So I think the margins are obviously very, very strong on the product side, and we have that benefit there. So I do think it gives us the opportunity to make certain investments in the second half of this year, whether you want to call it price less or discounts or rebates or incentives to the channel partners.
Brad Zelnick : Thank you, very helpful.
Operator: Thank you for your call. Our next question is from Eunji Song with Morgan Stanley.
Eunji Song : Hi. Thank you, guys so much for taking my question today. In terms of cancellation rates, could you guys give us any directional color on backlog cancellation rates? And what’s assumed in your guidance by year-end? And I have a follow-up after.
Keith Jensen : Last quarter, I think cancellation maybe we said was high single digits? This quarter, we say it’s low, low double digits, right? And as backlog continues to subside as Ken pointed out a moment ago, it’s not really going to make that much of a difference whether that cancellation rate goes from low double digits to mid-teens or something, or even 20.
Eunji Song : Got it. Thank you. And just as a follow-up, what percentage of revenue came from SD-WAN and OT security this quarter?
Ken Xie : We see together over 25%, pretty similar to last few quarters, but also growing pretty strong, 40% SD-WAN, 60% OT.
Peter Salkowski : We have over 25% of the bookings number. I don’t think we’ve given a revenue number for that.
Operator: Thank you. Our next question comes from Saket Kalia — excuse me, from Barclays.
Saket Kalia : Okay. Hey, guys. Thanks for taking my questions, here. Ken, maybe just to double-click on the competitive question a little bit, but zero in on one segment. I’m wondering how you’re seeing SASE vendors in this market? Meaning, do you feel like the — maybe backing up. Keith, very helpful comment just on how the competitive win rates trend versus the other traditional network security providers. But when you look at SASE, do you feel like the growing prevalence of SASE is impacting firewall appliance decisions at all?
Ken Xie : I think it’s a little bit different market. Somehow the service provider, the traditional telecom service provider or the service provider, we are a little bit behind in the last five to 10 years. So that gave the SASE provided opportunity to offer the service. But I do believe a lot of the telecom service provider, cloud provider, they have a huge advantage on infrastructure and the cost advantage to offer some additional security service, so which we’re also working closely with them. And at the same time, we also invest some of our own kind infrastructure because also, a lot of our additional service beyond SASE like the SD-WAN, the other FortiGuard, [Indiscernible] and FortiCare service also need some of the infrastructure, which we’re making more profit model, cost-efficient model.
Compared to some other SASE providers, they have to whether lease or whatever, which tend to — would like double, triple the cost compared to the similar service owning the infrastructure. But it’s the new service offered by the SASE provider. We do see mid sort of enterprise need, which we also started to invest more in this area.
Saket Kalia : Got it. Got it. Keith, maybe for you for my follow-up. Very helpful commentary just on the billings duration in the quarter. I think that definitely helps bridge the gap with at least the guide on billings in Q2. But maybe looking forward, how are you thinking about billings duration for the second half of this year? And I don’t know, is there a way to kind of do the same exercise, like what would billings have been if the duration would have been in line with your original plan?
Keith Jensen : I mean, the spreadsheet for the second part of that question Saket. So I will come back —
Saket Kalia : No, no problem. We can take it offline.
Keith Jensen : No, that’s fine. I think there’s been conversation over the last, say, three or four quarters about would duration slow down. And we commented that we had seen some slowdown in duration. Not 1 month a quarter, but it would kind of bounce around a little bit. The point I’m making is when you’re measuring year-over-year growth, we lost 1.5 points of duration, which works out to be about 4 or 5 points growth. So when you’re making the comparison on a growth basis, it really is a factor there. And then if you want to get in the SASE part of it, remember, that product is not impacted by duration, only services are, so you get a partial impact. I think if you’re looking forward, as I made the point, as we look at Q3 and Q4, the duration assumption that, I would say, is in that pool of things that I looked at what we saw in Q2 in terms of actual results and how those — some of those metrics and assumptions that go into the guidance setting process differed from what I’ve been saying for the prior few quarters and place a very heavy reliance on what I saw in Q2, whether that deal’s a push or whether a term or a bucket of other things.
So without going into specifics, I would probably answer that question that way.
Saket Kalia : Very helpful.
Ken Xie : Yeah, some additional point of SASE is very — especially a lot of companies starting return to work, return to office. So we do see a lot of like, call it, universal SASE, which is supporting both on-premise in the office and also work from home because if you back in office, forward all of office traffic to the part of SASE provided and the process, then back to the office not make much sense. And at the same time, we see a lot of leverage or SD-WAN leadership there. We do see a lot of required the single vendor SASE. And also some bigger company also, they try to do the call the private SASE solution. So instead of process SASE traffic in the service provider part, they want to own process in their own kind of datacenter infrastructure, which also we do believe will be a big potential market going forward.
