Operator: The next question is from Tal Liani with Bank of America.
Tal Liani: I have two questions on — related to the backlog. If the backlog is down $300 million or $250 million in Q4. Do you — and we are entering into a year that is supposed to be tougher for spending because it’s really only — really only starts this year. Does it mean that the backlog declines could accelerate this year on a sequential basis, dollar basis, et cetera? That’s the first question. And the second question is how should I think about the adjustment of backlog? I’m trying to think about what could the growth rate be after the backlog is adjusted down if the order — if the environment is not changing. So when I look at the sequential basis of 4Q, last year, it was up 10% roughly. And this year, if I remove this quarter, if I remove the backlog, there is a 25% delta between the growth you had last year and the growth you have this year because without the backlog, you were down 15% instead of being up 10%.
So the question is, is the order environment deteriorate that much between 3Q and 4Q? And then how does it carry on to 1Q, 2Q, 3Q, when the year progresses and the spending environment worsened in some sense. So again, my question is more about understanding how could the environment look like once you consume the backlog if the order environment doesn’t change much.
Ken Miller: Yes. So let me start with that. So from a backlog perspective, we did see a decline in the fourth quarter, as you noted, sequentially. However, I think it’s important to note, backlog was up approximately $200 million year-on-year, right? So for the full year, we had a pretty strong bookings year and actually grew backlog, but you are starting to see that decline and you’re starting to see orders, I would say, normalized, but actually, that’s really not the right way to say it. Customers have already placed orders, and we are now shipping those orders. So actually orders are understated, if you will, the true demand whereas the past 3 quarters, orders have been overstating through demand because they’ve been accelerating orders to account for multiple periods of time to adjust the lead times, now kind of the opposite is happening.
And as I mentioned, we’re not adding that back in. So the bookings number is going to be very unusual, I believe. This like it has been on the positive side. I think you’re going to see something similar on the negative side going over the next couple of quarters, which is why we think revenue is really the best demand metric you have. And backlog will come down, we haven’t stated exactly how much and the timing of it, it really does depend on our ability to capture supply, which is uncertain at this point, but we do expect it to come down throughout 2023, but remain high as we exit the year as customers are basically consuming orders we’ve already received. So I look at it as kind of a burden hand better than two in the bush scenario, where we already have the orders that really is the demand for 2023 in-house.
And as we shift that it’s going to play havoc on growth rates for current period orders.
Rami Rahim: And I’ll just add on this. I think Ken summarized the situation for Q4 really well. Orders that we would have otherwise received in Q4, we already had them in hand because of customers that were early ordering, especially in SP and Cloud. As we look at it to 2023, orders don’t need to grow in order for us to hit the at least 8% in revenue growth for the year. But I actually think they can grow. And in the Enterprise, I believe they will grow.
Operator: Okay. The next question is from James Fish with Piper Sandler.
