James Fish: Rami, for you, a big topic that’s coming up is AI workloads. Is there a way to think about the opportunity — or is that going to be out throughout the course of the year? Thanks.
Rami Rahim: 2022 and I think it’s a demonstration — that drive market share taking for our Enterprise business, and that — our Paragon automation for the metro within the Service Provider debate. Now having said that, I think your question is more around cloud providers and the opportunity that AI presents to us in terms of supplying the infrastructure necessary to keep up with demand. And earlier in this call, I mentioned how long term, I’m actually quite bullish about long-term cloudified businesses. And one of the reasons is because of AI. I believe that this is going to be yet another big initiative or a catalyst to increase traffic within the data centers and in the WAN leading or ending in their data centers among all cloud providers that they will have to get ahead of.
And they get ahead of that by building higher performance, more cost effective, more cost-efficient networks, both within the data centers and in the wide area network. We will benefit from that because of the existing footprint that we already have within the cloud space — as you know, we’re in pretty much all of the major cloud providers, hyperscale and the top 10 cloud providers as well. Add to that the new 400-gig opportunities that become exceptionally important to carry all this traffic cost effectively. And I think it bodes well for our cloud provider business in the long run.
Ken Miller: Yes. And to your second question, so from a backlog perspective, we believe our backlog remains extremely durable. Level of cancellations remain extremely low compared to the backlog levels, and I expect that cancellation level to remain low going forward. From a Q4 kind of timing of revenue mix perspective, you’re right in that the Q4 miss basically made — we made that up in Q1. So it really was a timing thing. We had a few more days. We would have made the quarter’s expectation, but that rate did slip into Q1. We’ve already made that up. You can see that reflected in the Q1 guide of $13.40 which lower sequential than we normally see from a Q4 to Q1. So I believe that has been made up. And other thing I’d mention is on the Q4 margin, which wasn’t asked about, we did see some favorableness in the Q4 margin.
Some of that is due to software mix and quite honestly, some of that’s because we couldn’t ship some of the hardware we were expecting to ship, which was at a lower margin. So that also has an impact on Q1 guidance where you’re seeing margin come down seasonally a little more than normal off of Q4. It always — it normally comes down, it comes down a little more to that software mix and as it relates to margin in 2023, I do think there’s opportunity for margin to be flat to modestly up. I do expect there to be some improvement in some of those expedite fees and freight costs. That said, there’s a lot of uncertainty with gross margin, and I feel that the street models as they are, the expectations there currently has, I would encourage you to keep those as they are for 2023.
Operator, we’ll take two more questions.
Operator: The next question is coming from Aaron Rakers with Wells Fargo.
Unidentified Analyst: This is Jake on for Aaron. I was just wondering if you could talk a little bit more about the momentum you’re seeing in 400G and any changes in the competitive landscape there?
