Palo Alto Networks, Inc. (NASDAQ:PANW) Q4 2023 Earnings Call Transcript

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So it’s really the five things, part of it is something which we’ve been doing and some things we’re going to have to keep pivoting harder. For example, one, we want to maintain this notion of being an evergreen innovation company. Our biggest insight is that if you want to lead in cybersecurity, you always have to be on the bleeding edge because the bad actors are. You always have to be scanning the market understanding, where the world is going, where technology is going to see what potential security risks are going to get created in the adoption of that technology, in the deployment of that technology to make sure we’re ahead of the curve, and we start delivering security by design. As in we’re not going to come in and try and bolt it on afterwards as our customers have been through the transformation, it’s to work with them, embed our architectures with customers as they go through their innovation journey, we’re in lockstep with them delivering security innovation.

I think the second part, which we talked about is we want to make sure that our platforms, which are now deployed in sort of different stages or different amount of sort of capacity with our customers, they become ubiquitous. We want to make sure that our customers have wall-to-wall platforms that allow them to look at it as a data problem, as an AI problem, not have to stitch our platform with five other security solutions out there and trying to build their own outcomes because it’s impossible for every customer to go to a secure integration by themselves. I think the way — the best analogy I can come up with, I think in the next decade, we will see sort of a standard platform for security out there, just the way we’ve seen platforms in CRM or we’ve seen platforms in HR, as you’ve seen platforms and financial sort of software.

We think it’s time that in the next decade, we will see a security platform in our future, which just works for our customers, and the customers are not spending time integrating multiple vendors trying to stitch their own. I just think that’s the only way we’re going to get to the future that we need for real-time and AI-based security. Third, the topic du jour, everybody is talking about AI. We’re talking about AI. We are not only talking about it, we will demonstrate that we can deliver security outcomes and the vision and the future that security needs using AI across Palo Alto Networks, and we’ll talk more about that. Well, that’s great. We can build amazing products, but also as a company, for our shareholders, we have to make sure that we can deliver all this innovation to our customers, both effectively; and two, we have to make sure that it’s easy to consume and deploy for our customers.

And we’re going to have to make changes as we go forward on how we actually go deliver all the wonderful capability to all of our customers, not just by ourselves, but actually working together with some of the bleeding edge partners in the world who are in this journey. Our partners are delivering these great security outcomes for our customers. And last but not the least, and one of the key things is we cannot do this unless and until our employees are fully bought into our strategy, our vision, feel excited every day to come to work and deliver a better security outcome to our customers to make them secure and be their cybersecurity partner choice. So with that, let’s take a quick look into each of these categories to see how we’re going to get there.

And it sort of boils down to these five key strategic sort of requirements and directions from our perspective, innovation, continued platformization, leveraging AI, continue to transform our go-to-market capabilities. And last but not the least, again, is to make sure our team is along with us every step of the way. So getting into the topic of innovation. I think I’m very proud of the track record we have so far. We’ve gone from 13 products/acquisitions that we’ve integrated in 2019, to delivering 74 in 2023. It sounds like a lot, but actually, these 74 are delivered in an integrated fashion. So it actually improves the efficiency of security for our customer. It actually makes usability better. It actually makes it much easier for us to deliver security outcomes.

So really excited about that. I think this whole AI revolution that we’re undergoing or we’re looking at, witnessing, it’s going to require us to keep investing, looking once again as to what capability AI is going to deliver across all of our products because we do collect the world’s most amount of security data. So we will keep driving innovation by underpinning more and more machine learning and AI under our platforms. We’ll keep looking at how to deliver more capability with the sensors that we have out there with our customers from an innovation perspective. We’ve talked about this. We are happy to make sure that we deliver innovation and security outcomes to our customers. It does not all have to be invented in Palo Alto. We will constantly keep scanning the market to make sure that there’s something out there that our customers need to get and somebody else is doing really well.

It’s our job to make sure we partner, collaborate, integrate or acquire to deliver the outcome that the customer needs from an innovation perspective. And last but not the least, being at the bleeding edge of security. Being one of the largest players, it is our responsibility to make sure we’re looking at all new technologies to see how they’re going to impact our customers and their states, whether it’s quantum, whether it’s AI because there is a dark side to AI. It’s our job working with our partners and the industry to make sure we deliver innovation in how to protect against AI getting abused or misused in the market. So I strongly believe for us to deliver on the next three to five vision of Palo Alto Networks, we are going to have to continue to be an evergreen innovation company, which I think will give this company longevity and sustainability forever in the future and being the leader in cybersecurity.

We talked about platformization or you’ve heard that word, you will keep hearing it to the next sort of 45 minutes from our team because we believe that’s the way to deliver security, is resonating with our customers. Our customers are seeing it. My team is going to show you some amazing UI. I think you’re going to start seeing not only just we’re talking about this sort of the next level of platformization. You will start seeing, right after me, how we actually bring it to life. So I cannot be more excited about some of the work we’re doing on the product side, stuff that we haven’t shown anybody yet. You are going to see it today because it’s important for us not just to talk about it, be able to show you how we’re going to deliver. So you will see a next level of integration and how we can deliver security outcomes.

You’ll see sneak peeks into how we’re going to leverage AI copilots in each of our products to create the simplicity and usability that security has not had, to be honest, so far. So I couldn’t be more excited about how our teams are going to keep driving more and more platformization, more and more integration, where things of integrating best-of-breed vendors as sort of DIY or do it yourself or do it home is going to be a thing of the past. So moving on to leveraging AI, I talked about this. But again, clearly, there’s no Analyst Day out there today that you cannot — you must talk about AI. So I think the reason is different for us. As a security company, we are always focused on figuring out how to leverage data. We have north of 100 machine learning models that run today at Palo Alto Networks across our products.

So this is not new news. But the way I think about it is, let’s call all of that precision AI. That’s AI where I cannot afford for it to be wrong. If it’s wrong, lives matter. If it’s wrong, ransomware happens, if it’s wrong, bad actors get in. So we have to be right 100% of the time. And to me, that’s the definition of precision AI. And to deliver that future, we have to build a lot of our own models. We have to train them. We have to collect first-party data. We have to understand the data. Today, we collect approximately 5 petabytes of data. Yes, 5 petabytes of data on behalf of our customers and analyze it for them to make sure we can separate signal from noise and take that signal and go create security outcomes for our customers. We still have 1.5 million net new attacks every day across our 60,000 customers.

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