Arista Networks (ANET) 4 May 182018 Q1 Earnings call transcript

Welcome to the first quarter 2018 Arista Networks Financial Results Earnings Conference Call.

As a reminder, this conference is being recorded and will be available for replay from the Investor Relations section at the Arista website following this call. I will now turn the call over to Mr. Charles Yager, Director of Investor Relations. Sir, you may begin.

operator. you, Thank and everyone, for us. joining Good thank afternoon, you are Arista and Networks' With Brennan, me and Ullal, call today's Officer. Officer; on President Jayshree Chief Chief Financial Arista's Ita Executive release afternoon, announcing first This XXXX. issued Networks a quarter the of its Arista release fiscal press

you of release, access a you website. copy the online at company's like would can If the it

XXXX our the note fiscal materially quarter statements, including no These exclude these differ We forward-looking course will obligation financial management make second the our innovations, today, of During industry and anticipated these actual the undertake relating year, this financial to this them rely market Networks' of as of for conference the call, Arista outlook use in those statements been measures opportunity uncertainties results subject Form non-GAAP and forward-looking recent we apply after to the Also, which you update our charges. SEC, litigation, detail impact the documents most our XX-K in of and to specifically representing from are statements. this the filed in to with should which risks are and adjusted and not a could expressed future. that have as on we discuss basis on certain in certain to by those views on call please statements call. our cause that

in our over release. reconciliations these call to press of financial non-GAAP earnings provided have measures that, measures We turn I financial With Jayshree. to the will GAAP

report non-GAAP $XXX.X of of in XX% perspective, call. predictable competitive the you, year-over-year. revenue, a We contributed earnings than the good quarter per our rest profitable I sales. of Thank steadily normal a we more dynamic our progressed seasonality. pleased in joining while million, the XX% for international We to growth of quarter, total first with in delivered geographic we was industry. had Thank services grew this XX.X% XXXX everyone, $X.XX Americas XX.X% us of a customers gross with the for that the Non-GAAP given you, revenue our quarter. margins as earnings highly From afternoon contributing overall demonstrated am of share theatres Charles. the non-GAAP and

ten number out verticals. titans number at service and contributed of four vertical; and customers pretty enterprises top Our by three; included providers five financial. by ranked in Cloud QX number providers followed our tied cloud the at strongly as much specialized followed one two;

quarter, latest perform on with continues CloudVision diversity, Arista Arista XXXXXX license; well. Our XXXXXX March open software be embraced the healthy, EOS single based to this cloud well Trident and on silicon we we continued form On merchant designing for by introduced the networks. fixed new always customers modern Flexroute, X models our and as XX, platforms platforms acquisition to our Tomahawk operational software with and Broadcom's leaf while differentiated using image software consistency. datacenter X silicon. X,XXX run have Arista, we customer customers and to trends routing At as cumulative exceeded networking CloudVision and

cloud two of San terabit via cloud in XXXX Wedge On and scale event collaboration per in their XX-gig billion balancing, high capacity stack, latency forwarding. with key Microsoft predecessors Arista demonstrated the buffering availability double intelligent and that protocols Facebook and fully Some XX.X of load and key are packet upgrades, monitoring, of and low-power the automated second featured X.X XXX SONiC. OCP's with innovations scale segment network as software include hitless and VXLAN such system with packets disaggregated performance and partners, new XXX-gig a with routing Jose, fixed path EOS March with

this also initiative. Abstraction the flagship Management supports As Containerized back Arista demonstrated Microsoft in the network Microsoft with cases, Switch EOS contributions in of Arista or both as Microsoft the XXXX year, advanced stack. on full SAI, Interface, journey our began operation EOS only This supporting XXXX to we customization XXXX and in across chassis you for many of SONiC via may expanded know, EOS flows. initiative modular of XXX. Facebook's and And scripts these automating Arista This SDK Arista's open allows is action. Wedge cold

MPLS one Wave platforms be interoperability with we a in SDN quarter, NFV top routing recognized employers of also as as XXX and to both in large proud gratified time the We're to in of a Paris. for eligible number ten strategy participated Work World Forrester Area's QX XXXX. Congress be top + ranked This the out also Bay We're the Places in companies. for employee to the at in and hardware recognized + in nine the category, event first leader offerings score current SDN The Best

now light our at pleased particular, the second of look well trajectory customer well XXXX IPC delays of overhead I expiration with the of as to the in patent XXXX remedial XXX. performance suspensions the XXX As XXX we most much expect been the quarters, with the respect am had to to I start, half successfully certifications And QX return of past normalcy are having XX, in the experiencing the ahead. In reflect and beyond that on pretty and completed on during and we as our three certification. recent the we patent on of the orders June of

it Officer, Ita? to details. our so, for with like XXXX QX over I'd Chief to financial Ita, turn Financial And that,

Thanks, period. revenues up non-GAAP the the up prior quarter GAAP titan QX revenues million all to in International approximately our We the $XXX This costs results non-GAAP demand lawsuits. from associated of our Jayshree, and full of and represented XX% Service prior in million A legal with million, compensation with revenue based million. earnings or stock-based analysis pleased our consistent of from selected provided to our our the were at for QX of is were and impacts and QX vertical. overall ongoing Total revenue, quarter came excludes year-over-year $XXX.X in above our strength quarters. reconciliation for $XXX revenue, afternoon. with results non-cash guidance $XXX on of guidance XX.X% is release. good XX% and the XXXX particular cloud total slightly with in

international to While from strength international in-region the some Overall gross our cloud to in to margin customer XX.X%, above also deployments This by XX% our head quarter Operating a million $XXX.X in down $XXX.X last growth R&D last $XX.X but of return growth was by count. of QX quarter in titan of Sales million, down typical or of $XX.X guidance in expense period. quarter, XX.X% in our from the this related reduced X.X% an million was at reflected the from count U.S. last additions. healthy mix continued customers, were prototype anticipated we experienced XX%. more quarter mix midpoint XX.X% last spending quarter. million with of revenue, up down head for was million spending, $XX the first from million businesses reflecting revenue, and quarter. expenses marketing came for or from offset $XX.X

income than million adopted for income tax in the expense of or guidance or updated quarter for operating and rate Act. for the million, a $XXX.X recently of anticipated XX.X%. our Other $X.X to was relation revenue. in The was income effective net XX.X% Our million higher quarter XX.X%. the quarter $XXX.X rate Tax and favorable tax This the reflects was resulted

the was prior shares, for lawsuits the per XX.X at in number million up share the in $X.X with XX% are from Our non-GAAP quarter diluted for million ongoing a number Legal expenses resulting of excluded share came quarter our associated earnings results. $X.XX, diluted from year. the and

of in the materials were reflects in XX billings quarter. Cash, cash the period. times, income optimize down in sheet. million billion. performance $XXX.X from Inventory strong quarter collections the days, and to our combined from at overall Now, reductions quarter, $XXX.X in in prior reflecting days finished QX. in equivalents QX, down capital and ended quarter. in in the This we timing to March the of cash X.X with balance as Inventory net turning We approximately This up XX to at generated the and raw the both from $XXX.X came requirements. $X.X times goods, chain. in decreased reflects DSOs improvements working investments million million supply continued operations turns from X.X

in maintained million $XX inventory we further addition, to of compared recorded assets $XX a other deposits In quarter. last million

million, XXX-related $XXX.X in Our from declined balance million in $XXX.X was million down many quarter Product deferred of revenue total by with customers the deferred qualifications. revenue QX. approximately $XX completing their

reclassified of In liabilities part approximately $XX deferred our other of addition, software-related balance we sheet. of million revenue contract the XXX, on ASC to as adoption

forward, adoption certifications go maturity of of any of we of relative given deferred lower the XXX-related product levels expect completion R-Series the and platform, XXX. the ASC revenue, remaining should As you

the a were days, from business. deferred in is an decline of and the of million. underlying inventory demand such As the trends Capital QX, quarter were in XX of from a reminder, payments. $X.X in in itself, days indication payable any expenditures timing received revenue not, reflecting days the product XX of for change up Accounts

second to the outlook our Now, for turning beyond. and quarter

momentum of pleased in business cloud the are demand quarter, strong with the particularly our We with the customers. first from

to XXXX, As we base. that are our networking cloud we the remainder continuing the believe forward benefit we across to in well-positioned growth of look customer from

mid-XX% relevant. for growth that of tough balance remains some year-over-year the for we believe year, Given comparables, the the consensus calls current the XXXX which in range,

XX% for reflects quarter, XX%; for $XXX any in margin ongoing in our margin approximately non-GAAP XX%. Tax anticipated compensation gross legal rate on excludes the impact to revenues of as Our Act. associated quarter be based an is to stock-based million; operating follows; XX% backdrop, We mix of as the elements range costs on guidance gross recently to tax towards the expect reflecting of approximately million of results any XX% quarter. with XX%, to adopted With revenues non-GAAP XX% a and is this further guidance which margin approximately $XXX now the of to guidance our XX% lawsuits, to of second go-forward non-cash cloud second and the the

that, be shares current Charles. with rate to expect for call $X costs Please outlook, effective XX.X%, million approximately quarter. associated expected back approximately we is on with Charles? diluted be ongoing turn our the Our approximately of million. lawsuits the $XX will tax to to now note I based the

Ita. you, Thank

to themselves call. constraints, We request like are Q&A now portion to of a Due that earnings please move time I'd question. everyone to single to the limit going the Arista to

begin Q&A now will earnings call. portion the Arista of the We

comes with Sachs. Your Goldman from first Hall question Rod

is open. line Your

that. is wanted project-oriented balance released Yeah. associated there certification with one, certify? Hi, some still I with customers now the those around of question. deferred to wanted a ask to that. for projects were as taking my the bigger XXX Are of questions I is on then, a now associated back of those Number revenue to focus certifications. And you or is, out result revenue you clear online with certifications? Thanks. deferred on couple that Thanks just those some waiting guess, normal ramping the guys to guys. some back all or called delays question and those are I be still had spending those

the off deferred on Thanks, Rod. and I'll take second first to piece. Ita hand the one then

I of – some how So use you and our think time. explaining took if certifications of recall, now completed cases having the majority complex I was

So we to virtually be pretty impact about in QX to half. second starting in the we look much that. In good feel and are very of pretty minimal the now non-existent certifications XXXX, at

to So now. we're new projects ramping back

behind Ita? the worst is So us.

some I Rod, sheet. Yeah. XXX feature question, normal in there the small. balance And take are stuff, that's then, deferred to think other still just certification-related unrelated there deferred first some delivery there, just of kind then type it's is And your

it going number features based on will going is we features that smaller, commitments of forward. rotate now as and be particular and contracts make to So much in value just

of with up, quite workloads wonder networking of AI little there's follow going. bit spending do you And you the and a that that market guys seeing what respect you're think around? you competition there. curious bit Just that's have comment you to in could Just a do majority find on the to how I or

is space in very, stages. I exciting. very It's think clearly Well, very AI whole the early

impact clearly we show and the latency In of has partners: road were reduce time. the networking. Pure. a that just profound importance storage And and ago, to our And on what is a cycle capacity NVIDIA; would is of weeks partner, I say AI performance, bandwidth that two fact, on with to

but GPU, an stages, we result benefit derive So still of stages. the and a say, as of indirect experimental amounts I early very large would

Great.

Okay. you. Thank

Thanks.

You're welcome.

Your from next question Suva Citi. comes Jim with

is line open. Your

Thanks very much.

behavior Given have product a is, more news the are your your and getting and these in it manner? to the of like change any privacy trade figure What some of some customers at and that, concerns especially positive waiting stuff or you putting lot any a of about either less, in tensions, in seen out of or I'm cloud wars? wars pausing or to your concerns they looking or geopolitical a at with trade because spending

wow. Jim. it, to Oh, going start heavy-duty Thanks, I'm to That's justice. won't but do question. a I enough answer

So, more want fiber since the When lot more you encryption will a whole of a an element compliance of details. intimate isolation who's privacy say audit and we Anshul much look element are The more? Sadana, give the vendors, of deal. segmentation security of and their Chief and big cloud with and particularly Officer, datacenters. the you strong our to at Anshul, encryption how and of our a Customer deploying some there's security state, element I becomes think an the cloud vendors we ownership work closely and with

the so relevant, The data GDPR that things is Jayshree. Absolutely, protection or local with to laws much trademarks, exist. cloud but respect like the in any very not for

building the within Western business of And that So, the all regions look part the when or we you one-off some localized you'll that are out, cloud and we're see. the Europe of smaller countries. in. see regions that's already cloud the companies, they're at impact that That's

so you. the It's you much Thank Great. appreciated. for Thank details.

Jim. you, Thank

Srini Your Macquarie. next question comes from from Pajjuri

line (USA), Pajjuri Capital open. - Srini Macquarie Your Two Inc. questions, is Ita.

for mean, where your in grew that sort or And Obviously, then, to second mid-XX% the of deceleration you're is growth in you XX% half, this mid-XX% clarification. that mentioned do Does some comfortable QX. the from within assuming you You you're expect year. just ballpark? one be

had deferred $XX on revenue XXX ASC that like impact you in you. Did Thank said of revenues. quarter? million the in help You terms

Yeah.

where the but the think about way sheet XXX, is the think rate. balance year, the the Right? growth So, that growth on really the we incorporating we're I as record a of for rate. - other Srini say And think on it the deferred from deferred balance have balance mid-XXs (USA), liability Inc. first one, was remainder it's liabilities, a of to subscriptions to would reasonable Macquarie the some a kind we you. It's for of reclass. on flowing commentary sheet the through So, a year a really to just relocation prepaid required as two so contract revenue, opposed and Pajjuri the it's ASC we not Great. Thank So then, to the Capital technicality P&L. right? contract on not QX the

from Your Nomura. next question comes Jeff Kvaal with

open. line Your is

Yes. spenders tied the by raft or so, sounds is beats in in week closely the a much. like pretty headlines their on Thanks that been of is We've big cloud CapEx. their about last hit over to going business. from what underlying very It talking

I set slower you to in XXXX be to are all last looks for Can bridge we It out you growing to in of fluctuate. would would a understand things little them faster the course that bit. grow balance year. like ought the than from quarter to versus you. CapEx gap? XXXX XXXX. year, So, help Thank But a it quarter like that grew think us in little over things

continue and Most partnership enjoyed spending, I cloud have strong titans many with do of very and to. do we know a them certainly, seasonal have Jeff.

future Our our to forecast very customers. networking heritage all and is tied cloud and undoubtedly types past, is present and our our our of for much

entire to moves subsequent which great small and quarters, a shifts, their you of two dealer the for still year I a the the quarters lot one away is near is spending this networking involves while or a piece we very is, of what and take from CapEx. have future, think should visibility or

QX no to So, QX. say, that understand But we or or around for in cases. more, intimately involved, business-wise have continue reason technically and team those the know strong to very are will QX we use Anshul we only believe and aren't we partnerships.

So, to. hard try predict not we that's and what's really to

you Sometimes that's know don't add we more either. don't know and that? Anshul, to want they anything why to do

exactly or and revenue not it's same discussed bigger same could when in to bookings the three-year for as components past lag the for and quarter, the be is we land build-out everyone, remind Absolutely. I'd much months this resell the in to why companies, a or the as networking is that product see for this. the month That's datacenter the cloud the want two-to a build-out And a very hard we've XX forecast project. regions. us

Yeah. But QX. demand cloud a momentum from was a in let strong Jeff, me from perspective and remind you, that

again and typically this So, quarter. I that – strong, we saw It's think

Okay. probe bit. a Thank you. little that maybe to And then, on

about talked a... You

We're sorry. one just mind. question, just if limit going I'm it to don't to you

Charles. Oh, got you me,

Go You got ahead. me.

Thanks, Jeff.

Your next from question comes with KeyBanc. Kurtz Alex

is Your open. line

Enders Hi, you of Alex. guys. spine customers And Steve Rack wondering years was for compare the your seen or how in also on in segment? had This guys past scale how mix provider trended. does if I the is within Top change few service any over web that's switches and that of

see and Obviously, routing leaf service us a don't provider. of the us change. cloud lot gives and given spine in more has use But appreciable the We ports. cases the

different. much not overall, So,

Thank you.

Thank Steve. you,

Your Silverstein and comes Paul Cohen next with question Company. from

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Ittai comes Your Oppenheimer. next question with Kidron from

line Your is open.

can vertical a standpoint, underperform the look think that it which – me and the of verticals guy. on – can help gate, the ladies of talk remainder the you a think – the Thanks. I bar? versus think about from bar mid-XXs you Help about year, for second outperform I at guys quarter including quarter, me And that out guess, you if good when

others. try where we're to do obviously, very as think mean, that. set to scenarios mean, here. in of see going I our different we there potential and a lay are that number with based of but I'm single outcomes, out demand through year and I try cases We've some Yeah. case move guidance go going strong not a I number to on we'll different the don't a

our you try of But verticals going know, very forward. lumpy. We'll some Ittai. are as to Thanks, do these best

may enterprise quarter really example, enterprise really in one number win do provider well well or in large customers. For with if we we a service of

double are them contributing of all digits terms general, in of doing well and So, segments. in

So, growing... the they have hope possibility all of we

bit an for on that's is update you as enterprise it. give little of a kind of Got the how important Can going you future? in

I for clearly, it Customers in quality to pretty number Yeah of it enterprise. The financials. well QX are we're vertical pull period, the and starts out seeking customer one like reasons. And to it performance. But close – no, would a opportunities our two innovation small, very QX. there think, and the and would from we our was incredibly just our and been I the both last our was we always QX And to gain alternative very, added enterprise with but was frustrated is say strong do if continue vertical. you size year. an in tend testing have in enterprise pleased long in number financials, very QX

Good good. Very luck.

you, Thank Ittai.

with from Your Barclays. Mark Moskowitz question next comes

line open. Your is

think But we mover or baseball in to in Yes. with touch Arista's about question XXX-gig? respect we the we I analogy. seems to terms just Arista's the That Thank inning? on fourth use a there. cycle? afternoon. the investors a advantage third wanted if first-mover lot mean, in Good be there actually you. from a are of Sorry see where get are you inning, should to momentum to how prime I XXX-gig could we

if second baseball inning. analogy, we're even Well, we're not the the a first cricket innings. if the and you I in analogy, you use say still between would use But first

as we'll XXX-gig to not year, it. first is into and And compute, strong mover going one the not going the entire of were understand first continue and the to to downlinks move XXX-gig think product. It's XX-gig storage to into spine, last the start for the the requirement, moves into networking. it's more for permeate prove we the routing with the and be flavors. to a important XX-gig I mover cloud we flavors datacenter into because many forms but It's be to very interconnect, need only

build that that arrival so, will believe the mover continue of make And to our stronger will large XXX-gig. next also upon we And first year we we and in XXX-gig have us advantage. share believe only

tandem. So, the two will go in

you. Thank

Mark. Thanks,

question comes Rakers next with Wells Your Aaron from Fargo.

is Your line open.

the the your looking over XX% on XX%, taking to just margin understand, this to guidance think, for or that guidance the and XX% down of at to couple product go little It line the I I of Thanks – the Yeah. to question. quarter, next gross ranges want would compare bit. looks came XX% quarters. a margin like gross last

just assumptions assumption. of changing resulted in of there, what's there's kind So, within that there of gross a or the if lower anything curious mix bit little margin a

Yeah. have to gross the we margin driver causing cautious – believe that's cloud, customer the I – into base XX% mix, we think as that head more us right? And be outlook. gross guidance we mix within a margin biggest a QX on mean, the QX, still gross so is customer going to and little be in I around kind margin large to heavier range is our XX% for of will

mix. really it's year, we So, for still think the good XX% to feel I But XX% customer actually, the a about.

you. Thank

Thank you.

Hendi with next Gabelli. Your comes from question Susanto

Your line is open.

my commentaries you I having seeing taking Arista in have for in is that among low enterprise still Congrats thank strengths sales. questions. despite enterprises. and of enterprise evening, QX penetration sales sales, on strong market and Arista's Good heard

state current for routing enterprise share you So, outlook and both into be penetration switching? opportunities, the to Jayshree, would of able insight and

I could us. improve huge doing have the a enterprise. you we And for that in agree though opportunity Hendi. It's Thanks, even to with can Arista penetration well, would even Okay. do its we're better.

routing, and seeing so penetration in we're penetration in either. is both switching not Our low

providers. doing especially for to better, we general, the by capability switching Arista I favored in larger routing, we're tends very because would I But well. in to would stronger offer, and providers but scale than see I routing say, service think penetration cloud like the of be our is do

you. Thank

you, Hendi. Thank

Your next comes RBC Markets. Mitch question with Capital from Steves

line Your is open.

Hey, taking my for Thanks questions. guys.

margin me to back little So just let a gross guidance, get on bit. the that

of So largest when fastest typically we increase the cloud is to supposed I what products? and terms I given of higher growing guess the piece, the the do mix given kind be guys there end expect vertical the missing buy hyperscale to margins in Or actually the am dynamic?

Yeah. I mean, if competitive have you a gross look margin. customers, to historically, to the mix of if better or tends and large be, cloud factor obviously lot that have pricing has then we they drive tended lower more a and

Yeah.

Ita what Mitch. said, clarify more, couldn't to I Just agree

driven are margins gross lower therefore lower gross prices and volume; cloud volumes margins and us. to drive Our by

margin below cloud the corporate significantly is So average. our titan

Right.

comes question Stanley. next Your Faucette Morgan from with James

is line open. Your

progress Great. continue of much. want the internationally, the customer kind ask there. just to Thank you making very both I and domestically to about we're base efforts to expand

things should what the think is hear kind to how and extended been about to seeing at opportunities progress that? times delivery. continue I'd us What we But lead Thanks. how on least that the be of has be been about of One forward? there going like seems to somewhat we've thinking you're that to

James. Thanks,

was we to goal may remember, Rivelo, the with You here specific expansion and and I hired enterprise. especially help international said Manny

is even But theaters. vertical we're show. for strong of in the international broadcasting I a just out think well I very in more us. investing M&E that a expanding strong network one both particularly The verticals. we came in We can think and do certain

changed you more. As we see, can even but few points ratios quarters, percentages can and to X in by have our the XX do last

that to execution and would know, can have you seriously. similar say, they Arista's denying last risk the even year, take started no there's in So enterprise and I are I gave, as the to that, be only also in But last opportunity stronger. answer enterprises Arista averse

that some vertical I ask all the a fully to be be as continue I especially going are patient to would you just in be. of to us. I'm I that, us, the see But high-performance for strong and agree to strong having to said having seeing enterprise be results So for expect verticals

Your next question comes from with JMP. Erik Suppiger

is line open. Your

happened deals getting Can a impact Can of you about point secondly, many on number clarification. down a deals you you us that just of bit revenues then, are talked has backlog little update that software And in you of have the now from of your backlog? quarter? qualified deferred Did talk what from in you to a that changes? routing customers One had were you function the and little were that certified. about the qualified bit come backlog the the the

Erik, I'll take the first. last we piece backlog. I mean, don't disclose

So into not that. going we're to probably get

the But I backlog and we – going our actually we're we quarter are to comments good the good think momentum the about say that disclose we about in numbers. quarter. across felt did felt the demand not the business in

did FlexRoute that. last quarterly I I on than And with answer rather quarter. you do Ita customers, question told you the giving was agree think No, year over XXX. number your to this And Yeah. well we I on year-end numbers,

year. Let going this double I just it as leave think to we're me

you. Thank good. Very

Erik. Thanks,

Thanks, Erik.

question next Henderson Alex with Needham. from Your comes

open. Your line is

Great.

I First, the say in remainder Did full like type the just of you did rate sure expected exact year? you to I'd followed clarify. growth not growth for you a you rate year language mid-XX% mid-XX% I'm expected the type say there. the or the that

year. Yeah, for remainder of the the

what's in XXX% if percentage, the quarter, I up do year? off you've XX% had U.S. the to pretty XX% enterprise driving It's Is internationally. What's had comments in of you is international implies service in my projects? range, moving growth the of about Can international the customers growth growth that, cloud about cloud please? the America you the about Thanks. which Is talk business it XXX% Great. that question spectacular in Is that? right provider? Remainder to for that's the North in math arenas. the from I driving that Then, you behind that? made

a Alex. Yeah. Thank you. question, good That's

XXXX XX to see international that we that a five the later, return I If think recall, verticals in on – lot And in when it we're to – starting years domestic. surprisingly, make started not of will X to XXXX the it? our we're investments to mirrors months you timeframe. And was investment.

So, some in pleased of as service we're it is Tier but as X cloud, both traction enterprises. with we're seeing well providers the

good and – chunk is too. a of financials global it, So

So, and customers. X U.S. and only providers. as The in end more that up much probably being internationally the isn't Tier there service Tier of one the the exist same X providers nearly is providers international They many cloud vertical for cloud

a give that flavor. you So, should

the correlated think increased to and planning is good performance XX I execution so, ago. And directly months good

Great.

Anshul job, Manny. and Good

question Company. Silverstein next and Paul Your with from Cowen comes

line open. Your is

can hear now? me Jayshree, you

Yes, you're happened much there? What better.

I know. don't

You you've gagged. been sounded like

I'll landscape, it simple. your customers? solutions competitive white with and box change of cetera Any Cisco Juniper, environment and the to in and respect any vendors respect like with to pricing et both commercial keep merchant introduced in the by

keep answer simple. my pricing. change No I'll in

And no in change landscape? competitive

competitive The change. landscape. normal No in aggression

Just continued aggression.

I this. Jayshree, apologize. just want But sure I to clear I'm make on

white Cisco incremental not any or including from You're boxes? seeing others, pressure

quarters. the a a not box, box not pressure I'll competitors the separate on. seen white question. seeing Specific aggression my strategy. I've incremental I normal several years this is the except last customer am white strategy, and Hold from competitive to over Yeah. pressure that

committed you container to or we Containerized models fully we're virtual, know, that launched with our customers consumption and be EOS, As physical. can on working

nothing do to with So, competition.

and right? but white revenue same you takes accessed. you extend, customers more the that could those that appreciate To customers, otherwise into translates it box of But, your to away from solutions go Jayshree, have more are I thing,

And just apologize. again, make so, sure. want to I I

solutions not seeing incremental by box any uptick of customers? You're white your

adoption, white before. I The due seeing to disaggregated And I competitive or change. same seeing I'm am rather box. again, told – as not EOS, white any or difference shift in not any box Just behavior you

All right. Thank I'll pass you. along.

Well, Paul. thanks,

Thanks, Paul.

Your question James with next Fish from comes Jaffray. Piper

line Your is open.

are I you you're disrupting ladies. about it Is replacements Arista ton wins? to And, Good there? Jayshree, how competitors, Hey, routing we've your a of questions campus gotten quarter what plans deals that. or of do direct today quarter. – Any last around the mainly elaborate talked going as footprint you and can winning think new mainly the is

James, the thank for you Okay. question.

routing market that some the my I the an I been part first through times the been reason of peers market been has on sign before, competitor shrinking. vendor think question, of that router have many been architectural shrinking tough actual So, as has shift. or talking going it's about is the the said is And

going interfaces we've I to more years think a some are of to And now, Nothing routing area five years of the LANs, and switching. last ethernet on come. been from for SONiC side, been shift The side incorporating switching ATM it's on new interfaces. or three that's of is for the to white in in three change the where TX moving the time there. type or traditional more more new –

and It's existing, in us, we is a for right? legacy all versus ourselves. case And use a looking footprint for peering it's new. specific it's new or their cases some footprint, see edge still or for the case of customer brand terms is In net a keeping routing greenfield what And then and use it's new, at core both if new routers. complete opportunity,

And campus? then, the

On I Arista to the plan before think I in will to does maintain, this campus, said campus. continue participate not and the I traditional

value-add differentiated in As with Arista's more aligned things they more or akin campus and and to open that. and evolve capabilities, different we're the become

Thank you.

James. Thanks,

from with Your next question Simon Raymond Leopold comes James.

open. is line Your

what question. quarter due guess, wouldn't the pent-up in there if expectations any Thank to or Great. was demand? I'm doing going to Thanks been bit case, And us some they talk call what's it for have sort we'd little your experienced on quarter catch-up why understand taking happened the help spend about wanted cloud you if that or wasn't March in my can were wondering vertical. of, while I I the the case, certifications. you. quantify it? can you June the you the the for pause If a

I Simon, catch-up call wouldn't it spend.

and the I'm they were our were always by sure think by hurt and they're while quarters. slowing cloud that vendor I patiently in fashion bought certification, certifications. gear still well other some And harmed time. the the waited down a as titans we during We three completed

new cases completed Arista certifications now of the where normal we've to use to So more they business certifications. are about the without worry can in back say having I'd we a and now all deploy

you there? something So, want Anshul, add to do

products. sure. build-outs that for in cloud see the compute steady And pace you our and Sure. QX, in The are happening at can storage for well a as

so good In freely no call, the But are also the are really addition on far certification. has the our longer not that, XXX-gig but these cloud of rest the asked is It's to nobody news optics. on available. to components that customers constrained related the just

you catch-up, good there's goes now? that a coming does steady So, pause opportunities we So, sort she sales? I in Basically, guess, as for continue see the won't mean this there registering if of to quarters? some wasn't

Simon, Yeah, it wrong, in at way the the – look and, I'm if the me past. correct Anshul, is pauses I

That's correct.

bright. And present future and look the the

taking you Thank questions. for the

Thank you.

you. Thank

question Your with comes from UBS. next Steve Milunovich

is line open. Your

you've wanted their or you. somebody the share, build-outs I not titan product think I fairly be to in given to you've difficult part. they'd a a Thank How expecting different for to got But customers? there's at of And time. with least guys cloud ahead. loyalty which if and completely are there's loyalty move you. worked comes in that a different go what direction, is how sense these they'd ask that quickly it your what's that sticky know on would with for I high could switch you're to But better new really them you. perception Anshul, long a a no vendor? a the stay the favor

Sure.

product. Arista this that ahead or customer-base they with similar base I'm that these day very stickiness automation, day the standard saying that or someone This how And very, What maybe is is somewhat one something of stickiness is what that us the or a and cloud would I solve a with it a integration, convinces or But reason. convinces hardware not a them as automate, is on given month a day do else, system shows strong. the customers. but their they the is the strong say is and customer – It's a stack, ship next actually this believe someone I is true. you is these with don't tied question. not referred loaded very light stickiness up stickiness just I that not their a a hardware. again And customizes along to a is the routing to and problems EOS for how customers, ready the not is will now. That's stickiness that interconnect, configuration, and operating where to the we a that's automation datacenter product integrate operationally. with market using not So, believe with stickiness in And software,

Thank you.

Thanks, Anshul.

question next Samik comes from JPMorgan. Your Chatterjee with

open. Your line is

the Hi. mentioned in driving innovation Thanks for taking disaggregator the software solutions your my with Jayshree, you're you question. prepared hyperscaler. remarks, on the

of see is if just monetization applicability you of think about to So, help road the and Thank hyperscaler disaggregated customers? of the beyond solutions me can there map those wanted you. those

hyperscalers Yeah, adopting these development you in sure – No, thanks, most are solutions of kind advanced because developers Samik. need and engineers. really disaggregated The

So, development. And work it's joint and more joint core sides it takes a therefore, from engineers. both

also use that. of monetization, that work monetize cases them and terms the doing into In closely both with we're tie to other we obviously, work

But capability. a certainly, and There willingness titans, investment and In and large category the few both would only who capability single-digit cloud them. to do terms would open probably very of the they say work outside have that I when that and it. the they're of cloud to ones with few very the providers are shown come But the use I customers. are I they're cases the moves say service type select have the

Got it. Thank Okay. you.

Samik. Thanks,

comes from Kelleher question next from Mark Davidson. Your

Your open. is line

questions. taking have been Thanks the Great. and answered. asked for Most

could in that could know, beginning, be Just represented, you just customers have us much that, concentration. many tell I mentioned top had something reiterate you about would the Thanks. And so customer quarter? many were customers at how XX% you great? the How if you

enterprises, talk XX% of in verticals, providers the and we we the of cloud top and to customers, year. Mark, which our know five service is concentration out the for four five certainly not What is I customer at top the in our XX XX don't titan, customers. were you say but contributed was there the quarter providers. did quarter, end let cloud about Financials verticals specialty, that

quarter? in on So concentration customer you anything can't the us give

remarks, you gave I what in opening so... my That's

Okay. Thanks.

Thanks, Mark.

Thank you, Mark.

next Your Jefferies. George comes question from Notter with

Your line is open.

lot, payment I calculation. in I I They on titans, guys of a was big linearity are if that that odd the you I guess, in to Hi. a remember terms, guys. a curious quarter, I understand, DSO And think cloud driver little longer mix XX-day about DSO a correctly. tend Thanks have number. the is

what's cloud kind revenue, there? love is with And going you all-time parts so, can walk titan DSO lows. of you linearity. at yet Thanks. the through know had mix to us of an on increased moving calculation I'd And the

quarter. driver. was I consistent, didn't consistent. mean, the the that generally if the the of think, quarter, linearity, on customer business, quarter-by-quarter will reasonably linear I about quarter it varied be kind a of on terms I basis. a is mix see linearity It's mean, Yeah. the in anything was think right? a particularly I We And I different in mean, depending throughout pretty right, quarter. But the overall

it. Got

motivator on big Was So drop then DSOs? the collections? in that for guys do better did you the

of would timing say. billings, It's I Yeah.

AR renewals in would've QX, end the back sitting the were I think quarter if there think that been of and some to service we're... I happened at that

by that. been affected wouldn't QX have

been have wouldn't that. QX Yeah, affected by

bit, lot could do as why the as numbers. So this, different a we across like, we you And, of moves parse it obviously, that around to collections right? little reasons a drive

Got it.

enough. you. Fair Thank Okay.

George. Thanks,

of Liani next Your with Tal from question comes Bank America.

Your line open. is

ask Hi, be a at coil Jayshree. the me you'll question going like that. yell I'll to and after famous and tesla I'm

So I'll ask the question.

hear Tal. the to wait Thanks, can't question. I

ask going you. to I'm

and a ask last – and XQ problem QX. I Just don't in understand QX, look year with it QX QX, at QX, happened what a If I year happened want what growing this to certain I'll way. in I XX% have in

sequential XX% year-over-year growth normal QX rates. QX, translates into and the So

down, QX – year-over-year year, that's So And last XX% of means it's goes a to giant, low into translates it growth first, lowest sequential that understand, sequentially, but instead so QX, tough was was means on right? concentration before. to because maybe you is guidance – QX have basis the your too and growth orders is suddenly to going back that X% comps, maybe into in had X% that QX. accelerated the fell growth trying you've QX I'm there some normal. XX%. The some

happening revisit maybe XXXXR, then go product happened in this into and any launches? why caused and Let's QX see that there sequential Meaning, now it what's it related slowdown, the slowdown than and lower not just growth. but is of what is to back we seasonal and that that's – QX part

exactly. Yeah,

X% a off getting little rates I defending spoiled, very all Tal, a too they're start happen think be large growth at I our to low. when to base

of are out a the routing with tremendous combined to confluence right of point enjoyed and that of large law numbers. you XXX-gig we think XXXX, amount I

a efforts at think good go reflecting growth. very best year, execute that fronts. to were at QX we you and back on guidance a They're XXXX/XXXX, X% our we're numbers. we remember, good very had much lower I if if all But quarters

So disappoint I'll Tal, and to not try us. proud you of be you, pleased but should

open to By the the just way question. this way, was the

the acceleration slowing four something quarters? in could it's Does down? in big giant the in talk a of I a after new quarters a just go now, no But four else go play caused concentration the of four this question, role back it means, this Or by quarters, last and second not it's So no that it, – there XXXXR, routing. was complaints. last can growth of growth you about the any if to product back

combination giant and was good spend. growth cloud routing of XXX-gigabit The a

it. Got

Everything And happened enterprise in. kicked then, the perfectly. has

Yes.

if So expect us. everything happens right to you're perfectly, from more

you. it. Good. Thank Got

All right, you. Tal. Thank

with next Bhagavath question Your from Vijay comes Bank. Deutsche

Your open. line is

question to Hey, is sheet growth M&A trending picture inorganically? put which then any Ita. and up and strategies, line the balance work, in growth to as starts chase a to Jayshree, afternoon, bigger My Yeah. on level look investor expectations, Thank question, you. you. thoughts is, good inorganic rate perhaps the Thank Jayshree,

Vijay. Yeah – no, good question,

time a to and personally amount spending I think have fair this on strategy – we of important. thoughtful is have about been be I been

with company. culture If a and fast right our the back you positive. when that integrate upon set EOS, work pick you're that our you yourself work But do an can if M&A just DNA, growth, actually and be add growth doesn't it adjacencies you with could our our go a into well actually

out. that So, we haven't ruled

them. look M&A continue We as you of fails. know for to XX% And activity

So, feedback it, that we good it's want be XX% and to question and... so good make that in

Thank you, Jayshree...

...one we keep getting.

you. Thank

Thank you, Vijay.

also Arista a was QX the you earnings the which XXXX This to last we access section concludes which on on our can I mention That provides that Investor results, posted information additional presentation, question. call. want have our Okay. fiscal our of website.

Thank This call. today's and concludes ladies you for joining, gentlemen.

disconnect. now may You