So we feel really good about our solution. And I would tell you that AI and all of these enterprise applications are not just about price. They’re about value, and we built a real good value for our customers over many years.
Mehdi Hosseini: Thank you.
Operator: The next question comes from Asiya Merchant with Citigroup. Please go ahead.
Mike Cadiz: Hi, good afternoon. This is Mike Cadiz for Asiya at Citi. So my one question is, given ongoing — in the AI field, given ongoing security and data sovereignty concerns by many companies, is there anything notable in the customer conversations regarding AI model placements, whether on-prem or in the cloud or any other architecture preferences that they may have?
George Kurian: Listen, I think that data is the foundation on, which AI is built. And if you look at what enterprises are doing today, they are augmenting foundational models with their own data to bring the relevance of AI to their business and their organizational needs. As a result, issues like malicious injection of bad data into a data landscape can cause huge impacts on AI, the ability to maintain data security, privacy, and lineage is are all conversations that are happening regardless of the regulatory environment, and they will only get stronger as the regulations get enforced like you are seeing, for example, in the European Union. This gives the needs to have data management across the life cycle of AI extreme importance, and we are exceptionally well-positioned, having the capabilities to build secure, private environments in the public cloud, as well as in customers’ data centers.
Mike Cadiz: Okay, got it. Thank you very much. Have a good day.
Operator: Thank you. The next question comes from Nehal Chokshi with Northland Capital Markets. Please go ahead.
Nehal Chokshi: Hey, thanks, and congrats on the strong results here. Mike, can you give us some early thoughts on fiscal year 2025. And what are the key things we should be thinking about when modeling fiscal year 2025 here?
Mike Berry: Yes. Thank you for the question, Nehal. So when going into fiscal 2025, we’ve talked about it, hey, we feel really good about the momentum that we have in Q3 as well as the guidance that we built in Q4. We’ve talked about the momentum around C-Series. George talked about all the industry, trends that are also tailwinds for us. And when you look at all of the priorities that our customers are looking at, we feel like we’re really well-positioned. We’ve given you a good view of where we think our product gross margins will land. The support business continues to be an important driver of profitability as well. And we will continue to be prudent around our investment to make sure that we drive growth. We want to do that.
We want to make sure that we are disciplined in our spending. But hey, there are some things that we also need to do and want to do to be able to continue to drive the top line. I think we’ve done a lot of great work around cloud to be in a much better position for next year. George talked about the 35%-plus growth in cloud storage in first-party marketplace. And Eddie asked that question as well. In the quarter, cloud storage continues to grow as a percentage. It’s now closer to 65% from a revenue perspective. So that’s where the growth will be. And then, we will continue to do the right things around return of capital to shareholders. We always want to leave flexibility for investments, but we also want to make sure that we’re mindful of our share count.
So without trying to guide 2025, that’s only the best Readers Digest version, I can give you.
Nehal Chokshi: That’s fantastic. If I may, how should we think about the support revenue? You’re coming off 4 quarters of year-over-year product revenue declines now that you’re back into year-over-year growth on the product revenue, how long do you expect the Support revenue start to cut back up basically?
Mike Berry: Yes, great question. And we look at this a lot, obviously. So in the last two quarters, we’ve seen deferred revenue actually decline year-over-year. A couple of things to haul, keep in mind, that what you see on the balance sheet as a total deferred, it also includes cloud that has declined a little bit more than the Support business in the last two quarters. 90% plus Support will come off the balance sheet, so you can take a hard look at that. But what we’ve also seen is a different trend where instead of tech refreshes we’ve seen a lot of customers renew their Support for up to a year, and that has also helped continue to drive Support revenue. You don’t see that as much in deferred. But the big driver will be growth in product revenue drives additional Support revenue with the multiyear Support.
You’ll see that in billings. You’ll see that in deferred revenue. So we feel good about being able to get that growth in Support. I think it was 2% this year, hopefully, at least that and going forward, if product — when product revenue grows, support revenue should follow. It will be a little bit of a lagging indicator a couple of quarters, but it will definitely follow because of the business model.
Nehal Chokshi: Fantastic. Thank you.
Operator: The next question comes from Ananda Baruah with Loop Capital. Please go ahead.
Ananda Baruah: Yes. Good afternoon guys. Thanks for taking the question. Yes. Congrats I mean congrats on a strong number of quarters here and really good ongoing execution. And I guess George, that’s I guess what I’d like to ask, I guess the first question is — and I’m sorry if you spoke to some of this, I was — there’s a few calls going on tonight. So I came on late. But to what degree the last couple of quarters or so, do you think that the strong product growth that you guys have put up. I’m going to try to actually parse to the degree that’s possible. Is the result of new product features, kind of new products, things that customers are doing beginning to do sort of differently with their data? It sounds like not really a material GNA benefit yet, which makes sense.
But if you could parse — if there’s any way to parse through those things, that would be helpful. And then, I guess the second part of the question is, I think I heard you make mention of you think there is like a tail to this going forward. And I mean is part of what you’re saying is that you think the product demand sort of outlook begins to look a lot different as you go through calendar 2024 and then maybe even beyond? I know that’s a lot, but I’d appreciate that. Thanks.
