Arista Networks (ANET) 6 May 202020 Q1 Earnings call transcript

Welcome to the First Quarter 2020 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 & McKee, Director Development. Corporate of Curtis Investor begin. may you Sir,

Thank afternoon, are operator. and With Networks’ you, Good and Ita me joining you President Financial on us. Brennan, for Arista’s today’s Officer. Executive call Chief Jayshree Chief Arista everyone, Ullal, Officer; and thank

press This ending XXXX. March a the for release afternoon, Arista Networks its results XXst, announcing issued fiscal quarter first

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

Arista litigations, call, outlook of Networks will benefits the to the quarter course conference which market potential on During we industry business, relating risks longer financial this opportunity, and COVID-XX statements, forward-looking our of uncertainties year, those for of management including innovation, financial in fiscal of and the make acquisitions, that second our outlooks, term of are impact recent the to discuss XXXX subject our impact forward-looking filed the Form These differ in those documents results specifically to by with representing statements statements the materially views SEC, Form of our apply could actual which We should statements. update these future. our and to no in and undertake anticipated XX-Q detail obligation in after on them this and cause the not these recent from most you rely as call. as our today, XX-K, the

exclude been to on are expressed call adjusted we charges. on this note basis, please use financial non-GAAP and certain Also, have measures that a certain

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

over will call to that, I with And Jayshree. turn it

Ullal Jayshree

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

pandemic, to largest like worlds XXX address First, in the I coronavirus year. the global would

Arista, recession supporting XXXX local are dotcom focused community. the At recessionary of is and this the of welfare both on helping our were which financial XXXX, events unlike Clearly, sector-specific. customers, our the crash of employees, we the of including or

during infrastructure and in these role supporting and cloud recognize global responsibility our mission-critical We communications times.

the to and real-time communication. adjusting norm new of audio video We’re

has Our has time as support load we help case doubled of but customers their the our need. initial now stabilized weeks, during in

specifics, Savis revenue, $XXX million a $X.XX. approximately revenues Getting for [ph] XX% back of non-GAAP delivered the from with contributed per earnings XX% share last of to QX quarter, up quarter. of we

gross non-GAAP XX.X%, healthy of margins software as a services million the customers solid were We and number Our registered our by influenced enterprise dollar result direct traction. mix. of

In is the and provider for tied QX third was specialty followed financials segment at service the titans and place. by now providers XXXX, second the place largest Tier cloud fourth vertical. our largest, enterprise The X consistently cloud

Due to main popular our mix, of enterprise, our requests sectors, mix. three which specialty service providers, mix, analyst our friends, cloud trends including annual approximately provider, approximately providing we from color into XX% approximately XX% now of titans, across both provider and services, includes our cloud and of our financial are more XX%

In geographies, QX with international the at contribution of at terms XX%. had Americas XXXX mix XX%,

Switch of mergers we and the Networks Big In XXXX. in acquisition of terms closed February acquisitions,

the into Arista's early complementarity offering entering space. analyzer traction are experiencing with packet network dense We and and broker data

model. We are as Zoom, of Teams cognitive as principles, cloud campus, with config expanding features well exciting networking open support Microsoft and Google in our based introducing the Hangouts, of WiFi the automation suite

Arista's cognitive with devices campus portfolio and automation. to clients, software-driven was explosion IoT launched users last address the summer of

QX our meeting We are XXXX. target $XXX well on first our ending year's million way to

take build years COVID-XX time, this this to our all While business. must our in with traction, than enterprise $XXX, we and of our especially believe took us prospects seven cultivate as to more we exercise era. we business cloud pleased we that are It patience part will

beginning of of quo. legacy to journey year XX disrupt five just only a and first year seven status are We years our to

shelters country-specific to rapidly respond with safety. to the have closed orders, assure and employee to us required and – our has healthy events. accordance health we COVID-XX offices all changing In

We experiencing and our and component contract capacity we shortages. constraints, Mexico, manufacturers our inventory with are in coping global managing supply Malaysia chain and some are with consequently San Jose,

times is working Arista in continuity our vary for our have doubled customers some recently popular planning their and throughout of Lead and with in products. XXXX. lockstep supporting business

second Our permits we visibility, increased especially us Until, number normal routine, is resume demand. of The in into economic cases have half visibility pretty XXXX to COVID-XX to environment April. sharply more has low. confirmed limited the

therefore, live to what is we it know and versus prudent we our may It this uncertain decline in is time, our XXXX at revenue with clear that, XXXX. assume times, annual

XXXX overall our at manage closely. this Arista's we'll this continue year to and expect We levels, business to monitor

Arista, the midst together with in sector pandemic. the unknowns and entire business supply of scoping global multiple is with global a chain

to in by short-term see enterprise offset sales with prolonged campus new strength cycles in expect cloud We prospects sector. some titan, and the

network Score the our of compelling We value to very highest XX of superiority, is vulnerabilities of the and remain confident in critical customers. product commitment combination that the and the industry great to quality our lowest Promoter Net with

Our recent market circumstances. us intimacy these will leverage unforeseen through operating navigate customer gains, share and

many We modern as our expect than peers stronger of industry networking. to emerge to we migrate

and to I behalf and financial healthy. our well specifics, wishers on Before over of all Ita of employees their listeners, truly wish and for families, Ita? be it Arista, turn I customers safe

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

the our million. lower revenues QX $XXX $XXX of down $XXX XX% to million Total in of just million, were guidance and year-over-year end above

related year-over-year the of this $XX quarter the was of to a of approximately million first part previously, deferred revenue on in decline in recognition XXXX. basis discussed As

was did and manufacturing constrained addition, In for in in shipments the times reasonably lead challenges, some extended and while QX XXXX components demand COVID-XX-related supply which experience we quarter. resulted healthy, somewhat

International a quarter came renewal service period, in revenue, revenues quarter, in XX% with strong approximately revenues XX% $XXX.X reflecting million, the number. up the revenue, at XX% total of activity represented coupled from Service for QX. revenue in from a XX.X% product of total down last lower

by quarter-over-quarter XX% and the year-over-year in were above basis the deployments a largely our XX.X%, revenue driven and Shifts and by cloud our QX in margin of guidance gross up from of mix approximately was geographical Overall, location of last well level customers. titan on XX.X% quarter.

reserved in constrained expected, the one-time saw mix. cloud period and As business sales margin the a inventory software gross we lower by of services in and strength offset our impact, healthy than related mix some more of supply-related previously with

from of in reflected expenses million down Operating in for quarter million XX.X% and down revenue, last to $XXX.X million. of revenue, $XX.X $XX the quarter. million lower engineering This or or spending decline the XX.X% came last from quarter $XXX.X costs period. at were R&D prototype largely

last consistent was X.X% revenue, quarter million with at approximately expenses and of marketing travel-related $XX headcount costs, increased spending. marketing or lower and Sales by somewhat with offset

flat million revenue. last approximately $XX at X.X% Our to G&A quarter costs or were of

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

quarter immaterial purchase We of amounts results in number Big expense of share quarter. year. the and earnings share for diluted from completed prior $X.XX, first revenue included in million XX.X% accounting per period, was diluted acquisition for our Switch in the Our the shares, resulting number non-GAAP with the in XX.XX down the

A of you together which of results, expenses $XX.X full from on results. acquired release. For amortization with reconciliation our and recorded period, one-time to we million non-GAAP those of acquisition-related focused our million consider to $X.X in our results which be GAAP of of have has the in excluded GAAP been nature, earnings provided non-GAAP intangibles, been we in our

$XXX the at $XXX balance period. approximately million stock shares four-quarter and $X.X million our a investments total repurchases cash at our share. brings to per to a This ended during weighted the the or to quarter of X.X repurchased billion. turning Cash, price date Now average quarter million over $XXX common equivalents sheet. We of

repurchase to net capital has of cash solid program stock requirements. increase slight repurchase billion a commencing in generated is reminder, in income and $XXX the reflecting flows, common and As cash shares three-year of first from million operations performance QX our in authorized from Board our Directors The a operating $X us working a funded quarter, allows XXXX. stock opportunistically program of

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

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

the for revenue receipts was timing in our now reminder, deferred Accounts days, and QX, down a related. days XX the As services payable almost inventory exclusively million. $X.X of is Capital from payments. XX expenditure days were reflecting balance quarter

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

closely and to As the Jayshree it under continue around customers, the chain various and continue to our monitor be supply operate how when COVID-XX is partners impact these world. and local mentioned, restrictions, will unclear restrictions lifted. of We, we our

outcomes provide While business color longer-term guidance, want position did interim. the these the to we’re in some and are predict we and provide a not how in to we on managing framing

from economic believe pause some IT businesses spending slowing stable, outlook. remain of or clarity on a to other demand we our cloud the see While verticals pending we could expect of number

carefully and a carefully prudent to range our investments we Given levels. investments it's closer in uncertainty, this XXXX believe to manage manage and our

projects key in engagements, customer expenses. from and reduction travel, while prioritizing benefiting natural and We marketing, are variable other a

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

of additional Now, a couple items. for housekeeping

the We to forecasted have pressure and on have XX.X%. some see rate the continued effective tax to upward increased rate

to addition, other current in lower our the In amounts expect rate future. environment the impact interest income we negatively

and uncertain monitor our to need inherently This situation and will new our we attempt mitigate continue an to current and continue is, need to to on its and however, uncertain supply chain. situation, situation, of guidance to monitor unfolds. Finally, understanding as the QX and for inherently our COVID-XX impact business we challenges and reflects will

for backdrop, With items million, all other based margin approximately of the impacts as as non-GAAP gross guidance $XXX XX% quarter, approximately XX%. to follows; $XXX million is is results revenues margins non-cash a of on non-recurring second and stock-based any compensation XX%, which this of operating and our to excludes of

be rate to diluted expected XX.X% shares. tax XX.X million of approximately effective with approximately is Our shares

Curtis. turn to now I back will call the

Thank you, Ita.

to a call. to move Thank earnings to possible. like your single now everyone please portion to of understanding. limit themselves it Arista question going take the request Due I’d that Q&A the you time please for are constraints, if away. Operator, We to

will of Instructions] call. being Your from line the first [Operator JPMorgan. now of with the Samik earnings question the Arista Chatterjee comes Q&A We portion

open. Your line is

expecting taking are benefit companies. some for the of you question. from the Thanks Hi. the cloud Jayshree, short-term mentioned

What titans. So you bit, are the how cloud on a of maybe that if is you this can providers? cloud elaborate seeing much from the specialty

you you. bit we more expecting longer why upside - sustainability similar And isn't isn't look of this why kind more upside term? there? Thank a Are there the in confidence as of

Sure. others are declining cloud Well, cautious. you Samik. words, titan Arista's Thanks, CapEx spend, some is strong are some as the consistent experiencing other reporting. In with know, performance cloud and are

So, is we've actually an to and a that given the all to pluses expect think spread. flat I flattish cloud improvement it's we because say saying safe this minuses, year, been titan down. the for And

So closely. of course, monitor this we’ll

long-term you visibility quarter-by-quarter. know, cloud on have It's never As titans. we

the more So half. second for especially we'll inspect closely,

unique Each Now in stronger nature. and providers. XXXX, well specialty specialty us different on It's they’ve X It providers We were off depends has but for in cloud for in providers, in somewhat QX. X QX. in pretty actually tier us started cyclical cloud a they QX had cloud a weak terms of architecture. the trend

closely second most I once sense will time, makes to going And we're business watch them half. succeed matter economics of specialized of them. will believe the keep monitor it a cases. this and But be in a for and over use some again, what in

you. right. All Thank

Thanks, Samik.

next Tim comes Long with from question Your Barclays.

is line open. Your

then vertical a a kind Jayshree, color process the I to about seeing us the little And on was it bit and vectors, just of you move. enterprises. you're if longer on little can you talked a what large on hoping -- maybe different as talk about could campus relates give you enterprise two for

people Could bit to little you home? about of So it's near-term working difficult given are lot just on-prem from talk equipment. moving the sell parts that, a a obviously,

color you. just there. little if a more give could you So Thank us

Sure, Yes. Tim.

customers, we've think So very your center. with recognized already good I well differentiated recognition for product. enterprise Arista's sector, question them. on And And been brand X,XXX-plus very to we've very from a answer data engaged is our with broad got there

shut a innovate. over just enterprise in we’ve had had XXX, And a doors with, customers down fact, engaged advisory all So, global with got engaged the February, been on and us, we Arista little were we most customers. XXX in before recently we

very new intimacy high, customers with is well we continue them enterprise to our with projects. and both So and existing with do

will I prospects. is We're enterprise we in campus not think enough face new and where get the with them. to be going challenged also in time the

virtual of capability fact, is of lot new it's a virtual for certainly But product a enterprise in even doing the testing, conversation, be virtual webinars, living building either. virtual We're and to their partnership campus both events, will challenging. world in. both, contact And for and campus relationship, level upgrade prospects and we're the nobody in ebCs,

familiar should prospects, COVID-XX customers. for this cycles definitely will projects delay with okay but it new So new our enterprise be for

you. Thank Okay.

Tim. Thanks,

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

Your line is open.

commentary just call your from you're to XXXX planning levels. healthy. stay is an Thanks. run wanted the OpEx on said, to you I that's beginning well Yeah. comment? follow-up, Jayshree, business the versus assume the everyone of And I

an Or maybe comment could the of of to OpEx to the where think is relates it also allow, end that revenue kind year? tends you at

No, better the than I second all, have half. we first Yeah. think - we first of the understand half Alex,

And unknown So, we please take I in know a second grain to supposed half. know I about but with much know CEOs you, and are the everything. tell everything, don't this uncertainty honestly can of

to doing And to the And is that? than expense and the control. we’re control want what add top what the So, can and we what year. the more I you controlling for can more line, Ita, Ita business is

better the mean, Alex, think, Yeah. of investment focus it's of we a the OpEx rest plays on right? the of the understand and out, levels, just until How kind I what I year. rest year

And looks us should back expect But were et see things of on that so, kind we where cetera, can for similar to unfold, the that's of cut for spending back expenses, as to And change now, then, come XXXX. you and the some right? focus. we to that, variable

support. and I key absolutely we Ita in something, invest want will to customer peddle and reiterate And metal continue R&D

since some reduce We spending. marketing perhaps will we travel, obviously, travel can't IT and

more. if And control so we and can what manage we business. the invest improves, certainly recalibrate and it we'll on work And

comment, I give the on that. mix to appreciate Ita, just And helpful comp, willing Obviously, to XX% that. titan on have you're cloud be would year-over-year the it year-to-date. if

Yeah.

and been. a the the kind we've trends put for how put range year, out it And around in past I right? the think deck, in investor of some how there what year the split played has looked it's we during right during

a prior So past commentary at the is then, short-term. And the deck investor more year, trend year. looking Jayshree's over is

that a range work to with. I you So think gives

is for is similar a think slide a good it And as, slide you I It’s guys, right? XX, it manner. special that's

Okay. I that. appreciate Thank you.

with William question next Your from comes Ader Blair. Jason

Your line is open.

Hi. Yeah.

comment can that in your one, on ones, secondly, quick really And out QX outperformed correct the two Just Is very is quick. going versus to pushed line you of then million? now? in promise $XXX Jayshree, cloud underperformed? that time enterprise I are Number be expectations it campus

think becomes QX. if a enterprise in supply supply there as I Jason, I in QX, stronger chain. QX, theme theme was We performed a cloud constraints say, in and would -- expected, which Okay, in we both

Our pretty normal verticals expected. were as

In terms on are of campus timelines, we target.

that the QX and personally acceleration, We revenue that million due first expect there. to wait But see to committed I now four third to the beyond in year, quarters ends we do in see $XXX change like No COVID. and we that XXXX. second have to are the would

you. Thank

Jason. Thank you,

Kidron Ittai with from Next Oppenheimer.

open. is Your line

second ladies. Hello, to you're very quarter Congrats, and say our guidance. must brave Thanks. I offer

out. I So it works hope

couple questions of Let for me A me. see.

over of the revenues that? question can because much business? back on all, the again, tell going levels? of and XQ, from you we investment rate of So can run XXXX Alex's spilled chain, supply understand XQ true XQ into the on us First how In to your

comment? to capture that to run a total want is OpEx just does modeling XXXX? make this, just sure, appropriately Ita this that equals total Or fine-tune rate in wise. I mean XXXX OpEx I

total as as will the would we're minus now, managing to again, number, how mean, to overall today, we I Ittai, we know for it more, think say right? or XXXX we sit Yeah. I we continue we OpEx go an address it. further. that's that through obviously, plus here seeing we're But as And year,

And as the far as push out?

Yeah.

did answer best that supply-constrained we So question, got in Ittai, our to but QX, we in March.

think I will really QX. be supply-constrained we in

So I less about more think supply-constrained. of demand and QX do is a case about

Ita. you, Thank Jayshree. you, Thank

Leopold question Raymond James. Your next with comes Simon from

is line open. Your

guess of wanted I challenging more understanding new I pipeline, opportunity. the better the Appreciate I got your sort a regarding or products, of you. campus sell certainly products much crisis, appreciate in visit customers/new comes XXX-gig business the COVID you is and I'm what new products. to to Thank how pipeline. in the comment for made looking it making from of you’ve the question

I'm overall sense of But campus to the what you. the targeting So was just guidance? that Thank and the into how that I how quantify understand fits that guess, comes struggling comment to with trying is a lot

Yeah. Thanks, Simon.

and understand important already to all, Its existing campus of small business. our overall First into to who it's customers, target our million. our naturally that can go $XXX we EOS is $XXX CloudVision. We know compared do that million believe

But the new in we and interest surprised said year, pleasantly as were I prospects campus. by last

new going to non-COVID us. I where more a level familiar comfort expected a to to think with likely in have So the XX% back I environment, prospects. our XX% current environment, are go would spend customers existing customers In and we're

prospects new will time. our take And

existing familiar not in last XX%, XXXX, was be on QX probably maybe will it which were we So year. trend on higher the customers even and

out that implications the And well? for has XXX-gig split as

No.

Okay.

again? XXX-gig on question your was What question. campus your answering was I So

campus broadly Well, I XXX-gig. new, speaking, of guess, I including and think

see versus that slid XXX-gig your when? a And if want sense timing the so market, I prior of has of get to out the expectation? how you So just if

Okay.

So is high our we before, we will first very, for and said of we high-end all, of late be providers And opposite campus. XXXX enterprises, in XXX-gig frame. XXX-gig, enterprise, truly time semi as believe, the trials early very quite in cloud, the expect

and XXX-gig low Nothing we continue really but production, availability there, due to XXXX. to material cost-effective the that. issues actually, optics even general has COVID lack changed see And in be of of cost, will some

factor for have OSFP plugable announcements. the we for XX Now a really higher exciting introduced low than simplifying product highly did OSFP DWDM Arista some is a compact, In power, to line which form card, XXX-gig, kilometers. we distances up Arista

their dense Switch. spectrally and and also XXX-gig with demonstrated with Sienna most interoperability efficient We Arista

So cloud continuing and for existing always our XXX-gig ports. number is just - to trials of to are researchers customers definitely we've we with said, the in you, But titans. as in put according this XXX-gig ports expect QX, X,XXX market context

XXX-gig so going think there's to two. don't several difference And the the I the change between ports in millions, term. However, was that's near magnitude X,XXXx

Thank you taking for questions. the

Absolutely.

comes Kvaal question next Instinet. with Your from Jeff Nomura

open. is line Your

wondering was course second I you Is sense you. quarter, get the into if demand a the it the little going of quarter you is of April, through Or the developing? understand thinking over so of were help better could just the we improving that the Thank change thing? type how about Yes. of us end and strongly? nature quarter that it to

Okay.

think full have of we'll to So in impact second I experience COVID-XX, think much we see yet the that more the half. I of

And terms I So QX, mostly we'll look of our look chain still tail chain. if we constrained. it end, at at if supply be supply in at QX, the very experienced I

QX and really enough up we couldn't we slow QX is as in better, both you up It March, because pick picks them -- and were understand couldn't theme, we theme for of seasonally us. and enough. think I So quarter know, ship QX,

is theme into going QX. to that And continue

strength in our do titans, all see, and is cloud we see as demand second worry think We I QX said, is the good QX, real So reasonable half. but about in we shipments.

the with loose how Okay. kind for the Are loose quarter? for of range dollar you us first able range kind second to of in a a or share either how dollar

first you Well, but done, is quarter I than the projected consensus. we can think tell, lower

and that of more and supply all supply related. count as that as can chain more chain You

quarter look at so on I going you mean to that, if that for revenue some our QX came not that magnitude the Jeff, idea of stage. it from where think, out do to I versus you try we the Yes. right? this guidance, of at first I'm gives

Yes. stage.

Thank both Okay. very much. you

Thank you.

Thank you.

Aaron from Fargo. Rakers question with Your comes Wells

Your line is open.

maybe question. how about think a of server the you question for about cloud Thanks taking the We're from public different industry demand curious asking lot But same profile Kind I'm healthy of of seeing talking at the a these guys. again. way vendors. cloud demand of reports several pretty the

the obviously, bandwidth the effect footprint others. deployments pulling kind you see or Arista? numbers a means And Microsoft and network We've what from versus for lag between actually of benefit and server seen more expansion

customers adding see expanding three do we all, needs. demand seeing density cases, are increase for they're case core we're in to expansion some capability server or also or their of use Either basically racks First international cloud spine their titan or additional in areas. our some geo

Although States, ordered contribution. from have been the some U.S. them United increasing of our titans

clear. What think forecast the us on very, Anshul have very that use are I very with see closely contingencies. scenarios sharpening timing is and us that for working the their we lead because really working and times and So understanding and team on and also is we long cases

to at try to not for well. look looking just give at So they're think second half the starting are as us when XXXX deployments, their QX, they they visibility I QX,

planning And our them for XXXX prudent QX so into of frame. while some or their business have not continuity any and QX doing factored seeing very are that in we we time forecast,

go And you – if I heard ahead.

add Anshul, some would to to more that? you like

to correlate in into components other of quarters you because I is some a go that. of And commentary time those it's because spike the the this in especially if that components other absolutely. one-for-one, pieces in frame remember about so know there's previous cloud where of No, been there's shortages on. coming compute, hard and lot other

has see will a computers been as and So some of stable. up result there some that on you Networking spike on. might volatility be

were the to towards prior stable. we of and networking on so They end on. constraints that saw short not things QX As gear was Jayshree but mentioned,

had wonder and do the commentary I I there’s on traffic growing comment street and so up of lot and how needs. a on. on last the spiking one is traffic And work-from-home and

have capacity. mind keep to relative those to We cloud trends the in overall

from need spend overall small fraction videoconferencing the the very calls markets. cloud means But working yes, phone home, may of And in edge a or broader or connectivity. that's

So yes, sometimes certain impact quadrupled less Xx traffic or grow that's X% the a to spend. in than regions. overall But

hyper So focus half the I impact rather would mentioned, there's to in are say them. second as cloud that some But things on material us. than we'll stable. And on now with

a stable that's meaning. great It's answer. And a

cloud expect You to would full for previously meaningfully the year it stable be be versus down? saying

cloud Yes. said, deferred Aaron, Like on revenue year-over-year. when wrapped expect flattish about – to be the year-over-year, we clarify we flat said, we thing we the talking again, Aaron business. the before just the to And business trends commentaries we're around the said, get Like we of then the all and

that, after the And the But context. it And the from deferred had that to to with improvement we and in then we're additive an to business about is now – then we think saying it's stable flat have deal still that afterwards, right? right? talked being is obviously, deferred we down,

Thank you much. very

Aaron Thanks,

Aaron Thanks,

Rosenblatt comes Your Ryan Koontz Securities. question from with next

Your open. is line

think or products of segment? are somewhat And rolling that invigorate there sales different that Great. Thanks. to is Or strategies the asked in you you going are new a any service of motion there you. segment guys kind Thank about that I out? provider laggard. a

that. for you thank No, Yes.

towards We more product more capability. marching and have been

and and chalk software a NPLS, X.XX.X, routing, EOS grade plane, flow just cases very just a introduced MPLs aware, of fact, routing use towards on features, plane engineering. with release provider In label, paring data service segment the BGP, traffic control transport we full segment single EVPN routing targeted cloud and

I product can to things tell is network. operationalize these richer you you service is what getting tell in our also time providers in richer I take and What their we're But capability. can

early call existing are Tier Tier provider customers, but our small to much We say win some to it. and doing ones, X and ones, starting already too service too early X in more and are we about okay small to

Great. Thanks, Jayshree.

Thank you, Ryan.

Ryan. you, Thank

Erik Suppiger Your next question comes JMP. from with

open. is line Your

challenge home not a taking the disruption issue where for or calling COVID-XX? where they've the the Can large impacted Thanks staying switches? getting execution in enterprise centers, where Or issue you are people is Yeah. and servers the and just most is impacting? a the personnel it accounts sales by discuss customer got deploying question. how the it actually at data is on Is

So classify Eric, ways. I in two would it

the enterprises already make are familiar enhancements. to We're us. us. okay. large to They how think Arista with I are with that work intimate know incremental They need and with

We led Chris are our of Ashwin, led by are right? supporting tremendous existing team, our systems engineering have They them. our Team by customers, with Sales Schmidt amount engagement

see difficulty engagement I dramatic change see So a product don't Where do differentiation. in sales is I prospects. yet or

be steam, logos. we're in. amount have So logos new customer our having tremendous where new gather we especially customer new logos XX% of been a to of and -- continue customer we healthy have And our having come a we tremendous internationally, amount

design face-to-face. lack concepts. were group to clinics the especially requires slowdown enterprises of convert deals them, into large due Number large network However, and large of and of obviously,

training, them familiar we than to existing march own forward more more able educating in So deployment, whereas do customers, with we're our with with can we progress. time are spending enterprise

Okay.

Thank I think very helpful. you.

Erik. Thanks,

next Your from question Morgan comes with Stanley. Meta Marshall

Your line is open.

Great. one Maybe just for Thanks. me.

kind been - data of to it you out early build the Xs of their behavior has own Tier change there forward, too as Tier of X any expect the or clouds. leverage whether of and cloud they kind Do noted will go centers Or the more? thought? continue public You But just of some the strong is kind

that to have Thanks. to behavior? change any

have the centers they're the their I data smaller applications. before, that know of some We of said their And public question. their depends good expanding going are on and Tier a they're it that's pausing ones some just continuing to for are not X. and but Others Meta, paused, Tier cloud, it's spending. the the larger Xs specialized

So it's will it their cyclical. complement but succeed the use my in belief that they cloud, cases will be public continue special and to

are coming control cloud. them year in of what back we are seeing They clouds that workload, specialty didn't some of I are public the is and they realizing the of can last and some this some much belong do year. And it the think better

continue So I a they'll -- I to place. think have don't

And in important they fact, and would traction a content streaming with particularly users delivery, some CD with We work home real-time of the good and example with see there. content from and of you the why some improved that guide. aggregates can make real of delivery and the XK was saw flows, there's XK customers, millions network investments

Got it. Thank you.

Ferragu Street. with next from New Your comes Pierre question

open. is line Your

for on taking my cloud. One question. Thank Hey. you more

have I this lower the access So between sell of end perspective see the year, server was spine. you things year that at And a versus is, is you'll flat mind to -- your last DCI, of higher and evolving? revenues the on mix in going mix lease access, level what for have how things you you wondering hierarchy your sell couple for I at universal in this

a this And also in product. products last that to - you. see Do year versus look based split evolution Jericho-based based or maybe you be and another mix significant products Thank would way between Tomahawk the versus at year?

Tomahawk of no. very would a servers. value always We've I Thank to Trident products a had the you, and nice family say is answer connecting with Pierre. mix short in

value the for and X,XXX Sorry, the the depending use cases, Jericho the flagship, the family products on then both. product customers and opt volume with so with X,XXX

is well. the not pushed It's times change very very, down year in XXX-gig doubling next are so I mix. change and much the the seeing people currently cloud. a in say would that and product getting we're as are seeing is we're biggest lead on both both XXX-gig popular They're products, out challenges

Thank you.

comes Your with Marchetti John next from Stifel. question

open. is line Your

the with I'm any a Jayshree, much. even kind of if on are the the impact verticals it's little supply broad than bit an very right of now, constraints group. going curious it one it's having that impacts others, Thanks the enough more or of across that any

here of sort in. And stuff guessing I'm that, a that inventory, then you a follow-up couldn't because to you inventory quarter? guessing I'm that you bit something bring Ita, of out out sold Is other likely occurs some as because just of again bit

look would. kind an that good stuff -- maybe are it's that's through now. onetime of take haven't opportunity most that's that and at me thought of a thing constrained, let a what -- we Maybe some we think go to mean I where I Yes. But sale inventory when that first. you we're things

for why it else, back typical gross driven a to right. I XX%, mix then XX% margin the think the anything and be that's than to comes guide just by customer So more will

sharpen Chris really what designs Anshul John, and Ashwin to our is to network our trend sure with What not verticals. us And them? I'm closely what's with can closely a and we when timing available, on key forecast what on to their and see worked Yes. times, and and customers work lead we are ship, we their saw that question your extended products not, did answer very on

improve this and And I - is Christopher - hope this this really working Schmidt hope are to we are QX. And last I these famous words, in should can this. we team John overcome and but hard McCool

to it customers. needs chance and considerations. saw their a more that have customers’ will deployment I by factor we fulfil top anything XXXX But didn't think I key a into by see lot vertical. I our

Thank you.

John. Thanks :

Thank you, John.

Question comes Suisse. Badri from Sami with Credit

Your line open. is

are going at types different to offering versus different more maybe a what's Thank little competing they a you us XQ in companies? least Hi. observations was could you give curious I maybe of had dynamics Or if or on some on region you've against XXXX, of what Arista just you. an European has bit in idea offer? little in are bit the Europe. products, And

I take you've XXXX shed in observation? But going as you you on customers to in light seen or COVID a in of know also your U.S. Europe. either that on lot post that, dynamics anything can change, you have an want pre or And made the X comments

No, for I think is presence Arista, because new. internationally our somewhat

are different countries. We in of stronger and our feeling investment in terms sales

we country-by-country, we say, two about ago. a now than or So Europe even did, better feel year

won between major I is titans. provider of cloud they Europe the equivalent service States the United What titans. we haven't is, have think the difference and And don't

tend have we So customers. to many wins, but smaller

countries level been developed my that team were but And that strong. long it the at Europe especially in that's Germany, session it of has very level November? last It Israel -- but has the And ago. -- our was like in engagement, entire think team all France, our seems intimacy was the Middle We wasn't with executive customers developed forever, U.K., -- country-by-country, there. I fact, of even a last East, the customer

base Arista in of do customers U.S. the European size embracing add. But I we and think the is customer So value for its differentiation don't we the just have

you little competitors it. both seeing competitors Got Europe? Or in similar or regions? are a maybe different bit just And in then competitors

some not least Europe. That is tend similar difference, we see the very in Asia In we see to at Europe. but in similar, don't not

Got you. Thank it.

Sami. Thanks,

Evercore. comes from line of Daryanani Question Amit with the

Your line is open.

on Thanks my what specifics Difficulty] question elaborate perhaps guess for I [Technical you taking perhaps you guys. could

Amit, hear we can't you.

you. You're lost choppy. We

ahead. were with go You - dealing

you chain did have what did quarter dealing bottleneck the have high the Would issues end like? supply or and if in issues towards June with different? theory, not the what would if chain supply the you not are looked you guide it And be something have or

we to Well, the than since -- issues. reality But is and it's chain theory. supply difficult speculate the have different

are we I Yeah. There's this a know to better. right? don't Obviously, movement constraints, those at point, that of there right? concise lot But

because constraint. That have doesn't we matter

if us. would more bottlenecks how normalize. to you the much alleviated help help guess, this was could way, and trying times size supply when maybe year, and help you I chain could I of half the guess, lead it back in you another maybe the maybe But think

in Is half that gross a the constraints? supply margin first the there year? to the the with dealing because Is of you're way Thank impact chain quantify of you.

it incremental we in mean, spending saw little very but was QX, a small. of I bit

some place XX% go. in I'd it's - I good to of we right? the that to QX. a will at is back and Again, to think see again, manageable XX%, and But this the range We go we'll we'll be see midpoint then stage, start, how

some the there half, prioritizing we over but you're something see at supply that's don't first really things, costs some because in least other is significant. incremental So

Thank you.

Amit. Thanks,

Amit. Thanks,

with Alex question Needham. comes from Your Henderson next

open. is line Your

I Thank Jayshree, that you're was approaching comment about COVID is think insight very more about thinking are How conditions, I accurate, much. You in enterprise the you executives some concerned is probably they're back into they're hoping way half. you in made a about thinking spending? could terms which the us what of? give

more demand you've related. the lot executives assume that’s I a saying top would of are with business assume that place done And you the at already about programs in that calls supply not in are getting I firms. related. process, chain It's completed. What are to they

expectations in pipeline quarter second that is the spending constrained? other the exit the off back any may as be way, there and you maybe put half falling for to But hard it sharply

Right.

So Alex, good a that's question.

And very XXX-year will. once constraints way them. enterprise think I the XXXX they overcome decision-makers plans meet They Arista phenomena, do have we and all our and would like with struggling to are, deadlines. to work in just are key right? the executives I they within And believe much supply and

I believe -- will multiyear them a but a plan take this XXXX And how also they'll about take in not for horizon, to many just start projects also world. of horizon. virtual thinking

demand to we some prudently. systematic And that visibility don't challenged they while demand, see if plan do planning. will don't prudent have we we think So significantly be

with before, is Where get chance said Arista, projects. on like hands had Arista, demand people a we are a but with to lot Arista, to who haven't will I People new their yet people testing do have who think familiar be more challenged, love it.

X,XXX-plus work and nothing projects we is. more customers or So year or But to this as year continue be with really, that may comfortable us, with their – engage to with plan next we'll doing part of enterprise really certainly, customers being the want

Thank Great. you much. very

Alex. Thanks,

Thanks, Alex.

Paul next question Silverstein comes Your from with Operator: Cowen.

line Your open. is

Jayshree. Ita, me, hear you Can

Yes, I can, Paul.

– here it’s I’d chain come question is which different how interestingly much only got of risk is have the I as question some of I’ve with like the demand. this say, displacement in quite much sort versus as a be again, titans not ask community try for So may classic weakness time. to you that supply of want quarter, cloud for investment to the terms but for up the worried

that currently And the general to relative lay position not its the Microsoft macroeconomic to day environment. your order – going in recognize just background But in to particular the concern. current about change any given in [indiscernible] your in for with

Maybe architectural is will of fundamental cloud try does and I thesis generically look competitive would seeing you're if question wearing Okay, I the We're titans competitive sort not mask. shifts. with you are just the a I But unchanged. say landscape that like or very answer muffled, sounding and the what question, understood major Paul. issues our

the that, look Creehan, we market XXX and gig. both where one recently if fact, the you validates are XXX it number third Deloro gig. spot share for doing consecutive market the In we year, our And in in are from number at one released data

And we for the share into data continue market high to high-performance switching. teens center increase

Anshul, are to any we I'd with pleased there's our call year to So, highlight. including you to you see progress year, want issues like after specific XXXX. titan if

No, Jayshree, intense. the including still Paul, with do continue to customers Microsoft, level joint sort these is and we as we've development, of before, of pretty said

so. But overly to there's these will we're environments be are that So, continue not competitive no worried. Yes, major shift.

has to Paul, the for -- Anshul is work been me highlight this good a doing. time

a platforms Sonic we interface, in use can titans cloud just is our close networking. mentioning. rich Arista work long working now abstraction know, of for And is best-of-breed and a collaboration and an on introduced you can this of history have Arista open who example with another we our Anshul switch layer that abstraction top SAI. As the today, so And

mortgage if risk been to you from sittings those relative incremental the anything to all haven't would just could of appreciate historically? the concern exactly Jayshree, phenomenon the forward-looking that comments. share and cloud I where or you cause seen heard you've I so And [ph] obviously, follow-up, with share But booking displacement, is and market respect

On best to of the Yes. That's paranoid want and nature, concerns. to continue way, always and hand, deliver we are be X best. should we our and we the that

particular change have no we the landscape. or shift the in other no concern competitive in concern or hand, radical On no

Thank you, right. All Paul.

it. Appreciate

Paul. Thanks,

with Next Bollin Cleveland Research. question from comes Ben

Your line open. is

about these I'm you think just could evening. interested for looking term. you about the you I tell longer step your customers picture for question. bigger and a just I'm guidance. Good back I'm was us broader Thank not how taking little thoughts, hoping hyperscale bit investment.

term, the demand Elastic seeing material Saas, change of kind the for in cloud in themselves. for drivers not migration drivers, seeing addition that a interim, capacity these and we're of The growth adoption framing near demand to rates, those big need

I'm in the themselves. big change demand So a seeing growth those rates, drivers

term, investment? Thank think interested specific the meaningful kind you. it acceleration I'm material accelerate drivers longer broader that growth are Any rates? for an could you of in think be about what So the you how that factors

cloud titans and Ben. I when standardized EOS greatest acceleration huge on you, spine. especially a Arista made came gigabit for think XXX architecture look, for the lease Thank Well, Arista's a universal the to fine migration

of development that over then and titans the those with - of scale acceleration, them all over through on cloud. to us, focus our that join allow region datacenters co-developed a number top the and all So distributed

the acceleration So the capabilities. of with their from with used the centers XXX-gig and and next storage and I more data server possibility XXX-gig think extending their comes cases, density

be think in I the don't year three but And next could that’s years. it this necessarily

repeat XXX-gig in a Anshul, that? and be you So we something will we have add to levels. succeeded to XXX-gig how or more want to do

they and with the of started the storage. with moved down different centers the data are look compute know cloud continuing and Yes. and at way that apps types to to I then journey. titans Then And cloud

the but think the now don't And please the their that large me in to connect continue And think that into edge view telecompany make type just so back phase next edge the centers. be in at more space of computing, investment edge directly then data of mean thousands this in pace I of will I by tenant invest there area.

mapping built so tenant different space and With being in and one the be few on. overlays encryption next these of to or from the years. kinds other And different of continue will and networks types built

the if most those re-stitched the how Internet. longer I now, projects few think picture, And wow, years it companies from the you at of think back look and XX years. in look that's this very the will is cloud the five, next some strategic I significant, because in are we say,

And cases truly Thanks, and they routing Internet. DCI redefine Ashu. underestimated. cannot the great. use The That's be

Our Ho Woo from comes Bloomberg. question with Jin next

is line open. Your

the may it relates a your Great thanks at your A bit as conversations close nature for all? This longer-term be little squeezing to question with of customers me enterprise. premature. enterprise changed in. Has the

playing I why networks start today? a to ask zero reason that one bit a into to that think should faster conversations their network does given touch that at given little would have the get customer out environment, stay we're thesis And no How home, automation, can anymore. fit is, the that

enterprise will that Do hyperscale enterprise provides And cloud-like you given think in that the you that -- positive have that especially that evolve? you the do environment to to long-term. be big switch might a guys

of a that operational to But with more very, you and is here. data customers ignite our Jin, right all good Woo point very up a box. bring really more have important. center But We these and how and campus to use No, the Yeah. different tend capabilities talk box are operationally. great thinking cases. about It's to

automation, it, the at right, huge day absolutely you when so look day topic. day And for center, campus, data one you're touch zero two, click one, zero,

and other one and Big vision. only why are we igniting Switch is streaming this we is The cloud real-time telemetry not bought

of iCH the really sort sum extending now vision cloud fix monitoring with extend But relative into we're we're observability data network analyzer, and and space dance that and of very pleased fabric. package to the our

operational more and So so complete that’s automation combination very that important segmentation the well. our going XX% beyond availability as platform conversations energy or enterprise much future be trial to is are in and security going to analytics,

the been that's customers potentially Or decisions on they're delays? turn and does crisis you've to been I force accelerate conversations and make left the guess, some decisions So causing purchasing purchasing having these that that pandemics for that, a or just ongoing Are time -- quite follow-on the architectural now?

Yes.

we'll we're becomes on we say automation importance and chain, were the going I early question. longer. think more continues on greater if too but the Last I overcome get supply it's getting I of pandemic. think I anyway, hammered think much because to but more them pandemic think it's the on analytics. now, that, Right They of if

From Ittai with Kidron Oppenheimer.

open. is line Your

was the for of from pressures pulling any into they plans Jayshree, did a Great. quarter in given from a business some that a half, there do that that Jayshree, couple. just the the and work you, get was it Ita. sense effects you One in respond of so budgets. by your, Again if pull-in customers just home and one half quickly -- activity to to second for first had

for Or travel; as you, headcount well? you're money How And comment, anymore. do reductions Ita, less you're I T&E, OpEx understand on not that? lot of there. XXXX this there saving clearly think is are the a business marketing, less just planned But about flying I

I mean, doing That's and of preserving yes. just I definitely and are employee take that resource that one most maybe talent. No, focused think we’re Yes. -- I'll probably kind on first, we our reading. important

expenses We’re base. can that and kind looking a hopefully, the at talent other manage employees of onetime areas, type variable near-term preserve we other window and in more expenses,

And answer to in pull-ins the short did not experienced question Ittai your QX. is, we

luck, Good good. ladies. Very

All right. Thank you.

Okay. This concludes the Arista QX XXXX Call. Earnings

our additional We which Investors results, today, and on Thank joining for have can website. please everybody. fiscal posted a of presentation, which the us section access you provides safe information you be on our

this today's concludes gentlemen, and Ladies call.

may You now disconnect.