Ken Miller: Yeah. So I expect our Enterprise revenue — I expect our Enterprise business to grow faster than market. So I do think we will take market share. The market, as many are predicting, is expected to slow down pretty significantly next year as compared to this year, but we expect to be able to grow — even if the market is slightly down, we would expect to grow our Enterprise business. So we are absolutely expecting market share taking.
Operator: Thank you. The next question is coming from Meta Marshall from Morgan Stanley. Meta, your line is live.
Meta Marshall: Great. Thanks so much. Maybe first question, I know on the Enterprise side, you guys are not as tied to macro just given kind of the share gain position you’re in. But just wanted to get a sense of any commentary around time from initial Wi-Fi sales to kind of the upsell of additional campus switching or additional SD-WAN, just whether you’re seeing an elongation of that in a more challenged macro or if it’s actually shorter just given the compelling ROI. And then maybe just as a second question, just the visibility. As we’ve kind of extended this inventory digestion period on Cloud and Service Provider, just the visibility that you have within those customers of just how much inventory they have. What is kind of the ongoing dialogue to get a sense of just when you guys could have a little bit more sense of visibility there? Thanks.
Rami Rahim: Thanks for the questions, Meta. So let me start with the first one on macro, and I think specifically the timing between sort of initial sale of a Mist solution to subsequent use cases. It honestly is all over the map. We have seen accounts that have traditionally been Wi-Fi customers have loved the technology, the ease of operations and years later, have come back to us saying, hey, we’d like to introduce wired, WAN, et cetera. But in many cases, we’re actually selling the full technology stack day one. In fact, we are deliberately tracking sales of full-stack solutions, and we hit a record — another record in Q3, where a full-stack solution would be some combination of use cases, wired and wireless, wired and WAN, wireless and WAN, et cetera.
And we’re continuously adding more and more of these capabilities, an example of which would be the NAC, network access control, where in the Q3 time frame alone, we added around 15 new customers and it’s starting to grow quite rapidly. We’re incenting our sellers to cross-sell. We’re enabling them to cross-sell. It’s definitely part of our sales motion. On the visibility, I guess, it really goes back to the question I just answered recently. It’s difficult to know exactly how much inventory levels our customers have, but we do know that, at least for the next few quarters in both SP and Cloud, their focus is going to be on deploying what they have bought — first receiving what they have bought, deploying it, getting it up and running before they start to feel the need to make meaningful orders again.
It’s just going to be measured in a few quarters.
Operator: Thank you. And the next question is coming from Tal Liani from Bank of America. Tal, your line is live.
Tal Liani: Yes. Hey. Two questions. Number one is the Cloud decline — Cloud vertical declined 28% this year — this quarter. Can you tell us what’s the basis for the decline? Is it the absorption of historical orders? Or is it delays of projects? Or what’s kind of the basis? That’s number one. And number two, the Enterprise vertical, this is the fourth quarter of very, very strong growth, 37%. And if I look back, it’s four quarters that you doubled the growth from the previous four quarters. And the question is the same, more or less, here. What is driving it? And then once we get to next quarter and the following four quarters, the comps are very tough. What do you think is going to happen to the growth rate? And again, I’m asking qualitatively just to understand what’s driving it. Thanks.
Rami Rahim: Okay. Thanks for the questions, Tal. Let’s start with Cloud Providers. The biggest thing driving the decline today is the fact that lead times have gone from what was over a year to normal, just a few weeks. And so the need for them to purchase in sort of like way upfront from when their needs are is just not there anymore. And therefore, they’ve just reduced the orders that they’re placing. So that is the number one thing that’s affecting our business. It’s not the only thing. There are definitely — there have definitely been some project pushouts. I think macro has affected their own businesses and the need for equipment. So that would be the second thing. And I think the other thing is they have shifted some of their priorities to, for example, AI, GPUs, which, as you know, are extremely expensive.
So those are the main reasons. I again feel the need to reiterate: I’m optimistic long term. I do believe that nothing has changed structurally, and I believe that I would not bet against the businesses of Cloud Providers. And therefore, it remains an incredibly important and strategic part of our business. It’s just going to be a matter of time before we start to see the rebound in the recovery there. In Enterprise, yes, we have seen and I believe we’ll continue to see strength. I’ve talked at length about Mist. So I’d be remiss not to mention also what’s happening in our data center business. We had record Apstra revenue. Each Apstra sale, which is our automation solution for the data center, intent-based automation solution, is pulling meaningful hardware at this point in time.
Apstra new logos have grown by 80% on a year-over-year basis, and the pipeline remains incredibly solid. Next year, the compares become more difficult in the Enterprise, no doubt. And this backlog draw in 2023 that Ken and I have both mentioned does affect Enterprise as well. It’s just that in the Enterprise space, orders continue to be very robust, and we expect order growth next year. So the path to revenue growth next year is much clearer. But obviously, yeah, it becomes more difficult from a year-over-year standpoint. So you should just factor that into your model.
Tal Liani: Thank you.
Operator: Thank you. That was all the questions we had today, and that does conclude today’s conference. You may disconnect your lines at this time, and have a wonderful day. Thank you for your participation.
