George Kurian: Yes. Listen, I think, first of all, the macro has stayed relatively consistent the whole time. It is uncertain. It’s not getting worse, but it is not the fundamental reason for the improvement in results. The second is the two biggest reasons for improving our results. One is product and the second is focus on go-to-market execution. Let me hit on, in terms of product, we brought the world’s best operating system to two or three major new opportunities. We brought it to a price point in the all-flash market that we have not addressed before with the QLC flash offerings. We brought the world’s best operating system to a block storage opportunity that multibillion dollars, multiple tens of billion dollars that we had never built a purpose-built block storage product for.
And we are continuing to see an expanding range of AI opportunities as customers are doing both training as well as building context called retrieval augmented generation drag. And so all of those have driven improvements in our results. I think the other part of the equation would be to recognize the benefits that we’ve had from focus in our go-to-market. We have prioritized two areas; the hyperscaler marketplace and first-party cloud storage services in public cloud. And we have focused on our all-flash portfolio as the two major priorities, and we have had strong results in both of them, and I’m very pleased with the results.
Ananda Baruah: That’s great context. I appreciate that. And just a quick follow-up for Mike here. Mike, you talked about attach in some context. And I guess I just wanted to ask you with the operating margins already in the high 20s, philosophically, is there any reason why with everything you have going on with mix and attach over time, you couldn’t touch 30% operating margin?
Mike Berry: So we did this quarter, Ananda.
Ananda Baruah: Sorry, it’s funny. I haven’t — yes, I apologize. I have to with all the numbers I had you didn’t — that’s a miss on me. So well, let me just ask you then, let’s start there. Like I mean, should we just expect mix up then going forward? I mean, how are you thinking about like showing the margins in the P&L versus doing something else with the op income dollars as mix continues to work in your favor? Thanks.
Mike Berry: Yes. And no apologies necessary. I know you folks are busy today. So hey, we’re super excited about the 30% margin. And a lot of that. There’s all 12,000 employees that helped us on that number. We’ve guided to 27% to 28% inQ4. What I would say is that we very much want to continue to be able to grow the business. And even as a CFO, I know, hey, we need to invest in some areas. There are some product investments that we need to make. We want to make sure that the go-to-market continues to have sales capacity. We’ve said it at the last Analyst Day, we’ll say it again, which is we want to invest, but our goal is always to grow OpEx at a lower rate than revenue to drive the margins up. Where those go really depends, I think, on a couple of things.
One is how well we can continue to grow product revenue, that’s obviously a big piece. And that then drives storage, which was Nehal’s question around — I’m sorry, around which is a big piece. So we don’t have a target in mind. And quite frankly, the other thing I just want to make sure and underline, this is both gross — product gross margins and operating margins. Hey, we love the dollars more. And so our goal is to be able to drive dollars. That may mean that, hey, margins stay relatively consistent or they go up or down in a quarter. Our goal is to drive more revenue, more gross margin dollars, more operating that then goes to EPS. So I don’t want to give you a target. Now we’ll talk about this a little bit in June. There is that trade-off.
Ananda Baruah: Thank you. That’s super helpful. Thanks a lot, Mike.
Mike Berry: Thanks, Ananda
Operator: [Operator Instructions] The next question is from Amit Daryanani with Evercore ISI. Please go ahead.
Irvin Liu: Hi. Thank you for the question. This is Irvin Liu on for Amit. George, you mentioned new customer wins resulting from the displacement of competitor 10K hard disk drive and hybrid deployments with C Series. But can you give us a sense on what the upsell opportunity looks like for some of your other product lines such as A series and public cloud services, particularly with these new customers.
George Kurian: Listen, we always start with one environment, and then we can cross-sell other environments into the customer. I think what we have seen quite clearly in the market is that the idea of having multiple different operating systems and storage landscapes in our customer is causing cost, complexity and security vulnerabilities and the idea of going to one consistent architecture across multiple landscapes is clearly seeing resonance and customers. And I think that as we have got obviously both unified, as well as block focused offerings across high-performance AFF A Series, as well as more value-oriented C-Series products, we see opportunity to not only win one part of our customers’ footprint, but over time, win all of their footprint.
The work that we’ve done in public cloud allows us to penetrate accounts that we don’t have a relationship with using the public cloud sales motion. And as we have shared many times, the number of new to NetApp customers in the public cloud sales motion is very strong, and we are excited about that. We continue to see good progress on that front even this past quarter.
Irvin Liu: Thanks. I also had one follow-up. Just on the dip in your mix of U.S. public sector revenue. Was there anything to call out here just in terms of government IT spending?
George Kurian: It’s just normal seasonality. I think public sector actually was a strong number for us across the globe and nothing other than normal seasonality for us.
Irvin Liu: Got it. That’s all I had. Thank you.
