On a year-over-year basis, we continue to manage our SBC down as a percent of revenue in-line with our long-term plans. Before turning to guidance, I want to frame some of the impacts that we’re seeing in our billings. As Nikesh noted, we see strong demand in the market and continue to see customers make a technical selection of offerings across our portfolio. From here, we see more customers asking for deferred payment terms either with annual billings, financing through PANFS, or pursuing external financing. Some customers are looking for additional discounts upfront payments as they grapple with the cost of money. Our strong financial position which includes $7 billion in cash, cash equivalents, and investments, combined with our many options in dealing with this dynamic, it gives us significant flexibility.
This can impact our billings trends quarter-to-quarter and we are reducing our billings guidance to account for this through fiscal year 2024. RPO and cRPO have more of a direct impact on future revenue this quarter with duration towards the low-end of the range we’ve seen over the last several quarters, we saw strong trends in cRPO. As we see low customer churn, we’re confident that independent and specific billing terms and contract lengths, we can continue to grow RPO at levels that support our forward revenue growth ambitions. Now moving on to our guidance for Q2 In the year. For the second quarter of 2024, we expect billings to be in the range of $2.335 billion to $2.385 billion, an increase of 15% to 18%. We expect revenue to be in the range of $1.955 billion to $1.985 billion, an increase of 18% to 20%.
We expect non-GAAP EPS to be in the range of $1.29 to $1.31 per share, an increase of 23% to 25%. For the fiscal year 2024., we expect billings to be in the range of $10.7 billion to $10.8 billion, an increase of 16% to 17%. We expect NGS ARR to be in the range of $3.95 billion to $4 billion, an increase of 34% to 35%. We expect revenue to be in the range of $8.15 billion to $8.2 billion, an increase of 18% to 19%. We expect our fiscal year ’24 operating margins to be in the range of 26% to 26.5%, up 190 basis points to 240 basis points versus fiscal year ’23. We expect non-GAAP EPS to be in the range of $5.40 to $5.53, an increase of 22% to 25%. And we expect adjusted free cash flow margin to be 37% to 38%. Additionally, please consider the following modeling points.
We expect our non-GAAP tax rate to remain at 22% for the second quarter and fiscal year 2024, subject to the outcome of future tax legislation. We also expect cash taxes in the range of $230 million to $280 million. For the second quarter, we expect net interest and other income of $55 million to $60 million. We expect second quarter diluted shares outstanding of 339 million shares to 342 million shares. We expect fiscal year 2024 diluted shares outstanding of 338 million shares to 343 million shares. And we expect fiscal year 2024 capital expenditures of $175 million to $185 million and $40 million to $45 million in Q2. With that, I’ll pass it back to Walter for the Q&A portion of the call.
A – Walter Pritchard: Thank you, Dipak. To provide as broad participation as possible, please limit yourself to one question. Our first question will be from Saket Kalia with Barclays followed up by Hamza Fodderwala from Morgan Stanley, go ahead, Saket.
Saket Kalia: Okay, great. Hi, guys, thanks for taking my questions here. Dipak, maybe the question is for you. Appreciate the revised billings guide in this macro backdrop and to your point the higher cost of money. I’m curious how you maybe thought about factors like pipeline, like close rates, and very importantly billing things duration for the rest of the year as we just try to get comfortable with how much that billings guide has maybe been derisked?
Nikesh Arora: Saket, thanks for your question. I’m going to take this one because it’s more about demand function. I think repetition doesn’t spoil the prayer, so I will repeat. The billings difference is not a change in demand for us or not a function of our pipeline. The billings change is a consequence of negotiations with customers and the customer says, you want me to pay you for three years upfront, you got to give me a bigger discount. You want to pay me, want me to do a three-year deal, you got to go finance it in benefits. I can do that, but I can say just pay me on an annual basis, I’m okay. I’ll collect my money every year. If I go in that direction my billings changes. It does not change anything in my pipeline, in my close rates or in my demand function.
Those are my point. So we’re just giving ourselves flexibility because this quarter we saw a lot more negotiations around those topics, we just don’t want to be held hostage to those kind of negotiations where we have to go finance deals to get DCV in there. Billings is a DCV metric. DCV is important if I am concerned about churn. I have very low churn across many product categories. So I’m very happy to collect my money on an annualized basis and that’s what’s needed to make sure that I don’t get pressure on financing, I don’t get pressure on having to give larger discounts. I retain flexibility. I do a lot of TCV deals. I do a lot of financing. This allows me the flexibility. So all I want to make sure is, there is no change in the demand function in the market.
