Release Date: February 27, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q: George, you mentioned some comments around sales execution. Can you elaborate on the efforts to rectify these issues and the expected duration for these efforts to show results? A: George Kurian, CEO: We have a strong pipeline driven by both secular and company-specific growth drivers. However, in the last weeks of the quarter, several large deals took longer to close. We are now inspecting our closing plans at a higher level of detail. Many deals that slipped from Q3 have already closed in Q4, and we expect this discipline to become part of our normal business operations as we implement fiscal year 26 sales plans.
Q: Can you clarify if the sales execution issues were more execution-based or if there was customer uncertainty, particularly in the public sector? A: George Kurian, CEO: We have seen some caution in European markets like France and Germany due to government changes, and a bit more caution in the US public sector. January is typically slow as budgets take time to unfreeze. However, we have good visibility into our pipeline and are progressing deals according to plan.
Q: How are you thinking about product gross margins beyond Q4, especially after using up strategic SSD purchases? A: Mike Aerie, CFO: We expect product gross margins to be around 56% in Q4, reflecting the benefit from strategic SSD purchases. Beyond Q4, as we use up these purchases, we expect costs to remain steady entering fiscal 26 and then start to decline. We have implemented price changes that should provide a tailwind in fiscal 26.
Q: Can you provide more details on the impact of the Spot divestiture on your financials? A: Mike Aerie, CFO: The Spot business we are divesting had about $94 million in cloud revenue over the trailing 12 months. The transaction is expected to be largely neutral to EPS. For Q4, we expect around $15 million less in cloud revenue due to the divestiture.
Q: What is the current penetration of your All Flash footprint into your installed base, and how is it impacting new customer wins? A: George Kurian, CEO: The penetration of our All Flash footprint into our installed base is now 43%. This reflects both the scale of our installed base and our ability to grow new footprints. All Flash and public cloud are key vehicles for winning new customers, and the pace of new customer acquisition continues to be strong.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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