John DiFucci

John DiFucci asked about the confidence in Oracle's applications business accelerating this year, contrasting it with the deceleration seen by many SaaS peers, and inquired whether this was primarily due to the "One Oracle" go-to-market strategy or product-related factors.

Answer

Mike Sicilia, CEO, attributed the confidence to Oracle's unique position as the only company offering complete application suites with baked-in AI (over 400 Fusion AI features and new AI agents). He highlighted strong growth in industry applications (21%), Fusion ERP (17%), SCM (18%), HCM (14%), and CX (12%), along with the AI Data Platform. He noted that customers are moving away from best-of-breed solutions due to high integration costs, and deferred revenue for apps is growing faster than in-quarter revenue, indicating future acceleration.

John DiFucci inquired about the drivers behind Oracle's impressive forecasts beyond just AI training, seeking more detail on other contributing factors to the company's growth.

Answer

Chairman & CTO Larry Ellison and CEO Safra Catz highlighted the significant demand for AI inferencing, the unique capabilities of Oracle's new AI database for vectorizing and securing private enterprise data, and the strategic advantage of Oracle's full-stack cloud offerings, including Cloud@Customer and AI application generators.

John DiFucci inquired about the drivers behind Oracle's impressive forecasts, beyond just AI training workloads, seeking more detail on what else is contributing to the company's growth.

Answer

Chairman and CTO Larry Ellison highlighted the significant and growing demand for AI inferencing capacity, which he believes will be a much larger market than AI training. He detailed Oracle's unique value proposition in enabling secure AI inferencing on private enterprise data by vectorizing it within their database and linking it to various large language models. CEO Safra Catz added that Oracle has become a de facto cloud provider for many customers, offering flexible deployment options like dedicated regions and Cloud@Customer, leveraging its full stack of infrastructure, database, and applications. Larry Ellison also mentioned the cost-efficiency of Oracle's 'Butterfly' private cloud and their advanced AI application generators.

John DiFucci asked about the drivers behind Oracle's impressive forecasts beyond just AI training, focusing on the role of AI inferencing and other cloud offerings in solidifying Oracle's position as a de facto standard for AI workloads.

Answer

Larry Ellison (Chairman and CTO) highlighted the massive demand for AI inferencing, which he believes is a significantly larger market than AI training. He emphasized Oracle's unique advantage as a custodian of high-value private enterprise data, leveraging its new AI database to vectorize data and securely connect it to popular Large Language Models (LLMs) like ChatGPT, Gemini, Grok, and Llama. This enables customers to ask complex questions combining private and public data without compromising security. Safra Catz (CEO) added that Oracle has become the preferred cloud for many customers, offering diverse deployment choices including public cloud, dedicated regions, and Cloud@Customer, all benefiting from Oracle's integrated infrastructure, database, and application stack. Larry also mentioned the cost-efficiency of their 'Butterfly' private cloud and their advanced AI application generators.

John DiFucci from Guggenheim Partners questioned the drivers behind the strong forward guidance, asking if the 'Stargate' project is a key component of the forecasted 70%+ IaaS and 100%+ RPO growth.

Answer

CEO Safra Catz stated that while the Stargate project is still in formation, related partnerships contribute to the outlook, which is primarily driven by massive, broad-based demand for AI and database workloads that currently outstrips supply. CTO Larry Ellison added that other large contracts, like one with TIMU, and rapid multi-cloud growth are also significant contributors, noting that the RPO forecast would be an understatement if Stargate meets expectations.

John DiFucci of Guggenheim Securities questioned the deployment timeline for the 40 planned multi-cloud regions with partners like Azure, AWS, and Google, noting that a lack of global footprint may be delaying deal closures for large enterprises.

Answer

CEO Safra Catz explained that hyperscaler partners are highly motivated to deploy these regions quickly to unlock revenue, with competition among them accelerating the process. Executive Chairman and CTO Lawrence Ellison added that achieving a global footprint (primary/backup in North America, Europe, Asia) is the key milestone, and he expects to meet most multinational customer needs within the coming months, estimating the full 40 regions could be deployed in about 12 months.

John DiFucci requested an update on the progress of OCI gross margins, noting past commentary about consistent improvement and questioning how they are trending given the massive growth.

Answer

CEO Safra Catz affirmed that OCI gross margins are continuing to improve, even with heavy investment and the growth of GPU business. She attributed the trend to the architectural advantages and high degree of automation that Larry Ellison described, which create significant operating leverage. Catz stated that both OCI and SaaS margins are improving with scale.

John DiFucci of Guggenheim Securities asked how Oracle's overall margins and profitability will be affected by the continued mix shift towards the lower-margin OCI business, despite its rapid growth.

Answer

CEO Safra Catz stated that OCI's gross margins are increasing with scale, partly because OCI includes high-margin services like the expanding Autonomous Database. Chairman and CTO Larry Ellison added that moving applications like Fusion to the Autonomous Database provides huge cost savings (estimated around 50%) and stunningly high margins due to automation eliminating human labor and improving hardware efficiency. He affirmed his belief that both profit dollars and profit margins will increase over time.

John DiFucci of Guggenheim sought clarification on why Rubrik is uniquely positioned to capitalize on the emerging AI agent security opportunity and what additional solutions customers might need beyond Rubrik to fully address this challenge.

Answer

CEO Bipul Sinha articulated Rubrik's strong position at the intersection of data, identity, and business applications, which are fundamental to AI. He described Rubrik Agent Cloud as an "agentic ERP" offering comprehensive monitoring, governance, and remediation capabilities, including "Agent Rewind" to undo AI agent mistakes. He also highlighted Rubrik's secure data lake for model fine-tuning, GPU virtualization, and ecosystem integrations with Microsoft Copilot Studio and Amazon Bedrock.

John DiFucci from Guggenheim Partners noted that Rubrik's strong results seem to defy the uncertain macroeconomic backdrop that has suppressed spending for other security companies, and asked for commentary on the demand environment and Rubrik's execution.

Answer

Co-Founder, CEO & Chairman Bipul Sinha attributed Rubrik's performance to its creation of the cyber resilience market, which he contrasted with the traditional 'whack-a-mole' approach of buying numerous prevention and detection tools. He stated that cyber resilience is a top priority for CIOs and CSOs, making Rubrik's platform a non-optional, quantum shift in security posture rather than an incremental tool. Sinha affirmed that the demand environment remains strong and that Rubrik is not opportunity or market constrained, given its position in a $50 billion market.

John DiFucci highlighted the impressive top-line and cash flow results but questioned the guidance for moderating free cash flow in fiscal 2026, especially given the strong Q4 performance.

Answer

CFO Kiran Choudary acknowledged the strong cash flow performance. He explained that while top-line scale and operating leverage are key drivers, the timing of collections is also a factor. Choudary noted that Rubrik has experienced gradual billings duration compression (mid-to-high single digits year-over-year) and has assumed this trend will continue. He characterized the fiscal 2026 guidance as a thoughtful starting point for the company's first full year providing an annual outlook.

John DiFucci asked about go-to-market partnerships, referencing field checks that indicate growing engagement with VARs and GSIs, and questioned if this trend was accelerating.

Answer

CEO Bipul Sinha confirmed that engagement with VARs and GSIs is increasing and has been a trend for several quarters. He explained that as customers demand cyber resilience, channel partners are bringing Rubrik into more strategic conversations about risk mitigation, which elevates their role from infrastructure providers to cybersecurity advisors. This shift helps partners broaden their scope and strengthen their customer relationships, driving more partnerships with Rubrik.

John DiFucci asked for clarification on the slightly lighter free cash flow guidance, questioning if there were underlying reasons or if it was related to the interim CFO appointment, and sought more details on Barbara Larson's decision to depart.

Answer

Barbara Larson, CFO of SentinelOne, explained that the Q4 revenue outlook reflects steady momentum, a healthy pipeline, and continued customer/partner engagement, with a prudent approach given the dynamic macro environment. She clarified her departure is a personal decision for an opportunity in a deeply passionate space, entirely independent of SentinelOne's strong outlook.

John DiFucci of Guggenheim Partners inquired about the drivers of business momentum, specifically asking for metrics or commentary on how the Singularity platform is gaining traction with existing customers beyond just initial deals.

Answer

CEO Tomer Weingarten explained that Q2 growth was broad-based with a consistent, even split between new customers and expansions. He highlighted that non-endpoint solutions like AI, data, and cloud are growing rapidly, with Purple AI and data solutions being the fastest-growing. Weingarten also noted that the new SentinelOne Flex licensing model improves the ability to land larger deals and expand with existing customers.

John DiFucci of Guggenheim Partners asked about the go-to-market evolution from a product-centric to a platform strategy, its impact on sales timing, and whether this transition contributed to the quarter's results.

Answer

CEO Tomer Weingarten described the go-to-market shift as a continuous evolution rather than a specific Q1 event. He stated that the move to a platform sale with flexible consumption models is a net positive that should improve efficiency, despite ongoing complexities in training and enablement.

John DiFucci noted that new ARR showed slight growth and asked for more color on why SentinelOne expects to perform better against a consistent macro backdrop in the coming year.

Answer

Barbara Larson (CFO) highlighted the improved new business growth in H2 FY25 and expects the trend to continue, with the FY26 net new ARR guide of ~$200M representing 2% YoY growth despite a ~$10M headwind from retiring a legacy product. Tomer Weingarten (CEO) added that strong platform adoption, a ramped sales force, and significant traction with AI solutions (over 300 AI deals in Q4) are key drivers of this confidence.

John DiFucci asked about SentinelOne's performance in the SMB and mid-market segments, noting that these areas typically have shorter sales cycles and could show momentum more quickly.

Answer

CEO Tomer Weingarten confirmed that the SMB and mid-market segments are performing well with increased momentum, highlighting the strong growth of MSSP partners. He noted that the benefits of the current environment are being seen across all segments and geographies, and that the acceleration in the core endpoint market is particularly encouraging.

John DiFucci of Guggenheim Securities asked if the company plans to redirect its go-to-market strategy to capitalize on the competitor's recent issues and whether its stance on not chasing marketing investment has changed.

Answer

CEO Tomer Weingarten responded that the company's existing strategy, which focuses on net new business generation and strengthening its channel ecosystem, aligns well with the current market opportunity. He stated there is no significant change in approach, viewing the situation as an accelerant to the strategy already in place. He emphasized that the company now has the discipline, systems, and processes to execute effectively.

John DiFucci asked for subjective commentary on Okta's outlook for the next year, given the absence of early guidance, and sought insights into the underlying business momentum following a strong quarter.

Answer

CEO Todd McKinnon emphasized that Q4 is seasonally their biggest quarter, with tremendous opportunity. CFO Brett Tighe explained that the size of Q4 makes five-quarter-out guidance unhelpful, and they will provide an update after Q4. Brett Tighe highlighted growing business momentum, successful go-to-market specialization, improving AE productivity, and increased sales rep hiring (Q2, Q3, Q4, FY27) as signs of confidence in opportunities like Okta securing AI, governance, and PAM. He also provided a formula for approximating FY27 revenue using Q4 current RPO and an estimated FY26 coverage ratio of approximately 79%. President and COO Eric Kelleher reiterated the effectiveness of go-to-market specialization, noting improved demand generation, focused persona engagement, and AE attrition near a multi-year low with tenure near a multi-year high.

John DiFucci from Guggenheim Partners sought clarification on the removal of 'excess conservatism' from the guidance regarding the federal business and macro environment, and asked how long the go-to-market changes are expected to be a headwind.

Answer

CFO Brett Tighe confirmed that the layer of prudence for macro uncertainty was removed because the feared negative impacts did not materialize in Q2. However, he noted that the guidance still incorporates the impact of the go-to-market specialization, as it takes time for such changes to fully mature. He reiterated the goal of guiding 'closer to the pin' than in the past.

John DiFucci from Guggenheim Partners asked if the ongoing decline in Net Retention Rate (NRR) was still due to seat and MAU upsell headwinds, and whether this pressure is expected to ease or persist due to the macro environment.

Answer

CFO Brett Tighe confirmed that these headwinds are still a factor and that he expects NRR to 'travel in this range' for now. He indicated that a significant deterioration in the macro environment would create further headwinds, suggesting a stabilization rather than an immediate rebound is the current expectation.

John DiFucci asked about the level of prudence in Okta's annual guidance, questioning if a change in the business or macro environment prompted the significant guidance increase.

Answer

CEO Todd McKinnon attributed the confidence to a "blowout" Q4, highlighting over $1 billion in quarterly bookings and strong large-deal momentum. He stated the macro environment remains consistent but noted that customers are increasingly consolidating on Okta's platform for security and to manage AI agent identities. CFO Brett Tighe added that the guidance philosophy of reducing conservatism continues, and congratulated the go-to-market team on their execution.

John DiFucci inquired about the preliminary FY'26 guidance, asking how to interpret its level of conservatism now that the additional buffer for the prior year's security incident has been removed.

Answer

CEO Todd McKinnon framed the guidance as a balance between optimism for new product momentum and appropriate prudence. CFO Brett Tighe clarified that the significant outperformance in FY'25 guidance was an anomaly due to the high uncertainty following the security incident and should not be expected going forward. He also noted that as a larger company, Okta's growth profile has matured, making comparisons to years past less relevant.

John DiFucci of Guggenheim Securities, LLC, complimented Okta's strong quarterly results but questioned the conservative guidance for current RPO (cRPO), suggesting it implies a future revenue growth slowdown that seems unlikely and creates negative sentiment.

Answer

CEO Todd McKinnon acknowledged the feedback, attributing the prudent outlook to two main factors: the need to conservatively lap last year's security incident and the persistent headwinds from a challenging macroeconomic environment. CFO Brett Tighe added that he looks forward to their continued debate on the topic.

John DiFucci asked about the sequential decline in ARR per customer, the first in eight quarters, questioning if it was due to the high number of new customers not having a full quarter's revenue or the lower average selling price (ASP) of the new schools product. He also inquired about the impact of expiring COVID-era funding on transit and how mass transit is prioritized for funding.

Answer

Clara Fain, CFO, explained that the slight 1% sequential decline in platform ARR per customer was primarily due to normal seasonality (lower summer volumes for universities, schools, and corporate contracts) and the nascent schools business, where new customers launched in Q3 and contributed limited revenue. She expects these customers to ramp up over time. Daniel Ramot, Co-Founder and CEO, clarified that the federal government shutdown had no impact. He noted that while some COVID-era funding is expiring, new funding from ballot measures and state legislatures is growing the overall pot. Mr. Ramot emphasized that Via's strategy is to adapt to each city's budget cycle, helping them save money during downturns or launch new services during expansion phases.

John DiFucci asked about the sequential decline in ARR per customer, seeking clarification on whether it was due to new customers not having a full quarter's revenue, seasonality, or the lower average selling price of the new school product. He also inquired about the potential impact of expiring COVID-era funding on mass transit, and how mass transit priorities compare to other funding alternatives during budget pressures.

Answer

Clara Fain, CFO, attributed the slight decline in ARR per customer to normal seasonality, with lower volumes from universities, schools, and corporate contracts during the summer, and the limited revenue contribution from new schools customers who launched services in Q3. Daniel Ramot, Co-Founder and CEO, stated there was no impact from the federal government shutdown. He explained that while some COVID funding is expiring, it's offset by new ballot measures and state approvals, with the overall U.S. trend for transit funding remaining upward. He emphasized that Via adapts its solutions to a city's budget cycle, offering efficiency and cost savings during downward trends or new microtransit services during expansion phases.

John DiFucci of Guggenheim Partners asked about the sustainability of the core data warehouse and analytics market as a growth driver, given the intense focus on AI, and inquired about potential long-term disruptive threats to this core market.

Answer

CEO Sridhar Ramaswamy emphasized that it is not an 'either/or' choice and that the core business remains very strong with a large on-premise market still to capture. He acknowledged that AI is a potential disruptor for everyone, which is why Snowflake is innovating so aggressively on all fronts, including using AI to improve its own migration technology (snowconvert.ai) to accelerate the capture of that core market.

John DiFucci asked about OneStream's go-to-market strategy for operational planning beyond the CFO's office and questioned the visibility behind the Q3 guidance concerning the US federal sector.

Answer

CEO & President Tom Shea explained the strategy centers on productizing targeted use cases, like ESG, built on the core platform's Agile Financial Analytics (AFA) capabilities. CFO Bill Koefoed added that the Q3 guidance balances near-term prudence regarding federal spending with the strongest second-half pipeline in the company's history, noting the government's long-term push to modernize and adopt SaaS.

John DiFucci of Guggenheim Securities questioned why OneStream did not raise its full-year guidance despite a strong Q1, asking if the unchanged outlook was due to prudence or an observed slowdown in demand.

Answer

CFO Bill Koefoed explained that while leading indicators like the sales pipeline are the strongest they have ever been, the company is remaining prudent and cautious due to heightened macroeconomic uncertainty. He clarified that they have not yet seen a slowdown in their current results.

John DiFucci of Guggenheim Securities inquired about the drivers behind the improving demand for modern consolidation and planning solutions, noting it seems to be a higher priority than other back-office applications.

Answer

Co-Founder and CEO Tom Shea explained that OneStream's core solution is essential for every finance team, and companies recognize they can no longer delay modernizing these critical systems. He emphasized that the company's 98% gross retention rate creates a durable customer base, which serves as a foundation for upselling new solutions like their finance AI portfolio. Shea added that the vast amount of curated financial data OneStream holds for customers is a significant asset for powering future AI-driven applications.

John DiFucci of Guggenheim Securities noted the market's focus on OneStream's consolidation/close replacement success and asked about the traction seen in financial and operational planning, independent of the close process.

Answer

CEO Tom Shea expressed excitement for the question, confirming significant traction in planning. He explained that OneStream's strategy is to first make core finance processes (like consolidation) efficient. This allows customers to then leverage the platform for more strategic activities, linking operational plans to financial objectives to holistically manage and drive the business forward.

John DiFucci of Guggenheim Securities inquired about the Nuclea acquisition's potential to be leveraged across the product portfolio and also asked about the quarterly free cash flow miss despite a raised annual forecast.

Answer

CEO Yogesh Gupta confirmed Nuclea is intended for integration across the entire portfolio, including the data platform, Sitefinity, and ShareFile. CFO Anthony Folger addressed the cash flow, attributing the quarterly timing to the complex but successful transition of the ShareFile business onto Progress's internal billing and collections systems, a major integration milestone that was prioritized over short-term DSO.

John DiFucci of Guggenheim Securities asked if the Nuclea acquisition could be leveraged across the product portfolio, a departure from the usual standalone model, and also questioned the lower-than-expected quarterly free cash flow despite a raised annual forecast.

Answer

CEO Yogesh Gupta confirmed that Nuclea's technology is intended for integration across the entire product portfolio, including the data platform, Sitefinity, and ShareFile, to create broad customer value. Regarding cash flow, CFO Anthony Folger attributed the quarterly performance to collection timing and the major operational task of migrating the ShareFile business onto Progress's internal billing and collections systems. He noted this was a critical integration milestone and that they prioritized a smooth customer transition, which temporarily impacted collections, but expects this to normalize quickly.

John DiFucci of Guggenheim Securities inquired if the Nuclea acquisition could be leveraged across Progress's entire product portfolio, unlike typical standalone acquisitions. He also asked for clarification on the quarterly free cash flow performance versus the raised annual forecast.

Answer

CEO Yogesh Gupta confirmed Nuclea is designed for integration across the entire portfolio, including the data platform, Sitefinity, and ShareFile. Regarding cash flow, CFO Anthony Folger attributed the quarterly result to collection timing and the deliberate, careful process of migrating the entire ShareFile business onto Progress's billing system, which was a major integration milestone.

On behalf of John DiFucci from Guggenheim Securities, Lauren Sanco asked if Progress has seen any business changes in major international geographies due to geopolitical forces.

Answer

CEO Yogesh Gupta responded that they have not seen any resulting changes, either positive or negative, in their international business. He attributed the stability to the company's products being deeply embedded in customers' mission-critical operations and the long-term trust built with their global customer base.

John DiFucci asked how higher interest rates and the political administration might impact Progress's M&A strategy. He also asked if the company would begin to break out SaaS revenue, given that ShareFile will make it nearly 30% of the total.

Answer

CEO Yogesh Gupta stated there would be 'no pause' to the M&A strategy, arguing that higher interest rates create a competitive advantage and lead to more reasonable valuations. EVP & CFO Anthony Folger confirmed it is 'likely' that Progress will introduce a 'services' line in its P&L during 2025, which will primarily consist of SaaS solutions, to provide better modeling clarity for investors.

John DiFucci asked for clarification on the free cash flow guidance, noting an implied raise excluding the ShareFile acquisition. He also questioned Progress's confidence in elevating ShareFile's profit and cash flow metrics to its own standards, given the deal's size, and inquired about potential weakness in the SMB market, a key customer base for ShareFile.

Answer

CFO Anthony Folger confirmed the implied increase in the core business's free cash flow guidance. He detailed the confidence in integrating ShareFile, citing its existing profitability, scalable cloud platform, strong gross margins, and the favorable structure of the carve-out. CEO Yogesh Gupta added that ShareFile's customer base is stable due to its mission-critical nature in regulated industries and that non-linear R&D scaling provides a clear path to the 40% operating margin target.

John DiFucci sought further clarification on the conservative annual guidance, asking if any customer conversations gave pause or if the caution was based purely on external macroeconomic news.

Answer

CFO Erica Smith and CEO Matt Cohen both confirmed that customer conversations have been 'incredibly positive' and give no reason for pause. Cohen elaborated that while their customers express concern about the broader macro environment (e.g., tariffs), their spending on cybersecurity and identity remains a high priority. The decision to not pass through the full Q1 beat was a 'responsible' one based on external uncertainty.

John DiFucci asked if the machine identity market has distinct layers, such as management and governance, and if the Zilla acquisition could help build that governance layer for machines.

Answer

CEO Matt Cohen agreed with the premise, stating the machine world is complex and requires a layered solution to observe, secure access, and automate the identity lifecycle. He confirmed that Zilla's capabilities can 'absolutely' be applied to build out the future governance layer for their complete machine identity security solution, validating the strategic fit.

John DiFucci questioned why Venafi represents a significant growth opportunity now, given its long history and perceived failure to fulfill its potential. He also asked if the recent U.S. election had any influence on the quarter's results.

Answer

CEO Matt Cohen attributed the opportunity to two key factors: CyberArk's massive go-to-market scale, which Venafi lacked, and a market inflection point where the volume, variety, and velocity of machine identities have made manual processes untenable. He stated that there was no material impact from the election on Q3 results and that the Q4 guidance does not assume any related budget flush.

John DiFucci followed up on a previous question, asking specifically if the cyber insurance industry is acting as a key tactical catalyst for demand, given that PAM is often a prerequisite for obtaining coverage.

Answer

CEO Matt Cohen characterized cyber insurance as a 'nice tailwind' for the business, confirming that PAM and EPM are core controls insurers look for. He positioned it as one of several key drivers, alongside the regulatory environment (DORA, SEC rules) and post-breach remediation recommendations, which all reinforce identity security as a top priority.

John DiFucci asked about Akamai's strategy to ramp up new channel partners for its faster-growing security products like Guardicore and API Security, and whether these new channels could also be leveraged to sell its broader infrastructure security portfolio.

Answer

CEO Dr. Tom Leighton confirmed that these products are sold through different channels than Akamai's traditional CDN partners, listing examples like Presidio, Optiv, and WWT. CFO Ed McGowan added that 80-90% of new logo acquisition comes through the channel. Both executives affirmed that these partners can and do sell the entire security platform, often leading with Guardicore or API Security and then expanding the relationship.

John DiFucci sought confidence in Akamai's ability to accelerate revenue growth to 10% from the current 3-4% guidance, asking if it's just a matter of math. He also asked for more detail on the profitability and competitive advantages of the compute business.

Answer

CFO Ed McGowan explained the acceleration path involves the delivery business drag moderating, security growing durably at 10%, and compute reaccelerating after a near-term transition. CEO F. Leighton detailed compute's advantages: lower egress costs due to efficient data handling, superior performance from a highly distributed platform, and the ability to run containers in hundreds of cities, all leading to better performance at a lower price than hyperscalers.

John DiFucci of Guggenheim asked if Workday's performance is now more sustainable and if it's positioned to emerge stronger when the macro environment improves, also inquiring about Global Payroll Connect.

Answer

CEO Carl Eschenbach affirmed this view, pointing to successful initiatives like driving AI and FINS SKUs, strong full-suite adoption (over 30% of new business), and partner contribution (over 15% of new ACV). Chief Product Officer David Somers added that Global Payroll Connect has been in 150 deals since its October launch, showing strong early traction.

John DiFucci asked for a high-level perspective on how AI training optimizations, such as those seen with DeepSeek, impact Arm's overall opportunity in the AI market.

Answer

CEO Rene Haas described such optimizations as a positive for the industry and for Arm. He argued that more efficient inference lowers costs and expands the total demand for compute, which is especially beneficial for Arm's sweet spot in power-constrained devices like phones and cars. He added that massive spending by cloud players shows the industry is still far from reaching AI's full potential.

John DiFucci sought more clarity on the Armv9 mix, asking if its growth is expected to continue and what might cause it to stall, given its current concentration in specific market segments.

Answer

CEO Rene Haas stated that v9 adoption growth is 'quite predictable' and guaranteed the 25% mix would be 'considerably higher' in a year. He cited growth drivers across PCs, the 'waterfall' of v9 into mid-range mobile, and 100% v9 adoption in the data center. CFO Jason Child added that the quarterly flatness was a temporary mix issue due to strength in the mid-range smartphone market, which has not yet transitioned to v9.

John DiFucci requested a clearer explanation for why the historically tight coupling between ARR and revenue is temporarily diverging.

Answer

CFO Burt Podbere clarified that the divergence is temporary and primarily caused by the structure of the Customer Commitment Packages (CCPs). He explained that when a CCP includes extended contract time, it creates an immediate impact on ARR, whereas the corresponding revenue is recognized over the life of the contract, causing a short-term lag and decoupling of the two metrics.

John DiFucci of Guggenheim Securities asked if the Q3 softness in Europe was more pronounced than usual and sought to understand its cause, questioning whether it was due to softer demand, macro issues, or execution on slipped deals.

Answer

Founder and CEO Gil Shwed explained that a 'giant deal' in Europe in the prior year's Q3 created a tough comparison. While not offering a single attribution, he noted that some deals are already being won in Q4 and that the company finished the quarter positively overall, with a healthy outlook reflected in the Q4 guidance.

Questioned the new pricing model, asking if the paid user base could double and why customers would accept paying more, and what specific new value justifies the change.

Answer

The company is confident in its ability to double the paid user base. They explained that customers are receptive because the price change is accompanied by a significant value increase. Previously limited 'free' users can now access a full suite of tools like AI, dashboards, and reporting, which removes friction and aligns the model with industry standards. Early results from new customers and a large SI are positive.

Asked about the expected focus areas for the new President of Go-to-Market, Max Long, and sought clarification on the guidance that Net Retention Rate (NRR) would continue to decline, questioning if it might stabilize or improve during the year.

Answer

The new GTM President was chosen for his deep experience in international markets, partner ecosystems, and multi-product cross-selling. The NRR is expected to decline as it follows ARR trends, primarily driven by the anticipated continued worsening of the SMB segment. The company's guidance is based on current visibility and does not yet factor in potential improvements from new initiatives.