Arista Networks (ANET) 2 Aug 192019 Q2 Earnings call transcript

Welcome to the Second 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 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 and Elliott, Director Development. Business of Chuck Investor begin. may you Sir,

Thank afternoon, operator. you, Good joining you us. for everyone, and thank

Networks announcing Officer; June on and afternoon, Chief quarter Arista me today's ended a are XX, for This Ullal, With press its issued release second call Financial Officer. Chief results Ita and Arista Executive Networks Brennan, the Arista's XXXX. Jayshree President fiscal

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

During risks this and including that detail management relating uncertainties actual subject the could which for our litigation, we of of with industry the SEC, the make XX-K are to our will results acquisitions, in benefits differ by quarter the recent from year, specifically third to Form which recent in most and the outlook of Networks those course innovation, statements. and Arista call, conference in filed opportunity, anticipated impact documents our financial forward-looking materially these of those cause statements to fiscal the XX-Q market XXXX our discuss Form and the

basis on the obligation call them this apply These not charges. We on and have views this on please of note adjusted as and Also, non-GAAP call. to been measures no future. in use representing are financial you as rely undertake we update these our after to should exclude today, forward-looking statements statements a certain certain that expressed

provided financial to press GAAP measures reconciliations in financial earnings have of release. measures We our non-GAAP these

Jayshree. to I'll that, With over call the turn

quarter us this XXXX for Chuck. you, earnings for afternoon joining Thank our you, everyone, second call. Thank

non-GAAP a demonstrated once was with XX.X% million, of non-GAAP of Services contributed grew record to combination revenue. share $XXX.X per a growth profitability earnings revenue $X.XX. again Our while

XX.X% expansion the drive number and one of customer rate solid in to logo two enterprise We our vertical. new throughout margins performance gross at the of new QX continue registered our influenced to record per by day from non-GAAP customers delivered We calendar of quarter.

segment titan largest our fifth now modern financials coming consistently high-tech In providers enterprise terms our specialty second and in segment third vertical. at X The in remained service provider, largest fourth with and cloud place. verticals, of is place, Tier cloud the becoming

X,XXX gig XXXX, of X,XXX the enabling models, terabit geography Americas was had two international silicon. mix, contribution during terms for well multi In QX band the RX in Arista switching new were launched and family QX, for availability. products Series XXXX. while uncompromising QX new routing for a X,XXX the XX%. XXX based and the as and flagship EOS in modular This XX%, chassis XXX a Arista quarter a We and We product Gigabit with on our is brand as families capacity JerichoX at Broadcom

We gig and XXX have now more platforms, XXX Arista other products peer. gig has XX, launched than any

active with revenue more qualification gig expected begun have next year We product XXXX. really in meaningful XXX

news, XXX the comment this I wanted to take industry to recent gig on opportunity Given optics.

speak will me who Chief Officer, about Andy? is more join our to Bechtolsheim, and this on Andy Development So this. Chairman,

Thanks, Jayshree.

The with and with from vendors first the optics that optics cost lowest the directly virtually being to cloud diversity the the changing typically all that in optics and model purchased see least XXX optics, have business in ensure we particle to and vendors. vendors the observation disaggregated don't gig. providers qualify supply is at switch optics between cloud, Cloud optics on led three of

that will a the do competing believe XXX CR be XXX price compatible optics with CR plan that improvements unprecedented CR, We very long are which is XXX will availability. modules gig that to that volume module of ship drive volume gig gig the competition the of performance distance case in on optics. offer quality optics and aware price, one gig competitive we until basis dozen mid XXX for In XXXX, one of coherent vendors market

work CR objective with optic deliver effective We largest are closely gig them to XXX gig that solutions XXX our cost the to market. with to the relevant most customers all XXX optics including to gig the qualify

Thank you, Andy.

the of new WiFiX which our speaking Arista's Ethernet first entry products, also introduced are So we all our over switches campus and of XXXXP edge with supporting into new cognitive Power offerings, formal CloudVision complete telemetry transitional in security segmentation IoT services. and addressing Arista the an exciting and for based security With campus, changes the cognitive flow the campus this establishes portfolio era. and

second are the half we results expect XXXX. in trials more early and now in We field

as So have second XXXX They now set with a we cloud and experienced QX, specific stabilization pause spending, of the spent. know, you some half titan for we all orders. resumed of XXXX, expect half speaking second XXXX in overall titan the of turbulence in cloud

second with consistent half, half trends second first recent these a XXXX. the Naturally, momentum forecast be expect Certainly, half cloud are will we cloud the CapEx improvement reported but in to be over an weeks. do of the repeat annual not

segment IPO On Our New X, multi-cloud at campus we our anniversary enterprise June is XXXX, in the celebrated Stock Exchange and York with premier interest both and our migrations. our analysts. with growing healthy customers five year

guest. Nadella area chief at in as a share Our event joining the collaboration Microsoft with was our integration cloud IoT V Azure companies with deep announced our Microsoft me We evidenced Together, Center. WAN two and cloud vision including Satya networking. synergistic CEO, special

cloud-led as strategy, also experience, our any attained for conviction compelling client that customers holistic proud their showing yet consecutive Center ability strongest Gartner's a we cloud to Quadrant for our fifth Arista with the as and in leader both strategic to execute. a vision the have a bringing partner. I networking, am Data to in to migrate seeing share in Magic are status As we year,

it specifics. And financial with that, like over to for turn Ita to I'd more

compensation other selected A GAAP our reconciliation non-GAAP certain of Thanks, is Jayshree, items. and earnings results impacts, provided stock-based of good in XXXX charges release. and on our results our for non-cash and This our to afternoon. non-GAAP and full QX QX guidance is analysis our acquisition-related based excludes non-recurring

midpoint revenues million approximately up XX.X% $XXX.X from activity. revenues up of our Total above of quarter, of were to XX.X% revenue, representing and of Service guidance the reflecting $XXX year-over-year strong, remained last million. level a renewals QX $XXX in million, healthy XX%

XX% in cloud up with in guidance of period healthy QX the in at $XXX for margin XX.X% of last revenue, Gross enterprise lower midpoint quarter. to period. quarter XX% contribution our revenues Overall the and XX% XX.X% International services from or the benefited prior million came a the in above from performance. a and of XX% from gross total margin up was combined

million $XXX.X last quarter revenue, down spending in of levels were R&D lower at from last $XXX.X the This reflected spending of million. product or prototype NRE the in slightly for quarter million or revenue, expenses of $XXX.X new quarter. from million $XXX.X XX.X% down period. and XX.X% at Operating came related

revenue, sales was or X.X% of costs. with from headcount, in $XX.X expense by marketing quarter and million increased Sales offset up somewhat reductions last other some

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

million net $XX.X operating revenue. expense of was million revenue. income XX.X% our for quarter for approximately favorable $XXX.X XX%. resulted quarter in rate and effective income This the tax at was of Our a was or for the lower of $XXX.X quarter or and Other the million XX.X% income

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

balance cash ended average repurchased the $XXX and common at share. turning $XXX the of per during investments Now Cash, $X.X million weighted quarter approximately our to sheet. at billion. price quarter equivalents, the of We stock a

The of has Board will be our QX repurchase XXXX. $X Directors reminder, program shares a As repurchase a to cash authorized billion funded operating common of opportunistically allows our program us stock commencing from stock in three-year flows. and

the quarter, offset cash by in reflecting strong million operations working from revenue. $XXX generated increased requirements performance, net and second deferred a in We of capital reduction income

days up in $XXX.X the in billings in down came $XXX.X timing were reflecting to slightly quarter, last Inventory QX, decreased X.X of million prior at period. quarter. the XX down in the Inventory period. DSOs times, million the from days, X.X XX in turns from from

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

Our revenue $XX reflecting in decreased of new quarter, million features. by product balance acceptance customer deferred approximately the

in inventory expenditures the million. of for XX payable XX days days the Accounts reflecting were $X.X days, and Capital timing payments. QX, were quarter receipts from down

and our Now the for to turning quarter third beyond. outlook

quarter. expected, some softness experienced we second demand As in the from cloud customers in our

for this indications in are muted compared we period, customers While demand business will from growth improved prior in to September early somewhat years. the that second-half these as remain believe

some continue to perform enterprise to by business. offset provider in well, our and the declines service financial expect We verticals

reiterate being On XX% the margin customer would gross overall XX% driver. key margin our we outlook mix with of the to gross front,

third our expand growth prioritizing and backdrop, on investments as for look follows. our stock-based any the headcount which will excludes We market other based is non-cash this to we carefully, to manage resources, and is quarter, in items coverage. guidance continue and the impacts non-recurring in a as compensation as sales With non-GAAP results business

million, $XXX XX.X%, shares $XXX approximately to Revenues approximately of to with of million of approximately expected operating XX%, our gross rate effective margins tax XX% $XX.X approximately XX%, of to margin be approximately is million. diluted

turn to I Chuck? the now Chuck. call will back

you, Thank Ita.

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

call. [Operator Jason question portion William Ader Arista first begin We earnings Q&A with from now will Blair. the of the Instructions] comes Your

line open. Your is

the on anything can tracking side, -- any in campus knowing winds, of there. that terms you Jayshree, provide about, investor customer worth Thank is progress community you. you investment metrics, your

Jason. Thanks,

we of QX. them of the As the introduced in you end at know, we June available most and June would said the in day be X, products in

be So, confidence good and them, I in to little we'll are that results team early been but with year. in have trials more very winds, QX, tune very, certainly we XXs to Anshul of field of customers next can fully QX, having have much and many with interactions, the I very customer and it's giving expect the a that say of early and

how of wireless, a comfortable some the side typically How to A do but had the there's well sale is you guys channels deployment. from And that to a respond complex campus, lot major with data data replicate you involved. potentially done or are be the going -- channels is much success will on is campus a switching, side people lot campus center you This standpoint able with you've center okay, guys says, the on more more that enterprise somebody you help on of the security. side? have do the get

Yeah.

for back the on moment data the we much years ask center. niche didn't We get step five when early was report So on years, even after the products. a in the It in of shipping focused the cloud enterprise. did financials mostly we success started center with data We and our and right?

take five the come campus market, our won't we to and traction categories, enterprise here sure with I'm years to say fastest of pretty be that that's already adopters, love three enter the I'm early So therefore, the going the to but really EOS, attraction. who place in

don't your point, for to looking and CloudVision, that new of glass, where partners, the channels, third integrators. be single of pane underestimate new then new The management that, will systems single and they're point one

So, look already. three those can if two three the start we segments, playing you at in out of

would have five the technology that customers the points appreciated response protocols, us. my many similar CloudVision last and in who center. in It's data so of the first is success And different with ways for Layer-X, for campus are no the Layer-X EOS very us than years be and

will year seeds is us $X.X million, was an new I first for is this take right I'd for billion a year none many in we quarter did, is which journey, but our one of and journey, of $XXX I customers if is happy $X to The think logos and and longer, said and three as multi-year success, five campus us the think sows be -- this before, because new times billion future, the very second a but overnight it should journey. point

you. Thank

Jason. you, Thank

question next comes Jaffray. Fish from Your James with Piper

line open. is Your

Hi. Congrats the on quarter.

XX% to if supply impact guess, should to XX% get of Ita. the you Thanks. how guide? tariff XX%. you're deal chain we on much gross margin is How would the the perspective. enough me done for tomorrow, think positively a kind I we about to And one a or of to Obviously be gross were impacted? from offset trade have margins But reiterating it Just

time, customer and of I and chain adder. Yeah, working of issues had improving the an been been we've hold the we've some addressing as same think customers, marginally that we've to or enough changed, supply the I with supply rates mean, been kind been which chain the we've on managing, at also increase obviously, the and tariff have progress fortunate we've to enough able that made we've adder

perspective the Right. I believe minimal before or heard that that's with that think the see swing away news enough we margin, case. chain we've tomorrow think from just completely is the some should a new wouldn't either we if still impact. in call, the done we think other, a that I in I there big And or We gross changes one supply But it. went to continue that it way have

done work think it's from of P&L enough where I kind neutral gross mostly margin we've perspective. a

Yeah, James.

team to to tariff it the of within we done a as manufacturing gross and that, has amount the margin, tremendous XX% Just can range, to with on but XX%, add will of the have to Ita XX% impact that XX% the be think said, work. range

think tariffs. I the are by the to We but And, will it. We absolutely are minimal. effect not be affected immune

color. Appreciate you. it. Thank Got the Yeah.

you. Thank

comes Rod Your next Goldman with question Hall from Sachs.

open. is line Your

normal? be that of would some per you some visibility progressing us of Yeah, for And they had you, few what like there the ask in on I guess, almost said expect hi or good level spending the normal, have? really idea return. middle have those you quarters? when spending resumed to give over It an orders seems back comments. you there you cloud the March. question. titan is that of sort to next visibility And thanks didn't just see you how to might kind just I'd zero your the had you new When dropped guys, large Can of

us think, norm of in XXXX a talking Having XXXX single-digit of was on seen gone frame to and all, we XXXX. first you're norm reference, think for Rod. have all reports from about, negative. use We I The level new shouldn't growth whose and the of said and CapEx So, XXXX CapEx has they of as and to that, Well, first depending – our changed. them I right? are double-digit real the half you've some adjustment all

and So some is growth you can that. hover Anshul, that new it's norm would the single to like going double-digit you low add the to more expect more to digits. no in

is which allocations We want reiterate, The has – is but this titan were time, unchanged. back mentioned loss. I was spending they're and last cloud to Sure. un-paused, to normal that there design or the no do Which why they

had out? -- the called that this Is reason you guys

Sorry, can you repeat the question, Rod?

and clarify guys to Is last inventory. said process inventory You utilizing that is were quarter. guys, had of we they wondered still just inventory using done I of inventory there well? it them Jayshree, the or an where you as they're just utilizing all are out in

of a are second orders half specific resumed. put we decision for that and extraordinary to an our the but a XXXX. some. pause, have think difficult nowhere cloud turbulence levels. titan explicit close they levels QX to had part at don't those they've improved reason the that conscious have I very It's comment inventory on The real of was on the first half, resumed over to made And

– So

very it. much. Appreciate Okay. Thank you

the not was Inventory reason.

Thank you. Right, it. got

Rod. Thanks,

Your Oppenheimer. comes Kidron Ittai next with question from

line Your is open.

and and congrats guess so Andy, Thanks, everyone. Great Anshul, I ladies, quarter.

of a broader Well, there now. definition is ladies

change that I such here, been quarter. way you there what to in is gives you of the in I guess, a I true. kind not communicate that there can anything on do down that with last to going has kind I but surprise Yes, the communicate stabilization? I them of has been drill claim a know Because that I understand confidence a sure change was it you is happen, just I'm stabilization. you? I the there want comfortable want they that guess, wondering, to with guess, surprise you and cloud. makes they're make you again way a

what right? to knows guess time. I'm if Ittai, as that's in stabilization one QX. we that's carry what's saying, at trying think QX, predict, maybe And not again change happen further a clarify we're to in your is but Anshul I good in couldn't but taking we and XXXX, could who can they literally had something. you point, quarter add want can this changes question. make side, better, Anshul see this on in trying imply that stabilization am anything I at to business a their say And is, on QX they're as good QX, to going the to to with knows mine, What

But I don't about anything the know future.

one. Good

our forth well normal The engineering you very us QX and next communication back it the communication was very but has sudden, gen as them. And between event otherwise, and as collaboration designs. customer our for a that expect planning been was for rare and

everything there, very, So, extraordinary nothing really now. is normal very

there, just prototyping but Ita, which know, question at million some me million explain A around, is never here. OpEx, on of hands $XX built done? midpoint I the about and to good, help get quarter? and significant don't a want of quarter-over-quarter expenses, quite increase how me, $XX Very be level I there lonely in is my probably unusual feel to the increase out you've you guide, nonetheless, is there you quarter-over-quarter so OpEx, a every your that's Help that would an happening really something in conservatism

in would kind and that. were of to last marketing given we intention the a prioritize sales into, just is did to included of and definitely I in there think mean, then If the R&D, the in I some we talked want to to harder investments and that not them there, I Yeah, that do maybe, reserving push right quarter make R&D, push we and call is about heading you to hard bit it the some is continue think on little we the rest obviously

move quarter. see you will this as next some R&D So increase we through in

luck. of Best Great.

product, right. Our cycles, with R&D new Ittai,

coming one out it always got a very years product time so prototype much proud the expense. things of of our has impact can of we've is and that we we're new natural on and So

stuff. Good it. Good luck. Got

you. Thank

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

is line open. Your

okay? you me Can hear thanks. guys Yeah,

Yeah.

All right.

clarification and question. a a Just

business hot So, and and assumption do like the continue obviously on think cloud their titan underlying cloud the see how Jayshree the networks your capacity to large compete. cloud their they second changing they'll other quote unquote invest utilization Because them titan comments titan half, networks? you that I chasing for in the resumption to in investor one is about they is how run the the and use and

their I'm that so the making given are pivot to run And understanding of their all have, how they network? you a you just network do think try understand, and they

I'll and Alex, comment, Again, to Anshul's closer it.

So he detail. give more can

We seen gigabit on any I'm megabit like vary not interconnect layers common for have or including gosh, that. to the to changes spend of will a general Leaf-Spine the XXX anything appreciable all XXX across There has data gig. been going of the the network, due in bandwidth denominator increase on that last optimize center

XXX on pick stay may actually gig titans longer, to may XXX gig. some XXX cloud Some gig some faster, go

So sort performance we see but to planning down bandwidth any do the personality all. major we megabit the don't changes, of at see the

may and add strategy. regions centers one is more open is than counts bandwidth, the data One that, I to thing incremental I've fact is, cloud will and on some new invest your we continue the always centers. on some going locations in see to new more data a see also innings, data thing and planning expect, early the centers, I'll put to not titan and that rely around them comment we their can new they where for may of Anshul in we're performance More but that said,

industry is I the more compiler optimizations. now the believe Yes. Alex, in of about to virtualization most so tied optimizations computer right commentary

of is X% know in total on you X% networking range switches and the CapEx. spend their it to As of the routers,

to squeeze create bottleneck, So they're going which a and impacts that XX%. not try the remaining and

network the to a do error has managed is and So no what providing offering. very one have run we by to optimize try free and trying competitive beyond to

it margin. the wide a it missed like pretty Then Ita, support on Anshul. maintenance the estimates looked you, consensus number, Thank by

should sheet You far on or obviously in around there was as and be support something there, -- was as the far deferred we contextually balance that well why should some did understand that's as the disconnect mix there the maintenance as a on quarter? was aware execution product, anything we that of there

think revenue, No, if I the mean, right, of it's look at percentage pretty quarter-over-quarter. you I consistent,

about revenue the talking You're services the… on

Yes.

there think Right? specifically. unusual We I guide it Yes. there. is mean I anything don't don't

Yes, I know.

it I very because is in QX, to this high normal, is be tends -- very or this mean, yes, normal QX Alex.

that wasn't Percentage of it different. revenue,

So looked numbers, a the at I'll I and quarter-over-quarter we think go but particularly I and different would it's think to the look have number we back don't trend what consensus not guide expected.

just very you Okay, checking. Thank much.

Yes.

Okay, thank you.

Aaron comes Rakers Fargo. next from Your with question Wells

open. is line Your

Aaron?

Can you hear Yes. me?

ahead. Now you're choppy. bit a we Go can,

Yes. I apologize for that.

So the congratulations again quarter. on

you. Thank

My There's -- been a question choppiness. clearly enterprise lot is signals recent actually some market. traditional on of the of the enterprise

of how a confidence One sounds Intel's back tonight. been at And market? to you've results, of enterprise cetera. the et system companies will healthy We what what gives that to you, saw through calendar be grow that year? of pre-announced what I'm market pace the that the chopping very curious in half you seeing continue

think we right? -- the or large we a base the a a of are recent operating this we're where so leader are are newcomer. we market And market, is I entrant, we're enterprise to not anything Well, new small the

all have we that. is because because awful an think existing And highly of lot enterprise have a and one large differentiated lack because of So fatigue products. I quality also TAM, of of and dominance and with vendor there we

unique are We seeing a the macro. despite situation,

little it, to bad is macro a a in we say enjoying despite desert, you if not the see but Now macro, think will. oasis if I there really the we're wouldn't

you. Thank

you, Thank Aaron.

with comes Your Instinet. from Kvaal next question Jeff Nomura

line open. Your is

me, guess, I clarification, please. question for a Yes, a and

all a in to It down? more prior methodology assumption have I'm you as the tempting with applied guide On sometimes or rates to close the a on is up same after coming adopt guidance, wondering conservative you quarters. have your if have question, you what

were at course back XQ, be levels or Jayshree And you we'll to at the the rate clarification is over third then we're of when the sustainable meaning sustainable full levels X, on? back you game run August quarter in say secondly,

intriguing. So of kind both your I'm still questions are processing them.

like first were did we been do that So guide one what the we normally asked? translating is your just conservative. is, and I'm you we question,

yes. Yes,

Okay.

think the in misnomer. have word bit I we this conservative So a a is label little of

we is guiding sandbagging and best we going to analyzing the very more best would have but there as and we forecast with be so you, as little on. more and this we're of think many can, a Particularly, particularly that our concentration, to there course, I enterprise, my there's customers in our so think is Jeff. much is forecast, That lot do best in effort. that. wouldn't I buffer question of customer

the as happen going terms August some it a summer on very slowest game it's in And the need the weakest game quarter? all world, to especially months quarter, we difficult be or say to in three will in ever on It's is so execute months a one. a I of wouldn't through it's on I parts process to in through would of predict it's going which, of to this August. quarter say

Thank Thank you all. Okay. you.

Thanks, Jeff.

comes from UBS. question Your Venkatesh Tejas next from

line open. Your is

on in end the of XXXX. would have interpreted if instead visibility. us you expect Jayshree, in many But percentage must levels, largest year, think XX% to historical go year, customer the as back of wonder XX% XXXX. to of the sales it get a we of which of better I closer you indicated be you as had you. earlier Thank can you comment in the as to I your sales what

I'm hear So curious to that.

good a question. Yeah. That's

think best mid I of high-teens is event, estimate, wonderful, yeah. is I still prediction teens, think to but XX% my our what a was rare

but on you then I you. thinking latter and about XXX you're follow-up you switching? generally you. and part, how that cloud said expect routing then in you XXXX, between know part Thank gig. cloud gig Thank can parse a And early XXX

And XXXX. with I you Well, the down by that, from we the of we slowed No said, ready talk, tell products. have often Andy XXX with optics. think optics problem Andy my and be some he Okay. to the but is gig, question. Good in as been as are predicting can

Andy? You want to that, comment on

Yeah, optics data to is XXX use will these do we mid those XXXX. of expect not one gig way CR in most optics cases for gig until be interconnect customers important before XXX the production actually But that. volume and the qualify center

So timing to here, it's the exact we XXXX. but cannot predict in going be

And these use number will right will in as option be versus for routing, other. parse versus want the a of be always start because interconnect, be cases center hard They'll or data beginning. it both. with of routing an Yeah. will switching almost large It to routing one the

Thank you.

Tejas. Thanks

next Stanley. Morgan Faucette with question comes from Your James

line Your is open.

want that to Thank you. on I question. follow-up gig XXX

in Just those, I but availability the those understand are of the potential the what equipment availability without customers -- optics? and commercial understand your availability you in? or in of of qualify can terms of of us can help evaluate customers the of stage are optics, what products evaluation And they fully

is factors at as the JerichoX silicon, many-form gig are the the James, look on XXX with many ports new Sure. or to and way Tomahawk products this or X of XXX-gig other well. based

before volume material designs, So new can of and them XXXX. closed, switches XXX-gig. optics transition you revenue can I optics the ZR from they think would second expect existing they'll to I the them but these starting half XXX-gig but as in really with qualification, products. wait already But on as like XXX-gig efficiency has for first. them impact customers think in the use with industry, again, in routers DR use and a then They show optics are more or the And or busy in FR qualifying

support support enterprise. products. then I'm how sales for around But today Great. you're as And go-to-market just that like about already talked are wondering kind to continue and made? really ramp commitments customers need those that a sales Is your quick or ahead efficient on you'll feel bringing about after you follow-up. thinking headcount can your to needs something those to Jayshree, personnel of new be up on you you of

a that's question. good Actually, very

sales after sales ramp systems can we and we wind. will But some the post get ramp engineers people ahead think of we the of the engineers I sales. up support

bit So, a of little both.

the data you in So saw not center. and do us we applying discipline are that James the conservatism, same

you We revenue, it the not because adding want is to if And and bar caliber quality compromised higher sure high. not are definitely increased, percentage sales people. of as and headcount, making maybe has our marketing a appreciably, pretty look a at of because that and we still are just bunch holding the we

The but moment. a is with as see is of the at huge partners. going and partners company, piece viewed a I as us a campus that part thing, partner we think big a the strategy piece And that's the in never to I partner friendly other that. friendly think We've key key are play this of been very

So, the go will hand-in-hand. two

That's right. good. All

with You shouldn't have any people. problem being friendly

So, good luck.

Thank you, James.

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

line is open. Your

I I'd to Before call. faster to the ask talk you my just next in like ask questions.

can I do Paul.

if handful of a got I've questions may. I

Yeah, Paul. speed. She's XXX-gigabit to trying to go from XXX-gigabit

let revenue doing in-demand good appreciate to a of is that regionally, quality She on from are comes away basis. fire a I the it. of respect Most job with of are but seeing good cloud. these regional me Yeah. off, chunky clarifications, you questions first what

regionally? rate follow-ups. were it and the quite So, are about like looks But regional then the What extent your the non-U.S. apply. growth perhaps seeing of your high the some I've regional to same teens. you you exposure; U.S. concept doesn't have got And

regions. in The the customer in growth growth in across customers rate regions. We're seeing better new rate especially of enterprise is international very terms acquisition all good,

new nicely. big be So, all logos to U.S.-driven bet regions be but international-driven, in customers more to customer tend larger the growing the and more are tend

extent macro-sensitive, spends, seeing. I Jayshree, so, on are any to quality and of that what guys trends quality but like an you in terms again appreciate macro degree are of to the company any gainers of or economically, sensitive other thoughts a you're sure less less you budgets, to you're

We've same seen NetApp most thoughts it appreciate that? number so, don't you from today Once other of any way us? in-demand gainers maybe thoughts any you can the you're of a on with an companies, perspective, from recently or again, I in weakness sure see share terms that or

seeing are the a result be of will But experience the with not is fast we it won't issues may certainly decisions. we My way is that macro see immune. in lot we activity

usually a would So, they conservative macro in, worry don't probably make because get tend when and set new biggest in, prolong want decision be macro to customers sets then should to a decisions. my making

seen you're seeing? you or elongation at just concern this point a Is that yet? already Have that

concern. I'm addressing a theoretical Yes,

have yet. not it We seen

growth All growth service service new does go right. on and the the is that then with revenues, saying revenue? moderation revenue without it And going to consistent in slow product your

Yes, with think associated there linearity that. is I a

just stuff, trend Yes, product. I and as you'll overall, will some the from get mean offset it but renewals

I million perspective, reiteration I campus, September, Jayshree XXXX All or talking not point Analyst more sense that a on of comment million ton $XXX is a timing on in you're right. calendar little out for the from we're that recognize Two your enterprise forecast or a event that your talking June that's my about $XXX a outlook the bit when think time clarifications. from is terms departure the is the a drifted difference

Yes, exactly Paul.

time. of period what million, $XXX said you when But

Day, Analyst holds, ago which the No, which from said what quarter still was four at only six I QX. is starting weeks

QX that of to substantially, we're that second unless and the half XXXX have Got optimistic something but still on it. and half bullish first So number. of activity in that changes -- XXXX result we

OpEx back simple to your enterprise would the I question it. earlier. have which more been going money. would Got was thought have answer as asked as Ita costs

money. bulk a to beautiful and channel, but spin, you're correct just I'm spend? projecting Not down with concentration enterprise the the to was going market that but your One forward numbers not cost things operating your relatively inexpensive what's a cloud, it and of about to address, has got if increase, salesforce, of marketing operative that XX%. the that in increase still of dramatic margin X.X% terms projecting increase on on me going those going Are sales and is in an wrong, from XX% the you're a

talked quarterly just Yes, quarter-over-quarter; in I there about I like the stuff, above think R&D it's things the and trend. mean we from

we it over not the overnight. is think that percentage way the described mean adding that's and about think XX% but it's overnight. as I Analyst we're not, Day going think the at that's that to you again But what it. about not, number. term think of about XX% the we're And to we're model, growing. I model, it's think then But the won't get right revenue, become incrementally longer when I a

Paul, back. can that the call we in do

no you. Thank Absolutely, worries.

Thank you.

Henderson with Alex Needham. from comes question next Your

open. is line Your

the sure, going I'm to going was to I'm Paul ask question, ask.

talk So, could market share trajectory. the a you hoping was about bit I little

two are there So, or was quite of that One underpinnings three were variables the obviously growth slowed kind always company the that a of the cloud bit. story.

annually? is point to expectation talk and whether Can fairly up market excluding switching the ability amount considerable share two for be, annually, you about your share the was continue to to a cloud, market of overall three for gains you on low. or what's your one pick can share growth other to The

go And does the we question that in there as is, on a into follow-up change that XXX-gig. any

think you your together? you've continue you to address clear pretty on those that been two software XXX-gig, you Thanks. grow could will I based think advantages

to total market predict Yes, the It's anything market. Alex. but Sure available difficult has has don't think reduced. on I share, substantially spend always changed cloud

another, So, some rate between position, one we getting cloud, enterprise and winds our only I in think see TAM design and in stronger. the of of may quarter is and both shifting our

of to So, from to zero a XXX-gigabit two switching. since gain gain, gain, but gain share switching like two of will rate basis, overall the especially more gone slower, Ethernet performance from three and in annual to to -- probably both rather a in maybe share will continue quickly, we've one market rate rather an believe than be I we be a on high teens

more is still The one question if at throw Cisco, Luxtera could I in. around. and Andy acquisitions If our Great. Acacia over

here. is Yes, Andy

get how they're closer need positioning against the optics, might to but -- an did there And with thoughts as the you optics advantage any chips going and as switch to we have did up why us can give chips on Thanks. XX require the get on switch they that that? that where that terabits to chip be thoughts any may to affect Any is he the to that that they concerns that you?

Great.

obviously, that field that both the mean, be we particular, we, that need people our particular will which So or conventional last XX, with to the at all, changing CR don't intensely XX problems has understand is in of factor core don't are of environment about will even deliver silicon to I want and competitive. reasons. product. the what DSPs see time-to-market pluggable the the to I motivations is over actions suppliers, market don't see years, packaging, I on for certain speculate over kinds optics, say optics the that know do technology, of there and that changing your competitive photonics, is optics, you with But with There's competitor's on here. plenty excited optics all well-understood in just gig so don't many question we pluggable taken XXX but the the form co-packaged plan is and for that start. we product where And XX.X, a

leave I'll it So at that.

you Thank much answers. very for Okay. your

Alex. Thank you,

Your comes with next question Jim Citi. Suva from

is line Your open.

on things does was to purpose. on lot of Thank beginning a well you the at pretty the much very much. as Arista It very great Andy as call but recently, hear

this excitement clarify change out I’m you more why definitely far speaking gain to are trying Or, as or a having So as or Andy, trying maybe understand figure behind to topic. better, standpoint to share? that addressing some you. tone. was figure and Arista that just share help a the is previously or to the Andy bit as gig and little the misperceptions temple you the show beginning the Thank call in the call a Can out versus us change likely just at of like competitive with well on there as appreciate, it I XXX

where you is mix XXX forecast, analyst The and XXX actually gig showed will if in cloud, deployed. gig the cloud cloud, for at forecasts cloud. vast obviously, Jim, in The of look XXX particular. amount the forecast like large Yeah, gig, lower projections small on

our that are a given confident will say forward. that strong market, business footprint So I we very, in have but optimistic, we shouldn't of going good that share

overkill I adoption much don't think is XXX gig you're going the for to almost XXX technology in gig as soon. see enterprise enterprise. a anytime actually traditional

this when to are starting that a customers, see deploy is cloud XXXX. the and in very much a the So story, the this really you and large customers big expect when cloud do we it's ramp, cloud

And is will any XXX in market other as we transition, that gig of dose it take ready anyone Arista, especially have a love think intent Andy except I differently is gig in do gig more and we performance the quarterly I think a from overhyped, else it for I and guest and a bringing don't than investors Andy time the sometimes think message. that products has hearing to than and Andy, deliberate but frequently call there's gets realism any XXX and speaker. leader XXX high switching pragmatic love

Jayshree, Great. my Thanks Thank for all Andy. much detail questions. so That's the you.

Thanks, Jim.

with Leopold next Your Simon question James. comes from Raymond

Your line is open.

Reflecting with you. gig the adopter. the you're everybody Thanks compare hear to cycle to XXX XXX the Great. on gig and be. from of XXX versus incumbent theme, gig one be your coming XXX follow-up on the taking thoughts Maybe to I'd cloud question. sort you're now is for cycle the will the like time, the and for maybe gig, on where I guess contrast, wants I'm primary the understanding

different a underdog you're position, anymore. it's the So not

that to want perspective. get I So

And just right impression context, as XXX gig, that this good XXX really, is gig the just within a density my clarification are XXX really switches being now as high gig. deployed

that not want to correct? awaiting So sure and just optics, the I is you. necessarily Thank make understanding

it kick migration, fast compute and to eight enough step X-gig happen, the to to storage was require and long the years did take happened. about enough cloud long. large Anshul better enough and a it it IO any so it going detail took and good I'd off, wasn't When XX-gig Andy's or look There’s love I'm and because very I why as and back and on well. at tail, hadn't

pushed XX-gig, especially really and XXX-gig. XX-gig XX-gig, cloud of advent The

all cycle And years. So the we two so a between or years, became why XXXX. XXXX and instead XXX-gig of three market took quickly. this happened only is leader taking It eight such

other years four When to start as cycle look cloud. happen, providers between will It XX-gig I time look to cloud migrate high-tech it think have cycle. it first the split specialty in three likely take and at at you'll then to and enterprise the it over XXX-gig the I XXX-gig, well. And will it'll to as

XXX-gig you of hopefully sense very and somewhere XX-gig too So fast maybe happened middle. long, took XXX-gig the a that gives why in

I If that. could to add

as is So may know. ramping you the XXX-gig still

Exactly.

our effective XXX XXX on it's next the significant than XXX no than very as XXX mistake save to growth more gig expecting reason deploy on into products we’re per-bit is gig XXX even cost gig why company And XXX the ports, for basis, year, a -- that. because The XXXX would cost and know, cloud gig gig. gig So you maybe right. double performance typically about

they to not too However, So at to expensive level. optics still the in XXX Right? possible. company, the because are the not It's available not volume. could are they that if just wanted deploy a and optics, volume, not arguably gig just cloud

to get on it keep mind, it a XXX volumes in kind XX the deploying is gig of, call and at the takes ports And rate long optics. in cloud of a year, time the million to those

sorry. XXX this So in meaningful even it's Go been that to revenue ahead and a XXXX saying is why story Anshul, get gig. all we've along

for with our their This competition when came that XXXX in with XXX understand products. we to out had a products $XXXX, gig announced everyone important already gig XXX is

with but you one it on. quality, software, partnership and on only solving support, on the customer, problems, on. if huge with merit, your was on so advantage So very and wasn't were the competitive, so as market on win The on we world some had own product the and real we on

seen exact and that very companies the feel and like Microsoft will we've position of with And and the good same repeat we you've recently, believe Facebook about will our continue. I and kind done thing collaboration here,

any saying gig? we or are in competitiveness, cycle the the share that price XXX this any and is take different different market gig. your competitors going competition pressure is they're XXX than to think because this And Should

against so That competed different competitors. always tough believe don't we've in dynamics will continue. No, there's far. any I

we're mean, I competition. not seeing new

same aggressive. being it's So the competitors

Great, my thank taking you questions. for

Simon. you, Thank

Chatterjee question JP with next comes from Samik Morgan. Your

open. Your line is

in to strategically kind of effort of to the spend views if taking question. to cloud? five how and the ask there the the about of at customer the you around kind you wanted that the thinking level to of mix business are diversification for a higher kind thanks are about the mitigate sluggishness be toward cloud how Jayshree, to of just of given years steer more Hi, from mix particularly any kind the seeing an is you I you customer mix, the have thinking particular of where customer some want now, volatility in

for follow-up you're maybe today any about are earlier? Ita, that a Can products this, were were exempt on products earlier. shipping just quick just from exempt you And is that China you tariffs addressed there clarify headline incremental some if Thank you. there that

is this think good I Samik, Yes, a question.

Our a coverage, and a go-to-market from a sales broader addressing from will horizontal enterprise we enterprise shaping much and on to where broader verticals geography, strategy was focused be is a from really that perspective. be one to

important And I they when we asked was you're diversification. then this the important customers said we year they ago, piece our no. we Two that of think campus should late. and And years an this be said will them in asked diversification. provide Campus

Arista technology hunger and for that to go beyond So data centers. you the the tells thirst the

So and were question? our addressing TAM go-to-market this. you out And horizontal Ita verticals answer of comfort going a broader normal important into tariff is going an piece to a of the

I on some impact, chain between of other yes, we making right. is, way and balances financial the think of improvements I stuff, kind but perspective, it from the Yes, about think to a think will supply we're it's the out, kind have

minimal we're the supply from though to chain continuing pretty perspective, respond. impact a So churn it's even to financial a

thank Great, you.

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

is Your line open.

a guys about in talked the just the numbers like from terms Hi, quick have annual you question street me, estimates. of

point? back Just looks are wanted estimates like. just kind you comfortable an idea I to where guys the for street clarity So are seasonality there, at half what of in this get

the you at guided you have high cloud as been started to the all mid at you one but teens We're right, No, have Day, I we and so. more quarter than a on going in to depending XX%, aggressive time, at think Analyst we guidance. a our guys year know Ita spend,

that beyond this taking think, at time quarter I the difficult manner to is that perspective. from It's Mitch, at us a for our go Yes, stage. we're a this

of kind Just time. the a a quarter running at business

to expectations. it. then on just clarify QX Got kind of the And

understand to than points trying going do half it's that? is just think half more is, it be essentially below or seasonal -- that commentary I'm So how to going few the be trends to on a you

about were deferred, that second Right? I demand, half, last half the if there think a were environment. strong where I of was think year, you second very over Yes, kind the second different comments we I mean it's we mean think at very we're etc. clear half building

significantly it's you I this look and of think in half are the where year. when we at different second

to the the part communicate. trying a it? I that the ready We're there business. do but number for QX the To think I in think that's momentum we're put to what yet, on not and changes has been specific significant growth in cloud, of

Got Thank it. you.

Your with Research. comes Gabelli next from Hendi Susanto question

Your line is open.

and Good one only my evening and thank question. taking for you

the Hendi. you, Thank for you Thank following rules.

partners? terms share QX and able terms Jayshree, early XXXX. verticals, an trials, of in Do to in and Hi, general integration you be would of adopters, your availability cognitive with in you will goals, building timing, Mojo, have milestone updates of channel campus and early ecosystem have

and toward have latter think the results half I Yeah, of we'll XXXX. more updates

the or very company, We've Mojo it campus Mojo The combination been cognitive E-Switch XX it's is now. We've have into activity, In redefining high. that's been well of Splines terms a of our year into CloudVision. received. new integrated XXXXP-P in integrated been layer. really our The a very

is the products So position tested time. campus to at terms and Arista design, in same the what of next-generation the architectural having new you're seeing is have here network shift to the

you So results definitely the more in activity share level high. very will QX The QX. and very, is with

you, Jayshree. Thank

Hendi. you, Thank

Your Bank. Brian question from Deutsche with comes Young last

Your line is open.

Hey, also opportunity. had thanks a the in. question I me on campus for squeezing

Wireless know led of is Is you're are your discussions as been more new that so I've Mojo, often WiFi you around and well? what robust need hearing that pretty or So portfolio more right by if would you or are thinking have is deals in where enterprise the now is a portfolio I – an the to Cognitive campus about that expand? seeing WiFi solutions. the And area but –

WiFi, with around. we other have larger the smaller of ClearPass, complete campus Splines. question. WiFi feel need to they very a way good the want but particularly because We the we in introduction It's small the a the with and Often see protocols. led WiFiX, enterprises, to the and conversation sites, XX a has with start it's partners that more actually with all integrate of portfolio, to with enterprise like the we lead they other configuration of is don't In often think

it a So nature of both. we of on enterprise depends see but the customers, bit the

Okay. Thank you.

Thank Brian. you,

highlight you. concludes questions the all financial Arista you This the to for and for for Call. good Thank the QX our achievements results XXXX opportunity and corporate Earnings

section Investor of We presentation, our the additional with I mention which forward on fiscal conversation results to you the want website. which posted also to have our look can that provides continuing quarter. we you a on access information the during

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

disconnect. You now may