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

Page 6 of 19

So we know how to use AI, and we believe we are uniquely positioned in the industry given our presence in end points, our presence in firewalls, our presence in the cloud, our presence across the entire network security stack to be able to deliver those AI-based outcomes to our customers. And we’re doubling down, we’re quadrupling down to make sure that Precision AI is deployed across every product in Palo Alto, and we open up the floodgates of collecting good data with our customers for them to give them better security because we think that is the way we’re going to solve this problem, to get to real-time security. But let’s not underestimate the opportunity generative AI puts in front of us. On a very personal basis, I believe generative AI is amazing for data summarization, for natural language interaction, for doing all the things where there was an information decay between our products and our customers.

We build great products. By the time they get to our customers, there’s a lot of translation that happens between our product developers and the customer and sometimes the breaches happen because the customers don’t fully understand our product because they cannot configure them right. All those things can be eliminated if we can implement generative AI effectively through our products. So our customers can interact with our products in natural language. They don’t have to have complex security understanding to operate our products. They don’t have to have complex security understanding to fix a problem. We can fix all of that if we, in our company, learn how to deliver generative AI-based interfaces, generative AI-based outcomes through our products.

And you know what, our teams are going to show you a glimpse of that. We have been working diligently over the last five months across the board at Palo Alto Networks. And I couldn’t be more excited about some of the stuff that you’re going to see just after this from our product teams to give you a sneak peek. At the same time, we’re going to do it in a deliberate fashion. We’re going to crawl, walk, run. We think we are on the right path. We’re going to work in lockstep with the industry. We have people analyzing and working with almost everybody out there. We understand where the best-in-class LLM activity is. We understand where technology is. We also understand what might be going in the next three to six months. So all I can say is that I think the combination of precision AI and generative AI is going to fundamentally change the way security outcomes are delivered to our customers because it will take away the complexity.

It will take away the confusion, the sort of usability problems that you have with security, and it will start helping deliver great outcomes to our customers. I think it’s just going to make our platforms amazing as we go forward. On the go-to-market side. In the last five years, we have done a phenomenal job, I think, of building the products that our customers need. Yet, we have to make sure that every customer understands our capability. Every customer has a road map with us where we can take them to deliver real-time security outcomes. For that, we need to skill — upskill our team in some areas, which we have been doing very effectively. As you saw, our team was able to deliver some amazing results for Q4, and I think we’re going to keep doing that.

We are going to go from being just a security vendor to being a solution partner. For that, we have to work harder with many players out there, which is something we’ve geared up to do, and we’re having some amazing early success. We’ve got to figure out how to institutionalize that capability at Palo Alto Networks. And that’s one thing BJ and his team are going to focus very effectively on in the next three to five years. Not just that, as I said, we need to figure out how to deliver architectural outcomes to our customers. Our customers are tired of spending too much money in cybersecurity and ending up with the same mess and saying, wait, my security outcomes aren’t getting much better, but I seem to be spending more money. It’s important for us to work with every one of them to deliver those capabilities in a architectural way so they understand the long-term road map because I think it’s fair to say that where we are today is not where we were five years ago.

I think we have enough confidence in our customers to partner with us for the long term because they believe we’re going to be around or we’re going to be an evergreen cybersecurity company. And last but not the least, I think it’s very important as part of our go-to-market efforts, we have a large team that delivers customer delight. Well, I just think we’re about to see a step change in customer delight with the application of generative AI. Again, we’ve been working really hard. You’ll see a bit of a glimpse of that in some of the things that teams are going to show you. And over the next possibly three, six, nine months, you will see more and more capability delivered to our customers using that generative AI framework or predictive AI or precision AI framework.

I think in the next three to five years, that is going to fundamentally change what Palo Alto is able to do out there in the market. And as I said, we cannot do this without the best people. Our employer brand has become phenomenal in the last five years. As we continue to deliver great innovation, great outcomes, people want to come work at Palo Alto Networks. People want to be part of the success of being the cybersecurity partner of choice for our customers. So we can only do this, we can only deliver our strategy if we have the best team. We continue to track the best, we continue to empower them. We continue to make sure that they can deliver great outcomes for our customers. We plan to keep doing that over the next three to five years because we believe this is a mission-driven opportunity.

Page 6 of 19