Dipak Golechha: So I think, obviously, we’ve got the technical side of Watson products. There’s VMs, there’s SD-WAN. There’s all of those different things that are in there. I think a lot of it will depend on like what customers want in terms of their network security architecture. We believe that the software side of the product continues to grow faster. We’ve been talking about that a lot. I think last quarter, we talked about, how 30% of product revenue was software. But honestly, we’re not guiding to product anymore. And I think, the reason for that is, because it’s not as relevant, right…?
Nikesh Arora: I think, Michael, one of the things that, I think, we should tell you is that we’re in the process of reexamining how to classify the revenue to make it much more easier for you guys to think about it, because product was the artifact of hardware. It comes from – in 1919 or 1930.
Dipak Golechha: 1970, yes.
Nikesh Arora: SEC – 1970, thank you. FASB requirement that has to be physically tangible. And I think with the emergence of SaaS companies, it’s become sort of hard to do that. So, I think we’re going to take a look at that, and I didn’t want to do it on a Friday night, and to add one more exciting thing you guys have to think about. So as the year progresses, we’ll find a better way of letting you think about our revenue, which is more measurable, more trackable and possibly more predictable for you guys. But yes, this is like a product we have to [indiscernible] percent of product that’s not hardware every time to tell you how to split that between hardware and software. I think it suffice us to say, we’re looking at it as a business across the board. We look at RPO, we look at revenue, obviously. We look at margin. We look at free cash flow, which our numbers we’re guiding to. And that’s what we manage on a sort of day-to-day basis to run the business.
Michael Turits: Just in case, Dipak, you weren’t thinking about our workload, we do appreciate not having to rebuild the model tonight. Thanks, Nikesh.
Nikesh Arora: I was hoping one of you guys was going to show up with a glass of wine, at least, but…
Michael Turits: I got on my T-shirt and this as close as I’m going to get.
Nikesh Arora: All right. That’s good.
Walter Pritchard: All right. Thanks, Michael, for your question. We’re actually going to go back to Patrick Colville, who I understand is now connected from Scotiabank, and then we’ll go to Tal Liani from Bank of America. Patrick, go ahead.
Patrick Colville: Yes. Thanks, Walter. I never thought I was going to hear The Cure and Friday I’m in Love on an earnings call. So a really quality way to start a Friday evening. Dipak, another one for you. I mean you’ve shared lots of like juicy metrics with us. The standout metric, to me at least, was Palo Alto guiding to, was it 17% to 19% billings CAGR to fiscal ’26. I mean, clearly, implicit in that is the firm’s consolidation message you see resonating with customers, which we see as well. But what I wanted to ask is in that billings target, you mentioned your M&A philosophy, but I just want to double click. Does that billings target need a steady stream of tuck-in acquisitions to hit it? And then also would Palo Alto ever do a transformative deal? I mean what would kind of change your mind there to do a transformative deal?
Nikesh Arora: Let me start with the second question first. If you don’t think we’ve transformed the company in the last five years, I don’t know, man. I don’t know what else to do to make you happy, okay? I’m sorry. It’s Friday night, I’m going home. So I think we’ve been doing transformative for the last five years, and what we’ve shown you is transformative in itself. And I’m just, in part, just – I don’t – look, you don’t need me to buy businesses for you. You guys, you’re shareholders, you’re smart, you can do it yourself. Unless there’s a huge leverage that we can prove that something we can take 1 plus 1 and make that two, possibly 2.5 for you guys, it’s not sensible for us to do it. And so far, we looked at everything in the world.
We look at everything every day. We see what – how things operate. So far, we haven’t felt compelled because we have a lot of work to do ourselves. I mean if we’ve been busy integrating a transformative acquisition, we’ll miss the next 5 trends because we’re busy. So that’s how we think about it. It gives you some insight on how we think about it. As it relates to tuck-in acquisitions, I think the better way to see if it goes back to what I said. Look, there are technologies out there that other people are working on. But we are not the only security company in the world. We’re not working on everything. And if something becomes relevant, something becomes an important feature that we think is needed by our customers, and we haven’t been working on it, it behooves us to go out and partner or acquire, which is what I said.
So should you expect us to maintain a rhythm around how we acquire companies? Yes. But you should understand, we have a five-year track record of doing that responsibility, doing it judiciously, doing it in a way that we integrate the acquisition, doing it in a way that would generate more ARR. And pretty much most of the ones we bought in the last five years have really not contributed on day 1 to the ARR or revenue because they’ve been mostly tech acquisitions. So I think that’s the way to think about it, if that helps.
Walter Pritchard: Next question from Tal Liani at Bank of America, followed by Joe Gallo at Jefferies. Tal, go ahead with your question.
Tal Liani: I want to ask about the synergy between the various components of next-generation security. When you talk about Prisma Cloud and Prisma Access and Cortex and even firewalls, talk about the synergy to a customer. Are these the same customers that they have benefits of buying multiple solutions from you? Or are you addressing conceptually different customers with different products and kind of addressing the entire market?
Nikesh Arora: Tal, you get the question of the evening award. In the last 5 years, we went out and we used our various products to do the land. We sold SASE where it was needed. We sold hardware firewalls where it’s needed. We sold software firewalls where it was needed. 1,700 of our customers in some way, shape or form, have all of these things. I think the next step in our evolution is going back to them and saying, listen, you have the hardware firewalls. It works way better with SASE. You want to integrate this across as a network security platform? That’s where we have to show value. And you started to see glimpses of that what I ensure you. Cloud XDR is a combination of endpoint and firewall data. That has been now expanded to all the data that you have in XSIAM across your entire state.
