Christiane, CFO, thank you so much for joining us to day for the Goldman Conference. Yes, thank you. Ken, there's been so much discussion this week around the next phase of CapEx buildouts for AI. I remember back in 2015, 2016, we were talking about the cloud buildout with the data centers from hyperscalers and the role that network security would play in that. I want to bring the conversation into today. When, as investors, we hear about the CapEx build that's happening for AI today, how do you think about where network security fits when we hear about Oracle and Microsoft building out these big data centers, either for training or for inference? Yeah, I think for the AI-related security business, we put in three different categories. We call the AI Assist, which we have probably a dozen products right now using AI Assist. It's the FortiManager, FortiAnalyzer, FortiSIEM tool. Once customers pay 20%- 25% more, they can get all the AI helping automate all this management tool we call the AI- Driven Security Ops, which is about 11% of our business last quarter, growth like 35%. The other part we call the AI Protect. It's AI helping the secure operation automate all these kind of signatures, all these new attacks. That's where we've been doing that for actually 15 years now. There's also what we call the AI Secure AI. It's protect AI infrastructure, like Oracle, all these kind of data centers. We do work with both the AI company and also some of the infrastructure companies trying to protect the AI, whether from some kind of a Gen AI or some kind of data leakage or some other part. That's also where we see some good potential because we feel we have the technology. We build our own ASIC chip for security, which can have a much faster, better computing power than any other kind of software approach. It will be a perfect fit for some kind of data center, for all this kind of AI infrastructure there. That's what we're closely working with them. Also, internally, we use a lot of AI for R&D, use a lot of AI handle supporting. We're doing that for like almost 15 years. If you look at the pattern, we have more than AI patent than any other cybersecurity company, like over 550 AI patents related to the AI. That's where we feel AI is important and a lot of growth potential, but it's still in the early days. To your point on early days, is there a nuance here between training and inference? What I mean by that is, as we go from more training workloads to AI to inference workloads for AI, presumably the security changes when you go to inference because there's more enterprise adoption or there's more user adoption. Maybe just talk to us a little bit about that dynamic. Yeah, there's a few eventually, because right now AI companies just burn so much money. I think eventually certain applications, certain things, they need to benefit from that, right? That's where the security comes in and try to see, I have to say, each application vertical could have different security concerns, security needs. I think right now we just feed our own kind of using AI, whether to handle the customer support. We feel if we do it well, can lower the supporting cost a lot, can also get into the consumer supporting the home user market. That's where the application we feel feed on it quite well because we have technology ASIC can develop the product into that market. Without AI to handle the supporting, we just cannot really go for that market. That's some part. Maybe Christiane also sees a lot of AI-related, maybe even some other company mentioned AI also helps lower the GI finance costs. Yeah, one of the areas that, of course, I'm involved in is looking at AI for us internally and in the finance function. I'm going through the same processes that our customers go through, right? What are the risks around AI and how do we secure AI? It's related that we are looking at the risks, what security do we need and what security products does Fortinet have or needs to establish over time to secure prompt injection, LLMs, what information goes out of your own network into AI engines, right? How do we make sure that this is secure? It's kind of very collaborative for me to figure out how can I adopt AI and benefit from AI, but also how do I work with the Infosec team and what is it our customers are asking us because they have the same concerns about security around AI that we need to figure out together. Ken, at a very fundamental level, Fortinet's IP has been weighted towards secure networking, the convergence of both security and networking for quite some time now. What about on the networking side? Are we at the point where there is enough step-up of traffic because of AI, such that for the switch access points, the actual networking infrastructure also needs to be upgraded in addition to the firewall infrastructure? Yeah, that's where I feel the networking security was still the top market in the cybersecurity space. Not just AI generates so much traffic, but also you connect a lot of devices, OT, IoT, whether the robot or connect the car or this appliance from home or connect online. I have to say most of these OT, IoT devices, majority of the time or maybe even most of the time, the only way to secure it is using network security because that's very different than the traditional endpoint market, which secures your laptop, your phone, which has a pretty standard OS to easily develop endpoint software to protect that. If you look at all these OT, IoT, all these small appliances, all these kind of robots, all these kind of cars, they all have quite a very different OS. Sometimes very limited computing power to add any security software on it. That's where the protection pretty much all has to come from network security. That's why I do believe network security will keep on growing, will keep on being the top in the whole cybersecurity space. That's also not only we keep on selling more products, but also we all started to build our own infrastructure we call the FortiCloud. That's also eventually combine all these kind of hybrid approaches where we're keeping driving the company grow. Maybe I'll stay on this idea of cloud for a moment. You had the Laceworks acquisition, and I think there's been an increase in investment in your cloud portfolio over the last five years or so. How do you feel about the quality of your virtual firewall product and your ability to protect North-South traffic in the cloud? I think a lot about virtual firewall is based on the same operating system, FortiOS. FortiOS has much more functions integrated together compared to any other competitors. Now FortiOS has about 30 functions integrated together, and about half of that 30 functions we can use in FortiASIC to our advantage. That enables us to keep on adding more functions. If you look at the network security space, that's also the reason I started Fortinet 25 years ago, because network security needs new functions. 25 years ago, network security pretty much was a firewall, VPN, and then intrusion prevention, separate box. There was some application control that had to do with some software, and there was also antivirus and more endpoint software. That's where, whether you call it NextGen firewall or UTM, now we're starting to integrate more functions into the same OS called the NextGen firewall. Nowadays, we're starting to see people need to be concerned about what's the data leakage prevention, DLP, what's the CASB, what's the WAF, what's under, that's called SASE. We feel we call the SASE firewall. It's the SASE function needed to be built into the firewall. That keeps on driving the network security growth. Most of the time, the attack comes from the networking side, right? That protects the attack from the networking side, using some kind of platform more efficient to block, no matter all the different applications or different approaches. That's the most efficient way to do that. That also needs a lot of computing power, also needs real-time high-speed processing of this data. That's where the ASIC come in to help. At the same time, the single OS can simplify the infrastructure, be more efficient. Otherwise, you have to have multiple boxes lined up, each providing different functions there. That's what we feel in the network security, keeping developing, integrating new functions, keeping our ASICs functioning, and keeping making it easy to manage the deployment is more and more important. That's the same trick we keep on doing for like 25 years. Yeah, absolutely. Let's talk about SASE in more detail. I want to better understand what's happening at the branch office because we have competitors like Zscaler, for example, that will say the displacement of firewalls at the branch office where you have a very strong position is actually accelerating. I think there is some nuance here in that not all branch offices are the same, and there are multiple ways that you can essentially protect your branch office. Maybe break it down for us. Are you seeing pressure in branch office firewalls? To what extent can you cross-sell SASE into the branch office? Maybe just a little bit of a conversation on what's happening architecturally. Yeah, I think the branch and also some like retail vertical, if you can provide a solution, combine networking, combine security, combine all the other functions together, and then they do need hardware to be deployed there. You can forward certain traffic into cloud process, but that's where the latency, the cost will be much, much higher. There's some kind of privacy, data safety concern, and also some service providers also want to offer their own kind of solving SASE, privacy SASE. First, I do agree customers need some additional security functions. The second point is most current firewall vendors cannot provide all these additional security functions, like all these DLP, all these CASB, which SASE providers have. That's where the SASE market comes up because they can add some additional functions. Right now, they can only process in the cloud because they cannot integrate with all the other network security functions. If you're using SD-WAN, it's a very good example, right? We started to integrate. If you look at the top five SD-WAN, we're the only one developed in-house, integrated with security. Within a few years, we've become the number one player in the SD-WAN market because you don't need to separate SD-WAN with all security single sources. The same thing for SASE. Once you have a SASE integrated with the firewall, with all the other things, you don't have to get all the separate things. I also have to send the traffic remote to process and send it back. That's what I see is how network security market will keep on evolving. I don't feel SASE will replace network security, but SASE will replace firewall. Firewall needs to add a SASE function to keep on going to the next stage. That's the way keeping happening in the network security has been there for like 30+ years. Christiane, on this point on SASE being incremental to the firewall TAM, maybe you could share with us a little. I know that SD-WAN is included in the firewall. It's not monetized separately. Talk to us a little bit about how your deal sizes change when you're able to upsell SASE and to the extent you're able to also upsell networking switches, access points, et cetera. I think that's the true benefit of Fortinet, that we have the ability to upsell into our customer base over time and capture more mindshare and show the customers the benefit of the FortiOS. How do the deal sizes change? There's not one formula because every customer is different. Some have more LAN/WAN requirements, some have more SASE requirements. As you know, our SASE journey just started about two years ago. Before that, we were more relying on service providers to roll out SASE, and then we decided to develop it ourselves. We see good penetration, and we see good win rates in our RFPs. The growth potential is massive because, as you know, we disclosed, we're about 13% penetrated in the large enterprise space. There's a lot more in large enterprise, as well as in the rest of the market where we are the network security provider. Maybe let's talk through the COVID cohort in particular, to the extent you already have engagement with those customers that bought additional product from you in 2020, 2021. What we're trying to figure out is, is there an additional upgrade cycle happening with that COVID cohort because they're engaging with you across more of the portfolio? Maybe illustratively, or if you have any specific customer examples, what are you seeing from some of those best customers, those best deals that were coming down the pipe in 2020? What do those deals look like in 2025? Maybe for both Christiane and Ken, whoever would like to address. The best insight we have is in the large enterprise segment, right? I think in 2020, 2021, customers were trying to upgrade and secure their networks because everything digitized, nobody was in the office. What we see now is that they're optimizing for more traffic, for AI, for new security risks that weren't even so prevalent five years ago. There's constant discussion around what new security risks exist and what firewalls do I need to cover these risks and how do I evolve my network architecture. With the newer firewalls that we have, the more security they can process, a significant opportunity over the next couple of years to sell more updated, upgraded technology to our customers and then expand into other products. I know we've spent a lot of time talking about the ebbs and flows to the end-of-support cycle in particular. We're now mostly through the third quarter. Is there anything that you can share with us as you look at the updated data? I know how closely you pay attention to the units in the maintenance support system. Are there any updated thoughts you can share with us on how that end-of-support cycle is tracking and whether it is moving the business as meaningfully as you would have liked? I think what we need to understand is that that end-of-support cohort is one part of the upgrade, right? It's typically a technology refresh that we've seen. We pointed that out because it was more obvious in our install base. We had declared a lot of devices end of sale five years ago during the supply chain shortage. We are tracking well, but we only have true visibility into what customers are doing in the enterprise segment. In the lower end of the market, we can see it after registration rates and so on, services attached to devices update. It's not that we have the visibility through the opportunities because it's truly channel driven. In the higher end of the market where we are involved with our sales teams and have direct discussions with the customers, we know pretty well what they're doing. Yeah, and also first, this end of service is very different than the normal refresh five years. If you compare that, much smaller, a very small part to the tier end of it. The second, that happens all the time. For us, also a little bit difficult to track because we have a two-tier, three-tier model. It goes to distributors, it's innovator, all these things there. The third point is really not refresh or end of service, never a top growth driver. The top growth driver always was the new function you provide, how to protect the new attack surface, right? Also how to address whether the speed that more stock kind of still happening every like 18 months or 24 months, the speed will double, there's more connection, like whether internal secure AI data center, all these OT, LT connect cloud, all these, that's all keeping driving that one. In the past we never put this as a kind of a growth driver. Also when we gave the midterm guidance in the United States in November, we say if you look at the three categories, secure networking, which grew about 8%, CAGR in the next five years will grow faster because we are the only one who have an ASIC unique advantage in the secure networking side. Unified SASE grew probably like 20%, probably 18%. We're keeping growing over 20%. That's also common. We have over a $1 billion business come from unified SASE also growing. Even we only launched SASE probably like less than two years ago, but we are fast growing. The same thing for SecureOp. It's 11% of business come from there. Also last quarter grow like 33% or 35%, something like that. That's the growth driver. That's we gave very confidence in the midterm will grow higher than the market growth. Market growth 12% for the next five years will grow above that, 12%+. That's the guidance. That's the confidence that we had because we look at each category where better keeping gaining market share in each category. Refresh probably confused some of the analysts, but which we never consider as kind of the top growth driver. Yeah, I have two follow-ups here. This is really good detail. I really like this point that the end-of-support cohort is actually a small piece of the refresh. You have a lot of engagement across your customer base that is more technology-led and innovative-led. The question then becomes, what happens over the medium term? I know it's too early to talk about 2027 guidance. The concern that investors have is if they calculate what they think the end-of-support cohort is and they subtract it, it suggests that product revenue next year could actually be negative. Could you just give us your thoughts here? Is there a scenario where product revenue next year is negative? I put it this way. First, it's also dependent on the overall market, right? That's where you look at the last year, probably the product revenue may be negative growth because it has some digestion going on. If the market is today healthy, in the normal environment, I do see the product revenue keeping growing. If you look at company history, we all grow above 10%. Right? Sometimes around 10%, but sometimes above that. By 2021, 2022, last two years, the product revenue probably grew like 40%, 50%. Some are driven by supply chain. In 2023, there's some digestion going on. The product revenue kind of flat or even, I think maybe negative 1% or 2% growth, something like that. I think going forward, since we're normal now, I don't see this kind of a supply chain, all this constant up and down. In the normal environment, I feel the product revenue will keep on growing maybe around 10%. That's the whole industry. We do believe we're keeping growth faster than the industry. Absolutely. I think there's a point here as well about visibility because, Christiane, you have better visibility at your enterprise customers. If we were to say, throw the Gartner forecast out of the window and only think about your medium-term growth algorithm based on what your enterprise customers are telling you as an example, give us a sense of what those conversations are. What are your enterprise customers telling you about their intention to grow with Fortinet or their intention to expand budget with Fortinet? I think there are a couple of growth drivers for, I think you were predominantly interested in product revenue right now, right? There are a number of growth drivers for product revenue from our enterprise customers that are, as Ken mentioned, AI- driven, that are functionality driven. Like, what do I need to protect? There's newer firewalls coming out now that can do more, and there's the regular upgrade cycles. We have expansion activity into OT. When we were in the network, we have a lot of customers that start securing OT. I don't want to call it necessarily white space, but OT is attracting more security. Not all manufacturing or OT landscapes have been secured in the past. Why can they not be secured with software? Because typically these devices don't have enough power, and you implement segregation firewalls and similar to secure the OT-related networks. That's a huge growth market that we are participating in well. Yeah, I see the three growth drivers in the enterprise. The first driven by the new function, whether the ZTNA, the DLP, the CASB, or the SASE function, you need to build this new function into the firewall platform enterprise that we're already using today. That's what we call the SASE firewall. Second, it's driven by the speed. The network speed keeps increasing. That's where I believe next year we'll benefit from the new ASIC. We only announced the new ASIC Wednesday in the product we started selling. We're not like some other competitor announced something still years to come. You will see some benefit from the new ASIC will help in driving much faster speed and lower cost, more energy efficient. The third is more like attack surface. Like you didn't have a security cover like a lot of OT, IoT, a lot of appliances, and even expanding to like a home market. That's a new attack surface, new connection. That's also driving the growth. Even within enterprise, like within the data center, internal segmentation and secure the east-west traffic in the AI data center there. At the same time, you protect all this work- from- home, all this new device, all this appliance. That's the top three drivers. I did not mention anything come from refresh or come from end of service. I appreciate that. Maybe we'll stay on this topic of OT because I do really enjoy when you demo your solutions there. I'm shocked that that business, or in general that the industry, hasn't adopted OT security in a more meaningful way. My question for the both of you is, why now? Why does it become a bigger deal now when this business has been part of Fortinet for some time and it's growing, I think, spilling slightly north of 20%? It's growing a little bit faster than the business. I would have hoped to see much more meaningful growth out of OT. Do you think it can become a more meaningful growth driver and why now? Yeah, the OT is probably generating over $1 billion per year for us. We also mentioned the earnings call. It's grown more than 20% year- over- year in the last earnings call. I do believe the next 10 years will be a lot of OT, IoT area growth because more devices will connect, even a lot of applications or like GenAI, and may drive a lot of additional traffic. I need additional protection. That's where we're in that market. We are the only leader based on the Westland report and doing that for more than 10 years. They need a little bit different kind of a function protocol, even the hardware appliances. Sometimes you need like probably hardware needs kind of ruggedized deploying like outdoor environment, all these kinds of things. That's doing it kind of a long-term investment. Sometimes maybe some other companies see the market move towards hardware, need more engineer work. We think that's a lot of growth potential in that area. Eventually, especially in the OT area, you don't see other like endpoint players. You don't see some other like different kind of because the networking probably the most efficient way to protect all this OT, IoT space. Yeah, absolutely. Christiane, I wanted to ask you a couple of questions about go-to-market and visibility. The first is we've talked a lot about the breadth of Fortinet's growth drivers over the last half an hour. What are the changes that you're making in the sales force to be able to enable some of the successful cross-sell? Are there any tweaks or adjustments on the margin that can help you cross-sell into the enterprise in particular? On the go-to-market, of course, we have incentives for our sellers to sell more products and solutions to our customers. The same is true for our channel partners. In the enterprise, you need to get into different buying centers for that though, because it's not all under one umbrella, right? We talk about convergence. In the budgets, often sit either with the IT organization or networking versus the security. We need to bring at the customer, we need to bring them together and we need to get access. That sometimes takes longer, takes a little bit longer from an upsell perspective. I like to talk to customers. I talk to customers and especially when you talk to purchasing departments, they really benefit from the integration and getting it from fewer vendors and better price points. Sometimes the purchasing departments actually drive the business to look at Fortinet. Yeah, the success example is you can look at SD-WAN. That's how we were successful. Because SD-WAN is the first networking protocol that can result in traffic-based application. That's also using the SASE. The SD-WAN, we pretty much all use in upsell cross-sell, become the number one because we have a huge firewall install base. Within a few years, we become the number one SD-WAN kind of player in the space. The same thing I believe happened in the SASE now. We do give a number every quarter. You can see kind of like how fast we're growing within less than two years. I have to say we make some kind of a mistake like a few years ago because when we IPO 16 years ago, the service provider account almost 30% of our business. In like five, six years ago, I do believe service provider has a huge advantage if they play SASE because we're doing quite well with them through the firewall VPN service. Somehow they just kind of not move fast enough and gave a lot of SASE players a chance. That's where we changed the strategy two years ago. We're doing our own SASE launch. We're building our own SASE infrastructure. You can see within two years, that's all driven by upsell cross-sell. That's also a much shorter sales cycle. All upsell cross-sell for SASE average only like a few months, maybe like two, three months. Compared to our competitors, it's 18 to 24 months sales cycle. I have the confidence within a few years will be the number one in the SASE space. Yeah, very good. Christiane, Ken was talking earlier about all the volatility we've seen in the market over the last five, 10 years and firewall growth in any given year. As a CFO, I imagine that your job gets more fun when you have visibility. Tell us a little bit about your priorities and your seat. How do you improve that forecasting, that visibility into the channel, into the pipeline, into the quality of the pipeline? Would love to hear about what you're working on there. We have the runway business, and I think that that will always be lower visibility because we have such a distributed channel organization, right, from a country perspective. What we are doing is we are working more closely with our partners to create better visibility. In the enterprise space, we have longer-term plans, account plans that we are working on with our customers to drive that visibility. The other part that we are working on, and it's going to take a little bit longer, is these customer journeys, right? To really build out the customer journeys of what could be the next product. There are also some of our channel partners who are very advanced in that area. We are partnering with them to make sure that this is available to them. They also, based on what they see in their own data sets, we share that and work on longer-term account plans. Yeah, very good. Fortinet is a much bigger company today than it was several years ago. You've scaled into a much bigger company. My question for you is, as you think about becoming the number one SASE player at scale, is there anything else you need to do from an organizational or a structural standpoint to be able to preserve unit economics, be able to continue to drive margins? We talked a little bit about visibility. What are the priorities as an organization as you scale? I think first, the cybersecurity or network security space, each year there's a new threat, new function needed. We need to keep up the innovation, keeping our threat list, I hope, internally on the innovation. That's a lot of companies when they get bigger, they're kind of more slower on innovation. We try to fight in for that one, keep up on innovation. Second one, once we get bigger, we also can leverage some of the economy of scale we have, whether the installation base or some other branding or some other resource we have. That's also with doing some long-term investment, whether certain infrastructure or certain technology, which will be a benefit company in the next five to ten years. That's also a few kind of important. On the other side, we also want to make sure the team also keeps upgrading and also keeps learning, including myself. That's also kind of pretty important to maintain the company growth. I want to ask about the buyback, and more specifically the timing of the buyback. An additional $1 billion increase in the board authorization for the repurchase. Why now? We've always been opportunistic about our buyback, and we believe it's a good time to buy back. If you look at our 8-K filing, you can tell that we bought back about $1.4 billion in August. It's a good price point right now for us. Yeah, if we look at it since IPO 16 years ago, we probably spent almost $10 billion, bought back probably almost 40% of our standing share. I don't see any other cybersecurity company have the confidence we have. We do believe companies in a predictive position, a lot of long-term investment eventually will pay back. That will keep us to see, hey, this could be the opportunity to buy back. Ken, since you mentioned continuing to learn as one of the priorities for yourself and the leadership team, what is the most exciting technical milestone that you've hit at the company with your engineering team in the last 12 months that you're just really proud of? I think like how quickly we can adopt the market change and also how quickly we can respond to the customer need, whether by the product function, like all this kind of SASE, all this infrastructure, and how quickly we even adopt like some business model. Like we before a little bit more channel focused, now we're more like enterprise, direct sales, marketing focused. I think the team did a great job. We have a great team. We have amazing technology and drive the company's long-term growth. Fantastic. Please join me in thanking Ken and Christiane for their time. Thank you so much for joining.