“We expect revenue to be in the range of $5.48 billion to $5.50 billion, an increase of approximately 29%.”

In context

“Dipak Golechha (CFO): Thank you, Nikesh, and good afternoon, everyone. Our strong results continue to be driven by solid demand across the breadth of our offerings with results again ahead of our guidance across all metrics. In the midst of top line strength, we balance profitability well. With the strength of this momentum and our favorable outlook, we are again raising our full year guidance. For Q3, revenue of $1.39 billion grew 29% and was above the high end of our guidance range. Product grew 22% and total services grew by 32%. By geography, growth was balanced across all theaters, with the Americas growing 30%, EMEA up 28% and JAPAC growing by 29%. NGS ARR grew 65% to $1.61 billion, supported by balanced strength across this portfolio. As noted in our Q2 earnings, going forward, we focus on NGS ARR as one of our core metrics as we believe it's indicative of the return we're seeing on our growth investments and also helps investors track the growing mix of this business within our revenue. We saw strong double-digit growth across all of our major NGS offerings with Prisma Cloud, Prisma SASE and Cortex as well as growing contributions from recently introduced NGS offerings. We are pleased with this diversified portfolio-driven growth. Overall, this performance, as well as the continued maturity of our go-to-market organization in selling our NGS capabilities gives us confidence to raise our annual guidance for NGS ARR again in Q3. In the third quarter of 2022, we delivered total billings of $1.8 billion, up 40% and also above the high end of our guidance range. Total deferred revenue in Q3 was $5.9 billion, an increase of 34%. Remaining performance obligation, or RPO, was $6.9 billion, increasing 40% with current RPO representing a similar percentage of the total as in recent quarters. Our teams executed very well again in Q3, and you see the result of the strength in these top line metrics, which lead to revenue. There were a few factors to call out that drove the strength that we saw this quarter. In addition to the significant strength in our NGS business, we saw strength in our attached subscriptions. We've seen customers use their budget to make incremental commitments to our attached subscriptions as they anticipate firewall upgrades and overall network security capacity increases. As well, they're seeing the value in newer subscriptions we have brought to the market over the last 12 to 18 months. This gives us further conviction around sustained demand for appliances as well as our software-based FWaaP form factors as customers look to benefit from our consistent architecture, including the subscription capabilities. Product revenue again was strong, growing 22% in Q3 with demand exceeding our ability to ship due to supply chain challenges. We estimate customers refresh their products every four to seven years, with many now evaluating our Gen 4 hardware. We're in the early days of this refresh cycle with only a small proportion having updated their products. As I noted earlier, we're seeing signs of customers making commitments to our hardware platform, both based on strong subscription demand and also the beginning of our installed base refresh activity. Our Firewall as a Platform billings grew 25% on top of the accelerated Q3 growth in the year-ago period. We continue to see this performance well-balanced across our FWaaP form factors. Within our FWaaP offerings, the strength of our product business held our Q3 software mix at approximately 39%, in line with Q2 and the year-ago quarter. Turning to the details of our results. Product revenue was $352 million, growing 22%. Subscription revenue was $640 million, increasing by 35%. Support revenue of $395 million increased 27%. In total, subscription and support revenue of $1.04 billion increased 32% and accounted for 75% of total revenue. Non-GAAP gross margin of 72.9% was down 170 basis points. The driver continues to be supply chain-related costs as we incurred additional expense for components and shipping. Despite the pressure on our gross margins, non-GAAP operating margin of 18.2% was up 120 basis points year-over-year. We were able to offset higher supply chain costs with lower operating expenses as we drove efficiencies across the business. Non-GAAP net income for the third quarter grew 38% to $193 million or $1.79 per diluted share. Our non-GAAP effective tax rate was 22%. GAAP net losses were $73 million or $0.74 per basic and diluted share. Turning now to the balance sheet and cash flow statement. We finished April with cash equivalents and investments of $4.6 billion. Product and associated subscription shipments shifted toward month 3, resulting in days sales outstanding of 71 days. Cash flow from operations was $390 million. We generated adjusted free cash flow of $351 million, a margin of 25.3%. With regard to capital allocation priorities, we did not repurchase stock during Q3. However, we do expect share repurchase to be a major use of cash flow as previously stated. We currently have approximately $450 million remaining on our authorization for future share repurchases. This current authorization expires on December 31, 2022. On the M&A front, we did not close any acquisitions in Q3. Managing stock-based compensation remains a management focus. This quarter, we reduced SBC as a percentage of revenue by approximately four points year-over-year and two points quarter-over-quarter. We will continue to apply discipline to this process while balancing reductions against the market dynamics for cybersecurity talent. Key to our ongoing success is maintaining balanced top and bottom line growth while continuing to acquire and retain top talent. Lastly, moving to guidance and modeling points. As Nikesh highlighted, we continue to see very balanced demand from customers across our portfolio. This includes demand for our appliance form factors that outstrip our ability to fulfill in the near term as well as strengthen our next-generation security portfolio. Our Q4 guidance takes into account the strong demand picture, the best information we have today on supply chain and other factors. Recall that a year ago in the second half of fiscal year '21, we were hiring aggressively. As we move beyond that comparison, investors should be considering the comments we provided around medium-term margin expansion goals. Turning to our guidance for the fourth quarter of 2022. We expect billings to be in the range of $2.32 billion to $2.35 billion, an increase of 24% to 26%. We expect revenue to be in the range of $1.53 billion to $1.55 billion, an increase of 25% to 27%. We expect non-GAAP EPS to be in the range of $2.26 to $2.29 based on a weighted average diluted count of approximately 106 million to 108 million shares. For fiscal year 2022, we expect billings to be in the range of $7.106 billion to $7.136 billion, an increase of 30% to 31%. We expect revenue to be in the range of $5.48 billion to $5.50 billion, an increase of approximately 29%. We expect next-generation security ARR to be $1.775 billion to $1.825 billion, an increase of 50% to 55% versus a very strong performance in the fourth quarter of fiscal year '21. We expect strength in product revenue to continue in Q4 with full year growth of 20%. We expect non-GAAP operating margin to be 18.5% to 19%. We expect non-GAAP EPS to be in the range of $7.43 to $7.46 based on a weighted average diluted count of approximately 106 million to 107 million shares. We continue to expect an adjusted free cash flow margin for the year of 32% to 33%. Achieving the rule of 60 was an aspiration we called out in our September 21 Analyst Day. The rule combines revenue growth and adjusted free cash flow margin. Based on our Q4 guidance, we're pleased to project that the combination will exceed 60% for fiscal year '22, which is ahead of our prior stated plan. We've seen strong growth in fiscal year '22. On a revenue basis, our guidance for the year is 3.6% higher at the midpoint than where we started and 7.5% higher at the midpoint for NGS ARR. Along with this top line, we've absorbed incremental supply chain costs and are happy to be able to continue to project the same operating profitability range as at the beginning of the year. Additionally, please consider the following additional modeling points. We expect non-GAAP tax rate to remain at 22% for Q4 and fiscal year '22, subject to the outcome of future tax legislation. For Q4 '22, we expect net interest and other expenses of $1 million to $2 million. We expect capital expenditures in Q4 of $36 million to $41 million, and we expect capital expenditures for the full fiscal year of $190 million to $195 million, which includes $39 million outlaid in Q2 '22 related to our Santa Clara headquarters. Stepping back, we're focused on balancing our drivers of total shareholder return. We're recognizing not only the importance of top line growth as we focus on executing strong market demand, but also profitability, cash conversion and our capital structure. Balancing profitability is a commitment we made at our Analyst Day, and we've been able to deliver on this in fiscal year '22 despite increased costs related to our supply chain. We will continue to make progress on our commitment of 50 to 100 basis points operating margin expansion and 100 to 150 basis points of adjusted cash flow margin expansion beyond fiscal year '22 through '24 whilst balancing top line growth opportunity. We're on track to achieving our fiscal year '24 targets we outlined in our September 2021 Analyst Day, including $10 billion in billings and $8 billion in revenue. We believe we can continue to deliver to shareholders outstanding returns as a proxy for the growth of the cybersecurity opportunity as well as world-class execution. With that, I will turn the call back over to Clay for the Q&A portion of the call.”