Shrenik Kothari

Shrenik Kothari asked about the impact of JFrog's partnerships with NVIDIA AI Factory and Hugging Face on driving new customer logos, and the adoption curve for additive solutions like AI Catalog, AppTrust, and agentic remediation among these new customers.

Answer

JFrog CEO Shlomi Ben Haim explained that platform expansion with security and MLOps benefits from partnerships. The NVIDIA partnership validates JFrog as a single source of truth for AI tools and models, supporting enterprise customers. The Hugging Face partnership serves as a top-of-funnel for JFrog and helps existing customers secure models from the open-source hub. He noted that JFrog is focused on serving both human developers and AI agents, tracking feedback and evolving to meet new needs.

Shrenik Kothari asked how strategic partnerships with NVIDIA AI Factory and Hugging Face are driving new customer acquisition and how JFrog is monetizing its unique position through the adoption of AI Catalog, AppTrust, and agentic remediation.

Answer

JFrog CEO Shlomi Ben Haim explained that partnerships expand the platform across DevOps, DevSecOps, and MLOps. The NVIDIA partnership validates JFrog for enterprise AI, while Hugging Face serves as a top-of-funnel and secures local model repositories. He emphasized tracking how AI agents interact with the platform to better serve both human developers and agents.

Shrenik Kothari asked for any early telemetry on the adoption of the new MLOps offering and its credit-based model. He also inquired about any changes to deal linearity within the first quarter.

Answer

CEO Shlomi Haim stated it was too early to judge MLOps adoption or pipeline impact, as the feature has only been available for two months and is part of the Enterprise+ subscription. CFO Ed Grabscheid confirmed that Q1 deal linearity was 'perfectly in line' with expectations, separate from the unexpected strength in cloud consumption.

Shrenik Kothari asked if the integrated platform approach, beyond just big deals, is leading to faster expansion or upsell of security modules like Runtime. He also inquired about a framework for thinking about the incremental top-line and gross margin contribution from the growing security business.

Answer

CEO Shlomi Ben Haim noted that while large deals are significant, the rest of the 250 security customers are on a by-seat model, which they hope to see grow in 2025. He highlighted future opportunities in MLSecOps and integrations. CFO Ed Grabscheid stated that the company guides gross margin at a corporate level (82.5% to 83.5%), which already incorporates the entire product portfolio, and does not break out margins by product line.

Shrenik Kothari asked how JFrog helps customers overcome deployment bottlenecks for its advanced security solutions and inquired about the impact of the GitHub partnership on product adoption and customer retention.

Answer

CEO Shlomi Haim explained that the strategy is to consolidate all software supply chain tools onto the single JFrog platform, available via Enterprise X and Enterprise Plus subscriptions, which simplifies deployment. Regarding the GitHub partnership, he noted they are currently in a co-engineering phase, not co-selling, with the goal of improving retention, attracting new customers, and driving joint innovation.

Shrenik Kothari asked about Check Point's financial flexibility, given its cash position and convertible notes, and what scale of IP or agency would justify a more transformative, AI-driven M&A strategy, contrasting it with smaller AI-native integrations.

Answer

Nadav Zafrir (CEO, Check Point Software Technologies) stated that Check Point maintains discipline in identifying acquisition targets, whether tuck-ins or larger, that can establish the company as a leader in its strategic pillars. He emphasized the importance of technology, people, culture, and integration potential to create a real platform, moving away from a 'supermarket approach' to consolidation.

Shrenik Kothari asked about Check Point's M&A strategy, given its financial flexibility and focus on smaller AI-native integrations, contrasting it with peers pursuing large-scale platform convergence. He inquired what scale of IP or agency would justify a more transformative, AI-driven impact for Check Point.

Answer

CEO Nadav Zafrir explained that Check Point's M&A strategy is disciplined, focusing on identifying targets (tuck-ins or larger) that enable the company to be a podium player in each of its four pillars. He emphasized the need for the right technology, people, and culture for integration to create real platforms, rather than a 'supermarket approach.' He stated that the goal is to build integrated, open-garden platforms that challenge complexity and the existing status quo in the market.

Shrenik Kothari of Robert W. Baird & Co. inquired about the monetization strategy for AI-powered features, including timing and potential for new SKUs. He also asked about the company's philosophy on prioritizing AI-focused M&A versus internal R&D.

Answer

CEO Nadav Zafrir detailed a multi-faceted AI monetization strategy, including standalone products, a new AI security platform, and embedding AI into existing offerings, confirming that separate SKUs exist and more will come. He stated the investment approach is a balance between hiring top talent and actively pursuing strategic acquisitions.

Shrenik Kothari asked about Check Point's relative insulation from supply chain issues, any impact on competitive win rates, and sought clarification on the potential margin impact from tariffs.

Answer

CFO Roei Golan clarified the potential sub-0.5 point margin impact is based on a hypothetical 32% tariff, not the current rate. CEO Nadav Zafrir commented that while it's too early to claim a competitive advantage from these dynamics, he believes the company's 'prevention-first' security approach will resonate well in a volatile global environment.

Shrenik Kothari asked for an update on Cloudflare's Act 4 initiatives, particularly AI Crawl Control, publisher engagement, early feedback on opt-out controls for scraping, and the development of a structured marketplace model.

Answer

Matthew Prince, CEO and Co-founder of Cloudflare, positioned Cloudflare as a neutral, trusted broker between AI companies and content creators, emphasizing the need for a new internet business model where creators are paid for their intellectual property. He noted overwhelmingly positive feedback from content creators and banks, who are experiencing IP scraping. Prince highlighted Cloudflare's advantage over hyperscalers in building content marketplaces due to its neutrality, with 2026 expected to focus on the financial impact of this new business model.

Shrenik Kothari asked for an update on Act 4, specifically AI Crawl Control, referencing a recent media company win, and sought feedback on adoption of opt-out controls for scraping and the evolution of a structured marketplace model.

Answer

Matthew Prince, CEO and Co-founder of Cloudflare, described Cloudflare as a neutral, honest broker between AI companies and content creators (including publishers and financial research teams), emphasizing that content creators deserve to be paid. He noted overwhelmingly positive feedback from content creators and a willingness from AI companies to engage fairly, suggesting that Cloudflare's neutrality makes it a preferred partner over hyperscalers for defining the future business model of the internet, with 2026 focusing on the financial impact of this model.

Shrenik Kothari of Baird sought clarification on Commvault's SaaS ARR recognition, specifically whether the lag effect in net dollar retention (NRR) was due to ramping off actual usage/consumption compared to peers who use linearity around duration and Total Contract Value (TCV). He also asked if SaaS Annual Contract Value (ACV) bookings would provide a clearer metric and if there were internal discussions about using metrics like ACV or backlog RPO.

Answer

Chief Accounting Officer Danielle Abrahamsen clarified that NRR is calculated based on the same customer cohort from the previous year, thus new customers are not immediately reflected. She further explained that while some consumption-based models exist, they represent a small, immaterial portion of ARR, with most SaaS ARR being tied to fixed annual subscriptions.

Shrenik Kothari sought clarification on the lag effect in SaaS Net Dollar Retention (NRR), asking if it's purely a function of recognizing SaaS ARR based on actual usage and consumption, as opposed to linearity around duration and Total Contract Value (TCV). He then followed up by asking if SaaS ACV bookings would offer a cleaner lens into performance and if there have been internal discussions about using metrics like ACV or backlog RPO.

Answer

Danielle Abrahamson, Chief Accounting Officer, clarified that the NRR lag is because new customers are not included in the calculation, which compares the same customer cohort year-over-year. She also stated that while Commvault has some consumption-based ARR, it's a small, immaterial portion, with most ARR tied to true subscription SaaS customers with fixed annual amounts. Sanjay Mirchandani, President and CEO, added that it represents future value and lifetime value of the customer.

Shrenik Kothari asked if NewEdge is a significant differentiator in customer decisions, especially given real-time LLM/AI agent interactions, and about future investment strategy.

Answer

Sanjay Beri, CEO and Co-founder, Netskope, confirmed NewEdge is a huge differentiator due to its speed and low latency (around 10 milliseconds globally). He described NewEdge as the 'highway' for AI agent traffic, optimizing end-user and end-agent experience, and an accelerator for Netskope's infrastructure advantage.

Shrenik Kothari asked about NewEdge as a key differentiator, particularly concerning latency for real-time LLM and AI agent interactions, and Netskope's future investment strategy for the network.

Answer

CEO and Co-founder Sanjay Beri confirmed NewEdge is a significant differentiator due to its speed and low latency (approximately 10 milliseconds globally). He described NewEdge as the 'highway' for AI agent networks, optimizing user and agent experience while accelerating security.

Shrenik Kothari asked about the Observability and Insights (O&I) product, how customers are using it, its monetization model, and its potential to embed into broader SOC workflows.

Answer

Mark McClain (Founder and CEO, SailPoint) explained that O&I provides visualization of identity connectivity (path to applications/data) and exposes current or latent risks, tying into SOC workflows through integrations with other security vendors (e.g., Zscaler, CrowdStrike, Palo) or direct embedding. He emphasized O&I's role in bringing rich identity context to often 'identity blind' SOC tools, marking a new era for defense against threats.

Shrenik Kothari asked for more detail on the Observability and Insights product, how customers are using it, its monetization model, and its potential to embed into broader SOC workflows.

Answer

Mark McClain, Founder and CEO, explained that Observability & Insights (O&I) provides visualization of identity connectivity to data, tying into SOC workflows through integrations with platforms like Zscaler, CrowdStrike, and Palo. The product aims to expose current and latent risks by bringing rich identity context to security teams, addressing the 'identity blind' nature of many existing threat detection tools.

Shrenik Kothari of Baird asked about the potential price uplift from Identity Resilience compared to Identity Recovery and how the introduction of new modules like Identity Resilience and Rubrik Agent Cloud might impact the durability of Rubrik's 120%+ net retention rate.

Answer

CFO Kiran Choudary stated that while it's early for Identity Resilience, it offers more features and will have a price uplift, though more data is needed to quantify it. Regarding NRR, he noted that Rubrik's strong gross retention and multiple expansion vectors support its best-in-class 120%+ NRR. He acknowledged that NRR naturally moderates at scale but will remain strong due to underlying business drivers.

Shrenik Kothari asked for more details on how Rubrik's strategic partnership with Microsoft has evolved, particularly concerning M365, Copilot, and Active Directory protection.

Answer

CEO Bipul Sinha described the partnership with Microsoft as very strong and complementary, with Microsoft focusing on cloud security and Rubrik on data security and cyber recovery. He highlighted deep co-engineering efforts for M365 and Azure, Rubrik's role as a key partner for Microsoft's security graph, and receiving Partner of the Year awards. He also cited a recent large M365 win with a major Microsoft customer as evidence of the partnership's success.

Shrenik Kothari asked about Rubrik's unique positioning in the healthcare vertical, especially in light of its recent Microsoft Partner of the Year award for the sector.

Answer

CEO Bipul Sinha explained that Rubrik has been developing its healthcare solution for three years, targeting a vertical he called "protect the unprotected." He noted that healthcare organizations have significantly more sensitive data, making them prime targets. Rubrik provides a comprehensive solution for mission-critical systems like EHRs to ensure operational continuity during a cyber attack, a key factor in its success and partnership with Microsoft.

Shrenik Kothari inquired if buyers are considering consolidating AI IAM governance around a single vendor and asked for insights into the typical conversion timeline from initial interest to ACV and bookings for the 100+ engaged AI customers.

Answer

CEO Todd McKinnon confirmed that the trends of an agentic future and identity stack changes are highly related. He provided an example of a Fortune 50 customer replacing multiple legacy identity vendors (Ping Identity, SailPoint, CyberArk) with Okta to standardize 5,500 applications. The drivers for this consolidation were cost, better integrated products, and crucially, enabling an agentic future by providing controlled, governed access to all applications through a standard Identity Provider (IdP).

Shrenik Kothari of Robert W. Baird & Co. asked about Okta's monetization strategy for its cross-app access standard and securing AI agent workflows, as well as any early feedback from partners like Zoom and AWS.

Answer

CEO Todd McKinnon explained that while open standards like cross-app access make the whole identity market more valuable, Okta's direct monetization comes from its products. For current challenges with non-human identities, monetization is through Okta Privilege Access (OPA) and Identity Security Posture Management (ISPM). For the future, he stated that Okta will monetize AI security by charging customers to manage their AI agents within the Okta identity system.

Shrenik Kothari of Robert W. Baird & Co. asked about the expected recovery curve for seat expansion in the second half of the year, given previous comments about headwinds abating, and what assumptions are embedded in the guidance.

Answer

CFO Brett Tighe explained that headwinds related to seat-based upsells are still expected to persist through the first half of fiscal 2026. He anticipates the Net Retention Rate (NRR) will fluctuate within its current range, but cautioned that a negative turn in the macro environment could create additional pressure. The guidance embeds this uncertainty without specifying a precise NRR figure.

Shrenik Kothari asked about the outlook for Okta's public sector business, particularly U.S. federal, given near-term budget uncertainties and the initiatives driving momentum.

Answer

CEO Todd McKinnon clarified that public sector includes strong momentum in state and local governments, not just federal. For the U.S. federal government specifically, he sees a massive opportunity as agencies look to consolidate and modernize legacy identity systems. He argued that Okta is perfectly suited for government efficiency initiatives, offering faster time-to-value and lower operational overhead than legacy technologies. While acknowledging some near-term uncertainty, he expressed long-term confidence in helping the federal government become more secure and efficient.

Shrenik Kothari inquired about how Okta views potential budget shifts or disruptions in the U.S. federal sector post-election and its strategy to navigate them.

Answer

CEO Todd McKinnon expressed confidence in the federal business, citing recent major wins at the DoD and a large federal healthcare provider. He believes the drivers for identity modernization—cybersecurity against nation-state threats and upgrading legacy technology—are largely apolitical and will remain priorities regardless of the administration, ensuring continued momentum.

Shrenik Kothari inquired about GitLab's current method for tracking the monetization of Duo-specific capabilities versus core DevSecOps or CI/CD functionality, and asked what percentage of new ACV currently includes Duo or Duo-related features.

Answer

Bill Staples, CEO, GitLab, explained that Duo Pro and Duo Enterprise are currently monetized via seat-based add-ons, though specific revenue contributions are not disclosed. He highlighted the strategic pivot to a platform-driven AI agenda, augmenting the core platform with AI capabilities, which is nearing general availability and will introduce usage-based pricing, marking the early stages of this new monetization stream.

Shrenik Kothari inquired about GitLab's method for tracking the monetization of Duo-specific capabilities versus core DevSecOps or CI/CD functionality. He also asked for the percentage of new Annual Contract Value (ACV) that includes Duo or Duo-related features.

Answer

Bill Staples, CEO, GitLab, explained that Duo Pro and Duo Enterprise products are currently monetized with seat-based add-ons, but specific revenue contributions haven't been shared. He highlighted a pivot to a platform-driven AI agenda, augmenting the core platform with AI capabilities and unlocking an agentic approach. This will introduce usage-based pricing upon general availability, marking the early stages of a new monetization stream.

Shrenik Kothari sought clarification on the specific use cases and modules driving traction within Zscaler's AI security portfolio, particularly the balance between visibility/governance (SBM) and runtime AI protection (AI Guard), and inquired about the investment horizon and margin impact of scaling these products.

Answer

Chairman and CEO Jay Chaudhry detailed the evolution of AI security traction, starting with GenAI Security for visibility, then AI Asset Discovery and Posture Management, AI Guardrails for internal applications, and Red Teaming via SPLX. CFO Kevin Rubin noted comfortable Q1 margins and Q2 guidance, with expected margin expansion in the back half of the year, balancing growth investments with financial model discipline.

Shrenik Kothari asked for details on the traction within AI Security, specifically which modules (AI Guard, SVM, AI Red teaming) are driving growth and whether deployments are primarily for visibility/governance or runtime AI. He also inquired about the investment horizon for computer-rich AI Guard products and their margin implications.

Answer

Chairman and CEO Jay Chaudhry outlined the evolution of AI Security demand, starting with GenAI Security for visibility, followed by AI Asset Discovery and Posture Management (AI-SPM), then AI Guardrails for internal AI applications (early stage but growing), and finally AI Red teaming from the SPLX acquisition. He noted ongoing platform extension to agentic exchange and balanced investments with operating margins. CFO Kevin Rubin added that there hasn't been a massive change in gross margins from AI products, expressed comfort with the Q2 margin guide, and indicated planned margin expansion in the back half of the year.

Shrenik Kothari asked about the role of AI security in Zscaler's new logo focus and how the go-to-market strategy is being adjusted for both new logos and platform adoption in light of this new opportunity.

Answer

Chairman and CEO Jay Chaudhry stated that Zscaler has significant opportunities with both new logos and upselling its large existing customer base. He noted that while financial incentives exist for new logos, most new solutions, including AI security, primarily drive upsell opportunities due to existing customer relationships and credibility.

Shrenik Kothari from Robert W. Baird & Co. inquired about the attach rates for Zscaler's GenAI security solutions and the role the Z-Flex program plays in driving their adoption, asking for the percentage of wins explicitly citing GenAI risk as a catalyst.

Answer

CEO Jay Chaudhry outlined a three-part GenAI security strategy covering public AI, private AI models, and agentic operations. He noted that the public AI security solution is bundled with the advanced data protection module. While he highlighted impressive growth in these new areas from a small base, he did not provide specific attach rates or percentages for GenAI-driven wins.

An analyst from Baird asked for more color on the contribution from Global System Integrators (GSIs) to the account-centric selling motion, seeking examples of how GSIs are helping to drive larger deals.

Answer

CEO Jay Chaudhry confirmed the increasing and significant contribution from GSIs, especially in large accounts. He cited two recent seven-figure deals driven by GSI partners, one for Zero Trust SD-WAN and another for data protection. He noted that GSIs are now standardizing on a broader range of Zscaler solutions, including emerging products, and that platform deployments create services opportunities for these partners.

Shrenik Kothari asked for details on the composition of contracts for the expanded platform, including workloads and IoT, and how this non-user-based pricing affects the land-and-expand motion.

Answer

CEO Jagtar Chaudhry explained that emerging products, which include workloads and IoT/OT, are growing faster than the core business, rising from 18% to 22% of new business in FY24 and expected to reach the mid-20s in FY25. He noted significant customer interest driven by the Airgap Networks acquisition for device segmentation. CFO Remo Canessa added that longer contract lengths are becoming more common, which provides billing certainty and more time to execute the expand motion.

Shrenik Kothari asked about the evolution of large-scale embedded GenAI workloads, how enterprise customers are deploying vector search inference, and whether these usage patterns are proving to be stickier and more voluminous than traditional logs/metrics, impacting NRR.

Answer

CEO Ash Kulkarni confirmed that AI use cases are generally more compute-intensive, and AI cohorts are growing faster than others. He noted broad adoption across various industries, with customers moving beyond pilots to production use cases. Ash expressed confidence in the stickiness of usage due to Elastic's comprehensive AI functionality, which extends beyond just vector search, and its ability to ensure accurate relevance. CFO Navam Welihinda added that the net expansion rate (NRR) is stable at 112%, supported by stable gross retention rates and strong cohort expansion.

Shrenik Kothari asked about the evolution of large-scale embedded GenAI use cases (e.g., DocuSign, NHS, Smarts, Proofpoint), how enterprise customers deploy vector search inference, and if these usage patterns are proving to be stickier and more voluminous than traditional logs/metrics. He also inquired about NRR dynamics, specifically how sales-led subscription is trending from an NRR perspective, and the NRR for renewals closed in the quarter.

Answer

CEO Ash Kulkarni confirmed that AI use cases are more compute-intensive, and AI cohorts are growing faster, as detailed at the Financial Analyst Day. He noted broad adoption across industries with production use cases, emphasizing the stickiness due to Elastic's broad AI functionality beyond just vector search and its ability to ensure accurate relevance. CFO Navam Welihinda stated that the net expansion rate (NRR) was stable at 112%, supported by stable gross retention rates and strong cohort expansion trends.

Shrenik Kothari asked for insights on up-tier expansions to the Enterprise tier, how current rates compare to historical ones, and what the most consistent catalysts are. He also asked if GTM changes affected up-tier timelines.

Answer

CEO Ash Kulkarni explained that moving customers to higher tiers is a consistent motion driven by a combination of features, not just one. He cited searchable snapshots, the new LogsDB index mode, and various AI functionalities as key drivers. Interim CFO Eric Prengel added that the GTM changes have successfully focused reps on enterprise and commercial segments, which aligns with the up-tiering strategy, and they are pleased with the results in Q2 and Q3.

Shrenik Kothari asked about the addressable opportunity for Fortinet's secure AI data center offering, targeting AI-native players, cloud providers, hyperscalers, or enterprise data centers, and followed up on its monetization as a revenue driver next year.

Answer

Ken Xie, Founder, Chairman, and CEO, highlighted Fortinet's unique position with ASIC for high-speed AI data centers, seeing early opportunities in securing big data centers and AI agents. He acknowledged it's early stage but with huge potential. Christiane Ohlgart, CFO, confirmed monetization through both product (hardware-centric for AI data centers) and services (software-centric for AI applications, AI-enabled solutions). Ken Xie added that AI-driven secure operations is a fast-growing pillar with over 20 AI-driven solutions.

Shrenik Kothari asked about the addressable market opportunity for Fortinet's secure AI data center offering, inquiring about target customers (AI native players, cloud providers, hyperscalers, or enterprise data centers) and how monetization would be skewed between product/hardware and services/AI ops next year.

Answer

Ken Xie, Founder, Chairman, and CEO, highlighted Fortinet's unique position as a network security vendor with proprietary ASICs, enabling high performance for AI data centers. He noted early engagement with AI players and data center service providers, seeing huge potential despite the early stage of the market. Christiane Ohlgart, CFO, stated that monetization would be broad-based, with hardware-centric solutions for securing AI data centers and software-centric solutions for AI applications and AI-enabled SecOps. Ken Xie added that AI-driven secure operations is already a fast-growing pillar.

Shrenik Kothari from Robert W. Baird & Co. inquired about Fortinet's go-to-market strategy, specifically how channel incentives are structured to drive platform adoption and multi-product sales.

Answer

CEO Ken Xie explained the shift towards more direct sales investment for large enterprises, which is driving larger, multi-product platform deals. CFO Christiane Ohlgart clarified that channel incentives are "exactly aligned around multiproduct," with partners receiving higher back-end rebates for introducing and selling new products from Fortinet's portfolio.

Shrenik Kothari asked about the drivers of strength in the EMEA region and whether Fortinet is seeing traction in APAC from modernization initiatives like OT and AI. He also inquired if new logos are landing with SASE/SecOps or still primarily FortiGates.

Answer

CAO and incoming CFO Christiane Ohlgart attributed EMEA's strength to OT and government sectors and confirmed similar modernization trends in APAC. She clarified that the majority of new logos are smaller customers who typically start their journey with a FortiGate firewall.

Shrenik Kothari asked for an update on sales incentives tied to SASE upselling and how these incentives are impacting overall deal conversion and profitability, given the strong growth rates.

Answer

CEO Ken Xie explained that the company is focused on accelerating training for its sales teams, technical teams, and partners. He noted that customers and partners see the benefit of a single OS, which makes the upgrade to SASE much easier and results in a shorter sales cycle compared to competitors. This ease of upgrade is driving the rapid ramp-up in the SASE business.

Shrenik Kothari of Baird asked if TrueConfirm would be monetized standalone or serve as an on-ramp to broader ETM, and inquired about the ETM trajectory given POC conversions and large enterprise consolidations. He also asked about incremental leverage from partners monetizing ROC services.

Answer

CEO Sumedh Thakar explained that TrueConfirm is included as part of ETM to differentiate from CTEM-only solutions and serves as a beachhead for converting VMDR customers to ETM, with TrueRisk Eliminate being the subsequent upsell. CFO Joo Mi Kim stated that ROC will help grow the top line through partner assistance in implementation, expecting some margin leverage but no material shift in unit economics. Sumedh Thakar added that ROC partners are bringing high-value risk management services and new deals to Qualys.

Shrenik Kothari of Robert W. Baird & Co. asked about the competitive advantages and monetization potential of Qualys's new ISPM solution. He also inquired about the potential headroom for the net dollar retention rate to grow.

Answer

CEO Sumedh Thakar highlighted that the ISPM differentiator is its ability to provide a holistic risk view by correlating identity posture with asset vulnerabilities, rather than viewing identity in a silo. CFO Joo Mi Kim stated she sees potential upside for the net dollar retention rate to continue ticking up from 104%, but noted no significant improvement is assumed in the current year's guidance.

Shrenik Kothari of Robert W. Baird & Co. requested a breakdown of a recent mid-six-figure TotalCloud CNAPP deal, asking how Qualys is differentiating in the crowded cloud security market and the role of its audit readiness messaging. He also asked how incremental OpEx is being deployed to support higher-value modules.

Answer

CEO Sumedh Thakar explained that CNAPP wins are driven by customers wanting to extend their existing Qualys program to the cloud, leveraging a mature solution that includes CSPM and identity management. He highlighted that the ETM platform's ability to ingest data from other cloud tools and the strong value proposition of audit readiness are key differentiators. CFO Joo Mi Kim added that OpEx deployment is based on annual planning for key initiatives, with flexibility built in for strategic bets, including those a potential new CRO might make.

Shrenik Kothari asked for quantification of the Q3 uplift from the federal business, details on go-to-market strategies in the sector, and more color on how billing schedules impacted the quarter's results.

Answer

President and CEO Sumedh Thakar highlighted two 7-figure federal deals (one new, one upsell) as indicators of momentum from focused investments, but noted the business can be lumpy. CFO Joo Mi Kim reiterated that billing schedule fluctuations are normal; last quarter, billings growth was below bookings growth, while this quarter it was higher. She advised using an LTM basis for a more accurate view of the business trajectory.

Shrenik Kothari asked about the underlying growth cadence for the SaaS business post-conversion, specifically the proportion of early-stage versus mature SaaS customers and the room for upsell/cross-sell.

Answer

CFO Guy Melamed reiterated that the SaaS business is strong, with confidence in achieving 20%+ growth driven by new customer momentum and healthy NRR from existing SaaS customers. He noted that the on-premises subscription issues are masking the underlying strength of the SaaS business, which is expected to comprise 83% of total ARR by year-end.

Shrenik Kothari asked for clarification on the underlying growth cadence post-conversion, specifically how much of the $545 million SaaS ARR core is early stage with significant upsell/cross-sell potential versus more mature with product adoption.

Answer

Guy Melamed (CFO & COO) reiterated confidence in achieving 20%+ growth for the SaaS business, driven by momentum with new customers and strong NRR from existing SaaS customers. He emphasized that the on-premises subscription renewals are masking the strength of the SaaS business, and they expect the SaaS mix to reach 83% of total ARR by year-end.

Shrenik Kothari asked for a breakdown of the drivers behind the strong SaaS NRR, seeking to understand the relative contributions from MDDR, Copilot security, and various cloud data stores.

Answer

CEO Yaki Faitelson responded that all new platform coverages are performing well, including Azure, AWS, GCP, Snowflake, Databricks, and Salesforce. He emphasized that as customers recognize the vulnerability of their data across all repositories, both cloud and on-prem, adoption of Varonis's various protections grows broadly.

Shrenik Kothari of Robert W. Baird & Co. asked how customers are responding to a unified view across structured and unstructured data and if budgets are shifting from legacy tools.

Answer

CEO Yaki Faitelson stated that it is 'smarter' for organizations to protect all data with Varonis to get unified classification and automated outcomes. He explained that the platform's ability to leverage identity context from Active Directory and Okta, along with other data streams, makes it a natural extension for customers to ensure compliance and prevent breaches in an effortless, tangible way.

Shrenik Kothari of Robert W. Baird & Co. asked for specifics on resource reallocation plans post-transition, such as repurposing sales for AI security, and how this intersects with converting large, complex on-prem accounts with specific data residency requirements.

Answer

CFO and COO Guy Melamed explained that the 2025 sales compensation plan specifically targets conversions, a change from 2024, but without losing focus on new customers. He noted that resource changes are prudent, with some hiring already done to handle documentation challenges, but the fundamental sales structure remains the same. He pointed to the strong improvement in ARR contribution margin (to 16.6%) and free cash flow as evidence that all investments are being made with an eye on leverage.

Shrenik Kothari asked about the company's M&A strategy following its upsized convertible notes offering, inquiring about specific technology areas or market segments Varonis might be eyeing.

Answer

CEO Yaki Faitelson noted that the Varonis data security platform opens up many logical extensions and that they are always looking at opportunities to accelerate their roadmap. CFO & COO Guy Melamed added that the new capital allows them to be more 'offensive' and look at slightly larger M&A, but stressed it would be nothing 'crazy' or that would change the risk profile of the business. He clarified a deal is not a necessity to reach their $1 billion ARR target.

Shrenik Kothari of Robert W. Baird & Co. asked about go-to-market progress, specifically regarding sales rep ramp metrics for non-endpoint solutions and the impact of the new Flex model and partner initiatives.

Answer

CEO Tomer Weingarten cited strong execution, record net new ARR, and record ARR per customer as evidence of successful sales enablement and a streamlined platform message. He noted the company is progressing well in its transition from a product to a platform-centric sale, with the new Flex model acting as a 'force multiplier' in this effort.

Shrenik Kothari of Robert W. Baird & Co. asked about the federal business, inquiring if budget constraints are causing delays in expansions or new logos, despite new FedRAMP authorizations.

Answer

CEO Tomer Weingarten acknowledged that longer sales cycles and more approvals are impacting the federal space, which was a factor in Q1 and is reflected in the guidance. However, he emphasized their strong competitive position with FedRAMP High authorization across the platform and a promising pipeline.

Shrenik Kothari asked how macroeconomic factors like constrained IT budgets and the recent competitor outage are influencing sales cycles, particularly for larger, more complex deals.

Answer

CEO Tomer Weingarten responded that macro factors remain relatively consistent and that the competitor outage is just one element adding to the company's existing momentum. He acknowledged that larger deals inherently have longer sales cycles but views this as a net positive, as these engagements are strategic and help catapult SentinelOne's position in the large enterprise market.

Shrenik Kothari of Robert W. Baird & Co. inquired about the significance of the CISA partnership, how the platform aligns with federal agency requirements, and the potential growth opportunity in the federal market.

Answer

CEO Tomer Weingarten described the CISA partnership as a long-term, wide-reaching agreement that will unlock market share gradually over years. He highlighted SentinelOne's unique ability to secure on-premise and private cloud environments as a key fit for federal needs. He grouped this with other strategic partnerships, like those with cyber insurers and Google, that are designed to lock down market share over the long term rather than provide a single large boost.

Shrenik Kothari began to ask about Tenable's approach to the public sector's unique procurement cycles and cost-conscious mindset, but the question was cut off due to a poor connection.

Answer

Co-CEO and CFO Stephen Vintz was unable to hear the full question due to an inaudible phone line and had to move on. The question was not answered.

Shrenik Kothari of Robert W. Baird & Co. sought clarification on federal renewals, asking if the improved visibility was for tactical VM deals or if it included broader platform consolidation opportunities with Tenable One.

Answer

CFO and Co-CEO Steve Vintz clarified that the improved visibility pertains specifically to the core renewal transactions, while the company remains 'cautiously optimistic' about larger expansion opportunities. Co-CEO Mark Thurmond added that having FedRAMP authorization for Tenable One and cloud security is enabling conversations with their large federal VM install base about platform expansion.

Shrenik Kothari asked how Rapid7 is differentiating its risk and exposure management messaging from that of traditional VM players.

Answer

CEO Corey Thomas emphasized that the key differentiator is a focus on 'integrated risk management.' He explained that Rapid7's platform uniquely consolidates assets, context, and risk data from across a customer's entire environment, not just from Rapid7's own tools. This approach, which includes consolidated remediation and automated workflows, aligns with the Gartner CTM framework and positions Rapid7 as an integration and automation engine for security operations.

Shrenik Kothari of Robert W. Baird & Co. asked if Rapid7 was considering specific go-to-market adjustments, such as flexible financing or trial periods, to alleviate customer hesitation and combat budget scrutiny.

Answer

CEO Corey Thomas acknowledged it was a great point and confirmed that the company is actively discussing such options. He clarified that while there is no broad-based program in place yet, the finance and sales teams are currently looking at these types of strategic and targeted approaches to help secure business going forward.