Thanks for listening. boosting. That [Indiscernible] one. Just platform given me the ability to experience to all of these different uses. incredible, innovation across our Network Security platform and again, all of which complemented by spread intelligence and security consulting to our previous cybersecurity partner of choice.

Good day and welcome to Palo Alto Network ' First Quarter 2022 Earnings Conference Call. I'm CLAY BILBY, head of Palo Alto Network's Investor Relations. Please note that this call is being recorded today, November 18th, at 1:30 PM Pacific Time. With me on today's call are Nikesh Arora, our Chairman and Chief Executive Officer will join us in Q&A session following his prepared remarks. You can find the press release and information to supplement today's discussion on our website at investors.PaloAltoNetworks.com. While there, please click on the link for events and presentations where you will find the investor presentation and supplemental information. In the course of today's conference call, we will make forward-looking statements and projections that involve risk and uncertainty that could cause actual results to differ materially from forward-looking statements made in this presentation. These forward-looking statements are based on our current beliefs and information available to management as of today. Risks, uncertainties, and other factors that could cause actual results to differ are identified in the Safe Harbor Statements provided in our earnings release and presentation, and in our SEC filings. Palo Alto Networks assumes no obligation to update the information provided on today's call. We will also discuss non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with GAAP and should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. We have included tables which provide reconciliations between the non-GAAP and GAAP financial measures in the appendix to the presentation. And in our earnings release, which we have filed with the SEC and which can be found in the Investors section of our website. We would like to know several upcoming events. Management is scheduled to participate in upcoming virtual investor conferences in December, hosted by Craig's List and Barclays. And now I would like to turn the call over to Nikesh.

Thank you, Clay. And good afternoon, everybody. As you can see, that was a video showing you some snippets from Ignite, our user and customer conference, which is just wrapping up. It has been a bit of a busy week at Palo Alto Networks, where we've had 27,000 customers and partners registered to engage with us virtually. Moving on to where we are at the end of Q1. Q1 was quite a familiar story from a demand perspective. We saw strength across major geographies and industries driven by heightened cybersecurity awareness. We've seen people at the top of organizations across government and private sector, they understand that it's their responsibility to ensure they are securing their environments against increasingly malicious threat landscape. This quarter, we saw a fair amount of press out of Washington, DC as Cyber Security funding was included in the recent infrastructure bill and executive orders are mandating focus from federal agencies. In the private sector corporate boards are forming Cyber Security committees and directing their teams to raise the bar in terms of Cyber Security posture. We had powered the networks institute our security committee as well this quarter. Early in the year, Gartner updated its forecast for spending in information security and risk management technology and services, calling for growth of 12% year-over-year in 2021. We see this backdrop as sustainable beyond this year, as customers not only grappled with familiar events like brands on where, and data breaches, but also new threats coming to light, light as they adopt cloud services and also try to hire enough qualified security professionals to keep their environment safe. All-in-all, I think demand is strong, attention for cybersecurity is high, and there's a long-term positive secular trend in place, which gives us great comfort towards the 3-year plan…

Thank you very much Nikesh, and good afternoon everyone. Please note that all comparisons are on a year-over-year basis and financial figures are non-GAAP, unless specifically noted, otherwise. We delivered ahead of our guidance provided in August across all metrics as we continue to grow and transform our business. In Q1, the acceleration of our topline continued driven by strength in our broad portfolio, including both our appliance offerings and our next-generation security offerings. For Q1, revenue of $1.25 billion grew 32% and was above the high-end of the guidance range. Growth was driven by product revenue in all geographies and all 3 platforms. Total deferred revenue in Q1 was $5.16 billion, an increase of 31%. By geography, Q1 revenue growth was strong across all regions. The Americas grew 30%, EMEA was up 35% and JPAC grew 38%. Next-generation security or NGS ARR, finished the quarter at $1.27 billion, continuing a steady growth trajectory. Within NGS, we saw exceptional strength in our Prisma platform, as well as XSOAR and XDR. In the first quarter of 22, we delivered billings of $1.38 billion -- up 28% and above the high-end of our guidance range. As a reminder, billings is total revenue plus the change in total deferred revenue, and that's of acquired deferred revenue. NGS billings of $366,000,000 grew 38% year-over-year. Remaining performance obligation, or RPO, was $6 billion increasing 37% with current RPO growing in-line with total RPO. As I mentioned at our Analyst Day, we believe RPO adds meaningful insight into our future revenue, as it includes both prepaid and contractual commitments from our customers. As we also forecasted during our recent Analyst Day in September, our Appliance business accelerated in Q1 as we achieved 25% year-on-year product growth, the fastest product growth in ten quarters. This was ahead…

Great. Thank you Dipak. And to allow for broad participation, I would ask that each person only ask 1 question. And our first question will be from Brent Thill of Jefferies with Patrick Colville and Deutsche Bank to follow. Brent, you may ask your question.

Thanks. Good afternoon. Nikesh, on -- when you think about some of the supply chain issues you're going through, are you seeing clients being willing to trade off for Cloud or are they accelerating their workloads faster to the Cloud and therefore, just substituting your solution there? Can you give us just the color of what you're seeing in the customer behavior, based on what's happening right now. Thanks.

Thank you for the question. Look, I think as Dipak highlighted and I said, we are seeing some customers get very sensitized around lead times and hence we are seeing them order ahead. We're also seeing customers think longer-term what they want for capacity for the full-year, hence we're seeing more visibility in terms of what their the needs are on the hardware front. I am also sure that there is some substitution going on because we know that not every player in the industry has consistently does what we're offering to our customers. So there is some substitution going on in the market from other vendors to us -- where they're already in the infrastructure as a first or second provider, or we have become a new provider in there. And outside of that? Yes, to some degree, we are seeing Cloud adoption continue to accelerate across the market. I think it's partly a function of the fact that people have made the shift to Cloud faster given the pandemic. I think there may be a marginal impact of people are running into the hardware issues, but it's not as widespread and broad-based as -- enough yet to call it a trend, but I'm sure on the margin that affect us there.

All right. Great. And our next question comes from Patrick Colville of Deutsche Bank with Sterling up to follow. Patrick, you may ask your question.

All right. Thank you so much for taking my question. Can I actually switch on to the NGS ARR? Very impressive as always, growing to $1.27 billion. I guess the sequential delta was maybe slightly less than we've seen with the recent trends. If my math's correct, about $90 million increase sequentially, which is about 8% sequential growth, which is a little bit below the trends we were seeing last year and before that. So can you just help me understand the puts and takes there of momentum around NGS, please?

There's a lot of momentum on NGS, Patrick, as we highlighted both in the Prisma Cloud 's side and the Prisma SASE 's side. As you experienced last year NGS business is very heavily backend loaded in terms of Q3 and Q4, because the teams spend a lot of time getting the customer to a -- most of the products are either a part of their Cloud transformation journey --as a soft transformation journey, or the network transformation journey. The key word in all 3 is a transformation aspect. And transformational aspects require longer PLCs, longer discussions with our customers. We have ample confidence that we will, handedly meet our expectations for the full-year NGS ARR. We actually don't sweat the quarterly evolution because we look at it as annual pipeline. And as I said, we feel it's well in hand and I couldn't be more enthusiastic about it.

Great. And our next question comes from Sterling Auty of JPMorgan with Phil Winslow up next after that. Sterling you may ask your question.

Yeah, thanks. Hi guys. Alright, so I want to go back to the supply chain -- which I'm sure a lot of us will. Is there a sense when you're talking to your customers, how much of the timing of these orders is for lead time -- meaning that you're--they're just joining in the first half, maybe you would've gotten some of these orders in Q3 and Q4. And how much of this might just be increased ordering because they're utilizing the solution in more ways. So more micro segmentation and other Zero Architecture used cases?

Yeah, that's a great question, Sterling. I honestly -- I think if I was to rank order the impact we've seen 25% product growth -- Remember, we've just done a hardware refresh for part of our portfolio, and that always -- Traditionally we see that whenever your hardware refracture customers will step up and want the newest piece of hardware and they've kind of learned how to anticipate it. Clearly the number 1 effect we're seeing in the quarter. I think the second effect is -- to your point -- increase consumption, and increased deployment requirements that we're seeing. Because you can tell -- you can tell if a customer is pre -ordering -- ordering ahead or is a net new customer. That new customers has never been a customer of Palo Alto--he's not ordering ahead. They're actually transferring to Palo Alto. So I think that's the third impact. And the fourth one, to be honest, which I would consider a 10% impact --give or take. It's approximately what you're seeing into the ordering ahead category.

Thank you. Thank you.

Our next question is from Phil Winslow of Credit Suisse with Saket Kalia up after that. Please proceed, Philip.

Great. Thanks, guys. Nikesh, just a question for you on Prisma Cloud. Obviously, you continue to put up good customer metrics as well as those consumption numbers. There's obviously been a lot of focus from investors on [Indiscernible] Lifecycle and Shift Left Security. 2 questions here. Where do you think customers, in terms of their adoption of these technologies, what inning are we in? And then second, when you are winning these deals, what are customers telling you about why, what's the differentiation?

I have the pleasure having Mr. Lee Klarich, our Chief Product Officer, and I don't want him to feel like he doesn't need to answer anything on these calls, so I'm going to ask him to jump in here, Phil. But the only 2 cents I'll give you, is that whenever the customer has been partly through their journey and their decided their homegrown tools or their point solutions are not the right solution for their infrastructure, it's typically where we see large Prisma Cloud engagements. Having said that, I'm not saying that they don't use us for those individual use cases -- They do. But eventually the step-up and say, I need to make a comprehensive confidence product bed. But I'm going have Lee jump in and talk about some of the shift left stuff we're seeing -- with the Bridgecrew, a recent announcement yesterday of offering wiz - like capabilities, which is 18-plus scanning. As well as integrating our Shift Left Enable [Indiscernible] Prisma collateral enterprise platform, so there's consistency.

Thank you, Nikesh. Look, I think a lot of customers are still in their journey to fully operationalized cloud security, there's no question about it. To some extent, they're even just still in their journey to even -- their shift to the Cloud and really understanding all the different dynamics that need to change in order to fully take advantage of cloud architectures versus traditional data center architectures. And so as we go through these shifts, and in a lot of cases we're helping to enable and drive these changes. There's a few that I would just highlight for you here. One is, we believe very strongly that for cloud security to be effective, it has to be embedded in the development and DevOps processes. This is why the announcement from earlier this week, where we're starting the Bridgecrew integration into Prisma Cloud is so important. It's what enables the Prisma Cloud security capabilities to be integrated into the CICD pipelines that the developers and DevOps teams use to develop their Cloud applications--Absolutely critical. Second, you're also seeing us for some of the recent advances we announced around agent-less security for making it easier for customers to get that initial adoption. And then even supporting a hybrid model where they can just both agent-based and agent with scanning, where we're the only ones in the industry being able to offer our customers that choice. And we continue to put the attention around Cloud identity, and the permissions and entitlement, and how that affects Cloud Security, which has long been an area overlooked and not well understood. These becomes some of the more advanced capabilities that our customers are now getting ready to adopt. And like our personal Cloud strategy, our goal is always trying to stay a step ahead of those needs.

Great. Thanks Lee. Our next question comes from Saket Kalia of Barclays with Brian Essex. After that, Saket, please proceed.

Hey, thanks for taking my question here. Nikesh, I thought it was interesting to see on the Prisma SASE side, that roughly 1400 of the 1800 customers there, are also next-gen Firewall customers. And so the question was asked earlier about the short-term impact of substitution from one to the other. I'm kind of curious about how do you think about that long-term. Do you find the Prisma SASE is additive to customer spending or do you find that more often it is substituting or replacing what they are doing with Firewall? Does that make sense?

Yeah, of course. I think a few quarters ago, my colleague, Mr. Lee Klarich, had done a phenomenal job of highlighting that the Prisma SASE customer is more valuable to us from an LTV perspective, i.e. on a like-for-like basis. And also it is a lower TCO opportunity for the customer, because now you're not upgrading every one of your hardware boxes. Take a case, you have 1400 stores somewhere, you got to put a hardware box everywhere and you got to upgrade them for every new software release we offer, and that's a truck roll and requires you to be comfortable that you want to do it. In the case of Prisma SASE, we'd roll it out, so all of our 1400 customers, boom, in 2 weeks, we have them upgraded to the next version of software, which allows us to do multiple software releases in quarters. And in the case of our firewalls, it takes 1 year to write the next big major release and it takes 4 months before our customers will be -- will tend to be agree to go and deploy it across their 40,000 stores because they're not, they're not comfortable yet because it's going to be a big change. And if that chain doesn't work. So I think technically, conceptually, 5 years from now we're looking back saying, what a stupid idea to go roll trucks and upgrade hardware,--I give you a case. I apologize for distracting, but a friend of mine is very much into electric cars and he bought a new electric car. I have 1 too. Mine is a Tesla. It does over-the-year software updates. His, he has to drive to the dealership and wait in line, then they put a USB stick, and they'll upgrade it. You tell me which one you want. So I think in the long term, we're going to say SASE is like a Tesla to the -- drive the car to the dealership and stick a USB in it. So from my perspective, SASE is a better technical outcome. It's a better security outcome for the customers, It's a better value for us and it's a better value for the customer in the long term.

All right. Great. Thanks, Nikesh. Our next question comes from Brian Essex of Goldman Sachs with Ty Liani [ph] up after that. Go ahead, Brian.

Thank you, and thank you for taking a question.

Please give me shit, Brian. Because it's his car, I forgot.

Not my car. For Nikesh or Dipak, whichever one wants to field this one. I think -- we heard a commentary around increased costs related to the product revenue, and in -- I don't know, we're in an inflationary environment, everyone's used to paying more for things. What levers might you have to offset that, whether it's vendor consolidation, actuary pricing increases, how do you -- how might you think about ways you can offset those higher costs on the other side?

Yeah. Look, as Dipak highlighted, from a product revenue and product cost perspective, I guess, translation -- Some of our chip suppliers are asking for more money for the scarce chips that they offer us. That's what it is. So in the short term, there is no offset. You want to chip, you pay for it, you buy it. In the broader scheme at Palo Alto we can offset it with other cost containment strategies with Dipak's on top of -- in dealing with them. Maybe you could talk about some of the supply chain efforts your team is doing because -- I will tell you -- it's kind of funny. It's as we said, this is one of our highest product growth quarters in recent history in the midst of a supply-chain crisis. And you guys know, we can't book it until you ship it. So we've not only been able to book it, but ship it. So Dipak's team must be doing something.

Let's just come back to your overall question. We look at all the different levers -- we did take a price increase in September in the U.S. November 1st -- internationally. So we do look at that as a lever. But fundamentally, I would say that one of the benefits that when you have already strong demand, is you have that visibility. Okay, so with that strong demand, with longer lead times -- but happening now though, we have extended our lead times by a couple of weeks. Like Nikesh had had said. That actually allows us a little bit more visibility and we have a world-class scene that uses that visibility to try and make sure that we can catch up as much as possible. I think beyond that, the levers that you would expect us to look at is everything and anything we have. We're looking at all of our vendors, trying to see how we can reduce costs there, leverage our scale, we would get everything about our payment terms that are lower costs, and also looking at all of our [Indiscernible]. But I would say it's a very balanced approach under the framework of total shareholders.

And our shift to software helps.

Yeah.

Clay? Did we lose, Clay?

Right?

Got it. I think I think.

Okay. I was muted as well. Next question coming from Hamza Fodderwala of Morgan Stanley, with Adam Tindle to follow. [Indiscernible] you may proceed.

Hey guys. Thank you for taking my question. Maybe just a quick one for Dipak, in case he's getting lonely there. Dipak, you gave a really strong total RPO number. I'm wondering if you can tell us what the current RPO was. And do you think that these CRPO metric is going to be a cleaner metric to gauge parallel to those underlying bookings growth as you shift more from hardware to software?

Thanks. So in my prepared remarks I actually did say that current RPO grew at the same rates as total RPO. So I do think that both are important. the reality is, I think total RPO is critically important because that's all of our future obligations. I think current RPO is what I spent a lot of time looking up because that really gives you a good understanding of your predictability of revenue over the next 12 months. I think both are important. I think the macro comment is RPO is important. You have to look at both. You have to look at your contract lines, you have to look at everything and anything around RPO and candidly, I'm surprised that more companies don't spend more time on it.

Thank you.

Great. Thank you. And our next question comes from Adam Tindle of Raymond James, with Rob Owens up next. Adam, you may proceed.

Great. Thanks for taking the question, Nikesh. I wanted to ask on go-to-market, and maybe you could tie in some feedback from new management members like Ahmed and BJ since joining. But kind of a two - parter. First, on the core sales team. On the last call you talked about them driving the majority of Cortex revenue, and I'm wondering if that's something that you could continue to drive that motion and apply to areas beyond Cortex. And then in channel, you had an inflection in partner-lead deals this quarter in Cortex. If you could maybe double-click on the drivers of that and what the team can do to push further into other areas beyond Cortex. Thank you.

Great. Thanks for question. You know what, having BJ here has been amazing. We can actually now have -- Amit is in a room elsewhere during a CIO meeting, BJ 's in Europe, meaning customers and I'm here doing an earnings call. So we've been able to divide and conquer in terms of being able to touch more and more customers. Outside of your question on Cortex and [Indiscernible] Look, we've been on a journey. We caught this Cloud thing early in our mind. But we're getting our motion right, figuring it out, and now we started to enable channel partners. As we enabled channel partners, we have been able to amplify our ability to go and approach our customers with Cloud capabilities. So as you can imagine, this is still a nascent market in terms of it's -- I think, this is going to be a huge market in next 5, 7 years. No wonder you're seeing those lofty valuation of startups out there. I firmly believe we are 18 to 24 months ahead from a comprehensive platform perspective. We're not standing quietly. I still -- we still have more engineers of Palo Alto building Cloud security capability than all the other startups roughly combined. So we're not worried about our strength and our ability. We have to remain nimble, we have to remain agile, and we have to make sure we amplify our go-to-market capabilities. So from that perspective, yes, you will see us continuing to amplify our Cloud go-to-market capabilities and our Cortex go-to-market capabilities. We are working on some very exciting product enhancements in our XDR front and Cortex front. More to come in future calls but that gives us confidence that as we keep seeding the market with XDR is going to open up a very large TAM thereafter for us in future quarters, for future years for the Company, allowing us to strengthen that third pillar. And last but not the least, I will give you one more anecdote, Adam. In the last 90 days, I have met more CIOs personally than I met on the first three years of working at Palo Alto. And that's not because I was lazy first, it's because I have had the opportunity to go engage with them, because now, we have a comprehensive cybersecurity platform, and many of them are saying, "This point solutions stuff is not working. I'm moving to the Cloud. So now I have some sort of redundancy built into my DevOps environment. Therefore, I may be willing to go look at one vendor to help me in in the entire stack from one end to the other. " So that's the go-to-market update.

All right. Great. Thanks, Nikesh. Our next question comes from Rob Owens of Piper Sandler, followed by Irvin Lu Robit [ph]. Rob, you may take your question.

Great. Good evening and thanks for taking my question. Curious on the federal fronts, given your end of quarter did span the end of the federal fiscal year, how things came in. But I think more importantly, what your seeing in terms of pipeline for the ensuing quarters, given it feels like a more linear federal spend coming. Thanks.

Thank you for that question. Look, I think as we talked about probably at the end of last quarter, new administration, early days, they were still trying to put their authorized process to get their stuff in order. So we did see obviously because there was ample Fed business for us at the end of their fiscal quarter -- fiscal year and are in the midst of our quarter. That was strong. What is even more heartening is if you guys have time, I actually did a keynote for Ginny Easterly yesterday morning for our Ignite event and it's very fascinating to hear her because you are seeing there is a very strong directive and will in the U.S. government right now to really treat cyber security seriously, and you've seen that manifested in the various infrastructure bills, where there are specific line items for cyber security spend to the extent there are line items for that cyber management in various bills. So you can see that there is a lot of seeding of Cybersecurity that’s going on in the federal sort of budgets. As with everything with governments is thoughtful, it's -- it takes time and it happens slightly slower than analysts and CEOs expect.

All right, thank you.

Great. Next question is from Irvin Liu of Evercore with Matthew Hedberg followed Urban, You may ask.

Hi, thanks for taking the question. You highlighted the completeness of your current platform, in that any acquisition in the near term would be incremental versus large scale. But I wanted to better understand, how do you weigh build versus buy decisions looking ahead? And which areas of the market do you see yourselves potentially having a product gap.

So Irvin, we have been very clear about certain areas of the market which worked well with us through an API or connectivity - based. For example, we've been clear in identity access management. We think there's ample good players out there. Us going into that space is not going to add any incremental value. Or similarly with email security, we've steered clear of that space, not because we believe that, eventually people migrating to Google, Microsoft, and Proofpoints there and there's a bunch of other people. So there are some areas we've seen where -- I think the best way to think about it as we did this exercise 3 years ago. We identified a blue ocean called Cloud, and then moved to the Cloud. And we said this is going to be a lot of new security products created for the Cloud. Let's get ahead of the trend early, which is what we did. We were about 6 or 7 companies in that space integrated and the results are in front of you, and I think we announced for you [Indiscernible] for Prisma Cloud last Q4, so you can expect that has grown this quarter, which puts us, as I said, at 6 to 10 times on many of these startups are getting funded at $6 billion to $8 billion. So clearly that's not a price I'd like to pay for that ARR given I'm sitting on 5 to 10 times of that AR myself. So from that perspective, it's both an area of the market that we want to pursue, ideally a Blue Ocean, which is Cloud Security, or we have a disruptive technology of you believe will compel the customer to replace what they have today. And that you are seeing happen in the XDR space,…

Our next question from Matthew Hedberg of RBC followed by Keith Bachman. Matt, go ahead.

Hey, thanks guys. The question for Nikesh or Lee. I think what stood out to me is you said 25% of SASE customers are from outside your core, which was great to hear. And I think really to the point of some of the earlier questions on Palo Alto is not only a consolidator, but also best-of-breed in these cases. Can you talk to how that trend has progressed, that 25% of the customer concept and are you seeing other things like that in other segments like Cortex, XDR, Prisma Cloud?

Yes. First, your comment on being best-of-breed, not just consolidators, that is a 100% spot on. Our focus from a product perspective is everything we do. We strive to be best-in-class in that specific area, such that when we bring it together, and integrate it for our customer from truly adding value and not just reducing number of vendors they have to do business with. And so along those lines, that's what fuels the number that you saw in terms of SASE adoption from net new customers to Palo Alto 's Networks. And it's a great starting point and it's an opportunity for us then to expand into other areas of network security, Prisma Cloud, Cortex after that. We've also shared similar numbers for Cortex in the past where we see a similar level of adoption of customers that come in for the very first time into XSOAR, into XDR, into Expanse. And quite frankly, Prisma Cloud is right up there as well in terms of net new adoptions. All of that has been made possible by being best-in-class in these different product areas and then affords the opportunity to expand in some cases fairly rapidly once they get in successful with the first product.

Thank you, Lee. Our next question from Keith Bachman of BMO with MIchael Turits, next. Keith, go ahead.

Thank you very much. I’d like to return to the supply chain if l could and direct to this to you, Dipak, sir. Can you help us understand what the price increases have been for your products thus far in the anticipation going forward? Just trying to understand what the impact to the topline may have been from price increases. And then the corollary question is, can you give us any quantification associated with the margin impact. You mentioned it was negatively impacted for the quarter and would likely be for the year. Just wondering if you could flush that out. I know you're offsetting with the OpEx line and doing a good job of holding the margins, but I'm just wondering if you could quantify the costs associated with it in terms of the supply chain impact. Thank you.

Let me just start off with your comment about pricing. We took pricing on September 15th in the U.S. November 1st, internationally. The amount that you really see in Q1 is quite minimal in terms of that, because you'll see the majority of that come through in Q2 and beyond. I wouldn't say there's much there in our results to date. Obviously, it has been factored in our guidance. When it comes to the actual cost that's been a couple of million dollars. Like for Q1, we expect that will continue in Q2, Q3, and beyond. And as I mentioned before, we're looking at everything on the table from OpEx to other things that we can do with our suppliers to offset, to the best of our ability. That's why we've really held off guidance where it is, just to give us enough flexibility to manage the next few quarters.

Well, we had a soft microphone on Dipak. We'll try to get that into the transcript if you didn't catch that. Our next question comes from MIchael Turits of KeyBanc, followed by Jonathan Ho, who will be our last question for today. Michael, go ahead.

Thanks. Nikesh, couple quarters ago you mentioned that you felt there were certain go-to-market challenges for both the Cortex and for Prisma Cloud or just some competitors. Are you now -- could you give us some stuff you're talking to? Until now, do you feel like you now do -- you need to do there? And you're getting enough from those product lines to contribute to next gen ARR as you might have hoped for this quarter?

Michael I want to leave you with historical perspective. Three years ago we were not in these businesses; 18 months ago is when we launched many of these products. So today, am I delighted with where we are? A 100%. Are we ahead of my expectations? For sure. Do I high expectations going forward? Yes. Have we cleaned out some of the stuff? That's my job. Every day, every week, we clean out stuff in our processes to make sure our go-to-market capabilities, our product capabilities get better and better. As to the specific issues we were dealing with in Prisma Cloud and Cortex, we've hired some new people, they are doing a phenomenal job. This past quarter, we expect them to continue that job. Based on the visibility we have on Prisma Cloud front, similarly in the Cortex front, we're in a highly competitive market, yet we continue to deliver on our expectation and exceed them. Like I said, XDR is strategic in the context that I believe, overtime, there will be a convergence between what we do in XDR XSOAR, and our teams are working hard towards making that happen. Also, I would [Indiscernible] that we do in Expanse, so we think we have critical mass in that Cortex space to really, really continue to build product capability over time, bring them to build that into a very large business. Similarly, on Prisma Cloud again, I think you can see from all the valuations people are getting or not. If it's not value, then we'd say it's a validation that everybody has identified that as a big area. And I honestly believe that, I'm not just saying, I believe that our teams have worked hard towards building an early lead, and our job is to keep, sustain that lead, strengthen our product continually, and make sure that capabilities are made apparent to our customers.

Great. And our last question for today comes from Jonathan Ho of William Blair. Jonathan, please ask your question.

Thank you for squeezing me in. Just wanted to get a sense of where we are in terms of the return to work and refresh cycle uptake. And what is giving you the confidence that these trends will sustain longer-term? Thank you.

Jonathan, that was interesting and thank you for asking the question. As I mentioned, I've been able to meet a lot more CIOs the last 90 days than I've had in my 3 years here. And I'll tell you every conversation with CIO is a conversation of adapting their information security and IT stack to the new reality in the market. The new reality is majority of companies are not expecting everybody to come back to the office. They're all looking for architectures which can make everything consistent. The most number of cyber attacks we've seen in the last year and a half or so have been in remote working and VPN, because people have had to deploy their older VPN technology and make it be functional from every corner of the world. So people are seeing that is the new threat factor. They are thinking about how do I take this and make this a long term, sustainable, network architecture? Couple that with their Cloud transformation, it's funny. Three years ago when I'd asked them the question, they were predict -- dipping their toes in the cloud, today, all of them are in two or three clouds. So there is a very strong secular trend behind the SASE opportunity as well as the Cloud opportunity. You pick your favorite sport analogy, I think we're in the first innings of baseball and we've bowled the second over in cricket.

I understand that one. Thank you.

It's alright. I don't understand the first one either. So, it's all good.

Fantastic. Well, with that we're going to conclude the Q&A portion of our call today, and I will turn it back over to Nikesh for his closing remarks.

Thank you, everybody for joining. And I just want to reiterate in my 3.5 years of being here, I haven't felt more bullish in the business as I feel today, given the visibility into the pipeline and the results are being -- teams have been able to deliver in Q4, as well as the visibility we have going into our three-year plan off for the first quarter. I want to thank you for attending. I want to thank you -- I look forward to seeing you in upcoming investor events, as well as I want to thank all of our customers, our partners, and most of all our employees around the world for putting in the hard work to get us where we are. For that see you next time.