Mike Cikos

Mike Cikos of Needham & Company asked if the dynamic between enterprise and AI-native customers is analogous to the past on-prem versus cloud shift and requested an update on FlexLogs adoption.

Answer

CEO Olivier Pomel clarified the analogy is imperfect, as AI-natives are new, fast-growing companies, while enterprises are managing a more controlled cloud migration. He confirmed that FlexLogs is a key component in all large enterprise deals, changing the economic picture for customers migrating from legacy log solutions.

Mike Cikos asked if there was anything unusual about the Q3 on-premises renewal cohort, such as a smaller subset of customers skewing rates, and if the lower Q3 renewal rates have persisted into October (Q4).

Answer

CFO Guy Melamed stated that Varonis Systems' business is back-end loaded, making it difficult to assess Q4 renewal rates early. He reiterated that the Q3 decline in on-premises renewal rates, affecting both federal and non-federal sectors, occurred only in the final two weeks. Guidance for Q4 assumes lower renewal rates, factoring in Q3's performance and the end-of-life announcement. CEO Yaki Faitelson added that there was no single theme for the Q3 issues, with some stemming from basic account management problems.

Mike Cikos questioned if the Q3 on-premises subscription (OPS) renewal cohort was unusual, potentially skewed by a smaller subset of customers, and if the lower OPS renewal rates observed in Q3 have persisted into Q4 (specifically October).

Answer

Guy Melamed (CFO & COO) explained that Varonis's business is back-end loaded, making it difficult to assess Q4 trends early. He noted that the Q3 decline in on-prem renewal rates (federal and non-federal) occurred only in the final two weeks of the quarter. Guidance assumes lower Q4 renewal rates, factoring in Q3 performance and the end-of-life announcement, without baking in any premature positivity. Yaki Faitelson (CEO) added that there was no single theme, citing basic account management problems and limited usage for some customers.

Mike Cikos followed up on the 20%+ ARR growth target, asking for more specifics on new logo acquisition, the size of initial lands, and whether an acceleration is occurring.

Answer

CFO & COO Guy Melamed confirmed an acceleration in both the number and size of new logo wins, driven by the appeal of the automated SaaS platform, MDDR service, and Copilot security. CEO Yaki Faitelson added that once customers convert to SaaS, the automated value they receive makes it much easier to drive expansion to other platforms.

Mike Cikos requested more granularity on the month-over-month consumption trends observed in Q3. He also asked about the current status of the Data Streaming Platform specialization team's build-out and the maturity of its playbooks.

Answer

CFO Rohan Sivaram stated that month-over-month consumption growth rates improved sequentially in Q3 and that the company would generally avoid providing that level of detail going forward. CEO Jay Kreps confirmed that the DSP specialization team is fully built out and operating in full execution mode.

Mike Cikos requested more granular details on the month-over-month consumption trends in Q3. He also asked for an update on the build-out of the Data Streaming Platform (DSP) specialization team and the maturity of its playbooks.

Answer

CFO Rohan Sivaram stated that month-over-month consumption growth rates improved sequentially in Q3, and the company was pleased with the performance, though he would avoid providing that level of detail going forward. CEO Jay Kreps confirmed that the DSP specialization team is fully built out and operating in full execution mode.

Mike Cikos of Needham & Company asked if the new focus on displacing CSPs represents a longer sales cycle. He also asked if cloud consumption trends in Q2 deteriorated further from Q1, given the updated guidance.

Answer

CEO Jay Kreps explained that displacing CSPs is not a longer sales cycle; in fact, it can be easier as it involves swapping in a better product for less money without displacing a large internal team. CFO Rohan Sivaram clarified that Q2 month-over-month cloud growth rates were 'flattish to slightly down' from Q1. He reiterated that while the guidance reflects this, there are several 'green shoots' like Flink, WarpStream, and late-stage pipeline progression that provide potential upside.

Mike Cikos asked for more detail on the Zero Trust Everywhere customer profile, including how spend materially changes, the number of modules adopted, and whether sales reps have specific quotas for this metric.

Answer

Chairman and CEO Jay Chaudhry explained that Zero Trust Everywhere is a natural journey for customers, starting with users, then branches, and finally cloud workloads. He noted that these deals often result in 2x or 3x ARR increases and that sales teams receive additional incentives for new products or logos, but not specific Zero Trust Everywhere quotas.

Mike Cikos of Needham & Company inquired about the macroeconomic environment, asking why Zscaler's results appeared strong in April and May despite mixed reports from other tech companies and whether product momentum offset increased deal scrutiny.

Answer

CEO Jay Chaudhry stated they did not experience a softer April, attributing their resilience to not selling security appliances and focusing on high-priority areas like Zero Trust and AI security, which also offer cost savings. CFO Remo Canessa credited the strong sales organization under Mike Rich, which emulates ServiceNow's model of deepening relationships with large enterprise accounts.

An analyst from Needham & Company asked if the 20%-plus growth in unscheduled billings was primarily driven by emerging products and sought more color on which of those products are seeing the most traction.

Answer

CFO Remo Canessa clarified that the growth was broad-based across both core and emerging products. CEO Jay Chaudhry added that within emerging products, ZDX, branch solutions like Zero Trust SD-WAN, and cloud workload protection are all performing well. He noted that emerging products ARR is growing twice as fast as core products and cited a seven-figure deal for Zero Trust SD-WAN as an example of recent success.

Mike Cikos of Needham & Company asked about the durability of competitive displacements in security given market dynamics and inquired about the net expansion rate assumptions embedded in the guidance for the remainder of the year.

Answer

CEO Ashutosh Kulkarni described the move away from incumbent SIEMs as a long-term secular trend, not a temporary event, and noted that product innovations like EASE are designed to sustain this momentum. CFO Navam Welihinda did not provide a specific net expansion rate guide but indicated that the full-year outlook reflects strong customer commitments and a better macro environment, with an expectation for the metric to perform well.

Mike Cikos of Needham & Company asked for a force-ranking of the specific drivers that contributed to the significant outperformance in net new ARR during the quarter.

Answer

CEO Tomer Weingarten emphasized that the outperformance was broad-based and not attributable to a single factor. He highlighted several key drivers: a strong expansion motion, successful new logo acquisition, larger deal sizes facilitated by the Flex model, triple-digit growth from Purple AI, and a record contribution from data solutions.

Mike Cikos of Needham & Company asked about the monetization strategy behind the impressive adoption of Snowflake's AI features and whether a larger sales effort is required to convert that usage into revenue.

Answer

CEO Sridhar Ramaswamy explained their deliberate strategy was to first drive broad adoption by making AI easy to use and a natural extension of the platform. This was achieved without a massive sales push. Now, with wide adoption established, they are seeing large-scale rollouts of products like Snowflake Intelligence. The consumption model naturally aligns revenue with value, and specialist teams are now focusing on these high-value use cases to accelerate revenue growth.

Mike Cikos requested more granular detail on Atlas consumption trends during the quarter and the reasons for the broad-based strength from large customers. He also asked if the outperformance in multiyear deals was a result of customers renewing earlier than expected.

Answer

CFO Mike Berry explained that Q2 Atlas consumption growth was relatively consistent with the prior year, benefiting from a strong start in May and notable strength among larger U.S. customers whose workloads are growing for longer. He clarified that the multiyear outperformance was due to underlying strength and a greater number of multiyear deals than expected, not from any pull-forwards or unusually large deals.

Mike Cikos of Needham & Company sought to clarify if May's Atlas consumption growth rebounded to February/March levels and asked about the drivers behind the significant increase in new customer logos during the quarter.

Answer

CFO Mike Berry confirmed that May's consumption growth was much more consistent with the healthier trends seen in February and March. CEO Dev Ittycheria attributed the strong new logo additions to the maturation and sophistication of the self-serve motion, which efficiently acquires mid-market customers and complements the direct sales force's upmarket focus.

Mike Cikos from Needham & Company inquired about new CFO David Barter's initial findings and strategic approach, and asked for more specific examples of the "early signs of improved spending" in the U.S. Federal sector.

Answer

CFO David Barter stated his financial philosophy aligns with his predecessor's, emphasizing a bottoms-up planning approach, and noted he would update long-range plans later in the year. CEO Thomas Hogan and CRO Marcus Jewell pointed to a robust pipeline, a recent significant federal deal, and high customer interest in the newly acquired Keryllium technology as early positive indicators.

Mike Cikos of Needham & Company asked about the progress of the sales integration with Weights & Biases and whether on-demand spot availability is a necessary component for new customer acquisition.

Answer

CEO Michael Intrator called the integration 'fantastic,' highlighting three new joint products that provide a significant differentiator. He affirmed that on-demand and spot capacity are important for their 'land and expand' strategy to attract new players and use cases, which helps build the pipeline for larger, long-term contracts over time.

Mike Cikos asked about the sales progress with the 1,600 clients from Weights and Biases and whether on-demand/spot availability is a necessary component for new logo acquisition.

Answer

CEO Michael Intrator described the Weights and Biases integration as 'fantastic,' leading to new integrated products that offer clients deep observability and performance optimization. He confirmed that on-demand and spot capacity are crucial to their 'land and expand' strategy, as it allows new players and use cases to experiment on the platform, fostering future growth.

Mike Cikos asked for details on the Compute business's performance in the first half of 2025 and the rationale for full-year growth potentially landing just under the 15% target.

Answer

CEO Tom Leighton stated that Compute, particularly Cloud Infrastructure Services (CIS), is exceeding expectations with major contract wins and projects 40-45% year-end ARR growth. CFO Ed McGowan clarified that the full-year revenue result depends on the precise timing of when these large deals begin revenue recognition, which could cause a slight variance from the 15% goal, but affirmed the underlying business momentum is very strong.

Mike Cikos sought clarification on ODC revenue, asking if the Q1 result was in line with expectations excluding the one-time true-up, and whether customers hitting ODC limits are choosing to renew early.

Answer

CFO Jim Benson confirmed that the underlying ODC revenue was in line with expectations. He clarified that customers have a mix of behaviors, with some going into ODC and others opting for early expansion, but noted the quarter's large expansions were not primarily driven by customers over-consuming their commitments.

Mike Cikos of Needham & Company questioned if the improved Q2 upsell activity was a catch-up from Q1 delays and whether the driver was macro stabilization or internal process improvements.

Answer

CFO Joo Mi Kim clarified there was no catch-up effect, as upsells are tied to the specific customer cohort renewing in a given quarter. She attributed the improvement to a combination of a non-worsening macro environment and better GTM execution in communicating the value of Qualys's evolving product suite.

Mike Cikos of Needham & Company inquired about the net new ARR growth for the AI/ML business in Q2 and asked for an explanation of the factors affecting the 99% Net Dollar Retention (NDR) rate, especially given the lapping of a price increase.

Answer

CFO Matt Steinfort clarified that the AI ARR growth of over 100% Y/Y was against a difficult comparison from Q2 of the prior year when AI capabilities were launched. He stated the incremental ARR of $32M was the highest in company history, with a good balance between AI and core cloud. Regarding NDR, he explained that while some large customers are accelerating, others remain cautious, creating a mixed impact. He emphasized that strong new customer acquisition and AI growth are driving overall revenue momentum despite the lagging NDR metric.

Mike Cikos of Needham & Company inquired if ServiceNow's platform innovation is accelerating new logo acquisition and asked for more details on the 'NowNext AI' program.

Answer

President & CFO Gina Mastantuono confirmed strong new logo performance, noting that average new logo ACV more than doubled year-over-year. President, CPO & COO Amit Zavery explained that the NowNext AI program is a strategic C-suite initiative to accelerate AI adoption with key customers, leveraging existing senior engineering and consulting talent.

Mike Cikos from Needham & Company inquired about Cognite's Q1 performance relative to its internal plan, the demand environment, and the timing impact of recent large contract wins on the fiscal 2026 guidance. He also sought details on the RPO treatment for a specific multi-year deal and the financial contribution (revenue and OpEx) from the recent GroupSense acquisition.

Answer

CEO Elad Sharon confirmed that Q1 revenue was slightly ahead of expectations and that demand momentum remains healthy. He clarified that one large renewal was already in the guidance, while another $10M+ per year subscription deal begins in fiscal 2027, hence not impacting the current year's revenue. CFO David Abadi explained that the $10M+ deal's RPO only includes one year due to specific contract terms. Regarding the GroupSense acquisition, Abadi stated it's a breakeven business adding $3M in recurring revenue and a net $2M in OpEx. Elad Sharon added that all GroupSense customers are in the US, aligning with the strategy to expand presence and cross-sell Cognite's technology.

Mike Cikos of Needham & Company inquired about Cognite's Q1 performance versus its internal plan, the impact of recent large contract signings on the fiscal 2026 guidance, the accounting for a multi-year deal in RPO, and the financial and strategic details of the GroupSense acquisition.

Answer

CEO Elad Sharon stated that Q1 performance was slightly ahead of expectations and that demand remains healthy. He clarified that a significant new subscription deal's revenue recognition begins in fiscal 2027, hence its limited impact on the current year's guidance. CFO David Abadi explained that only one year of this multi-year deal is included in RPO due to specific contract terms. Regarding the GroupSense acquisition, Abadi noted it's a breakeven deal adding $3 million in revenue, while Sharon emphasized its strategic importance for expanding into the US market with a new customer base.

Mike Cikos of Needham & Company inquired about Cognite's Q1 performance relative to its plan, the current demand environment, and the timing of revenue recognition for recent large contract wins. He also sought details on the financial impact and strategic rationale of the GroupSense acquisition, including its contribution to revenue, RPO, and the US customer base.

Answer

CEO Elad Sharon explained that Q1 results were slightly ahead of plan and that demand momentum remains healthy. He clarified that a major new subscription contract's revenue will be recognized starting in fiscal 2027. CFO David Abadi detailed that the GroupSense acquisition adds $3 million in recurring revenue and is a breakeven transaction aimed at expanding the US footprint. Sharon added that all of GroupSense's 50 customers are US-based, presenting a cross-sell opportunity for Cognite's technology.

Mike Cikos of Needham & Company inquired about Cognite's Q1 performance relative to internal plans, the timing and financial impact of recent large contract signings, and the strategic rationale and financial contribution of the GroupSense acquisition.

Answer

CEO Elad Sharon explained that Q1 slightly exceeded expectations and that one major contract win will impact FY27 revenue, not FY26. CFO David Abadi detailed that the GroupSense acquisition adds $3 million in recurring revenue and is a breakeven transaction aimed at expanding US presence. Abadi also clarified that the Remaining Performance Obligation (RPO) for a specific large deal is limited to one year due to contract terms.

Mike Cikos asked for an update on the macroeconomic environment, noting differing reports from peers and inquiring about trends and linearity seen in April and May.

Answer

CEO George Kurtz stated that the team executed well and "powered through" a noisy environment. He attributed the strong performance, including fantastic net new ARR, to having the right platform to solve customer problems, with Next-Gen SIEM being a particular home run. He emphasized focusing on execution and what the company can control.

Mike Cikos sought more detail on the mix between the expansion of existing workloads and the addition of new ones, and also requested an update on the market traction for the recently announced Capella AI services.

Answer

CEO Matt Cain explained that the company's momentum is driven by a focus on landing new applications, which is aided by platform consolidation trends where customers choose Couchbase for its unique capabilities. Regarding Capella AI, he noted it is currently in preview with active customer engagement. He highlighted that the success of the free tier, with sign-ups tripling year-over-year, is building a strong top-of-funnel for future application growth.

Mike Cikos sought more color on the churned customers, questioning if they were from newer or older cohorts, and asked about OpEx discipline and the future contribution from the partner ecosystem.

Answer

CEO Matthew Cain clarified that the churn was isolated to a couple of accounts where Couchbase was not as strategically deployed and was not indicative of a broader issue. He emphasized that partner investment is an ongoing and persistent part of the business, and that overall efficiency gains in R&D and go-to-market are driving leverage and progress towards their Rule of 40 and free cash flow objectives.

Mike Cikos from Needham & Company asked about the customer overlap between those adopting Evergreen One, Fusion, and Portworx.

Answer

CEO Charles Giancarlo explained that Fusion is core software available to all customers, while Portworx is a separately licensed product. CTO Rob Lee added that all three offerings deliver elements of the cloud operating model to customers, with Evergreen One focusing on consumption agility, and Fusion and Portworx providing cloud-based management and automation. He also noted an expectation for greater integration between Fusion and Portworx over time.

Mike Cikos from Needham & Company asked if the cohort of VMware displacement deals exhibits different behavior compared to the broader pipeline and sought clarification on whether hiring would catch up within the fiscal year.

Answer

President and CEO Rajiv Ramaswami explained it's difficult to separate VMware displacement deals from the general pipeline, but anecdotally, some of these customers are more motivated to move quickly. CFO Rukmini Sivaraman reiterated that the company has seen no direct tariff impact and that the team is actively hiring to its fiscal year plan, with some hiring timing shifts from Q3 to Q4.

Inquired about the nature of deals closing earlier in the quarter, the sustainability of this improved linearity, and the status of remaining transitional costs from the legacy MSS business wind-down.

Answer

The early deal closings were a positive anomaly rather than a sustainable trend or a sign of macro weakness. The company confirmed that all transitional costs related to the legacy MSS business wind-down were completed in Q2, marking a significant milestone that allows full focus on future growth.

Inquired about the drivers of the Q4 ARR outperformance and sought clarification on the 'measured approach' to the upcoming large renewal cohort.

Answer

The ARR outperformance was a mix of some deal pull-forwards and positive momentum with larger-sized deals closing in the quarter, which also increased average revenue per customer. The 'measured approach' to renewals is a balanced and cautious stance reflecting the current macro environment of deal scrutiny and longer approval cycles, despite having strong customer satisfaction scores.