of supply chain shocks that were anticipated, which did cause some of our customers to think, oh, my God, what's going to happen? Next time I ship a car across the border, it's going to be twice as expensive.

Speaker Change: Not on Prem.

Nikesh Arora: So it's a very commoditized industry. And you've seen pricing sort of get rationalized because of many players in the market and it being an extension of many existing categories. In AI, I think we're going to see an accelerated version of that, because AI is moving a lot faster than any other technology transformation that's happened. And, you know, we are sort of, you know, it's better to be lucky than good, sometimes. And we were lucky that we deployed native firewalls in every public cloud provider, that allows us to expand that capability, because we want to watch AI transactions, which stream in line, you have to be aware of the traffic is the traffic is in the cloud service providers, right?

Speaker Change: If that's the case that traffic has to be looked at it has to be bidirectional traffic. Because these things are going to have a brain of their own right. They're gonna have agency when that happens you have to look at what the brain is doing because sometimes it can be erratic.

Speaker Change: In AI I think we're.

Speaker Change: You're going to see an accelerated version of that because he is moving a lot faster than any other technology transformation. That's happened and we are set up you know.

Speaker Change: So from that perspective, AI runtime security becomes a very important pillar and we sat around the team that we have done a really good job on our <unk> firewall and then they discovered customers wanted to understand the veracity of the models. They wanted them scan. They wanted a persistent red teaming is that while my God, it's going to take us six months to build it like Oh, Let's go look at who's the best in the market if I'm protect.

Speaker Change: Is it better be lucky than good sometimes than we were lucky that we deployed native firewalls in every public cloud provider that allows us to expand that capability, because we want to watch a transactions midstream in line you have to be where the traffic is the traffic is in the cloud service providers right. If you think about it 90% of AI implementations that are running through cloud service providers.

Nikesh Arora: Or I can't ship anything. What am I doing over here? So you saw that little sort of uncertainty in the market, which happened to the last month of our quarter. So that's why I'm particularly delighted that our teams got their heads down and executed. It was not an easy quarter to execute. Had we not had the tariff conversation, the geopolitical tensions, it would have been much easier to sail through it. But we had our lessons from the pandemic. We had our lessons from the supply chain crisis. So we had to go back and pull up our shorts and execute the same practices that we did then.

Speaker Change: We were lucky that the founders found a fit with our team in terms of how they were going to work with us and we're going to close that acquisition and that team is actually going to run our AI security business.

Nikesh Arora: If you think about it, 90% of AI implementations are running through cloud service providers, not on-prem. If that's the case, that traffic has to be looked at, it has to be bidirectional traffic because these things are going to have a brain of their own, they're going to have agency. When that happens, you have to look at what that brain is doing because sometimes it can be erratic. So, from that perspective, AI runtime security becomes a very important pillar. And we sat around the team, and we had done a really good job on our AI firewall, and then we discovered customers wanted to understand the veracity of the models, they wanted them scanned, they wanted persistent red teaming, and so, oh, my God, it's going to take us months to build it.

Speaker Change: Not on Prem.

Speaker Change: If that's the case that traffic has to be looked at it has to be bidirectional traffic. Because these things are going to have a brain of their own right. They're going to have agency. When that happens you have to look at what the brain is doing because sometimes it can be erratic.

Speaker Change: Excellent okay.

Speaker Change: Sure.

Speaker Change: Next up we have Matt Hedberg from RBC, followed by a <unk> from Cowen.

Nikesh Arora: And we're kind of like on the same sort of cadence now in Q4, because we are trying to stay ahead of the curve. Because I don't think many of our customers changed their plans from a transformation perspective. But there was a pause for a few days where they were trying to figure out where the market goes. And thankfully, as you see, that we seem to have overcome that as a global economy. So there's a little more, I'd say, stability in the business climate than there was towards the early to mid part of April. But our teams did execute through it.

Speaker Change: Hey, Thanks Hamzah further question congrats on the results guys.

Speaker Change: So from that perspective, I run time security becomes a very important pillar and we sat around the team and have you had done a really good job on our <unk> firewall and then they discovered customers wanted to understand the veracity of the models. They wanted them scan. They wanted a persistent red teaming is that while my God, it's going to take us six months to build it like Oh, Let's go look at who's the best in the market if I'm protect.

Speaker Change: I had a question for Lee.

Speaker Change: Walking around RSA, it really felt increasingly like it was an AI conference versus a cyber conference.

Speaker Change: You guys talked about $400 million in <unk>.

Speaker Change: <unk>, which is great I guess my question is.

Nikesh Arora: We're like, no, let's go look at who's the best in the market. We found Protect.

Speaker Change: From an Egencia World talk about why Palo Alto is best positioned to help customers think through that which is obviously a whole new paradigm shifts, but they talk about some of the foundational aspects that you feel really good about from from that from an agenda perspective.

Nikesh Arora: We were lucky that the founders found a fit with our team in terms of how they were going to work with us, and we're going to close that acquisition, and that team is actually going to run our AI security business.

Nikesh Arora: So I'm very proud of that.

Nikesh Arora: Thank you. Great.

Matt Hedberg: Next up, we have Matt Hedberg from RBC, followed by Shaul Eyal from Cowen. Hey, thanks, Hamza, for the question. Congrats on the results, guys.

Yeah great.

Speaker Change: Okay.

Speaker Change: Great question, I think two years ago, RSA was AI, a year ago, whose AI security and this year. It was a gentle chaos right Bruce cycling through the different forms of AI.

Gabriela Borges: Next up, we have Gabriela Borges from Goldman Sachs, followed by Matt Hedberg from RBC. Hey, good afternoon. Thank you. Nikesh, I wanted to follow up on your comment on learning your lesson from cloud. Maybe just a little bit more on how you think about the AI product portfolio evolving from here. How do you think about what this looks like a couple years out, the mix between organic and inorganic? And on your plan being site-spiked, how do you think about including us all from being leapfrogged in AI technology specifically, given how quickly the technology is evolving?

Speaker Change: Yes.

Speaker Change: Next up we have Matt Hedberg from RBC, followed by a <unk> from Cowen.

Speaker Change: Hey, Thanks, Tom for the question Congrats on the results guys.

Lee Klarich: I have a question for Lee. You know, walking around RSA, it really felt increasingly like it was an AI conference versus a cyber conference. And, you know, you guys talked about 400 million in AIRR, which is great. I guess my question is, you know, from an agentic world, talk about why Palo Alto is best positioned to help, you know, customers think through that, which is a whole obviously a whole new paradigm shift. But talk about some of the foundational aspects that you feel really good about from that from an agentic perspective. Yeah, great question. I think two years ago, RSA was AI, a year ago, it was AI security.

Speaker Change: I had a question for Lee.

Speaker Change: With IDENTIKEY I think.

Speaker Change: Walking around RSA, it really felt increasingly like it was an AI conference versus a cyber conference.

Speaker Change: The way I think about it it starts with this idea that AI is going to move from being a sort of help her function to having the autonomy.

Speaker Change: You guys talked about $400 million in <unk>.

Speaker Change: <unk>, which is great I guess my question is.

Speaker Change: It's going to be able to take actions on its own obviously those actions will be metered out and increased over time as as trust is built up.

Speaker Change: From an Egencia World talk about why Palo Alto is best positioned to help customers think through that which is obviously a whole new paradigm shift, but they talk about some of the foundational aspects that you feel really good about from from that from an agenda perspective.

Speaker Change: And when you think about that in concept one of the.

Nikesh Arora: Thanks.

Speaker Change: There's a few key building blocks that are going to have to be present and one of those is it's not just going to be sort of an open ended let AI kind of create and do whatever it wants to they'll have to be certain guardrails and constraints on that from an enterprise perspective, and certainly from a cyber security perspective and so.

Nikesh Arora: Thanks, everyone, for the question. I think, you know, in the cloud world, if you go back five years ago, which is when I'd say five or six years ago, when the whole cloud security evolution started, there was an over-indexation and focus on cloud boss trying to understand what's going on, trying to understand where the misconfigurations are, trying to understand how do you configure GCP, how do you configure AWS, et cetera. And there was a whole flurry of companies, the Dome9, Evident, Redlock, Twistlock, all the companies that some of us bought and turned into our sort of core cloud portfolios.

Speaker Change: Yeah.

Speaker Change: Great question, I think two years ago, RSA was AI, a year ago, and saying is security and this year. It was a gentle chaos right Bruce cycling through the different forms of AI.

Lee Klarich: And this year, it was agentic AI, right? We're cycling through the different forms of AI. But with agentic AI, I think the the way I think about it starts with this idea that AI is going to move from being a sort of helper function to having autonomy, like it's going to be able to take actions on its own. Obviously, those actions will be metered out and increased over time as as trust is built up. And when you think about that in concept, one of the, there's a few key building blocks that are going to have to be present.

Speaker Change: With Egencia K I think the the way I think about it starts with this idea that AI is going to move from being a sort of help her function to having the autonomy.

Speaker Change: The first aspect of that then that positions us very well as our breadth and strengths across everything related to automation right. Our export platform has over 1000 integrations, we know how to integrate with all the different systems and enterprise, we know how how to programmatically approach. This in a consistent reliable way what.

Speaker Change: And to be able to take actions on its own obviously those actions will be metered out and increased over time is as trust is built up.

Nikesh Arora: But there was a lot less focus on runtime because everybody was experimenting. Everybody was trying to figure out what to do with cloud and deploying it. So clearly that's where the market was, that's where all of us focused. But I think we did ourselves a disservice by not indexing harder on the runtime scenarios, which is where eventually the market has evolved. As you can see, now we see more action in cloud detection and response and cloud SINs than we see in cloud posture. And over time, cloud posture is getting commoditized. Every vendor in our industry has a cloud posture module, whether you're in SaaS, you're in endpoint detection, or you're a cloud security vendor.

Speaker Change: And when you think about that in concept one of the there's a few key building blocks that are going to have to be present and one of those is it's not just going to be sort of an open ended let AI kind of create and do whatever it wants to they'll have to be certain guardrails and constraints on that from an enterprise perspective and certainly.

Speaker Change: Happens then if we put a AI engine behind that and that's the agenda piece that can actually start to actually create and evolve and improve and learn over time.

Lee Klarich: And one of those is, it's not just going to be sort of an open-ended, let AI kind of create and do whatever it wants to, there'll have to be certain guardrails and constraints on that from an enterprise perspective, and certainly from a cybersecurity perspective. And so the first aspect of that then, that positions us very well is our breadth and strength across everything related to automation, right? Our ex-war platform has over a thousand integrations. We know how to integrate with all the different systems in the enterprise. We know how to programmatically approach this in a consistent, reliable way.

Speaker Change: So no one else really has the same level of integration and automation capabilities that can be paired with AI.

Speaker Change: From a cyber security perspective, and so.

Speaker Change: The second piece is the biggest concern that I heard from just about every customer I talked to was the sort of the permission infrastructure for how do you make sure that these a gentex systems are actually allowed to do with they're allowed to do it.

Speaker Change: The first aspect of that then that positions us very well as our breadth and strength across everything related to automation right. Our export platform has over 1000 integrations, we know how to integrate with all the different systems and enterprise, we know how how to programmatically approach. This in a consistent reliable way.

Nikesh Arora: So it's a very commoditized industry. And you've seen pricing sort of get rationalized because of many players in the market and it being an extension of many existing categories. In AI, I think we're going to see an accelerated version of that, because AI is moving a lot faster than any other technology transformation that's happened. And we are sort of, it's better to be lucky than good sometimes, and we were lucky that we deployed native firewalls in every public cloud provider that allows us to expand that capability because we want to watch AI transactions midstream in line.

Speaker Change: And the our footprint.

Speaker Change: Footprint and understanding the interconnectedness of all different applications and enterprise.

Lee Klarich: What happens then if we put a AI engine behind that, and that's the agentic piece that can actually start to actually create and evolve and improve and learn over time. So no one else really has that same level of integration and automation capabilities that can be paired with AI. The second piece is the biggest concern that I heard from just about every customer I talked to was the sort of the permission infrastructure for how do you make sure that these agentic systems are actually allowed to do what they're allowed to do. And the, our footprint in understanding the interconnectedness of all different applications and enterprise puts us at a, in a very good place to be able to understand the right permissioning and the security implications of that.

What happens then if we put a AI engine behind that and that's the Agentic piece that can actually start to actually create and evolve and improve and learn overtime.

Speaker Change: Puts us at a in a very good place to be able to understand the write permission ing in the security implications of that and so we shared this in two forms one what we're doing on prisma errors to secure a gentex systems and two we gave a preview of a gentex, which is going to be our approach to building egencia platform for our customers and I'm excited about both.

Speaker Change: So no one else really has that same level of integration and automation.

Nikesh Arora: You have to be where the traffic is. The traffic is in the cloud service providers, right? If you think about it, 90% of AI implementations are running through cloud service providers, not on-prem. That's the case that traffic has to be looked at. It has to be bidirectional traffic because these things are going to have a brain of their own, right? They're going to have agency. When that happens, you have to look at what that brain is doing because sometimes it can be erratic. So, from that perspective, AI runtime security becomes a very important pillar. And, you know, we sat around the team and we had done a really good job on our AI firewall, and then we discovered customers wanted to understand the veracity of the models, they wanted them scanned, they wanted persistent red teaming.

Speaker Change: The capabilities that can be paired with AI.

Speaker Change: The second piece is the biggest concern that I heard from just about every customer I talked to was the.

Speaker Change: With us.

Speaker Change: Thanks, guys.

Speaker Change: The permission infrastructure for how do you make sure that these a gentex systems are actually allowed to do what they're allowed to do and the hour.

Speaker Change: Hey, Matt.

Speaker Change: Next up we have <unk> from Cowen followed by Jonathan Ho from William Blair.

Speaker Change: Thank you good afternoon, guys. Congrats on solid results congrats depends on leading kids that first call.

Speaker Change: Footprint and understanding the interconnectedness of all the different applications and enterprise.

Speaker Change: And the cash back to queue later and talent and I get these are two different products at their core.

Speaker Change: Puts us at a in a very good place to be able to understand the write permission ing in the security implications of that and so we shared this in two forms one what we're doing on prisma errors to secure a gentex systems into we gave a preview of a gentex, which is going to be our approach to building egencia platform for our customers and I'm excited about.

Lee Klarich: And so we shared this in two forms. One, what we're doing on Prisma Air is to secure agentic systems. And two, we gave a preview of agentics, which is going to be our approach to building agentic platforms for our customers. and I'm excited about both of those.

Speaker Change: Those seem to be exceeding their targets internally both should continue to show great results.

Nikesh Arora: And so, oh my god, it's going to take us six months to build it. We're like, no, let's go look at who's the best in the market. We found Protect. We were lucky that the founders found a fit with our team in terms of how they were going to work with us, and we're going to close that acquisition.

Speaker Change: From where you sit.

Speaker Change: Would you ramp.

Speaker Change: Them as Palo Alto is probably better acquisitions over the course of the past.

Speaker Change: Five years.

Speaker Change: With us.

Unknown Executive: Thanks guys.

Nikesh Arora: And that team is actually going to run our AI security.

Speaker Change: Thanks, guys.

Speaker Change: What was the bigger Tam opportunity longer term.

Shaul Eyal: Next up we have Shaul Yael from Cowan, followed by Jonathan Ho from William Blair. Thank you. Good afternoon, guys. Congrats on solid results. Congrats to Hamza on leading his first call. Nikesh, back to Curator and Talon, and I get these are two different products at their core. Both seem to be exceeding their targets internally. Both should continue to show great results from where you sit. Would you rank them as Palo Alto's probably better acquisitions over the course of the past four or five years?

Speaker Change: Hey, Matt.

Speaker Change: Next up we have show Leo from Cowen followed by Jonathan Ho from William Blair.

Lee Klarich: Next up, we have Matt Hedberg from RBC, followed by Shaul Eyal from Cowen. Hey, thanks, Hamza, for the question. Congrats on the results, guys. I had a question for Lee. You know, walking around RSA, it really felt increasingly like it was an AI conference versus a cyber conference. And, you know, you guys talked about 400 million in AIRR, which is great. I guess my question is, you know, from an agentic world, talk about why Palo Alto is best positioned to help, you know, customers think through that, which is a whole, obviously, a whole new paradigm shift.

Speaker Change: I think the if you step back and you.

Speaker Change: Thank you good afternoon, guys. Congrats on solid results congrats depends on leading kids that first call.

Speaker Change: Do you think five years out.

Speaker Change: I think five years out security will be delivered on top of a large security data lake by.

Speaker Change: The cash back to queue later and talent and I get these are two different products after a core.

Speaker Change: By some version of machine learning and AI.

Speaker Change: The traditional approach to security of writing policies in writing rules and writing human sort of in our controls at the edge is going to fail.

Speaker Change: Those seem to be exceeding their targets internally both should continue to show great results.

Speaker Change: From where you sit.

Speaker Change: Because AI will be incessantly banging at those edges trying to find the loopholes in the mis configuration in the way humans have not secured deep.

Speaker Change: We will do them.

Speaker Change: Them as Palo Alto bogey better acquisitions over the course of the past.

Lee Klarich: But talk about some of the foundational aspects that you feel really good about from that, from an agentic perspective. Yeah, great question. I think two years ago, RSA was AI, a year ago, it was AI security. And this year, it was agentic AI, right? We're cycling through the different forms of AI. But with agentic AI, I think the the way I think about it starts with this idea that AI is going to move from being a sort of helper function to having autonomy, like it's going to be able to take actions on its own. Obviously, those actions will be metered out and increased over time as as trust is built up.

Speaker Change: Five years.

Nikesh Arora: Where is the bigger TAM opportunity longer? Like, I think the if you step back, and you think five years out, I think five years out security will be delivered on top of a large security data. by some version of machine learning and AI. I think the traditional approach to security of writing policies and writing rules and writing human sort of controls at the edge is going to fail. because AI will be incessantly banging at those edges, trying to find the loopholes and the misconfiguration in the way humans have not secured the perimeter. So if you believe that, and you say that the way to make sure that your perimeter is secured is look at all the data, analyze it, pattern recognize it, and have your agents, the same agents that Matt was asking about.

What was the bigger Tam opportunity longer term.

Speaker Change: The perimeter.

Speaker Change: If you believe that and you say that the way to make sure that your parameters secured is look at all the data analyze it padron recognize it and have your agents. The same agents that you know.

Speaker Change: I think the if you step back and you.

Speaker Change: Do you think five years out.

That was asking about those Asian should go back and say I found a mis configuration at the edge, Let me go fix it.

Speaker Change: I think five years out security will be delivered on top of a large security data lake by.

Speaker Change: Why shouldn't that not happened why should security in the future be some security analysts sitting in writing a policy pain thing do this or traffic and do this phase G. D. P et cetera. So by definition. It means you should have some version of agenda guy securing a parameter of five years from now that requires that agenda guy to have access to all the data across all the endpoints right. It doesn't mean you have to.

Speaker Change: By some version of machine learning and AI.

Speaker Change: The traditional approach to security of writing policies in writing rules and writing human sort of in our controls at the edge is going to fail.

Speaker Change: Because AI will be incessantly banging at those edges trying to find the loopholes in the mis configuration in the way humans have not secured deep.

Lee Klarich: And when you think about that in concept, one of the, there's a few key building blocks that are going to have to be present. And one of those is, it's not just going to be sort of an open-ended, let AI kind of create and do whatever it wants to, there'll have to be certain guardrails and constraints on that from an enterprise perspective, and certainly from a cybersecurity perspective. And so the first aspect of that then, that positions us very well is our breadth and strength across everything related to automation, right? Our X4 platform has over a thousand integrations.

Speaker Change: The same endpoint doesn't mean, you have to have prisma access browser or a SaaS or your Palo Alto Sassy do you have anything you'd add zee scalar and let's go Palo Alto whoever you want at the end of the day the data has to get to one place.

Speaker Change: The parameter.

Speaker Change: If you believe that and you say that the way to make sure that your perimeter security look at all the data analyze it padron recognize it and have your agents the same agents that Oh.

Speaker Change: Now what's happened is we've been collecting data recently in a new paradigm for the incident respond to use case, well guess what that same data can be used for the policy. The mediation use case of predictability escape. So I think the evolution of security will be people will go towards that loss.

Nikesh Arora: Those agents should go back and say, I found a misconfiguration at the edge, let me go fix it. Why should that not happen? Why should security in the future be some security analyst sitting and writing a policy pane saying, do this to traffic and do this to HTTPS, et cetera? So by definition, it means you should have some version of agentic AI securing a perimeter five years from now. That requires that agentic AI to have the access to all the data across all your endpoints. It doesn't mean you have to have the same endpoint. It doesn't mean you have to have Prisma access browser or SASE or Palo Alto SASE.

Speaker Change: Matt was asking about those agents should go back and say I found a mis configuration at the edge, Let me go fix it.

Speaker Change: Why shouldn't that not happened why should security in the future be some security analysts sitting in writing a policy pain, saying do this or traffic and do this space G. D. P et cetera. So by definition that means you should have some version of agenda guy securing a parameter of five years from now that requires that agenda guy to have access to all the data across all the endpoints right. It doesn't mean you have.

Speaker Change: Harmonized security data lakes, which will be used for multiple activities and I think we're seeing the beginning of that and I think three to five years and when you look back and say that was obvious it's not obvious today because people are still going to sell a best of breed products at the perimeter to protect it but how can you protect the parameter if you only have a singular lengths on the problem.

Lee Klarich: We know how to integrate with all the different systems in the enterprise. We know how to programmatically approach this in a consistent, reliable way. What happens then if we put a AI engine behind that, and that's the agentic piece that can actually start to actually create and evolve and improve and learn over time. So no one else really has that same level of integration and automation capabilities that can be paired with AI. The second piece is, the biggest concern that I heard from just about every customer I talked to was the sort of the permission infrastructure for how do you make sure that these agentic systems are actually allowed to do what they're allowed to do.

Speaker Change: To have the same endpoint doesn't mean, you have to have prisma access browser or a SaaS or Palo Alto sassy do you have anything you'd have zee scalar NIPSCO Palo Alto whoever you want at the end of the day the data has to get to one place.

Nikesh Arora: You can have anything. You can have Zscaler, Netscope, Palo Alto, whoever you want. But at the end of the day, the data has to get to one.

Speaker Change: If you only see what you see with your product how can you predict the perimeter you have to see the entire enterprise to understand where the relative opportunities rather other than mistakes are I think that's where security goes in two to five years. So in that context, I think prisma access browser is a great edge device, which will actually be very interesting and useful because you have full visibility of the <unk>.

Nikesh Arora: Now, what's happened is we've been collecting data recently in a new paradigm for the incident response use case. Well, guess what? That same data can be used for the policy remediation use case or protective parameter use case. So I think the evolution of security will be people will go towards a lot, you know, harmonized security data lakes, which will be used for multiple activities. And I think we're seeing the beginning of that. And I think three to five years from now, when you look back, you'll say that was obvious. It's not obvious today, because people are still going to sell best of breed products at the perimeter protected.

Speaker Change: Now what's happening is we've been collecting data recently in a new paradigm for the incident respond to use case, well guess what that same data can be used for the policy. The mediation use case of predictability escape. So I think the evolution of security will be people will go towards a lot.

Speaker Change: The interactions of the endpoint with the human or perhaps on the agent perhaps in that use case.

Speaker Change: Harmonized security data lakes, which will be used for multiple activities and I think we're seeing the beginning of that and I think three to five years and when you look back you'll see that was obvious it's not obvious today because people are still going to sell best of breed products at the perimeter to protect it but how can you protect the parameter if you only have a singular lengths on the problem.

But you're gonna need something in the back to try and make sense of their data and be able to respond in real time with I think that's where the underpinning of the next generation Simmons of the world is going to be.

Lee Klarich: And our footprint in understanding the interconnectedness of all different applications and enterprise puts us in a very good place to be able to understand the right permissioning and the security implications of that.

Nikesh Arora: But how can you protect the perimeter if you only have a singular lens on the problem? If you only see what you see with your product, how can you protect the perimeter? You have to see the entire enterprise to understand where the relative opportunities, where the relative mistakes are.

Speaker Change: Okay.

Speaker Change: Alright, Thank you sure.

Speaker Change: Next up we have.

Speaker Change: If you only see what you see with your product how can you predict the perimeter you have to see the entire enterprise to understand where the relative opportunities rather run it a mistake. So I think that's where security goes in two to five years. So in that context, I think panamaxes browser is a great edge device, which will actually be very interesting and useful because you have full visibility of the of the <unk>.

Speaker Change: Joel Fishbein from Truest, followed by Andy Nowinski from Wells Fargo.

Nikesh Arora: And I think that's where security goes in two to five years. So in that context, I think Prisma Access Browser is a great edge device, which will actually be very interesting and useful because, you know, you have full visibility of the interactions of the endpoint or the human, perhaps, or the agent, perhaps, in that use case. But you're going to need something in the back to try and make sense of that data and be able to respond in real time. And I think that's where the underpinning of the next generation SIMs of the world is going to be.

Speaker Change: Hey, guys.

Speaker Change: Can you talk a little bit about the enterprise browser and why.

Speaker Change: Cowen has seen the inflection that it has and does this perhaps help your platform approach, particularly around the AI opportunity. Thank you.

Lee Klarich: Thanks guys.

Speaker Change: Actions of the endpoint or the human or perhaps on the agent perhaps in that use case.

Nikesh Arora: Next up we have Shaul Eyal from Cowen, followed by Jonathan Ho from William Blair. Thank you. Good afternoon, guys. Congrats on solid results. Congrats to Hamza on leading his first call. Nikesh, back to Curator and Talon. And I get these are two different products at their core. Both seem to be exceeding their targets internally. Both should continue to show great results. From where you sit, would you rank them as Palo Alto's probably better acquisitions over the course of the past four or five years? Where is the bigger TAM opportunity longer? I think the, if you step back, and you think five years out, I think five years out security will be delivered on top of a large security data.

Speaker Change: Yeah, absolutely so.

Speaker Change: But you're going to need something in the back to try and make sense of that data and be able to respond in real time with I think that's where the underpinning of the next generation Simmons of the world is going to be.

Speaker Change: <unk>.

Speaker Change: The the key if you think about this from a secure browser perspective is.

Hum.

Speaker Change: It it's a niche sort of use case when it is disconnected from everything else right.

Speaker Change: Okay.

Unknown Executive: All right. Thank you, Shaul.

Speaker Change: Alright, Thank you show.

Joel Fishbein: Next up, we have Joel Fishbein from Truist, followed by Andy Nowinski from Wells Fargo. Hey guys, um, can you talk a little bit about the enterprise browser and why, you know, talent has seen the inflection that it has? And does this perhaps help your platform approach, particularly around the AI opportunity? Thank you. So the The, the key if you think about this from a secure browser perspective is it, it's a niche sort of use case when it is disconnected from everything else, right? You have a user, they browse the internet, you secure it, it's interesting.

Speaker Change: Next up we have.

Speaker Change: If a user they they browse the internet you secure it that's interesting.

Speaker Change: Joel Fishbein from Truest, followed by Andy Nowinski from Wells Fargo.

Speaker Change: When we deliver it and are able to integrated with our platform.

Speaker Change: Hey, guys.

Speaker Change: Can you talk a little bit about the enterprise browser and why.

Speaker Change: It is completely transforms that from being a sort of one off use case to being in everything use case, we can now secure user traffic to the internet. We can secure their connections to SaaS, we can secure their connections to private applications with the recent announcements where we're integrating VDI, we can even secure their connections to things that are not even browser based.

Speaker Change: Cowen has seen the inflection that it has and does this perhaps help your platform approach, particularly around the AI opportunity. Thank you.

Speaker Change: Yeah, absolutely so.

Speaker Change: <unk>.

Speaker Change: The the key if you think about this from a secure browser perspective is.

Speaker Change: And so.

Speaker Change: The what I just described is enabled by us delivering it as part of a comprehensive platform.

Speaker Change: Hum.

Speaker Change: It it's a niche sort of use case when it is disconnected from everything else right you have a user they browse the internet you secure it that's it's interesting.

Nikesh Arora: by some version of machine learning in AI. I think the traditional approach to security of writing policies and writing rules and writing human sort of controls at the edge is going to fail. because AI will be incessantly banging at those edges, trying to find the loopholes and the misconfiguration in the way humans have not secured the perimeter. So if you believe that, and you say that the way to make sure that your perimeter is secured is look at all the data, analyze it, pattern recognize it, and have your agents, the same agents that Matt was asking about, those agents should go back and say, I found a misconfiguration at the edge, let me go fix it.

Speaker Change: As opposed to standard solution that we can deliver it stand alone and we have some customers that are starting there as a first step toward a broader adoption, which that's part of the flexibility in our platforms work, but the comprehensive Lucian is really what's driving the inflection point as we see it and then to your point around how.

Lee Klarich: When we deliver it and are able to integrate it with our platform, it completely transforms that from being a sort of one off use case to being an everything use We can now secure users' traffic to the internet. We can secure their connections to SaaS. We can secure their connections to private applications. With the recent announcements where we're integrating VDI, we can even secure their connections to things that are not even browser-based. And so The what I just described is enabled by us delivering it as part of a comprehensive platform. as opposed to a standalone solution.

Speaker Change: When we deliver it and are able to integrated with our platform.

Speaker Change: It is completely transforms that from being a sort of one off use case to being in everything use case, we can now secure user traffic to the internet. We can secure their connections to SaaS, we can secure their connections to private applications with the recent announcements where we're integrating PDI, we can even secure their connections to things that are not even browser based.

Speaker Change: How AI factors in we're finding that.

Speaker Change: Through the secure browser, we're able to then deliver a differentiated solution to our customers for securely adopting AI, where they get better security and a better user experience when adopting AI because we can embed a lot of the security controls directly in the browser.

Speaker Change: And so.

Speaker Change: The what I just described is enabled by us delivering it as part of a comprehensive platform.

Speaker Change: Which just makes it a lot easier from an adoption perspective.

Nikesh Arora: Why should that not happen? Why should security in the future be some security analyst sitting and writing a policy pane saying, do this to traffic and do this to HTTPS, et cetera? So by definition, it means you should have some version of agentic AI securing a perimeter five years from now. That requires that agentic AI to have the access to all the data across all your endpoints. It doesn't mean you have to have the same endpoint, it doesn't mean you have to have Prisma access, browser or SASE or Palo Alto SASE, you can have anything, you can have Zscaler, Netscope, Palo Alto, whoever you want.

Speaker Change: As opposed to standard solution that we can deliver it stand alone and we have some customers are starting there as a first step toward.

Lee Klarich: Now, we can deliver a standalone and we have some customers are starting there as a first step toward broader adoption, which that's part of the flexibility and how our platforms work. But the comprehensive solution is really what's driving the inflection point as we see it. And then to your point around how AI factors in, we're finding that through the secure browser, we're able to then deliver a differentiated solution to our customers for securely adopting AI, where they get better security and a better user experience when adopting AI, because we can embed a lot of the security controls directly in the browser, which just makes it a lot easier from an adoption.

Speaker Change: Sorry about that Jonathan next up we have Joel fishbein from tourists and we will wrap it up with any new Wenski from Wells Fargo.

Broader adoption, which that's part of the flexibility in our platforms work, but the comprehend solution is really what's driving the inflection point as we see it and then to your point around how.

Speaker Change: Thanks for the question Hamzah Congrats.

Speaker Change: A follow up to <unk> question or your answer to <unk> question.

Speaker Change: Howie I factors in we're finding that.

Speaker Change: Pretty powerful statement about the data Lake security I'm curious about how you view threat intelligence and the importance of sharing threat intelligence in the AI era.

Nikesh Arora: But at the end of the day, the data has to get to one. Now, what's happened is we've been collecting data recently in a new paradigm for the incident response use case. Well, guess what? That same data can be used for the policy remediation use case or protective perimeter use case. So, I think the evolution of security will be people will go towards a lot, you know, harmonized security data lakes, which will be used for multiple activities. And I think we're seeing the beginning of that. And I think three to five years from now, when you look back, you'll say, that was obvious.

Speaker Change: Particularly against the bad guys love to hear your thoughts on that.

Speaker Change: Oh look we've always had a built.

Speaker Change: Which just makes it a lot easier from an adoption perspective.

Speaker Change: Belief the threat intelligence should be shared for the most part there's obviously certain exceptions, but generally speaking where we have been opened we were one of the founding members of the cyber threat Alliance, which is.

Unknown Executive: Sorry about that Jonathan. Next up we have Joel Fishbein from Truist and we'll wrap it up with Andy Nowinski from Wells Fargo. Thanks for the question Hamza, congrats.

Speaker Change: Sorry about that Jonathan next up we have Joel fishbein from tourists and we will wrap it up with any new Wenski from Wells Fargo.

Speaker Change: <unk> focused on doing just that even amongst security vendors, so with our competitors.

Speaker Change: Thanks for the question Hamzah Congrats.

Nikesh Arora: Nikesh, I guess a follow up to Shaul's question, or your answer to Shaul's question, you know, pretty, you know, powerful statement about, you know, the data lake security. I'm curious about how you view threat intelligence and the importance of sharing threat intelligence in this AI era and, you know, protecting against bad guys. Love to hear your thoughts on that. Look, we've always had a belief that threat intelligence should be shared for the most part. There's obviously certain exceptions, but generally speaking, we've been open. We're one of the founding members of the Cyber Threat Alliance, which is focused on doing just that, even amongst security vendors, so with our competitors.

Speaker Change:

Speaker Change: A follow up to <unk> question or your answer to <unk> question.

Speaker Change: I actually think the to a certain extent the advent of AI and attack or AI.

Nikesh Arora: It's not obvious today, because people are still going to sell best of breed products at the perimeter protected. But how can you protect the perimeter if you only have a singular lens on the problem? If you only see what you see with your product, how can you protect the perimeter? You have to see the entire enterprise to understand where the relative opportunities, where the relative mistakes are. And I think that's where security goes in two to five years. So in that context, I think Prisma Access Browser is a great edge device, which will actually be very interestingly useful because you have full visibility of the interactions of the endpoint or the human perhaps, or the agent perhaps in that use case.

Speaker Change: Pretty powerful statement about the data Lake Securities I'm curious about how you view threat intelligence and the importance of sharing threat intelligence in this AI era.

Speaker Change: It is going to have an interesting impact on this lot of threat intelligence is oriented toward the idea that if I know about a specific attack a specific piece of malware or specific IOC I can build a protection for that specific thing.

Speaker Change: In protecting against the bad guys love to hear your thoughts on that.

Speaker Change: And in the advent of AI more and more attacks are going to be novel attacks are going to be new and different and it becomes much more important that protection Center AI based now this AI based protection.

Speaker Change: Look we've always had a built.

Speaker Change: <unk> will be informed by threat intelligence, but it'll be less of a direct correlation.

Speaker Change: <unk> focused on doing just that even amongst security vendors, so with our competitors.

Nikesh Arora: But you're going to need something in the back to try and make sense of that data and be able to respond in real time. And I think that's the underpinning of the next generation SIMs of the world is going to be.

Speaker Change: It will become much more important than being shared from a threat intelligence perspective actually becomes more about them.

Speaker Change:

Nikesh Arora: I actually think the to a certain extent, the advent of AI and attacker AI is going to have an interesting impact on A lot of threat intelligence is oriented toward the idea that if I know about a specific attack, a specific piece of malware, a specific IOC, I can build a protection for that specific thing. And in the advent of AI, more and more attacks are going to be novel attacks are going to be new and different. And it becomes much more important that protections that are AI based. Now these AI based protections will be informed by threat intelligence, but it will be less of a direct correlation.

Speaker Change: I actually think the to a certain extent the advent of AI and attack or AI.

Speaker Change: Attack techniques and approaches.

Speaker Change: And that's actually going to require a bit of a change to the threat intelligence space. So that'll.

Speaker Change: It is going to have an interesting impact on this lot of threat intelligence is oriented toward the idea that if I know about a specific attack specific piece of malware specific IOC I can build a protection for that specific thing.

Nikesh Arora: All right.

Shaul Eyal: Thank you, Shaul.

Speaker Change: That will need to happen I'll need to play out.

Shaul Eyal: Next up, we have Joel Fishbein from Truist, followed by Andy Nowinski from Wells Fargo. Hey, guys. Can you talk a little bit about the enterprise browser and why, you know, Talon has seen the inflection that it has? And does this perhaps help your platform approach, particularly around the AI opportunity? Thank you. So the The, the key if you think about this from a secure browser perspective is it, it's a niche sort of use case when it is disconnected from everything else, right? You have a user, they browse the internet, you secure it, it's interesting. When we deliver it and are able to integrate it with our platform, it completely transforms that from being a sort of one off use case to being an everything use We can now secure user traffic to the internet, we can secure their connections to SaaS, we can secure their connections to private applications.

Speaker Change: It'll be interesting to see how that shift manifests itself.

Speaker Change: Thank you.

Speaker Change: And our final question will be from Andy Nowinski.

Andy Nowinski: Okay. Thank you for squeezing me in and I'll make it a good one here.

Speaker Change: You guys had solid growth.

Speaker Change: And platform Ization customers I think you know 1250 that have deployed a platform. That's a small percentage of your total installed base of over 70000 customers. So I'm wondering is there any way to look at the percentage of IRR that those platform customers account for because I would guess that they account for a much higher percentage of your ear are then.

Nikesh Arora: It will become much more important that what is being shared from a threat intelligence perspective actually becomes more about attack techniques and approaches. And that's actually going to require a bit of a change to the threat intelligence space. So that'll need to happen, it'll need to play out.

Speaker Change: And it will become much more important that what is being shared from a threat intelligence perspective actually becomes more about attack techniques and approaches.

Speaker Change: And that's actually going to require a bit of a change to the threat intelligence space. So that'll need to happen I'll need to play out and it'll be interesting to see how that shift manifests itself.

Speaker Change: The 2% to account for in your installed base. So I'm really trying to understand the importance of the growth in these platform customers relative to reaching your $15 billion target. Thank you. So let's recap Andy I think we had said we want to get to between 2500 3500, plus amortization and we believe when we get there.

Nikesh Arora: It'll be interesting to see how that shift manifests itself. Thank you.

Speaker Change: Thank you.

Andy Nowinski: And our final question will be from Andy Nowinski from Wells Fargo. Okay, thank you for squeezing me in and I'll make it a good one here. You guys had solid growth in platformization customers. I think you now have 1,250 that have deployed a platform. That's a small percentage of, you know, your total installed base over 70,000 customers. So I'm wondering, is there any way to look at the percentage of ARR that those platform customers account for? Because, you know, I would guess that they account for a much higher percentage of your ARR than, you know, the 2% they account for in your installed base.

Speaker Change: And our final question will be from Andy Lewensky from Wells Fargo.

Speaker Change: Okay. Thank you for squeezing me in and I'll make it a good one here.

Speaker Change: You guys had solid growth.

Speaker Change: At the current trajectory of air or per platform deals.

Speaker Change: <unk> platform is Asian customers I think you know 1250 that have deployed a platform that's a small percentage of.

Speaker Change: We're going to get close to a $15 billion target.

Joel Fishbein: With the recent announcements where we're integrating VDI, we can even secure their connections to things that are not even browser based. And so The what I just described is enabled by us delivering it as part of a comprehensive platform. as opposed to a standalone solution. Now, we can deliver a standalone and we have some customers are starting there as a first step toward broader adoption, which that's part of the flexibility and how our platforms work. But the comprehensive solution is really what's driving the inflection point as we see it. And then to your point around how AI factors in, we're finding that through the secure browser, we're able to then deliver a differentiated solution to our customers for securely adopting AI, where they get better security and a better user experience when adopting AI, because we can embed a lot of the security controls directly in the browser, which just makes it a lot easier from an adoption.

Speaker Change: And that assumes somewhere between 60% to 70% of our N D. S. A R. R is made up of these platform customers.

Speaker Change: Your total installed base of over 70000 customers. So I'm wondering is there any way to look at the percentage of IRR that those platform customers account for because I you know I would guess that they account for a much higher percentage of your ear are then.

Speaker Change: That makes sense.

Speaker Change: Yes, certainly not us okay.

Speaker Change: That's our math. So you can do the math now yourself and say you know what does that mean, if 70% of 15 billion is a lot of hard to compute.

Nikesh Arora: I'm really trying to understand the importance of the growth in these platform customers relative to reaching your $15 billion ARR target. Thank you. So let's recap, Andy. I think we had said we want to get to between 2,500 to 3,500 platformizations. And we believe when we get there, at the current trajectory of ARR per platform deals, we're going to get close to our $15 billion target. And that assumes somewhere between 60 to 70% of our NGS ARR is made up of these platform customers. Does that make sense? Yeah, certainly. Okay. That's, that's our math. So you can do the math by yourself and say, you know, what does that mean?

Speaker Change: And then you can divide that by 2500 3500, whichever you like and see the average hour per deal and then you know we'll.

Speaker Change: I will tell you if you worked that back five 6% a year or the next five years, you'll say Wow you know that.

Speaker Change: I believe when we get there at the current trajectory of air or per platform deals.

Speaker Change: Must be the average platform the lip Aldo how's it give or take got.

Speaker Change: Got it thank you.

Speaker Change: We're going to get close to a $15 billion target.

Speaker Change: Okay, great with that we'll conclude the Q&A portion of this call I will now turn it back into cash for his closing remarks.

Speaker Change: And that assumes somewhere between 60% to 70% of R and D. S. L. R is made up of these platform customers.

Speaker Change: Again, thank you everyone again for joining us for our earnings call and we look forward to seeing many of you at upcoming Investor events. I also want to thank our customers partners and as I said, our employees for powering through what was a tumultuous April but we think now its business as usual all of US are heads down trying to execute on our big four plus billion over quarter in Q4.

Speaker Change:

Speaker Change: Yeah, certainly nice okay.

Speaker Change: That's our math. So you can do the math yourself and say you know what does that mean, if 70% of 15 billion, it's not hard to compute.

Joel Fishbein: Sorry about that Jonathan.

Nikesh Arora: If 70% of 15 billion is not hard to compute? And then you can divide that by 2500 or 3500, whichever you like and see the average AR per deal. And then, you know, we'll tell you if you work that back by 6% a year, or the next five years, you'll say, wow, you know, that must be the average platform deal that Palo Alto has, give or take. Got it. Okay, great.

Nikesh Arora: Next up we have Joel Fishbein from Truist and we'll wrap it up with Andy Nowinski from Wells Fargo. Thanks for the question and Hamza, congrats. Nikesh, I guess a follow up to Shaul's question or your answer to Shaul's question, you know, pretty, you know, powerful statement about, you know, the data lake security. I'm curious about how you view threat intelligence and the importance of sharing threat intelligence in this AI era and, you know, protecting against bad guys. Love to hear your thoughts on that. Uh, look, we've always had a belief that threat intelligence should be shared for the most part.

Speaker Change: And then you can divide that by 2500 3500, whichever you like and see the average hours per deal and then you know.

Speaker Change: Thanks again.

Speaker Change: I will tell you if you worked that back by 6% a year or the next five years, you'll say Wow you know that.

Speaker Change: Must be the average platform dilip volatile how's it give or take got it. Thank you.

Unknown Executive: With that, we will conclude the Q&A portion of this call.

Speaker Change: Okay, great with that we'll conclude the Q&A portion of this call I will now turn it back into cash for his closing remarks.

Nikesh Arora: I will now turn it back to Nikesh for his closing remarks. Again, thank you everyone again for joining us for our earnings call. We look forward to seeing many of you at upcoming investor events. I also want to thank our customers, partners, and as I said, our employees for powering through what was a tumultuous April. But we think now it's business as usual. All of us are heads down trying to execute on our big $4 billion quarter in Q4. Thanks again.

Nikesh Arora: There's obviously certain exceptions, but generally speaking, we've been open. We're one of the founding members of the Cyber Threat Alliance, which is focused on doing just that, even amongst security vendors, so with our competitors. I actually think the to a certain extent, the advent of AI and attacker AI is going to have an interesting impact on A lot of threat intelligence is oriented toward the idea that if I know about a specific attack, a specific piece of malware, a specific IOC, I can build a protection for that specific thing. And in the advent of AI, more and more attacks are going to be novel attacks are going to be new and different.

Speaker Change: Yeah.

Nikesh Arora: And it becomes much more important that protections that are AI based. Now these AI based protections will be informed by threat intelligence, but it will be less of a direct correlation. It'll become much more important that what is being shared from a threat intelligence perspective actually becomes more about attack techniques and approaches. And that's actually going to require a bit of a change to the threat intelligence space. So that'll need to happen, it'll need to play out.

Nikesh Arora: It'll be interesting to see how that shift manifests itself.

Nikesh Arora: Thank you.

Andy Nowinski: And our final question will be from Andy Nowinski. Okay, thank you for squeezing me in and I'll make it a good one here. You guys had solid growth in platformization customers. I think you now have 1250 that have deployed a platform. That's a small percentage of, you know, your total installed base over 70,000 customers. So I'm wondering, is there any way to look at the percentage of ARR that those platform customers account for? Because, you know, I would guess that they account for a much higher percentage of your ARR than, you know, the 2% they account for in your installed base.

Nikesh Arora: I'm really trying to understand the importance of the growth in these platform customers relative to reaching your $15 billion ARR target. Thank you.

Nikesh Arora: So let's recap. And I think we had said we want to get to between 2,500 to 3,500 platformization. And we believe when we get there, at the current trajectory of ARR per platform deals, we're going to get close to our $15 billion target. And that assumes somewhere between 60 to 70% of our NGS ARR is made up of these platform customers. Does that make sense? Yeah, certainly knows. Okay. That's our map. So you can do the math now yourself and say, you know, what does that mean? 70% of 15 billion is not hard to compute.

Nikesh Arora: And then you can divide that by 2500 or 3500, whichever you like and see the average AR per deal. And then, you know, we'll tell you if you work that back by 6% a year, over the next five years, you'll say, wow, you know, that must be the average platform deal that Palo Alto has, give or take. Got it. Okay, great.

Nikesh Arora: With that, we will conclude the Q&A portion of this call. I will now turn it back to Nikesh for his closing remarks. Again, thank you everyone again for joining us for our earnings call. We look forward to seeing many of you at upcoming investor events. I also want to thank our customers, partners, and as I said, our employees for powering through what was a tumultuous April. But we think now it's business as usual. All of us are heads down trying to execute on our big four plus billion dollar quarter in Q4. Thanks again.

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