All right, welcome everyone. Thanks for joining us at the Extreme Networks Investor Day. This is our first event since 2023, so it's been two years since we have seen all of you, and thank you for joining us at NASDAQ. Can you believe this company's been public for over 25 years? This Extreme went public in 1999. We just rang the bell this morning downstairs, and it's so exciting because it feels like a startup, right? I mean, it's so much innovation happening and new people coming on Board and joining us. I know you're eager to talk about some of our new executives that have joined us over the past two years. Networking is changing. Networking is growing again. We are delighted to be here, and thank you all for being with us. Obviously, I'm the IR guy. I have to say this.
We're going to be talking about non-GAAP financials in our financial results. Of course, it's an Investor Day. We're going to be making forward-looking statements. I think that's why you're all here, right? Without further ado, I wanted to introduce our President and CEO, Ed Meyercord.
All right, thank you, Stan. We appreciate everybody being here. I think we lost, I think we had casualties of about 10 people to travel. Yesterday we were coming in, and the team was coming in, and Nabil shared what looked to be, I do not know how many people have ever worked with an Etch-A-Sketch, and if you have tried to draw circles with an Etch-A-Sketch. Nabil had this funky look. I do not know where you were circling, Nabil, but I do not know. Hours later we got in, but we were able to get the full team here.
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He could, that's right. Yeah, we really appreciate everybody making the effort to be here. I think about Stan, to your point, it was pretty amazing to think that it was six and a half years ago that we were actually at this location, and we go back in time and we look at where we were, and literally we didn't have cloud. We were just talking about that. Dr. Steegen, we were having a little chat beforehand from Barco. She'll join me soon up on stage. She was saying, "When did you get into cloud?" It's pretty amazing to think that the last time we were actually here on this location, cloud was part of the future. Obviously, we've gone a long way since then.
I also want to say that we're executing at a very high level with this team, and we're going to pull people aside. Any of you who can enlighten us, there was an article in the Wall Street Journal that said 80% of the S&P 500 companies announced good results and nothing happened in the market. Then we announced what we thought were pretty good results, and we beat the numbers, and we raised, and we're down 20%. It feels like a little bit of an elephant in the room, but from an investor perspective, yeah, we'd love for those to enlighten us as we try to, as we go on our journey, we figure this out. One of the things I'm going to talk about at Extreme today is going to be the quality of execution and the quality of the team.
We have several new team members and then people who are taking on different roles. Nabil, who is going to follow me, and he's going to be talking about our platform at Extreme Platform ONE, our innovations in the marketplace and our differentiation from a technology perspective. Nabil has been our Chief Product Officer, but he's taken on a new role of President of our AI platforms. Two years ago, Nabil moved his family out to Seattle. We're very close to AWS and Microsoft, and we're way out in front in terms of what we're doing with AI technology. Nabil is a thought leader in the industry, but also executing on this. You will hear from him about how we believe our size is an advantage in this new world of AI and platformization, and we'll talk about that. That's going to be on the front- end.
Our teams, I'm looking at Kevin. The last time we had Investor Day at Major Baseball, Kevin was six months old, and since has learned an awful lot about the networking industry and is coming together as a key member of the team. I look at Monica Kumar, who's coming as our Chief Marketing Officer, world-class marketing, not only building our brand, recruiting amazing people on the team, elevating our status with industry analysts, but most importantly, working very closely with Norman Rice, who is now our Chief Commercial Officer in sales, and really focusing on how we invest dollars to drive opportunities in pipeline and funnel. How can we be efficacious? How can we be very efficient in this spend? Monica's a real pro, and she reports directly into me, but works hand in hand with Norman, and you will have a chance to hear from her.
Anisha Vaswani has joined us, significant experience as a CIO and in the tech space in Silicon Valley. She has come in not only as a CIO in terms of how we are scaling our systems, and we have revamped our systems for SaaS. We will talk a little bit about that, but also in her role as customer number one. She is working very closely as part of our process. None of our technology is going to get out to customers without first going through customer number one, which is Anisha and her team, and she will share some of that that she is doing. Also, as we are elevating as a company moving upstream, we are spending more time away from just maybe a network operator or network admin and more time with CIOs and having more strategic conversations, and that is what that is about. I mentioned Norman.
Norman Rice has been with us for many years. Since I started, it's been over 10 years, hard to believe. He has worn many hats at the company, but most recently, he's taken on the role of running sales in addition to other functions he's got, including supply chain. Norman's done a fantastic job organizing that team, building up that team, and getting very, very precise in terms of the processes he's putting in place and our ability working with Monica in terms of funnel, funnel conversion, and how we call our numbers. I would just say that our team, all- in- all, that you'll hear from today is a big upgrade from where we were just a couple of years ago. We work very well together in the quality of execution. I'm going to kick off here.
I'm going to make a few comments, and then Nabil's going to follow me and talk about platformization, and he's going to talk about our technology differentiation, as I mentioned before. I think there's going to be a lot of questions, so we thought we would just break there and open it up and let you ask questions. Then we'll take a break, and then we'll get into productivity at Extreme and customer number one with Anisha. I forgot to mention Dr. Steegan, who's here. After my comments, I'm going to pull her up on stage, and we're going to have a quick conversation. We also have Stevens Institute here, and we'll talk about our solutions, CIO to CIO, and then we'll get into market and go to market trends, and then Kevin will wrap up from a financial perspective.
We say we're set up for success. These are the main pillars. The bottom line is we look at our Extreme today in the industry and where we are. The bottom line is that we have strong fundamentals in the enterprise networking space, and I'll touch on that. Extreme is taking share. We've been winning large customers, and success begets success. We'll talk about how small gains on the customer and the share front side have a big impact on Extreme. It's really about our technology differentiation today and also where we're going with our technology. Interestingly, the competitive landscape, we usually get a lot of questions as it relates to competitive landscape, and I would say our competitors are actually creating tailwinds for us. That's our view of what's going on in the marketplace.
Finally, again, this is all leading to an outlook, a financial outlook that we believe is very attractive. When we look at the industry, a lot of we also in our audience today, we have industry analysts, and people are talking about what's happening with this Catalyst Cisco refresh because they came out and they said $43 billion of Cisco gear has got to be upgraded and refreshed. That's for us to chase as well. That is a big deal for us as we look at refresh cycles and we look at competitively what's happening in the industry. We have a chart on the right to look at adoption cycles of Wi-Fi technology. Wi-Fi 7, we have a different expectation for Wi-Fi 7 in this cycle than we did for Wi-Fi 6E. You can see that trend and the comparison.
Wi-Fi 7 is already 20% of our Wi-Fi business and growing rapidly. We believe that there is a wireless refresh that will be taking place and that will be fueled by pent-up demand from Wi-Fi 7, and we talked about Cisco. I'm moving up from the bottom here. We are seeing the macro fundamentals and trends have been strengthening for us. In the Americas, we're seeing strength. In Europe, we've seen governments solidify spending plans, solidify spending return. In Asia-Pacific, in specific, we have been doing quite well in those markets, and we'll talk about that. It is in our geos, and it is also across all of our verticals. We have horizontal solutions, but we apply them. We have solution sets that fit into our vertical segments in terms of government, in terms of education and healthcare and manufacturing and retail and entertainment across the Board.
We are seeing a very healthy spend environment for enterprise customers there. Finally, everyone is focused on AI. If you are a CIO or even in the Boardroom, everyone is asking the question, how are we leveraging AI? What tools are we using to take advantage of this new technology? What are the use cases? What are the outcomes? In our case, we are a leader here, and we will talk about that. I hope at the end of this morning session, you are going to walk away with a better understanding of why we believe and why we have confidence that Extreme is a leader here. As we are building this platform, what does that mean for customers in terms of how we will change their use cases and drive outcomes? Outpacing the market, net-net, we have been winning larger customers and taking share.
What happens when we win a large customer, for example, like the Japanese government, where it is a project worth tens of millions of dollars? This was a cross-functional project where Nabil and our engineering teams put together a unique solution for the government, where we are taking our Fabric technology and applying our Fabric technology across a Wide Area Network, providing them with a Private Cloud solution and cloud flexibility that is truly unique and our competitors could not replicate. When we win that business, when you drop down and you look at customers like NTT or KDDI, these are the biggest partners in that country. They see that solution and Extreme winning, and then their teams train up on our technology. We then start working with those partners in different ways, and they start bringing us more opportunities.
The point here for us is, as we're moving up market and winning some of these bigger customers, success begets success. As we start winning large customers, it spills into the partner community, and then we start winning more and more business. It also helps our brand recognition, and you're also seeing that in the marketplace as more and more people are aware of Extreme, and they want to hear from us. We'll talk about how the competitive landscape is also driving that. Net-net, we're growing at twice the industry. You'll hear Kevin talk about the fact that as we look forward, we're looking forward at double-digit product growth and overall revenue growth. You'll hear us talk about earnings growth in the 20% range as we look out over the next five years. These are some of the verticals.
The point here is you might recognize some of the logos. We are actively engaged with all of these customers in developing their networking solutions and working with them. It is across all of our verticals. It is across all of our geos. These are names that you know, but for us, this is where when we are successful in penetrating and getting into these kinds of customers, usually they have multi-vendor environments. Usually, there is an opportunity for us to take wallet share. As we take wallet share, this is where we would say large crumbs. If you look at our relative market share and then you look at the impact of winning some of these larger customers, it has a bigger impact on Extreme.
As we're able to move up market into these kinds of customers, success begets success, references, large customers feel more confident going with Extreme, knowing that we are in these kinds of networking environments. That gives our sellers and our sales teams confidence and a little more swagger when they walk into these accounts. Next thing you know, we get in and we win more. In addition to the funnel of opportunities that we get, it's also the quality of the funnel. When we get through into a head-to-head competition, we're winning. That's the exciting thing that's giving us a lot of confidence. Why are we winning? This is a quote from one of the largest defense contractors in the world, actively putting together a comparison between Extreme and a large networking vendor that they've been with for many, many years.
Because of the strength of our Fabric and the Automation of what we're able to do in terms of how we provision services, I will encourage all of you in the break to go out and visit [Mark Delavalle,] who is showing a Barco implementation where we have a mission control setup where you can see our technology at work and the Fabric at work. Our ability to provision services across a complex enterprise network that may be distributed is unique.
Literally, this is a customer quote that said, "Oh my gosh, what you guys have just done in six minutes literally takes the other team six hours." We have had a lot of fun with that, and we have done sort of the photo play and the Extreme people are reading the newspaper while the other vendor is still working feverishly away to try to stand up the network services that are required. This is the power of our Fabric, and we will talk more about Fabric technology. When you get into environments like manufacturing where milliseconds matter and your network has got to be up, Rentschler is a company that is based in Germany. They are also in Massachusetts. They are a very active pharmaceutical company. I think it is something like 25% of the new drugs that are coming out they are involved in the manufacturing.
Here again, for them, it's all about Fabric. It's about being able to segment the network into services. It's about the resiliency of our platform and the security. It's very popular when we get into manufacturing type of environments. Nabil will talk about how in enterprise environments it is very different than hyperscale data center environments where you might hear more about Fabric. In this case, everybody knows we do a great job marketing our sports and entertainment franchise and the business that we do. This is really about complex wireless environments, and no one does better than Extreme in complicated wireless environments. I would say complicated and complex environments in general. This is where we shine. The Giants were the first Major Baseball team to actually have Wi-Fi in their stadium.
They are staunch supporters of Extreme, and I would say they're right out on the edge of how do we leverage AI and then how do we leverage networking capability to enhance the fan experience. For them, the three things that really matter, it's the game itself and the players. It's the fan experience, and it's the network that they're using to deliver. This is where Extreme shines. Kroger is one of the largest cloud-managed wireless networks in the world. We have 2,800 stores in Kroger that are running in a Private Cloud environment. One of the unique things that Extreme brings to the table, in addition to our Fabric, in addition to complex networking environments, is flexibility as it relates to cloud.
We have more and more customers like the Japanese government or like German customers where data sovereignty is becoming more and more important in a world of more complicated security landscapes where people want to have control over their data. They want to bring the cloud inside their environment and run the cloud inside their environment. Who offers that capability? Extreme is the only player in the industry that can offer the kind of cloud choice and cloud flexibility that we do. This is something that we have done for Kroger. 2,800 stores and a Private Cloud running in their environment was a big differentiator in how we won that deal. They are also using our technology. I would tell you a Kroger grocery store is a complicated networking environment.
When you look at all the sensors they have and how serious they are about leveraging technology to drive the customer experience in their stores. They have methane gas sensors hanging from the ceiling over the fruit section to determine how ripe the produce is and at what point they clear the produce. It is pretty incredible how they are using this. It is a Petri dish for the Internet of Things, and obviously, we are their partner on this journey. If Extreme is in a Kroger environment, we can be in any retail environment. This is where we leverage the relationship with Kroger and the kinds of things that we are doing to drive other relationships with other prospective customers. All of this comes into Platform ONE. Nabil will come up here soon, and he will talk about platformization and what does that mean.
Effectively, what we're doing is we're bringing our entire portfolio and our entire solution set into a platform. The platform, effectively, the way that it's designed and the way that it's architected is such that it will make it a lot easier for customers to consume services. It'll make it a lot easier for us to bring new capabilities and services at a pace and a speed that will be faster than what was ever available before. The net-net, for me, around AI and what does this mean is it's about automation. It's about visibility. It's about use cases where you're saving customers time. It's in your providing better visibility into the solution set. We believe, because of our size relative to larger competitors, that it's an advantage. This is really complicated stuff.
If you're standing up a consumer-based AI offering, the requirements in terms of accuracy relative to a mission-critical environment, it's got to be right. The data's got to be accurate. When you get into B2B applications, this is where you're dealing in a whole new universe of complexity. This is where, for us, we believe that our size is an advantage in terms of what we're able to bring together and then the time-to-market and speed-to-market advantage that we'll have. Platformization for us is a strategy. Agentic architecture for us is we built a true agentic architecture that will allow us to roll out new services and new agents very, very quickly. That's also something we'll touch on with Nabil. I talked about our competitive tailwinds. Look, anytime you take two huge companies, and HP and Juniper are fairly large companies, there's a huge synergy requirement.
They have to let a lot of people go from a cost perspective. They have a lot of really complicated decisions to make in terms of their technology roadmap. They just came out and said they're revamping their partner program, but they're not addressing Juniper. If you're a Juniper partner, I don't know what you do with that. There's just a lot of confusion out in the marketplace. We all sell through the channel.
Are you guys there?
As we look at it, our lens, there's human talent. We have been picking up talent from these companies. We're very actively doing that. We have people who are motivated and energized to join the Extreme team. We have partners who are coming over and looking at an economic outlook where Cisco, for example, the big news is completely overhauling their partner program.
It appears to favor the top 50 partners. The other 55,000 partners out there have to jump through more hoops. Their economics just got worse, and they're going to be looking for alternatives. This is an opportunity for Extreme to step up. With HP and Juniper combining as one company and with Cisco in their market position the way they are, Extreme is by size the third largest player. We become the choice, especially as people are considering AI and having the most modern tools. How long is it going to take for the HP, Juniper people to create this true agentic platform with velocity?
Hello, hello. Anybody there? Alina or Robert?
I want to be with a company that can bring me kind of the most modern advancements in networking technology. We're getting more at bats.
The net-net, the headline of this is that we're getting more at bats at talent, at partners, at customers. That's real. All of these things are leading into a financial picture that for us is attractive. We looked at our growth rate. We have six quarters of consecutive growth. Typically, we have seasonal dips, but we've grown right through that. We have 15% year-over-year growth in the last quarter. Our ARR is growing at a faster clip. We talked about already the 10% revenue growth number, 20%+ earnings outlook, EPS, and then just the scale of our ARR as we go forward. The drivers is what we've been talking about. We're winning up market with our Fabric, with our cloud choice, with our complex networking solutions, and the future of Platform ONE and how it's all coming together and the advantage that we have.
The bottom line is that people want to talk to Extreme more now than ever before. They want to hear what we have to say. As they evaluate the landscape, it's creating opportunities for us. That is the high level and the high-level points. We're going to dive into each one of these. Before I invite Nabil up, I have Dr. An Steegen, who is with Barco. Barco is an important partner of Extreme. It is so important that we have not offered her a chair. Maybe I'll find a chair for her if we will sit down. Barco, it is a Belgian-American radio company from 1934, believe it or not. They have come a long way since then. An has a long and distinguished technology career. She was at IBM, so she has been here in the U.S. for many years.
She was also on the Board of Barco before she became CEO. We also share that. We have that in common. One of the things that is interesting about Barco is we talk about complex networking environments, and they have command and control systems. They bring visibility. When you look at what they are solving for in complex environments like in healthcare, robotic surgeries, when you look at disaster recovery and oil and gas environments, you have got a very complex solution and a very interesting relationship with Extreme. Thank you so much for being here. I am going to get a chair and come sit next to you.
Thank you.
I do this all the time. I get in front of a mic, and I talk in front of the mic, but I actually have. What is this? I have to advance the slide. Okay.
I think we have some visuals here. Ann, I think it would be good if we just start off, maybe if you want to share a little bit about Barco with the crowd here.
Yes. Good morning, everybody. Thank you very much, Ed and Extreme Networks, for inviting me here today. It's a real pleasure to be here. It's exciting times, I think, for both companies. Definitely times where technology is going to make a difference. Very quickly, Barco, we're a Global Technology company. We're specialized in visualization, collaboration, connectivity, and also automated workflows. Basically, what you can say about Barco, we do everything in the visual and audio chain except making cameras. We do everything in post-production, transmitting of data, rendering them to any format. Of course, we make high-end professional projectors as well as high-end medical displays.
The future is a little bit more than that. We're sitting on data. We literally transport data through our networks. It is all about what can you do with data. Can we basically make intelligent workflows out of that. That is also part of our roadmaps moving forward. We're in three markets, very critical mission markets, as you said, enterprise, entertainment, and healthcare. They are truly mission-critical, which means if you're in an operating room and you need a network in an operating room, there cannot be any failure. Even when you're in a cinema theater, you do not want the projector to go down. Mission-critical, no failure is really important in all the markets where we're in.
Can you talk a little bit about what is the networking challenge overall that you face when bringing all this together?
There are definitely a couple of challenges. First is latency. For example, operating rooms in a hospital, more and more surgery today is minimally invasive or surgical robots. There is one commonality between the two: basically, the surgeon is no longer looking at the patient. It is because the camera, the endoscope, is in the body, and the surgeons need to look at a surgical display. Of course, you cannot have any latency, no delays on the video data. It can be remote. It can be in New York. There were demos done where there was a surgery done in Italy while the surgeon was in New York. You see the future is really, and again, latency is critical. Other things are redundancy. The system can never be down.
You need to make sure that you have enough redundancy built into the network. Cybersecurity, more and more important. We always say every system that we design, every pixel needs to be secure by design. That is important. Then interoperability. More and more, we hook up many systems from many vendors to our network, to our operating systems. The question is, how can we easily hook those up? That is, of course, where Extreme Networks comes in and can help us. Yeah.
That is an easy segue to the next question, which is, but it is really about the Fabric technology and maybe your experience of the Fabric technology and how in these complicated environments Fabric comes in and plays a role. I know, as I said before, we have it set up. We are actually connected to a Barco environment.
When we take a break, I encourage you to actually check it out live. You can dive as deep as you'd like into the technology. I see Mark Delavalle back there, who will take you through and explain some of the challenges that we face. I'm curious just to, through the lens of Barco, how you think about the future.
The easiest one in the demo is also all about command and control centers. Traditionally, these control rooms, as you know, air traffic control rooms, they're very siloed. They're in one location, and the data is really protected in that location. Now, the future is no longer siloed. It's really distributed. You have many remote control centers that need to be somehow distributed, but the operation system needs to be aggregated.
You need to basically be able to run an operational system across all those distributed sites. That's the new trend. If you think about that, I think from Barco's side, again, we run an operating system in a control room. Video distribution, audio distribution, workflows on top of that. We need to make sure if they're now all distributed, that all of the data come together. We do need Fabric clearly to basically make sure that we have the best possible connections between all those distributed sites. My team tells me that. I think I dare to say this here, but they basically say Fabric is magic because we have now many use cases where we deploy Fabric together with Barco Control and where you really see the advantages.
Some of the advantages are clearly in just the way, and you showed it, how easy it is to implement the Extreme switch and how easy it is to configure it. That's already step number one. How easy it is to pick up in an automated way to pick up the different devices, the different systems on that network. We said cybersecurity is important. The hypersegmentation that you do to make sure that users' devices are really dedicated to a subdomain, and that can be literally protected then from lateral attacks. That is, of course, risk mitigation that we do need on our networks. Redundancy, the way that you build in redundancy, the way you dedicate devices and users to subsegments and making sure that you choose the fastest path to connect is also very important. All of that fits very well, again, on our mission-critical infrastructure.
If you think about it just again, like you said, surgical remote surgery, it's something that's happening. Remote diagnostics, you do mammography, but the physicians are sitting somewhere else, but you need instant data.
I know we were talking about oil and gas and disaster recovery for oil and gas, right?
Yeah, many opportunities there. Yes, yes, yes, yes. I think, again, the world is going distributed, but we need operating systems that combine everything together from these distributed sites. If that's happening, we have 17,000 control room installs today. First of all, they need to be upgraded, but also many of those are evolving into distributed sites. There are many opportunities in command and control. We're in so many different vertical segments present.
We see actually in almost all these segments the need for distribution and bringing the data back into one central place. I think that is many opportunities that we can work on together. We have already many examples also that we worked on together. I think we can say Bayer Crop Science is one where Extreme Networks or Fabric, as well as Barco Control, we basically made the management of many chemical sites of Bayer Crop Science actually much more efficient, much more simplified, but robust, resilient, secure. I think that was well appreciated by the customers. Many more to come.
Many more to come. I think one of the issues that, I mean, obviously, we look at it through the competitive lens.
One of the things that we want to highlight for investors is the differentiation of our technology versus our competitors. A lot of the things that we're talking about here through our Fabric technology just can't be replicated. I know it's one of the things we can mark and share a few things in our live environment. There is a resiliency to the Fabric technology. There is also the acknowledgment of where you're playing. If you're in hospital rooms, it's different than being in a data center. If you're in an oil rig, it's different than being in a data center. These are, I don't want to call them messy environments, but in a way, the enterprise environment is a lot more complicated in terms of the technologies that exist and the potential for failure.
Having a technology that has this subsecond convergence where things just do not go down, that we can demonstrate, this is where we have won. This is how we have been winning some of these larger accounts. The largest agricultural equipment manufacturer in the world chose Extreme after a lengthy, lengthy competitive process over our competitor, one of the largest competitors in the space, because they could not replicate. After many, many attempts, it could not be replicated. Again, it creates new opportunities for us. Where do you see the opportunities?
If the world is going to go distributed, all these segments where you are going to see distributed sites, that is where the opportunities are. We see many of our markets moving into that direction. It is like you said, the backbone is very complicated, but the user should not feel that.
It should be really simplified. They should feel secure. It should be resilient. It should not fail. It is up to us to make sure that the end user, it is easy to use for the end user. I think that is something that we have. The combination of both technologies is definitely going to make a difference there. I am pretty convinced about that. Yes.
Barco has been growing at a great clip. Under your leadership, the company, I think, has never been stronger. Congratulations for that. We are looking forward to growing with you. I would say what I am looking forward to is the, and we will segue into this conversation, we were talking about this earlier, which is what happens when you take the capability of Fabric, right?
What happens when you enhance that and then you add Fabric fully into Platform ONE, for example? Now you have enhanced capabilities of Fabric, enhanced tools, enhanced visibility. That just brings your solution to yet another level. That is what we are really excited about.
Yeah, AI is going to make a difference there. Absolutely agree. It is going to speed up things. That is one thing. It is going to make it more robust, more learning you can do. This is definitely going to help. Absolutely. Yes. '
Thank you. Thank you for sharing it and for coming up on Safe Experience. An, I hope you do not mind, but I think we are going to let Nabil come up first before we open up to Q&A. Nabil, I am going to turn it over to you.
I think we've given you a little bit of a background, but I think people want to hear about our competitive differentiation.
Yeah, I think so .
And this platform I'll let you take it.
When you put investor community and the industry analysts in the same room, and you put a technologist on the stage, then it's like, how far down the technology rabbit hole do I want to go? I will try to address both of the audiences here. Because while technology itself could be very complicated, its impact on the enterprise value is very clear and very simple. We will be able to address both of them. Okay. One theme that I think everybody would say came out very loud and clear from Ed's presentation was that we are winning more and more upstream. It's not that we have never won big customers.
We've always had big customers. Now we are seeing a big systematic improvement when it comes to large customers in every vertical, in every GEO out there. I wanted to start from there. Why? Why is it that the big customers are really putting their confidence in us? What is it that the best customers look for? First and foremost thing, obviously, they're looking for a breadth of a portfolio because big networks, big complicated customers out there, they're not buying point solutions. They have data centers. They have campuses. They have branches. They have across the WAN. They have security requirements. They have all sorts of different things. They want a vendor that has the portfolio. Not just have the portfolio. They're looking for a vendor that has very specific differentiation in various portions of their portfolio.
Is that the only thing that they're looking for? No. Absolutely not. The next thing that they look for is the speed of innovation. Because when a large customer buys into a vendor, it takes them two, three, four, five years to just roll it out. They are not buying it into your product for that point, for that quarter, for that year. They want to partner with you, making sure that you can take them to wherever they need to go to differentiate in their industry. They are looking for the portfolio. They are looking for technology differentiation. Most importantly, they are looking at your, the vendor's, ability to innovate faster than anybody else in the market. These are the three things that we check boxes on each one of them.
That is why you see more and more large customers not picking us up as alternatives, but as the first choice. What are some of these key advantages that I'm talking about? This is a very quick summary. Let's just start from the bottom. You heard a lot about Fabric. When we acquired Fabric seven years ago, it was a campus core technology. Today, it goes everywhere where an enterprise can possibly want to go, from the data center to the campus to the campus edge, across the WAN, into the branches, into people's homes, everywhere. You remember, some of you might remember from two years ago when I stood up and said that one of the key strategies for us is Fabric everywhere. Here we are where we can deploy Fabric in every and any portion of an enterprise.
That too without a click of a button. Not even with a click of a button, but without a click of a button. Fabric is at the core of our technology differentiation. Wi-Fi. Now, Wi-Fi, as you know, this is what the new generation thinks internet is. Back in the day, it used to be a cable hanging. The new generation thinks it is Wi-Fi. My five-year-old, he knows that if the Wi-Fi goes down, he cannot see his cartoons. That is mission critical. Wi-Fi. I know the person when it comes to Wi-Fi, somebody that is sitting in this room, maybe in the front row, called us the kings of the complex environment when it comes to Wi-Fi. He is absolutely right. Whether it is highly distributed environments or it is highly complicated, highly complex, concentrated environments. Ed gave both of those examples.
On one side is Kroger with 2,800 stores, highly distributed. On the other side, pick any of the stadium where there are 10,000 people or 100,000 people with 200,000 devices crammed into a stadium. We go across both of those and everything in the middle. We do not stop there. Then comes security. As Dr. An mentioned, security is becoming more and more important. It is no longer a bulletin on top of a network. It has to be pulled into the network. From hypersegmentation, which is in the Fabric, all the way to Universal ZTNA, which combines NAC and ZTNA into one environment, and both of them coming together and working together. Isolation, not only just in your over-the-top model, but down into your data plane, all of them together. We do not stop there. Let's continue upstack. Then comes Cloud.
Cloud is where your management sits. That is where your security management sits. That is where your analytics sit. I'm not going to go into the feature and functionality of there, but I'll give you a simple differentiation that is resonating across the world for us. That is our unique ability to provide you the same capabilities of the Cloud, either in the Public Cloud or a Private Cloud or on-prem. Again, Ed gave examples for that. Kroger, one of the largest Private Cloud customers out there. Why Private Cloud? Because that is where all of their operations live. They want to make sure that it is specific to them and is very secure for them. You go to a different portion of the world. You go to Japan, GSS. There, all of that cloud is actually on-prem. Why on-prem? Because their biggest requirement is sovereignty.
They want to make sure that they can produce a Sovereign Cloud on it where all of the data and all of the controls are within their jurisdiction. Whether you go from Public Cloud or Private Cloud or on-prem, same cloud capabilities. The key thing here is if you look at our competitors and our vendors, yes, they all have on-prem options, but those on-prem options are different applications with different feature sets, different requirements, and in most cases, different licenses. That is cloud. On top of it, you can have the best technology in the world, but if you cannot wrap it up in the right commercial model for that customer, then down goes that technology differentiation.
In addition to all of this technology differentiation, we have the flexibility on the commercial side from traditional models all the way down to consumption and everything else in the middle. You will hear a lot more about it later in the day as well. I cannot forget our world-class support because eventually something will go wrong. When it does, can you support the customer? The key message here is you do not win because of one thing. You do not get displaced because of one thing. You win because you create a portfolio that addresses the needs of the customer. You win because you create very specific differentiation in each one of those layers. You win because you put them together in a zero-friction environment. You wrap it together with a commercial model that is flexible and meets the need of the customer.
That is why you win upstream. That is why you see examples after examples after examples across the world of us winning larger customers from our competitors in a head-to-head fight. In a nutshell, that is really what our portfolio strategy is. We talked quite a bit about Fabric. I am not going to go into the technology detail of it, but I will answer one question that I get asked all the time. Why is it that you cannot bring a data center Fabric into an enterprise environment? You can, but it just does not work. I know Ed used the word messy, so I am going to stick with that. That is true. Enterprise environments are messy. What do we mean by messy? When you are building a hyperscale data center or a very large data center, what do you do? You get new space.
You get all new servers, the latest and the greatest, and there are racks and rows of servers out there nicely, cleanly plugged in. You say, like, "Okay, this is my data center, and now I'm going to configure it." It's a simple claw. I can script it to be automated. That's not a good example. I should be able to script it. I would say that anybody can script it to be automated. When you come into an enterprise environment, you are dealing with multiple geolocations. You are dealing with multiple skill sets. Because how many of the enterprises actually send $200,000 a year worth of engineers to go work on a branch? If you do, you have a lot of money because others don't. You are dealing with multiple generations of technology.
Do you know, on average, in an enterprise environment, how many different generations of technology there are? Five and a half. Five and a half generations of various different technology. That is the messy environment. You simply cannot take an IP Fabric from a data center and assume that you're going to throw it into an enterprise environment and it'll actually work. That is what translates into what Ed was talking about. You can take hours and hours and hours just trying to set it up. This Fabric is built from ground up to work in those messy enterprise environments. That is the unique advantage that we have. We have more than 10,000 deployments out there. It's not one or two. It is 10,000 deployments in every geo, in every location, in every vertical. What is the biggest advantage?
In spite of all of those complexity and that messiness, it is 90% less when it comes to operations between this Fabric and an IP Fabric. Before one of you or any one of you thinks that we are like, "Oh, you guys don't have IP Fabric. That's why you're saying it." No, we actually do have it, and we sell it in the telco side of our equation. We have both of the Fabrics, the right Fabric for the right environment. Now with Platform ONE, the magic just got better. The advantage is, yes, Fabric just simply works, but you put Platform ONE on top of it, and now you have real-time visibility of that segmentation, and you can do a lot more with it. With the power of AI on it, there are so many more use cases that get unlocked. All right.
On the Wi-Fi side. Now, as I said, Wi-Fi is Internet when it comes to normal people or everyday people. I shouldn't say normal, but everyday people. When you and I are talking about it, when we think about Internet, it is Wi-Fi. Wi-Fi is becoming more and more mission critical as well. We are actually seeing more and more enterprise applications run over Wi-Fi as opposed to wired environment. Wi-Fi is no longer like, "Oh, well, it's a coffee shop Wi-Fi. If it goes down, so what?" Wi-Fi is mission critical at this point in time. For us, biggest portfolio, widest portfolio on the 6 GHz spectrum. Wi-Fi 6, EN7. You heard us talk about we see that Wi-Fi 7 transition is a lot more robust compared to Wi-Fi 6.
By the way, that also drives changes on the edge switching side as well because now you need those multi-gig ports and so on and so forth. It is a network transformation out there. Now, for us, what are the biggest advantages? First, when it comes to complex environments, nobody does Wi-Fi as good as we do. What are those complex environments? Guess what? Most of the large customers are complex environments. Whether you're talking about stadiums or venues, or you're talking about distribution centers, or you're talking about hospitals, these are all complex environments, and our technology actually works really, really well on them. Number two, we are probably the only vendor out there that at this point in time is 100% clouded, 100% architecture agnostic. If you have come up in the Wi-Fi world, you would probably have heard all of these debates.
Do I deploy a centralized controller-based Wi-Fi, or do I do cloud-first and distributed? At this point in time, for us, we do not really care. Most of our large customers deploy both of them under the same Platform ONE license. That is the second really big advantage for us. The last part I would say is the proof is in the pudding. When it comes to complex environments, we have more than 100 venues around the globe that are running day in, day out on our Wi-Fi. As Dr. An said, going down is simply not an option. If you are running an airport, it is not an option. If you are running a healthcare environment, it is not an option. If you are sitting in a stadium and your big boards and everything are running on Wi-Fi, that is simply not an option. Wi-Fi is mission critical.
When it comes to mission critical Wi-Fi, there is nobody else that does it as good as we do. Okay. One more technology differentiation, and I promise then I'll talk a little bit about strategy. The last one is the C loud part. Look, we continue to grow our Cloud. We are more than 3.3 million devices connected to our cloud. And remember, these devices are not just being managed, but these are 3.3 million data streams. I want you to hold that thought in your mind because I'm going to come back to that when we talk about AI. At the same time, we talked about our Cloud continuum, public, private, on-prem. We started doing that three, four years ago. I actually remember it was probably the last one where we stood up and we said, "Look, the cloud definition is not the same for everybody.
For some people, when you talk about cloud, they think AWS. For other people, when you think about Cloud, they think about their data center. For some people, when you think about Cloud, they think of a cage where they hold the key. That is the continuum from public to Sovereign Cloud. We provide all of them. When it comes to Cloud, there is more and more requirement for certification around the globe. That is just something that's the world that we live in that is proliferating around the globe. That is something that we not only are heavily investing in, but we are farther along on this than anybody else. Whether it is Fabric, whether it is Wi-Fi, whether it is Cloud, we have specific differentiation in all of them.
But the beauty is when they all come together to provide that value to our customers. Okay. Moving a little bit off of this and coming back to platformization, because I remember last time when I talked to the investor community two years ago, we said we are embarking on a platformization strategy. And there were a lot of questions around, "Well, what the hell is a platformization strategy?" It was early days at that time. Now it's a little bit more common. We'll take a quick kind of swag at it. We still believe platformization is the core to our strategy. Let's say why. Number one, what's the advantage of the platform to the customer? These are something that are becoming more and more relevant. The first and the foremost is it's end-to-end control. It's end-to-end portfolio. Why is it important to the customers?
Total cost of ownership. It's less complex. It reduces your operational inefficiencies when you're running the entire thing on one portfolio. Number two, and this is really interesting, it's zero friction expansion across edges and technologies. My CIO is sitting right here. Those of you who either know CIOs or have been CIOs, imagine a time when you have to take multiple vendors and actually integrate their technologies together. You probably spend most of your time and budget on that. Platforms bring it down to almost zero. Last part is vendor sprawl. Vendor sprawl is a real thing, especially for larger customers. Platforms help with that as well. Shared telemetry plus shared AI. This is one of the most critical things here. When it comes to AI, the value of a data set is great. The value of multiple data sets together is amazing.
The value of AI grows exponentially as you have more data feeds going into your AI system. By the way, there is simply no way to accomplish this without a platform and a data architecture to back that platform up. The last part is obviously compounding value. This is the Flywheel effect. Every time you add one more solution into that platform, every existing solution gets better. You add Universal ZTNA to our platform, not only does your security get better, your Fabric gets better as well. You add Wi-Fi into your platform, not only does your Wi-Fi get better, but your Universal ZTNA gets better because now it is all the way to the end client. You get the part. When it comes to platform, this is a Flywheel effect. Once you get the Flywheel going, it is very difficult to get off of that. Okay.
What is the value to us as a company? Why are we spending or why have we spent money and so much effort in building platforms? Simple. Number one, stronger recurring revenue. We do sell a lot of devices. For every device that is attached to a subscription, that is higher recurring revenue for us. You have seen our growth in recurring revenue over the last few years. Kevin will walk you through what we are looking at as we move forward. Gross margins, very simple. I am not going to go into that. Software and subscriptions are much higher gross margin compared to hardware. As the mix changes, it is better for us as a company. The middle one is the one that is really important to me. That is the customer lifetime value. A hardware sale is a one-time sale.
I'll sell you a switch. I'll sell you an AP. And five years, seven years later, I'll come back when you're refreshing. But when I sell you a platform and I sell you a SaaS application, I'm working with you every single day to help you get value, derive value out of that. That is a lifetime equation. What happens? Customers start building their operating models on top of your platform. Now you are sticky. Sticky not because you have put some artificial boundaries where customers cannot get away from you, but sticky because you are providing that value to them every single day increases the customer lifetime value. Last part, it is scalable for me from an innovation and R&D point of view. The cost of bringing one new thing to the platform is considerably lower than bringing a new product.
As an R&D leader, as a technology leader, that's how I scale without scaling my R&D budget in a linear fashion. The last part, larger wallet share at the customer. Because on the platform, the most interesting thing is one more thing. You have seen that in every other industry. Once a customer is on a platform, selling them the next widget, the next value, be it an app, be it an AI agent or whatever have it, they're all much easier. Value to the customer, value to the company. Why is it that we don't have so many platforms out there? Why isn't it that every company, every networking company is building a platform and they've already shipped a platform? It is difficult to build platforms.
You can take this, it is difficult to build, or you can take it as this is the mode. This is why we are so far ahead of everybody else because this is the work that we have done. Number one, you can't just build platform as a product. Platform is a multi-year commitment to a full-stack execution. What do I mean by that? How many of you were sitting in a room like this where seven years ago I stood up and I said, "Hey, we acquired these six companies, and the first thing we're going to do is combine all of their portfolios together. We call it the universal portfolio." You were there. You were there. A bunch of you were there. That was seven years ago. You can't just stand up and build a platform.
You have to bring your entire portfolio together from the hardware, from the operating system, from the AI, from the data part up. This is a multi-year effort. Why is this important? Some of our largest competitors have been trying to do it for 10 years and still have not done it. Some of our other big competitors are just starting on this journey. You cannot enter the world of platformization without that. Second, really, really important one. Why do you need to have all of your portfolio in one architecture? Data. When people talk to you about AI, they are really talking to you about data. The AI revolution is actually a data revolution. The old adage that garbage in, garbage out, it is absolutely true for AI.
You can have the best AI agentic system and you throw in garbage data in, and there is garbage insights that come out of that. Building that data architecture is absolutely critical. Now, you can think in the market and see how many of our competitors actually have it. Let me tell you this. If you have seven platforms, you do not have any platform. When you go to a platformization strategy, there has to be one because all the data has to be combined together. There are a couple more ones. This one is really interesting to me because people think about technology, but one of the biggest hurdles to building a platformization is actually your organizational structure. The silos within because you have different business units and staff, different requirements. Your go-to-market becomes different.
Try going out and selling to a large customer where you open up your jacket and here are all of the watches that you can buy from me versus you go in and you have one go-to-market model, which is you get onto the platform and you buy the value that you require. Last one that I would point out here is the first-mover advantage. We were absolutely the first ones that announced platform. We were the first ones that GAed platform earlier this year. I'll show you how that is doing. That advantage only compounds. In the world of AI, once you get ahead, and unless you stumble, that Flywheel effect that I've talked about that makes sure that you stay ahead and that distance between you and your competitors only increases. It becomes very difficult to catch you. Why? Because you were the first platform out there.
The more customers use your AI, the better your AI gets, the better your AI gets, the more customers use it. That is the Flywheel effect. Time is the biggest metric in it. Once you are ahead, it is very difficult to catch you up. We introduced Platform ONE back in December, last December. We GAed it in July. It has been out there for about 90 days. You could ask me, how is it doing so far? Three things, early days, 90 days is not a long period of time. The three big things that I want to point out to you. First, there is a huge amount of interest and adoption from our customers early on. Now, before you ask me exact numbers, Kevin is sitting right there. He told me not to say exact numbers, but I will give you an idea nonetheless.
It is tens of thousands of devices that are already connected to Platform ONE, and it is hundreds of customers. When I say hundreds, it's not one-on-one. It's multiple, multiple, multiple hundreds. This is in the first 90 days. Clear adoption and clear interest that we see from there. Behavioral shift. This is very important to us. Is it just that, okay, well, now this is a new thing, but I'm going to go connect? No. By the way, commercially, when you get a Platform ONE license, you have right to use for Platform ONE as well as all of the existing ExtremeCloud IQ applications as well. The customer has a choice. They can use whichever platform that they want to use.
We are seeing very clear preference from our customers to use the workflows in Platform ONE, specifically the ones that are built on top of the AI core, which brings me to very early but still measurable AI-driven gains. What are these gains? The most important gain that you can get from AI is capacity, which means that, hey, I needed to spend 10 hours to do this thing. AI does this 10 hours, so now I have 10 hours to go spend on something else. That is the capacity gains. Just to give you an idea, our early adopters, they are on track to gain a capacity of up to cumulatively across them around 300,000 hours a year.
If you know the average price of a NetOp and a SecOp person out there and you can look it up, you can do the math of how much capacity gain that is. These are just our early adopters. Early days, 90 days, but we are extremely confident with this, and we are seeing our customers really jumping onto it and adopting it. Of course, we have a lot of customers and a lot of devices, so it is a journey for us, but very good early signs. The last part, when Ed asked me to take over this additional role on the AI platform side, the question that we talked about is the job to build AI. The answer that we both came up with was no.
Because these days, when I go buy a toy for my five-year-old, it also says that it is built on AI, although I do not really know whether I want AI in a five-year-old's toy or not. AI hype is at the height of it. The biggest question really is, how do you build an AI moat? As an investor, the biggest question you should be asking, or you probably already are asking, is that you stand up here and you talk about all of these AI things, and then I turn around and I look on YouTube and TikTok and in the media, and it says like, oh, a high schooler with a Cursor prompt can build anything in five minutes. Where is the reality? The reality is, yes, you can build anything. Good luck trying to scale it and running it on enterprise.
How do you build an AI moat for enterprise? This is my last slide and last message that I want to leave you with. There are two AI moats that we have built, and we will continue to make them bigger and bigger and bigger. This is why we are so confident on our prospects on AI. Number one, I talked about early, is a complete unified data across the entire portfolio. Single data architecture, single data pipeline for every piece of equipment, every product that you can buy from Extreme. Now, let that sink in for a second. How many of my competitors can actually stand up and with a straight face say that? If they do not, you should ask them that, how are you going to get to that?
Until you get to that, how are you going to deliver the cross-domain AI advantages that every company seems to be promised on? This is an AI moat that is difficult to bridge. Second one, models are commoditized. There is a new model that comes out every day. And every model, there are small language models, there are large language models, there are domain-specific models. There are so many models. Just like we have been cloud agnostic, we are model agnostic as well. We can actually go ahead and use any of the models. Now, you can be like, you know anybody else can do that as well? Yes, they can with a lot of spend and a lot of money.
You guys have seen that in the industry that a lot of people are like, hey, I am spending a lot of money on AI, but I do not know where the ROI is. So many millions of dollars went down the drain. Why? Because they are experimenting with AI. They do not know how to build AI for unit economics. This advantage that we have, which is a proprietary technology that we have built and we have filed patents on this as well, is our ability to use the right model with the right cost for the right query in real time across our entire portfolio. These are the two big moats that we have developed and will continue to build on top of that. There are other advantages that we have as well.
Again, I talked about we got on this journey many years ago building universal and a single-year OS and all that kind of stuff. That is an advantage. One that I want to talk about is the AI for unit economics. This is the difference between productization and experimentation. One of the studies that recently came out is that, hey, 95% of the projects that people, enterprises are doing on AI are going to fail. Very interesting. Everybody focuses on that 95%. I like to focus on, and you should be sitting here. We were having this conversation recently. We like to think about the other 5%. What happens to the 5% that are actually successful? If you double-click on that report, it shows that those 5% came from vendors who actually understand how to productize AI without blowing their cost away.
If you can't build AI for unit economics, you can't really have an AI portfolio. This one, the third one, is really near and dear to my heart, which is creating engineering capacity through AI. Because in the end, Ed said, we are the third vendor in the industry, but we're quite a bit smaller than the one ahead of us. That translates into the budgets and the R&D that is available. Can I actually go compete person to person with my larger competitors? No. I don't want to because not only are we putting these agentic systems into our product, we are actually utilizing them to create capacity within. I will leave you with this number, and you can do the math. Like this year, and this was still an early year for us, we actually created capacity equivalent to 12,500 man-hours this year.
Next year, we are on target to create 150,000 hours of productivity without additional cost associated with that. This is how we compete with our larger competitors. This is when Ed was talking about that, hey, this is the advantage that we have. This is the size advantage. By being nimble, we can actually go and nullify the dollar advantage that our competitors have. This is a huge use for us. AI plus platform is the advantage. I have said that many times before. I will repeat it. If you do not have a platform strategy, your AI is a chatbot. If it is not a chatbot, then it is a siloed AI. Siloed AI will not go anywhere. We went from there is an app for it to there is a chatbot to it, and now there is an agent for it. That sprawl does not help.
How do we help? By bringing AI and platform together. The last one, and this is the one that I repeat to everybody in Extreme all the time, this is the one that we live on a daily basis. Move first, move fast. We were the first to announce platform. We were the first to say we are going after platforms. We were first to announce platform. We are first to GA platform. We have moved first, and we will continue to move fast. In the end, it is never one thing, but it is all of those different things in our technology, in our culture, in our differentiation coming together that is helping us to win up market, helping us to win more. That is why we stand here very confident about the future of the company. With that, I'm going to sit this one down.
Well done, Nabil. Yeah. I think we'll take some questions from the audience at this point. I know I'll reiterate a couple of things that Nabil mentioned. First of all, we've been working on this for over three years. You came out and talked about platformization and what does that mean for us. When we look at Extreme as a company and we look at our investment line, we've been investing in AI. This is not something that is new. What I would say is that Nabil, part of the reason why we wanted to elevate Nabil into President of AI Platforms, which is well-deserved. One, he's got an amazing team under him that have come up that are sort of taking the mantle inside of Extreme. Two, it's because with a very small team, we can make a big difference.
Instead of having a lot of dollars or a lot of bodies, we can actually have a bigger impact with a smaller initiative with the smartest people we have focused on solving these problems. That is the rationale behind the decision that we have made. We do believe that being our relative size is an advantage.
Absolutely.
I am going to pause here, and then we will open it up to questions. Yes.
Hi. Tal Liani from Bank of America. You have been around for many years, and you have your strengths and weaknesses, and you are still a very small player. The question I have is, what changed with your customers that enables you to grow beyond your weight limit? Meaning, why now? What enables the 10% growth in the market that does not grow 10%?
Is it about technology, or is it about go-to-market, or is it about the decision-making process that you see with your customers?
I think that's a great question. I assume everybody heard the question. I'm going to answer that with somewhat of a non-answer, which is, I think it's about all of those things. First of all, our technology differentiation today is different than it's been. I'd say we're at, from a competitive standpoint, we're at a different place than we've ever been, certainly since I've been here over the last 10 years. I would let you chime in on that. What we find is that the quality of the opportunities that we're being brought into is a lot higher.
When we have a level playing field, in other words, there is not kind of a strange personal relationship somewhere at the top, or there is some strange economic decision to just give away the business, and then someone bites on that. When we go head to head, we are winning. I would say, since I have been at the company, this is a phenomenon that has been happening over the last couple of years. It has not really happened prior to that. As we win these kinds of customers, it has an effect on the channel. There is this effect. When we win that, I talked about the farm equipment manufacturer that is global. There are 80 countries around the world, tens of millions of dollars of networking. They went with Extreme exclusively. They love the Fabric. They are excited about where we are going.
We had to build a global channel network to support that customer. We came and knocked on doors, and we opened up a lot of relationships. We are bringing in a very high-quality customer. That partner now says, wait a minute. This is not the Extreme that I used to know. This is really interesting. Now I am going to bring an opportunity to Extreme. It takes time. You are not going to see the networking industry flip. I mean, it is just the nature of such a large industry with an installed base. Nabil talked about five and a half generations of technology sitting in enterprise environments. We are seeing it. There is somewhat of a Flywheel effect for us. We are more confident calling this higher growth rate. As far as I am concerned, it is not enough.
The team, we'll get Norman and Monica up here, and Kevin, and we'll talk about kind of how we're doing. Again, they're large crumbs. When we take a point of share, it has a much bigger impact on our growth rate. What I will say is that we're seeing more at-bats. We're moving further down competitive processes, and we're winning more than I've ever seen. The market kind of takes notice from a partner program. I'm not going to call it an unknown today because it's early innings as it relates to AI. We haven't seen any evidence of the larger competitors coming out with a real platform. Just going to say. With that, we're excited about where we are and what's coming. We are hosting our first AI summit on Thursday.
We're bringing out some real innovation as it relates to new agents and agent exchange and sort of accelerating the services that we can bring into our platform. As Nabil highlights and points out, because of our size, it could be an advantage for us moving forward with customers in terms of what we can bring to enterprise customers. There may be a follow-on question.
I just wanted to follow up. In the past, in the last 25 years, not always the best technology wins in networking. Does AI change the market environment in the way that technology matters more? Meaning, will AI provide tools to customers that, or maybe changes just the decision-making process in a way that benefits companies that have better technology?
I'm going to take a high level, and then Nabil will let you come in because I know you're going to ask.
The investment in AI, the investment wave in AI is the largest investment wave we've ever seen in technology by a wide margin. What we see is at the board level, boards are talking about to CEOs, how are you leveraging AI? CEOs are saying to CIOs, how are we leveraging AI? There's this question where everyone is trying to answer, and what are the use cases? I feel like there's a lot of interest today in this subject. Is there a lot of AI washing? Yes. Is there a lot of misinformation about AI? Yes. I do think inherently there's a lot of pressure on leadership and management to bring AI use cases to bear. We feel like this is really a unique opportunity for Extreme. It could change the inflection of growth for us. Nabil, I'll let you.
Yeah, no, no, you're spot on. I'll answer your question directly. Yes, absolutely. Because what's happening in the larger customers is because of this pressure of AI transformation, whether hype or not, whether it's going to happen tomorrow or it's going to happen in three years, starting from the boards, as Ed pointed out to the exec teams and lower down, leaders are all looking at it. It's FOMO. It's Fear Of Missing Out. Nobody wants to miss out the AI transformation. It has become a really big component of decision-making. That's one point. What happens is that when they look outside, they look at their existing vendors, but most of the large existing vendors, by just the nature of their size, are slower to react to this AI market, as I talked about the platformization.
Then they look at other vendors and say, who else is a little bit ahead on this AI axis? That is the point that we made that, look, it plays into our size. It plays into our technology differentiation. I would say for us, we had a lot of point products with a lot of differentiation over the years, the last 25 years. This is the first time we have the platform effect where they all work together. At the same time, AI disruption is the biggest new component in the decision-making. Combine them together, and there is a huge opportunity for us.
Yeah, and I am going to ask on this, the CEO of Barco, when you are thinking about sort of the technology, is it different?
Yes, it is different. AI is definitely going to change the world. You cannot avoid that.
Today, a lot of investments are being done in AI infrastructure, but the true value is going to come from AI applications. Every board knows that. Every company knows that. Now it's a question truly through AI technology to find use cases ahead of your competition and be first with those use cases in the market. I think that's what Extreme Networks is doing right now with Platform ONE. That's what other companies, that's what we do in our niche markets too. We look at AI applications that change and improve the workflow of our end users. That's where you're going to make a big difference. It's unavoidable.
It's unavoidable that this is going to, yeah, the new leaders will stand up, those who have basically, and yes, you have to look for it, and you have to work hard to find the innovative solutions, the value adds that you have there. If you find them, you have a win. I'm pretty convinced about that. Yes.
Thank you. Nabil, have you, NVIDIA has created this huge tailwind in AI. Now much of their talk track in networking is very data center focused. Correct. I mean, that's created a great investment piece. When you think about kind of the uniqueness of the Fabric, have you thought about how you take what NVIDIA has started with the role of the network that it plays and extend it to the campus and use that as a lever to drive more Fabric sales?
I think you might want to repeat the question because I'm not sure everybody got that.
Yeah, so the oops. Yeah. There we go. Yeah. So the question was, with the tailwind that NVIDIA has created around driving the value proposition of the network to enable better AI, how you then take that value prop and extend it out from the data center to the campus and use that as a way, and the branch as well. You're right, Bobby. Yeah. As a way to really use this as a moment in time to articulate the value of the Fabric as the network for the AI era outside the data center.
Yeah. Look, we have talked about this before with you, Ashley. Absolutely. Look, so just for everybody else, NVIDIA, the two terms that they really use is scale out and scale across.
Their point is they're just simply not data centers big enough that can run all AI. You got to expand it and not just adjacent buildings, but across metros and so on and so forth. That's the scale out and scale across. Anybody remember the DCI? Scale across is the new AI name for that, right? That's the NVIDIA part that CZS is talking about. Now, when AI workloads or more or less workloads, but more inference as it comes towards the enterprise side or the campus side, what are the requirements on the network? Is Fabric really well suited for that? That's really the crux of the question. The answer is absolutely yes.
Now, one thing that I would say might surprise you is that on the data center side, bandwidth is probably the most important thing on the workload, data center workloads as a concern or AI workloads in the data center. When it comes to campus, it's actually not really the bandwidth because inferences are not really bandwidth extensive. What's really required is, number one, security, where hypersegmentation plays really, really, really well. The second part is reliability, the lack of latency and reliability, which Dr. An talked about. These are the two characteristics that we see will become the most important thing for a campus enterprise network that really wants to have AI at the edge, inference at the edge. For that, Fabric is the hands-down best network that's out there. Are we seeing that already in the market right now?
I would say very, very early conversations. We haven't really seen people really go after that yet, but we are ready for it when customers are ready for it. We already have the tech for that.
Oh, we got one.
Can you hear me? Maybe one for Nabil and Ed, kind of a combo. Nabil, you talked about telemetry and frictionless and hypersegmentation as being an advantage of Platform ONE. Maybe can you drill down? I know it's early days. It's only been basically a quarter. What is the key sort of functionality that is really driving that early adoption from your customers? Is it the Agentic AI piece?
Ed, when you talked about getting more at-bats and winning more, I mean, it's early days again, but is Platform ONE leading to more at-bats, or is that just better closure rates, or is there something else besides sort of the market disruption that you're seeing that's leading to more at-bats and/or wins? I think, Nabil, I know it's a multi-part of it. You said it's hard to do this platform. There's obviously an 800-pound gorilla in the marketplace. What's, in your view, is kind of your lead or your sort of intellectual sort of competitive position that kind of keeps them in the rearview mirror, if you will, kind of going forward from a platform perspective?
You want to take the first one? I'll take the first one and then I'll go next to you. Okay.
The first one, what are the key some of the early advantages that people are thinking? They're not just in AI. They're in multiple places. One of the biggest advantages on Platform ONE is simply this amazing end-to-end visualization. Believe it or not, there is nobody in the industry out there that can show you every single endpoint in an enterprise in one visualization environment. That's one of the biggest things that people love about it. The second part that we are seeing is that this is multi-persona. It has something for multiple different people. Think about, and Norman is sitting out there, he'll probably give you that anecdote. Be like, "Oh, Platform ONE, this is amazing.
So many use cases, and we showed it to 20 new customers. You know what was the one use case they all loved more than anything else? The fact that they can actually see, manage all of their contracts and all of their subscriptions in one place. There is no other company that can actually do that. There are multiple use cases. Now, as you go on to the actual network management side, what we are seeing is that people love these Cross-domain workflows. You are going from Fabric to Wi-Fi, or you are going from Wi-Fi to Universal ZTNA, singular policy, way more easy to operate. What it does is you do not have to do integrations. Everybody used to say, "Oh, give me an API and I will build a script on top of it." Yeah, good luck. We all know that. This is all built into it.
That is the second category. The last one is AI. You could ask me, I gave you a number on the productivity. What are the big use cases? The three biggest use cases that we are seeing at this point, one quarter in. Number one is knowledge acquisition. It is still, look, prompting is the new search, right? I mean, we know that in the market. That is true for networking as well. Believe it or not, not everybody knows in a network environment what are the new features and stuff. Search is the first step for every network deployment. What is this new product? What are the features of it? What can I do with that? How do I configure that? Blah, blah, blah, blah, blah, right? That is one big use case that is coming in. The second one is troubleshooting.
Troubleshooting is a massive use case. I'm not going to come here and tell you that, "Hey, AI is going to fix all of the problems, find them and stuff." No. It accelerates your troubleshooting 100x. What you needed six days to do, you can do it in like six minutes, right? You still need to be involved in this. That's the second use case. The last use case that we are seeing is evidence collection. When something goes wrong and you need to open up a ticket, obviously every support team will be like, "Hey, give me this dump and that dump and this information and that information. Can you tweak this and tweak that?" AI has taken that load away. Those are the three initial use cases on AI.
I would say visualization, cross-domain workflows, and these three initial AI use cases, that's really what's driving adoption because they all translate to immediate value to the customer. One thing that I would say is anybody that comes up and stands up and says, "Hey, we're investing a lot on the AI, and we believe that these use cases will come out and then show you the slides on it." Yeah, they do not know how to do AI. When we did Connect, we showed no slides, and we brought a true production environment into our user conference. Nobody does that. That's madness, right? Nobody brings a production environment, but that's the power of the platform. That's what's shifting people's mind. It is not on slide. It is not tomorrow. It is value today, right? That's what's driving it.
Yeah. I mean, good answer. I think that covers a lot of maybe both questions. What I would say, yeah, the big differentiators today are the Fabric technology that we've got. Our competitors cannot replicate it. We bring outcomes, and they try, and they can't replicate it, and customers challenge other players. It becomes a differentiation. I would say our sellers, and Norman will talk about this, we've changed our process so that we can better accommodate larger customers. It's a different kind of sale when you're selling into much larger customers. I would say in terms of our process, our selling process, holistically, we have a better approach. Marketing, what Monica will talk about in terms of brand and brand awareness and sort of how we're working. It's sort of a paradigm shift at Extreme where we still have our existing customers.
We still have existing environments and solutions, but we're in a position now where we're moving up. It all fits really nicely into the platform discussion because everyone is curious. An just said, "Everybody wants to, people want to know, like, hey, what is your solution? Who are you working with?" We have a very clean story to tell, and people are intrigued. They want to hear more from Extreme. That starts generating more at-bats, considering our relative market share because, again, we're a lot smaller than the big two, right?
I will add your last one because that's an important one because you asked how far back somebody like Cisco or HP is to us, right? Look, they're smart people. We have a lot of respect for them, right? Everybody is a smart person in the industry.
It is not about we are smarter than them. It is just simple math, and it is just simple facts. It took us three, four years to bring this portfolio together. You remember Universals and then Cloud and Cloud Agnostic. We have been on this journey for at least six years, six, seven years, and this is where we are. Now, when you come to HP, they are just restarting this journey with the acquisition of Juniper. Sure, you can make your own bet whether they will do a little bit faster than us or a little bit slower, but either way, it is a multi-year difference between us and them. When it comes to Cisco, I just do not really know. The key is, look, you cannot throw money at it. That is the part that I was making. It is a multi-year execution. It is ground up. You need to break those silos.
You need to bring those products together. That is not a money problem, right? That is almost like a political will problem, if you would, right? Anybody's guess is better than me whether Cisco will be able to do that or not. If you ask me, we have a multi-year lead across against both of those large competitors. On top of it, I will add one more thing, although you did not ask, what about startups? People ask me like, "Well, AI startups are so cool. They can come up." What is our advantage against the startup? Scale and data. AI can, it is very easy to go and say that, "Hey, I am going to build synthetic data, and I am going to build this model." Yeah, good luck scaling it unless you actually have access to real data.
We have really considerable notes against our larger customers, and we have considerable notes against startup. We find ourselves in a really good situation right now.
All right. I think we have time for one more.
Thank you. I'll limit myself to one question. Ron Westfall, HyperFRAME Research. Yes, a good day to ring the NASDAQ bell and put the spotlight on Extreme differentiators. Yes, the competitive landscape is shifting dramatically. I think you answered part of the question I have, as just recently Cisco came out with this unified edge platform, and they're arguing that in addition to networking and security, you need tighter integration with storage and compute. My question is, how does Extreme see this coming from a competitive perspective, i.e., how is Extreme going to address the storage and compute requirements of enterprise customers?
Are you seeing this type of demand coming from the customer base?
Thank you. Great question. First, I would say that this is like the fifth edge strategy that Cisco has come out with in the last 10 years. Maybe this will be successful. I do not know. I wish them all the luck on that. Here is the thing, right? They are still thinking in terms of workloads because when do you need storage and compute and network together? That is a workload. This is the same old rebrand of the world is going to go towards a micro data center that is going to sit at the edge of the enterprise. MEC was that strategy. There were multiple strategies that came out with it, and each and every one of them failed. Why?
Because what we actually are seeing is that workloads are massively gravitating towards these massive big data centers, and inference is going to the edge, and inference does not require compute, does not require storage. Your phones can do more inferencing than you would ever—actually, that is not a phone, but you get my point, right? They can do more inferencing than you ever need. What is required is what I was talking about earlier, a network that can provide you the uptime and the security. A network that needs to do that, it needs to do it all the way from the data plane, which is our hypersegmentation, all the way to user and identity, which is our Universal ZTNA. Guess who can provide you both of them in one platform under one policy? There was a reason why we went in that direction.
If you ask me, good luck to them, but I think they're trying to solve a problem that does not exist when it comes to enterprise AI inferencing, as Dr. An said, on the application side. They're still trying to solve the infrastructure problems. I don't think that AI infrastructure is coming to enterprise edge. We are seeing OpenAI doing $1.7 trillion or $4 trillion over the next 10 years. Yeah, good luck selling a mini data center to an enterprise for the edge. My very straight and honest answer on this, right?
I would add one point that I think Anisha would support as a CIO is the decision-making process is still very different. We're seeing that on the security landscape as well.
The fact that Cisco, for example, is redoing their partner program and they're requiring security, they're requiring every piece of the portfolio be sold, it's actually helping us because that's not how enterprise customers are working today. I would say the same thing is true with HP, Juniper.
Thanks for the questions. I think, Stan, we're going to take a moment here for a break.
Yeah, we're going to take a break, and we'll be back [audio distortion].
Where do people go?
People can come out towards the back over here and enjoy some lunch demos and then talk to some of our executives. It's time for some executive engagement. Yeah. Yeah.
All right. Thank you, everyone. Yeah. Yeah. Nice show. It was great.
Good. The back half, hopefully the first session was productive. In the back half, we're going to focus. We're going to kick it off with Anisha, who is our Chief Information and Customer Officer. I mentioned Anisha before. We were lucky to recruit her. There were a lot of people chasing after her talents, and we were glad to get her at Extreme. We will talk about—she'll talk about how we have made an investment in our back office to support the SaaS business and the growth of the SaaS business and to scale our back office. We are at the tail end of those initiatives, and Anisha has come in and has been driving that home. Also, importantly, what I was looking for is a CIO who would report directly to me on the Executive team, who would represent our customer, and someone who internally could go toe-to-toe with Nabil.
He's not in the room, is he? Okay. But someone who could go toe-to-toe with Nabil around our products so that, as we're releasing Platform ONE, as we're coming out with upgrades and new—that it's being vetted and tested through our own people, through our own lenses of Customer Number One. And Anisha's driving that in addition to driving Customer Number One in terms of handling all of our customers and being front and center in front of our largest customers. And she's done a phenomenal job. Anisha, I'm going to ask you to come on up and then maybe say a few words about yourself, and I'll put you on the spot on why you decided to come to Extreme, perhaps.
Great. Thank you. Great to be here. Thank you, everyone, for attending today.
Since I'm the new kid on the block, I'll spend a minute, as Ed said, giving an intro to myself. Anisha, I joined six months ago now. Time flies when you're having fun. And I have spent 30 years in IT. I've been a CIO at a few different places. And most of them have one thing in common. They've been fast-growing companies that are scaling. And that speaks to one of my passions and one of the reasons I came to Extreme. I thought it was a really interesting inflection point. I was very sold on the product vision and the strategy and what they were trying to do. And so that was one of the big compelling reasons. I was a CIO at Box for a little bit, which is a Cloud Content Management Provider. I went from there to Toast, which makes restaurant hardware and software solutions.
I was their first CIO, helped them go public. We went from less than $500 million in ARR to now they're over $2 billion in ARR. I was also at Shockwave Medical, a medical device company that was doing about $1 billion in revenue when we got acquired by Johnson & Johnson. The compelling product vision, the inflection point where we were at, what I thought was a really—there's a lot of AI whitewashing. We talked about this, that especially CIOs get to hear and have to tolerate through. When I interviewed with the leadership team at Extreme and what we were trying to accomplish with Platform ONE, I interviewed with them early in the year. We hadn't GAed the product yet. It was super interesting and compelling to me.
That, combined with the culture and honestly the quality of the Leadership team that I had assembled, are the big reasons I chose to come to Extreme. I can say I have not been disappointed. Been busy, but not been disappointed. With that, I'm going to jump in, as Ed said, cover a few things about what we're doing inside of Extreme, right, in terms of driving productivity. We think about AI in sort of these four buckets, right? We talk about AI-native products. The first two circles here in engineering productivity, you actually heard some really interesting commentary from Nabil on this. What we're doing, our platformization strategy, what we're doing with building the one, the first, the only comprehensive AI network management platform in the industry.
You heard some really compelling stats around what value Nabil and the engineering team have seen around productivity using AI. We are not stopping there. Certainly, as a CIO, one of the things I am interested in driving is AI use across the rest of our business process and function. How are we using AI in the rest of our business? That is one area of focus. I will share a little bit about what we are doing there. Also, how we are enabling AI employee productivity with the help of AI, right? This is a very common use case. You hear about it. We are no different. We are thinking about how do we get more value, how do we scale efficiently, how do we give employees time back to do productive work and move away from doing unproductive work?
So those are some of the focus areas that I'm looking at across the company and partnering with the leadership team, especially in business process. I'm working with Kevin on the Finance team, working with Monica on the Marketing team. We're working with HR transformation and what do we do to drive use of AI in all of these functions. Pretty exciting time to be a CIO, certainly from that perspective. We always talk about CIOs being change agents. I honestly, in 30 years of technology, haven't found a better time to be truly living up to that promise and that opportunity. We look going forward. We've been on a two-year journey. I mean, AI—and Nabil mentioned this in the context of product, but it's very true in the context of enterprise IT, right? Your AI capability is only as good as your underlying systems and data.
We have been on a two-plus year journey. I cannot take credit for that. I am the new kid on the block, but the leadership team had already initiated this, right? I hopefully have a little bit to do to completing the journey. We have been on this two-plus year journey to really modernize and optimize our tech stack internally. We have streamlined our application footprint dramatically. We just released about a month ago a brand new front office tech stack that really streamlines how we do opportunity management and quoting and making sure we have a single system for hardware-software renewals. We are on the cusp of launching a brand new set of capabilities for the back office, for finance, order management, supply chain, with the tail end of that journey as well. What we are trying to do really is the second point.
We're trying to build for scale and really make sure our systems are set up for running a SaaS business. We're building in agility. One of the things, one of my goals as a CIO, is to make sure that these systems are agile as we introduce new commercial go-to-market models. As Nabil and Carla and the team think of great new monetization models that we have not thought of before, our ability to pivot and support those matches the velocity of the business, right? That has been a big focus for us to make sure we do that. We want to boost employee productivity. We are also looking to scale efficiently. As our business grows, we want to bend the curve on the operating cost of doing that, right?
It is really important that we think about how we continue to drive productivity in different groups of employees and see benefits from doing that. These are some smattering of examples of where we applied AI for results in our own organization. I will underscore that this is a journey, right? This is not where we want to end. Ed definitely wants more from me in some of these metrics than are up there today. I would, again, underscore we are experimenting, we are learning, and as we learn, we drive for more value out of these. Some of these are not uncommon or not specific just to us. You see a lot of use of AI in tech support. We are certainly seeing benefits of that. We are seeing faster resolution time by doing some of these things.
We have deployed sales and partner AI tooling that really focuses on making our salespeople and making our partners more efficient in being able to quote and respond to RFPs and in the sales cycle support them as they are quoting Extreme products. Super excited about this. We are rolling out capabilities in Configure, Price, and Quote and Internal IT. We are on the cusp of doing some stuff around security operations. Lots going on here. I think the message is we are not sleeping on AI just like no CIO is, but we are, in addition to having a strong story around how we are building AI-native products for our customers, also leading the charge in terms of adopting AI internally for our own use to drive efficiencies, to drive productivity in our employee base. This will continue. We are excited about going down this journey.
The great news is the Leadership team are not at all resistant to change. Sometimes you get that, right? They're very embracing of this. We are looking to partner and continue to drive this going forward within the Company. Lastly, before I go on to sort of the next section, I want to talk about Customer One. Ed alluded to this. One of the other really big reasons I was interested in coming to Extreme was this part of the role. I've been at enterprise software companies, and I've always felt like the CIO's role has been underutilized in terms of understanding value. I always tell Nabil, "I'm your CICP. I'm your Chief Ideal Customer Profile, right?
You should be talking to me." I've had some experience doing this semi-informally or some degree of formality around playing that Chief Customer Officer role in terms of being the first one to adopt and give feedback on the product, right? Again, lots of credit to Ed and the Leadership team for thinking in a very forward way about this. That was a big part of what really, really interested me in the role, the dual mandate of running this IT organization as a CIO, which I know how to do and have done many times before.
Formalizing this Chief Customer Officer role, where not only am I the first one to deploy and use our products and give feedback, our goal at the end of doing this is really to make sure we deliver products that hit the mark with our customers, right? We deliver the value we think it should. It delivers with the quality we think we should. We are really focused on being the first and best customer. We want to be a referenceable customer. We want to have close interaction with product and engineering on ideation around what product features should we build, what capabilities should a product have.
We also work with sales and sales engineering, work with my GTAC team in support to articulate what's the best way to use products, what are best practices, how do you troubleshoot issues, and give real-world usage and implementation advice back to these teams that are on the front lines supporting our customers. I am super excited about being able to do this. At the end of the day, what we're interested in doing through all of this is really building greater customer centricity across the organization. I see myself as a customer advocate first, right? I can be that voice of customer internally across the function. Whether it's how we're delivering support, whether it's what features we decide to prioritize, what areas we decide to focus on, I get to do that as Customer One.
It's been exciting and invigorating, frankly, to be partnering with Nabil and the Product team and Norman and the sales team and talking to customers. It's a really unique dimension to the role that I'm enjoying. At the end of the day, what we want to see is that translate into better products and better experiences for our customers. That was a little bit about what we're doing internally and what my role is internally. What I'd like to do next is invite Michael Parente up. I'll do a quick fire, no fire, but chat, CIO to CIO chat with Michael. Michael is the CIO of Stevens Institute of Technology and a customer of Extreme. Thank you, Michael. Appreciate you coming today.
Thanks for having me. Thanks, Ed, and the Extreme team for having me today. Are we sitting?
Yeah, that's it. Why don't we start with tell us a little bit about yourself and about Stevens.
Sure. My name, again, is Michael Parente. I'm the Vice President for Information Technology and CIO at Stevens Institute of Technology. I actually graduated from there, left for the private sector, came back by chance, and went through a whole bunch of different roles. I've been there for actually 16 years now in the CIO role, two weeks, officially.
Congratulations.
Thank you. Just real briefly on Stevens, in case for those of you that do not know, we are a private nonprofit research institution right across the river in Hoboken, New Jersey. We are primarily STEM-focused. We have a business school. We have a small humanities school and most recently a school of continuing and professional education. We have 9,000 students, give or take. It is split about 40, 60 undergraduate, graduate. We have over a dozen research centers and labs. A very diverse population and diverse needs on campus.
Great. What does that translate to in terms of complexity of your environment? Talk a little bit about, because I do not think I fully appreciated what you are dealing with. I think the audience would love to hear as well.
Sure. Everybody has a particular need when you're on a university campus. Everybody also has their own idea how things should be running. It is really balancing all of that on your enterprise network. We really have, really, it is around three areas, right? We have our students who, they want to just bring their devices. They want Wi-Fi everywhere, as we were talking about earlier. That is more of your BYOD Network. We have our Administrative staff. They are running enterprise apps. They have our enterprise data. That is more locked down. That is like your Corporate Network. You have your faculty and your research groups. They need a little bit of both because they need the flexibility to stay open. We also need to be able to ensure that it is secure and performant. We also have, there are IoT devices all over campus also.
It's just we've got a little bit of everything on our campus.
Yeah. Great. I know you've been there two weeks in this role, but give me a little bit of history. How and why did you start working with Extreme?
Sure. Actually, if you do not mind, I will back up real quick and also mention in terms of our infrastructure, we are both, we are hybrid, we are cloud, and on-prem. We have moved a lot of our, most of our enterprise applications and our commodity stuff like email to the cloud. We do have an on-premise, a good presence in research computing. We have a high-performance computing cluster in our data center. Probably 70% of our data center is research servers. That is where I mentioned we need that particular part of our network to support that. Why Extreme? Unfortunately, Stevens had a bit of a cyber incident back about six years ago. Part of unpacking that was looking at the network architecture. We were also at that time looking to do a core refresh.
We used that as an opportunity to say, "All right, how do we go about doing this the right way, more resilient, more secure?" but also with a very small team. We do not have the luxury of having a large team. We have five people on the team. That includes our team lead. That includes our Infrastructure Project Manager. It is a lean team that has to support all of campus. We were looking for a vendor that we could grow with that eventually we had hoped we can get on a full platform. Because again, I know Point Solutions were referred to in one of the past talks. We like Point Solutions for certain things, but something like our network technology stack, more efficiency if we can get on the full stack. We started off by just doing the core at the time.
We did the core. It allowed us to do all the segmentation that we needed to do that we did not have in place before then. We did that with the expectation that we would grow with the platform as more got released. We got into the Fabric then and started realizing the benefits of that, the simplicity, the scalability. Having a small team, again, as we are building this out, that is extremely important. Fast forward two years when it was time to do our network refresh. We went with Extreme for that. As of right now, I think we have about 2,200 access points deployed across campus. We have since moved out to distribution. We are almost completely on the Extreme stack now at this point. Now we are really seeing the benefits then of using Fabric across all that.
We can spin up services, put in new hardware very, very easily. I know our team enjoys working with the technology stack also.
Great. What's it been like working with Extreme for you and your team?
Like I said, enjoyable. I think we got over the initial learning process. Now we're really seeing the value. One of the things that we strive to do that we would not have been able to do in the past is aim for 100% uptime during our semesters. I was joking around with somebody. I said, "We're not doing Robotic surgery on campus, but our students, our faculty have the same expectations. Our President does not want us to go down even for a second." That five-nines mentality. We've actually been able to achieve 100% uptime, no unplanned downtime over the past two years during our fall and our spring semesters. We push all the upgrade work to the summer and the winter break.
A lot of that, all of that, I think, is due to the fact of how we architected the network on the platform. Yeah, it's been great. The other thing I want to mention is we chose Extreme because we felt that the Company was forward-looking. I think there's a lot of evidence to that in terms of what's been rolled out now. Most importantly, it's not just about the technology for us. It was about the partnership. Every time we go and we look for a vendor, especially in something that we're using across the enterprise that's this critical, we want someone that not only has great technology, but that also invests in us as a customer. The technology is we're going to run into a problem at some point.
We want to have someone there by our side because, again, we do not have an army to support this. I feel like we have gotten that too.
Great. Awesome. It would not be a CIO chat without talking about AI. What are you doing with AI? What are your plans?
It wouldn't be a day without talking about AI or a minute.
True.
I mean, we're still, as a university, I think, in the infancy, I'd say, of where we're at. We're trying to put together a campus strategy. Everybody is still using AI in different ways across campus for individual and group success. Our administration is using it for the productivity gains that we talk about in our everyday. With the students and the faculty, they're using it for teaching and learning in the classroom and to create curriculum and to use it as a tool and to gain the skills that they're going to need when they go on in their careers. Our researchers are using it as the subject that they're researching or as a tool to finish their research. We're really focusing right now on using AI for student engagement. We are here talking about networking.
In the IT side of things, we're using it right now in all our operations, whether it's our systems administration for automation or in our networking, looking at it inside the platform, cybersecurity. Again, we have a small team in cybersecurity, so you have to level up that way instead. That's why Platform ONE, very awesome. I mean, I would love to see, I think we could get some great gains out of that. There's been a directive at Stevens, much like a lot of everywhere else, where can we use AI? We try to use it wherever we can. It's embedded in a lot of our applications. We're using it separately. Using it here, I think it'd be great.
Awesome. Speaking of Platform ONE, you have a captive audience. Nabil's literally sitting right in front of you. If he could build you any agent to do anything on your network, what would it be? What capability? Right here.
Yeah, I was going to say I'm going to cheat and say it's the Overwatch agent that can do everything. So that's the one task, right?
The agent of agents.
Yeah. I mean, if you're going to ask me what are the two areas, the one area would be Cybersecurity. I like protection, network protection. Because at the end of the day, that's the one thing that will keep me up at night more than anything. Looking at an agent that can look at the network and basically get ahead of problems before they have problems, whether that's capacity issues, performance issues, or security issues, and essentially be that 24/7 network engineer that's either doing something or alerting our team with analytics and information so that we can take action, that's what I would do.
Awesome. Thank you.
All right.
All right. Thank you so much for your time today. Appreciate it, Mike.
Thank you for being a customer. Appreciate it. All right. With that, I'm going to invite onto stage Monica Kumar, our Chief Marketing Officer. Monica.
Thank you so much. Good afternoon, everyone. Good. Thank you. Can we try it one more time? Good afternoon
That's a little bit better. All right. This morning, we heard about the market opportunity from Ed. We heard about the technology innovations and leadership from Nabil. The third piece of the puzzle that we are going to talk about now is the go-to-market execution. In my opinion, that is a key ingredient for success. Before I do that, let me talk a little bit about myself. Some of you I know are industry analyst friends. I don't think I've met the investor community before as part of Extreme. I've been, just like Anisha, three decades in B2B tech as a marketing leader. I spent almost two decades at Oracle running the Oracle database business marketing for that, and then at Nutanix about four years, again, helping Nutanix transition from an on-premises hyper-converged infrastructure company to a hybrid multi-cloud company.
I was very excited when I got connected with Ed about Extreme Networks and where the company is headed. I joined Extreme in January last year. It's going to be coming up to two years now. I'm super excited at all the great work we've done to come this far. I'm going to talk about that in a moment. Now, the way I think about marketing, it's not just brand or demand. Yes, those are important ingredients of marketing. At the end of the day, marketing is a growth and impact driver. What I mean to say is turning brand equity into measurable ROI and revenue performance is our goal. That's what I'm going to take you through.
I know you were talking about, so why now? Why Extreme? Why now? I'll show you a few reasons why Extreme. Why now f rom a go-to-market perspective. Yes, the Campus Networking Market is growing single digits, 5% CAGR over the next five years. We all know that. However, there are subsegments of the market. Cloud managed, in particular, is one of them that's growing double digits, 13% CAGR. Extreme is already a leader in that segment. We are one of the top three cloud managed providers. We are also growing. We also have a 10% market share in that segment already. As you can see, we are growing at 2x the market growth rate currently with a 24% growth in our annual SaaS ARR. This is a segment that we are very focused on as a company is driving more growth within the cloud managed market. However, I knew you wouldn't be satisfied just with a 13% growth rate. Come on, right? Neither are we. Neither are we.
The reason why we are so bullish is look at this, how the Campus Networking Market is progressing over the next five years. We are literally at the tipping point of that. We're just starting out. This is the AI networking piece of the campus market. It's about to take off. Over the next five years, according to the 650 Group, it's going to have a 72% CAGR. It will become half of the Campus Networking Market. While the Campus Networking Market is $29 billion today, it will go up to $37 billion. Out of that, $19 billion will be AI Networking for campus. Think about that. Think about how well we are positioned given the current portfolio that we described and the continuous innovation that we are bringing to market around AI Networking for campus.
That's one of the reasons why we are very bullish about the opportunity for Extreme. Why now? Why Extreme now? One thing I do want to say before I go into this is, as a marketing leader, my focus is on driving, again, pipeline and funnel and business growth. However, we need to be grounded in market realities. I want to share with you the—sorry. I think something is wrong with my slides. There we go. Market insights are the foundation of execution. In order for us to run the right campaigns, have the right messaging, the right product launches, we need to ensure it's grounded in customer and market reality. We recently ran this report, which is going to be published in a couple of weeks. It's called State of Cloud Networking. We surveyed over 200 IT leaders globally.
We questioned them about not just networking, but also IT solutions in general. As you can see here, the numbers from last year and this year are significantly different. If you'd like, we'll share both the reports with you, and you can compare yourself. Today, over 74% of those we surveyed have deployed Agentic AI already in some form or shape in their environments. It could be non-networking as well, but they have already deployed it. About 58% have a greater emphasis on AI expertise within the organization. Look at the last stat. 94% prefer AI natively built into networking platforms. This ties back and validates our Extreme Platform ONE value proposition and our strategy around platformization. It is grounded in customer and market reality.
That's why also we are optimistic about Extreme now in this moment and why we believe we are very bullish about our growth coming up in the near future. If I were to summarize the report, there are three key elements we got out of it. Number one, platformization is accelerating in networking. Number two, AI is transforming the networking workforce. Many of the IT leaders told us they are looking for AI expertise in the networking workforce. And last but not least, Agentic AI is moving from theory to practice, meaning the ROI is becoming more and more important, and organizations are looking for AI to be built into their current solutions. So what do we do about this as a CMO? How do I think about it? The way I think about execution as a CMO is around four Ps.
Let me explain what I mean by them. Perception, Platform, Pipeline, and People. It is not in any particular order. Let me explain what I mean by that. Perception is driving brand awareness and equity. It is, again, like I said, not just about messaging and content and great visuals. Those are important. Really, brand as a catalyst to drive growth, to create demand, to ignite new logo growth, and to create a bigger footprint for Extreme in the partner and customer ecosystem. You talked about winning in upmarket. One of the reasons is in the last year and a half, we have been very vocal. We have been amplifying our brand in a big way, connecting back to our portfolio and showing customers how we can drive outcomes for the customers. That is the value of brand in driving pipeline. Let us talk about platform.
We've been very focused on driving campaigns to build Platform ONE funnel, close the business, but more importantly, focusing on adoption so we can think about renewal and upsell opportunities in the future. That's Platform ONE. People, arming our sellers, arming our partners with the right tools, insights, playbooks so we can win faster, we can win more frequently is what we are doing in terms of enablement. All of this together in the service of the fourth P, which is pipeline. Kevin tells me translates to the fifth P, which is Profit, right? We have to make sure that we are building Pipeline, but we are converting Pipeline too. We have to convert Pipeline, have the revenue performance alongside it, and again, convert that into measurable ROI from an effective marketing perspective.
I just wanted to share this with you because I'm really proud of the work that the team has done. Again, this is about Extreme delivering on our brand promise to customers, ultimately driving outcomes for customers and partners. That is what makes our brand come to life. Just putting words in a PowerPoint is not enough. You will see that as Nabil talked about Platform ONE, the whole genesis of Platform ONE is to drive extreme simplicity, extreme reliability, and ultimately extreme value through automation to organizations. We have tons and tons of examples of customers who are doing that with Extreme today across our entire portfolio. We have done a lot of work in the last year and a half to really amplify our voice. I am going to show you a couple of examples of that.
Some of you in the audience here today are industry analysts, advocates, and friends. I hope you see that. We hired Ben Kalb to run our AR program. Ben is somewhere here. There is Ben in the back. We have made it our mission. Thank you. Yes, he is amazing. We have made it our mission to stay very closely connected with the industry analyst community, to update you on a regular basis, to get insights back from you, to ideate with you, to dialogue with you. As a result, we have seen a whole number of coverage from our industry analyst friends. I know the investor community deeply values also the insights and knowledge you get from the industry analyst. I hope you are seeing that.
Also, with the press and media, and again, the number of articles may not mean anything to you, but it means something to us. We've had thousands of articles written about Extreme in the last year, especially Extreme Platform ONE, with a strong positive tone. Again, we monitor this very closely. We want to make sure our placement in the key media publications is high. All of this is, again, like I said, it's not just about getting placement. It's about making sure we are part of conversations, that we are reaching higher levels within organizations, and there's awareness about Extreme as we go talk to new prospects. I have to show this. Thank you, IDC. You guys ran the IDC Marketscape.
I'm proud to say Extreme Platform ONE got us a placement in the leaders' segment of the IDC Marketscape for Worldwide Enterprise Wireless LAN 2025 vendor assessment. Again, this is all the payoff of the work that we've been doing across the technology innovation, the brand amplification, and all the work we are doing with engaging with the analyst community as well. What are we doing to develop funnel? This is the practice that we are building by deeply collaborating with sales. Norman and I came up with this notion of pods. We have 19 regional pods, which comprise of sales, marketing, and channel teams working together on the ground. They have a business plan. They have a bookings goal. They have a funnel goal. They have industries that they're targeting, partners they're working with, programs they're running, tactics they're running, and so on.
All those 19 pods roll up into a global number each quarter. We are running this type of best practices on the ground and making sure we are enabling folks on the ground while we think global, but we are acting local to enable our sales and marketing organizations with the ultimate goal of, of course, creating funnel, but winning business. We very keenly focus on conversion rates that are happening there as well. One of the ways that we are arming our sellers is by providing prescriptive win recipes. It is really important when we know what works well, we rinse and repeat that because we have a higher probability of winning when we provide fully integrated sales motions in place. You can see from the left to right, these are all the ingredients that go into every single sales play.
For example, Extreme Platform ONE play, we start with the segments, targets, use cases, campaigns, messaging content, enablement. We are giving them tools like ROI calculators, demos, trials, enablement, and then we execute on the play. This is the magic that happens when you have a very tightly run prescriptive play. We also have identified target account lists, by the way, and segments that we're going after together working with sales. I wanted to give you an example. We're running competitive plays, cross-sell upsell plays, and Extreme Platform ONE play, of course. There are many, many things we are doing as a marketing organization working with sales, but I'll highlight a few high-impact programs that we are running. CXO program. Of course, we are amazing at talking to our user community, and we have a very loyal and big user community base that loves Extreme.
However, what we are realizing is in order to win more in upmarket, we have to start engaging more with the CXO audience. Ed mentioned recently that we have an AI summit this Thursday at the MLB headquarters here in New York City. We have 80 CXOs coming to that event. We launched our CXO program last year, and I can tell you this. Every dollar of investment in the CXO program is yielding $55 of funnel for us today. For me, it is very important. Even the AI summit, we have talked about it as a thought leadership event. I love it. At the end of the day, I want pipeline and closing business.
We have millions of dollars of funnel that's walking in already into that event on Thursday, and we'll be maniacally focusing on how much do we close, how much new pipeline do we create, and how do we convert that. Connect, you guys are hopefully familiar with. It's a user conference. It grew 26% last year. We had 48% more pipeline that got created out of Connect attendees that came to Paris last year. We had 57% more executive engagement at Connect. Big deal progression. I'll just mention one more thing. Norman and I are working together on all opportunities over a million dollars. Sales and marketing are working together to progress it. Make sure we can close them faster. What we've realized is when marketing gets engaged with sales, we are closing.
Our win rate is twice more, is 2x higher, and the deal size is 3x bigger. That's something we are working on together. Lots of new tools for our sellers and partners, ROI calculators to calculate business value, product tours, and trials. What I want to leave you with is think about marketing at Extreme not as just a brand or demand engine, but it's a real growth engine for the business. It's the one that's working very closely with sales, aligning on segments that we go after, aligning on creating funnel and closing business for revenue impact. I'll leave you with this quote because it really captures the philosophy that I have in terms of how I think about marketing. Strong brands build more than just awareness. They build resilience.
Our marketing investment today is creating the demand, loyalty, and leadership that defines tomorrow's growth. Thank you very much. With that, I'll get Norman Rice on stage. Thank you.
Hi. Thank you, Monica.
Oh, thank you, Monica. Hello.
Good afternoon. This is the coveted after-lunch communication. Nothing better than being the after-lunch. Now, I'm the setup person for our CFO, which is what you're supposed to be waiting for. Kevin's going to bring it home. Let me start with Kevin and Stan had asked me to make some comments about, oh, thanks, Kevin. Kevin and Stan, my role, I'm CCO. My role for many years was COO and has been COO, where I have responsibility for operations, supply chain, all of that. I now have sales as well for the last seven quarters. That's the CCO title.
Bringing that together, remit, bringing that together and creating precision around what we're forecasting, where we're going, that's been a pillar of what we've been doing since I've been in this role. Let me rewind for a minute. I'm going to put on my COO hat and talk about supply chain. This is in direct response to our earnings that happened a couple of weeks ago and some of the things that came out of that and some of the feedback loop. I'm going to rewind seven years for a second. At that time, we embarked upon a series of acquisitions to create scale. We didn't have the infrastructure in place to scale.
When we started to roll up and put together the Motorola asset from Zebra, the Avaya asset, and the Brocade asset, we had a really unique opportunity to look at what were the best practices and what could we do to build scale within our supply chain. We did a 100% overhaul of our supply chain infrastructure that gave us complete visibility and automation across everything. I can tell you where our parts are, whether they are in the origin all the way through to development to build right through to the channel where each part is with a very high degree of accuracy, but on a, call it an hourly notice. That is what we can deliver today. That came under complete stress, but also performance during the supply chain crisis and COVID. That team delivered. That team continues to deliver.
Those infrastructure investments we made delivered, continue to deliver. In fact, what we saw is largely before we implemented our price increase, which took effect on November 1st. I have total confidence in our ability to recover and move through that. I am not going to take Kevin's thunder away from that, but Kevin will show you what we are doing and how we are recovering that space. That is it on the supply chain. Again, I am available in the Q&A and find me in the hallway. Happy to talk to you about any of that, any of the history and all those things. Oh, one more thing. We saw this coming a year ago. Last November, we went public to our customers, to our partners, to our distributors talking about the impact of AI.
We thought that we would start to see longer lead times, parts scarcity, and increased costs as a result. We started broadcasting that publicly to all of our partners so that they would start ordering ahead, start thinking ahead, do a lot of the things that we learned during the supply chain crisis, plan forward, think forward, and be ready for a price increase that's going to be coming. We do not know how much or when, but that's now been implemented. Just to cover that, that includes DRAM as well. All right. Let's change gears. Sales. That was my slide head. Sales. What's going on? There were a couple of cool, really great questions that came up. It was Tal from B of A cut right to the chase and said, "Hey, you're a small market share holder.
How do you take share? David, you from UBS also asked, "How do you compete against a full stack? Whether it's a solution, how do you compete against a full stack that has compute, storage, all those types of things?" The answer to both is the disruption that's happening. The theme to this event is disruption. What are the disruptions that are happening? They're happening multifold. How we answer those is how we've oriented ourselves and as all of my colleagues walk through how we're delivering on that. The disruption starts with the people disruption. Our industry is mature. I may call it long in the tooth, but it's mature. There's a specialization. What used to be really important was specialization. Today, generalists are more important. Generalists are largely filling the roles that used to be specialists.
To put into other terms or use examples, that's a Cisco CCE hard-coding a response dynamically to an AI agent application taking an action proactively. That's how you accomplish that. That's how you create scale. The AI agents and all that aspect are starting to accelerate that movement in that disruption. The other disruption is what Ed said, $43 billion. $43 billion is the install base of the Catalyst 9K coming to end of life. Not end of service, not end of support, gone, dead, can't use it anymore. That is a great opportunity for us to take advantage of. Now I'm going to rattle off a few stats because I think this is probably one of the most interesting and applicable disruptions for us. And Bob, you got to keep me honest. 500,129. 500,129. Bob, what is it? [audio distortion] .
You were last week at Cisco's channel event. They have 500,129 partners. 668. Ed, do you remember what 668 is? [audio distortion] Exactly. We talked to the industry experts. One of the other fun things that's going on in the industry is when Cisco, HP, and Juniper merged, we're able to pick off or recruit some of the better talents that are out there in the market. We've done that in the channel. We've done that at a few places. We find out information and we learn new things. We get to bring in some of the experts. The top advisor to Cisco who helped build the program said 668 partners will make the same amount of money or more than they did last year.
That leaves 499,461 partners that will not make as much money. That's a problem or it's an opportunity. That means 0.13%. Where's Alan? That's 0.13%. 0.13% of all partners will make money. That means 99.87% will not compared to what they did last year. That's the opportunity for us. Now, we're not going to go after all of those, but we have the technology disruption, we have the economic disruption, and we're building the infrastructure to be able to execute on that, and that's our scale to go with it. I just wanted to address a couple of those. Here are some of the building blocks. Now, Monica talked to this.
The pods, the trick here with the pod and the beauty is really just the alignment on a common goal, a common funnel, common target, whether you're in sales, whether you're marketing, whether you're in distribution, you're all working towards these common targets. Those create symmetry and alignment with our teams and help us set up for execution. Big deals process. We put in place a cross-functional capability. So when we identify a project after a standard methodology so that we're all speaking the same language, we bubble it up, and then we put the right attention on it so that we can go and win and increase our win rate in that category, so higher conversion rates in that category.
That's a big part of the infrastructure, and it's a function of both the training itself and the discipline when we go through all of the forecasting and build processes. Finally, targeting large partners. This is a great example. When I started in sales, one of the first things that I looked at when I was diagnosing the challenge, where do we scale and why don't we scale? If a lot of our partners are playing in the mid-market, by definition, they're playing in the mid-market. I use a few different analogies of being not the tallest person on the NBA team, but that's effectively you can't coach that height. You have to be able to go and get bigger, broader players. That's the example that we can use. I'm going to talk to that and give you some examples. Financial models.
Nabil outlined this as part of our full portfolio of an offering. You have to deliver on scale in our technology, but you also have to bring different things that matter to those partners. Let's go back to those 499,461 partners. How do they make money? We have different models. We have the traditional CapEx model. Everybody's aware of that. That's a history. It's been here forever. The MSP model, something new and disruptive for us. We added metered billing. Metered billing, that means a lot to a lot of partners because you have cash flow protections, you're able to follow what your customers are doing, gives you more flexibility, so on and so forth. We move down into the lower right. We have our subscription private offer. This is where we've decoupled all of the software from the hardware.
It's 100% software being sold as a subscription to a customer without a financial obligation tied to it. There's no leasing instrument. There's no other obligation. Highly disruptive. We are transacting on that in every region in the world, Asia, Europe, Americas. We have multiple customers using this model. In fact, that combined with our fully as-a-service offering are making up 14% of our new subscription bookings today. Our pure OpEx model really uses that model to use the subscription offer to power the offering to the end customers. That flexibility is our response to Nile and Meter. This is our version. Nile and Meter in one category, we have all the above. We have the Nile and Meter offer, again, decoupled from the hardware, 100% OpEx for the end customer without a financial obligation. We have the ESPO or subscription private offer.
ESPO is our internal terminology, but subscription private offer for customers to have full OpEx flexibility. We have the traditional CapEx model, and then we have a fully metered hybrid model in MSP. All of those things together are the tools that help us and be interesting to partners so we can go on and take share and meet the customers where they are in the market. Let's talk a little bit about some of these partners. Up here, there are a few categories. Technology. We had to call out our friends from Barco, so thank you to them who are in the room. We have technology solutions that we bring to market with our partners. We are embedded in their technologies, and we are using their technologies like AWS, Microsoft, and we are leveraging and using their capabilities to expand our networking. I'm moving for you.
Just for you, Zayas. I've just been seeing those in the meantime. Yeah, yeah, yeah. What I want to draw your attention to is really in the center. A lot of these transacting partners, and think of the traditional resellers. I'm back to the numbers, the Cisco numbers, the 668 and everybody else. What's really interesting on here, and I'm going to show you examples, but the likes of Insight, very, very large Cisco partner, historical, huge history there. We're aligned with the president. We're rolling out right now a subscription private offer through them to the marketplace. That's coming to market as we speak. That's for them to go in and sell as a service, 100% the rate card out to their sellers. Their sellers are trained. It's just now starting up.
Computer Center, huge Cisco partner, a lot of history with Cisco across Europe and around the world. Computer Center is going in and pitching to their existing customers. They are the incumbent partner. They are pitching an alternative to the existing incumbent technology that they sold into them many years before. Displacing Cisco even in the core of their offering at Computer Center. Logicalis, the list goes on. I will talk more about and give examples of NTT and KDDI, but it is the exact same thing. We are seeing that happen. Now, how do we scale that? They are attracted to us. The partners are attracted to us because of the disruption that is happening. They are attracted to us because we have alternative models. They are attracted to us because our technology is different. It is scalable, and there is a big future ahead of us in terms of disruption. All right.
Here's just some of the score, the tail of the tape, as we say. In FY 2025, which ended July 1 or June 30, over 20% of our business and new logos came from larger projects. 59% of our customers are buying our full stack in that time period, which is very substantial. They're not buying one aspect. They're not buying switching or wireless or our platforms. They're buying all together as a turnkey. 90% of our bookings from partners, our partners are selling the full stack. They believe in the full solution. That's where we're competitively differentiated. We talked a lot about our SPB Fabric. We talked about our high-density Wi-Fi. We talked about a hybrid where they come together.
Over the top, you have Platform ONE where you can be on-prem in a Private Cloud or a Sovereign Cloud, or you can be in the cloud so you get the scalability and speed of the cloud. You can illustrate that in a proprietary way with our technologies like our Fabric that nobody else can do because they do not have those technologies to be able to illustrate. It is a big differentiator for us. I already mentioned 14% of our new bookings in subscription are coming from these alternative models. They are taking shape. We like this slide. I thought this was interesting. When you look at our new logo dollars, we are going up. This is a proof point to illustrate that we are getting into larger projects and we are winning.
As we win larger projects, the two color tones, one's over $1 million, the other's over $3 million, our $3 million projects are taking a larger and larger aspect of all of our new logos. It makes a lot of sense. You're getting new logos. You're getting bigger new logos. It's great to win new customers. It's great to win bigger new customers. I can say a lot of that's because of the share shift that's happening in the partner base with some of the largest partners in the world. Thank you to our friends at Cisco and HP. You sent me something. Yeah. I should send them a gift, right? A few examples. The first one here, it's a Fortune 86, just to throw a number out there in case you're looking. You want to look it up. Anyone want to validate?
In the Fortune 100, one of the largest farm manufacturers in the world. We've already talked about this, but they selected us. I love this story. We were the last ones invited to the party. Literally, we were the last ones invited to the party. CDW and Verizon introduced us. We went in. They asked us to go first in a multi-day, multi-vendor eval because they figured they were going to take us out first. Here we are. We won the account. We're the global standard across the board. Our Fabric stood out. The way we illustrate with our management suite stood out. The way that we're going in terms of Private Cloud for Platform ONE is what stood out. That illustrates the value standardizing on the technology front. The second aspect of that is the economics. Now, the economics here, we use an alternative model.
We use our private subscription offer. Why does that matter? A manufacturing company that does business in 36 countries has hundreds of different sites, also has to deal with VAT taxes and tariffs. Those go away when you're not buying hardware. They're software. Yeah, right. Be specific, but they are greatly reduced. The savings was millions and tens of millions of dollars because of those impositions. A lot of how we delivered that model, how we delivered it with the partner, the partner, by the way, that we ended up working with, it's a number of partners, but it's primarily CDW, but globally we're fulfilling through an infrastructure of partners to be able to scale, illustrate we can scale, fight it that way. Our CDW partner here stepped in, and they were the incumbent who had been pitching cisco previously.GlobalData
Cisco was the incumbent, not anymore. Now we are. We're rolling that out. That's a great story for us internally because of how our teams came together. We identified all the right sales motions and moved it ahead. Win. Win is another great story. The Wynn Gaming Group owns lots of different assets around the world. Historically, we've worked with them only in Las Vegas, and we started with physical security. We started with managing their physical security, the cameras, the cameras that are watching things, cameras that are watching you while you're counting cards, all that kind of stuff. I know Bob does, but the cameras that watch us and make sure we're all safe. Exactly. You got to take a class on that. They chose to standardize on us across the Board.
They're working with us in Boston, Macau, and now we've added the newest and called one of the largest casinos in the world, which is coming up in UAE. That casino and that resort is getting a ton of attention because it's the first one in UAE, and they expect it to be one of the largest and biggest, most profitable ones that they've ever had. We're going to see fast follows happening and standardizing on our technologies. The CIO of that group sent us an email the other day. The PR folks were saying, "Don't say it.
Don't say it." They came out and said, "Hey, we're one of the best partners to work with in so many words." They are very pleased with how we're rolling out, how quickly we're rolling things out, and it's just a great win across the Board in terms of being global. I'm going to take a second. Ed had talked about Kroger. Nabil had talked about Kroger as a customer. One of the best things about Kroger was that Kroger, not only their use case, but they put 110,000 access points in thousands of stores across the country. They set a high bar goal of, "We need to accomplish this in three years." Remember, they can only do that at night. You can't close a grocery store during the day with people hanging access points and doing stuff. You have to do that at night. What did they do?
They did it in two years. They started off a little slow, and they accelerated the rollout. Two years, 110,000 access points across thousands of locations because of the ease of implementation, ease of configuring, and ease of deployment and management of our access points and of our solution. That is one I wanted to hit on. All right. Winning up market and regulated space. This is a hot topic, the regulated space. Now, I have not talked to all the verticals and all the categories, but we have been winning in our traditional ones that we usually talk about, which is healthcare, education, government, sports, different venues. We covered some of those, but wanted to focus on our enterprise business and how that has been scaling and helping us drive growth, helping us drive better predictability, better foreseeability, and also in the regulated space.
Regulated space is a huge opportunity for us for a few reasons. One, our Fabric is differentiated. Our Fabric is certified. Our Fabric is certified by multiple governments around the world to their certification standards so that they can check the box and say, "Okay, this technology meets the need on a secure basis for us to be able to buy the solution." Reducing barriers to entry in terms of purchasing. The second aspect of that is how we illustrate the value of that and how we manage it and how we orchestrate it and how we do analytics on it. That is coming from our Cloud. Our Cloud offering is our Cloud Continuum. Whether you are in the Public Cloud or your Private Cloud or you want it to be a Sovereign Cloud, those are the solutions that our customers are looking for.
We have three really large projects going on around the world, and this is one of them. The one that we've spoken to a couple of times is the government of Japan. In Japan, we have a design win. The technology team convinced the customer and worked with the customer and built a full end-to-end solution for Fabric across the campus, across the SD-WAN, and then a Private Cloud, Sovereign Cloud offering for those customers. It is the standard in the federal government of Japan. We're just starting. We are very bullish on the opportunity because we have already booked $20 million. We see, at a minimum, the foreseeability of this over its lifecycle. A minimum is 50, what we can see in our funnel today and well beyond. Very, very happy about that. That is one of our biggest projects around the world.
We have others that we'll be talking to in the future, but they follow the same very similar architecture, very similar requirements, whether it's in the Americas or in Europe. The common theme is they're going after our differentiated solutions, are standing out, led by Fabric and driven by the Sovereign Cloud or the Private Cloud, which has our, it's built on Platform ONE. To be able to illustrate it, it could be or likely has other aspects to it, like pull-through items like wireless and things like that. The architectures are very, very similar, which is really amazing. That's the strength of our value proposition there. One of the other things to stand out on this opportunity and this customer is KDDI and NTT. NTT, it's one of the largest providers, partners in the world, and certainly the largest in Japan.
Very controlled market, very stagnant market in many ways. Decisions aren't made easily, and displacements made even harder. They went into their existing customer, the government, and displaced the existing technology because ours is better. Not because the economics are better, because the technology wins head-to-head and meets the customer's needs. That's a huge testament to what we're delivering. It speaks to we don't need more at-bats. We need more quality and scale at-bats. It gives us the opportunity to be able to move from the back of our feet to the front of our feet when we're going out to customers and speak, "Hey, we can scale to that level. Why can't we do that everywhere? We can adapt to that economic model. Why can't we do that everywhere?" That gives our teams more energy and our partners more energy to execute.
NHS, longtime customer of ours. Why it's up here is it's a franchise. There are 461 NHS National Health Service Trusts in the U.K. alone, and it's standardized on our Fabric technology. They have standardized because of the ease and simplicity of the technology, but they have been able to do that and drive value across 25% of those and it's continuing to expand. Just showing that we can land and expand, continue to build business within various categories, whether it's Healthcare, Manufacturing, Education, and the categories go on. Just in closing, the thing I want to leave you with is that 500,129,668 partners are going to make money. That leaves 499,143 that are not. That's our opportunity. That, with our technology, the infrastructure we put in place to scale, and it's up to us to execute. Thank you. Kevin, you're up .
Thank you, Norman. Appreciate it. Ed, did you save the best for last? Is that what you did? No, thanks for all for coming today. Appreciate it. We did a really good job kind of hopefully outlining for you where we sit today. It is kind of an inflection point when I think about where Extreme is, right? Over the last five, six years, we have really kind of brought our hardware portfolio together. Now we are moving on to the software layer, right? The software, the operating systems, the platform is all coming together as well. As we know, software eats the world. At the end of the day, what is going to drive the next three to five years in networking, we think, is the software side. The Agentic AI that we are bringing, this Fabric technology, which is software as well, is all coming together and helping our networking be far more seamless than anybody else.
We talked about our new commercial models, generating 14% of our subscription. I think that's going to continue to grow as a company. Those new commercial models, they're 100% attached related to subscription. All of those have subscription related to them, which is really exciting. We talked about going and driving and winning up market with Monica and her marketing team, kind of a newly rebuilt marketing engine that we have behind us, and that's working out really, really well. We talked about Anisha and the scale that we are bringing as an organization to Extreme Networks. We can continue to scale this business over time because all of our systems are there, and we've got the internal deployment of our IT that we're using before our customers even use it. We're really hardening down our technology before it even goes out the front door.
These are the things that we are doing that I think is going to continue to help us grow as a company, which is exciting. When I think about kind of the metrics, right? We just in Q1, we beat by $14 million on revenue. We raised Q2 by $10 million. We stopped there. We paused for a moment. We'll see how the second half of the year goes. We just beat and raised in the first quarter and raised our revenue. Now at the midpoint of our guidance, we're looking at double-digit growth for this year. That's exciting from our perspective. We continue to drive our recurring revenue model as a company. To me, as a SaaS CFO, traditionally, I love recurring revenue. It's going to continue to build a highly predictable, highly visible revenue stream for our company in the future.
We think that will give us a turn of the dial from a valuation perspective out in Wall Street. That is an important element. As Ed said earlier, while we continue to grow our revenue double digits, we are also going to grow our profitability 20%+ per year. That is our commitment over the next three to four years. That is an exciting part of our story as well. We continue to do all these things in a way that makes us different and unique to the industry. Let's talk about gross margin for a second because I think that was also an inflection kind of point here in the quarter. A little bit lower in Q1, we had to pay some expedite fees to get some of that equipment out to some of our customers.
We had a little bit higher cost as well on tariffs that caused us to be a little lower than normal. Yet we still had our earnings per share in the quarter. Our outlook is still very strong. Our outlook is really—and by the way, some things happened. Trump's visit to China recently enabled them to pull back by Executive order, some of the tariffs that have had. We expect now, this is new news, in Q2 to be at the high end of our guidance range on the gross margins. That is exciting news for us to share with you today, even just 10 days from where we were just on our earnings call. We also talked about being 100- 200 basis points higher on our margins in Q4. We still feel very confident as a company to be able to do that.
We'll be back into the 63% range, very close to our 64%-66% long-term range, even at the end of this year. We're feeling good about that. When I look at our new commercial models, we talked about this two years ago when I was here talking about really MSP was the first new commercial model that we rolled out two years ago. Two years ago, I said, "Hey, I think we can do about 25 MSPs per year." We'll do 25 the first year, 25 the second year, and 25 the third year. We'll get somewhere around 25, 50, 75. We have 61 right now, and we're exactly two years from when I last said that we'd have 25 per year. We are certainly on track, if not a little bit ahead of track on the MSPs.
We have these other commercial models that I think are really interesting, and they're kind of nascent right now, but really starting to get a lot more traction for us as an organization. We think these new commercial models, in addition to the competitive Fabric, in addition to the Platform ONE strategy that we have, new commercial models that align our business with our partner's business, we think is going to be very attractive for these partners who are looking to make more money. If they want to make more money, how are they going to make more money? Get into a business that's recurring revenue for them. If they're not going to make money with Cisco, if they're not going to make money with HP and Juniper, they can make money with us because we've got the commercial models that support their business.
Next thing, let's talk a little bit about our growth rates. I'll get into recurring revenue and the vectors of growth that we'll see there. Our revenue growth, first of all, we're expecting it to be about 10% growth per year. We're right now at 20% product growth and 15% overall growth. Platform ONE and all these other areas that we have, these commercial models are going to continue to grow our support and subscription. What we are doing as a company today is we're combining the Cloud Management and the support, and then we're adding in other technologies like Agentic AI and Universal ZTNA, as well as other security features that are going to make Platform ONE that much bigger, if you will, than what we have today. Today, we sell Cloud Management separately from our support, separately from our ZTNA.
All of those are separate products. When we combine them together in one platform, we're going to get some real benefits there. That's going to drive our double-digit growth on subscription and support to 12%-14%. We'll basically double that on the product side of the market growth. Market growth for product is typically 3%-4%, and we think easily we feel like we can be in the 7%-9%. Let's talk a little bit about these vectors of growth for subscription and support on Platform ONE. First and foremost, when I think about there's really when I sell the Cloud Management versus I sell support, they're basically different economics. They're sold separately. They're priced separately. The customer has to make two different decisions. Are they going to buy the Cloud Management? Are they going to buy the support contract?
Sometimes the attach rate on those are different. I also have different renewal rates for those. You can see the numbers up here. Our renewal rates are much higher on Cloud Management. You use Cloud Management to manage your network every day. As gear gets older, let's say four or five years older, you're kind of at an inflection point of, do I want to renew the support contracts? I think about it as like the AppleCare that you buy on a new phone. You buy that point of service, that point of sale, but then three years from now, do you renew the AppleCare? Probably not. We've been running into that issue too with a much lower renewal rate on support than we have on the Cloud Management. That all goes away when we bundle it all together.
When we bundle it all together in one platform, now I make it a lot easier for my partners to sell Platform ONE. It's got the Agentic AI in there, so that adds more value to it. I get a higher ASP increase. I get a better attach rate. Most importantly, on the support side, I get a better renewal rate. In three or five years, when they go to renew again, they're not thinking about this as just being a separate support contract. It's a bundled technology sale, and they're going to basically renew the whole thing. That's going to drive for us a pretty meaningful improvement in our SaaS ARR. We're about $200 million today in SaaS ARR. That's going to grow very meaningfully over the next four years. We're going to grow up to $650 million in SaaS ARR.
That's because you've got support, and you've got subscription, and you've got Agentic AI, you've got Universal ZTNA. All those software features that I just talked about are all bundled together in the one subscription. That's going to be meaningful. 30% growth year-over-year. Very, very healthy for our SaaS ARR. I want to make sure that you understand, though, that the combined support and subscription, at the same time, support will come down because we're going to move our entire customer base into subscription and out of the individual contracts that we have for support. That's where I get the 12%-14%. SaaS ARR is going to grow meaningfully, and we're going to basically convert those individual support contracts that don't renew as well into the subscription base. Nevertheless, both ways, very high margin business for us, which is going to be exciting.
This is the last thing that I'll share with you on a recurring revenue model. Today, we have about 36% of our revenue comes from recurring revenue. We expect that mix to increase over time. 36% will become 41% over time because we're going to keep all that recurring revenue as we get higher renewal rates. We're going to keep that, right? Product is one-time sale, and recurring is recurring. The good news is we will move our mix. What that does for us as well, remember I just told you Q4 I'm going to be at 63%. I'm going to get a 100 basis point increase alone off this mix shift over the next three to four years. I'm already at 64% with my 63% in Q4 and then my mix shift here.
I think I'll be able to grow even further than that. That's the exciting part about the business model and the financial model that we talked about is really attractive. What will this do? This will obviously generate better cash flow for our business, and we're expecting cash flow to go up, and we're expecting profitability to go up as well. We believe that we can hit the 22%-24% operating margin. Where does that leave us from a financial model and what we look for? I'm looking at 64%-66% gross margins. I think it's very fair for us to be able to get there. We will continue to work to generate scale in our business in OpEx.
We believe that the ranges that we have for R&D, sales, and marketing in G&A are very reasonable to get us to 22%-24% as a company operating margin. That will drive a lot of cash flow, a lot of margin improvement for us, and we think drive a lot of value in the stock price. We will also focus on buybacks. That is another thing that we would do with that cash flow. We have a $200 million buyback in place as of July 1st, and we will continue to buy back shares in the market as needed. Last but not least, this is exciting. We just gave out guidance for the rest of the year only at revenue.
We said, "Well, maybe we'll actually flesh that out for you a little bit more." Here is the flesh out, which we will file as an 8-K later this afternoon. We are updating our guidance here, and our guidance on the revenue is the same, but we are giving more granularity around where the margins are going to be at the end of the year and what our earnings per share are. Our earnings per share we're now saying is going to be a minimum of $0.99 up to $1.02. This will move the street up in terms of what the street numbers are right now. That is exciting for us as well. Our continued confidence as a team in all of what we're doing is kind of reflecting itself back into our numbers.
Hopefully, we'll continue to beat and raise like we've been doing. Six sequential quarters in a row at the midpoint. This will be our seventh sequential quarter in a row with growth. We're really on the growth trajectory that we are very excited about. Thank you for coming today. Really appreciate all your time, energy, and support. I think now we'll bring up the entire management team, and we'll go through a Q&A session. Sound good?
If you'd like me to come to you, just raise your hand, right? I don't make it easy. I got to move these chairs.
That's right.
You got the standing position.
All right. Let's see who we have first. Sean.
Hi. Thanks for the great presentations. I have a ton of questions, but I'm going to just limit myself to one. The one that just passed, so Kevin, your presentation was great. Thank you. I congratulate you on these flexible commercial models that you have. I feel like it really speaks to the flexibility and the relationship you have with your channel partners. It's not something I hear a lot of from some of the other vendors. Congratulations. I was wondering if you could help us unpick hardware margins and all of that because your competitors struggle with this. It's also something you can play with because that 800-pound gorilla, the margins they get on their hardware are significant. I feel from looking at that slide that maybe you're able to eat away at some of those or compete with them by eroding that.
Does that mean that some of those models hit the margins more than others? If you could just talk a little bit about how that plays out, that would be great.
Yeah, sure. These new commercial models you're talking about, I mean, first of all, traditional gross margins on product tend to be in the 58%-60% range. Below our overall corporate rate, which means that the subscription and support margins are higher to bring us up to the 64%-66% long-term mark. These new commercial models are different. They are designed purposely for us to get more subscription, first of all, 100% attached on the MSP program. The ESPO program has no hardware on our books, right? The customer gets the hardware. The customer gets it through a different intermediary. They pay at a lower price for the hardware. And then we take all the normal profit and the operating system that sits on that hardware.
We put it into basically a term license, a subscription for that customer, and then we sell that at an 85% margin.
We take zero cost on the hardware. The hardware is being purchased directly from our ODMs by what we call an aggregation partner. The aggregation partner buys directly from the ODM at our cost. Think of it as the ODM gets to sell higher volume at the same price. It goes to the aggregation partner. Our cost of goods sold is zero. Our cost of goods sold is our operating system and our Platform ONE are sold together as a bundle. That is what we sell to the customer now. We have costs associated with that. As Kevin said, that is in the 80%, 85% range.
Just think about it as an iPhone. iPhone is sold for $1,300, $1,400. It does not cost $1,300, $1,400 to create an iPhone. It is probably $100 or $150 of components. You are paying for the iOS. You are paying for the Cloud Management. you are paying for everything else when you buy that phone. It is a similar concept, right? It does not cost us what we sell it for. All of our IP is the Cloud Management. it is the Agentic AI. it is the operating system that sits on there. More of the cost is really in that layer as opposed to the hardware itself.
Yes.
That's right. [audio distortion] You're transferring some of your margin to them. We have flexibility to be able to allow the MSP to have a higher margin along with our higher margin, and we can make those economics work for us and for them in a better way.
Correct .
David.
Either for Ed, Kevin, or Norman. Implicitly in your outlook, you're assuming that on product, you're going to double the market's growth. You're going to take share. Effectively implicit in subscription, you're taking considerably more share, right? Just in a different accounting or economic model, either through ESPO or MSP. How should we think about your share position in the industry when you kind of aggregate those different models, right? If ESPO and MSP was more hardware-centric, that would obviously make a much higher product revenue number. You'd be going 2x, 3x the market, just trying to get a sense for how to think about how the share plays out.
Yeah, I'll comment. One relates to market share when we think about hardware and you think about projects and networking projects and us maybe taking share from other players. The other thing to consider is where we are today in terms of the percentage of our base that is on subscription. We're still adding, and there's an acceleration that's taking place because of us selling subscription licenses for switching and for all of wireless. I also think it's also the math that Kevin went through, that slide looking at renewal rates. When you factor everything into a subscription model, which is what we're doing with Platform ONE, all those factors kind of come together for a higher growth rate. [audio distortion].
Yes, that's correct. It would be [audio distortion]. That's fair.
That's fair. Yeah. Just using that as an example, think of it as a $40 million traditional customer, $10 million subscription customer.
Monica did say, right, that the market for subscriptions is growing at like 13%. Right now, we're growing at 24%. I showed in there later that we really think that we'll be growing at 30%. I absolutely intend, we intend to grow faster than the market on the subscription and support side.
David, the way the modeling works is that we end up showing less revenue over time if you look at it over five years, but we show more cash flow.
That's right.
That's right.
Hi. A question about your support attach rate change. You're going to plan on. I think what the slide said is that support used to attach at 60% or 70%, and it will soon, or will over four years, go to about 95%, right?
Right.
Okay. I just want to make sure I get that. I think.
That's part of the driver of the growth.
Yeah, totally. Yeah. No, I think I get that part, and that's very clear. I was wondering more on the expensive side. Are you planning for more, whatever, people on the other side of an 800 number, or are you expecting there to be more of a Platform ONE effect where it's going to do troubleshooting, AI magic, all the things? That's my first, sorry. That's my first easy question. And then [crosstalk]
Okay. I also wanted you to sort of quantify what kind of a price increase you took in percentage term versus old on November 1. Just give us the aggregate price increase, if there's such a thing.
Mid-single digits.
Thank you. Okay. I guess we're done here.
I would say, think about the cost that we will put in place with the support and Platform ONE. A lot of this might actually be cost savings because it's called deflection. As Nabil employs these AI agents and they're fixing the network before there's even a problem, that actually could help us from a support management perspective. We will look to get more and more efficiency there with our own deployment of AI internally, as Anisha said, but also customers will get faster resolution within the system itself, which will help us on that side as well. I do believe that our margins will stay at or above where we are today. I'll let Nabil comment as well.
No, I think you covered it perfectly, right? I think, as I said earlier, when it comes to AI, especially on the enterprise side, the thing as an investor or an analyst that you have to look at is unit economics, right? If a company cannot adjust their unit economics downwards with the use of AI, they will blow out their cost. For us on platform side, the advantage is that we can increase the install base that gets support at a lower unit economics. That is exactly what Kevin is saying. That is all done through tech. That is why we can do that. Yeah.
One other comment as it relates to our price increases. We're very good at this. We have a team that's very well-oiled in terms of how we evaluate price increases across the portfolio and how we do this. Typically, we have the advantage of Cisco and their pricing umbrella. We're able to stay under that pricing umbrella. We're very careful about how we do that. The teams move very quickly, and we're pretty efficient at that. Yeah.
Hey, Monica. There's been a lot of chatter among marketing pros around adjusting from search engine optimization to GenAI or AI optimization. I'm just curious what you started there and then, more importantly, though, how you measure that because I think I don't know if anybody's figured out how to actually measure the effectiveness of that yet.
Absolutely. We've started looking at that in the last, I would say, eight to nine months, years. The thing that we're working on is we know our buyers are using AI to buy solutions. They're doing the research. 70% of the research is done upfront. Now, more than search, it's LLMs. We need to use AI to sell and market. One of the things we are doing is making sure our content is reformatted in a way that it can be served up to LLMs because LLMs have a specific kind of format that they grab in terms of content. Number two, we are also looking at how many times Extreme shows up in citations in terms of the quality and the quantity of citations and the positive mentions of Extreme.
We Cre working on making sure our placement in terms of number of citations in LLMs is higher. We are starting with ChatGPT first. Of course, we are looking at Google AI and Perplexity as well. It is an ongoing effort. It is all hands on deck in marketing. I know Steven is smiling in the back. He and our Content Marketing team have been leading that charge along with our web team. One of the things we are doing is reformatting our web content as well as we speak through that. I am happy to give you more details, but this is one of the biggest initiatives we have in marketing that is behind the scenes that is not visible to people. We certainly want more of Extreme content to be served up when questions are asked about what is the top secure networking vendor in the industry.
I want Extreme to be number one there. We are working on getting that. We do have our way of measuring it. There are a number of MarTech vendors out there now. There are tons of GEO startups out there. We are also talking to some of them to see if we want to use their tools to continue to gain insights and train. I call it how to train the LLM, right? How to train a dragon is the same thing. That is what we are doing. How to train an LLM. [audio distortion]
Oh, yeah. We are using AI for translations as well, right? We use an AI engine to translate our content into various languages. Of course, we have a global presence. You can imagine German, French, Japanese, Spanish, and this variety of other languages we translate our content into. Yes, you're right. That's the next challenge, how do you then do that at scale globally in different languages as well.
Yeah. I would just add some of the tooling we've built, the sales assistant, the partner assistant, it works in 40-some languages. We've actually seen a significant uptake from our channel partners in Asia-Pacific because it can dynamically interact with our partners in local language. I just have to say it's a full-circle moment. I mean, we spent forever putting CAPTCHAs in place to make sure the websites were being accessed by humans. Now we're doing this complete 360 to get rid of them CAPTCHAs and to make sure they're consumable by machines. Here we go.
You know what? It is interesting. Machines want more statistics. They want more FAQs. Now you might start seeing more FAQs appearing on the Extreme website, and you'll know why.
I'm going to read one from the web while we transition. We got one from Eric Martinuzzi from Lake Street. Norman, this is directed to you on talent acquisition. He's asking about the disruption that we're seeing, and is that impacting your ability to attract talent?
Sure. Yeah. The question's around talent acquisition, and the answer is yes and yes. What's great about Juniper HP is there's a lot of talent out there, people that do not want to be part of the HP apparatus. That works on both. That really works for Juniper folks. We have been able to identify those people and recruit them, or they have presented themselves to us. We have some high-profile ones that we will be announcing in the coming weeks and months. We also have benefited. I talked about our partner programs are built around the architect that wrote the partner program for both Cisco and Juniper now has a blank slate of paper, blank sheet on which we built our current offering to go after. What's the number, Stan? 499,641 partners.
That'll be in the transcript just to cover it.
Yeah
Hi, it's [Steve Schuchat] with GlobalData. I have a question around customer flexibility and the subscription and support offerings. I totally understand the support offering, bundling those together. Let's say a customer reaches year four. Some customers, and I know this isn't happy for Extreme, but some customers like to stretch their investment a little bit. A lot of your competitors simply won't allow that. They won't sell a software subscription without support. Would you?
That's a great question. When you think about support, the way you're talking about, say, for example, Cisco and stuff, there is a portion of support which is simply break/fix, like access to your attack. That's typically the part that customers are like, "Hey, it's already three years old. Do I really want to renew it for four or five and stuff?" That's the lowest common denominator for when we talk about Platform ONE. The part that we put in support is actually a lot of proactive stuff. That is, think about like, "Hey, let us tell you that this NIC is going to fail before it's going to fail.
Let's tell you that your security policy is actually out of threshold, and let's clean this up before you actually have an event and stuff. When you add those kinds of support elements, the proactive support elements in it, we have never seen a customer that does not want to pay for that. To answer your question directly is, in Platform ONE, the support angles that include the tag as well as their proactive support elements that I just talked about, they are part and parcel of your subscription, and we do not separate them out. That was.
You can buy break/fix separately, yes, if you want to, yes. When you buy Platform ONE, it is part of it.
That's about it.
Let me add one thing to that, which is what we're trying to do is reframe the whole conversation around what Platform ONE is, right? If you think about a SaaS offering that you get out there, any SaaS offering, salesforce.com, etc., it includes the support. There's support you can call in and ask questions and that sort of thing. There's a support element there already with SaaS applications. We're basically just including the support that we have within Platform ONE, similarly like other SaaS applications. We do not want people to think about a specific value towards the support.
At the end of the day, I think the support with the Agentic AI that Nabil built, it's going to be so good that you're not going to call in to my support organization necessarily for help as much because you will be able to ask the system itself how to solve something, and it will proactively solve it for you. Or it will be human in the loop. It will ask you, "Do you want me to solve it, or do you want to solve it yourself?" It will tell you how to do that. The amount of queries that we get, like I'll call it call deflection, is likely to go down on the support. There is always going to be break/fix and RMA and all of that stuff.
That is a, and by the way, also, our failures of our hardware are going down, or, yeah, going down and down and down. That is really low at this point from a company. All of those benefits kind of will come back to. They'll come back in the gross margins.
David.
Right here, Jim Fry with Omdia. Channel partners are going to be an important angle of leverage for you folks going forward here. Without a question, I'm going to walk out of this room with $499,000 in my head. Thank you, Norman. To Norman and Monica, actually, how much of that are you going to target? I mean, this is a, so here's a question for you. How many partners do you have in your channel program today?
We have a couple thousand that are transacting. So about 1,400 that transact in the last trailing 12 months.
7,000 overall?
Yeah, 7,000 overall. $1,400 that transact in the last 12 months. To answer.
My question is, what are you doing to plan to grow that? Because it's substantial investment, perhaps, on your part to really grow that program successfully.
It's not quantity as much as it's quality. That's what spending—I see Tim shaking his head back there. We can't afford to spend a lot of time and effort and investment and opportunity costs on thousands of small partners that can't produce or, my metaphor earlier, won't be the tallest person on the field, on the basketball field, the court. That said, what we want to do is focus on—what we are doing is focusing on the partners that give us the best return. It's not hundreds. It's dozens. That's very achievable for us to convert a handful of these partners and go after the share. The pitch is very simple. We go in and we go into Logicalis, CEO of Logicalis. Say, "Okay, you have a billion-dollar business. You have about an $800 million a year annual Cisco business.
What do we want? We want your Cisco business. It's that simple. We start there and work backwards. If we can get 10% of their business, they'll be the most meaningful, one of the most meaningful partners in our entire portfolio. We do that 10x . That's all we need to do to be able to grow our share. That's it. That's exactly what we're executing against. The examples I put on the board, that's exactly what we're doing. It's just that handful, and we just need those to convert. Who are they and why did we target them? We targeted them because they are below that top few hundred or a couple hundred that Cisco has primarily in terms of earnings. They are the most susceptible. They are the number three or number two in the market, not number one.
They're the ones that are going to help us and have the most impact from the changes in the programs, the vulnerability of the program, and some of the vagueness of those programs.
I wanted to add, marketing is completely not stuffed with that strategy. We have several high-touch programs. We have Partner Advisory Council. In fact, Logicalis was there, Computer Center. Many of the logos on Norman's slide from Europe were all at a Partner Advisory Council. We now have something called Extreme Partner Sales Exchanges, where we are doing about 50 roadshows in the region, very concentrated, local, on the ground to connect with our key partners, exactly the ones that he's describing. We call them EPSIs. The whole goal of EPSIs is to educate partners, share campaigns, and create demand and win business together. Last but not least, we also have some fun doing this, by the way. I want to mention Cis co had their partner summit, right?
We had a little guerrilla marketing campaign that became bigger than I thought, which I am very happy about. We had a van driving around the entire Cisco Convention Center. Many of you maybe saw it. Some of you who were there, we got photos from you. We spent very little, but it was a big impact because the awareness was huge. We actually had people on the ground. Our SVP of Channel was there meeting with several partners. They took notice. Our tagline was, "Partner for profitability with Extreme.
That's a key point. Partner for profitability. To kind of finish the comment there, they make more money off us. That's the intent. As our new partner program comes to light, and that's per transaction, not in totality, as we get to that point, we start to displace project by project or program by program. We can do that because we know exactly how much they make. We benchmark that. We can do it against each of the accounts. We've implemented our program to offset that as well as the financial models that give you a bigger boost in terms of, think of that as supercharging. I was going to say the program that we ran last week was PSYOPS, Psychological Ops. We're out there doing that. Our teams were actively recruiting the disenfranchised. It did work.
I mean, there's a handful of folks that were disenfranchised. You pull them out to the side, you have a conversation about, "Hey, if it's confusing, we'll make it simple to you.
I think we should be clear. We're not going to be going after all the partners. We're going to be very targeted in terms of who we go after. The teams will be very targeted in terms of who we go after and will be prescriptive in terms of the solutions. Insight, we have a very specific offer. We think this is a program that can scale up into the tens of millions of dollars. That's why we went after them in a more strategic way. However, our systems, our marketing campaigns, we will welcome other partners to come in. They'll just have a different level of touch. They'll be touching the platform, but they won't be touching humans. From a cost perspective, we're not going to scale up for the lower-end partners, but we're going to make it easy for them to transact.
We are going to be open. I would say for all partners, it is going to be easier to transact with Extreme. It will be easier for them to onboard and come on. If a smaller partner wants to become a bigger partner, they can graduate at some point. We segment the partners very closely. We will be very targeted in terms of where we invest time and money for these kinds of programs.
Kevin, I have to ask a long-term gross margin question in cash flow. I appreciate all the detail. How much of the model from a gross margin perspective is predicated on revenue mix versus underlying improvement in gross margin per revenue category in the model, right? You have got price increase. You have got component relief, some tariff relief. Is it just mix that is driving gross margin, or is there an improvement in the underlying product? I will give you the second one on working capital. Obviously, a shift to MSP and ESPO should help working capital from your perspective. How should we think about that incremental cash flow? I know you said buybacks, but is that less working capital intensive going forward from a CapEx cycle perspective? If someone is buying aggregated products from a distributor or a reseller, obviously, that is positive for your working capital conversion.
How should we think about kind of the benefits of that going forward?
Yeah, sure. One thing that maybe Q4 will be at 63%, right? I said the shift from 36% of our revenue going to 41% should be 100 basis points of margin improvement with just that shift alone. Kind of like the 63% becomes 64% just by virtue of time and subscription and support being a higher growth rate than the product growth rate, right? That is the answer to your first question, the 100 basis point improvement there with just the revenue shift. On the latter question around working capital and just improvement there and cash flow in general, yes, you're right. Stock buybacks is absolutely something that we've been doing and we will consider to continue to do. Obviously, we could pay down debt. We've got a lot of opportunities.
There's potential for M&A at some point in the future if something were to show up that was attractive to us. All of those are potential opportunities for us to drive value drivers for shareholders. I think at the end of the day, what we are looking to do is drive, like we talked about, profitability at that double the rate of revenue growth. That will continue to scale our overall profitability and drive that cash flow.
Can I ask a follow-up? How much of that 20% growth is from buyback if you thought about it that way? How much of that incremental?
I'm just thinking purely operationally. P&L-wise, we won't be, in other words, what we do is we tend to buy back as many shares as get released. So we keep share counts neutral.
Okay. That's great.
Yeah. Yeah, that's the policy that we have at the board level where we capital allocation. We're allocating capital to sop up the dilution from our equity progr ams.
Yeah. So we're trying to neutralize that.
Hey, guys. Tomer Zilberman, B of A. As I think about your 14% of subscription bookings coming from the new commercial models, you talked about how that's going to increase over time. What's your long-term vision as to where that goes to? Is that coming more from refresh and competitive displacements, or is that coming more from modernization for campus infrastructure as it relates to AI?
I think it'll be higher than the 14%. I'm not guided to that today. Honestly, we're not sure. I mean, MSP is the one thing that I could say from two years ago, we are on track for that. These other commercial models that we have are contributing. I think there's a big opportunity for us to continue to see improvement there over time. That's effectively in the $650 million that we've called out there as the SaaS ARR target for us. It's embedded in there. We didn't call that out as a separate number. I would say it's at least the 14%. It should be higher.
I think the answer is a combination of both.
It's a combination of both.
Right. Maybe as a follow-up, one of your competitors has talked about right now, as we think about AI usage, the chatbot is very peaky in terms of traffic or traffic demand on the network. They said, as we scale up and go more towards Agentic, there's going to be a higher level, a higher sustained level of inference demand on the network. They also talked about how they expect that sovereignty is going to play a more important role. You showed the quadrant of the four different areas of four different deployment models that you have, customer-managed versus partner-managed. Do you expect that you would shift one way or the other as you move more as your customers move more towards AI?
The way we've thought about it traditionally is not a cannibalization of the business we have today. We've thought about this as incremental. These new commercial models are designed, if you will, for us to go and attract new partners and new opportunities that we've never really had before. SPs, larger MSPs like Insight, these are ones that we've never had access to before. To us, that's really incremental upside for us as opposed to our business shifting from one model to another.
Thanks.
Just to add, the point that you were making in terms of, like for that said competitor, is moving from a chatbot traffic to an Agentic, that's really, how should I say it very politely? That's them presenting a bug as a feature, right? That's because they have two different architectures. They said, like, "Hey, as we shift from one to another, their cost structure changes behind the scene." Going back to the genetic economics, and by the way, their front-end licenses are different there as well. That shift to them matters, right? To us, it doesn't really matter because it's the same platform, whether you use it from a public point of view or on-prem or private. It's the same platform, number one.
Number two, whether you interface with our AI through a chatbot or through an agent, it all goes through the same AI core anyways. For us, zero impact either way. The customer can buy whichever way they want from a commercial point of view. They can use whichever way they want. Our unit economics is guarded against any transitions between them. Yet again, it is difficult to build platforms. Other companies, when they try to force-fit their current technology into a platform, run into problems like that where their unit economics is directly tied to actually where the customer is coming from. For us, we do not have those problems.
Any other questions in the room?
Yeah, and I'm not showing any questions on the webcast, so. I think we have one more. Just wait for the mic. Hold on a second.
I thought I'd take the opportunity to thank you. I noticed on your list of partners, you had Palo Alto. It fed to a question that I had earlier about just generally secure. The network security market, application security, firewall, it's like a different set of vendors. It's like not the same vendors. A lot of the networking vendors are looking to this security networking convergence because they're like, "Oh, this is going to give us a chance to play in this market." I'm interested from your perspective, what's the ideal situation when you go into an enterprise when you're looking at that application security, that firewall market? Is it a partnership? I'm just interested in how you're seeing that and whether you're actually seeing this IT security, like this network security convergence.
Yeah. I can give you a product lens from this, and then there is a CIO sitting here, so you can ask her how CIOs are looking at it. From our point of view, we have no interest in going and building firewalls. I think we have been super clear about that. That, look, that's a different market. That's not the market that we are going into. The portion of the security market that we believe is legitimate to us is the access security. Think about it from a hypersegmentation point of view. For us, the need that we feel is that the security vendors, when they come towards hypersegmentation or segmentation, they kind of ride over the top, as you know, right? It's like, "Okay, you put a UZTNA.
Yeah, you're segmenting at the user level, but your network is still all common and it's all shared. We believe that that's a flawed model, right? What we believe is that if you're going to segment your network, if you're going to segment access, it needs to be all the way from the network all the way to the user. If you notice, that is exactly what we have done. We have said, like, "Here is segmentation in our Fabric. Here's your segmentation on-prem through NAC. Here is segmentation in UZ in terms of your end user and stuff." By the way, they're not separate things. They're all part of Platform ONE. They're all under the same license, same policy. Our strategy on the security side is very clear. We have no intentions of building firewalls or going into UEBA or XDRs and stuff.
We partner there. That is 100% partner. That is why you saw Palo Alto up there. There are other security vendors that we partner. We have a very big partnership with Microsoft on their security portfolio as well. This portion of the security is best done both across networking as well as over the top. We see a huge gap in the market, and we are out to fill that. That is our clear kind of stance from a product point of view.
Yeah. I would just add, as a buyer, I do not look to a networking vendor for a firewall solution. At the same time, security is a multilayered thing. Especially from a lens of containing lateral movement on the network, I want to be able to do that at the network layer, right? I do need security solutions from my networking provider. At the same time, when I am looking at firewalls, I am not looking here. I think they are complementary.
Yeah. Anisha, I got to ask. It's not really related. I guess it's kind of related to the company. Jensen has said repeatedly that the IT departments are the HR departments of the future, right? I'm curious, do you want to be that? Do you want to be picking the right GenAI tool for finance and sales and marketing and things like that? I guess this might be a combination, you and Norman, when you think about the infusion of GenAI into the company, have you adjusted people's goals internally to assume that, yes, they are more productive, so you can sell more and you can things like that?
Yeah. No, I think it's great. I've heard that quote before. I'll tell you, I've talked to Kimberly, our Chief People Officer, about I think CIOs and Chief People Officers are thinking deeply about workforce skilling in that capacity, for sure. We definitely talked about how do we put something together to just up-level AI literacy within our workforce because I think that is something we need to partner on. I think from a CIO perspective, governance, security, guardrails are super important. I'm not one of those CIOs that believes that every Agentic AI decision has to reside only in IT or be only deployed in IT. I mean, I think some of the most innovative ideas come from our employees. The question is, how do you have guardrails around that, right? I do think we have a role to play.
I think securing our data, securing our content, securing our users, understanding what agents are doing in your environment, even if they're not deployed by IT, I think having observability, security controls around that is absolutely a role for IT to play. We partner very, very closely with leaders, right? What Monica wants to do in marketing, I see my role as how do I enable that? What Kimberly wants to do in HR, how do I enable that, right? I think it's all about partnering there. We do need a strong observability, security, governance layer that is centrally managed. In a new Agentic world where you're deploying agents all over the place, how do you make sure what's their scope, what's their control, what are they doing? How do you have auditability on decisions and actions they're taking?
Those are all things that we need to think about as CIOs.
Zay asked your second part was about raising quotas, higher productivity, things like that. The answer is yes. How that manifests itself is we have AI tools that support our sales and our partners. We put specific targets on their funnels and then their conversion tied to that. I can give you specifics in how we respond to E-Rate as an example, leveraging these tools to be able to respond broader, faster, and to more. That is one of the ways that you see it manifest itself. The result is higher funnel, better conversion, higher productivity. That almost makes the AI agents a mandatory part of the job, right? You're not going to be able to do it soon without it. Absolutely. It's embedded in these tools. In fact, we rolled that out at our Extreme Academy Live last year. You had to use our sales agent.
You had to use these tools to be able to support the responses and participation in the events. That continues to build, and now we've rolled it out to our partners. It's the same thing. I mean, the objective is faster, better productivity is the objective.
Let's go to our last one from Bob.
Hey, guys. Throughout the day, you've talked about how you're selling bigger deals, more deals, platform deals that encompass more of the portfolio. I'm wondering what kind of impact that's having on the sales team and how you're upscaling the sales force because I'm sure these conversations are now reaching C-levels or higher-level executives and how you're handling that and making sure that they're able to have those conversations.
Yeah. So the question of how do we upscale the sales force as we go? How do we take them on the journey or not as we go upmarket? What we found is, first off, just standardizing on the same methodology, delivering on the same methodology throughout the forecasting process, throughout the qualification process, having funnel measurement, having consistent funnel measurement, how the conversions work, all that kind of stuff, making it very simple, but making it very consistent across the Board regardless of your role, your geography, or insert name. That is part one. Part two is also training our teams on how to go upmarket and have those more complicated conversations. Now, not everybody's going to make it. As we've seen, we've been weeding people through that process because we want to be able to convert on these projects and move forward. It's not 100%.
It's not 100% one way or the other. We're pragmatic about it. We're working through that. A lot of folks are really moving and following that train. A lot of our partners are moving and following that train, but not all will be able to.
Norman, if I can add to it, we are also rolling out persona-based training, Bob. While we are very good at talking to the user community, we've done that for years. Like I mentioned, we have been embarking on CXO programs, but also bringing sales up to speed in how to target what the pain points are. It's going to be different for a CXO, CIO, than a network administrator. That's the part of building the content and the playbooks too. With the CXO events, we are actually getting a lot more prospects coming to our CXO events as well, which is getting sales more engaged with the dialogue initially and creating that engagement and hopefully converting. Working very closely with Norman and team on enabling the sales team, like he said, to have that conversation.
That's going to be different than with the network team.
One thing that's helping us too, Executive engagement. You can't get Executive engagement at the other two or three competitors out there like you would at Extreme. We care a lot about our customer success. If you're a larger customer, you should be here because you know you're going to get the top team looking out and making sure that your deployment's going well.
All right. Thank you, everybody, for joining us. I think we have one final comment, closing marks from Stan. Then we'll let you all go.
Yeah. I just want to thank everybody for making the time to be with Extreme. We had a full day here. I think as I opened up, hopefully you're getting a flavor for the Extreme leadership team and the breadth and the talent that we've got here. I would say the team is very confident and very confident in our outlook, both short-term and long-term, and our ability to execute. We are pretty pleased with where we are and the climate. Stay tuned. Thank you.
Thank you.
Thank you so much.