Arista Networks (ANET) 3 May 192019 Q1 Earnings call transcript

Welcome to the First Quarter 2019 Arista Networks’ Financial Results Earnings Conference Call.

During the call all participants will be in a listen-only mode. After the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time. [Operator Instructions] As a reminder, this conference call is being recorded and will be available for replay from the Investor Relations section at the Arista website following this call. the to turn now will call Mr. over I & Yager, Director Advocacy. Product of Charles Investor begin. may you Sir,

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

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

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

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

afternoon you, Thank joining earnings XXXX everyone call. Charles. this our us you quarter for first of for Thank

customer contributed a while enterprise largest continue grew did of the to day. drive vertical approximately non-GAAP number a record is dollar demonstrated and of in our segment of earnings a was per margins our the we influenced We at largest Services to QX record our growth non-GAAP fourth by two providers enterprise customers by again XX.X% cloud acquisition. second $X.XX. now vertical. cloud our services. financials modern million and just solid and to We from at non-GAAP revenue. both in Metamako a rate X with with new contribution profitability XXXX, as The place. QX expansion delivered came QX XXXX registered supported Tier in Our fifth service place and our share providers per combination we was one a gross strong performance In consistently revenue titan in of XX% from third once strong of segment $XXX.X million, specialty

OS to the QX our that terms both with delivered In We product as was contribution XX%. be Spline international developed at collaboration Americas XXXX as XX% announcements geography Facebook's in two well on Facebook new EOS platform. QX of with with in during close flagship enabling the XXXX, in the we supported coming major

first subscriptions software doubled low of acceptance for bookings CloudVision with network a introduced quarter the with the having latency QX the pleased We increased precision from also We're platform. our XXXX. XXXX, record application high our

bump in start, than and March decent strength in the While somewhat in less are order XXXX. a off month we of normal speed to saw XXXX is We experiencing April. QX of the a late

historical our from growth normal We are therefore XXXX in QX and forecasting patterns. slower

And of forecast into the industry of particular, in give period first with this times, contributing put Some led cloud provider us demand has in the the to We consistent of two many spend XXXX cloud our one and we're note decreased are of service reasons the half healthy To lackluster have In titans XXXX. quarters in perspective, this one the in – the a time, momentum innings. very in as shared trends. continue of the compared XXXX. vertical massive the seeing to cloud forecast. cloud XXXX first QX typically one of a for of volatility to much titan with performance I you for early we QX this XXXX titan on fulfilled its providers is enterprise Meanwhile, hold absorption half have orders XXXX. and placed to most this

typically Arista’s prior expect as crucial take investments years a or training well programmable campus customer require a cycles. the present deployment from typically XXXX Our and to acceptance. terms technologies of both the as to enterprises year do for sales FTN can year enterprise of more off. new data the contracts, We be in These paying in now center are and

this new introductions are the And ahead, in expect ramp look product our second to we uptick create XXXX. As we slated half of demand. to in

ahead more customer more in course, I'm personally. our the excited technology. of And for over it I new momentum strategy Arista’s about that in networking will, financial foresee opportunity like summary pipeline superior at But hear area cloud a their like customers XXXX second half migrate turn with of metrics. the product in our Day. a networking Analyst in unwavering area by June bright to as our with and quality here prospects Ita cloud we You to to belief in and second

related quarter combined was mid-point QX for last enterprise and healthy range results revenues came is other quarter. XX.X% gross QX $XXX the revenue, the XX% International of quarter. GAAP up XX.X% our to million, our the guidance good strong XX% level our on of from in or million. of the reflecting to for and charges and prior in of compensation focus up based margin Gross the a revenues selected quarter. XX.X% provided million, slightly non-GAAP in margin of XX.X% benefited were revenue, million, period XX% and the results Thanks with from for stock-based down from representing of guidance above were $XXX.X percentage revenue, above at in $XXX total revenue QX Overall, Jayshree guidance spending XX.X% optimization. XX% from This $XXX an XX% quarter in flat service of on items. QX from at Total of up R&D year-over-year to for on of approximately afternoon. in release. to absolute of our a quarter excludes and Service reconciliation basis. cost revenues certain $XXX.X last mid-point our contributions our $XXX.X renewals non-recurring full essentially million period. healthy non-cash earnings or in our came up continued were and and non-GAAP XXXX A is of million, Operating quarter analysis dollar last and expenses last the impacts, acquisition

X.X% Sales We the was or continue significant products offset NRE essentially marketing last sales $XX.X some other revenue. to reductions see headcount flat new million, costs. in period. by and spending increased quarter to prototype expense Again related in of and with

G&A were quarter. or of revenue, slightly million Our $XX.X X.X% down costs from last

income the updated reform The lower regulatory approximately XX.X%. resulted of and quarter effective for tax operating $XX.X million, $XXX.X was the certain This on expense tax or tax based the income or a and rate in of positions in XX%. income of guidance. IRS the reflected revenue. Other lower rate for XX.X% million, finalization Our our primarily net $XXX.X quarter at favorable the was million for was quarter

Our number the is diluted $X.XX, diluted million share share year. XX.X number shares up of a from for resulting the earnings the prior quarter in quarter per for XX.X%

billings ramp the in $XXX.X from investments as down strong a X.X in equivalents in increased cash to chain the collections offset income primarily of cash approximately overall turns sheet. last rated revenue and quarter. to at from generated prior in DSOs supply X.X QX, reflecting balance performance XX up turning days ended new million and the products. reflects We quarter, product deferred were from Cash, raw of in Now $X.X days, and the amounts. we XX strong by from the in period. in times, in operations down materials quarter, activity new Inventory reduction increases the capital billion. goods the the million $XXX finished came Inventory at This reflecting million quarter. for of working increases times $XXX.X net quarter timing

revenue million, down QX. $XXX.X in $XXX.X Our was total million from balance deferred

deferred XX the from the new half year. features. decreased of customer revenue by significant trend XX down This in inventory reflecting timing reduction balance payments. revenue $X.X the quarter product approximately receipts acceptances QX, payable expenditures XXXX for of and consistent days days the Our first affecting million. $XX and quarter of deferred for million had in is days Accounts were in a product Capital also we were the of

$X capital. year In authorized our stock will board of addition, program. opportunistically repurchase to we billion allows repurchase common has three that us This of shares funded be a stock directors from working our and today announced

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

As look focus second we especially verticals, in forward, key we positioned presence new and remain half expanding believe that of the products to well our with and on other we customers the our market in as cloud enterprise we our year. bring the

quarter, period primarily well verticals. saw demand financial of some executed in back cloud across the the in provider March shortfall from service we at metrics we all the While key end and our

assumption some this business second trend the impact quarter maybe the guidance and year. June are for the continues managing assumes full Our through quarter the we on there

front, margin XX% reiterate upper would being QX gross indicating we driver of the the range to towards our gross overall for and the outlook with On XX% of key the mix customer margin XXXX. end

sales With resources. guidance or continue a We approximately operating expansion to stock-based revenues margins of approximately range. of results with follows: in maintain of $XXX the this other as discussed previously non-GAAP margin operating XX%, impacts above the growth, to We including excludes XX%. the margin non-cash the and top-line and approximately continue at compensation on million, believe gross headcount as to which is XX% and our non-recurring our XX% to backdrop, items based the invest of addition of of $XXX that business we is second reasonable quarter,

diluted rate call approximately tax back to XX.X turn Charles. approximately effective now the I XX% to million. be Our is with Charles? of expected will shares

Thank you, Ita.

should the limit We are as themselves a portion move to should of question. to everyone time call. single the consent Q&A that to going request now earnings Due I to Arista

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next [UBS]. Your comes Tejas question from Venkatesh

open. is line Your

Thanks for taking the to in guidance. my question. I into a more XQ dig little bit did want

little is still then And bit healthy? below X vendor I cloud that in a this cloud be. Given cloud Tier the terms XQ used we noticed Should are it and also titans top think the pretty to where others verticals. of one basically were that in the rankings that

seeing was are well? there service also. So as I And provider you weakness think XXXX in weak

going could off of So so what's well. perhaps so weak coming you a talk you on much. Thank as there somewhat there, about

Thanks, Tejas.

think combine to best I questions you one. successfully in I'll all three. do three my answer

to terms going I guidance our QX, isn't one of think but contribute for there. to cloud was is are greatly in expected, in it to in multiple limited one. specific titans than There different

Some are doing and well some are not.

takes, of negative. of the to vertical products. a everything. strength overall So and We lot expect spite one It's We in demand. see it us. still in strong as a the puts add vertical be for see net you number a We its

in We’re competitively superior there. very strong

QX different acquisition Metamako you it's okay, to expect in in. as QX not X said new, that to trend. I are the that and not any it And disappointment specialty the last is specialty continue as segment. of industry right our was – XXXX so read last the no providers, came we do cloud terms an call. there sure enterprise I'm broader as the Service much getting we in be financials will and should cloud expected you is be the in a I nothing so different. And was are and vertical was be the In message stronger, providers, Tier think that the start And the they enterprise weak. to

question. Next

Suva with Citi. Your comes from next question Jim

Your line is open.

you Thank I from mentioned very that typically you cloud your believe to you Jayshree quarters of titans. one two much. visibility get

they a half kind understand exit June-July second have digestion So of risk this new May, uncertainty? indications still that period? we be the for you the just point to talking in as time any Or bit you. Thank at conviction trying when we're the today is it We're of or of year. little here will completed your given the

Thanks, Jim.

have our answer. year. forming we're second think conviction I of the for half We the a direct don't

What though even clear have the half X. of the demand don't the end We to quarter weeks don't is we year. weeks, do have the six digestion tell, visibility data, complete can you Q As of six new make so will we second a believe of by for trend.

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

Thank you.

Jim. Thanks,

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

is line Your open.

estimates I for that the guys, you my thanks made guys consensus up with you at on public just taking Hey want follow quarter, a question. revenue statement comfortable Last were to was would still Is least give you that? that saying trajectory. kind the time, the for it case? the or year. that around take. Or full At down assume numbers should come from XX% the that of

want make have to form we I data we all, down would we I think to come definitively. and vigilant first for more don't watching opinion think to the closely, want can – for Mitch, we one this definitely further and until should numbers of an want be QX really detail and be we're

we call happened of on the Day much you were change things in half fine So and last when the the March. at second talked Valentine's of to

– Got is guess in one on of buyback you you the to it. are one terms it’s opportunistic like of then opportunistic just that internally using I guys buying And the rough terms just in clarification metric stock? quick believe the there. what What's a there,

in buyback be. we mean, right any have to haven't that I the haven't will mean, on the again, not feel what it's we limits putting but externally. Yeah, disclose place, stock I externally. the disclosed set the facility time, We're those to we're hard freedom we that we when so planning that

important happen. at look they I a this think will as then specifics happen the and framework as to it's

Got you. it, thank

question. Next

Thank you, Mitch.

Your comes with Kidron next Oppenheimer. Ittai question from

is line Your open.

pause? Thank maybe you, I a not tie some and a mentioned going loss? ladies. guess back you closely. else. also you what cloud, that such not something to you always help – gives me would – that you're you Can it I you guess, is that comfort Historically, pause I do Jayshree, that the that this very explain design the very an a change this to is potentially How get understand the architectural that mentioned can you've comfort pause pause. tied, is

working your customers customers large you You cluster on of cloud have premise. have people actually that at

see standpoint. So they a just can see a too runs bit something the can too build, as hot, too perhaps they build cold, when from bit a far

is color feel maybe or loss me just give I'm a me bump again in to can again and trying – speed a to So of design not you makes something understand change some that that this architecture else.

Yeah, yeah, a fair point Ittai.

things were when to linear As you fairly know, we talked you.

feeling March were especially a slow down we order in fact In titans. the change mid And confident. we cloud in sudden sudden from a experienced quite and

weeks, we conclude us in comfort, one of was concluding, I But quarter titan give health the So that a you shifted for a business trend. are while right. six love to reflect the we suddenly six would we're that not don't weeks, matter, for prudent cloud felt watching, really it to

they've competitive market on that question any your answering cycle. dynamics note to dynamics, experiencing the of different changed. terms that important normal we're from we in not It's So are don't believe

have We and in markets both continue to the a share gain tremendous center new the campus. at and cloud opportunity data

So week kinds have read I said, cloud QX. on titan as orders paused six an guidance. down And slowed into in wouldn't especially things those our and except, anything this impact I specifically of most one

luck. Good good. Very

you, Thank Ittai.

Alex Markets. with Kurtz from comes question next Your KeyBanc Capital

open. line Your is

Thanks taking question. Yes. for the

here, years the obviously, guys process as you your to said, just titans to forecasting very being close Just Ita horse dead you're cloud for had now, have in many accounts.

volatility as the around this and sales obviously accounts. you of the we're caught what And seeing not either what process all up trying with coming, kind just think – understand organization as, off I because in what guess from past to these there's from guard forecast your far management? guys pipeline I been the rolling changed So, what, prior

in to one color, you Yes. say Anshul breeze who who do want that's I'm the the a Alex, to more? COO, give lives newly good you going daily a our Anshul, but ask appointed to to is question. is closest

Sure.

center to really we’re DCI. other as throws well within win the and cloud Alex, companies, both data change as So continuing real there. no There's rear

companies one spending. not with to that late of we’ve all the these hard but it. joint spending shift. great in QX, very co-development are was The R&D is Facebook. We mentioned. still March as work there you some a However, in with cloud are that that they just our And That's is very with closely made companies. saw like

designs that on we been well, these hence not and willing pause, no own simply some of the there's team, real think up, all just and very spending. So, in shift they there's have companies designs absorbing still more. the are buildup their we architecture, getting But inventory previous

you. Thank

Thanks, Alex.

Hall next question Your with Goldman comes from Rod Sachs.

open. is line Your

maybe I thought out providers. guide. in and question, is calling a you of you're bottomed the is. a kind under And didn't way the providers know anticipate? continue to rethinking service you're about, negative with guys to this maybe – clear dead guess Yes, growth, thanks us the back comment want want may won't I I anymore. you, just that of horse then of growth think I I the small from have then Jayshree want out you've as negative you you serves beat an that that it the providers, question or, for ask little guys. though. is that on about a do out I second you the you service felt before made don't what the be it I I ask in I a to come suggested to point it at weaken on And if full-year update bit think to that

first for asking Rod, question. not all, the I you of thank same Yes. think Okay.

best we full have of weeks – with we've six you but know would as correct. and be least the this this data it year. if the I point full you Ita, Specific answered comment, think some to can. diversity not want to at don't already I at understanding, So year concluding would

concluding the our year. how Ita, QX like like a and deciding you to We’re vigilance patients from in comment your we'd through guide and it flows that? want we'd on

have the I'd obviously, what spend mean Rod, think not of are terms managing for QX, are think we back see the looked half plus year. is think as see that's the prudent. just or but Again, from only I we to the necessarily we minus, I from that managing the we clear we cautiously to we – I visibility we Yes, because perspective, thing add of business, any

So you sales will kind and leverage in some on see of manage and EPS, side, us invest where we side the earnings kind until we know of help stand. the drive R&D

Yes. And a I a as to QX. would little regarding No, service it contributed say bit providers.

contribute We QX, due largest shortfall to little expected but bit to a to titans. cloud the was the

couple Could mean, any know time. I people you of there? update get a you last campus? on want Any, I updates

Well, I say things. – two I’d think

lot are clients liking more better design about activity from a a on June to also more But are get very much that of two things integrated the playing, lot Day. assurance, hear steering generally this in activity, from the You'll successfully really Analyst been say want is into customers has acquisition campus our Mojo there. more approach a our architectural and is cognitive they've support. detail seen We focused that that. to seeing OpenConfig But service we're native more fundamental campus

has our very been that the received competitors splines is the And a finally, year well really playing XX and onto zones. catch CloudVision to are for deployed. later campus Our coming up

but promising a in more So start. June, very

you. Thank Okay.

Rod. you, Thank

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

open. line Your is

the give thinking but ask number, revenue I'm range you're you a generate for the can in knowing sense point what in answer much either – us to campus, you year? any or for can going is, Jayshree, what how any

do do I actually that want I to question, Paul, the so Day? answer at Analyst but can

That's what I figured.

Better than saying never. Right?

I appreciate that.

you. Thank

as the Turkey My difference… been I referencing if one question others know go if particular of having during back cold “pause”, most I the all referenced are is, others the to to may. others, and you the I'll don't Then simple is June. material apologize you I’m were going asked cloud going the titan questions

just And are titan doing then Sorry, of them doing well said particular to. of orders But in the some or we as the in put others hall, QX. – let titans not think one cloud me one are most Paul. correct We two said they on their also you I cloud put expect orders well as but we'd QX. in haven’t are hold

out of titans of not something So neutral, if cloud you we the one two two doing like had balance sort that. the well and minuses, five and well, doing pluses

two one the between In were stopped. that sounds much just was right. the difference soft, that so All – the it to like

catch that's different demand also on the other deployments as up they of digestion two, something or With previous think you to there? there's going

related it's think combination their to and CapEx. of how and all digestion. don't We we to own decisions think a digestion No, it's spend

decisions else? And you CapEx timing something think decisions the or or just

did When you put and correlate. did a we XXXX. they the earnings shift the a eventually have to can leases Yes. all And When and they their centers? XXXX reducing seen we etcetera. you did significant new see don't on exactly titans you've the they correlate When generally cloud calls know, from to spend CapEx data spend? but from quarter, a as Meaning

spending but will some like would also XXXX we completion more of will of they're – us spend some, – in and affect to I absorption currently also absorption So them. the them less, see

And Okay. for one me. question quick just final

service out be service providers than you surprised proven mistaken, if a has sound go. On old to bit not to providers, That like more little been call thoughts the the that and doesn't the I'm you in sense different. it it's from new – get hear is challenging

I your market And how assume in in challenges least versus penetration, in about your the first So are it softens far, about came player found how even turn, you that than when you've of expectations. previous implies that I further at in. when you provider, the service talk terms talking you’re you fast softness and mean softness new

demand should in recognize be important of I the not immaterial. of gain, obviously should your you terms relatively the the total, it's less progression. nature So

Yes.

it further? But question would simple did be, the again, soften

Yes.

One word answer.

answer one Simple word in yes. is,

Okay. Thank I appreciate it. you

you, Paul. Thank

question comes with Raymond Simon Your James. Leopold next from

is line Your open.

Thank the you question. very much for taking

talk about better I'm with to trends, sense shed you And line of is going questioning. what wanted this to do need I to maybe revenue trends. could to rather some light expand on your specifically It if of really see a where So, you expense markets. get than

So the trend I to get things in relatively is sales perspective? the higher. the beyond had cloud campus and and like little is this from success quarter, like Help back you. campus. you bit a us understand December to what noted – for you an quarter, lighter marketing your and need broaden high areas in a successful from to Thank do marketplace to, be expense but

Anshul, Sure. are want and in Simon, maybe get continue Manny But to we this, think three need add doing to we stronger. do things, and I it. I to the think you campus that's to to covered

the The every, first global enterprise internationally, stronger We're company is, footprint, but we in major campus. just single have has U.S. to coverage invest the every more the in and a world. across

tremendous cam feet tremendous there, we got street. on opportunity got and we've So more and the put to

think you So there. us more a canvas more I vertical opportunity. us a will for of invest than actually continue horizontal opportunity watch just be And to

one. that's So

love and to be do who and already everything customer And they single there, is, the This important with us. touch know X,XXX also win have the direct and customers a The familiar are who and for and thing most quickly customer second control. us to important us. binary you. be will with the can worked image with change and much final obviously oriented appreciate EOS, quality because we the state The the is, management an have have not CloudVision, wins customers and

very, the on and combination not as channels integrators razor a perhaps and investing but Manny you see will of equal, and channels channels. add to regional some channels, Not, in as important. that? geographies and focused want will all are to You do even be systems a team Anshul, sharp Anshul heavily well lead

campus talk about about And Analyst We Day overall. as we the talk on more well. this

what little maybe of expense could hiring a bit get the chance, or the Any for quantification should you're for? around rate we of growth expect budgeting year, rate we of

doubled last think, going perspective we it's a I from what in to did budget people. be year

should line leverage what expect from to line. offset of least from look I we'll we at revisit are at top I that And – R&D we'll sales future, can of priorities in foreseeable But our on the as – We think point. you the see the leverage, and marketing. Simon happens think, what income And drive top Yes. know, from some kind at and then, you that. sales spending marketing the to see we'll perspective kind will investments as go-to-market, this

taking Great. Thank you for the question.

Thank you, Simon.

question next Your comes Faucette from James with Stanley. Morgan

line open. Your is

you very killing avoid try a change to much. I'm to that wanted Thank to going I topics. horse different

those than of give your that's on changing at tax and model, rate on I'm continue you. can just evolving where we some if this is in have least have a a quick versus So our a then think and just seeing look I that happening for of when about how you’ve wondering in – question was lot Thank non-camp, lower question maybe how we modeled. other or you customers, of forward? And basis? something at Ita geography-by-geography kind all, and that what a that indicated wondering you're going was quarter titan the like, strength your that's you I'm service should there, And have customers well. from geographic to basis. provider going terms that non-cloud color And group, at do if or your makeup what's on a is

Yes, take first. one maybe I'll that

out stuff the and did we quarter – reduction. that positions came So [indiscernible] and that’s we our of some tax did finalize some reform other tax around this

XX% a actually was it So in QX.

it's it's were we But to higher XX% in we probably of, think for come guided type think range, good I a in. place see down it come probably how that. off We settles be so QX, structurally than a time XX.X% until from I over that's we've that. down

think to now. be a good I So is probably XX% place

Okay.

Thanks. Okay.

very States a my the uptick Thanks EMEA. both have in didn't question. United healthy I what the James. but the in information To all well as is at seeing as fingertips, logos, answer and we're

and well So, through are continue new expect trending that QX, we logos to in XXXX.

well. In seeing financials, these think strength terms of start enterprise verticals, we a verticals trend, media, healthcare, vertical more strong see other places seeing a generally And in and education but us. in entertainment, the no tend for is at we reason moment. wouldn't new of I the some be don't as a definitely top we three to High-tech

Anshul, good to had a in a I you in verticals if think XXXX would and, point. statistic data good get are more on that They participating XXXX will. Fortune we're horizontal, So many continuing customers be you how mid-to-large make Global more, enterprises. our and and

Sure. At Global XXX XX% to these the under or statistics to been risk this the the of risk our every have customers. customers, improving roughly And of just XXXX quarter. time, and XX% Fortune

are winning our Not the in as well. broader We verticals. just enterprise initial

Yes. That's very promising.

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

line open. Your is

Hi, guys.

always I Day that and work First thought evening Valentine's is karma got confirmation on a the that. us for making my bad now

right. All

to yes. I – yes, want ask

Next night. time, it that don't do

on want a ask to question your routers. I Next,

and sell had give providers hour. you the the to you're accept us that, your more Thanks. You providers – in service update any take routers what's to providers seeing if said routers, before than on difficulties you have there's take vision that their your of or anticipated. service Can an to difficulties to XX to still willingness vision change for

That's good Yes. question, Tal. a

And custom it's Jericho plus Routers difference Jericho service really where but per And they and port between the more to Generally time done LAN is the both of silicon, future. density, we're different can't layers, it. to low the providers, have operationalize implementation. that's the the And needed strategy, price think XX routers kinds the shifted is, XXX cut that They down whether fast port. X to number or NextGen of routing. providers the modern I AX has So, in you interfaces. cloud WAN and as what to and . Jericho unlike generally on a merchant time Arista generally go had believe to or fundamental

a couple cases. you use comment a with want we However, on success of had Anshul, to that?

provider. service fairly contract are the and cycles long RFP the the Look Absolutely. cycles for Sure.

do activity, are the international So us. the have state steady longer. lots cycles the we sales MSOs but U.S. In with of are

rest in well do the cloud. Telco the of which the slow. We the been is do Telco data cloud, we part over So is well there. But what's Telco the of center

new old we have an RFP. have RFP because And a and Yes. they

So they jived. haven't

I is aggregate, mean? because it. cloud you. big in the follow-up the I that customer you guidance, see I on that we will asked, is that customer will everyone plus is this to for I understand of this a did Got what The quarter There grow growth. it's question that in to grow – but this abnormal remove growth customer is, a And question specific XXX% one it in if want ask something or If or kind Can aggregate? look at differently. have it grew pausing, group not it.

try to the Yes. we're the that think I that, of vertical right that I a on out appropriate, going Tal don't single I is know at vertical. to know we're point, start don't concentration the but going to probably customer out inside breaking this

Got it.

Okay. you. Thank

next comes with from Morgan. JP Your Samik question Chatterjee

open. is line Your

hi, Hi hi, Hi, Ita, thanks the taking Anshul. for Jayshree, question.

around as I'm as mean, question I given of, the you Facebook well very customers. sounds trying easier product much of kind kind kind just position with to think with that that Facebook going the that, implementation at enthusiastic OCP, sounded for with about preferred a like the and me. of switch implications through like So, about co-developed quickly

thinking share of providers the about does can So of you're terms terms in other opportunity just here cloud position of kind your what terms in you Thank what you. with market implications well? think kind in help imply the as what of of me this and

example joint without customers they and announcement that the And, a the development cloud developments saw on we things a projects We've we do work is many other was to or want as you OCP look examples to Samik, customers with. do build preferred and that to they one it, Does we that. as have these to and about few people cloud longer buy. to often one. there. those. will talked world similar I well. Titan of joint projects of very do right the Anshul, position do on, have buy, and work perfect about The this of versus But too do no build is companies do The partners

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very companies. earlier we do with these well the comment, So, to

avoid that. So like design this mean loosing that is not to are we

that I the we of think capitalize a wise. to market the think spent, us you're for position right. It's we're best that. doing overall very have and matter in on well technology that great not But align. did it's a I opportunity

turned customers and exciting serves collaboration But with of lot is Facebook served also this customers a We've this think of joint a well. as enterprise a I example of which around product. our enterprise activity seen well. all with very

So, very good.

Thank Great. you.

Samik. Thanks,

Thanks, Samik.

Nomura Your Kvaal next from with question Jeff Instinet. comes

line Your open. is

type like little very stick with a much a cloud out. the further go bit let's Thanks

of are some future sort talk rival in that titan conversely, to calls topologies be a you topologies helpful. Can Thank that the now? are think be to that about of insertion other should those future? if helpful I design is there talked able works That'd the bit a risk the we a as you. little as that cloud is point? helping complexity about, an in vendors networks. one you of the have things that use is of is prior group what in Or rising extent Are

Hi, is Jeff this Jayshree.

virtues is need of uptime always the I having of the make they virtues But one the challenges they one and the biggest of of the titans have complexity think elegant and is scale that availability. said the and cloud one it remove and simple. they or

and removing Spline complexity. I tremendously different there of network complexity the Leafs So, except that which address they've and use especially Leaf cases. when I more flat Arista view tiers to for they've Anshul many as view very, is that of fat many use don't cases, Spline well. and built look as tiers the you done, team many very done this at what

DCI, routing there's And obviously end is different when Microsoft, in Leafs use integration there's including OpenConfig of look or of low we the elegance regional there are Facebook at is with security So cases. there. different of you case options, they types develop great Spline there another models and the is types of Spline, area Sonic also at the very

providers. we to add is what's cloud led design, I happened The many elegance can the to use to our one more diversity And of cases has you come examples more And work if that. some mind. want but mind. comes say to with to doesn't just Ita would the not So, the it's of how has, word word complexity

and the have do the design with these so we larger they right, really getting not that, about is and to systems manage is we're scale, larger to worried very well scale It but that. customers,

of from I gone now this all first the third simply think to the finally. innings we it's that or second of

many early more no left, there's more So but days. it's

rephrase should it up expecting use cases grow, for let maybe, cases ability as particularly we be Well, these into is insert the say routing bit me these like use and little thinking I'm pick and to pace of a to there use a, example. your cases of

to many the the FlexRoute I to and moved as thing fast moved when that XXX did, year tremendously our we in of cases likely a and gigs happen cloud to XXX last a you from combination our we should XXX. and have we those is you expect can and think also when already Yes, routing hybrid alone just move customers that seen titans, with to XXX same gig use of with

the in pickup to familiarity and the time expect routing the qualification to can compress. and You –

all you Thank much. very Okay.

Jeff. Thanks

Suppiger Your next Securities. Erik JMP from comes with question

Your line is open

the Yes thanks question. for

by I think in contribution anticipate mid-teen you the XX%. go it XX, Microsoft, XX, was said would that you was that up teens, still think on it year had to contribution, will thought back the be from I would you That percent last So probably in XXXX.

started for as say the it's gave we I get good second I now. you to answer knowing but don't think around there as it's half, the It's without know in February. one safe an if we can

Okay.

So that you of in terms correct? is contribution the changed haven't your Microsoft, expectation from

one on half see have Based and to quarter better. then know QX second the we'll No, we'll and guide?

Okay. Does that sense? make

sense. quick makes That One one. Yes.

did as some, change in Your deferred revenue that March at deferred expectation? deferred or did entered was that the you your you course expected quarter revenue, revenue from recognition would've in deferred during the all came the the down of what the the change your was revenue, quarter

No, also I very knew last that lot unusual We products that there some for and this we of that customer acceptance the call, about waiting that that think saw on similar QX kind a we we last right. anything wasn't had were we I it's on knew we think around to talked year. particularly and had, and what

expect. think pretty impact you'd I So of that much the as is

April. direct to demand was real in late for and again, The the be just Eric, and in change big transparent completely products March change, our

All right. you. Very good. Thank

Eric. Thanks

Eric. Thanks

with Suisse. question from next Your Sami comes Badri Credit

Your line is open.

though love Thank I'm Hi. a Even to you. question, I'd not. ask cloud

specifically… more So

you Thank us. Okay. sparing for

on it with gross Actually do OpEx. margin to Yes. has both margin your guidance, and

in similar you've the as to type profile do Or operating think channel? in a of down, given at So back I'm if of out? and guess XQ if emphasize revenue level margins of in half of the guide to coming to an modeling expecting back should half your idea be you the they specifically see comparable XXXX, we your it's of you that in we further moves investments like, build in back margins would That just XXXX be see how sequential your back just is I question. you're asking get look why the year? interesting the to incoming this rate XXXX, operating off we your which that margin great back Should a still going slower channel half start that on given saw to be XXXX, the below record half of booked historical in

others, gross waiting and margin. right. going to flow for enterprise back gross margin seeing an right. obviously in that's I because would perspective, higher And through the and customer mean, are less a mean, activity mix for And QX you're comes its we drive of cloud I that to to margin, operating right. all it from some seeing a uptick

of kind a slowness to that's that the So some – it's seeing. we're counterbalance top line of

engineering, – we’ll investing that In leverage I right. terms investments of of to top the need years, – side then we'll clip the and of goal we've been number leverage is the a And had make. over to our we've think a engineering line. sales our in to fast last spending, delivered really And continue drive we marketing

drive I us on that's really for room the to marketing. sales to exactly think the to out some then there is where and And and that some leverage there So comes use that to improved strategy, there margin, operating the we'll we're on the focus just you gross margin OpEx. mean, going it in have the guide for see. up tick of to and put saw then off that QX I fund with

quick percentage went it. through sales channel? percentage the very on question sales were what Got And direct just what of of and then Mojo, a

business model Mojo was extremely channel. The

would by becomes and of the it direct, fulfilled more more it Arista, become although part channel more As still.

given So will probably But is this QX I itself. XX% to would end forecast how channel. the the say would today through XX/XX. influenced predominantly it I It's if our be look still Mojo of by by year, sales had it

Thank it. Got you.

Fargo. Your next question Rakers from Wells with comes Aaron

open. is line Your

two in taking here well. Yes. and question. I'll for the Thanks try slip as

any that cycle you speak product within dynamics should or customers evolving software a the allude a particularly next I'm into you have if about the year really think pause kind And as but that of new a I'm half? then a about company, of cycle dynamic, back to your customers, there's the moved that First to couple digestion, is maybe to of we March. years? only selling product the also, know you. half we of it how going with the over of truly motion in a through back just kicker or I all, pause kind curious related being just curious, Thank we could as think potentially seen

questions. two but are very Those important different

multi-year Most anything it our waiting the with business the existing a for new always we pause. got see pause, different. the and we run match as much right. It we was a it just products. of they're they of pretty not was are of – still the roadmap, aware year terms products. they was – just indicated, didn't mix products like but so But our but dynamics customers They In on don't isn't new to saw, often it and and

to transparent open the So how We're very drive transparent and also very open and we about the We're about that. products. migration. know

saw we of believe any don't we indication that. So

center However, there's data we new going year. in half the and that our of products, the of only campus to second the help feel in and particularly enthusiasm the do excitement us,

In Arista want terms enterprise excitement to Many, because time the CloudVision it. our of our the software choosing we demos, customers CloudVision first really XXXX, right. Three say seeing of we're I base. our started into It’s selling, many and years in are customer EOS. of

blown telemetry. As manageability, know change the the just the too, segmentation products by our are control, but you are features, the away they automation, the macro great analytics, the

software the Anshul’s by Ashwin higher. and driven So emphasis. in couldn't systems not sales software the expertise putting tremendous engineering probably team be He's a

think a started this year about ago. I we

right. That’s

It's as of think a I down every systems support see gradually, particularly well attributes. the with our been is, expert gratifying obviously of happening then the engineer would from say, customer the QX been software I XXXX. to engineer that's CloudVision the this it over so, as of but results have our all to leaders doubled quarter something first one And and networking bookings

you. thank Okay,

Aaron. Thanks,

Henderson with from comes Needham. question Alex Your next

is Your open. line

but the what probably that X.X those bit on of in any between be you does by of this transactions, of acceptance demand very And cloud driven give you could products? assume XXX-gig, was role little XXX-gig of us of type? you're you I hoping have and your the terms could of talk a an much. Web timing we the competition the Thank timing seeing transition. out XX% in I plus will where you that on about most a are year update

Yeah.

we've as more I'm well. talk market And products. Anshul not pipeline. stopping. there and in will in you we’re to acceptance going XXX-gig Alex, got Tomahawk know into in to Broadcom the to it of we're market hope about many We leadership introduced some turn as and the So, leadership our that the had to excited our we very XXX-gig transform technology we about We

XXX-gig to actually cloud those without a we've about next factor come feasible market Tomahawk right, the as in past the companies, are the ZR but likely. exciting was will architectures the talked core for cloud without with deployments is Jayshree. All of XXX-gig was with the form most in availability Facebook mid many developing Alex, year, well optics the the few Express but XXX-gig. not thanks, X as to

a waiting they sudden XXX-gig to cloud there it result migration the for time they before XXX-gig would don't architecture. need or the not a the XXX-gig needed They're can were that either transition. and qualify migrate deploy optics as products companies they this to new So of over continue to

I XXX-gig deployed. with Anshul trying are communicate XXX-gig think that I to is being confuse key really the ready and don't

year, we XXX-gig be deployed be So they'll of Arista it year the time, but but ready and will beyond. a get now, is really focused architectures will already on year continuing this much it in when maybe next have

– some expected a cloud. So have they from competing weakness around in there year you're of the in components be cycles are servers, clear, arena the that other number first just to that around other the product the XXX-gig in and broader around key half companies most macro indicated of the of

You were bucking that trend.

should commentary as Now, the in are to companies To that from other with expecting of well? the in back you is that expect line the you that resurgence the they the the space. that we more from were be extent year, seem something half prior in

conclude want mean didn't expect for quite cloud wait, tuned that way. will about we want that I we as to from half. but QX spend the refrain turn We from it for to you think were more. We think very watch see, should well I I us. second and out stay in optimistic don't what

and get So optimistic on sure. we before be to QX want QX, more we'd

to mentioned we that you rather but that the transition have XXX-gig with is and with products, what complete than I we to expect just go as many of than… longer Alex the are along ready

optics there's the change it. fact Can't that to no to connect

Right.

Right, so…

that. understand I Okay,

a be lot solution. and to come. of there's Alex But answer be solution A to a and your time of mix long XXX-gig promise question, electrical to yes, a going only think is XXX and a weak would I XXX-gig for match this

very Thank Super. much. you

Alex. Thanks,

Fish Jaffray. Piper from comes James question Your next with

open. is line Your

can’t James? hear James. We

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great. Okay,

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Got it, thank you.

James. Thanks, you. Thank

Research. comes with Milunovich next Your question Steve from Wolfe

open. is line Your

places going Yes, I And part that current know last quarter to of cloud. wanted I new wouldn't is did cloud guys gave if year of I'm And of seeing here, the underestimate meant that on with were you that pause was new one the sell Alex's a that or you. happening, don't And you the finding obviously so you what's just question. a you to real or at basically Microsoft. that customers. year, shocking digestion huge reasons, new companies on to. in I Last exception not tiers were other customers, the is at Thank wondering, were Microsoft? just was think, It types a follow-up to be

continuing I with No, live are and the we regional great titans make to progress DCI well, used our and they're cloud think are there. and cases, many spine including in alive cast

paused we who QX, didn't the to in who customer underestimated pause customer even in I intend the QX. think in QX. And paused

found that out you letting So when And of we know. found – together. we've that kind we they're did,

that would would this? months with have the sense, even didn't visibility surprised six themselves of you kind normally a you So in to the customer if three

be Yes, particular in would that this true. case,

of we've important I to and always have shorter, it's back said we right. to And remember go visibility. been has wanted do always kind think project that book Order

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Yes.

projects between big understood. a difference There's and orders taken

you. Thank it. Got

way, few add that, there surprised by forecast been times that and by been they've many order last just years And didn't in has either. to positively the the to

came in one the direction. the this where times the forecast negative So is of rare

comes from Your Gabelli. Henry with next question Susanto

Your line is open.

question can that Cloud thank and [indiscernible] you questions. of and current products? to ask Titan about project and between a hold much my the resumption I Titan How for sales of want forward-looking evening the resume Cloud situation. that fast taking how our lag Good the on is on a

add can I'm an sure and color. Anshul take I'll answer to that more

resume put they I they on it product can a things Is can hold. hold that in fast can to correct? it as put in they think weeks resume as on They weeks and months.

spending Yes, including basis. the There's service, and Henry they cloud as us on. CapEx our the But they things the data quarter-by-quarter spend if building a on they're adding I in does not centers, many customers’ their products. said, region end, with the centers look across run, find will data in so money to and appearing, adding correlate in long racks need are then and

turn the Simply matter projects. them back rate So on spend it's of when to fairly well. it of money as for easy these on a

you. Thank for you. Good

you. Thank Andy.

question comes from Your John Marchetti next Stifel. with

line Your open. is

Thanks very much.

the question last I think in may get tonight. I here

for products for obviously recovery of bit hopes of a to some expect How talked new, this, certainly second tend half, the that of on should of how maybe maybe much broader what's back about the trying little Jayshree you? on there. you to to guess the the piece I Just half. for of new these coming little that launch big of second follow-up it second you half demand maybe we to relies being some the Just A than that get cloud? that wanted Is or in much some new versus a sense the a the the outlook just be products bit that? focused much

for best saved question We as John. guess. thanks Yes, a the last I

existing company. we've very engineering carry of think specific enhance an while also proud us products their been products networks of cases. use and for way parent new our R&D to always in I We're fuel customers the our

products new a products, done. be especially always but and campus and we've what will So a will help, in continuum think the data the in I center new continuation definitely the cloud of

whereas second half more we in in uptick have been So factored datacenter didn't any if already products cloud campus, think I there's the in new would the that new products it the yet, in. and from from come project the

Thank you.

you, John. Thank

for call. Okay. your QX Thank This earnings you questions. the concludes all XXXX Arista

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