Entering a Period of Confusion and Uncertainty. Downgrading to Neutral.

Research evidence excerpt

Entering a Period of Confusion and Uncertainty. Downgrading to Neutral.

Callback Notes

■ FY26 Guidance Assumptions. Downmarket is deliberately declining at an accelerated pace, with that business expected

to decline 20%+ in the near-term as the company removes less efficient resources and rightsizes the model. The goal is

to get to a healthier overall business over the next 4-6 quarters, while assuming upmarket growth decelerates by a few

points from current levels due to software weakness and the near-term drag from shifting customers from seats toward

consumption. GTM broke down the -$62M FY26 Revenue Guide revision. About a quarter of the reduction is tied to pullingAPPLICATION deal resources out of downmarket and shifting more toward PLG, roughly one-fifth reflects weaker software trends seen

at the end of 1Q and into April, another one-fifth is tied to seat-to-consumption assumptions, and the remaining ~40% is

broad conservatism.

■ Growth Going Forward. Management acknowledged that a lot has changed within the last quarter and said the right approach

is to reset near-term expectations, build in more conservatism, and update investors as visibility improves. GTM believes that

when growth does return, the company should emerge as a structurally more profitable business, with margins closer toSOFTWARE 40% rather than 35%. For the back half of the year, GTM expects both the Q/Q change in RPO and the change in billings

to be negative. For Q2, depending on the timing of some of the company's initiatives, negative low single digits is a good

starting point.

■ Confidence in Returning to Growth. Management said the key takeaway from 1Q was not the decline in $100K+ logos itself,EQUITY but that logos down-selling out of the cohort were meaningfully lower than a year ago.