George Kurian: I’ll take the second, and Michael cover the first question. Thank you for the question. Listen, I think that with regard to customer adoption of flash-based technologies, they are — we saw the high-performance landscape moved to flash several years ago, and there’s been a steady movement of that footprint to flash. That is about 15% to 20% of the overall storage market, maybe 20%. The next tranche of use cases are more in the general purpose application footprint. These are in the process of migrating over multiple years. We are in the early innings of that migration. And so we feel very good about the position of our flash portfolio to attack that part of the market. It is essentially the 10K hard drive market that is about 30% to 40% of the hard drive market. So, you’ll see that move over time. And so I’ll let Mike talk to the first question you had.
Mike Berry: Sure. On your question, Asiya, as it relates to linearity, we did see a nice quarter-on-quarter pickup in Q2 which was really driven by the factors that George discussed. And look at the midpoint of guidance for the year, we do expect it to be relatively consistent with the numbers we like to talk about, which is the 48% in the first half and 52% in the second. Again, keep in mind that the good bit of our revenue, thankfully comes from support, very predictable. Hopefully, we can do a little better, but that is — the midpoint of guidance is pretty much right on linearity.
Asiya Merchant: Great. Thank you.
Mike Berry: Thank you.
Operator: Thank you. And our next question today comes from Wamsi Mohan with Bank of America. Please go ahead.
Wamsi Mohan: Yes, thank you so much. I was wondering, George, if you could comment a little bit on a public cloud revenue trajectory in fiscal ’24, given some of the changes that you noted? And given those changes in CloudOps, how does that change your long-term revenue outlook for that business on a relative basis, I think before you were thinking 40% of total Public Cloud. Wondering where you’re thinking that, that might shake out now in the long-term?
George Kurian: So, let me provide some baseline before I jump into the strategy review takeaways and the implications. First, cloud is roughly 10% of total revenue. Subscription is 23% of cloud revenue, down from about 35% a year ago. So, it’s a small percentage of the total cloud revenue and an even smaller percentage of the total company revenue. The mix of Cloud Storage and CloudOps is still relatively consistent approximately 60/40. We focused our strategy review on all elements of our cloud portfolio and had five key takeaways that I outlined in my prepared comments. Sharpening the focus on first-party and hyperscaler marketplace storage services. These performed very well in the second quarter and continue to be uniquely differentiated both to end customers of our on-premises solution and a vehicle to acquire net new customers alongside our cloud partners.
We would carefully manage the transition of some of the storage subscriptions to our consumption offering as we roll out [1P] services, customers that used to buy storage subscriptions prefer to now go towards the 1P offering, and we’ll manage that carefully. We will integrate some standalone services like data protection and privacy into our cloud storage offerings so that they bring more value to the base offering. And we’ll refocus other services like Cloud Insights, which are subscription services and Instaclustr to differentiate NetApp in the cloud storage workload motions that we are focused on. We’ve decided to exit some standalone services like Virtual Desktop and SaaS Backup services. And all of this will lead to about a $55 million ARR headwind from these actions in the second half of fiscal year ’24.
The reduction in Public Cloud subscription services will be partially offset by the good growth of our consumption cloud storage services in particular. And so our plans for the second half of the year assumes that we will have a modest decline in cloud revenue. We’re not going to guide it but we assume that. And we have built that into the guidance for the fiscal year ’24, which we took up by approximately $100 million. We’re not going to comment today on the outlook for the overall cloud business. We will talk to you when we update our long-term models to that effect.
Wamsi Mohan: Okay. Thanks, George. And if I could, Mike, your margins were really, really strong, both sequentially and on an absolute basis. Wondering as we think about free cash flow margins, would all this EBIT margin improvement flow through into free cash flow margins? And secondarily, just on the EBIT margins, is there a way to dimension out of the three things that you noted, maybe rank order or order of magnitude so that we can get some sense around the confidence of sustainability, especially as it relates to commodity pricing, which you seem to indicate won’t really matter too much sequentially. But just wondering what was the biggest sequential driver of that margin improvement? Thank you.
Mike Berry: Sure. So on two questions there. First of all, on cash flow, and I’ll do operating cash flow. We do expect for the year, I talked about it in the prepared remarks, operating cash flow to move relatively consistently with non-GAAP net income. So to your question, yes, as the income increases associated operating cash flow, short of any quarterly fluctuations in working capital. So all good there in terms of free cash flow margins largely moving with operating cash flow. And then on the second question, and I’ll answer this on a sequential basis, not a year-over-year basis. As we look from Q1 to Q2, certainly, the mix shift was a significant impact. We did receive some benefit on costs as those older inventories are now completely gone.
