Rajiv Ramaswami: I think the Cisco piece, by the way, just let me – I think we should decouple that, right, because this AI piece works with everybody servers. So, customers can buy servers from Dell or HP or Lenovo or any of server partners and we have a wide variety of them, and we have been supporting GPUs for multiple years. So, we don’t necessarily need this to be only Cisco. So, they can buy that from whoever they like their server partners. What we expect with Cisco is a significant expansion in terms of our go-to-market reach, right, with their go-to-market, their ability to sell into a much broader customer base and their footprint, we should be able to benefit from that in the long-term.
Mehdi Hosseini: Got it. Thank you for the color.
Operator: Thank you. And one moment for our next question. And our next question comes from Erik Suppiger from JMP Securities. Your line is now open.
Erik Suppiger: Yes. Thanks for taking the question and congrats on a good quarter. First off, on the GPT-in-a-Box, are those customers developing their own large language model or are they using third-party software on that box? And then secondly, in the – go ahead.
Rajiv Ramaswami: Yes, Erik, I think the answer that most of them would not build their own large language models. They would use foundation models that are available. For example, there is new ones coming out like Lama 2 [ph] that are open source. They could, of course, use GPT if they like as well. But there are much of the models. Most customers in the enterprise, I don’t think will develop their own models, but use what’s available out there. They would probably fine tune it with the data that they have.
Erik Suppiger: Okay. That makes sense. And then secondly, in the partnership with Cisco, are the Cisco sales getting comped on selling the Nutanix software?
Rajiv Ramaswami: Yes, they are getting compensated just as if they were selling Cisco products, so 100% compensation for their service.
Erik Suppiger: Very good. Okay. Thank you.
Operator: Thank you. And one moment for our next question. And our next question comes from Wamsi Mohan from Bank of America. Your line is now open.
Ruplu Bhattacharya: Hi. Thanks for taking the questions. It’s Ruplu filling in for Wamsi today. I had one question for Rajiv and one for Rukmini. Rajiv, can you comment on a couple of things to specifically demand by vertical. You talked about some share gains this quarter. How is the pricing environment? Is that holding steady, or are you seeing any pricing pressure? And then can you talk about your view on the backlog heading into fiscal ‘24, has that normalized now, or is it still elevated?
Rajiv Ramaswami: Yes. So, on the pricing, we haven’t seen any significant change in pricing this quarter compared to our last quarter. And in general, as we, for example, attach more of our products with our portfolio towards these, ASPs tend to go up, right, because we are simply attaching more of the portfolio. So, we haven’t seen any shift or big change in our pricing dynamics. Now, on the backlog and with respect to verticals, again, I can’t say that there is any significant difference. I think it’s more a function of volume and deal size that dictates discounts and rather than any particular vertical related factors for us. Now, with respect to the backlog, I am going to let Rukmini comment on that.
Rukmini Sivaraman: Yes. Thank you, Rajiv and hi Ruplu. So, on backlog, as we talked about I think last year for fiscal year ‘23, backlog, it did move around as expected during the course of fiscal year ‘23. Despite that, we ended ‘23 actually with a slight increase and that should impact backlog dollars year-over-year. And we are factoring that into the outlook for fiscal year ‘24. So, we expect some backlog to be consumed over the course of this year. But as is to be expected in an uncertain macro environment like the one we are in, I think the range of possible outcomes are just wider than before. And more generally, as we continue to grow, the absolute dollar number of backlog could also continue to increase over time.
Ruplu Bhattacharya: Okay. Thanks for the details there. If I can ask you, looking at the guidance for fiscal 1Q versus the full year fiscal ‘24, it looks like there is operating margin improvement as you go through the year. So, what are the drivers for that? And then if you can talk about the seasonality you expect in ACV billings. Again, looking to – should we think that going from 2Q to 3Q, should we expect the same level of decline, your renewables business is growing. So, just any thoughts on how should we model ACV billings in fiscal ‘24? Thank you.
Rukmini Sivaraman: Okay. So, there were a couple of questions there. I think the first one was on Q1 operating margin versus full year and so I think I will just remind folks that, again, Q2 and Q4 are seasonally in general, seasonally a stronger quarter for us. Q2 because you have December in there, which is annual budget flush for many customers. And so Q2 is stronger for that reason and Q4 is our fiscal year-end. And so Q2 and Q4 seasonally strong quarters, which means that margins, although operating expenses and cost of goods sold don’t vary as much, the top line does look stronger in Q2 and Q4, and therefore, margins in general also tend to look stronger in Q2 and Q4 compared to Q1 and Q3, right. So, that’s sort of one call out on the margin piece on the full year versus 1Q.
And then on seasonality, I think was your second question, Ruplu. More generally, I would just say, I think as I have said, you should expect some seasonality in top line for a slight decline between 2Q to 3Q and that follows sort of a new and expansion. Therefore, generally, renewals ATR also does follow that pattern as well. And to the extent we expect any variation in that, we will make sure to call that out. But as of now, you should still expect somewhat fairly normal patterns we can talk to that.
Ruplu Bhattacharya: Okay. Thanks for the details.
Rukmini Sivaraman: Thank you.
Operator: Thank you. And one moment for our next question. And our next question comes from Nehal Chokshi from Northland Capital Markets. Your line is now open.
Nehal Chokshi: Yes. Thank you and congrats on a strong quarter, you had another one. That’s fantastic. And nice to see the buyback being announced, could you talk about what is the priority of allocating capital to buyback growth to, say, paying down debt?
Rukmini Sivaraman: Yes, sure. So, I will just talk more generally and our focus continues to be on sustainable profitable growth, as we have said and we continue to make prudent and thoughtful investments into our go-to-market innovation engine, as I have said earlier, in response to another question. We are happy to have generated over $200 million of cash – of cash flow last year and have $1.4 billion of cash and short-term investments. And so we think of this share repurchase authorization as a reflection of the confidence in our long-term financial outlook by returning capital to shareholders while ensuring that we have optionality to continue to invest in growth and to our other strategic priorities. And to your question on paying down debt and how we do take a look at that, of course we look at all of the alternative uses of our cash before making any decision.
