Palo Alto Networks Inc at Bank of America Global Technology Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Tal Liani - Bank of America Securities - Analyst : Nikesh, thank you very much for doing this. And I want to start from a vision question, along that question. The question for investors is how will Palo Alto look five years from now? How is it going to be different from now? What is the main message when you sit down with big corporates that look at your roadmap and how the company is going to shape up? What's the message for of your customers of where you want to be years from now?

Question: Tal Liani - Bank of America Securities - Analyst : Got it. So just to put it in reference, what Nikesh just said, yesterday, we hosted a dinner, and the Bank of America IT group was there. And they said that Bank of America budget is $11.7 billion, IT budget and of that, $1.2 billion is spent on cybersecurity. So certainly a major part of our investment annually.

Question: Tal Liani - Bank of America Securities - Analyst : I can maybe send $1 billion. I'm not sure about the other $0.2 billion.

Question: Tal Liani - Bank of America Securities - Analyst : You've spoken about platform, and you've coined the phrase platformization, and other companies said the same thing after that. What does it mean -- the word platform, what does it mean for Palo Alto?

Question: Tal Liani - Bank of America Securities - Analyst : Yeah. And what are the benefits for the -- outside of complexity, reducing complexity, what are the benefits financial benefits maybe, or what are the benefits for customers? Is there any technical benefits, meaning system efficacy, et cetera? Or is it just about prices just about on those bundling discounting?

Question: Tal Liani - Bank of America Securities - Analyst : When you sell a platform, it's different than selling a point solution. So as you transform to a platform, what kind of changes do you have to make you to go to market and customer service organization? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 04, 2024 / 2:50PM, PANW.OQ - Palo Alto Networks Inc at Bank of America Global Technology Conference

Question: Tal Liani - Bank of America Securities - Analyst : And does it mean that you need to do more system integration now or team up with more system integrators because incorporating or deploying a platform is so much more complicated for corporates?

Question: Tal Liani - Bank of America Securities - Analyst : Got it. How does it work? So platformization by the way you answered basically you discussed it platformization is mostly a market of large corporates at this point. So that means the smaller customers, et cetera, they continue to buy point solutions. That's the way to think about the market for the near term?

Question: Tal Liani - Bank of America Securities - Analyst : I want to maybe drill down a little bit to your success with next-generation security. So last quarter, you grew ARR by 47%. What are the components of this growth? What are the parts that are growing faster and where do you see more success or better demand, et cetera?

Question: Tal Liani - Bank of America Securities - Analyst : So maybe I'll start with XSIAM. What does the acquisition give you? Why did you buy the assets from IBM?

Question: Tal Liani - Bank of America Securities - Analyst : So staying still with the smaller parts of your business? I'll just ask a question on Cortex before I go to the larger parts. Cortex, you mentioned previous quarter, I remember discussing with you and you said that now you feel that you are at par with standalone endpoint companies that have a platform. Talk about the Cortex success. What is the deployment you're seeing? -- what is the demand you're seeing from customers? Where can you fit yourself in the market?

Question: Tal Liani - Bank of America Securities - Analyst : And what's the synergy between Cortex and the rest of the portfolio?

Question: Tal Liani - Bank of America Securities - Analyst : I want to go back to Prisma access and SASE. There's a lot of entrants, new entrants to the market, right. So we have Microsoft and all the other firewall companies. How do you -- what do you think is going to be -- or how will the market look like on two vectors. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 04, 2024 / 2:50PM, PANW.OQ - Palo Alto Networks Inc at Bank of America Global Technology Conference Number one is, will the other firewall companies be able to also sell on top of their firewall SASE, is it this is the main selling point? Or are there any other factors that can drive success? And second, when we talk with Fortinet or with Microsoft, they talk about a very low pricing level. So do you envision price erosion in the market?

Question: Tal Liani - Bank of America Securities - Analyst : And when we spoke with last quarter, they are trying to differentiate by saying we're going to eliminate the firewall. It's a zero trust, we're going to eliminate the firewall. This is -- that's where the market is going. Do you share the vision? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 04, 2024 / 2:50PM, PANW.OQ - Palo Alto Networks Inc at Bank of America Global Technology Conference

Question: Tal Liani - Bank of America Securities - Analyst : And is there a synergy between your firewall revenues or firewall sale and your SASE sale is there?

Question: Tal Liani - Bank of America Securities - Analyst : I want to switch maybe to Prisma Cloud another big opportunity for you. You and I had here a discussion two years ago and there are a lot of startups in the space. And you look at the market today, and most of these startups are having difficulties -- serious difficulties rounding down or valuation going down in rounds. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 04, 2024 / 2:50PM, PANW.OQ - Palo Alto Networks Inc at Bank of America Global Technology Conference And the question is, how will the market look like in your point of view? Like five years from now, we know it's going to be a giant market, it's going to be a big market because that's where applications are going. But from a player's point of view, how will the market look like? Will you have the same competitors you're having today, or do you envision entry of other players to the market?

Question: Tal Liani - Bank of America Securities - Analyst : You mentioned you made seven acquisitions. How streamlined? No, within Prisma Cloud, how streamlined is the solution? Have you managed to integrate all these seven acquisitions into a unified experience for customers, et cetera?

Question: Tal Liani - Bank of America Securities - Analyst : Same question I asked you about Prisma Access. How synergistic is Prisma Cloud to the rest of the business? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 04, 2024 / 2:50PM, PANW.OQ - Palo Alto Networks Inc at Bank of America Global Technology Conference

Question: Tal Liani - Bank of America Securities - Analyst : So the market went through, the market itself went through a period of elevated demand and then a period of absorption. Talk about the outlook for firewall, overall firewall growth. And we spoke a little bit about it but is there a different environment going forward? Then forget the last three years, it was different, unique. But if you look at the three years prior to that and the next three years or the next four years, do you see different environments or is it going to go back to what we've seen before?

Question: Tal Liani - Bank of America Securities - Analyst : Financials you and I spoke about billings versus bookings and for the right reasons, you say, focus on bookings. That's the important part. Talk about both ends. What do you see in the market in terms of bookings? And what do you say to investors on the billing side?

Question: Tal Liani - Bank of America Securities - Analyst : Maybe I'll talk here with my line of questions, I have a few more, but I want to leave enough room for questions from the audiences. Is there a question in the audience? Anyone wants to ask a question, just raise your hand? We should have a microphone going around.

Question: Tal Liani - Bank of America Securities - Analyst : Yes. [To shine] how do you define -- you mentioned the last quarter, 65 platformization deals. How do you define the platformization deal?

Question: Tal Liani - Bank of America Securities - Analyst : Another thing that we discussed before was the federal segment, you derisked your guidance and you remove federal contribution. What is -- first of all, what are the current trends in federal? And how do you see it playing out the next few quarters, a few years?

Question: Tal Liani - Bank of America Securities - Analyst : Got it. Another thing you spoke last quarter was $150 million deal in the health care space. Can you provide details? I mean this is a giant contract. Can you provide details on what are you doing for the customer? How did it start? And what did you replace with? So, just a little bit of details on your participation.

Question: Tal Liani - Bank of America Securities - Analyst : Great. My last question is just on margins. Margins were strong last quarter up to 100 basis points. What's the outlook?

Question: Tal Liani - Bank of America Securities - Analyst : Nikesh, thank you very much.