This is really a new message, it’s one that addresses the concerns of CIOs of CTOs, even business units and developers. So this is getting us certainly a higher level attention in major accounts.
Paul Ziots: Thank you, Mehdi. Next question, please.
Operator: Next now to David Vogt at UBS.
David Vogt: Great. Thanks, guys. So Kevan and Giancarlo. I just want to go back to the current demand environment and the macro. You touched on the challenging macro backdrop and FlashBlade//E was a really strong launch during the quarter. Just curious about what did you see from customers, was there any sort of potential spin down, where it did make sense to maybe use more lower-cost all-flash solution in the quarter. At the expense of maybe a little bit more performance solutions in addition to maybe disk replacement. And then how do you think about that sort of dynamic, as we move through the balance of the year. It doesn’t sound like the macro is getting dramatically better, and so should we expect to see, obviously on the Blade E side and then ultimately on the Array E side, sort of be a key growth driver in the second half of the year? Thanks
Charlie Giancarlo: Yeah. We haven’t really seen that type of what do you call-it a spin down or cannibalization. We track this very-very closely, as you might imagine when we bring in a lower-price performance product to see if customers are trading down. We really don’t see that, it really did open up net-new opportunity for us to go into go into new areas. I think we were at a better economic environment. All of these numbers would be would be enhanced, but no. I think it’s just the. We’d all love to see even stronger growth than what we’re seeing now and of course we’re pedaling very hard to drive more performance out-of-the team overall but the economic effect has been broad-based. And, I would say if anything, when you have an economy that started-off the year the way it did customers reduce their intention to spend and they have their high-priority projects and because we announced the disk to flash transition after the beginning of the year.
I think if anything it’s muted and will be increased next year as customers start to plan for it, you know in there in their budgets. So, no, I think it’s more of an economy than anything else.
David Vogt: Great. Thank you.
Paul Ziots: Next question, please.
Operator: Next now to Thomas Blakey at KeyBanc.
Tom Blakey: Hey, guys. Thank you for taking my question. I just wanted to circle back to the subscription service line, and from a puts-and-takes perspective Evergreen//One doing great, off to a great start. Just what maybe focus on the other areas that maybe you’re experiencing some pressure, specifically want to know it’s like maybe there is just understanding how you relatively start smaller and grow with your customers, if there’s any pent-up demand that you can see there heading into next year from that, for many pressures in the other areas of the Evergreen products. Thank you.
Kevan Krysler: Yes. I know this is Kevan and I’ll start-off and then have Charlie add-on any more commentary, but it’s a good question. And again, we commented on the strength of our subscription ARR, which really has been driven and fueled by our Evergreen//One subscription offering. Now, obviously, with demand being a bit lower on the CapEx side, the attach of Evergreen subscriptions, whether that’s forever or foundation, is impacting somewhat our subscription ARR growth rate, which I’ve talked about a little bit earlier. Now if we look at — and really that’s the only thing going on that. I would highlight, in particular. If you’re looking specifically at our subscription revenue growth rate. Do you want to let you know, we’ve got professional services in that line-item as well. And obviously, that’s not growing at the same pace as our subscription offerings. And so, that would be driving your difference that you might be noting.
Paul Ziots: Thank you, Tom. Next question, please.
Operator: We go next now, to Simon Leopold at Raymond James.
Simon Leopold: Great. Thanks for taking the question. I wanted to see if we could maybe step-back and help us size the AI opportunity, as to sort of where it is now and where it’s going? I think in the past you’ve talked about sort of where FlashBlade is and that maybe AI use cases, not just generative we’re probably more than half of those use cases. You’ve given us some customer metrics, wonder if we could get some revenue metrics as well, even a ballpark. Thank you.
Charlie Giancarlo: Yeah. We don’t, you know Simon, we don’t generally like to break these things out. I would say though that AI is a significant contributor to our revenue. It’s not an — it’s not a dominant one, nor frankly do I expect it to be. It’s a very exciting new area without a doubt. And we expect to see growth, growth in that, but plain old — plain old data storage, both for high-performance databases, as well as for lower performance bulk data, will continue to dominate our market. What is exciting about the AI environment is high-performance systems generally are high-profit system environments, which is good and we do hopefully anticipate like the Meta RSE, that we might see environments where the scale of it really starts to grow.
But I would say still — and I think this is true for everyone except for the GPU builders, while it’s an exciting new area. It’s probably going to be a small, let’s say low-double-digit portion of their overall revenues in general revenue.
Paul Ziots: Thank you, Simon. Next question, please.
Operator: We go next now to Nehal Chokshi at Northland Capital Markets. And Nehal your line is open, if you do have a question.
Nehal Chokshi: Yes. Thank you. Hey. Thank you for the question and I really like the new presentation content format, it’s really great, thank you for that. So, FlashBlade//E, it sounds like you’ve had better-expected revenue and pipeline with respect to pipeline, are you assuming a lower conversion rate of that pipeline, for the remainder of this fiscal year, that’s more or less driving the — no change in forward guidance here?
Charlie Giancarlo: Yeah, Nehal. It’s a great question and the answer would be no. Our conversion rate, especially for FlashBlade//E is quite healthy. And we considered that in our overall annual revenue guide, that we provided. The other thing to highlight as well as and we’ve highlighted that in my prepared remarks, is the strength of Evergreen//One, which needs to be considered as well, because obviously that takes more time to make its way to revenue. And that’s been considered as well as we’ve looked at our overall annual guide for this year. So hopefully that’s helpful for you.
Paul Ziots: Thank you, Nehal. Next question, please.
Operator: We go next now to Matt Sheerin at Stifel.
Matt Sheerin: Yes. Thanks. My question is on the recent Azure VMware announcement. Could you help us understand the significance of that, in terms of your position with Microsoft, within that, the Azure ecosystem, how that positions you versus competitors in the cloud and how we should think about the product roadmap going-forward?
Charlie Giancarlo: Yeah. We consider it to be a very significant announcement. It is a combination of VMware in the cloud Azure VM services, VMware services as well as our Cloud Block Store, providing a simpler methodology for customers to move their existing workloads into the cloud. And also at the same time, dramatically reducing their overall cloud costs. So it’s really a one-two punch that’s hard to beat. We consider the relationship with Microsoft, very strong and continuing. We’re looking-forward to doing more things with them as we, as we go-forward and I think this is going to be a very competitive offering in the market. Rob?
