“We expect our non-GAAP EPS to be in the range of $5.56 to $5.58 per share, an increase of 25% to 26%.”

In context

“Dipak Golechha (Chief Financial Officer): Thank you, Nikesh, and good afternoon, everyone. To maximize our time spent on Q&A, I will provide highlights, and you can review results available in our press release and supplemental financial information on our website. Within our revenue of $1.98 billion, product revenue grew 1%, while total service revenue grew 20%. Within services revenue, subscription revenue grew 25%, and support revenue grew 11%. Moving on to geographies, we saw revenue growth across all theaters, with the Americas growing 15%, EMEA up 20%, and APAC growing 8%. This quarter, our lower APAC revenue growth was driven by lower product bookings in the region, offset by higher subscription bookings, which benefit revenue over time. We reported Q3 billings within the range we guided, although as Nikesh and I have noted several times in the past few quarters, we continue to focus less on this metric. We saw an increase quarter-over-quarter in business transacted with deferred billings, which was also higher than we forecasted. The impact on our financials from platformization this quarter was in line with what we expected 90 days ago, and our expectations around the impact in Q4 and beyond is unchanged from what we talked about in February. First, we saw a greater volume of large deals with some customers opting for deferred payments over the term of their purchase instead of paying upfront as they grapple with the higher cost of money. This drove the quarter-to-quarter increase in periodic billing plans that I noted. Also, this level of periodic billings was higher than we forecasted 90 days ago. We also saw an uptick in the array of our platformization programs we launched early in the quarter. These programs continue to ramp up as we roll them out broadly. Within our RPO of $11.3 billion, our current RPO was $5.4 billion. Our average duration of new contracts increased slightly year-over-year but remained at approximately three years. On our balance sheet, you will see that our debt balance came down by $659 million. The driver for this was early conversion, which occurred at the option of the debt holders and was settled by us in cash. Our remaining debt matures in June 2025, although we may continue to see early conversions. During Q3, we spent $500 million to repurchase 1.7 million shares of our common stock. Our buyback strategy remains opportunistic. I know that billings has been a significant focus for investors. As you're all aware, remaining performance obligation, or RPO, captures the full value of our contracts, independent of customer billing terms. As we have explained over the last year, with an increase in factors impacting payment terms on a quarterly basis, there's been significant volatility in our billings. With this volatility in mind, we've been increasingly focused on driving high-quality bookings, which add to RPO and maximize our NGS ARR in contracts. Focus on these metrics provides a more relevant view of the business. If we look at the history of these metrics for our company, you'll see that NGS ARR has consistently grown ahead of our other metrics, and as it continues to contribute a higher proportion of our revenue. You also see the correlation between RPO and total services revenue growth is high. Our RPO is mainly comprised of contracts for offerings that carry ratable revenue, recognized through our total services revenue. Billings, on the other hand, is significantly influenced by the invoicing terms on contract signed, which adds significant volatility. In Q3, we saw RPO growth tick up along with strength in NGS ARR, including us raising our guidance here. This is in contrast to billing trends which went in the other direction, thereby showing the divergent trends in action in our Q3 results. Nikesh talked briefly about our first-of-a-kind IBM partnership that has multiple facets that touch each of our platforms and include significant devotion of resources from both companies. I'd like to provide more details on the financial impact we expect to see. As part of the partnership, we've agreed to acquire IBM's QRadar SaaS assets, certain QRadar intellectual property, and IBM's on-premise QRadar customer list. The total consideration is $500 million plus earn-out consideration based on successfully migrating QRadar on-premise customers to our XSIAM offering over the next several years. We anticipate closing the transaction by the end of September 2024, subject to regulatory approvals and other customary closing conditions. The calendar year 2023 QRadar SaaS revenue was on the order of $100 million. However, as we work through the details of the customer contracts we are acquiring and the deferred revenue associated with this business, we expect our recognized revenue could be much lower than this in our fiscal year 2025. We will provide more information on the financial impact closer to the close of the transaction. We will invest to fuel this partnership and ensure a seamless experience for QRadar customers purchasing and migrating to XSIAM. As part of the partnership, we have entered into an agreement with IBM whereby they will operate parts of the business on our behalf on a medium-term basis. We expect we can make these investments within the profitability framework we spoke of previously. Specifically, we continue to expect 28% to 29% non-GAAP operating margin in fiscal year 2026 and 37% or greater free cash flow margin through fiscal year 2026. Before I provide Q4 guidance, I wanted to remind you of what we talked about last quarter when we introduced platformization and discussed the top-line headwinds we expected it would have. We continue to expect platformization-related drivers, both larger deals with associated costs of money impacts and acceleration in platformization programs, will impact our billings over a total of a 12- to 18-month period. Consistent with what we noted in February, we expect that this will persist through fiscal year '25 as we anniversary the rollout of these programs resulting in lower billings and, to a lesser degree, revenue. Beyond this period, we expect to grow faster than we discussed in August and sustain this growth for longer. Now moving on to our guidance for Q4 and the year. For the fourth quarter of 2024, we expect billings to be in the range of $3.43 billion to $3.48 billion, an increase of 9% to 10%. We expect revenue to be in the range of $2.15 billion to $2.17 billion, an increase of 10% to 11%. We expect non-GAAP EPS to be in the range of $1.40 to $1.42 a share, a decrease of 1% to 3%. For the fiscal year '24, we expect billings to be in the range of $10.13 billion to $10.18 billion, an increase of 10% to 11%. We expect NGS ARR to be in the range of $4.05 billion to $4.10 billion, an increase of 37% to 39%. We expect revenue to be in the range of $7.99 billion to $8.01 billion, an increase of 16%. For fiscal '24, we expect operating margins to be in the range of 26.8% to 27.0%, an increase of 270 to 290 basis points year-over-year. We expect our non-GAAP EPS to be in the range of $5.56 to $5.58 per share, an increase of 25% to 26%. And we expect adjusted free cash flow margin to be 38.5% to 39%. In the interest of time and to get as many of your questions as possible, we've included the modeling points in the appendix of our earnings presentation. With that, I will turn the call back over to Walter for the Q&A portion.”