George Kurian: Listen, I think that the first comment that I would make is AI primarily offerings today on unstructured data, whether it’s predictive AI using unstructured data to analyze images or audio files or generative AI that analysis text on various types of document formats, unstructured data is the priority. Second, I think with regard to unified file and object, listen, we created unified storage and we have a really strong track-record in unified across file, block, object and cloud. And I think that is the new definition of unified rather than little systems that tried to say that they’ve got one protocol or the other. I think the third is when you talk about AI, it’s a broad topic. And therefore, what customers typically have is versions of data that they used to trade different models.
At the time that they are running the trading workload, they typically store it on a high-performance landscape like all-flash system. But they keep those models available so that they can go back and look at when they make changes to models and data sets and what the implications are for accuracy. And so the archival life cycle of that data is usually on disk or on cloud. And then I think the last point I would make is, listen, we are seeing clients use hybrid workflows. Public cloud is a strong place where a lot of the developers and data science teams are beginning their Workflows, either Vertex in and Google or Sagemaker in Amazon and our solutions on public cloud give us a strong position to start with the data science team at the start of these AI projects.
Krish Sankar: Thank you, guys.
Operator: The next question is from David Vogt with UBS. Please go ahead.
David Vogt: Great, thanks. Hey, George. Hey Mike. I had some phone difficulties. So I apologize if you addressed this. On sort of the AI sort of strategy going forward versus like mass capacity storage, what are you hearing from your customers from the enterprise side in terms of what the priority looks like from an investment perspective? I know your mass capacity product is seeing some really strong traction out of the gate. But over the longer term, how do you think the mix between high-end, high-performance storage and mass capacity trends? And then maybe just on Public Cloud real quickly, I know this has been sort of a fits and starts business for you. When you think about how much of maybe an impact on your management bandwidth, how are you thinking about that business longer term now?
I know you’re talking about giving out updated outlook maybe next quarter. But do you still think it has the same opportunity to be a key driver for the business? Or is it maybe a little bit less of a longer-term opportunity today than you might have thought 90 days ago or even a year ago at this point? Thanks.
George Kurian: Let me hit on those two points. I think the first is with regard to AI, again, as I mentioned, it’s a broad life cycle of tasks. There are light portions of the life cycle that run on extremely high-performance systems. And then there are portions of the life cycle where the data sits on more fine-tuned capacity-oriented systems because you want to keep versions of your models available. And so I look at it like any type of workload, there’s a portion of time where the workload has data that’s hot and then there’s a portion of its life cycle where you want to keep a copy of the data. With regard to the overall all-flash array outlook, listen, I think we have one quarter in. We are really pleased with the adoption of our capacity flash products.
Overall, what I see is all-flash will grow at higher than our total storage business and will be a bigger part of our mix. Within all-flash, the capacity flash products will grow more quickly than the performance flash products because one is attacking the next tranche of upgrades and refreshes, which is the 10-K drive market while the high-performance products have already been in market for a long period of time. So I think that’s how they break that out. With regard to cloud, I think that, listen, the opportunity is strong. We are excited about the growth of our cloud storage services all of the capabilities and the pace of customer adoption of those services. We have more exciting news to come with Google around the work we’re doing with them, both with regard to the expansion of our offerings as well as new use cases in the Google Cloud that you’ll hear more about in the next couple of weeks.
And I think that our approach right now is to focus on the best parts of our cloud portfolio have a dedicated go-to-market model that has been well received by the hyperscalers. We’re 1 quarter in. The cloud storage and consumption offerings performed well. We have work to do on the subscription side. We’ll give you an update next quarter. Our overall view of cloud has not changed.
David Vogt: Great, thanks guys.
Operator: The next question is from Steven Fox with Fox Advisors. Please go ahead.
Steven Fox: Hi, thanks. Good afternoon. I just wanted to follow-up on some of those last comments, George, especially on subscription. I guess I’m wondering, obviously, you want to grow faster in public cloud. But — and the subscription business being down, it seems like it’s consistent with the type of macro we’re in. So I guess I’m trying to understand more specifically, given all the other stuff that’s going on in terms of public cloud, in terms of refining the business, why the subscription business is especially disappointing here as opposed to maybe riding it out until you start to see an up cycle? Thanks.
George Kurian: Yes. Listen, I think that we are not the only company in the world that had a subscription cloud software business that got impacted. When we saw the trends for optimization, you generally see the consumption part of the business get optimized quickly because you are on a pay-as-you-go contract. I think the subscription part usually gets affected at the time of a renewal of a subscription or a decision to expand or not expand a subscription. That doesn’t excuse the fact that we wanted to do better in the subscription part of our business. I think we’ve got work to do to refine our portfolio, sharpen the value proposition, optimize pricing in certain cases to meet customers’ expectations, and we’ll give you an update on that. We’re already working on those. We’ll give you an update on that on the next call.
Steven Fox: Great, that’s helpful. Thank you.
Operator: The next question is from Wamsi Mohan with Bank of America. Please go ahead.
Wamsi Mohan: Yes. Thank you. It sounds from your comments like you had at least 7 to 8 points of backlog-related headwind from last year in AFA. Can you help us think through is the magnitude sort of similar in fiscal 2Q? And for fiscal second-half on the Hybrid Cloud side, is it fair to think that there’s going to be a 4 to 5 point acceleration in growth? And as you look at the estimates that the Street’s modeling is kind of — that’s kind of what is implied. And I’m wondering if you could talk about what is the upside that you’re seeing in hybrid that’s offsetting the weakness in public, given your relative overall guidance didn’t change? Thank you so much.
Mike Berry: Hey, Wamsi, it’s Mike. Thanks for the question. So let’s go through the numbers. So yes, you’re pretty close on the impact. It was about [Technical Difficulty] So last quarter, we talked about, if you adjust for the backlog benefit in the first half of fiscal ’23 and you compared our growth this first-half with the second-half of last year when we declined about 5% or 6%, we expect the growth to be better than that, still slightly negative. That is about the same in Q1 and Q2, so Q2 has about the same impact. Based on the midpoint of guidance, we do expect Hybrid Cloud then to have growth in the second-half, the low-single-digit growth based on the guidance that we gave. And we’re still comfortable with that based on the progress that we saw in Q1, especially related to C-Series.
The focus that we have on the new products, as well as the go-to-market changes, we do expect those to bear more fruit as we go into the second-half, and that’s based on what we’ve seen not only in pipelines and then also sales activity. So overall, yes, that would be accurate, and that’s what gives us confidence as we go into the second-half of the year.
Wamsi Mohan: Okay, great. Thank you so much.
Operator: The next question is from Meta Marshall with Morgan Stanley. Please go ahead.
