Mike Cikos

Mike Cikos asked for details on the FlashBlade//EXA customer win, including the sales cycle and key factors, and inquired about the progress in establishing customer testimonials or a repeatable playbook for this new offering.

Answer

Rob Lee, CTO and Growth Officer, expressed satisfaction with the initial EXA customer win and multiple sales. He described how a GPU cloud customer, initially opting for an alternate vendor, was 'blown away' by Everpure's performance in a test, leading to an immediate order and subsequent follow-on orders. He emphasized EXA's ability to meet high-performance demands while providing Everpure's known reliability and simplicity.

Mike Cikos from Needham & Company asked for details on Everpure's first FlashBlade//EXA customer win, including the sales cycle, key factors in securing the deal, and the company's strategy for establishing a repeatable sales playbook for this new offering.

Answer

Rob Lee, Chief Technology and Growth Officer, described the win with a GPU cloud customer who initially chose an alternate vendor but switched after being impressed by FlashBlade//EXA's performance in testing. The customer placed an order within days, leading to follow-on orders. Lee highlighted that FlashBlade//EXA addresses a market gap by combining high performance with Everpure's known reliability, usability, and simplicity.

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 asked about the primary takeaway from the AMD partnership announcement, specifically whether it's about expanded AI opportunity or customer choice, and how Nutanix is managing its key investment initiatives given the reduced revenue profile.

Answer

CEO Rajiv Ramaswami emphasized that the AMD partnership provides customer choice across the AI ecosystem (NVIDIA/AMD), ensuring a consistent platform experience and benefiting from both ISV ecosystems. CFO Rukmini Sivaraman stated that investment initiatives remain consistent with the fiscal year's start, focusing on go-to-market coverage and R&D for Kubernetes, AI, and external storage. Operating margin is maintained due to higher contra expense from partners and lower commissions from shifted revenue.

Mike Cikos asked for the primary takeaway from the AMD partnership announcement, specifically whether it's mainly about expanded AI opportunity or customer choice, and what other insights should be considered. Mike also inquired about Nutanix's key investment initiatives for the year and how they are being managed against a reduced revenue profile while preserving margins.

Answer

Rajiv Ramaswami, Nutanix's CEO, emphasized that the AMD partnership is crucial for offering customers choice across the AI ecosystem, which is built around NVIDIA and AMD. It allows Nutanix to provide a consistent AI platform for agentic applications, regardless of whether customers use NVIDIA- or AMD-based servers. Rukmini Sivaraman, Nutanix's CFO, stated that investment initiatives remain consistent with the beginning of the fiscal year, focusing on go-to-market coverage (e.g., portfolio specialists) and R&D innovation (Kubernetes, AI platform, external storage). Margin preservation is achieved through thoughtful investment, efficiencies, and some contra expense from partners.

Mike Cikos sought clarification on whether the growing proportion of business through third-party OEM partners implies dependency on their shipping timelines for revenue recognition, or if it's tied to customer flexibility, and if Nutanix can assist OEMs in accelerating shipments. Cikos also asked for a breakdown of the $80 million full-year guidance reduction, distinguishing between factors exhibited in Q1 versus expectations for Q2, Q3, and Q4.

Answer

Rukmini Sivaraman, Nutanix's CFO, clarified that OEM revenue recognition is tied to when partners ship hardware, not customer flexibility, and that Nutanix does not control OEM shipping timelines. Rajiv Ramaswami, Nutanix's CEO, concurred that they cannot directly control OEM shipping. Sivaraman explained that the Q1 revenue was within range but would have been above the high end if assumptions had held, indicating the magnitude of the late-quarter dynamic. She noted that the first half/second half revenue mix for FY26 is not meaningfully different from last year, providing a conceptual understanding of contributions.

Mike Cikos sought clarification on whether the growing proportion of business through third-party OEM partners implies dependency on their shipping timelines or customer flexibility, and if Nutanix can help OEMs accelerate shipments. He also asked for a breakdown of the full-year guidance reduction, distinguishing between Q1's exhibited impact and expectations for future quarters.

Answer

CFO Rukmini Sivaraman clarified that OEM revenue recognition is tied to when partners ship hardware, which is distinct from customer-requested flexibility. CEO Rajiv Ramaswami added that Nutanix does not control OEM shipping timelines. Ms. Sivaraman explained that the Q1 revenue was within range, but would have been above the high end if assumptions on future start dates had held. She noted that the first half/second half revenue mix for FY26 is not meaningfully different from FY25, providing a way to conceptualize contributions without breaking down specific quarter impacts.

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.

Mike Cikos with Needham & Company sought clarification on the widening delta between unlevered and levered free cash flow margins from 2026 to 2027, and whether this delta would further widen if additional capacity investments beyond the current 31 MW were assumed.

Answer

CFO Matt Steinfort explained that the steady-state cash flow generation capability is best reflected by unlevered free cash flow, as equipment leasing smooths capital requirements. He noted that front-loaded costs from new data center leases and equipment leases temporarily impact gross margins and net income before revenue catches up. He emphasized that DigitalOcean's methodical approach to capacity expansion, driven by compelling returns and avoiding the GPU arms race, allows for significant growth acceleration (from 11-13% to 30%) while maintaining strong margins. He stated that the current 2027 guidance does not assume additional capacity beyond the 31 MW already committed.

Mike Cikos sought clarification on the free cash flow topic, specifically if the 3-point delta between unlevered and levered free cash flow in 2026 is expected to widen to about 10 points in 2027, and if additional capacity investments beyond current guidance would further widen this delta. He also asked for additional color on the assumed ARR from AI customers to derive the 25% growth exiting calendar 2026, given the current $120M exiting 2025.

Answer

CFO Matt Steinfort clarified that the unlevered free cash flow (18%-20%) represents the steady-state cash generation capability, while levered free cash flow includes interest and principal payments, which are financing transactions. He explained that while there are front-loaded costs with new capacity, the leasing model smooths capital requirements, and utilization quickly improves margins. He emphasized that the 2027 guidance is based solely on committed capacity, and future capacity decisions would be made based on compelling returns. Regarding AI customer ARR, he stated that with $120M in Q4 2025 growing 150% and demand exceeding supply, it's expected not to slow down.

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 from Needham inquired about the expected gross margin headwinds, specifically whether they are tied to customer success initiatives for the large NeoCloud deal or represent a multi-year factor. He also sought clarification on the de-risked guidance approach, asking if swing factor deals and minimum commitments primarily relate to NeoClouds or the broader move upmarket, and requested insights into sales cycle lengths for $500,000+ deals and the NRR outlook for calendar year 2026.

Answer

Marc Suidan, Chief Financial Officer, stated that gross margin headwinds are due to increased data center costs, equipment, and accelerated CapEx, impacting margins by a few hundred basis points in the coming year. He noted that white-label solutions generally have lower gross margins but also lower OpEx. Marc Suidan explained that the de-risked guidance primarily relates to larger deals (over $500,000 ARR) and NeoClouds, which have longer and less predictable closing times. Gleb Budman, Co-founder, CEO, and Chairperson of the Board, added that while the 8-figure deal took nearly a year, many other large deals (50K-200K) closed quickly, with some taking around six months. Marc Suidan projected NRR could drop to around 100% for Q2 and Q3 2026 due to lumpiness from a large customer in 2025, but should average closer to 110% for the full year. Gleb Budman highlighted that AI customers, growing 75% in number, expand 3x faster than average, potentially boosting NRR long-term.

Mike Cikos from Needham asked about the expected gross margin headwind, specifically whether it's tied to customer success initiatives, pre-revenue deployment for the large neocloud deal, or a multi-year factor. He also sought clarification on the 'de-risked' guidance approach, asking if it primarily relates to neoclouds or the move-up market, and inquired about the NRR outlook for calendar year 2026.

Answer

Marc Suidan (CFO, Backblaze) explained that gross margin pressure stems from increased data center costs, equipment, and accelerated CapEx for large deals, noting that white-label solutions generally have lower gross margins but also lower OpEx. He clarified that the de-risked guidance applies to larger deals (over $500,000 ARR) across the upmarket segment, including neoclouds, due to longer and less predictable closing times. Gleb Budman (Co-founder, CEO and Chairperson, Backblaze) added that while some large deals take longer, many move quickly. Marc Suidan projected NRR could drop closer to 100% for Q2 and Q3 due to the variable customer, but should average closer to 110% for the full year. Gleb Budman highlighted that AI customers, growing 75% in number, expand 3x faster than average, potentially boosting NRR long-term.

Mike Cikos asked if the major U.S. tech customer for the $200 million Inference Cloud commitment was a new or existing Akamai customer. He also inquired about changes in sourcing servers or hardware given heightened pricing dynamics and the capital intensity for CIS.

Answer

Ed McGowan (CFO) confirmed it was an existing customer, not one of their largest, who was using CDN and security and dramatically increased their spend. He clarified that capital intensity is driven by significant demand for CIS, especially the $250 million investment for Inference Cloud, which is well-informed by committed customer demand. He noted no significant change in the complexity of what they're buying (mostly servers, networking equipment) but they are exploring different sourcing to mitigate memory chip cost increases. He added that normalized CapEx, excluding price increases and the AI Inference Cloud purchase, would be at the lower end of their typical range.

Mike Cikos inquired whether the recently announced four-year, $200 million deal with a major U.S. tech company was with a new or existing Akamai customer, and asked about the capital intensity, server sourcing, and persistence of pricing dynamics in the current market.

Answer

CFO Ed McGowan confirmed the major U.S. tech customer was an existing client who significantly increased their spend. He explained that the capital intensity increase is driven by significant demand for CIS, particularly the $250 million investment in Inference Cloud, and mentioned exploring different sourcing options to mitigate memory chip price increases.

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 from Needham & Company asked about the factors contributing to the better-than-expected cross-sell success of the Adlumin acquisition to N-able's existing customer base. He also sought clarification on the implied stronger constant currency growth in Q2 and the second half of 2026 compared to Q1, inquiring about seasonality or new product incubation.

Answer

President and CEO John Pagliuca attributed Adlumin's success to its AI-infused, agnostic technology stack, which allows it to ingest logs from various environments and take action in minutes. He highlighted the separation of software and service, allowing MSPs visibility, and the broad demand driven by compliance and AI threats across both large and small MSPs. EVP and CFO Tim O'Brien added that 70-75% of Adlumin opportunities are greenfield. Regarding the 2026 guidance, Tim O'Brien noted expected seasonality similar to 2025, with newer product initiatives having a heavier impact on net new ARR in the second half of the year, as some products move from customer preview to general availability.

Mike Cikos asked about the factors driving the earlier-than-expected success in cross-selling Adlumin to N-able's existing customer base.

Answer

President and CEO John Pagliuca highlighted Adlumin's AI-infused, agnostic technology stack, which allows it to ingest data from various environments and take action in minutes. He also noted the separation of software and service, allowing MSPs visibility, and the strong demand driven by compliance and escalating cyber threats, leading to broader adoption across MSP sizes. EVP and CFO Tim O'Brien added that 70-75% of opportunities were greenfield.

Mike Cikos asked about the adoption trends of unlocks in Q4, the assumptions for Inseyets and unlocks contributing to ARR reacceleration, and the impact of Corellium's cost base and FX headwinds on the calendar 2026 guidance.

Answer

CFO David Barter explained that Inseyets conversions would follow broader deal seasonality, while unlocks growth is expected to kick in late Q1/Q2 with new technology. He quantified Corellium's impact as approximately one point of margin compression, heavier in the first half and dissipating by year-end. FX was noted as a temporary headwind, burdening the P&L by more than a point due to the strengthening shekel.

Mike Cikos with Needham asked about the adoption trends for Inseyets conversions and unlocks in Q4, and how these factors are incorporated into the ARR reacceleration assumptions for the coming year. He also sought clarification on the cost base impact of Corellium and the FX headwind on the calendar 2026 guidance.

Answer

CFO David Barter explained that Inseyets conversions, currently at 55%, are expected to follow broader deal seasonality, while unlocks will kick in later (late Q1/Q2) as new technology hits the market. He quantified Corellium's impact as about a point of margin compression, heavier in the first half of 2026, and FX as more than a point of headwind due to the strengthening shekel, both expected to dissipate by year-end 2026.

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 inquired about the company's progress in improving the dollar-based net retention rate (DBNRR) from its current 111%, considering go-to-market maturity, end-to-end observability deals, and the DPS renewal cycle.

Answer

Jim Benson, CFO of Dynatrace, noted DBNRR stabilization at 111% and stated that the sales organization focuses on maximizing bookings, leading to variability between new logo and expansion-heavy quarters. He expects an inflection in DBNRR in fiscal 2027 as the first full three-year DPS cohort classes mature.

Mike Cikos (Needham) inquired about the stabilization of dollar-based net retention rate (DBNRR) at 111%, asking about the progress in improving this metric, the impact of go-to-market maturity and end-to-end observability deals, and the timing of the DPS renewal cycle.

Answer

Jim Benson, CFO, noted satisfaction with DBNRR stabilization and explained that while sales focus on maximizing bookings can lead to variability, the company is still in a 'building phase.' He highlighted that fiscal 2027 will see the first full three-year cohort classes for DPS, which, with continued execution, should lead to an inflection in the DBNRR metric.

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 followed up, seeking confirmation on the implied net expansion rate of 105% in the guidance for the back half of the year, and asked at what scale Tenable One needs to be to achieve an inflection point in growth.

Answer

CFO Matt Brown clarified that the guidance underwrites a net expansion rate of 105% for the first half of the year, expecting it to stabilize and potentially inflect higher, demonstrating overall growth stability. Co-CEO Steve Vintz added that confidence in their strategy, execution, and investments in the platform and AI security are prerequisites to driving higher growth, with the opportunity directly in front of them.

Mike Cikos asked about the $24 million headwind to unlevered free cash flow from billings and restructuring, seeking clarification on why analysts should or should not attempt to derive a normalized CCB from this figure. He also requested confirmation on whether the guide assumes a net expansion rate of 105% in the latter half of the year, and at what scale Tenable One needs to be to trigger an inflection point in growth.

Answer

CFO Matt Brown reiterated that CCB is expected to align with current consensus despite billings headwinds, advising focus on metrics like net expansion rate (106% in Q4, expected to stabilize at 105%), Tenable One new/expansion business percentage, new customer additions, and revenue. Mr. Brown clarified that the guide underwrites a net expansion rate of 105% in the *first half* of the year, with expectations for stabilization and potential inflection higher. Co-CEO Steve Vintz added that confidence in execution and strategy, including platform and AI investments, is crucial for driving higher growth.

Mike Cikos of Needham inquired whether Varonis' M&A assumptions for 2026 guidance include any revenue or ARR contribution from Cyolo or SlashNext, and asked about the current go-to-market organization, including typical sales rep tenure and changes to incentives for the new year.

Answer

Guy Melamed, CFO and COO, confirmed that 2026 guidance assumes no significant top-line contribution from acquisitions like Cyolo or Interceptor (SlashNext), but sees significant opportunity. He explained that the 2026 compensation plan for reps removes quota retirement on conversions, incentivizing them to focus on new and existing customer sales, which is expected to increase productivity.

Mike Cikos from Needham & Company sought clarification on Varonis' M&A assumptions, specifically if no revenue or ARR contribution is assumed from Cyolo or SlashNext for 2026, and inquired about the go-to-market organization, including typical sales rep tenure and any changes to incentives following the Q3 headcount reduction and federal team downsizing.

Answer

Guy Melamed, CFO and COO, confirmed that 2026 guidance assumes modest, not major, top-line contribution from acquisitions like Interceptor (SlashNext) and Cyolo, despite seeing significant opportunity. He explained that the 2026 compensation plan for sales representatives removes quota retirement on conversions, instead incentivizing new customer acquisition and existing customer expansion, which is expected to increase productivity by freeing up time previously spent on conversions.

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 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 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 asked how deal timing and macro sales cycles played out in Q3 compared to expectations, and if the public sector's performance impacted the guidance.

Answer

Tomer Weingarten, CEO of SentinelOne, acknowledged the unpredictable macro environment, leading to a measured approach for Q4 guidance while maintaining confidence in execution. He stated that federal business was in line with expectations, despite slower procurement cycles, noting strong engagement, positive demand signals, and a significant expansion deal in Q3.

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 asked about the magnitude of Q3 product revenue upside compared to the prior quarter, which saw significant large customer migrations, and whether Q3 represents a more normalized level of migration activity. He also asked CFO Brian Robbins if there had been any changes to Snowflake's guidance philosophy.

Answer

CEO Sridhar Ramaswamy explained that a 3% beat is considered strong, and Q3's 2.5% beat was solid, contrasting it with Q2's lumpy, one-time large migrations. He reiterated that large migrations are difficult to predict and confirmed the consistency of their guidance approach. CFO Brian Robbins emphasized that quarterly variability is not the best indicator for a consumption model, pointing to the full-year guidance as the most meaningful signal, and confirmed no change to the guidance philosophy after reviewing the forecasting models.

Mike Cikos asked about the magnitude of Q3 product revenue upside compared to Q2, which had significant customer migrations, inquiring if Q3 represented strong execution with a more normalized migration activity. He also asked Brian Robbins if Snowflake's guidance philosophy has changed at all.

Answer

Sridhar Ramaswamy, CEO, reiterated that a 3% beat is considered very good, and Q3's 2.5% beat was solid, acknowledging that Q2's larger beat included 'lumpy' and unpredictable large migrations. Brian Robbins, CFO, emphasized that quarterly variability is not the best way to evaluate the consumption model, pointing to the raised full-year guidance as the most accurate indicator. He assured that there would be 'no change to the guidance philosophy' after reviewing the forecasting models.

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 followed up on the net retention rate comment (106%) and asked for an update on sales capacity hiring, specifically if there are dedicated teams for new logo acquisition versus existing accounts, and if any incentives are in place.

Answer

President and COO Eric Kelleher confirmed that Okta has started carving out territories for new logo acquisition, implementing a hunter-farmer model in the U.S. commercial business a year ago, which is progressing well. He noted that this model has not yet extended to the enterprise business, where platform specialization allows reps to balance both new logo acquisition and deep engagement with existing accounts. CEO Todd McKinnon added that a significant portion of growth and focus is on larger deals, with million-dollar deals growing 17% in Q3.

Mike Cikos sought clarification on the U.S. public sector headwind, asking if its magnitude from the government shutdown and DOGE effects is anticipated to compound or increase in Q4 compared to Q3.

Answer

James Shen, Interim CFO, GitLab, declined to comment on the specific quarter-over-quarter change in magnitude but confirmed that lingering effects from the shutdown are expected, as the federal government's operations do not normalize immediately.

Mike Cikos sought clarification on GitLab's Q4 guidance regarding the public sector headwind. He asked if the impact from the U.S. government shutdown and DOGE is expected to compound or increase in magnitude in the January quarter compared to Q3.

Answer

James Shen, Interim CFO, GitLab, stated he would not comment on the specific magnitude of the headwind quarter-over-quarter. He confirmed that lingering effects from the shutdown are anticipated, as the U.S. federal government's operations do not normalize overnight, and they are working with customers on pushed deals and renewals.

Mike Cikos asked for Zscaler's perspective on competitive trends and pricing discipline within the SASE market, given recent claims of success and displacements by other security vendors.

Answer

Chairman and CEO Jay Chaudhry asserted Zscaler's strong position in the Zero Trust market, differentiating it from SASE vendors. He highlighted Zscaler's expansion through new functionality, data security, and innovations, stating that the market has recognized winners and Zscaler continues to extend its lead with strong pipeline and win rates.

Mike Cikos inquired about trends in the SASE market, specifically regarding competitive displacements and pricing discipline, in light of recent claims of success by a large security vendor.

Answer

Chairman and CEO Jay Chaudhry asserted Zscaler's strong position in what he termed the 'Zero Trust market,' noting that the term SASE lacks clear meaning as many vendors claim it. He explained that Zscaler's expansion is driven by new functionality extending Zero Trust Everywhere and a larger data security platform. Chaudhry believes the market has already identified winners, with Zscaler increasing its lead, and reported strong pipeline, win rates, and results despite new entrants.

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 asked for further clarification on the 'why now' behind the non-AI native strength, questioning if it's a composite of factors or something more specific. He also asked about how Datadog constructed its Q4 guidance, considering the holiday season landing on weekdays.

Answer

CEO Olivier Pomel reiterated that the non-AI native strength is a composite of various factors, describing it as 'the usual' way Datadog has grown. CFO David Obstler confirmed that Datadog incorporates historical day-by-day patterns and holiday impacts into its guidance, adjusting for calendar period differences.

Mike Cikos asked for further clarification on the 'why now' behind the non-AI native strength, questioning if it's a composite of various factors clicking or something more specific. He also inquired about how Datadog constructed its Q4 guidance, particularly regarding the holiday season landing on weekdays and its potential impact on usage.

Answer

Olivier Pomel, Co-Founder and CEO, Datadog, reiterated that the non-AI native strength is a composite of factors, describing it as the 'usual' way the company has grown for 15 years. David Obstler, CFO, Datadog, explained that the company has years of experience analyzing day-by-day patterns and incorporates the impact of holiday vacation periods on usage into its guidance.

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 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 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 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 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 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 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.

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.