Meta Marshall is an Executive Director and Senior Equity Analyst at Morgan Stanley, specializing in technology sector research with a focus on cloud communications, networking, and infrastructure software. She has provided coverage on companies such as Zoom Video Communications, Juniper Networks, and Pure Storage, with a coverage universe of 46 stocks and a track record that includes a 53% success rate and an average return of 4.7% per recommendation according to TipRanks. Beginning her analyst career before joining Morgan Stanley, Marshall has developed a strong reputation for insightful sector analysis and investment recommendations. She holds professional securities licenses and is registered with FINRA, reflecting her compliance with industry standards and regulatory credentials.
Meta Marshall questioned the net new ARR deceleration in Q3 from Q2 and the confidence in a pickup in Q4, seeking more detail on the dynamics.
CFO Brian Carolan stated Q2 achieved $57 million, consistent with last year's tough comparable, and expressed confidence heading into Q3.
Meta Marshall inquired about the net new ARR deceleration from Q2 to Q3 and the factors contributing to confidence in a pickup in Q4, seeking more detail on the Q3 and Q4 dynamics.
Brian Carolan, SailPoint's CFO, noted that Q2's net new ARR of $57 million was consistent with the prior year, which was a tough comparable, and represented over 40% on a two-year CAGR basis. He expressed confidence in Q3 as a prudent starting point, aiming for a beat-and-raise cadence in the second half.
Meta Marshall inquired about the net new ARR deceleration in Q3 from Q2 and the confidence in a Q4 pickup, seeking more details on the Q3 and Q4 dynamics.
CFO Brian Carolan stated that Q2 net new ARR of $57 million was consistent with last year, which was a tough comparable, noting a two-year CAGR of over 40%. He expressed confidence in Q3 as a prudent starting point and hoped to demonstrate a beat-and-raise cadence in the second half.
Meta Marshall asked for further insight into the projected deceleration of net new ARR from Q2 to Q3, and what factors contribute to the anticipated pickup in Q4, seeking clarification on the Q3 and Q4 dynamics.
Brian Carolan, CFO, SailPoint, noted that Q2 net new ARR of $57 million was consistent with the prior year, despite a tough comparable, and represented a two-year CAGR of over 40%. He stated that the Q3 guidance reflects a prudent starting point, with an aim to demonstrate a beat-and-raise cadence in the second half of the year.
Meta Marshall followed up on the AI order strength, asking if the upside is driven by strengthening scale-across opportunities or deepening existing engagements. She also inquired about the impact of elevated DRAM pricing on Cisco's gross margin outlook.
Chairman and CEO Chuck Robbins stated that the scale-across opportunity is emerging, with the recently announced 51.2 Tb router targeting this area, but most Q1 strength came from deepening existing use cases and accelerated pluggable optics sales. CFO Mark Patterson confirmed that tightening supply and significant price increases for DRAM, PCB, and optics are included in the updated Q2 and full-year guidance.
Meta Marshall followed up on AI orders, asking if the strength was from scale-across opportunities or deepening existing engagements. She also inquired about the impact of elevated DRAM pricing on gross margins.
Chuck Robbins, Chairman and CEO, stated that while the scale-across opportunity is emerging, most Q1 strength in AI orders came from deepening existing use cases, with significant acceleration in pluggable optics. Mark Patterson, CFO, acknowledged tightening supply and significant price increases for memory, PCB, and optics, but confirmed these factors are included in the updated Q2 and full-year guidance.
Meta Marshall from Morgan Stanley inquired about the growth outlook for the security business now that the Splunk acquisition is anniversaried, and also asked about the new CFO's top priorities.
CEO Chuck Robbins expressed optimism for security, citing over 20% order growth in new products and double-digit growth ex-US Federal. He also noted over 300 new logos for Splunk in the last two quarters. CFO Mark Patterson outlined his priorities as funding for success, durable profitable growth, financial discipline, and shareholder returns.
Meta Marshall of Morgan Stanley inquired about current customer buying behavior, specifically asking if there were signs of order pull-forwards due to tariff uncertainty, and requested commentary on the public sector business.
CEO Chuck Robbins stated there has been no meaningful change in customer purchasing behavior and, along with CFO Scott Herren, saw no evidence of a broad-based pull-ahead of orders. Robbins and Herren cited stable channel inventory, consistent Meraki activation times, and normal order linearity as evidence. Robbins also noted that global public sector orders grew 8%, with U.S. federal orders showing double-digit growth.
Meta Marshall of Morgan Stanley inquired about current customer buying behavior, specifically asking if there was evidence of order pull-forwards due to tariff uncertainty, and also requested commentary on the public sector.
CEO Chuck Robbins stated there has been no meaningful change in customer purchasing behavior. CFO Scott Herren elaborated, providing several data points like stable channel and web-scaler inventory, consistent Meraki activation times, and normal order linearity, all indicating no significant pull-ahead activity. Robbins added that global public sector orders grew, with U.S. federal orders showing double-digit growth.
Meta Marshall from Morgan Stanley asked what specific products were driving the strong organic security growth, excluding the U.S. Federal impact. She also inquired about where customers are prioritizing their spending within the broader trend of data center modernization.
CEO Chuck Robbins attributed the security strength to new products like XDR, Secure Access, and Multicloud Defense, which have been deployed by over 1,000 customers, alongside a full refresh of the firewall portfolio. For data center modernization, he stated that while momentum has primarily been in switching infrastructure, Hypershield is gaining significant mindshare for east-west traffic security, representing a massive opportunity.
Meta Marshall asked about other ways Gen Digital Inc. is utilizing AI beyond the 20% efficiency gained in customer support. She also inquired about any impact of the 'beautiful tax bill' on the company's tax rate.
Vincent Pilette, CEO, detailed AI initiatives in two categories: building AI-native product features (e.g., Norton Genie, Spark) and transforming Gen into an AI-first company by changing workflows in marketing (creative production, performance marketing) and R&D (automations, reducing maintenance costs, increasing innovation velocity). Natalie Derse, CFO, stated that the non-GAAP tax rate remains steady at 22%, and the tax payment primarily impacts short-term cash flows, not the long-term tax rate.
Meta Marshall asked about other ways Gen Digital is utilizing AI beyond the 20% efficiency gained in customer support, seeking insights into its broader application within the business. She also inquired about any expected impact of the OBBA (Omnibus Budget Reconciliation Act) on the company's tax rate.
Vincent Pilette (CEO) detailed AI's use in building AI-native product features (Norton Genie, Spark, Norton browser) and transforming Gen into an AI-first company, highlighting its role in marketing (creative production, performance marketing) and R&D (automation, reducing maintenance costs, increasing innovation velocity). Natalie Derse (CFO) stated that the non-GAAP tax rate remains steady at 22% and is assumed in the guidance, with the transition tax payment primarily impacting short-term cash flows, not the long-term tax rate.
Meta Marshall asked about the Q4 gross margin guidance, specifically if any headwinds from tariffs or component cost increases were embedded in the outlook.
Christiane Ohlgart, CFO, clarified that the Q4 gross margin guidance primarily reflects the mix between hardware and service revenue, and the absence of certain reserve release benefits seen in Q3. No significant headwinds from tariffs or component costs were noted.
Meta Marshall inquired about the Q4 gross margins, specifically asking if any headwinds from tariffs or component cost increases were embedded in the guidance.
Christiane Ohlgart, CFO, stated that there were no such headwinds. She explained that the Q4 gross margin guidance primarily reflects the mix between hardware and service revenue, and the absence of certain reserve release benefits that positively impacted Q3.
Meta Marshall asked about the key milestones Lumentum is looking for as the OCS business ramps towards $100 million, specifically regarding lab testing, hardware, and software. She also inquired whether the vast majority of the future transceiver ramp would only include the primary customer, or how additional CloudLight customers would contribute.
President and CEO Michael Hurlston outlined the OCS revenue ramp, stating that hardware is generally qualified with three customers in labs, but software is the main challenge, expected to be fully qualified by major customers in the March quarter. For transceivers, Michael stated Lumentum has line of sight to $250 million/quarter, balancing customer opportunities for highest margin. He noted the primary customer will remain leading, but they are engaging with others for margin-rich opportunities like 1.6T. EVP and CFO Wajid Ali added that 1.6T margins will be significantly better than 800G, contributing to the $250 million target.
Meta Marshall inquired about the key milestones Lumentum is tracking for ramping the OCS business to its $100 million target, specifically differentiating between hardware and software qualification. She also asked if the future transceiver business ramp would primarily involve the major customer or if additional CloudLight customers would play a significant role.
President and CEO Michael Hurlston outlined the OCS revenue ramp, expressing increasing confidence. He stated that hardware is generally qualified with three customers in their labs, but software qualification is the primary challenge, expected to be complete for major customers by the March quarter and the third customer by mid-year. For transceivers, Michael Hurlston explained they aim for a 'bounded' $250 million per quarter business with reasonable margins by being selective, focusing on margin-rich opportunities like TRO and 1.6T, building on success with their primary customer while also engaging others. EVP and CFO Wajid Ali added that 1.6T margins are expected to be significantly better than 800G, contributing to the improved margin profile.
Meta Marshall asked about the company's plans for ramping additional cloud transceiver customers and the primary drivers behind the strong gross margin performance in the quarter.
President and CEO Michael Hurlston stated that Lumentum is focusing on its three current hyperscale customers for cloud modules due to capacity constraints. He attributed the gross margin improvement to favorable product mix and a strong focus on cost reduction, adding that he expects further margin expansion in coming quarters.
Meta Marshall of Morgan Stanley sought clarity on the drivers of margin improvement in the Cloud and Networking segment, asking to distinguish between yield improvements at Cloud Light and pricing advantages in EMLs. She also inquired about the company's strategy if tariffs were extended to Thailand.
CFO Wajid Ali attributed the margin improvement to broad-based strength, including moving DCI production in-house, strong EML demand, and improved module yields. CEO Michael Hurlston reiterated the focus on reaching the 40% gross margin target. Regarding tariffs, Ali stated that while a tariff on Thailand would be a headwind, the company is already in discussions with customers about potential pricing impacts, and for now, Lumentum is not the importer of record for most U.S. shipments.
Meta Marshall asked for clarification on the drivers for the sequential gross margin decline, questioning if it was due to mix or yield issues, and also inquired about the potential relative size of the two new cloud customers compared to the incumbent.
EVP and CFO Wajid Ali attributed the gross margin headwind to initial yield issues during new transceiver product ramps and costs associated with underutilized capacity at the new Thailand facility. He expects margins to improve as these issues resolve and high-margin EML shipments increase. President and CEO Alan Lowe added that the new cloud customers have the potential to become as large as, or even larger than, their current largest customer once they are fully ramped.
Meta Marshall inquired about how front-end network upgrades are progressing with the increase in inference use cases, and how this compares to Arista Networks' expectations from a year ago.
Jayshree Ullal, Arista Networks' CEO and Chairperson, noted a significant shift from InfiniBand to Ethernet for back-end networks (800G, 1.6T next year). She explained that pressure from the back-end is driving front-end upgrades and a convergence of the two, making differentiation difficult. Ken Duda, Arista Networks' CTO and SVP of Software Engineering, highlighted Arista's unique differentiator in offering consistent solutions across both front-end and back-end.
Meta Marshall asked about the current pace and nature of front-end network upgrades for inference use cases, comparing it to expectations from a year ago, particularly in light of the increasing convergence between front-end and back-end networks.
Jayshree Ullal, CEO and Chairperson, described a "sea change" where Arista is increasingly involved in constructing 800G (and soon 1.6T) back-end networks, which in turn drives front-end upgrades. She noted the growing convergence of front-end and back-end, making differentiation difficult. Ken Duda, CTO and SVP of Software Engineering, highlighted Arista's unique differentiator in successfully selling both front-end and back-end solutions.
Meta Marshall from Morgan Stanley inquired whether the current strength in cloud demand is primarily driven by accelerated front-end network upgrades or stronger-than-expected back-end AI demand.
Chairperson & CEO Jayshree Ullal explained that the significant AI deployments are now creating pressure on front-end cloud networks, leading to a more balanced deployment of both. She noted that this is causing a convergence of front-end and back-end topologies, with the company's $550 million guidance increase reflecting momentum across cloud, AI, and enterprise sectors.
Meta Marshall asked about the broader $1.5 billion AI revenue goal for 2025, questioning if its achievement is more dependent on tariff outcomes compared to the more defined $750 million back-end target.
CEO Jayshree Ullal clarified that the $750 million back-end figure is more directly measurable, while the $1.5 billion total AI number is a 'nice goal' that is harder to parse from general cloud traffic. She stated that tariff outcomes are not expected to materially impact the achievement of either target, as the underlying demand is strong.
Meta Marshall asked about the impact of AI model developments like DeepSeek on Arista's view of the back-end versus front-end network ratio and on broader AI training investment trends.
CEO Jayshree Ullal viewed these developments positively, stating they signal a new class of efficient AI accelerators for use cases beyond training, such as inference and reasoning. She believes this will lead to a more distributed AI landscape, expanding Arista's opportunity to provide scalable networks for a diverse range of 'XPUs' and customers, rather than being limited to a few large back-end training clusters.
Meta Marshall asked about Arista's AI opportunities beyond the five main trials, specifically inquiring about traction with Tier 2 providers, sovereign clouds, and other enterprise customers.
CEO Jayshree Ullal explained that the five main trials are highlighted because they have the potential to scale beyond 100,000 GPUs and significantly impact results. She confirmed these 'AI titans' include both hyperscalers and Tier 2 providers. Ullal also mentioned the existence of 10-15 smaller AI trials within the classic enterprise segment, indicating a broader funnel of opportunities beyond the largest deployments.
Meta Marshall asked about the decision to reduce the federal team despite Varonis Systems having FedRAMP High authorization for its SaaS platform, and how the company plans to pursue federal opportunities going forward.
CEO Yaki Faitelson clarified that Varonis Systems has FedRAMP Moderate, not High, and noted that the federal business continues to underperform. He explained the decision to reduce the federal team's footprint and reevaluate the strategy, emphasizing the value proposition of moving federal customers to SaaS.
Meta Marshall inquired about the decision to reduce the federal team despite FedRAMP Moderate authorization for the SaaS platform, and the strategy for pursuing federal opportunities moving forward.
Yaki Faitelson (CEO) clarified that Varonis has FedRAMP Moderate, not High, and the federal business continues to underperform without clear empirical evidence for investment. He explained the team reduction is a regrouping effort to reevaluate strategy, prioritizing SaaS migration and new offerings like database activity monitoring and email security. Guy Melamed (CFO & COO) added that the federal business doesn't behave like the enterprise business.
Meta Marshall (Marianne) asked about the impact of pricing actions, taken to offset tariff costs, on customer demand. She also inquired about the expected impact of the OBBBA tax bill on Zebra's effective tax rate and cash taxes going forward.
CFO Nathan Winters reported a positive benefit from pricing actions, now expecting around $60 million or one point of annual growth, an increase from prior guidance. He noted no dramatic impact on demand, as Zebra's pricing aligns with competitors facing similar tariff impacts. Regarding the OBBBA tax bill, Nathan Winters expects a $50-60 million reduction in cash taxes this year and over $200 million in incremental cash benefit over the next two years. The effective tax rate is expected to increase modestly to 18% due to new permanent rate effects and a shift in income.
Meta Marshall asked if the company's expectation that customers might adjust volumes to offset tariff-related price increases still holds. She also inquired about any significant customer concentration or 10% customers within the Elo business.
CFO Nathan Winters noted that on transactional business, volumes have held up well despite price increases. However, in mobile computing, pricing realization has been lower than anticipated due to an electronics tariff exemption, which has kept the market competitive. CEO Bill Burns confirmed that Elo has a diverse customer base with no 10% end-customer concentration, similar to Zebra, with its largest customer being a distributor.
Meta Marshall of Morgan Stanley asked about the status of the device refresh cycle for products sold during the COVID-era demand surge. She also requested an update on the performance of the RFID business during the quarter.
CEO William Burns stated that while the opportunity to refresh devices sold in 2021-2022 is still ahead, there is no specific acceleration of that cycle into 2025. He added that RFID had strong Q4 sales growth, with adoption broadening beyond general retail into new use cases like fresh food, government, and manufacturing.
Meta Marshall asked for more detail on the drivers of the recent strength in the healthcare vertical and requested an update on OpEx initiatives and how they should be viewed heading into 2025.
CEO William Burns attributed healthcare strength to a mix of new customer wins and existing account refreshes, driven by the need to automate workflows. CFO Nathan Winters explained that restructuring benefits are now largely realized, and the 2025 focus for OpEx is on driving productivity and scale through technology like AI, rather than further cost-cutting programs.
Meta Marshall asked about the form of conservatism F5 has incorporated into its FY2026 estimates, inquiring if it involves discounting, delayed purchasing decisions due to remediation efforts, or other incentives. She also asked to contextualize how much of fiscal 2025 systems business growth was due to the product upgrade cycle.
François Locoh-Donou (President and CEO, F5) explained that the 0%-4% FY2026 growth guidance, down from an expected mid-single-digit trajectory, accounts for three potential near-term disruptions: F5 and customer resources diverted to incident response, potential delays in executive approvals for deals, and possible project cancellations. He noted that these impacts would primarily affect new projects or footprint acquisition, and no such impacts have been observed yet. Cooper Werner (EVP and CFO, F5) added that roughly two-thirds of FY2025 systems business growth was from tech refresh, with one-third from data center capacity expansion driven by AI readiness, and that the refresh cycle is still in early stages with over half the installed base on legacy products.
Meta Marshall asked about the form of conservatism F5 has incorporated into its estimates, inquiring if it involves discounting, delayed purchasing decisions, or incentives for upgrades. She also asked for context on how much of fiscal 2025's systems business growth was attributable to the product upgrade cycle.
François Locoh-Donou, President and CEO, explained that the near-term impact considered in guidance includes resource allocation disruption for F5 and customers, potential delays in executive approvals for projects, and possible project cancellations, primarily affecting new projects. Cooper Werner, EVP and CFO, clarified that roughly two-thirds of FY2025 systems growth was from tech refresh, with one-third from data center capacity expansion and AI use cases, noting the refresh cycle is still in early stages.
Meta Marshall from Morgan Stanley inquired about business linearity, asking if the start of Q3 was showing any unusual patterns. She also asked whether the recent weakening of the U.S. dollar had noticeably changed the behavior of international customers.
EVP and CFO Cooper Werner responded that Q3 has started strong with healthy linearity and no signs of demand erosion. He noted that while a weaker dollar provides a slight benefit to international customers, it is currently balancing out earlier strength in the year and has not caused a material change in sales velocity or customer behavior.
Meta Marshall of Morgan Stanley asked if the business linearity one month into Q3 was tracking differently than usual, given the lack of pull-in during Q2. She also inquired whether the recent weakening of the U.S. dollar had noticeably changed the behavior of international customers.
CFO Cooper Werner responded that early Q3 results were strong, with healthy linearity tracking to expectations and no signs of demand erosion. On the currency question, he acknowledged that a weaker dollar provides some benefit on street pricing but noted the dollar had strengthened earlier in the year, so the recent move was more of a balancing effect and had not materially changed sales velocity or customer behavior.
Meta Marshall inquired whether the improved systems revenue outlook for fiscal 2025 was driven more by market share gains or by an accelerated hardware refresh cycle among customers.
President and CEO François Locoh-Donou stated the systems strength comes from both competitive displacements and a more material tech refresh cycle. He noted customers who had been sweating assets now have more budget certainty. EVP and CFO Frank Pelzer added that customers are now comfortable with their long-term hybrid multi-cloud architectures, which encourages reinvestment in their on-premise hardware estates.
Meta Marshall questioned customer adoption patterns for AI security products, specifically whether they prioritize 'security for AI' (data security, agentic AI solutions) or 'AI for security' (SecOps side).
Chairman and CEO Jay Chaudhry outlined that customers first sought to secure public AI use, then private applications with AI Guard, and now show significant interest in agent-to-agent communication for Zero Trust. He emphasized Zscaler's natural fit for securing agentic communication given its Zero Trust platform.
Meta Marshall from Morgan Stanley asked how recent wins with vertical-specific AI Companion offerings are informing Zoom's understanding of customer needs beyond traditional use cases like summarization.
Founder & CEO Eric Yuan responded that early adopters are now seeking more advanced capabilities, leading them to the paid Custom AI Companion. This allows them to connect Zoom's AI to their own internal data indexes and use customized templates. He emphasized that this is a growing trend and teased further AI innovations for the upcoming Zoomtopia event.
Meta Marshall asked for statistics on Zoom Contact Center customers adopting higher-priced AI SKUs and sought clarification on whether the cautious enterprise outlook was due to elongating deal cycles or reduced seat demand.
CEO Eric Yuan stated that Q1 was the largest quarter for Zoom Virtual Agent ARR contribution and upsells. CFO Michelle Chang added that customers are increasingly opting for the premium Elite SKU and that the cautious enterprise outlook stems from sales cycle elongation and increased deal scrutiny in some large U.S. accounts, not a broad-based change in demand.
Meta Marshall of Morgan Stanley inquired about customer feedback on Zoom's AI offerings following the Zoomtopia event, specifically asking about areas of strongest interest and future roadmap direction.
Founder and CEO Eric Yuan responded that customer feedback on AI Companion 2.0 has been "extremely positive," driven by its rapid innovation, ease of use, and no-additional-cost model. He highlighted that over 4 million accounts have enabled AI Companion and that monthly active users grew nearly 60% quarter-over-quarter. Yuan also noted strong interest in the upcoming Custom AI Companion for enterprises seeking more flexibility, which will be a monetized offering.
Meta Marshall from Morgan Stanley inquired about the most popular features and use cases for Zoom's AI Companion and how this usage data informs the company's future investment strategy.
CEO Eric Yuan explained that customers highly value AI Companion because it's effective and included at no extra cost. He identified meeting summaries as the top use case for Zoom Meetings and highlighted new AI features in Contact Center, such as expert assist and automated wrap-up notes. Yuan emphasized that AI Companion is being integrated across the entire platform and that more enhancements will be announced at Zoomtopia.
Meta Marshall inquired about the go-to-market investments being made to drive the product portfolio, especially for Contact Center, and the specific sales motion behind the recent large deal win.
CFO Michelle Chang outlined three go-to-market priorities: moving upmarket, accelerating channel partnerships, and returning the online business to growth. CEO Eric Yuan added that channel partners are critical, driving 6 of the top 10 Contact Center deals in Q4, and investment in the channel will continue.
Meta Marshall of Morgan Stanley inquired about the business areas most impacted by tariffs, the planned mitigation strategies, and whether the current strength in aerospace and defense spending is sustainable or likely to accelerate.
CFO Neil Dougherty detailed a multi-pronged tariff mitigation strategy involving supply chain optimization, utilizing existing global manufacturing capacity, and passing on costs where necessary. CEO Satish Dhanasekaran noted that aerospace and defense demand recovered in the second half as expected, driven by existing programs and robust prime contractor backlogs, positioning it as a steady value creator.
Meta Marshall asked about the aerospace and defense business, specifically if there was any pushback on allied orders tied to U.S. programs, and also inquired about the portion of tariff impact related to shipping into and out of China.
CEO Satish Dhanasekaran stated the aerospace and defense business saw strong order growth, particularly in Europe, despite the U.S. continuing resolution, highlighting wins with NATO and the U.S. Army. CFO Neil Dougherty specified that tariff exposure from shipping both into and out of China represents less than 10% of the total tariff impact.
Meta Marshall asked about the aerospace and defense business, specifically regarding any pushback on allied orders tied to U.S. programs, and requested a breakdown of the tariff impact between U.S.-China trade routes.
CEO Satish Dhanasekaran reported strong aerospace and defense order growth, driven by Europe and U.S. prime contractors, despite the U.S. continuing resolution. He cited wins with NATO and the U.S. Army as evidence of a strong spending environment. CFO Neil Dougherty specified that tariff exposure from trade in both directions between the U.S. and China accounts for less than 10% of the total tariff impact.
Meta Marshall asked for commentary on the federal budget environment's impact on aerospace and defense orders, which were affected by continuing resolutions, and sought context on the specific order strength in wireline driven by AI.
CEO Satish Dhanasekaran explained that the aerospace and defense business is stable long-term, driven by defense modernization, despite near-term order timing issues from continuing resolutions. Regarding AI, he highlighted strong demand across the ecosystem for high-end capabilities, including R&D for terabit speeds and next-gen technologies like PCIe Gen7 and DDR6, leading to robust opportunities and collaborations.
An analyst on behalf of Meta Marshall from Morgan Stanley asked about growth drivers in the automotive segment beyond simulation and EV sales, such as charging infrastructure. The analyst also inquired about potential areas within Keysight's portfolio to expand content or introduce new products for the AI opportunity.
Executive Mark Wallace identified automotive growth areas beyond the current EV pause, including manufacturing test, software-defined vehicles (ADAS), and charging infrastructure. Executive Satish Dhanasekaran highlighted that beyond physical layer tools for AI, a significant opportunity exists for emulation platforms. He stated Keysight is focused on enabling the broader R&D ecosystem from design to test.
Meta Marshall of Morgan Stanley inquired about NICE's investment strategy for AI and partnerships, its effect on near-term operating margins, and the company's confidence in achieving its 12% cloud growth target for the full year.
CFO Beth Gaspich stated that investments in international cloud infrastructure are paying off and confirmed the full-year guidance for a 50 basis point operating margin expansion. She expressed confidence in the 12% cloud growth target, noting strong performance in Q1 and Q2, but mentioned that some softness in the LiveVox business is creating a slight headwind, preventing potential outperformance. CEO Scott Russell added that the core CXone mPOWER platform and AI are strong, providing confidence despite the short-term LiveVox challenges.
Meta Marshall asked about NICE's current level of investment, the near-term outlook for operating margins, and the company's confidence in achieving its 12% cloud growth target for the year.
CFO Beth Gaspich stated that investments in international cloud infrastructure are yielding positive results and reiterated the full-year target of a 50 basis point operating margin increase. She expressed confidence in the 12% cloud growth target, citing solid Q1/Q2 performance and good visibility for Q3, while noting that softness in the LiveVox business adds some uncertainty for Q4. CEO Scott Russell added that the strength of the core CXone mPOWER platform and AI provides a strong foundation despite short-term LiveVox headwinds.
Meta Marshall inquired about NICE's current investment levels, the near-term outlook for operating margins, and the company's confidence in achieving its 12% cloud growth target for the year.
CFO Beth Gaspich stated that investments in cloud infrastructure, particularly for international expansion, are yielding positive results. She reaffirmed the guidance for a 50 basis point increase in operating margin for 2025 and expressed high confidence in the 12% full-year cloud revenue growth, despite some softness from the LiveVox business creating uncertainty for Q4. CEO Scott Russell added that the strength of the core CXone mPOWER platform and AI underpins this confidence.
Meta Marshall asked if the cautious outlook for the industrial lasers business was due to geographic customer concentration and inquired about any potential lumpiness or design changes in the datacom business affecting sequential growth.
CEO Jim Anderson clarified that the caution in industrial lasers stems from broad macroeconomic factors like high capital costs and tariff uncertainty, not customer concentration. For datacom, he acknowledged that growth rates can fluctuate quarterly and that expected technology transitions, such as from 400G to 800G, are proceeding as normal and are not a cause for concern.
Meta Marshall questioned whether the cautious outlook for the industrial business was due to any observed pull-forward of orders or simply general macro uncertainty. She also asked about any impacts on the company's military business related to federal government processes.
CEO James Anderson clarified that the cautious industrial outlook is due to macroeconomic uncertainty, not any signs of customer order pull-forwards. He also noted that the aerospace and defense business, while a smaller part of revenue, has been performing well, showing good sequential and year-over-year growth in the most recent quarter.
Meta Marshall from Morgan Stanley asked for an outlook on the Lasers and Materials segments for the remainder of the year, seeking a view similar to the 'cautiously optimistic' tone on telecom and noting the headwind from automotive.
CEO James Anderson maintained a cautious near-term outlook for the broader industrial markets that the Lasers and Materials segments serve. However, he pointed to positive signs and growth in specific subsegments, including display capital equipment driven by OLED adoption and improving orders in semi-cap equipment. He confirmed that the automotive sector remains a particular area of weakness for the Materials segment.
Meta Marshall asked about the geographic source of the telecom strength seen in the quarter and whether the gross margin upside from improved yields was a result of new progress or a tailwind from prior issues.
CEO James Anderson explained that the telecom strength was a combination of end-market improvement in both DCI and traditional transport, alongside new product ramps, with positive signs across geographies. He clarified that the yield improvements contributing to gross margin were new progress resulting from the company's focused cost-reduction initiatives, not a simple recovery from past disruptions.
Meta Marshall of Morgan Stanley inquired if the transition to software and cloud models in the video business is creating a meaningful revenue headwind. She also requested an update on the adoption rates for the APEX NEXT radio.
Chairman & CEO Greg Brown confirmed that the Alta cloud platform is the fastest-growing part of the video business and that the company is managing the deferred revenue transition while still achieving significant growth. EVP & COO Jack Molloy reported double-digit order growth for APEX NEXT in Q2, noting its exclusivity with the new SVX device and its role in driving application services revenue.
Meta Marshall's representative asked about the federal budget approval process, potential upside from immigration enforcement efforts, and if any revenue from Ukraine is expected in the 2025 forecast.
CEO Gregory Brown confirmed there is no revenue from Ukraine expected in 2025, compared to about $80 million in the prior year. EVP & COO John Molloy detailed strong engagement with the DOJ, DHS, and DoD, highlighting a multiyear pipeline and a new FedRAMP high classification that opens up further opportunities. Gregory Brown added that the government vertical for video is expected to grow faster than the overall video segment's 10-12% forecast.
Meta Marshall of Morgan Stanley asked for context on the ramp of the new MXP660 TETRA radio and for an update on the resolution of the U.K. Home Office Airwave situation.
Gregory Brown, Chairman and CEO, described the MXP660 launch as being in its very early stages, making it too soon to predict its traction. Regarding the U.K. Airwave matter, he confirmed a hearing is scheduled for the following week regarding the company's challenge to the CMA's ruling, with a decision expected by the end of the year or in early 2025.
Meta Marshall requested the approximate size of Viavi's data center business in Q4 and the expected revenue contribution from the recent Inertia Labs acquisition in the Q1 guidance.
President and CEO Oleg Khaykin detailed the NSE segment's revenue mix as approximately 50% service provider, 30% data center ecosystem, and 20% aerospace & defense, highlighting significant growth in the latter two. CFO Ilan Daskal added that Inertia Labs is tracking above its previously announced $50 million annual run rate, and the Q1 guide also includes growth from the base A&D business.
Meta Marshall asked if the demand recovery seen in the quarter occurred earlier or was stronger than management had previously expected. She also inquired about the anticipated recovery path for the Service Enablement (SE) business.
President and CEO Oleg Khaykin confirmed that while they had seen positive signs starting in the September quarter, the December quarter was when customers began 'putting money where their mouth was,' leading to the stronger-than-expected results. For the SE business, he noted strong interest in AIOps but a lag in revenue conversion, good performance in private networks, and continued weakness in enterprise spend, expecting calendar '25 to be a recovery year for the segment.
Meta Marshall of Morgan Stanley asked about potential changes to the run-rate of the OSP business, particularly anticounterfeiting, and inquired about any positive signs or "green shoots" in the SE business.
President and CEO Oleg Khaykin projected near-term softness for OSP's anticounterfeiting products due to inventory digestion and currency redesigns, but expects a rebound to traditional run rates in the second half of the next calendar year. For the SE segment, he described a split picture: continued softness on the enterprise side but very strong momentum and a growing order funnel on the telecom and private network side, driven by AIOps, with revenue expected in the second half of fiscal '25.
Meta Marshall from Morgan Stanley asked about the company's balance between profitability and growth, given the seemingly modest increase in OpEx, and also inquired about the primary geographic drivers for the CPaaS business growth.
CEO Samuel Wilson explained that 8x8 is reallocating OpEx to drive growth and is willing to accept a temporary dip in operating margins to achieve this, with a long-term goal of growing revenue faster than expenses. CFO Kevin Kraus added that this involves reallocation in both COGS and OpEx. For CPaaS geography, Wilson identified Asia as the largest contributor in dollar terms, with strong traction in the UK and rapid percentage growth in the U.S. driven by RCS.
Meta Marshall of Morgan Stanley inquired about the traction of CPaaS offerings in the U.S. market. She also asked about the evolution of pricing models and customer preferences for consumption-based versus per-seat pricing.
CEO Samuel Wilson confirmed that 8x8 has launched CPaaS in the U.S. and secured its first customers, though it's still a small business experiencing some growing pains. On pricing, he noted that while AI and CPaaS are naturally consumption-based, he believes per-agent pricing for core contact center services will persist, as customer feedback on pure consumption models has been negative. The key is having flexible systems to meet customers where they are.
Meta Marshall of Morgan Stanley inquired about which sales channels are proving most lucrative for new customer bookings and if there are specific verticals or customer types showing success. She also asked for a comment on whether the Fuze transition was slower or faster than expected during the quarter.
CEO Samuel Wilson revealed that the best source of new business in the quarter was direct sales, particularly in North America, though the global reseller channel also saw improvement. On the Fuze migration, Wilson stated the progress was as expected but expressed a desire to accelerate the upgrade cycle. He confirmed the company remains on track to shut down the Fuze platform by the end of the next calendar year.
Meta Marshall from Morgan Stanley inquired about the lessons learned in driving AI bookings adoption and the potential opportunities arising from US immigration enforcement funding.
President Josh Isner stated that the key to AI adoption is allowing users to experience the value directly, such as the time savings from Draft1. Regarding immigration funding, he anticipates federal solicitations in Q4 for products like counter-drone, FUSYS, and video, and believes Axon is well-positioned to compete for that business.
Meta Marshall inquired about the adoption trends for Axon's AI tools, such as customer bundle preferences and pipeline strength, and asked about the entry point for the recently announced largest-ever enterprise deal, questioning if it was driven by Fusus or body cameras.
CEO Patrick Smith described the AI products as the fastest-adopting in company history, highlighting that the AI Era Plan closed deals within weeks of its launch. President Joshua Isner explained that the large enterprise win had multiple entry points, including Fusus, body cameras, and Evidence.com, demonstrating a strong and growing product-market fit in the segment.
Meta Marshall inquired about AI adoption trends, including which product bundles are gaining traction, and asked for context on the entry point for the recently announced large enterprise win, questioning if it was through Fusus or body cameras.
Patrick Smith, CEO, described the AI products as the fastest-adopting in company history, highlighting that the AI Era Plan closed deals within weeks of its launch. Joshua Isner, President, explained that the large enterprise win had multiple entry points, including Fusus, body cameras, and Evidence.com, with strong customer interest in other products like Dedrone.
Meta Marshall of Morgan Stanley inquired about the strategic rationale for the remaining A&S and Ruckus businesses (RemainCo) and the expected corporate overhead costs post-divestiture.
CEO Charles Treadway explained that the immediate focus is on closing the CCS transaction while continuing to invest in A&S and Ruckus, highlighting recent product developments and strong Q2 results as proof of their progress. CFO Kyle Lorentzen added that a significant portion of G&A will transfer to Amphenol, and the remaining allocated costs to A&S and Ruckus should be representative of the future corporate structure.
Meta Marshall from Morgan Stanley inquired about the long-term strategic fit of the A&S and Ruckus businesses within RemainCo and asked for an estimate of the go-forward corporate overhead costs after the CCS divestiture.
President & CEO Charles Treadway responded that the immediate focus is on running the businesses and closing the transaction, highlighting recent investments and strong Q2 performance in both A&S and Ruckus. EVP & CFO Kyle Lorentzen added that a significant portion of G&A will transfer with the sale, and the currently allocated costs to A&S and Ruckus should be representative of future overhead.
Meta Marshall of Morgan Stanley asked for a comparison of demand visibility from data center customers versus service provider customers. She also requested an update on the ANS segment, particularly regarding the progress of customers who were previously in holding patterns on architectural decisions.
CEO Chuck Treadway explained that visibility from data center customers is as good or better than the broadband side due to daily communication and strong AI-driven CapEx plans, noting that Q2 bookings are ahead of Q1. For the ANS segment, he highlighted that investments in new products are paying off with significant ramp-ups in nodes and amplifiers with major customers. While some customers are still deciding on upgrade paths, he noted nice wins for the virtual CMTS solution acquired from CASA.
Meta Marshall requested a rough revenue growth range associated with the 2025 EBITDA guidance and asked how management is assessing the drivers of the NICS business recovery, between pent-up demand and fundamental growth.
CFO Kyle Lorentzen indicated that while not providing specific guidance, full-year revenue growth would be in the 20% range. President and CEO Chuck Treadway explained the NICS recovery is driven by the resolution of channel inventory issues, a return to normal growth, traction with RUCKUS One and Wi-Fi 7, and a planned $15 million investment in the direct sales force.
Meta Marshall asked about the recent data center capacity expansion, questioning if it enables market share gains and if CommScope plans to enter the data center interconnect market.
President and CEO Chuck Treadway explained the investment adds approximately $300 million in revenue capacity to meet strong projected demand of 20-25% annual growth. He clarified that CommScope's focus remains on products used inside the data center, not on data center interconnect opportunities.
Meta Marshall from Morgan Stanley requested an update on Five9's strategy to leverage partners for professional services and other levers being used to accelerate customer implementations.
CEO & Chairman Mike Burkland stated that the 'Project Pull-Through' initiative is working well, with partners handling an increasing share of implementations, enabling scale. He also noted that new technology like AgenTeq AI is inherently faster to deploy. President Andy Dignan added that many of these service partners are also resellers, driving both top-line deals and bottom-line efficiency.
Meta Marshall of Morgan Stanley asked about initiatives to shorten deal cycles by demonstrating quicker ROI and inquired about the future evolution of the Salesforce Fusion partnership, especially concerning Agentforce.
President Andy Dignan clarified that deal elongation stems from increased signature requirements, not Five9's go-to-market process. Regarding Salesforce, he confirmed the partnership is a journey, with the current focus on BYOT for Einstein, to be followed by broader channel routing and eventually Agentforce, calling the current announcement 'only the beginning.'
Meta Marshall asked where Five9 will focus its investments following the recent RIF and whether there has been any disruption from Dan Burkland's upcoming departure.
CEO Michael Burkland confirmed there has been very little disruption from the leadership transition, crediting a smooth handover. He stated that future investments will be prioritized in two key areas: R&D, specifically to extend the company's leadership in AI, and go-to-market, with plans to continue adding sales quota capacity throughout the year.
Meta Marshall of Morgan Stanley asked about the market's demand for immediate ROI on investments and whether Five9 is able to demonstrate that value more quickly to customers.
Executive Michael Burkland described the current focus on AI as a 'transitory distraction' with a steep learning curve for customers, but expressed optimism that decision-making will improve. Executive Andy Dignan added that AI delivers high ROI, and Five9 is enabling its sales team to focus on this value proposition while also adjusting implementations to deliver AI benefits earlier in the process.
Meta Marshall of Morgan Stanley asked about the pace of new third-party integrations into the Maestro platform and whether the anticipated 'voice multiplier' from AI would be a sudden step-function change or a more gradual development over time.
CEO David Morken indicated that new Maestro integrations and features would be announced at the upcoming Reverb conference, highlighting the recent NICE acquisition of fellow Maestro partner Cognigy as a validation of their strategy. Chief Product Officer John Bell described customer adoption as a gradual process, where clients first migrate to the cloud and then progressively layer on more advanced services and applications.
Meta Marshall requested more detail on Maestro platform traction, asking for metrics on account growth and whether customers are primarily new or existing. She also inquired about specific efforts to upsell Maestro to the existing customer base.
CEO David Morken reported that "hundreds" of enterprise customers are now using the Maestro platform, emphasizing these are significant clients with high average annual spending, not free-tier users. He explained that Maestro serves as a critical orchestration layer for both new and existing customers to integrate their own AI solutions with telephony and CCaaS platforms. While not providing specific revenue KPIs for Maestro, he highlighted its importance in enabling the AI strategies of their enterprise clients via its AI Bridge capabilities.
Meta Marshall of Morgan Stanley inquired about the recent routing wins and whether they represent a payoff from prior investments. She also asked about the demand for installation capacity given the revenue ramp.
President and CEO Gary Smith stated that routing wins are accelerating as service providers return to core network investments after a period focused on 5G. Executive Advisor Scott McFeely quantified this, noting routing orders in the first half of 2025 were over 75% of the total for all of fiscal 2024. On installation, Smith confirmed that the need for engineering, furnishing, and installation (EF&I) services is growing "exponentially" and Ciena has good visibility as a key partner for its large customers.
Meta Marshall from Morgan Stanley asked about the seasonality of cloud customer spending and what assumptions for tariffs are currently included in the company's guidance, as well as mitigation strategies.
CEO Gary Smith explained that cloud spending is not susceptible to typical seasonality due to the massive scale-up, describing the trend as "up and to the right." CFO Jim Moylan stated that the guidance does not include effects from potential new tariffs due to the fluid situation, but noted Ciena has a resilient supply chain and will work with customers on reimbursement if tariffs are enacted.
Meta Marshall asked about Ciena's confidence in customers' ability to deploy equipment at the pace of purchasing, and how the company is balancing investments in areas like routing against near-term cloud opportunities.
CEO Gary Smith stated that Ciena has high confidence in deployment capabilities, citing closer customer collaboration and an expanded services role in managing and executing installations for both service providers and cloud customers. Regarding investments, Smith and CFO Jim Moylan noted that foundational investments have already been made, positioning them with leading technology. The focus now shifts to execution and driving operating leverage over the next three years to achieve their 15-16% operating margin target.
Meta Marshall inquired about Ciena's comfort level with fiscal 2025 Street estimates and asked whether the growing pluggables business is viewed as additive to the company's total addressable market.
CFO Jim Moylan stated that while the company feels great about its market position and the 6% to 8% long-term growth rate is a good target, Ciena would not comment on specific 2025 estimates at this time. CEO Gary Smith confirmed that pluggables are viewed as an incremental TAM opportunity, primarily in the short-reach data center interconnect space where Ciena has not historically had significant revenue, and is not seen as cannibalizing the core long-haul and submarine systems business.
Meta Marshall asked where HPE is seeing the most traction for its AI servers and about the path to improving the margin profile of the storage business, particularly with its own IP products like Alletra.
CEO Antonio Neri explained that AI server traction varies by segment, from compute-heavy builds for service providers to integrated solutions for enterprises focused on time-to-value. CFO Marie Myers added that Hybrid Cloud margins, which include storage, are expected to improve to the high single-digits by the end of the fiscal year.
Meta Marshall asked for a breakdown of the 250 basis point shortfall in Server operating margin, questioning how much was from traditional server pricing versus additional GPU inventory and pricing pressures.
CFO Marie Myers clarified that while the original 10-11% Server margin guidance for Q1 anticipated pressure from AI GPU transitions, the magnitude was greater than expected. She stated that the primary unanticipated factor was significant pricing challenges within the traditional compute business, which was not factored into the initial guidance.
Meta Marshall asked for more detail on the puts and takes affecting gross margins, specifically within the Server segment, considering the mix of different server types and the recognition of the El Capitan supercomputer project.
CFO Marie Myers stated that while segment-level gross margins are not disclosed, the Server segment's operating margin was strong at 11.6%, which included the final acceptance of El Capitan. She attributed the performance to a high mix of Gen11 traditional servers driving richer average unit prices (AUPs), successful pass-through of commodity costs, and disciplined OpEx. CEO Antonio Neri added that traditional server orders saw a third consecutive quarter of double-digit year-over-year growth.
Meta Marshall of Morgan Stanley inquired about the drivers behind the strong Server segment margins, questioning if it was due to better ProLiant margins, pricing discipline, or other factors, especially given the high mix of AI revenue.
CFO Marie Myers attributed the 10.8% Server margin to several factors. She highlighted the successful shift to higher-margin Gen11 servers, the ability to pass on commodity costs in a competitive environment, and disciplined operational expense (OpEx) management, which was down sequentially.
Meta Marshall of Morgan Stanley inquired whether the current AI traction represents a pull-forward of deployments or just the beginning of a longer trend. She also asked if the strength in first-party and marketplace cloud services is being driven by these AI use cases.
CEO George Kurian described the AI momentum as an "ongoing unfolding" of the enterprise AI market, with inferencing representing the core opportunity, suggesting it is the beginning of a trend. He confirmed that the strong cloud performance is indeed partly driven by customers using NetApp's cloud services for AI proofs of concept and deployments, in addition to strong technology differentiation and execution in other enterprise use cases.
Meta Marshall of Morgan Stanley asked whether the strong AI traction represented a pull-forward of deployments previously expected later in 2026. She also questioned if the growth in first-party and marketplace cloud services was being driven by these AI use cases or by the general maturation of the offerings.
CEO George Kurian responded that the AI momentum is part of the ongoing evolution of the enterprise AI market, particularly in inferencing, and he expects the opportunity to continue accelerating in fiscal 2026. He confirmed that the strong cloud performance is partly driven by enterprise AI customers using NetApp's cloud services for proofs-of-concept or full deployments, in addition to strong overall technology differentiation and execution in expanding use cases.
Meta Marshall of Morgan Stanley asked if the strong traction in AI represents a pull-forward of deployments or just the beginning of a longer cycle. Additionally, she questioned whether the strength in first-party and marketplace cloud services is being driven by these AI use cases.
CEO George Kurian characterized the current AI momentum as the 'ongoing unfolding of the enterprise AI market,' expecting fiscal 2026 to be a pivotal year for inferencing opportunities. He confirmed that AI use cases are a significant driver of the strong cloud performance, complementing the business's core technology differentiation and execution in other enterprise workloads.
Meta Marshall inquired whether the deal slippage was purely execution-based or if increased customer uncertainty was a factor, and also requested commentary on the public sector business.
CEO George Kurian acknowledged a degree of caution in European markets, particularly France and Germany, and noted that the Q4 guidance accounts for expected caution in the U.S. public sector. He clarified that in Q3, the U.S. public sector performed as planned and reiterated that the primary issue was deal timing and procurement cycles, not a fundamental shift in demand.
Meta Marshall from Morgan Stanley asked for an update on large Evergreen One deals that had previously slipped and the current time-to-close for such deals.
CFO Kevan Krysler noted that while two strong quarters do not constitute a trend, he was pleased with the performance in Q4 and Q1. He described the current environment as 'business as usual,' with both large deals (over $5 million) and higher-velocity transactions tracking as expected, indicating stable deal cycles.
Meta Marshall of Morgan Stanley asked about the current dynamics in customer appetite for CapEx versus OpEx purchases, particularly regarding the Evergreen program.
CEO Charles Giancarlo described the market for on-prem as-a-Service offerings as 'immature,' leading to a longer, more complex sales cycle involving customer finance departments. CFO Kevan Krysler added that the Q3 peak in conversions to traditional sales moderated in Q4, and the FY25 decline was driven by the timing of large deals in the first half of the year.
Meta Marshall asked for more detail on why the hyperscaler deal's volume is 'to be determined,' questioning whether the uncertainty lies in the customer's rollout schedule, the percentage of the data center Pure will secure, or other variables.
CEO Charles Giancarlo explained that the primary variable is the customer's data center build-out schedule, which Pure does not control. He added that while Pure has qualified for a very large portion of the data center, the exact percentage is also somewhat unknown as they aim for an even larger share. The customer's own design work for other components is also a factor.
Meta Marshall requested more detail on the delayed large Evergreen//One deals, asking if they involve Tier 2 or enterprise customers and whether the delay is due to a handful of deals.
CEO Charles Giancarlo confirmed that the delayed deals are with large enterprise customers. He specified that the issue pertains to a handful of deals each quarter, which makes their exact closing dates more challenging to forecast.
Meta Marshall from Morgan Stanley inquired about the traction with Dell and Cisco channel partners and asked about the most prominent customer requests and areas of activity at the recent .NEXT conference.
President and CEO Rajiv Ramaswami noted that the Cisco partnership is a consistent contributor to new logo growth across various segments. He described the Dell relationship as earlier, with the PowerFlex solution just becoming generally available. At the .NEXT conference, key customer interests included broader external storage support, easier migration paths, modern applications, and capabilities for secure, air-gapped environments.
Meta Marshall of Morgan Stanley inquired about the drivers behind the growing momentum in winning customers from competitive platforms and sought commentary on the performance of the U.S. federal vertical.
CEO Rajiv Ramaswami attributed the 50% year-over-year new logo growth to a maturing pipeline, effective go-to-market initiatives, and increased leverage from OEM and channel partners. CFO Rukmini Sivaraman added that the U.S. federal business improved in Q2 with solid year-over-year growth, though it remains less than 10% of annual revenue, and that uncertainty for the remainder of the year has been factored into the annual guidance.
Meta Marshall of Morgan Stanley asked for clarification on the expected fiscal Q2 recovery in the U.S. federal business, given the upcoming change in administration. She also requested an update on the integration timing for Dell PowerFlex.
CEO Rajiv Ramaswami stated that the Q2 federal business forecast is based on their current near-term view and that they feel comfortable it will return to more normal levels, while acknowledging they cannot predict what a new administration will do. He also confirmed the Dell PowerFlex integration is expected to be in the market in the first half of calendar 2025, with revenue contributions anticipated in fiscal 2026.
Meta Marshall asked if Nutanix has refined its strategy for targeting VMware customers and requested details on the timing and dynamics of renewals expected in fiscal 2025.
President and CEO Rajiv Ramaswami explained that Nutanix is deliberately targeting larger enterprises, where the biggest market opportunity exists, which involves longer but more fruitful sales cycles. He affirmed the mid-market remains a sweet spot. CFO Rukmini Sivaraman noted that the available-to-renew pool for FY25 shows strong year-over-year growth, with fiscal Q2 and Q4 typically being the strongest renewal quarters.
Meta Marshall asked about RingCentral's target business mix across its customer cohorts and which customer types or verticals are showing the greatest adoption of RingSense.
CEO Vlad Shmunis explained that the company aims to grow all cohorts but is seeing strong traction with smaller businesses and Global Service Providers (GSPs), which together represent over $1 billion in ARR and are growing in double digits. He noted that RingSense adoption is strong in voice-centric verticals like healthcare, financial services, and retail, where enterprise-grade reliability is critical.
Meta Marshall from Morgan Stanley asked about any additional go-to-market investments required to sell the new product portfolio and whether potential upside in the yearly forecast would come from exceeding the new product ARR target or from stability in the core RingEX product.
President and COO Kira Makagon explained that GSP partners like BT and Vodafone are already eagerly adopting the new multiproduct portfolio, including RingCX and AI add-ons. She stated that potential upside is a combination of both factors: exceeding the $100 million new product ARR target and driving new product sales into the large installed base, which is a relatively new and accelerating motion for the company.
Meta Marshall asked where Twilio is seeing the greatest attach rate for multiproduct adoption and whether expanding ISV relationships and international growth are changing the company's perspective on the most attractive international markets.
Chief Revenue Officer Thomas Wyatt responded that multiproduct adoption is broad, including customers adding second and third channels (e.g., messaging, email) and adopting software add-ons like SMS Pumping Protection and Verify. He added that ISVs are also expanding their usage, often adding Voice for customer care, which is happening in both domestic and international markets.
Meta Marshall inquired about the business environment and sales cycles at the start of the year. She also asked when the new wins in the Segment business might help improve its sub-100% net expansion rate.
CEO Khozema Shipchandler described the current business environment as positive, with customers engaged, although the company continues to plan for a neutral macro environment. Regarding Segment's net expansion rate, he noted that while they don't manage to that specific metric, underlying improvements in deal stickiness, faster customer activation, and new interoperability features are expected to positively influence expansion characteristics over time.
Meta Marshall asked if the pickup in dollar-based net expansion was driven by gaining wallet share with new products or by an improving macro environment. She also inquired about the progress of go-to-market improvements within the Segment business.
CEO Khozema Shipchandler attributed the DBNE improvement to customers adopting additional products rather than a macro shift, which he characterized as neutral. On Segment, he noted that while go-to-market improvements in churn and time-to-value have been made, it will take more time for these to reflect in revenue. He highlighted the successful pairing of Segment data with Communications products as a key strategic win.
Meta Marshall of Morgan Stanley asked if early orders from Lumen are tracking to expectations and whether new content in Samsung's latest phone would impact the trajectory for the Specialty Materials segment.
Chairman and CEO Wendell Weeks confirmed that Lumen's demand is as anticipated, with shipping commencing after extensive product qualification. He also expressed enthusiasm for the new Samsung phone content, stating it aligns with the 'More Corning' strategy and positively reinforces the value of their latest innovations.
Meta Marshall asked about gross margin leverage into next year, referencing a past 40% bogey, and requested updates on key milestones for the Hemlock and solar businesses.
CFO Ed Schlesinger stated that while there is an opportunity to exceed the current 39% gross margin, the company's primary focus is the 20% operating margin target by the end of 2026. CEO Wendell Weeks added that Corning is making progress on milestones to launch a new solar market access platform and expects to provide a detailed update around the Q1 2025 investor event.
Inquired if the time-to-upsell from initial WiFi to other campus products is elongating due to the macro environment, and asked about the level of visibility into customer inventory at Cloud and Service Providers.
The time-to-upsell varies, but there is a strong trend of customers buying the full technology stack from day one, which hit a record in Q3. Visibility into specific customer inventory levels is difficult, but the dialogue indicates that Cloud and SP customers will focus on deploying existing inventory for the next few quarters before placing significant new orders.
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