Gary Steele : Yes. No, great question, Rob. So the motion that we’re running today is we’re going to existing security customers where we have a strong anchor, a strong set of relationships. We’re using those relationships to get to the broader central IT organization, either a CTO, CIO, sometimes Vice President of Operations, and we’re showing them the value and opportunity of thinking about tool consolidation typically. And literally every customer that I talk to, they have tens of “Monitoring tools,” using old words, but that’s what they oftentimes have. And they’re trying to figure out in this world where the digital footprint is growing rapidly, how do they get a single architecture that enables them to scale that broad digital footprint.
And so you can’t have a million different tools all doing different things. And so we run a broad play that enables us to show the value of Splunk and the value that you get by bringing the Observability Cloud in, integrated with the core platform, and how you can drive better resilience as a result of that. So that’s the play we’ve been running. And we enter — we start with the base of security and we move to observability versus the other way around. And I’ll let Brian comment. We don’t — we haven’t published any great metrics. There may be some other ways to think about it. But…
Brian Roberts : Yes. I mean we look at the attach, I think we feel good about the momentum there. But I think back to Gary’s point, when we can sell — successfully sell unified security and observability, it helps obviously increase ARR and it just makes that relationship even more sticky. And I think one thing that we saw in Q2, our renewal rate increased year-over-year, which we feel great about.
Operator: Your next question comes from the line of Joshua Tilton from Wolfe Research.
Unidentified Analyst : This is Patrick on for Josh. You all talked pretty extensively about your own directives to drive cost efficiencies. And we’ve obviously heard a lot about optimizations across the industry. From your perspective, have you seen customers looking to optimize their spend this point, whether it be with log injection or on the observability side? And then also on the observability side, do you find that you’re replacing other vendors more often or homegrown solutions? Or is it kind of a mix of both?
Gary Steele : Yes. I think in this economic time, I think customers broadly are looking at how they can overall optimize costs. So I think that is definitely a conversation. A few things to note. One is when customers say, “Hey, I feel like my Splunk bill is big. What can you do to help me?” We really talk through our overall strategy which is how do you think about your data and where it lives? So through our federated search capabilities, we allow people to get access to data wherever it might live. So you can then think strategically about where is the lowest cost place for storage. Good example of that is S3 where we support federated search on to S3. And then coupled with that, Edge processor, one of the core capabilities of that solution is to reduce the level of data.
So we go — we lean into those conversations and really help our customers think through where they can optimize and save money. And then as you extend that broadly in observability, as I mentioned before, thematically, we see lots of tool consolidation kinds of opportunities where the outcome is reduced spend of vendors, and we’re leveraging the Splunk platform to be able to drive that dialogue and win that. And then in terms of your question, on who the incumbent — you basically see everybody as we go into these because big companies, so I think Global 2000 again, they have a broad range of what they would term as monitoring solutions. So you literally see everybody.
Operator: Your next question comes from the line of Brad Sills from Bank of America.
Bradley Sills : And great to hear the commentary and interest level of observability. We certainly hear that from the channel. Would you classify that more as pipeline or deal activity that’s already happening today? And if it is more pipeline, is there something on the horizon here on the road map that could potentially be a catalyst to convert that pipeline? Or is this just a gradual effort to continue to integrate observability with the core security suite?
Gary Steele : Yes. No. Great question, Brad. So what I would say is, just go back to our prepared remarks, we had some amazing wins with our observability solution in the current period. At the same time, because of the broad interest level, pipeline continues to grow as well. And so I would say it’s a little bit of both. Like we’ve had really good adoption and we’re getting good reception. This play of doing tool consolidation has been working well. I think that’s what’s driving pipeline conversion in the short term. And then we’re on a long journey to continue to deliver new cool capabilities that make the observability experience that much better. And so I don’t know that there’s any one thing that anybody is waiting for, Brad. I feel like the maturity of where we are today versus a year ago is amazing. And I feel like we’ve got a really good setup as we head into the second half and into next year.
Bradley Sills : Great to hear, Gary. One more, if I may, please. If you could just remind us how the macro has impacted the business. Are you talking about elongated sales cycles, smaller deal sizes to get deals through. And coming out of the macro, could we potentially see some acceleration as those things come back?
Gary Steele : Yes. So I would say the macro environment has been largely consistent this entire year. And what that means to us has been we’ve seen choppiness in cloud migrations, meaning customers, cloud migrations, they will defer them if they can because it represents an incremental project. There continues to be a lot of deal scrutiny, meaning additional sign-ups, et cetera. I think, though, having said all that, as we described earlier, I think our team has done a really good job of navigating through that. And so I think we’ve been able to deal with it reasonably well.
Brian Roberts: Yes. I think in terms of — when you think of the second half of the year, I have — there’s no one out there thinking the macro environment is going to get better. And so I think we have to keep that in mind in terms of how budgets are set for calendar ’24. So we’re not going to provide guidance today for next year, but stay tuned for Investor and Analyst Day on January 9.
Operator: Your next question comes from the line of Pinjalim Bora from JPMorgan.
Pinjalim Bora : Congrats on the quarter. I just wanted to ask you about the renewal portfolio overall. Maybe talk about the performance. I think you said renewals rate improved year-over-year. Was that for the whole portfolio or just cloud only? And any comments on kind of sequential improvement in renewal rates?
Brian Roberts : Sure. So that renewal is dollar based, and it’s the full portfolio. So it’s all and it did increase year-over-year. So again, we’re feeling really good in terms of the value proposition. And just back to Gary’s point, how we’re executing in this macro environment. And this is a year where renewals should grow in terms of the opportunity roughly 20% this year.
Operator: Your next question comes from the line of Keith Bachman from BMO.
