This is the summary of the first quarter, we have 16% growth in net sales. We have a 14% decrease in operating income, 25% increase in total operating expenses. We have a net 9% increase if currency exchange rates used for 2022 were applied for the first quarter of 2023. On a non-GAAP basis, we have these numbers, it's a negative number for the operating income. You may remember, in the first quarter, in regard to software, there were certain situations, and after the second quarter, there will be changes. Compared to the first quarter, we have these situations. Well, our guidance has not changed in terms of increased sales as well as income. Next.
Here are the pre-GAAP numbers. In the first quarter, you may wonder why we have a decrease from the fourth quarter. We are seeing that the expenses are still high. In that sense, we have seen that the income ratio has gone down. As the net sales increases, we will see changes taking place. This is net sales growth by region. We see growth in all of the regions, especially in Europe and EMEA. As described here, last year, in regard to the deferred revenue, for last year, there was $988 million, which should've been recognized as sales. We have this coming in in the first quarter. Therefore, it may seem a bit high here.
If we exclude that, then it would be a -3%. Here is the situation if currency rates of 2022 were applied for 2023. This is by segment. You can see by consumer and enterprise. Here is the breakdown. In terms of non-GAAP sales, now we had a major impact because of the currency exchange rates. Within this, there had been price increases as of April 1. Before that, there was demand that came about, and this was about approximately JPY 1 billion worth. If we exclude that, then it was about 7% or 8% growth. In the Q2, we have some that were included in the Q1. If we consider about the Q2, then compared to the previous year, it may be a negative result.
Meanwhile, for the Americas, we have this negative number. You may be wondering why it's -10%. We'll be showing you the numbers about this. Overall, when it comes to the cloud operations, there is a decrease in AWS activity. We have seen a decrease as well. In the Americas, the cloud-related sales was quite high. It has been impacted. We see continued good growth in Japan. Meanwhile, when it comes to the consumer and the enterprise situation, we see here the pre-GAAP results. You can see here in Japan, the consumer side is high, and this will be touched upon in Mr. Omikawa's presentation. There's also beyond-device security services that is doing quite well, as well as our traditional business. This is the active customer count.
The flow has not changed that much. We see growth in the subscription channel. Here are the ARR numbers. As for the numbers, the ARR is calculated. When we create the budget, we are converting the numbers, so therefore, the numbers are slightly different from last year. However, overall, we see a similar growth rate. In that sense, these numbers can be used. There's also a 25% increase. You may be pointing out this number, but there has been a decrease in investments, and there has been the impact of this felt in this area. There is not much to comment about this area, but in terms of the expenses, between the fourth quarter to the first quarter, we see this usually a decrease in the expenses.
We have the wages which has not been impacted that much. Compared to last year's first quarter, the expenses had increased last year in the second quarter. So we're looking forward to increase net sales in the second quarter. This is the cash flow situation. There's nothing to comment here. As for the headcount, this had been mentioned last year, but we see an increase in the headcount. We have reduced churn rate, and so there had been a net increase last year. We're not trying to intentionally decrease the headcount this year. We have reduced the rate of recruiting compared to last year because we were able to hire. Here's the breakdown of the headcount.
We have not frozen the recruiting activities, but we will not be recruiting as much as last year. Here's non-operating items. One comment, and we have the equity method applied. The equity method is applied and because of that, we have to take into account the situation there. There's nothing to comment on the balance sheet. Here is the highlight and the lowlights. For the highlights, we're seeing strong growth continue in Europe and EMEA, both the consumer and enterprise business has seen healthy growth. Also in Japan, this is a highlight for Q1, but there was pre-booking of renewal revenues due to price increase. As for the lowlights, already as mentioned, there's a slowdown in ARR because of the situation of the subscription business, and there's a overall slowdown in cloud operations.
This has impacted the situation in the Americas, and we're seeing a decrease in revenues. That's my explanation. The projection for this fiscal year is unchanged. With that, I would like to close off my presentation, and I would like to answer any other questions that you may have later on. Thank you very much.
Dear investors, thank you for joining us for the new year's first Q1 Trend Micro business update. Trend Micro has been in the cybersecurity for 35 years now, and we continue to always adapting and always innovation. In the past five years, we've been embracing all this cloud and SaaS transformation, and we are very happy to announce that we believe our transformation from product to platform are very successful and well underway. We believe our competitive edge against our competitors that is offering the cybersecurity platform are the following three things. First, with Trend Micro, it's very easy to integrate with our existing EPP, the endpoint protection and existing customers environment, and also the third-party integration. Second is Trend Micro can best support the hybrid environment, no matter it's half in cloud, half in on-prem, or any type of multi-cloud solution.
Trend Micro has the best support for hybrid environment. Third, Trend Micro understand how the IT operation work and also the innovative Trend Vision One can support the security operation center's work. Therefore, Trend Micro's product can work across IT and SOC operations. With this advantage and our platform transformation already underway, we are very confident and have our Road to 2025. We can see Trend Micro in 2025, we will cross $2.5 billion of gross sale. We will have $1.5 billion of ARR, annual recurring revenue, and we will achieve the Rule of 40, which is the profit margin plus our growth rate will cross 40%. We will have more than 100 million protected assets, no matter it's desktop, it's consumer, everything.
We will have more than 500K enterprise SaaS customers. We will exceed 18 million consumer customers. That's our whole company's The Road to 2025. Although these are road, the transformation in both consumer and enterprise are all underway, but they are in different pace. Therefore, starting from this quarter, we will talk about different transformation between consumer and enterprise business. From 2017, consumer business was 26%. Until 2022, consumer business is only 22% of overall Trend Micro's business. Also, the distribution and how they progress in different country and region are very different. As you can see, Japan has majority consumer business, 46%. EMEA only have 12% of consumer business. Europe is almost 100% is enterprise business. America have 18% of consumer business.
Those are different country distribution and different pace of the company's transformation. Even though Trend Micro, under the same brand, global brand, we are going through this refresh and activation of risk to resilience, very successfully. We transforming Trend Micro's overall brand from a traditional product cybersecurity company to a cybersecurity platform company. They are under different pace. Therefore, starting from this quarter, I will introduce our COO, Kevin Simzer. He will introduce in more detail about our business progressing, though both in enterprise business and in consumer business. It's the business health operation. Hope this new information will help you even more understand about Trend Micro's future and our business operation. Thank you.
Thank you, Eva and Mahendra. Hi, everyone. My name is Kevin Simzer, and I'm the Chief Operating Officer for Trend Micro. We thought it would be helpful for you to get a better idea of what our long-term plans are for our enterprise and our consumer businesses, and a little bit more insight as to where the growth is coming from. Let's jump in. From an enterprise perspective, all of these numbers that I'm about to share are non-GAAP numbers. They're for reference purposes only, and they give you an idea of how we're thinking about the business and where we think the growth is gonna come from. All of the numbers are in US dollars. They've been converted at the exchange rate below in order to give you some comparables.
From The Road to 2025, our long-term plan, we're targeting $2 billion in sales, gross sales by 2025. We've been transforming the business, that means we've been driving more and more subscription SaaS business, that is $1.5 billion target by 2025. It all comes down to customers. How are we doing, what have we set for our target there? We've set 100 million protected assets. A protected asset is a desktop or a laptop. It could be a work, a virtual machine in a modern data center. It could be a cloud workload in a hyperscaler or a container. Ultimately, where it really matters is how are you doing at growing your customer base? We're targeting 500,000 SaaS enterprise customers by 2025.
We feel like the markets that we're in give us lots of room to expand and grow. We sell in the IT infrastructure buying center. That's where we are selling our endpoint protection, our email security, our network IPS. In the SOC buying center, of course, the hottest topic right now is XDR, and our market-leading platform is doing well there. From a cloud buying center, we're definitely jumped on this one quickly over the years, and we attached ourselves to hyperscalers, and that's where we're protecting applications that are running in a cloud environment. We're doing all of this with our unified cybersecurity platform, one of the broadest in the market, and it all starts with Attack Surface Risk Management, where we get a good idea of what a customer's overall attack surface looks like.
We can sprinkle over top of that our threat intelligence and get a good idea of where the most important assets are that you should be protecting, and we can provide the protection. From a Q1 perspective, we saw our enterprise sales growth continue to drive forward 9% year-over-year at $334 million. Nice growth continuing to happen within the enterprise space. Our Annual Recurring Revenue is really the nucleus of this business that we've been continuing to move more and more of our customers towards $692 million at the end of the quarter. That was up 25% year-over-year. As that part of our business continues to get bigger, we can see that our gross sales growth will continue to accelerate.
From a SaaS enterprise customer perspective, we're up over 373,000 now SaaS customers. That's up 9% year-over-year, and that's with two sales motions. Number one is we are doing health checks and talking to all of our existing customers. If it's right for them, we will be upgrading them from their on-premise offering to our SaaS offering. As we continue to land new logos, we're also landing more new logos with our SaaS offering. Both of those are helping us to increase that number of SaaS customers. We're doing a really nice job of getting both broader and deeper within our customer base at 68 million protected assets and 29% year-over-year growth. SaaS continues to be quite important for us, and it has been leading the charge from a transformation.
Like I said, we are selling in a hybrid environment. When we can, we've been actually moving aggressively towards our unified cybersecurity SaaS platform. Our SaaS business is now, well, $108 million at the end of the quarter. We finished up 30% year-over-year growth, and that continues to be one of the major growth areas. We can see as this continues to get bigger, it will have a bigger impact on our top-line numbers. If we dive in deeper on what the areas that growth came from, you can see it's across all three of the buying centers that I laid out there. We continue to do very well in IT infrastructure operations, up 23%.
SOC operations, and everything to do with XDR is up a whopping 74%, so really, really nice growth there, and that continues. That's been going on. From a cloud operations perspective, at 16% year-over-year, this is softer than what we have typically seen. In fact, the comparable quarter, last year at the same time was up 60%, so we've seen quite a big softening in the cloud operations. We've seen longer sales cycles. We've definitely seen projects are there, but longer sales cycles, more approvals needed, and many customers starting to rationalize their spend with hyperscalers. We see as they rationalize their spend with hyperscaler, it also means that they rationalize their spend around security relative to that hyperscaler. We're definitely seeing that softening. That in particular is what has impacted us in the Americas.
Cloud operations has been our growth engine within the Americas, we saw that softening the most in the Americas, that had an impact on both our Americas number and also on our overall annual recurring revenue, where that was down a couple of points. Couple of examples. We thought we would drill into cloud operations a little bit, from a cloud operations standpoint, this is sizable for us. We're up over 10,500 enterprise customers. That's up 28% year-over-year, we're protecting 6 million now cloud workloads and applications. Really nice terms of breadth. We've been transforming our go-to-market, whenever you think of the cloud and you think of go-to-market, you can't help but think of super marketplaces. Specifically, the one that we leaned into the most was the AWS Marketplace.
Really pleased to see this up over 84% year-over-year. We won the Global Partner of the Year award from AWS for Marketplace last year based on the success we've seen, now the AWS Marketplace represents our largest channel to market. In terms of a customer win, this is an existing customer of ours in the U.S. They're a software company in the data analytics space. They had a new project, in bringing that new project on board, they were looking for a little bit more visibility across their infrastructure, they felt like they had too many tools. We ended up winning this expansion project, and it was displacing CrowdStrike and Rapid7 in this account. The customer decided to consolidate security tools into Trend and remove CrowdStrike and Rapid7.
A nice example of us expanding with the breadth of our platform. From a SOC perspective, we're up over 8,700 SOC customers now, we've really been doing a nice job of leaning into this quite heavily, 86% year-over-year growth. We have an optional package that a customer could pick up, and that is a Managed XDR package. That is because we're seeing this shortage of cybersecurity professionals in the industry continue to really cause challenges for many of our customers. We are now offering up a Managed XDR offering. That gives. In some cases, we might be a second set of eyes with our security practitioners. We might help them with 7 by 24. We might help them with off-hours coverage or in sometimes prime time.
That's an offering that we have in place. Because we've seen more and more activity in and around managed security service providers and global systems integrators wanting to actually help customers with this shortage of skill set, we decided to jump in and do even more here. We closed an acquisition in Q1 of a small little technology tuck-in called Anlyz, brought us a number of security practitioners, specifically in the SOC space. They brought us a platform that helps us with what's called a SOAR offering, so really a lot more automation that we can build into the security operations center, ultimately with the goal of making our enterprise customers more effective in their SOC. We have an example of winning a customer.
This is in the EMEA region, actually in financial services, specifically insurance, so heavy compliance, lot of security, and they had multiple vendors. They ended up with wanting to rationalize their endpoint, and ultimately deploy an XDR offering so they could in fact get more visibility as to what was going on across their enterprise. We ended up winning this business. We displaced Symantec on the endpoint, which we've done many times, but this is a customer example where we displaced Symantec. In terms of competing for the XDR, we competed against Palo Alto, CrowdStrike, and SentinelOne, and we ended up winning out against those three.
Just to show you the strength of our platform and how that can all come to bear and help out customers. Okay, over to the consumer business. In this particular case, because the majority of our consumer business is in Japan, we thought we should talk in terms of Japanese yen. We have a long-term plan for this business as well. Our Road to 2025 shows JPY 60 billion in gross sales, we feel like is a good target, and that means that we will continue to grow our consumer business. In fact, not only grow, we'll also grow the customer base, 18 million paying consumer customers by 2025. We've really got this focus in on the non-personal computer, the non-PC part of the market. We feel like that represents some open opportunities for us and to help customers out.
We're targeting 25% of our entire installed base to be non-personal computer. Up until now, we've been really focused in on go-to-market innovation, and we've been fixated on new channels to market. Mobile has been our biggest growth over the last several years, and that will continue as we continue to do well in terms of protecting consumers on their mobile devices. That's been the biggest part of our growth. We've been looking for alternate channels, in particular the telco space in the EMEA region, and we're doing well at securing a number of telcos who would like security to be built into their offering.
Because we're one of the unique cybersecurity companies that has both an enterprise business and a consumer business, and because we all went through COVID together and everybody is still working in a hybrid work environment, where they're working at home sometimes, maybe all the time, or they're working in the office sometime. We found that some of our enterprise customers wanted an offering that would help them with those workers that are working at home. They have their work computer, and that's fully protected, but what about the other devices on that home Wi-Fi? How can they protect those? Well, that's exactly what our consumer offering does. We're packaging that up for our enterprise customers, and we think that's gonna actually be very helpful in terms of driving some more growth within the consumer business.
Finally, we continue to do a lot of innovation in around the consumer space and one of the areas that we're seeing is around identity protection. That's an area that we have done. We have an offering, and we're continuing to expand on that. We're doing some very, very innovative things around NFT and what that could potentially mean for the future. Lots of stuff going on in terms of helping us to drive additional growth within the consumer business. From a Q1 performance standpoint, very, very nice growth. Up for the quarter, we finished at $15.2 billion. That's up 8%, 8.1% year-over-year. Very pleased that we saw growth across all the geographies that we do business with.
In the areas that we feel we've invested in, that is around mobile and telco channels being increasingly important to us. We're seeing our AOV start to increase as we expand our overall size of wallet and what consumers are spending with us as we add additional capability within our platform. That's gonna be another area that we will continue to grow and expand on. With that, I'll finish. Thank you very much. I hope you found this helpful. I appreciate your time. Thank you.
My name is Ueno of Daiwa. Can you hear me? Please allow me to ask a question. In regard to the lowlights of page 28, could you tell us more details about this lowlight? In regard to the pre-GAAP, in regard to the decrease, is it because of the cloud operation security decrease or is it because of tougher competition in the Americas that there is a decrease in the cloud operation so that the overall results are down? In regard to the factors involved in cloud operation security, could you talk about this?
Let me go one by one. First, in regard to the cloud operations investments, this was touched upon in Kevin's presentation as well. Up until now, there had been more and more investments made by AWS. In regard to our customers, they're looking at more efficient ways of utilization. AWS net sales have been stagnant in terms of growth rates. In regard to the second point about the Americas, I mentioned one point, but another point is the fierce competition that's taking place.
With the fiercer competition that you touched upon, is that the reason why the non-GAAP growth is low in the Americas?
Yes.
There's also the cloud operation security spending situation. Does it look like this will end? What's your feel about this in the Americas?
As Eva has mentioned, ultimately, we'll be moving forward with the transformation and we'll be conveying the value of our transformation to our customers to tie this to results.
Second, I have a simple question. On page 22. You know, there seems to be an increase in the add-on expenses. Was there something that took place internally?
Yes. In January, throughout the world, we gathered the sales force people from throughout the world. This was an important meeting, and there were expenses there.
This is a temporary thing, and does this end this year?
We're doing this annually.
What about for the quarter?
We will not see this in the third quarter and the fourth quarter. There may be some other different event that occurs, but in regard to the sales event itself, that will not take place within this fiscal year.
That's all from my side. Thank you very much.
I would like to add. On overall basis, it's higher because we had a face-to-face meeting for the first time in three years.
I understand. Thank you.
Thank you very much for your question.
I will unmute your microphone for the next person. Please ask your question.
Yes. SMBC Nikko Securities, my name is Kikuchi. I was going to ask, basically the same two questions as Rena San. I think this is everybody's interest. As far as expenses goes, headcounts did not increase this time. Well, actually, it's higher than last year, but from the second half of last year, it is not really increasing in terms of expenses, maybe because of seasonality. We want to know what happens next. The company plan was underachieved last year. If you repeat the same process once again, you would lose the trust of the stock market. I understand that you may be thinking that it's more important to grow the business. The company's plan, the budget, in order to achieve that, without fail, are you going to control your expenses? Is that the plan or intention?
Last year, we could not achieve the target, and we explained the factors behind that last year. We had the upfront investments, and over the short term, profit is not necessarily everything, so we may not be able to achieve the profit target for the short term. For transformation, we want to capture the new opportunities, and we have to make investments, and that will turn to future profit. We will try to explain these situations at these meetings. We already have a forecast for this year, and we expect to be able to meet that plan. If there are any changes going forward, we will try to provide explanation.
I see. Through the transformation, if anything is going to increase, is that going to be mostly headcount related, payroll related?
Well, as... Maybe Eva should explain this.
The AI, for example.
Yes. I'd like to take the chance to address those questions. The first one is talking about the U.S. and also the cloud operation revenues not achieving. I think we do see that in the past two quarter because of economy, because of all the macro situation, we see the slowing down of customers moving their on-prem infrastructure onto the cloud, which is our major. Before, that was our major cloud operation revenue growth coming from. That part of slowing down is just, you know, the project, they slow, they don't move those on-prem infrastructure onto the cloud, and therefore, their spending on the cloud operation security is less. At the same time, we're seeing there's a huge demand for those cybersecurity, pure cybersecurity, Security Operations Centers budget is increasing.
Therefore, we want to switch all our efforts, both on the field and on the RD side, onto the security operations centers investment, which is in our product is Trend Vision One. You will see that we are doing the switching of the resources both in the RD side because of different capability or expertise that we need to hire new people that is more specific to security operations centers knowledge and expertise. On that part, we will increase the investment. At the same time, of course, on the cloud side, we will try to control and see how we can switch those expertise onto the SOC side and not just, like, letting them go.
Those are the resources switching time that we were doing is not about we slow down the hiring or anything, but it's the expertise are different and therefore, the human resource profile has to be switched. At the same time, we also seen this very important AI, new type of OpenAI, the Large Language processing capability that we should be analyzing and using. Therefore, we did slow down some of the hiring so that we can better see how we can better utilize all this OpenAI and this new capability as using the AI as our application development platform. Those are the moving and the change in our investment area. I would say, I'm very happy to say that we believe that our switching to security operations centers efforts is starting to kick off.
Our investment in our the OpenAI, very quickly in July, we will announce AI-based security operations centers Vision One, which is very powerful and we believe that will be enable our customers to use this AI platform to achieve better cybersecurity operation. Those was achieved within two quarters. That is showing our investment in the AI and in the human resources expertise part is really at the right place and rewarding.
Thank you. Thank you very much. If you would like to ask in Japanese, please take advantage, there is an interpretation facility available. Now, there has been an explanation from Eva, and I understood very well. Now I'd like to ask about the U.S., and I understand that the ARR is growing there. In non-GAAP, there was slightly negative results, but there is growth. In regard to the non-GAAP revenues, it is not as high as before. When we look at the revenues on an accounting basis, it's not going to be that great a negative factor. Is it the case that the non-GAAP fluctuations are going to impact revenues? Which should it be?
The non-GAAP impact is not going to be eliminated completely. As you say, when everything goes to subscription, then at that point, they change the situation with non-GAAP. Everything in SaaS is not paid on a monthly basis. Based on the circumstances of the customer, there may be three-year contracts, and there may be impact not felt on the non-GAAP until then.
I see. Thank you very much. That's all from my side.
I also want to add something to that. When I talk about our investment in the security operation center and the new product, Vision One, that Vision One's revenue is totally SaaS-based and is all the ARR, and also it's all paid by subscription. It will have the same effect as what the non-GAAP will be smaller because it's now multiple year deal.
Thank you very much.
Thank you very much for the question. We'll unmute the next person, so please identify yourself and then ask your question. We'll unmute the next person. Please identify yourself, then ask your question.
This is Sato speaking. Can you hear me? There's only one question. In regards to the first quarter results, for the internal numbers, do you... This is quite good. Do you think that something was lacking or was it satisfactory? In terms of operating income, previous time, we understood that there were several points that were completely open. In terms of the operating income, it was around JPY 7 billion. I thought that it would be JPY 7 billion-JPY 8 billion, but now you have JPY 9.5 billion in operating income. Probably the difference is in the area of the salary and benefits. That may be the big difference, I thought. How should we perceive this? Please tell us.
Yes. I mentioned this in the session, it was according to what we forecast. We have to look at the prior investments made in the Japanese market. Whereas this appeared in the first quarter.
After the second quarter, this might be a negative impact, we have to look at that. If we look at just the first quarter, we have seen this situation. I see. In the first quarter, I thought that there was JPY 1 billion offsite costs, this JPY 9.5 billion is quite a good effort. It may not necessarily be the case. Well, we don't necessarily feel that way. Compared to the second and third quarters of last year, it was around JPY 7 billion-JPY 8 billion. I thought that the numbers would go down to that extent, it didn't go down that much. You have a decrease of the headcount by 45 persons, I thought that this was the biggest impact.
You think that there was the prior investment impact. Yes. In regard to the cost, we're trying to be more efficient about our usage. We are working and making efforts there, and we want to continue to increase profits. When it comes to, as Mr. Megumi has mentioned, there was the demand because of the demand situation. Therefore, the impact on the profits was not that great. When we look at this on a pre-GAAP basis, it may seem that this has increased the profits considerably. If it's on an accounting basis, I believe that the impact was limited and we were able to keep down the expenses. In areas outside of salary and benefits, we did not spend that much.
I see. Once again, in the interviews, please let me ask further questions. Thank you.
Thank you very much. I'll unmute the next person's microphone. Please state your name and affiliation and ask your question.
This is Segawa, Morgan Stanley Securities. Can you hear me?
Yes, we can.
Sorry about the last time. I have two questions. Both are related to outlook forecast. Well, U.S. non-GAAP declined 10% down year-on-year, which is a huge decline. If you look at other securities companies' earnings in the U.S., in the tough macroeconomy, they are really trying to reduce the cost, control the cost. You also mentioned fierce competition. Compared to three months ago or 6 months ago, is the competition getting definitely fierce? Is this getting more difficult? Can you please explain the situation in the United States? That's my first question.
Thank you for your question. I spoke about competition, but it's not just related to the cloud investment. I think the competition is basically unchanged, but there is a new factor, which is cloud operation investment deceleration, which was explained by Kevin too. If you combine these two factors, unfortunately it translated into this decline, 10%.
I see. Thank you. Second question. The situation is quite tough in the United States, but in Europe, Asia, Middle East and Africa, strong growth is still continuing. Current level of inquiries and the future outlook, are there any things that we should be concerned about or look out for?
Cloud investment deceleration, is this going to be more broad? It will spread? That's one potential concern. EMEA, Europe will grow faster than America. That's what we expect in our outlook. Faster than America or Japan.
I see. Europe and the Asian regions. You are saying basically that there is nothing for us to be concerned about at this point in time?
Yes, that's correct.
Thank you. That's all from me. Thank you.
Thank you very much. Are there any other persons who would like to ask questions? No more questions? There does not seem to be any more questions. We would like to close off the Q&A session. Please go ahead, Eva-san.
I was just want to say, I think the reason that U.S. is hit harder is because for Trend Micro's business, our U.S. is more relying on the cloud operation side of the revenue growth. Versus other regions is actually more balanced or not overly relying on the cloud, SaaS business growth. That's why this time when the cloud operation slowing down, U.S. is hit and affected most, but the other three region is not as hard.
Thank you very much.
Thank you.