Palo Alto Networks Inc at UBS Global Technology and AI Conference Transcript

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

Question: Roger Boyd - UBS - Analyst : Awesome. Maybe just to start high level, coming off 1Q, there's a lot of topics to get into, but high level, how are you thinking about the macro demand backdrop today? And as we enter 2025, how are you thinking about cybersecurity as a budget priority?

Question: Roger Boyd - UBS - Analyst : Okay. I want to touch on the regulatory backdrop. But before that, you mentioned AI. And we sat here last year, we talked about kind of the impacts of GenAI and cybersecurity, and it felt like a lot of the concerns over what GenAI could mean from an attacker perspective were pretty vastly outweighing the near-term potential benefit for the vendors. And I think broadly as an industry, we're talking about operationalizing Generative AI into 2025. But do you feel like from your business, what you're doing with some of your co-pilot offerings that next year, we can start to level the playing field? Or do you think that kind of unbalanced way that attackers leverage new technology persist? Does that make sense?

Question: Roger Boyd - UBS - Analyst : Got it. Okay. Maybe just one more on the regulatory environment. I think you rightfully pointed out that the focus on automation potentially creates opportunities with you for the federal customers. How do you think about a more deregulatory environment broadly as a demand driver for cybersecurity? And I think you maybe agree that there's been an element of cybersecurity demand fueled by regulation. And I think that's probably faded a little bit as the attack environment has gotten worse, but do you see that as a potential headwind at all?

Question: Roger Boyd - UBS - Analyst : Yeah. Got it. Okay. On platformizations, you ended Q1 with I think 1,100. You put this target out of getting to 2,500 or 3,500 by fiscal '30. Now that we're a couple of quarters into this kind of push, how do you think about that sales motion? Is it becoming more repeatable? Have you been able to leverage the channel to the extent you wanted to? And how should we think about the trajectory of those platformization as we get towards that target?

Question: Roger Boyd - UBS - Analyst : Got you. I want to talk about this end market and XSIAM. I think that's one of the bigger opportunities out there. If you look at all the vendors that are targeting next-gen SIEM, I think the commonality is some level of integrating SIEM more tightly with endpoint or in some cases, cloud security. How important do you think that is? And what's your high-level view on how the next-gen SIEM market kind of plays out from here?

Question: Roger Boyd - UBS - Analyst : I think -- feel free to push back on this, but relative to some of the other vendors in the space, it feels like Palo is aiming for more of a SOC transformation. And I think it kind of goes back to everything you've talked about so far. But maybe relative to other vendors in the space, it's a potentially heavier lift and feel free to push back, but you've got about --

Question: Roger Boyd - UBS - Analyst : You've already added about, I think, 150 XSIAM customers. You've got 500 or so QROC customers and I think double that or additional $500 million

Question: Roger Boyd - UBS - Analyst : Well, I think it's potentially better longer term because you're aiming for more of a SOC transformation where maybe some of the other vendors

Question: Roger Boyd - UBS - Analyst : Well, to be fair, I mean, of the 150, I think you've talked about 40 that are spending $1 million plus per year. So it's --

Question: Roger Boyd - UBS - Analyst : I think you debated on the earnings call whether the QRadar Talon deal was one of the best acquisitions you've made as a company. But just to shift to SASE with Talon, you've talked about pretty impressive adoption. How do you think about the use case for that within the SASE broader universe? And how do you think about enterprise browser adoption? There's been some chatter about what happens with Google. Any impacts to how you're thinking about that space?

Question: Roger Boyd - UBS - Analyst : High level on SASE, we've talked about kind of the endpoint market and the SIEM market, maybe narrowing down to three or four big vendors, you think that plays out in the SASE space? And I think right now, it's probably a story about three or four or five vendors depending on who you ask, but you've got potentially seven or eight total that are looking to enter the space. And I think part of that speaks to where we are in the overall SASE adoption cycle, but how do you think about SASE as kind of a critical area being satisfied by a few vendors? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 03, 2024 / 4:35PM, PANW.OQ - Palo Alto Networks Inc at UBS Global Technology and AI Conference

Question: Roger Boyd - UBS - Analyst : Fair enough. In the past, you've talked about firewall being a single-digit growth area. It felt to me like on the last earnings call, you were maybe warming up to a view that hardware could better support your growth across the board over the next few years. Can you just put a little more context behind that? And I think a lot of investors are aware of one of your competitors talking about a firewall [side].

Question: Roger Boyd - UBS - Analyst : Got you. So I want to talk about free cash flow, and I want to ask you about billings.

Question: Roger Boyd - UBS - Analyst : Anyways, if you look at last quarter, I mean, pretty impressive free cash flow results. The billings result was, I think, below where people had expected. Again, you're not guiding to it.

Question: Roger Boyd - UBS - Analyst : Fair enough. Can you just talk about, as investors look to get comfortable with the free cash flow guide, what other levers you have to control free cash flow? And I think investors recognize the $1 billion-plus you have in short-term backlog and short-term finance receivables, but anything else you can provide around color around some of the operational and working capital benefits?

Question: Roger Boyd - UBS - Analyst : Got it. Okay.

Question: Roger Boyd - UBS - Analyst : Got it. I'll ask one question from the audience. The question is whether diversification of solutions is preferred in cybersecurity. And you spoke a little earlier about how it's physically not possible for companies to manage 50, 70, 100 different solutions. But any change you perceived in the market around risk diversification following the CrowdStrike incident? Has that materialized at all?

Question: Roger Boyd - UBS - Analyst : Cool. I think we'll end it there. So thank you very much for joining. It's a great chat, and thank you all for participating.