Nutanix, Inc. (NTNX) Earnings Call Transcript & Summary

All right. Thanks, everyone. Appreciate it. I'm pleased to have Rajiv Ramaswami and Rukmini Sivaraman from Nutanix, CEO and CFO. Thank you so much for being here.

Thank you.

I thought maybe a place to start would be for folks who aren't as familiar with the story, a brief intro of Nutanix kind of your market position and maybe how that's changed over the last couple of years.

Sure. Nutanix started out being a leader in what was called hyperconverged. We pioneered this way of simplifying how data centers are operated, built and operated to run applications. So that's what got us on the map, and we continue to be leaders in hyperconverged infrastructure, the latest market share data from Gartner shows that about 50% market share in that space. Now over the last few years, we've been evolving from that foot -- that position to become a platform -- a hybrid multi-cloud platform for running applications and managing data wherever they may be sitting, whether they're on-prem inside data centers or whether they are in the public cloud. In other words, to provide a full stack offering on top of which businesses run their mission-critical apps and manage their data regardless of where those might be. And these days, the world is hybrid. So companies have applications everywhere, including in the public cloud, including on-prem and including in the edges, and the data that we've had as well, and we provide that platform to manage all of those. That's kind of where we are today as a platform. And going forward, we also are extending our platform to be a platform for running modern applications. Kubernetes is based, containerized applications as well as these Generative AI applications that are starting to emerge in the enterprise. And so our aspiration is to be a leading platform for those applications as well, again, anywhere.

Yes, that's very helpful. I think a question that comes up is around TAM. I think at the Analyst Day, you talked about I think, $76 billion opportunity. Obviously, hyperconverged is a big portion of that. Can you maybe quantify some of the other kind of more immediate opportunities that are emerging, the contribution to TAM. What are you most excited about, in the broadening opportunities?

Yes. I think that TAM represents the whole envelope of what's available in front of us. And by the way, that doesn't include anything that Generative AI might add to or -- so we don't exactly know how big that is. But I think for us, it's all about how quickly we can eat into the TAM. Hyperconverged is a small portion of the TAM. And at our last Investor Day back in September, last year, we quantified what portion of the penetration we have with HCI and how much more we can penetrate. And there's ample opportunity to penetrate further into this TAM with our offering. At the same time, there are some drivers that are accelerating our penetration into the TAM. One of them, of course, is the world is more hybrid now than ever before. Second is there's an industry upheaval happening with Broadcom buying VMware. The third is we have more go-to-market partners these days with Cisco and Dell both in the market reselling our product. And the fourth is that we continue to drive increased leverage through our channel partners.

Yes. So I want to touch on kind of each of those components. Maybe starting with the Broadcom dynamic. Obviously, that's been top of mind. Can you just talk about kind of, I guess, customer willingness to kind of maybe move away or diversify away from VMware and kind of how you think that plays out from a timeline perspective?

Yes. I mean, over the past couple of years, we've seen a huge influx of interest from companies looking to diversify and reduce their risk independence. And initially, those are larger companies that came to us because they're more aware of what this acquisition might mean for them. But they also have the longest cycles. They take long -- they're big infrastructure, it takes a long time for them to migrate. And then the smaller customers are already not building up the awareness. After all the changes started happening earlier this year, with the Broadcom pricing and so forth, that's when their awareness grew as well. We expect this to be a multiyear journey for companies. They're not going to migrate overnight. Infrastructure migrations tend to be slow. We have a lot of experience doing these migrations because we've been doing them for a long time for the last 10-plus years, and a lot of it is automated as well. But we expect that this will play out over a period of many years.

Yes. And the current kind of pipeline, like is the sales cycle shorter for kind of mid-market? How do you think about kind of the mid-market versus enterprise pipeline coming from this and kind of the velocity of that?

No doubt. I think in general, the smaller customers were late in building awareness, but they can be faster to move because it's usually a simple environment. So I'll give you an example, we talked this last quarter about a large university, very significant university here in the U.S., wanted to do a migration of their public cloud deployments of VMware. And we were able to do that migration it was a very fairly short cycle for us, and we were able to automatically migrate their use cases -- their applications running on AWS on the VMS platform over to our platform, fairly automated fairly quickly. So that's an example of a simple deployment. Some of the larger deployments take a long time for us to win. So this Fortune 100 financial was an 18-month cycle that we talked about in our last quarter call. So we've been -- we had an 8-figure ACV deal in the prior quarter that took what over 2 years to get to that point. So that's the nature of the big deals.

Maybe to level set, could you just talk about demand environment today? I think in some of the earnings calls, you've talked about maybe elongation of sales cycles. But what are you seeing in terms of kind of willingness to adopt and general trends in the demand environment in macro.

Sure. Yes. So -- let's start with the macro, which is that we've talked about, to your point, Kevin, these elongation of sales cycles that we've seen for a few quarters now, which we believe is attributable to customers just being more watchful of how they're spending their money and cautious with regard to that, which is fine with us because, generally, our value proposition is also one of lowering their total cost of ownership and increasing their ROI. So we think that the value proposition is strong. Teams are taking customers and prospects are taking longer to actually transact though. So that's one piece. Other than that, I would say it remains somewhat uncertain, but stable, right? That hasn't changed dramatically in the last 90 days necessarily. And when we look forward, I say, look, I think we are -- we just put out our fiscal at '25 guidance, we're assuming that it stays more or less the same because I think we're all sort of reading different publications. And you sort of say, like, who knows what's going to happen in the election. Interest rate cuts we'll know later this month. And so we're assuming that it stays more or less the same as what we saw in the recent past.

Is Broadcom. If Broadcom is raising the price [indiscernible], when you win customers from them, let's just say they're short of when you were [indiscernible] VMware. Where do you think of pricing ending up for you? And then even though it does take a long time, should we expect as the Broadcom pipeline and building. Because it sounds like you're just like Yes it gonna take a long time. Is there any slope to that? And the last one is, is your portfolio and product capable of doing everything there or there something [indiscernible].

Yes. So the second and third question I answer fairly quickly. Yes, our portfolio is capable of pretty much handling the entire VMware -- VMware footprint as such. Now the pricing question is a bit more intricate, okay? It's not as simple -- and sorry, the second question was what again?

It's a pipeline...

The pipeline is certainly continuing to build, okay? So no doubt about that. The first question is actually the most complex to answer on pricing [ spend ]. So keep in mind that most of the VMware customers are largely deploying just vSphere. And so the price uplift they're seeing is moving from perpetual to subscription and then subscription full stack. So now we, on the other hand, have been selling full stack, right? Our offering is a full cloud platform. But we also have [ à la carte ] options where customers can buy what they want, not necessarily just only the full stack. We have portions that they can mix and match and deploy it. So our aim is at a full stack level, we're going to be very compatible and competitive with Broadcom. And that -- again, there's some more nuances.

With the new Broadcom?

Yes, with the new Broadcom yes, absolutely. And keep in mind also that when somebody uses that full stack, they're actually making use of all the elements of the stack. In the case of Broadcom, they may have to buy the full stack, but not necessarily really use all the elements of the stack. Right? So there is -- in fact, a lot of it is just like most VMware deployments, 80%, I would say, roughly, are vSphere only deployed with 3 tier storage, separate storage. And for those customers, when they buy -- when they upsell them to vSphere, again, the questions as they're going to consume all of it and get all the value vSphere, for example, does include HCI. So there's also a distinction in terms of real usage versus actually paying for stuff that you may or may not need.

So many of the customers just use vSphere and they're getting charged for everything. If they come to you, would that mean maybe you should raise your price for just all the current vSphere version.

So we don't have a à la carte vSphere version today. We are working on one, which we expect to be available in a limited fashion with some storage arrays, starting with Dell PowerFlex early next year. So -- and that's our ability to get into the installed base and just do more of a hypervisor replacement.

Any other questions? Rukmini maybe one on -- I think maybe breaking down the components of the business, I think can you talk a little bit about the land-and-expand portion of the business? I think you've talked about a little bit of softness there versus the renewal. I mean, this probably goes into a broader question on the transition subscription model, but kind of level set for us kind of the components and the health of those?

Yes, so just the description point, so we embarked on this subscription transformation about several years ago now. And so we -- today, we sell only term licenses for our software. And we would say that the transformation phase that is done and behind us, meaning that we've really rallied the entire company around that and all the business model, the big heavy lifting around the business model is done. Going forward, we think we'll have more and more renewals coming up over time. So that renewal cohort is going to continue to grow. We believe that at scale, sort of natively SaaS companies. We believe the vast majority, 75% to 80% of their total billings is coming from renewals because of how long they've been at it. For us, that number is less than 50%, right? So the mix of our total billings that's coming from renewals. So that is not only a growth driver for our revenue and billings, but it's also highly efficient and levered growth driver because, of course, renewals transact much more efficiently than our land and expand. So we've seen good execution around that, and we expect that to continue going into fiscal year '25. The land and expand, as you alluded to, Kevin, that land, of course, is us winning new logos, bringing new customers onto the platform, expand is growing with existing customers. That was below our internal expectations for the last fiscal year. Now we still beat all of our guided metrics, so that was good overall and both on top and bottom-line. But the mix of it, the land-and-expand portion, we believe we could have done better than we did in the last fiscal year. And the drivers for that have -- were the following. One is this modestly elongation take cycles that we talked about earlier. And the second piece is that we are seeing a bigger mix of larger deals in our pipeline, which is by design, right? So we've actually chosen to go upmarket because that's where we believe the bigger market opportunity is. And some of the dynamic around the Broadcom customers looking for alternatives is also kind of driving into that. So when you put all that together, bigger deals are becoming a larger mix of our pipeline, and that is good because like I said, a lot of it is by design. What it does introduce more variability when it comes to deal timing. So when will the deal close? Rajiv gave an example earlier about some of them taking quite a long time. There's also variability in terms of outcome, meaning how big the deal might be. And then there's also variability on deal structure. And some examples on deal structure would be duration, for example. And duration does impact our revenue. It does impact our free cash flow because we largely collect multiple years of cash upfront. And it could also mean license deployment. So if it's a really large purchase, the customer might request that they be sort of phase in the license activation can also impact rev rec. So all those are factored into how we thought about fiscal year '25 because we believe a lot of those dynamics will continue going into this fiscal year.

That's really helpful. And I don't know if you've disclosed this in the past, but when you think about kind of maybe the mid-market growth contribution versus enterprise, is that -- do you see that being kind of stable from '24 to '25 or any unique dynamics between like the customer cohorts in terms of growth dynamics that you're seeing?

So we haven't provided a quantitative breakout of that, Kevin. But look, that sort of the segment just below the largest segments, right, of the customers has been historically our sweet spot, right? And so that continues to be our bread and butter that we're going to drive continuously even going into this fiscal year. And then the bigger category where we have this more large deals, that's where we think -- I think we're well positioned, but it is more variable.

And then one on the federal market, kind of -- it feels like that's kind of strong kind of vertical for you. Can you just talk about the trends you're seeing there? Obviously, some not cyclicality, but timing in terms of kind of the big quarter federals usually Q3, but kind of what are you seeing in terms of adoption trends within the federal market?

Yes. I mean, so federal this is a strong quarter, right, it is a big quarter budget cycles and so forth year-end budget cycles. Fed has historically been a good market for us. We are fairly widely deployed across public sector, but also across government, defense, Intel, all the agencies. And so it continues to be a good opportunity for us. We continue to make good progress there. It's a lot of it is project driven, budget-driven types of spend, but we are being used for a number of mission-critical applications and a very important vertical for us. In fact, it's 1 of 2 verticals that we have as a company. Fed and health care. Those are the 2 verticals. Everything else is not verticalized.

So I want to touch on, Rajiv, you mentioned Dell, I think, earlier. So maybe walk through what's different about this partnership, what kind of TAM it opens up because it is a little bit unique versus some of the other partnerships that you have.

Yes, there are 2 elements to the Dell partnership. The first element is Dell is taking our full stack, integrating it with their servers and selling it as an appliance. In fact, they used to do this a long time ago before they bought their VMware and then they stopped doing that. And now that offering is now in the market as of a couple of weeks ago. And there, again, Dell have a huge go-to-market engine there, but we're also aware of the fact that Dell sells multiple products. They have their own storage systems. They sell ours. They also sell VMware. So -- but we're excited about the fact that, that offering is now in the market and Dell sell as being compensated for reselling Nutanix. The second offering, and that, by the way, to me, is an acceleration of our existing market, right, in terms of -- we're already in the market. Now this is another significant go-to-market lever. To accelerate our penetration to the TAM. The second is sort of opening up this new front, which is a hypervisor only replacement. So in most cases, when HCI, when customers move from a 3-tier architecture to our architecture, they have to replace their hardware. And therefore, hardware refresh cycles have a direct bearing in terms of the timing of when these steps are most could happen. Now a lot of this VMS footprint as well as the installed base out there is mostly what we call 3 tier. So servers connected to storage with a hypervisor on them. And so this -- in the past, we never really had a demand to provide a stand-alone hypervisor because it wasn't something that the market needed. Now there is customer interest in us having a stand-alone hypervisor, Dell is very interesting partnering with us. So we are actually now building a stand-alone hypervisor. We're taking the hypervisors that we have embedded in the product, making that a standalone hypervisor or getting it to work with Dell PowerFlex, which is one of their storage arrays. And that will be in the market sometime next year, hopefully, the early part of the next calendar year. And that allows a customer to substitute a hypervisor with another hypervisor, without having to replace the rest of their hardware investment. So an easier entry point into the customer less disruptive, gets us in the door. And over time, we can try and upsell the rest of the portfolio.

Yes. That's great. And how do you think about maybe the -- it's obviously very early, but in terms of kind of contribution to the financial model, how should investors kind of think about that?

For Dell specifically?

Yes.

So, [indiscernible] the first part of the solution is available as of 2 weeks ago. And so that we're assuming we'll have a small contribution this year. Clearly, it's the first year. So these things take a bit of time to get up and running. So we assume a small contribution likely in the latter half of the year. For the second solution, we believe that will start contributing in fiscal year '26.

Okay. And then I think it's important to maybe touch on Cisco. I guess how would you frame kind of the medium-term opportunity? Obviously, Cisco has a large sales force that can go out there and sell. So maybe talk through kind of the medium-term opportunity and kind of the win rates kind of that you're seeing out there with the Cisco partnership?

So Cisco as a partner is fully aligned in the sense that they don't have any other competing product. They have end-of-life, their own products that they had in this space. And their sellers are fully compensated on selling this offering from Nutanix. So we're excited about that partnership. We had the first year of it just complete. And towards the latter half of the year, our Q4, they were a good contributor to our new logo count as well. So the whole thesis of the Cisco partnership is on landing new customers. New to Nutanix that may be existing Cisco customers but new to Nutanix. And so we are excited about that. We expect that this year, we will continue to grow and build upon that. Though you should -- it's worth keeping in mind that the Cisco, Cisco of course, is huge from a GTM perspective from a networking perspective there, of course, a giant. But their share in the server market and the hyperconverged market is fairly small. So keep that in mind as well in terms of the expectations and in terms of what we could be doing there. But we are excited about that Cisco relationship and looking forward to continuing to get it to grow.

Yes. So a question that comes up is AI, right, and the implications there in your market. So maybe start with a high-level question on -- how do you think about the AI opportunity. You obviously have introduced a few products, but maybe starting with a high-level picture of kind of how you position yourself to kind of capture share of that market?

Yes. If you look at the AI [indiscernible], there is there's an element of building and training these large language models. Then there is -- the next step is to take these large language models, fine-tune it on the enterprise data that you care about or do a RAG or a retrieval augmented generation. And then now that trained fine-tuned model for inferencing. We play in the latter 2 portions. We are not in the exports as much to the big sort of training of these massive large language models from these big clusters. And that's largely happening at a very small handful of players. Our play is really, as this stack broadening out into the enterprise use cases where companies start real applications, Generative AI applications they want to build and deploy it. They deploy those, wherever their data is present. A lot of enterprise data is sitting in the data centers and also being generated at the edges and inferencing also needs to be done close to that. That's our play. And so we have a turnkey solution for that called GPT-in-a-Box that we've been in the market with now for the better half of this last fiscal year, and we'll continue to enhance that. The idea is that it makes it really simple for companies to deploy an LLM model that they like, easily pull it from a repository, whether it's Hugging Face, NVIDIA have deployed, connected to a GPU endpoint, create an Inference endpoint and offer it up to the app developer. So it really simplifies how Generative AI can be deployed. We're seeing good traction, early traction because most companies -- most enterprise companies are still in the early phases of experimenting and proof of concepts with Generative AI use cases. we're seeing good traction with customer support use cases, document search and analysis, use cases, co-piloting as well as the fraud detection. These are some of the use cases across multiple verticals.

Yes. And I guess on GPT-in-a-Box, I think you launched 2.0 recently. Can you maybe talk about kind of the net new incremental capability?

So net new when we came out with GPT-in-a-Box, what we did was we took our existing cloud platform. And then we said we will help customers augment that with a bunch of what I would call ML operations capabilities and have a services offering, I don't know to get this all deployed. With GPT 2, we are making significant enhancements to productizing all of it into a turnkey solution. Now all the workflows are integrated. It comes built in with these MLOps models. They're already part of the product. The interfaces with Hugging Face and NVIDIA, those are all automated, so the companies with the 1-click interface, you can basically go out there, download your LLM, attach it to a GPU. Create an Inference endpoint and make that available. All of that stuff is now turnkey. We expect to have that available later this year. And that just simplifies again how the stuff gets deployed in the enterprise.

Yes. That's great. And maybe another question on, on Project Beacon, I think that's been something Nutanix has been working on for a while. So maybe talk about kind of the vision there in terms of enabling developers to kind of write those applications and run it anywhere.

Yes. So if you look at the sort of [ us ] as a platform for modern applications, what do people want to do? People want to build these applications. They want to have all the services available to build them and then be able to run them without being locked in. And the public cloud today actually is a great place for you to build these applications, and you can use that native proprietary services, but then you generally get locked in. What we are providing with Project Beacon overall is 3 components. First component is the ability to manage Kubernetes Clusters because most of these applications are built on top of Kubernetes and run on Kubernetes. To be able to manage these across any environment, including public clouds. The second is providing a set of native storage services, containerized storage services that these applications need also in a consistent way across all these environments. And the third is providing a set of platform services that these applications need, such as databases to start with databases. They provide, for example, the ability for customers to manage match [indiscernible] databases or Oracle or SQL or Mongo any of these databases that they need for these applications and make those available as well. And over time, what this allows companies to do is to essentially build one of these modern applications, build it once using this set of services and then be able to run it across any of these substrates, whether they want to run it on-prem or in the public cloud of their choice. Without them having to worry about changing those applications. So we're getting there in phases. We've got some of the phases in the market already and others are coming over the next few years.

Yes. That's great. And I forgot to ask about -- we talked -- we discussed Dell and Cisco, but can you just touch on kind of the broader partner channel and kind of where that fits in the model, whether that's international, maybe mid-market focused, what's kind of the strategy there?

So our business really -- all our business goes through our value-added partners, the value-added resellers. So we have a 2-tier [indiscernible] model. And we've been fulfilling through the channel for quite a while now. Now what we've done this year is a couple of things. First, we want the channel to drive and source more business for us. And we've also created a tiering of our customers where we've opened up a set of customers, white space customers, offered it up to our channel partners to say, these are yours to go make them happen. We don't have direct sellers targeting those accounts. So there's a channel can go out there and bring those customers to us. That's number one. Number two, we've provided significant enhancements to our partner program to enable them to reward them for bringing us these new logos. And then number three, we've been signing on a number of new partners over the last several quarters. As they become interested in terms of taking our offerings to market.

Yes. That's great. Rukmini, maybe one for you on -- you discussed a little bit about the subscription transition, and you've set out some longer-term targets for free cash flow Rule of 40. I guess, how do you think about the appropriate level of investments over the next couple of years to kind of hit those growth targets and balance, I guess, that Rule of 40 metric that you talked about?

I think you're referring to the fiscal year '27 targets we had at last Investor Day, Kevin. So we're not updating those or necessarily commenting on them on an interim basis, but I'll give you a sort of a maybe a general philosophical view on that. So if you look back, starting fiscal year '23 and looking back for the 3 years before that, we effectively kept our OpEx levels fairly flat from a dollar perspective. And that was largely by design because we were going through this transformation of business model, and mindful about getting a lot of the other pieces in place. Now we are there at that point. Actually, a year ago, we were at that point. And so if you look at our fiscal year '24 results that we announced a few weeks ago, you will see that we actually increased our investment levels. OpEx grew in fiscal year '24. And our implied guide levels for this fiscal year, it is growing as well. And so we do believe that it's time to invest now because our market opportunity is large and growing, as Rajiv has talked about. And so -- but we're investing in a very prudent way, right? So targeting it at places where we know the return will be high. And more generally, as we think several years out, we are committed to balancing growth and profitability. It's the first, we should say that growth remains our #1 priority. So if we can get that extra point of growth we'd rather get that than the extra point of free cash flow margin or operating margin, it is a balance. So we want to make sure that we're capitalizing the growth opportunity but doing it efficiently. Now if I look at the drivers with the bottom-line growth drivers, I think we talked about, but if I look at the drivers of the bottom line, a few things. One, we touched upon this earlier, but the mix of billings and revenue that's coming from the renewals is going to continue to grow. That naturally provides leverage in the model because renewals transact more efficiently. The second piece is around our productivity of our sales reps. So this is now on the land and expand side and how we define productivity is the land and expand ACV per sales rep. And we've talked about how we've had improvements in that over the years. So we've seen some nice improvements over the last few years. We still think we have room to grow. So we don't think we're at what we consider benchmark levels. So there are continuous improvements that we're driving there, including things like channel, which we just talked about, selling more of our portfolio, for example, et cetera. And so that's an also leverage because the existing people, but doing more with those folks. And then the last piece is what I said earlier, which is, yes, we will invest, but we'll do so in places that have a good return. And do so in a thoughtful way. So when you sort of put all that together, those we think are the drivers of leverage going forward. And we are committed to balancing those and then running sustainably at a Rule of 40 plus over time.

Yes. That's great. Any questions from the audience?

The shares outstanding is round about 8% to 10% here. And then in the last quarter, they were down. So what you if you didn't do any buyback or -- what do you do to [indiscernible] think options in?

You don't want to repeat the question, because there's no mic there.

Right. Yes. So I think the question was around shares outstanding, how -- what should we expect it to do going forward? It did go down in the last quarter and then just, I think, SBC in general. So a few things to call out. Just more specifically on the last quarter. In June, we announced that our 2026 notes, we got a conversion notice on that from Bain Capital that held those notes. And so those have all now been converted. Contractually, we were quite settle that with both cash and shares. So we paid them [ $818 million ] of cash and then the rest in shares. And the share count went down because before that conversion, we had assumed a complete share settlement on that on an if-converted basis. And of course, we ended up paying a mix of cash and shares. Hence the share count went down. Now in terms of how to think about dilution going forward, I'd say a few things, we have become much more disciplined and closer to market practice around our equity compensation for our employees, everything from which roles get equity to participation rates, et cetera. And so a lot of that heavy lifting is done we'll continue to be really disciplined about that. We treat equity like any other expense. So we plan for it during our annual plan cycles, and we hold ourselves accountable to those. And then the last piece around dilution more generally, we do have a share repurchase authorization in place. There's over $200 million left in that repurchase authorization. And so we'll continue to sort of return capital that way going forward. And then lastly, when you think about our employee RSUs, so employee own taxes on those RSUs. And historically, what we were doing was at every vest, which happens 4 times a year, we were selling a portion of employee shares to generate the cash and then give to the IRS in terms of their tax liabilities. We've switched to now a different method called net share settlement, which effectively uses our own cash because we're generating enough cash now. So we're using cash to pay those pay taxes on behalf of those employees retiring those shares -- and so there's no selling of those shares in the open market. So effectively, it's a form of managing dilution. It's not quite a share buyback, but it has the same sort of anti-dilutive effect.

[indiscernible].

We have a specific numbers, so I'm going to give you a percentage here today, we have set our longer-term targets. Again, not something we gonna update on an interim basis. But over the longer term, we've said we will target less than 10% of revenue. SBC is less than 10% of revenue.

So you look at your kind of incremental dollar growth [indiscernible], Can you give us any color on just the relative size of the contribution between these newer opportunities whether they're VMware displacement partnerships they're doing versus kind of an accelerating available to renewal pool that you have talked about in the past?

Yes. So a few different things there. So when you think about revenue and billings growth, I would say you [indiscernible] that I'll talk about sort of just revenue and billings, which does get -- does benefit from renewals. So renewals cohorts do continue to grow nicely year-over-year. So that does help with billings and revenue. Keep in mind, though, that renewals typically transact with a lower contract duration relative to the land and expand. And for both our total billings and revenue, there is an element of the duration that comes into play. So that's on the renewals. When you think about land and expand, the largest driver there is what we've been doing for years now, which is displacing the legacy sort of 3-tier deployments out there. So Rajiv said before that we look at the industry probably the vast majority, I don't know, 80% of data centers to the legacy 3-tier environment. And so the biggest chunk of that land and expand will come from that motion, which is us displacing the legacy. And that is now being aided by this boost from the competitive environment and what's happening with Broadcom and VMware customers. So that's the first sort of piece and probably the biggest piece. And then you have the partners we've talked about, the Cisco and the Dell, which are smaller. I mean Cisco is 1 year and Dell we just announced, right? So those are clearly smaller. And then channel partners, as Rajiv talked about before, also aiding with that. But again, it's early for us because we -- while we transact everything through the channel, they are starting to help us really truly source new customers.

Any final questions? Okay. I think we can end it there. Rajiv and Rukmini, Thank you so much. .

Thank you for having us.

Thank you for having us.