Adam Tindle: Okay. And one quick follow-up, just to make sure Peter kicks me off the call next time for this one. But it will be in the weeds, Keith, sorry. I want to ask about supply. We’ve been monitoring inventory commitments. They’ve been elevated for a little while now. Obviously, demand is deteriorating faster than expected. And we’re just trying to think about how to manage inventory and future inventory given this new state of demand. where that might manifest itself in results. I think you mentioned product gross margin pressure. I wonder if that was related to that. But any comments on kind of managing this oncoming inventory relative to the current demand?
Keith Jensen: Yes, it is related to the inventory levels. And I think we’ve been managing it for the better part of the second half of this year. And that’s some of the commentary you’re getting as we look into 2024 in terms of where the pressure may come from.
Adam Tindle: Any way to quantify it though?
Keith Jensen: Quantify, no.
Ken Xie: Yes, we feel still in a healthy level and we tend to keep about 6 months’ inventory. That’s where like when 2, 3 years ago, the supply chain should happen, we are in market position because also a lot of time, our customer need some urgent delivery of certain products. So we’re probably still keeping the similar policy there. but also we’re in a refresh cycle of our new products, especially end. I think so far, we — I think we also kind of resurprised in the last 2, 3 years. now since starting to stabilize and so changing from a shortage a little bit more towards even some oversupplied. So we feel we are in a pretty good position because we more handle is operation manufacturer directly. So we handle it better than most of our other competitors on the inventory right now. Yes, we also don’t see a big issue about the current inventory level.
Operator: Next question comes from Adam Borg from Stifel.
Adam Borg: Maybe just on the sales execution issues that you talked about in the script, maybe go a little deeper on what exactly — what exactly happened and a little bit more about the steps you’re taking. And maybe just as a follow-up, just on the SASE partnership with [ GCT ]. I know it’s obviously just been a couple of weeks but maybe talk about early customer feedback from initial conversations?
Ken Xie: Yes. We — if you look in the last 2, 3 years, we’re growing a lot of business also hired a lot of salespeople — and the last 2, 3 years, we probably doubled the business. And at the same time, during the supply chain, you should somehow certain sales feel it too easy to get deal because as always a shortage of certain product there. So that’s where we feel we need to enhance the training enablement and — at the same time, I also need to be more disciplined about the performance. So that’s — at the same time, we also — when we’re shifting this to more like a service-based SASE kind of consolidation cross-sell multi-cell secure part sales also need to keep in learning. At the same time, the market need to be kind of more efficient and also kind of a projection to the new growth opportunity. So that’s the focus we have right now. So we are definitely keeping looking to be more efficient in both the sales and marketing going forward.
Adam Borg: Great. And what about the early feedback on [indiscernible].
Ken Xie: Yes, it’s very good that give us a very quick start to match any other competitor on the location, number of [indiscernible] number up and they also have a broad coverage, so it’s a good partnership. At the same time, we continue to working with some other partners. We also will continue to build ourselves. And the long term, we feel we have more advantage than some of our competitors because we always have a strategy invest in some long-term or long-term investment strategy, including some real estate, some other parts which give us a much better long-term return.
Operator: Our next question comes from Patrick Colville from Scotia Bank.
Unidentified Analyst: All right. Ken, Keith, Peter. My question is about being, I guess, kind of qualitative guidance you guys gave for 2024 billings. If I remember correctly, in last quarter, it was expect kind of high teens busing growth exiting fiscal ’24. Was the commentary this quarter expect double-digit growth exiting 2024?
Keith Jensen: Let’s try I’m following the math.
Unidentified Analyst: I’m just trying to — so last quarter, you guys gave some kind of like a forward look for 2024 billings. And if I remember rightly, the kind of forward look was expect exiting billings growth to be in high teens. Earlier in your kind of prepared remarks, there was a comment which was expect double-digit growth in the second half. I guess — are we going from high teens to double digit? Is that the change?
Keith Jensen: Yes. I think that’s prudent given what we’ve just seen in terms of the third quarter performance.
Operator: Our next question comes from Joseph Gallo from Jefferies.
Joseph Gallo: I’ve got a two-parter, one for each of you. And Keith, as a follow-up to that last question, appreciate the commentary on bottom line floor for ’24. Can you just talk about the methodology of top line guidance? Is this a rip the Band-Aid off guide? Or what underpins the confidence and visibility on a reacceleration of billings. Is it SASE turning on or just hardware digestion only taking 2 to 3 quarters? And then, Ken, given what you’re seeing with AI, do you believe adoption of AI workloads eventually shift workloads back to on-premise and drives a higher need for firewalls long term?
Keith Jensen: Yes. And I wasn’t quite sure if the question was about the Q4 guide or the 2024 commentary about numbers.
Joseph Gallo: More for next year but both. Has the methodology for your top line guidance change following the past 2 quarters?
