Goldman Sachs Analyst on Adobe’s Next CEO, Docusign CEO on Product Roadmap, Oracle Results Preview

0:13Welcome, everyone, to The Informationist's TI TV. My name is Akash Pasricha. It is Friday, September 4th. Today on the show, we'll get one analyst's view on Adobe's new CEO and unpack what we've learned from software earnings at large these past few weeks. We've then got the CEOs of Netscope and DocuSign separately coming on the show to discuss each of their quarterly results. And we're going to close out the show with this week's edition of The Editor's Cut, talking about Microsoft's new Azure disclosures and what to watch for next week with Apple's iPhone event and Oracle earnings. It's going to be a great show, so let's get right on into it.

0:53The past few weeks have been packed with the software sector's quarterly results. And yesterday, Adobe announced its new CEO, too, tapping Anil Chakravarti, who has led the company's enterprise ambitions. For more on all of this and the themes coming out of earnings season, I want to bring on Gabriela Borges, U.S. Software Equity Research Analyst at Goldman Sachs. Gabriela, welcome to the show. It's great to have you here. It's a pleasure to be here. Thanks for having me. So you've been quite busy, I trust, the last couple of weeks with all of these results surging in. It's probably the most exciting time of the quarter, I'm sure.

1:29I want to get through some of them and I want to get through your take on some of the themes that we've seen. But let's start with the Adobe news last night. So we were waiting to see who the new CEO was going to be. They tapped the top enterprise exec. We know we had a departure as well from the consumer chief, I guess you could say. you have a sell rating on the stock. Did this change anything for you? The way we think about evolution in software in 2026 is a little bit different to how you would have thought about it in 2021 or 2015, because the pace of competition, the pace of disruption, the pace of technology change is greater.

2:06And so there is a lot more that a CEO of a software company in 2026 has to deal with on an everyday basis. One of the things we've been writing about is if you were a leader in the SaaS era, What do you need to do to be a leader in the AI era? And you take a company like Adobe that has this incredibly rich IP in digital design and creation, their install base and the creative cloud side. How do you then leverage that to be a leader in the AI world? And the playbook that we're looking at is, number one, you have to minimize technical debt. Number two, you need to innovate either organically and inorganically with an acquisition like Topaz Labs.

2:40And number three, you have to monetize. I think Adobe is a little bit still figuring out where they are in that process. I would put them somewhere in the innovation stage where they've recently made an acquisition, but they still have a little bit of heavy lifting to do from a product standpoint to really be bleeding edge. And there are a couple of interesting product cycles that we're watching, like Express and the orchestration engine with Firefly that we think will be key for that. You're talking about the SEMrush acquisition? Is that the one you're talking about? No, actually Topaz Labs. Topaz Labs.

3:09Which one was that? I'm not familiar with that. Yeah, there's some really interesting next generation image and video assets that we're paying attention to. Many of them actually go to the Adobe Summit because Adobe Ventures has investments in them. And so those are the types of deals that take Adobe to the forefront of where the innovation is happening. And that's what we need to see in a lot of these software companies. It needs to be really obvious that companies are innovating at the speed of light. And I think there is so much potential for Adobe to up their game as it pertains to innovation.

3:38So what will it take then for a Nill Trucker Verti to earn perhaps not a buy, maybe a neutral is the next step for you guys? I mean, what's it going to take then? And what do you see as the future of this business? I mean, is this a business that you think, I don't know, maybe it merges with another one of these enterprise software companies that are sort of seen as figuring it all out still? Is that sort of the case to make it a more compelling investment? What do you see here as the future? One of the standards that we hold ourselves to is whenever we have a sell rating on a company, we write about what would make us more positive and it prevents thesis drift and it holds us accountable.

4:17One of the things that we've said is key for Adobe is the Firefly product. If you think about the ecosystem today for next generation image and video assets, it's very fragmented. What Adobe can bring is that layer of distribution that's enterprise proven, it's commercially safe. You know that if you're Goldman Sachs and you're using Adobe that you have a commercially safe product. That can be Firefly for them. It could be a really interesting orchestration layer that gives their enterprise customers flexibility to be able to pick and mix between all of the different types of next-generation models.

4:48And Adobe can essentially deliver that in a way that's really compelling. So that's the product cycle that we're looking for them to lean into. And I think that we'll see more data points on that over the next year. But notably, I've noticed you didn't mention much of the marketing stack in there. You're focused still on the consumer business. I think it's the more interesting opportunity for a pivot. There is a lot happening in marketing right now, and we're seeing the - A lot of competition too, you're seeing. Exactly. There is a lot of companies in the marketing space that are making the competitor environment hard.

5:22Now, that's also true on the Creative Cloud side, but with Creative Cloud, Adobe has a position that's unparalleled. I don't know if the same is true on marketing. Right, right. So Adobe reports results next week. This was them very much getting out ahead of that. I want to talk about the results that we have seen the last couple weeks. And if you look at your coverage list, I mean, it's just about everybody right now. What were the broader themes coming out of the quarter for you insofar as how AI is or isn't raising the total top line for the companies? There's a tailwind in cybersecurity, sure.

6:02But, you know, which companies are seeing headwinds? Salesforce, I mean, people are pretty excited about the Claudeforce partnership, I guess. So maybe the SaaSpocalypse isn't as bad as we thought. What are the big takeaways for you from this quarter? I'll separate my comments maybe into the three layers of the stack. So you have the infrastructure side, the application side, and maybe we'll pick cybersecurity as our third bucket. The infrastructure piece, I think, is probably most obvious. So you look at names like Datadog and Snowflake, where the inflection from AI is driving incrementally better acceleration.

6:37And you can see that in Snowflake's print, where the size of the beat and the trajectory that they have exiting the year is definitively accelerating relative to last year. And so I think one of the key observations is these infrastructure names are on an absolute tear if you're on the right side of history and AI is a tailwind. And we're probably in the middle of a two, three, four, six quarter durable tailwind. Maybe it even ends up being a three-year durable tailwind. The second category on cybersecurity, that inflection is just beginning. And admittedly, we thought it was going to take a little bit longer.

7:06But if you listen to the commentary out of CrowdStrike even yesterday at the Falcon conference or out of Palo Alto Networks on Tuesday night, out of Okta a couple of weeks ago, you're starting to see this inflection in not just the narrative, but also the way these companies are recognizing backlog, the way that the contract sizes are trending. All of that is a really good thing, especially because we're so early in the cycle of enterprise AI adoption that this is a tailwind that's going to persist. And then maybe just to finish here on the Salesforce piece and what's happening in the application ecosystem, I think we've been waiting to see proof that AI can be additive to the growth algorithm for some of these companies.

7:42What Salesforce did when they reported is not only did you have the announcement with Dario and Mark on TV, but you also had the data point, which is when you upgrade to these more sophisticated AI-enabled SKUs, Salesforce recognizes anywhere from 60 % to 80 % in premium pricing. Now, there's a lot of questions to be asked here on what exactly is happening with the pricing model, but that initial data point now allows you to actually do some modeling from a cohort standpoint. If we go from five points of the install base, 10 points of the install base, operating at 60 % to 80 % premium, you can now start doing math around that as an analyst, and the numbers can get pretty exciting.

8:19Do you cover MongoDB at all? Is that on our list? Okay, I was going to ask, because you said infrastructure names are, you know, they're certainly ripping, and MongoDB is a company, I mean, I'm looking at their stock chart here, they're down 5 % this year, so it's not seeming to follow the same trend. But anyway, we'll put that aside. You do cover Workday. And so we've got the report about an acquisition, maybe. We'll leave aside whether or not that's going to happen. Do you think Workday gets bought? There are some really interesting opportunities in the public markets. And what I mean by that, and maybe I'll level the conversation up from Workday specifically.

8:57Think about that playbook we were just talking about and going from being a SaaS leader of 2015 to a software leader that's AI enabled in 2026. That's a lot of work. That's a lot of heavy lifting, especially if you're going to rethink the pricing model from first principles, maybe move to outcomes-based pricing. A lot of that heavy lifting can often be easier to do in the private equity ecosystem. And having spent time in the private equity community, I've seen examples where with the right strategic partner, you can execute on some of these turnarounds. And maybe turnaround is too strong a word here.

9:28But some of the heavy lifting required on multiple pieces of the model on the product side with R &D, on the go-to-market side, on the pricing side. on the way that your company is organized structurally. And so I wonder if - You're expecting some takeovers, it sounds like. We've heard about, broadly speaking, we have M &A rankings for the companies under our coverage. We think about what can make sense mathematically. We look at history and fact patterns to be able to predict what does this look like. And so when you put all of those things together, we'll see, we haven't had a lot of M &A announcements since one stream, I think it was, early in the year.

10:03Who's at the top of that M &A list, the rankings that you put together? Yeah, let me give you the framework. So certainly what we look for is core IP and the potential for that core IP to be useful in a different construct. So can you actually make the transition if you execute well on technical debt, pace of innovation, monetization, all that good stuff? And then we also look at some of these companies have just been so beaten up by the public markets. And part of that is because we're evaluating new information all the time. The terminal value discussions are changing. So all of that together allows you to take some sort of probabilistic view.

10:40And the rankings views are, okay, 15 % to 30 % probability, 30 % to 50 % probability. And so who's at the top of the list? I will have to get back to you. I have it as a ranking system. All right. So, look, taken together then, I mean, you guys have your big tech conference coming up next week. You've got a number of executives coming to the event. What are the questions that you want to find answers to at that event next week? I think the number one question is any specificity that we can get on how much deal sizes are getting bigger. Take a company like Snowflakes. So they have two drivers right now.

11:19They have Cocoa, which is their Cortex code product, which they've given a couple of nuggets on quantifying. And then you also have the underlying core business where the pace of migration has gotten accelerated because coding tools can actually help you migrate data from older cycle databases and database warehouse management tools to newer generation Snowflake type tools. And so any nuggets we can get on that help us to quantify some of these product cycles, we were just talking about Salesforce, for example, how do we quantify the 60 to 80 percent? How do we understand the nuances of that number better?

11:52So any product cycle that one of these companies has that is going to be fueling the growth algorithm for the next 12 months, can we get the management teams to give us a couple of nuggets that help us size the opportunities rather than just putting our finger in the air and saying, is AI a tailwind or a tailwind? Right. Great. Well, Gabrielle, I want to thank you for coming on. That is Gabrielle Laborgias, U.S. Software Equity Research Analyst at Goldman Sachs here on TITV. Cybersecurity company Netscope reported its quarterly results this week. Revenue grew 29%, just about the same as last quarter.

12:26The company lifted its revenue outlook slightly. Shares initially spiked after the results, but they came right back down yesterday. I want to bring on Sanjay Barry, CEO of Netscope, for a conversation. Sanjay, welcome to the show. It's great to have you back. Yeah, great to see you again. So, Sanjay, we had you on last quarter as well after your results, and I was looking back at our conversation. One of the things you had mentioned to me is that Netscope is currently in the process of ramping its sales force to get them up to speed on how to pitch your AI offerings and really make it a convincing sell.

13:03Where are we in that ramp? Are they ramped yet? Are they out there? Is it done? And really, I'm asking, when can we expect the AI infusion into the results because of that? Yeah, so a couple of things. One, the sales team is around 50 % of them are ramped. So we still got a ways to go to ramp them. We actually started ramping them first in EMEA, where he saw great growth over 30 % in APJ, and then NAMM afterwards. And so that's in motion. We expect some growth in that ramp teams really towards the later part of the year. AI security, though, for us, it's an upsell and it's a new logo. And for us, we've seen great growth in that area.

13:44We had some great wins securing people's agentic traffic, securing their user-based prompts and responses, protecting their data. And we've seen about 33 % of that pipeline is now in POC, and it'll follow the normal enterprise six to 12-month sales cycle. So how big is Netscope's sales team now, Olin? How many people do you have across the world? So we haven't disclosed sort of the number of people, but think about our reps as hundreds. That's sort of the way to think about it. So help us understand, I mean, for people who haven't, I mean, I've never worked in sales or cybersecurity. I mean, when you say ramped, why does it take so long?

14:25I mean, you know, like, is this not just a matter of, hey, we've got hundreds of sales reps around the world, in Asia, Europe, North America, we've got these new products. Isn't this just putting a couple of orientation, like a couple of days, get the new products out. What's taking so long? Yeah, so let me explain what ramped means. Ramped is you get somebody in, they start to get enabled and we do that using AI and avatars and so on, act like a grumpy CIO or act like a CISO. We have different ways that we talk about and enable them. But when we think about ramped, it's not just getting them enabled.

15:06It's they have to then go out and get a lead to a customer, get a meeting, pitch the product, get to a POC, go through procurement. And so the ramped cycle is more from when they start to when are they fully ramped and delivering closed deals. Got it. So when you say ramped, it's not educating them, it's the sales cycle. No, it's the sales cycle. Yeah, exactly. No, we want them up to speed quick. Okay. So when you say 50 % are ramped, that's meaning to say that 50 % of your sales team right now, they've basically, you know, they've made their first sale related to your AI products. Yeah. And some of the non-ramped reps, they'll make sales before they're fully ramped.

15:52But what we really mean by it is generally we give them about nine to 12 months. 12 months is sort of the ramp time if you think about getting them onboarded, enabled, and then closing their first deals with a sales cycle and enterprise. So a good way to think about it is that time frame. Got it. So let's go back to the results then. So, I mean, 29 % growth is nothing to sneeze at for sure. The company is now burning cash for the first six months of this year, which is different from the same period last year. Why are you burning cash? What's the story here? Yeah. So we guided to be free cash flow positive for the year.

16:28Right. Slightly. It was only a couple percent, right? Yeah, exactly. And the reason that we're going through that transition is we're going through to an annual billings transition. So previously, when you purchased a three-year deal, you paid up front. What we did is we said, look, we're going to move that to annual. Whenever you buy a three-year deal, you're going to pay us annually. And the beauty of that is that when you get through that, and we kind of reach the trough of that, when you get through that, you get very predictable cash flows, and you get layers of these cash flows, and your cash starts to inflect in the right direction.

17:04And so we're looking forward to where it goes from here because by mid-next year, we'll be through that annual billings transition. And I'm curious, on the pricing model, we've written a little bit here at The Information about the trend of software companies looking to outcome-based pricing as sort of the next leg of customers getting value from the product. We had consumption. It's an upgrade from Seat. I guess you could say, where do you fall on that spectrum? Are you playing with outcome-based pricing? Is that the way you've always worked? Yeah, it's a great question. So we follow over three models.

17:38If you look at traditional models, it was more user-based. We moved to, for our AI products transaction-based pricing. So for example, when we're preventing agents from going rogue or watching if they exfiltrate data, that's by transaction. That's a prompt and a response. And we charge across all our AI security products that way. Gateways, Agentech broker, guardrails, all transaction. And that's the way that customers also think is like, wait, yeah, they're not users. So now we also have outcome-based pricing for what we just recently introduced, which is our AI agents. And so we have an AI agent that will find the needle and haystack of your malicious insiders.

18:16And I'll tell you, Mary and Joe are trying to exfil data through a coordinated exfiltration attack. Here's the case. Here's what they did. And here's why. That's an outcome. You pay for that outcome. And so AgentScope, which is our AI agents, those are paid by outcome. Right. Tell me, speaking of agents going rogue, what was your reaction to the OpenAI hugging face incident that everyone's been talking about? It's funny, you keep coming on at inflection points in the cybersecurity story because last time we had you on, you were playing with Mythos. We were talking about whether or not Mythos would get released to the public.

18:53We now know Fable came along. Now we've got the hugging face incident. What does that tell you about these tools and about this climate? it. Yeah, I think it just reinforces the notion that people have to realize that agents, they have no morals, they have no conscience, they have no EQ. They'll do what you say. And so if you give them a goal, they will go to every single possible way to get to it. They'll cheat, they'll scheme, they'll blackmail, they'll do whatever they need. And so when you unleash an agent, you have to give it its morals. You have to give it its EQ prescriptively. And so that's really what it teaches us is that, look, don't think of these things as some, you know, oh, this is an amazing human, right?

19:38That's not what they are. And ultimately, you got to contain guardrail and make sure that you're clear with what an agent can do. I have to tell you, though, it's kind of, it's so interesting. I mean, you know, we say that, but then I feel like the way that agents are marketed, I mean, that's not the way that they're marketed, right? Because to get people to adopt agents, you basically have to say they are kind of like your human assistant. And so there's a little bit of a mismatch there. Yeah. Look, I don't like the word human. I like the word. They're not a human. There may be a human's assistant.

20:17Yes. But if you think of an assistant as somebody you traditionally think of as, hey, I qualified and they good morals and integrity and so on. No, it's not that they're bad. They just they don't have such a concept. Right. And they don't have a conscience. And so you really have to be careful. You have to make sure that you sandbox them, you guardrail them, you're prescriptive, and then they'll do what you need them to do. But you've got to have controls. So I tell people this. Assume you're vulnerable. Assume agents go rogue. Assume they do what you don't want them to do. You need to survive and have security in that environment to protect that.

20:56Right. Sanjay, I do want to ask, I mean, so cybersecurity companies have seen a lot of momentum in the stock market. Investors have sold off shares of your company this year, largely. What do you chalk that up to? Yeah, I mean, we're up probably 30, 40 % in the last six months. And so we see obviously growth back as well, but we're new, right? We're not even past a year in our public company journey. And so we're still getting out there. We're getting our first few quarters out. We are one of the fastest growing cyber companies out there. Gross margins trending towards 80%. Our operating margins is increasing, going through our fee cash flow inflection with the annual billings.

21:33And so all the metrics are moving in the right direction and similar. We're beating our guidance every quarter. We beat it every single guide metric we had we beat. And so I think just continuing to deliver that is the game. And I play the long game. I'm here to win for customers and winning for customers. Speaking of the long game, I mean, you know, we're both Toronto natives. Every time you come on the show, we talk about Toronto sports. And I'd be remiss if we don't acknowledge the Kawhi Leonard scandal that we have found. He's back now. He's back. He's back in Toronto. You know, we got the claw back.

22:10But man, what a road it's been. It has been a road. It has been a road. In fact, if you see over my shoulder, there's a Raptors painting. And if you look closely, there's the shot from Kaiwe. Yeah. Yeah. Yeah. There's the shot. I know. So now we know, we seldom know what's behind the biggest shots. We don't. Sanjay, I want to thank you for coming on. That is Sanjay Berry, CEO of Netscope, here on TITV. DocuSign reported second quarter results. The company grew top line 9%, the same rate as last quarter. Free cash flow margin was about 34%, also the same as last quarter. I want to bring on Alan Tegeson, CEO of DocuSign, for a conversation.

22:54Alan, welcome back to the show. It's great to have you here. Yeah, likewise. Thank you. So can you remind us, DocuSign, I mean, look, everybody knows the DocuSign product very well. We all use it probably every week. It's much broader now than just the core signature product. So walk us through the product stack, and then we'll talk about the results shortly. Yeah. So about three years ago, we identified the opportunity to reimagine agreements end to end. And so from the creation of the agreement, whether you're drafting or reviewing somebody else's document, all the internal approvals and customization that happens, the execution that we're particularly well known for, and then managing the agreements once it's executed.

23:34And we've built an entire suite to do that, first of its kind, and we're seeing tremendous traction with that. So what we shared today was that that suite, which we call intelligent agreement management, is now 15 % of our total ARR. And we've raised our estimates for the full year for both that revenue, our overall revenue, and that as a share of our business. So it's really driving the growth of the company. And we're now able to project some growth acceleration, which is very exciting. And so tell me, I mean, is it also sort of like helping people draft these contracts and review it? Like, are you transitioning a little bit more into sort of the legal tech sector or what's the road back for you guys?

24:23Yeah, I mean, DocuSign is really the agreement layer intelligence for the entire company. So a typical contract is touched by many different functions, right? In procurement, it might be you might have a procurement officer, you might have a finance person, you might have a legal person, to your point. And there's often many other folks involved. And so we can enable that workflow end to end. And sometimes the company will have a pre-existing agreement, a template of sorts, and that then gets customized. Sometimes there'll be an agreement from another vendor, and they have to tailor that and edit that and redline it.