Jason Ader: Thank you.
Alex Kurtz: All right, thanks Jason. Next question please.
Operator: Thank you. [Operator Instructions] And our next question will be coming from Kash Rangan of Goldman Sachs. Your line is open.
Kash Rangan: Thank you very much, team. I’m curious to spend a little bit of time, if I don’t mind, Dave, thank you read out a bunch of things that Susan is going to be doing to the go-to-market organization. It came across as being very substantive — at the same time, it also went through very quickly. Can you expand upon what exactly is going to be the new bent to go to market? And the measures that Susan is adopting, what are they meant to remedy versus the approaches in the past? And how important is this? Because the product we’ve always appreciated the product strength of HashiCorp it’s been the key asset for the company. Just trying to understand incrementally the tweaks to go to market what are they really addressed? And what are they really motivated by so we can all understand the shape of this recovery? Thank you so much.
David McJannet: Kash, sure. Happy to double-click on that a little bit. Just to reiterate, really, the first substantive change that we introduced over the last 6 months, was a refocusing of our go-to-market resources on a slightly smaller number of accounts. I think that’s point number one. Obviously, we have been in a very aggressive investment phase coming out of our IPO. And as the market environment changed, we obviously had to remedy the fact that we had a lot of resources now allocated in places where perhaps we’ve gone through relatively quickly. So now we hold those resources back to focus on the most important accounts and that is certainly paying dividends, and it’s the appropriate thing to do. Point number two, I think it’s worth actually just contextualizing where sort of as you evolve from the early adopters of the world to the early majority, how you have to engage with them in a much more prescriptive manner.
Again, that’s the consistent pattern of this particular part of the growth arc of any company to get to this kind of customer base, which is the early majority, our go-to-market motions are now much more prescriptive in their nature, both for our customers in terms of how we engage with them, which is we go talk to about more of a solution-oriented conversation around life cycle. And then number two, it’s much more process rigor, which is, again, just the nature of scaling this the side of the organization. So I don’t think — I wouldn’t say that changes are massively substantive. It’s much more process-oriented to help get more consistency in growth as we hit this particular scale inflection point. And the first one is just really about reallocation of resources, which have gone slightly extended as we grew.
Kash Rangan: Got it. And one follow-up for Navam. When I look at the sequential total subscription revenue growth rate. I mean it was the highest we’ve seen in several quarters. I’m wondering if you could double-click on that because if I just annualize that sequential growth rate, you get to a better growth in what you’re guiding to, maybe there’s some onetime effects in Q4 sequential subscription revenue. I also look at the sequential change in current RPO, roughly $62 million or so again, the highest we’ve seen in several quarters. Can you help us understand what might be driving that Q4? It looks like some of the leading indicators look good and some don’t like to know customer count is a little bit on the slugger side. But certainly, these caught my attention, I just wanted to see if you could offer more perspective.
Navam Welihinda: Yes. Thanks, Kash. And absolutely. I mean we saw pockets up optimization, which relates to some of the 100,000 numbers and customer numbers that you saw. But from a broad perspective, Q4 was a great quarter as it related to the performance we saw from a rent perspective and a cRPO perspective. Now it’s important to keep in mind that there is seasonality in the business in the fourth quarter, particularly in the back half of the year and specifically in the fourth quarter, where these are larger quarters compared to Q1, for example. So there is a seasonal aspect to Q4 versus Q1. But for the most part, we saw positive signs, which we reflected in our prepared remarks and which also was the basis for how we were thinking about the growth recovery and our path back to sort of a 20% quarterly revenue growth rate sometime in the 2026 period.
So yes, we’re optimistic about the early signs we’re seeing. A – Alex Kurtz Great. Thanks, Kash. Let’s go to the next question, please.
Operator: Thank you. One moment. And our next question will be coming from Brad Sills of Bank of America. Your line is open.
Brad Sills: Oh, great. Thank you so much. I wanted to ask a question around the emphasis on security. You called it out a couple of times here, both as a separate — focus on go-to-market and also on the commercial differentiation. How should we read that? Are you identifying that as kind of a core use case beyond provisioning with Terraform? In other words, our customers, do you see line of sight for customers potentially landing with security or Terraform and then the expansion opportunity kind of unfolds from there?
Armon Dadgar: Yes, Brad, thanks for the question. As we’ve talked about a lot, we really have two core products, obviously, Terraform, which we think about as sort of the key landing point when we talk about infrastructure life cycle management starts with provisioning, and there’s a sort of a broader portfolio around that. When you think about — sort of second land product, it’s very much the beachhead within the security life cycle story that we’ve held, right? So those have always been historically the land business. They make up the majority of the revenue. I think what you’re seeing is an evolution from telling sort of a point product story around those into really simplifying that solution story that Dave talked about.
So that our field isn’t able to go talk about we’re not just solving a secret management problem while we’re solving a security life cycle. We’re the beachhead, but really that brings in things like our radar product for secret scanning, detection and inventory and then brings the boundary as well for the privileged access management for the human access. So it’s really about moving from sort of telling that point product story into a broader solution, but it’s not a dramatic shift all has always been a land product for us and is a significant revenue contributor.
Brad Sills: Understood. And then if I could also ask for a bit more detail on some of the process efficiencies that you’ve identified for areas of improvement. Dave, you mentioned speed in the pipeline velocity in the pipeline is a focus some technical resources to kind of back that up that you’re putting into play here. Would just love to get more details on how you’re thinking about some of the tactical things to improve process discipline?
David McJannet: Brad, I think this is — I guess I’ll just bring it back to just the operational opportunities for us to improve as we scale. We’re here at our sales kick off again, reiterating this through our growing sales organization. And so the process is just really about process consistency and things that yield faster and higher win rates. There’s a whole litany of things that are operational in their nature. And I think it’s just, again, the nature of where we are, it’s how do we do this consistently across the world in every geo in the same way, and this is just normal operational day-to-day element. And I certainly feel so we’re good about it. I think the fact that Susan St. Ledger has been now in place for a couple of quarters.
I have to remind us that she has been part of a couple of different companies going from the $600 million scale to the $1 billion plus, and that’s certainly what it takes to do so, and we’re super bullish about the work she’s doing.
Brad Sills: Great. Thank you, Dave.
Operator: Thank you. [Operator Instructions] Our next question will be coming from of BTIG. Your line is open.
Unidentified Analyst: This is Chevron for Gray Powell. Thanks for taking my question. So I just want to circle back on Terraform stacks. Can you provide any insights or statistics on that product? And then when it goes officially GA, how should we think about that accelerating the free to pay like this year and going into next?
Armon Dadgar: Great. Thanks, Trevor. Yes, so the way I would think about Terraform snacks is, effectively, it can almost call it the Terraform 2.0. It’s the biggest enhancement we’ve added to Terraform since it was introduced — and effectively, what it does is enhance Terraform’s ability to manage multiple environments and multiple layers of the infrastructure stack at the same time, right? So prior to the stacks, customers have to sort of manually build process around how to handle multiple environments. For example, development and testing, staging production. So there was a manual process and manual orchestration around that versus with stack, we now have a native understanding and a native ability to or across those multiple environments.
For our particular customer base, this is most impactful to those kind of 4,000 biggest customers they’ve talked about. They all have very large, very complex infrastructure. And so we think this is going to be a compelling set for them. And in fact, already, we’re seeing great resonance with the folks in private beta using this capability already. So the decision we’ve made is really to bring that only to the commercial customers through Terraform Cloud to begin with. And so to your second part of your question on free-to-paid conversion, effectively, it won’t be available in the pure-play community addition. You will have to start on the commercial products to leverage stacks, right? So obviously, at the very bottom end we have a free tier that allows some limited scale usage by adding substantial scale usage where you have to be on one of our commercial tiers of Terraform product.
Alex Kurtz: Okay, next question, please.
Operator: Thank you. [Operator Instructions] And our next question will be coming from Fatima Boolani of Citi. Your line is open.
Fatima Boolani: Good afternoon. Thank you taking my question I wanted to zone in on the sales motion that will emphasize more of a cloud-first approach into your enterprise and very large customer base. I wanted to get a better understanding how much of this will involve the conversion of an existing Terraform environment into cloud form factors? And how much of this is really going to be emphasized and focused around the expansion and extension of self-managed enterprise overall Hashi footprint into the broader portfolio of solutions? And then I have a follow-up, please.
Armon Dadgar: Yes. Thanks, Fatima. Yes, it’s a great question. So effectively, the sales comp change that took place is really to emphasize land deals on Terraform Cloud. Now that said, obviously, we’re engaged with customers on a renewal basis as well. It’s obviously in our interest to move them to Terraform Cloud. It’s also in the customer’s interest. I think they realize features much more quickly. They don’t have to do upgrades. They’re not on the hook operationally. So there’s a lot of benefits to the customer from moving from self-managed to cloud. But similarly for us, we get better visibility into the usage, lower cost of support and ability to deliver innovation to them more quickly. So the sort of process changes are really around incentivizing land, obviously, there’s strong incentives on the expansion side as well.
And then our view as ones people are part of the cloud platform that simplifies our ability to drive the next product along because they’re already on an integrated chassis.
Fatima Boolani: I appreciate that. And just as it relates to one of the bundles and the more storytelling approach on the go-to-market front. So you did introduce the Dura Trust bundle last year, I’d love to get an date on how much traction that’s gotten vis-a-vis maybe penetration in the base. And to the extent there are other logical bundles that you could create to build that transaction velocity and enhance that expansion and extension momentum, especially since you’re incentivizing the land deals on cloud. So shortening that expansion sales cycle — into other solution areas like boundary or taker and way point? That’s it from me thank you.
David McJannet: Yes, it’s Dave. Thanks for the question. Yes. So I think the simple way to describe it is the — we effectively have two conversations we have. One is infrastructure life cycle, one is on security life cycle. We previously had this Zero Trust SKU bundle, which has essentially been replaced by the security life cycle form factor, which gives you access to multiple products within the security portfolio. So yes, we have actually recognized the success of that to some degree and institutionalize that as a default selling motion for security life cycle management, and then also introducing that infrastructure life cycle management. So we’re really trying to simplify the structure of what our field teams have to bring to bear, and we’re certainly optimistic that, that simplicity will drive better yield.
Alex Kurtz: All right. Next question, please. And I think we have to limit to one question just a matter of time that we’ve left here. Thank you.
Operator: Thank you. [Operator Instructions] And our next question will be coming from Matt Dezort of Needham. Your line is open.
Matt Dezort: Hi, this is Matt on for Alex. Thanks for taking the question. I wanted to double-click on the HCP cloud chassis. Is Terraform still generating the lion’s share of that revenue stream so far as customers move to fully managed? Or is Vault making a move? And how is that composition expected to change over the next 12 months and into fiscal ’26?
Armon Dadgar: Yes. Thanks, Matt. So today, actually, both Terraform and HCP are significant contributors to the cloud revenue line. I think what we expect this year is given the shift we’re making towards providing a sales incentive around landing with tariff cloud we expect that there’ll probably be some differential increased land on Terraform and then looking at basically evaluating whether a similar thing would make sense back half of the year for Vault. But again, I think this is where we look at customer appetite and there’s slight differences given the run time nature of Vault. There’s a little bit more customer apprehension versus something slightly less onetime critical like Terraform. So we’re going to take a little bit of a wait and see on customers. But yes, I think near term, we’ll see more Terraform.
Matt Dezort: Thanks.
Alex Kurtz: Thanks, Matt. Next question, please.
Operator: Thank you. [Operator Instructions] And our next question will be coming from Brad Reback of Stifel. Your line is open.
Unidentified Analyst: This is Mark on for Brad. Want to see if you could provide a little detail on the linearity in the quarter and the macro improvement, the, I guess, optimization abatement that you guys talked about and how that’s sustained through February, and how that contributed to kind of your confidence for the guide for both FY ’25 and ’26? Thanks.
Navam Welihinda: Yes. Just a reminder, we’re subject to regular enterprise patterns, which means that there is linearities more towards the back half compared to the front half of both the year and Q4 was stronger than expected from a linearity perspective. And as I mentioned earlier, all positive signs from a macro perspective and how the optimization cycle is playing out.
Unidentified Analyst: Thanks.
Alex Kurtz: Thank you. Next question, please.
Operator: Thank you. And our next question will be coming from Ari Terjanian of Cleveland Research. Your line is open.
Ari Terjanian: Hi, all. Thanks for taking the question. Just real quick on RPO. What percent of lands in the quarter were the cloud, HSP Cloud? And then do you think — is there any potential pull forward ahead of comp plan changes for this year?
Navam Welihinda: Yes. There was nothing unusual that happened in the fourth quarter compared to the other quarters. So nothing in terms of unusual activity there.
Alex Kurtz: All right.
Navam Welihinda: Thanks.
Dave McJannet: Thanks, Ari.
Operator: Thank you. And at this time, I would like to go ahead and turn the call back over to management for closing remarks. Please go ahead.
David McJannet: I’d just like to thank everyone and express my thanks for the participation for everyone who is able to attend. And we certainly appreciate all the questions. We look forward to speaking to everybody soon. Thank you.
Operator: This concludes today’s conference call. Thank you for participating. You may all disconnect.
