Larry Dignan

Editor in Chief of Constellation Insights Constellation Research

About Larry Dignan: Dignan was most recently Celonis Media’s Editor-in-Chief, where he sat at the intersection of media and marketing. He is the former Editor-in-Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in CNET, Knowledge@Wharton, Wall Street Week, Interactive Week, The New York Times, and Financial Planning. He is also an Adjunct Professor at Temple University and a member of the Advisory Board for The Fox Business School's Institute of Business and Information Technology.&nbsp; <br>Constellation Insights does the following: Cover the buy side and sell side of enterprise tech with news, analysis, profiles, interviews, and event coverage of vendors, as well as Constellation Research's community and… Read more

Are AI agents going to reinvent workflows, processes, the future of work and enterprise efficiency? Or are AI agents just a better user experience and another excuse to sell you a different flavor of the "suite always wins?" Your answer depends on time frame.

We've detailed how it's early in the agentic AI journey and there are a few requirements needed to scale. It appears 2025 is about standards, protocols, improving AI models and orchestrating agents within the same silo-ed platforms you're currently stuck in. If AI agents go production and drive ROI, it's a 2025 story.

• Lessons from early AI agent efforts so far
• Every vendor wants to be your AI agent orchestrator: Here's how you pick
• Agentic AI: Everything that’s still missing to scale
• BT150 zeitgeist: Agentic AI has to be more than an 'API wearing an agent t-shirt'

The disruption of the minute with AI agents is likely to be about the user experience. When you purchase from your friendly neighborhood SaaS vendor you're buying a data store and often a UI. The enterprise software vendors see this oncoming AI trainwreck and are quickly positioning themselves as platforms with consumption models.

Boomi CEO Steve Lucas said: “I think SAP will always exist. Workday will always exist; Oracle will always exist. Here's the real question. The real question is, how much of that exists in the future? I believe is their UI will go away entirely.”

How would SaaS vendors be valued if they were actually headless systems where enterprises used AI agents to create the user experience? Consider the following developments:

• Salesforce is using Agentforce to become more of a platform and break down its various cloud silos--Service, Sales, Data, Commerce etc. The UI becomes Agentforce over time with a credit model.
• Google outlined at Google I/O how the dream is about being a universal AI assistant that would traverse various services and devices. That's a consumer dream, but those customer experiences and the tools behind them (Gemini, Agentspace and data and AI platforms) appear on Google Cloud.

• Microsoft CEO Satya Nadella has repeated referred to Copilot as a user interface to AI-based applications that are delivered via agents. Nadella said at Build that Microsoft "is bringing together agents, notebooks, search and create into a new scaffolding for work." "Beyond horizontal knowledge work, we are introducing agents for every role and business process," he added.
• SAP executives argued that Joule will be an always-on AI assistant to optimize processes and drive returns. Via Liz Miller, Muhammad Alam, member of the SAP Executive Board, said enterprises should standardize on Joule as their agent of choice. "You can either further complicate your landscape by adding yet another layer of tech, whether from workflow providers or from platform providers, where you knowingly or unknowingly, shift more towards the iceberg," said Alam, who leads the SAP Product & Engineering Board area and has global responsibility for all business software applications. Alam noted that the idea of best of breed AI agent systems doesn't work (as if he'd say anything else). He acknowledged that the enterprise suites didn't innovate fast enough even as he through a few jabs at ServiceNow.

• ServiceNow also is a big AI agent play and is all about platform. As a result, it doesn't seem hamstrung by UI issues.

Add it up and you have a bunch of vendors talking AI agents that may merely be defending their cross-selling models and interfaces that put a face on their software.

Larry Dignan

Editor in Chief of Constellation Insights Constellation Research

About Larry Dignan: Dignan was most recently Celonis Media’s Editor-in-Chief, where he sat at the intersection of media and marketing. He is the former Editor-in-Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in CNET, Knowledge@Wharton, Wall Street Week, Interactive Week, The New York Times, and Financial Planning. He is also an Adjunct Professor at Temple University and a member of the Advisory Board for The Fox Business School's Institute of Business and Information Technology.&nbsp; <br>Constellation Insights does the following: Cover the buy side and sell side of enterprise tech with news, analysis, profiles, interviews, and event coverage of vendors, as well as Constellation Research's community and… Read more

Anthropic launched a set of developer tools that make it easier to build AI agents and launched new Claude 4 models. The news, outlined at Anthropic's first developer conference, highlights how large language model companies are branching out.

For enterprises, the most interesting item from Anthropic's conference is new API capabilities. Anthropic launched a code execution tool, a Model Context Protocol (MCP) connector, Files API and the ability to cache prompts for up to one hour.

These API tools ride along with the launch of Claude 4 Opus and Sonnet 4. The combination means that an AI agent can use the MCP connector to an application like Asana to reference tasks and work, upload relevant reports via Files API and analyze progress with the code execution tool.

Speaking during a chat with Chief Product Officer Mike Krieger, Anthropic CEO Dario Amodei said he has been surprised by the MCP support. "I was surprised at the pace at which everyone seems to have standardized around MCP," said Amodei. "It was very strange. We released it in November. I wouldn't say there was a huge reaction immediately, but within three or four months it became the standard. There's this feeling of being on the spaceship."

This workflow, outlined in an Anthropic blog, highlights how the company is building out a toolbox for AI agents.

• Agentic AI protocols: MCP and A2A today, many more tomorrow
• Lessons from early AI agent efforts so far
• Every vendor wants to be your AI agent orchestrator: Here's how you pick
• Agentic AI: Everything that’s still missing to scale
• BT150 zeitgeist: Agentic AI has to be more than an 'API wearing an agent t-shirt'

Anthropic's developer conference kicked off in the same week as Microsoft Build and Google I/O. Both of those conferences were also AI agent heavy.

Here's the news in a nutshell:

• Anthropic API has a code execution tool that will give Claude the ability to run Python code in a sandbox to produce insights and visualizations. Claude then becomes more of a data analyst that can handle use cases such as financial modeling, scientific computing, business intelligence and statistical analysis.
• The MCP connector on Anthropic's API will connect Claude to any remote MCP server without code. Claude will now connect, retrieve tools, reason, execute tool calls, manage authentication and return a response with integrated data. MCP has garnered wide support in a short amount of time.
• Files API simplifies storage and access of documents for Claude applications. Instead of managing file uploads in each request, you can upload documents once.
• The extended prompt catching will improve agent workflows without more expense.
• Claude Opus 4 and Claude Sonnet are advances in coding and reasoning, respectively. The models can alternate between reasoning and tool use, use tools in parallel, and work well with GitHub Actions.

In addition, Claude Opus 4 and Sonnet 4 are hybrid models with two modes: Near instant responses and extended thinking for deep reasoning. Both models will be available on Anthropic's API, Amazon Bedrock and Google Cloud Vertex API. Pricing is on par with previous Opus and Sonnet models.

Amodei said the industry is headed to a world where you can dispatch agents to do things and models overall will become more autonomous. "We're heading to a world where a human developer can manage a fleet of agents, but I think continued human involvement is going to be important for the quality control and make sure agents do the right things and get the details right."

The Anthropic CEO noted that use cases for these autonomous models and agents would be for software development, cybersecurity, scientific research and biomedical. Amodei also said that it's possible that MCP will hook up to real world data and equipment.

• Anthropic Claude Research integrates with Google Workspace
• Databricks forges partnership with Anthropic, adds innovative system to enhance open source LLMs
• Anthropic's Economic Index highlights AI augmenting mid-to-high salary jobs
• Anthropic outlines most popular Claude use cases

Constellation Research's take

Holger Mueller, an analyst at Constellation Research, said Anthropic's moves are an example of foundational model players moving upstream and branching out. For instance, OpenAI is moving into hardware and Cohere is focused on collaboration as is Anthropic.

Mueller said:

“The LLM vendors are working up the stack into the PaaS layer. Anthropic is a great example of this move with its latest release. Not only is it providing more MCP support, but also giving developers the ability to upload files easier, leverage analytic libraries, and provide a longer context window.

Anthropic's moves will give developers the ability to build agents in a more efficient way. It is good news for CxOs, as they have more choice as LLM vendors move up stack and bump into the traditional PaaS players. Ironically, some of these new competitors will be partners and even investors in Anthropic. It will be interesting to see how these relationships will develop further since Anthropic is on a collision course with ancient software offerings."

Larry Dignan

Editor in Chief of Constellation Insights Constellation Research

About Larry Dignan: Dignan was most recently Celonis Media’s Editor-in-Chief, where he sat at the intersection of media and marketing. He is the former Editor-in-Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in CNET, Knowledge@Wharton, Wall Street Week, Interactive Week, The New York Times, and Financial Planning. He is also an Adjunct Professor at Temple University and a member of the Advisory Board for The Fox Business School's Institute of Business and Information Technology.&nbsp; <br>Constellation Insights does the following: Cover the buy side and sell side of enterprise tech with news, analysis, profiles, interviews, and event coverage of vendors, as well as Constellation Research's community and… Read more

Workday reported better-than-expected first quarter earnings as the company benefited from "continued efficiencies." Workday said that more than 60% of its customers are now using Workday Illuminate AI.

The HCM and financial software company reported first quarter earnings of 25 cents a share on revenue of $2.24 billion, up 12.6% from a year ago. Non-GAAP first quarter earnings were $2.23 a share.

Wall Street was looking for non-GAAP earnings of $2.01 a share on revenue of $2.22 billion.

Carl Eschenbach, CEO of Workday, said the quarter was solid and "a testament to the durability of our business and the relevance of our platform."

• Workday Enters the Era of AI
• Employee Experience Platforms: Workday Peakon
• Workday aims to be system of record for AI agents, digital labor
• Workday Rising 2024: AI Illuminate, AI agents, Evisort acquisition

CFO Zane Rowe added that the company is focused on "executing in this uncertain environment and are reiterating our fiscal 2026 subscription revenue guidance of $8.8 billion while increasing our fiscal 2026 non-GAAP operating margin guidance to approximately 28.5%."

During the quarter Workday launched new Illuminate Agents, added new customers including United Airlines and Mutual of Omaha Insurance Company and saw traction in the technology and media vertical.

As for the outlook, Workday projected second quarter subscription revenue of $2.16 billion, up 13.5% from a year ago. Subscription revenue for fiscal 2026 will be $8.8 billion, up 14%. Non-GAAP margins for fiscal 2026 will be 28.5% up from the 28% projected for the second quarter.

Constellation Research analyst Holger Mueller said:

"Workday had a good quarter, breaking $2 billion in subscription services in a quarter for the first time. Despite restructuring and reducing headcount by about 7.5%, all its key costs in R&D, sales and marketing and G&A were still up. The impairment charge for restructuring  practically halved its operating income from 3.2% to 1.8% of revenues. Eschenbach and team are managing Workday on a razor thin margin, and evidently do not want the vendor to slip back in to the red."

Larry Dignan

Editor in Chief of Constellation Insights Constellation Research

About Larry Dignan: Dignan was most recently Celonis Media’s Editor-in-Chief, where he sat at the intersection of media and marketing. He is the former Editor-in-Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in CNET, Knowledge@Wharton, Wall Street Week, Interactive Week, The New York Times, and Financial Planning. He is also an Adjunct Professor at Temple University and a member of the Advisory Board for The Fox Business School's Institute of Business and Information Technology.&nbsp; <br>Constellation Insights does the following: Cover the buy side and sell side of enterprise tech with news, analysis, profiles, interviews, and event coverage of vendors, as well as Constellation Research's community and… Read more

Since the start of the generative AI boom, demand for Nvidia GPUs has been insatiable. Nvidia is still raking in cash from its AI infrastructure, but there are few recent developments indicating that the industry is maturing a bit.

In an announcement largely overlooked amid Nvidia CEO Jensen Huang's keynote at Computex, the company launched Nvidia DGX Cloud Lepton, an AI platform and marketplace that will connect developers to available GPUs.

Nvidia isn't providing the service, but has lined up a set of cloud partners including CoreWeave, Crusoe, Firmus, Foxconn, GMI Cloud, Lambda, Nebius, Nscale, Softbank Corp. and Yotta Data Services. These providers are offering Nvidia Blackwell and the rest of Nvidia's stack. GPU marketplaces including Fluidstack, Foundry and Hydra are also participating.

The marketplace "connects our network of global GPU cloud providers with AI developers," said Huang, who added the Nvidia and partners are "building a planetary-scale AI factory." Huang said leading cloud providers and other GPU marketplaces are expected to participate in DGX Cloud Lepton.

Developers would purchase GPU capacity directly from cloud providers or bring their own compute clusters. GPU capacity can also be deployed across multi-cloud and hybrid environments.

With the marketplace, Nvidia is trying to democratize GPU access a bit. After all, Microsoft, Meta, OpenAI, AWS and Google Cloud are likely gobbling up the capacity.

The other Nvidia move that made me go hmm was NVLink Fusion, which enables other CPUs to plug into the Nvidia stack. Speaking at his Computex 2025 keynote, Nvidia CEO Jensen Huang unveiled NVLink Fusion. NVLink Fusion allows cloud providers and presumably sovereign AI efforts and ultimately private infrastructure to use any ASIC or CPU to scale out Nvidia GPUs.

MediaTek, Marvell, Alchip Technologies, Astera Labs, Synopsys and Cadence are the early adopters of NVLink Fusion for its custom silicon. Qualcomm also announced its data center efforts and moves to integrate its CPUs into Nvidia infrastructure. Fujitsu and Qualcomm CPUs can also be integrated into Nvidia GPUs via NVLink Fusion.

Constellation Research analyst Holger Mueller said: "Nvidia once again acknowledges the importance of the network for AI. The speed and efficiency how data is served to the precious and inexpensive CPUs is what matters."

The other development in AI infrastructure this week was revealed at Dell Technologies World. Dell outlined a plan to disaggregate data centers and use AI and automation to create a stack that can better mix and match layers, vendors and AI workload architectures.

Dell's disaggregated approach to the data center will apply to private cloud and on-premises deployments.

And finally, Dell is diversifying its AI factory approach. Yes, Nvidia's full stack is the headliner for Dell AI factories, but the company added an AMD version and early-stage Intel offerings.

Add it up and there seems to be some acknowledgement that there will be Nvidia diversification whether it's with custom processors from AWS, Microsoft and Google Cloud or custom ASICs and rival efforts. Even Nvidia's NVLink Fusion acknowledges the broader ecosystem at least for CPUs. Nvidia is playing the long-game, which revolves around the ecosystem and connecting AI infrastructure with its platform.

Larry Dignan

Editor in Chief of Constellation Insights Constellation Research

About Larry Dignan: Dignan was most recently Celonis Media’s Editor-in-Chief, where he sat at the intersection of media and marketing. He is the former Editor-in-Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in CNET, Knowledge@Wharton, Wall Street Week, Interactive Week, The New York Times, and Financial Planning. He is also an Adjunct Professor at Temple University and a member of the Advisory Board for The Fox Business School's Institute of Business and Information Technology.&nbsp; <br>Constellation Insights does the following: Cover the buy side and sell side of enterprise tech with news, analysis, profiles, interviews, and event coverage of vendors, as well as Constellation Research's community and… Read more

Zoom Communications delivered better-than-expected first quarter earnings as the company is seeing strong demand for Zoom Customer Experience, Zoom Revenue Accelerator and Workivo.

The company reported first quarter earnings of 81 cents a share on revenue of $1.17 billion, up 2.9% from a year ago. Non-GAAP earnings in the first quarter were $1.43 a share. Wall Street was looking for non-GAAP earnings of $1.31 a share on revenue of $1.17 billion.

Eric Yuan, Zoom CEO, said "we saw continued momentum in Zoom Customer Experience, Zoom Revenue Accelerator, and Workvivo as customers look to elevate CX, reinvigorate sales, and strengthen culture." He added that the company appeared to be landing accounts in an uncertain economy. Enterprise revenue in the first quarter was $704.7 million, up 5.9% from a year ago. Online revenue, which is small business accounts, had revenue of $470 million, down 1.2%.

Zoom evolves AI Companion with agentic AI features

Zoom said it had 4,192 customers contributing more than $100,000 in trailing 12 months revenue, up 8% from a year ago. Online average monthly churn was 2.8%.

As for the outlook, Zoom projected second quarter revenue between $1.19 billion and $1.2 billion with non-GAAP earnings of $1.36 a share to $1.37 a share. For fiscal 2026, Zoom projected revenue between $4.8 billion to $4.81 billion with non-GAAP revenue of $5.56 a share to $5.59 a share.

Yuan in prepared remarks said:

• "Adoption of Zoom AI Companion continues to grow, with monthly active users up nearly 40% quarter over quarter."
• "While we continue providing tremendous AI value at no additional cost to users with a paid license, we're now monetizing through Custom AI Companion. Though only weeks in market, we're seeing strong enthusiasm from several Global 2000 trial customers, who are especially excited about features like Bring Your Own Dictionary and Index, meeting summary templates, and our Jira integration."
• "Zoom Phone continues to perform strongly, with revenue growing in the mid-teens. It is also opening new markets for Zoom by integrating seamlessly with other productivity suites and delivering a best-in-class, AI-first voice experience. The adoption of Zoom phone integration with Microsoft Teams has grown significantly, showing how we can meet customers where they are and add value within their existing tech stack."
• "In Q1, the number of Zoom Contact Center customers grew 65% year over year and Zoom Virtual Agent landed its largest deal to date as an upsell to Contact Center - altogether Zoom Customer Experience is a triple digit million ARR business, growing in high double digits."
• "Zoom Revenue Accelerator, our AI-first sales enablement and conversational intelligence solution, continues to deliver strong results for revenue teams. In Q1, licenses grew 72% year over year, reflecting growing traction."

Larry Dignan

Editor in Chief of Constellation Insights Constellation Research

About Larry Dignan: Dignan was most recently Celonis Media’s Editor-in-Chief, where he sat at the intersection of media and marketing. He is the former Editor-in-Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in CNET, Knowledge@Wharton, Wall Street Week, Interactive Week, The New York Times, and Financial Planning. He is also an Adjunct Professor at Temple University and a member of the Advisory Board for The Fox Business School's Institute of Business and Information Technology.&nbsp; <br>Constellation Insights does the following: Cover the buy side and sell side of enterprise tech with news, analysis, profiles, interviews, and event coverage of vendors, as well as Constellation Research's community and… Read more

Snowflake delivered first quarter revenue growth of 26%. The company's data platform continues to see strong demand due to AI workloads.

The company reported first quarter non-GAAP earnings of 24 cents a share on revenue of $1.04 billion. Including stock compensation and other items, Snowflake reported a net loss of $430.1 million, or $1.29 a share.

Wall Street was expecting Snowflake to report non-GAAP earnings of 21 cents a share on revenue of $1.01 billion.

As for the outlook, Snowflake projected second quarter product revenue of $1.035 billion to $1.04 billion, up 25% from a year ago. "We see an enormous opportunity ahead as we extend this value throughout the full data lifecycle," said Snowflake CEO Sridhar Ramaswamy.

• Snowflake adds OpenAI models to Cortex AI via expanded Microsoft partnership, integration
• Snowflake Marketplace: The Future of Data Monetization and Enterprise AI
• Constellation ShortList™ Automated Cloud Data Warehouse Services

By the for numbers for the first quarter:

• Snowflake had 606 customers with trailing 12-month product revenue of more than $1 million.
• Remaining performance obligations of $6.7 billion, up 34% from a year ago.
• Research and development spending in the first quarter was $472.4 million, up from $410.8 million a year ago.
• The company has been hiring as expenses have crept higher.

Snowflake cited customers such as JPMorgan Chase, AstraZeneca, Dentsu, Kraft Heinz and Siemens. He noted that the company is focused on innovative use cases.

Here's what Snowflake CEO Sridhar Ramaswamy had to say on the earnings call:

• "Our core business is very strong, our product delivery remains on overdrive, and our go-to-market engine continues to get stronger and stronger. We are in the zone and there's still an enormous opportunity ahead."
• "We've made important progress in delivering an extensible and flexible connectivity platform, both unstructured as well as structured data. Snowflake connectors, which leverages the technology from our acquisition of Datavolo enables customers with seamless connectivity and data integration with key platforms like Google Drive, Workday, Slack, SharePoint and more to tap into critical data across the business."
• "This quarter alone, we have brought over 125 product capabilities to market, a 100% increase over what we delivered in Q1 of last year. We continue to see strong adoption of open data formats, especially truly open modern table formats like Apache Iceberg."
• On hyperscale cloud competition, the Snowflake CEO said: "The hyperscalers are formidable. They are amazing both from an engineering execution and business perspective, but they also work with Anthropic and OpenAI because they are the best -- among the best model makers in the world. Similarly, we are very uniquely positioned in terms of being the excellent data platform that is. And we've also learned how cooperating really leads to a better outcome, whether it is with AWS, which is our biggest partner, or more and more with Azure. There are many customers that Azure not play is just a better outcome for everybody that is involved."

Constellation Research analyst Holger Mueller said:

"Snowflake had a other great quarter, missing the $1 billion in product revenue by a hair. The question going forward is how will its customers adapt to AI. Snowflake has an ambitious agendas here, including its LLM, but the verdict is still out where enterprise data will live. The balance is slowly shifting from analytics vendors to AI automation vendors, and there the transactional vendors that are gaining momentum in product. The second half of 2025 will not only be different for Snowflake, but all analytics centric vendors." 

Larry Dignan

Editor in Chief of Constellation Insights Constellation Research

About Larry Dignan: Dignan was most recently Celonis Media’s Editor-in-Chief, where he sat at the intersection of media and marketing. He is the former Editor-in-Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in CNET, Knowledge@Wharton, Wall Street Week, Interactive Week, The New York Times, and Financial Planning. He is also an Adjunct Professor at Temple University and a member of the Advisory Board for The Fox Business School's Institute of Business and Information Technology.&nbsp; <br>Constellation Insights does the following: Cover the buy side and sell side of enterprise tech with news, analysis, profiles, interviews, and event coverage of vendors, as well as Constellation Research's community and… Read more

Hitachi Digital Services CEO Roger Lvin said the move to AI agents will feature more transformation in a shorter amount of time than cloud computing due to "the reinvention of processes and applications from scratch." Lvin also talked about talent in the AI era, R&D, operations technology and IT convergence and the need for domain knowledge in AI use cases.

Lvin spoke at Hitachi Digital Services' US Analyst and Advisor Day. Hitachi Digital Services is part of Hitachi Group's Digital Systems & Services division.

Here's a look at the takeaways from Lvin's talk:

Agentic AI's real impact. Lvin said agentic AI is "a real movement" that will have an impact that's overlooked. "Agentic AI will allow us to skip what we had gone through with cloud," said Lvin. He noted that the cloud had two phases. First, there was migration which was largely successful. The second was implementation and returns, which didn't deliver the savings expected for many. The cloud led to a lot of brown field implementations that revolved around retooling existing systems and processes. Agentic AI will feature more green field implementations because there won't be a lift and shift progression.

"With agentic AI, you're going to see a significant movement towards modernization in a green field type of manner. I think you're going to see a lot of reinvention of processes and applications from scratch because of the new approaches. I think that will come about a year from now."

Your data will never be perfect enough. Lvin said it's a mistake to think you have to have your data house completely in order before taking on AI use cases. He said: 

"For AI, obviously, you need data. If you don't have data, you are dead in the water. But I think a lot of the companies two years ago were stuck in the in their horizontal proof of concept hell. I think a lot of companies are now stuck there because they think their data has to be perfect before they go on this AI journey. 

I've changed my own perspective that, and I believe that that's kind of nonsense now, because data will never be perfect. It's never been perfect 10 years from now, it's not perfect now, and we can all be certain that it's not going to be perfect 10 years from now. It's like talent. The best organizations didn't have enough talent 10 years ago, and probably will not have enough talent 20 years from now. The important thing about data is that you have to advance these programs simultaneously. You can't wait for perfection in one swim lane before you take on the second because otherwise you will be in the proof of concept forever."

AI talent. Lvin said the primary issue is that AI requires multiple skills and knowledge including domain knowhow, physics mathematics and experts in horizontal technology. "I don't think that'll change and I don't know if the US is particularly great at teaching those skills. We're good at training those skills, but not necessarily the best at keeping them within the country," said Lvin. "You're going to look for engineering skills, but you're also going to look for domain skills, which we're not going to have enough of."

Mission critical systems. Hitachi Digital Systems runs systems for the likes of Japan Rail, major automotive companies and transaction systems behind the scenes. Lvin said the secret sauce is to run mission critical applications, infuse Japanese quality and process knowhow and new innovations. "These mission critical systems can't go down and they have real-life implications when they do now work," said Lvin.

R&D. Lvin said Hitachi spends $3 billion each year on R&D with a focus on asset heavy and asset light industries. That expertise resonates with enterprises with mission critical systems. "My pitch to engineers that we bring in is that if you want to be a good consultant there are plenty of good companies out there. If you want to be hardcore engineer, this is a place for you to be," said Lvin.

ERP. "We're seeing a huge resurgence in SAP, particularly in the midmarket," said Lvin. "There has been a little bit of a walk back from developing the latest, greatest and coolest UI. Customers are saying let me focus on the core systems and reduce the technology debt."

Operations technology (OT) and security. "SecOps have been around a long time, but the mission of protecting OT is lagging significantly behind," said Lvin, who said enterprises are starting to catch up with OT security.

OT and IT convergence. Lvin said OT and IT are converging because physical infrastructure is going digital.

"A train is used to be four wheels, four walls, a big engine with a black box like you get on an airplane. Today, the train has over 40,000 sensors that are reading the condition of the track. They're reading what's happening with the weather and everything happening with the train. What is new in that example is actually AI on the edge. Hitachi has worked on advanced computing with Nvidia. Now there is a card that sits inside the train, reads the data in real-time from the sensors and now we know more due to things like computer vision."

Use cases. Lvin said Hitachi likes to partner with customers on AI use cases. "The difficulty today is finding the real use cases. How do you bring the application into the real world," said Lvin. He added that the art of finding the right AI use case is about domain and industry knowledge, technical skill and returns.

Larry Dignan

Editor in Chief of Constellation Insights Constellation Research

About Larry Dignan: Dignan was most recently Celonis Media’s Editor-in-Chief, where he sat at the intersection of media and marketing. He is the former Editor-in-Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in CNET, Knowledge@Wharton, Wall Street Week, Interactive Week, The New York Times, and Financial Planning. He is also an Adjunct Professor at Temple University and a member of the Advisory Board for The Fox Business School's Institute of Business and Information Technology.&nbsp; <br>Constellation Insights does the following: Cover the buy side and sell side of enterprise tech with news, analysis, profiles, interviews, and event coverage of vendors, as well as Constellation Research's community and… Read more

Palo Alto Networks reported better-than-expected third quarter earnings as the company continues to consolidate cybersecurity budgets.

The company, which kicked off a platformization war among security vendors last year, said third quarter earnings were 37 cents a share on revenue of $2.3 billion, up 15% from a year ago. Non-GAAP earnings were 80 cents a share.

Wall Street was looking for non-GAAP third quarter earnings of 77 cents a share on revenue of $2.29 billion.

As for the outlook, Palo Alto Networks said revenue will be between $2.49 billion to $2.51 billion with non-GAAP earnings of 87 cents a share to 89 cents a share. Wall Street was looking for non-GAAP earnings of 87 cents a share on revenue of $2.50 billion.

For fiscal 2025, Palo Alto Networks projected revenue of $9.17 billion to $9.19 billion with non-GAAP earnings of $3.26 a share to $2.28 a share.

• Palo Alto Networks acquires Protect AI, aims to secure AI ecosystems
• Palo Alto Networks delivers strong Q2, launches Cortex Cloud

By the numbers:

• Next-generation security annual recurring revenue for Palo Alto Networks was $5.09 billion, up 34% from a year ago.
• Operating income was up 23% on a non-GAAP basis in the third quarter.
• About 90 customers in the third quarter standardized on Palo Alto Networks.
• The company had 44 customers with more than $10 million in annual recurring revenue on next-gen security.

CEO Nikesh Arora made the following points on the earnings conference call. 

• "It is becoming increasingly clear that as organizations aspire to simplify and modernize their security architectures in the age of AI with data at the center, our strategy is resonating, resulting in larger deals."
• "The urgency to adopt AI is omnipresent in all of our customers. It no longer seems to be a choice. It's becoming a strategic imperative for every customer as the risk of inaction is too high."
• "It was not an easy quarter to execute. Had we not had the tariff conversations, the geopolitical tensions, it'll be much easier to sell through it. But we had our lessons from the pandemic. We had our lessons from supply chain crisis. So, we had to go back and pull up our shorts and execute the same practices that we did then. And we're kind of, like, on the same sort of cadence now in Q4 because we are trying to stay ahead of the curve."