Arista Networks (ANET) 3 May 222022 Q1 Earnings call transcript

Welcome to the First Quarter 2022 Arista Networks Financial Results Earnings Conference Call. [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. Ms. Liz Stein, Arista's Director of Investor Relations, you may begin.

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

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

of fiscal specifically call to We been expressed representing financial and During year; please total have of after them from documentation these including this materially charges. this to on and those as statements, will and manufacturing which make we the the to cause course note not measures differ filed to forward-looking for statements quarter outlook with of and capacity, and the These undertake our call. of market certain COVID-XX, these actual results a are forward-looking on basis on which you detail adjusted uncertainties financial addressable in our that addressing XX-K statements. impact today, and Form the second rely are this and risks to apply views recent update in costs, future. that purchases longer-term anticipated on use could Also, benefits conference outlook as our by XXXX XX-Q component call, obligation those non-GAAP of Form pressures most inflationary the should our the XXXX no our these constraints, statements Arista exclude innovation certain strategy Networks' SEC, financial acquisitions, management beyond; opportunities; inventory for product relating potential our and in subject supply for discuss the in we market business, chain the and

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

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

Back In uncertainty trends. are in now facing in over express addition global We renewals increasing thoughtful we by record donations inflation behalf to tragedies the of to for On Arista, revenues contributed concern a Foundation. the thank employees war XX.X% of we the the Ukraine delivered and Causes and QX for the with XXXX. deep Humanitarian Ukraine with of the the $XXX.X Arista pandemic, matched approximately Arista Services, non-GAAP their $X.XX. share per Ukraine to support software million our the the revenue. quarter, of earnings

continuing chain costs. term. Our near non-GAAP XXXX, sharply gross by supply sight in certain influenced elevated Vendor constraints decommits clear and components margins increased with the for of in was XX.X% March no relief in

and Cloud followed at terms vertical, In providers place, by our XXXX financials was of service Titans QX enterprise, strongest third and providers fourth. tied at largest specialty cloud verticals, and

performance included center, XX%. XX% to mix Americas Arista the analysts, in data XX%, switching market approximately international overall in gained geographical with According market XXXX, share Our in at the market to share. strong contribution growing high-performance at calendar

growth this our cloud achieved to also the XXX-gig networking. has chain. all challenges supply proud pioneer despite Arista #X position a XXX- XXX-, leader switching maintain and are in We to client and the in and of been

as with and is the health education new in well tech care, logos increasing sector. relevance customer enterprises, retail provider Our as

really greater base the years CIOs million networking horizon personally million, XX than million-dollar worldwide million changed. and the greater These engaged for than X in million, XX all last the X What's clear than Our have than CXOs doubled logos is of that include: across and greater categories. as planning X in customers. categories has I greater

our been customers in strategic The nature nature. never Our discussions visibility our of and most with is stronger. has demand also

a to illustrate try few examples. me with Let

and unmatched the workloads AI on upon can software analytics. feature. our threats detected building on changing scale their Network EOS is integral campus, an the secure requiring for instead For data based data is rich of holistically. client-to-cloud compute-intensive, AI now XXX-, AVA with we're XXX- to hunting to becoming In with managed [indiscernible] enabling a and security migrating on networking AI across virulent is our as sales way cognitive zero-trust and sets enterprises, manage larger in XXX-gig both In example, and being future automation and heritage service sensors. the network expand and performance cybersecurity be domains clearly that customers superior, the to Spine, are and cloud based thereby network threat to CloudVision is

this to EOS proud helped forward for architecture. specifics. Lake preferred Microsoft that November, Titans, progress the growth. fulfill in decade-long double-digit is for And of it and foundation QX engineering our now is I'd of years networking, with Arista and Data to an Clearly, it's all Arista's well, In exciting design. multiple products of and stack to last I'm turn available to prescriptive all to XXXX and way data-driven expansion midst conclusion, our launched traction Cloud Network so cloud customers' right network Edge financial resonating over This with partnership the validating Ita forge and especially the total that, market use like Our growing we has and with and hyper predictive customer look for or cases. joint proactive, scale TAM Meta, quest

to reconciliation noncash our for our results is non-GAAP and were well afternoon. above of is of million, QX on our nonrecurring 'XX and certain guidance and revenues other QX based year-over-year million This our XX.X% earnings million. all Jayshree, of acquisition-related QX excludes A charges good and Thanks, compensation the release. upper guidance of $XXX end impacts, analysis and results selected stock-based $XXX non-GAAP our provided up full $XXX.X Total in items. in GAAP to

which for the $XXX.X revenues of in higher million with broker international customers, decommits or down and in spending of Operating $XXX.X deferred. Overall XX% R&D revenue, million. in from continued gross in last of quarter to our of or our our quarter, period. margin XX.X%, quarter QX first at million XX% quarter deferral cloud Services shipments approximately the range up unusually of healthily total of were in some XXXX. This in in were at resulting XX.X% $XXX.X was cloud to accelerated XX%. revenue, Our or the higher XX% above expenses software an for high midpoint remained headcount quarter guidance the revenue came our revenue in expense at Sales from the the revenue mix at decline overall to global expedite primarily in and of including in was of up in some the constrained XX.X% headcount million or and International $XXX.X compensation with for last expenses compared This product purchases reflected quarter, business million. $XX.X strong million to came increased period. primarily and higher from QX. variable with from marketing to of supplier growth X.X% quarter costs in in customers, subscription shipments first enterprise introduction fourth driving some $XX.X new contribute fees the period. with combined revenue, million $XXX.X the period. of increased quarter, international down quarter last XX.X% XX% the Supply shipments titan and volatility the contributed the reflects approximately

benefit marketing expenses. lower and to COVID-related continue we reminder, from a As travel

$XX.X with in quarter. revenue, came at Our million last or G&A X.X% consistent of costs

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

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

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

reminder, As repurchases acquisition repurchased market our $XXX amount future dependent approximately actual million timing we've or shares October now conditions, and and billion opportunities authorization. of against business business is factors. X.X $X price, requirements, and stock million The other Board XXXX on a

Now reflecting last quarter growth with were of working in from X.Xx. DSOs and combined earnings at for $XXX.X XX billings from prior operating higher Inventory period. inventory. generated the first QX, deferred cash quarter. in investments. increased from $XXX.X million consistent XX in component operations the linearity turns came revenue million to continued the million up in to at turning performance, period, in quarter, Inventory days the up primarily We reflecting in the the of strong reflecting in days, cash with capital performance $XXX.X quarter,

demand for supply orders that billion beyond, commitment for from periods purchase in the our number environment and and up billion, quarter continues. XXXX lead largely in strength time QX. was $X.X this overall and reflecting commitments long Our represents $X.X The significant increase expectation those for

of for order to reminder, we a As inclusion or the mitigate these products prioritize strategies early continue in to of newer, obsolescence. excess risk help life-cycled

and quarter, billion, can services-related is linked $XXX Our on a deferred related quarter-by-quarter Titan basis. with products, large most revenue, balance, represents and majority the balance directly revenue total up was to balance Cloud service from million clauses of customers. largely $XXX million of the in acceptance which recently product revenue QX. from of up new this contracts, term our deferred for deferred The to vary Approximately $X.X timing last $XXX million

QX, Capital Accounts quarter healthy expenditures product higher period of days new product resulted million. XX introductions acquisition and payable significant in increased $XX.X and rate use we timing days with for acceptance the clauses and receipts customer-specific with reminder, a days, As deferred in inventory revenue XX of cases customer These a were existing combined the a remain payments. expanded down were new amounts. trends from have customers. in reflecting

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

for growth, heavily across Day supply the somewhat Analyst sectors balanced for revenue market Our XX% environment. year-over-year outlook our constrained and XXXX by calls

XXXX, across demand remain from strong As business other and metrics through Titan, cloud we customers. enterprise our strength progress particular Cloud with the

come additional quarter. margin increased a components accelerated supply negative From business try to sources percentage this decommits must While means backfill due decommitted gross and line, in in supply-constrained lower impact to may on perspective, environment, make accretive any we've to component forecasting in and supplier model a also with These we mix this that a while fees. gross response expedite the cloud difficult. have momentum added decommits shipment to margin manufacturing to to this accelerated capacity bottom demand, the growth, turn other as

Turning specifically to QX.

balance including $XX million revenues cloud-related revenue expect $X of approximately to $XXX approximately the We deferred recognition million billion, from sheet. of

basis XX%. XX% On cloud margins the assumed approximately healthy of gross XXX the combined quarter, gross expedite in an XXX to of result points to costs margin would front, with expected mix in

a as and marketing baseline for and XX% this non-GAAP billion, to R&D with million investment spending in quarter, impacts based margin stock-based we follows: backdrop, as our results investments is With approximately the guidance revenues items and to XX% approximately to operating is noncash nonrecurring grow and gross excludes continue of our our sales which of $X approximately on to second line investments, all As to any plan. compensation expect to in XX% and $XXX other and margins XX%. of of

rate turn Liz. the call with Our approximately shares is a effective of be expected I XXX approximately million back basis to diluted XX% now to post-split Liz? shares. tax on will

Thank you, Ita.

We to Thank away. earnings understanding. the it Instructions] your the you call. Q&A portion now will Arista Operator, move [Operator take of for

[Operator Instructions] Badri from Suisse. of comes Credit the Sami line Your question first with

have question. one and then clarification I one

do on on you it Can that is around. or the they we First you days bit for customer like the specifically are more acceptance moving a actual they do XXXX? my some thing talk talked actual a deferred planned maybe have you about little is, revenue, you date and you what there's suppliers, sounds do little just reason lot Could how elaborate that to for decommits? when you clauses. delivery define tell And many your bit by? expand just question decommit, just just midyear because is they Ita, when decommitting the -- actual And then when before a actually

their products particular, and first, new right? question opportunity in mean, large-scale we time to obviously, periods of you're test can't in revenue these And mimic new have those the about completely products deferred in they customers, everything to larger to don't you bringing the take where lots customers, I have product environment. environments. new the I'll

perspective bill them accept from ship, period on those, where have are products, customer revenue some we but need because so prove we the we acceptances that time cash it's can can give to the we so they to and the give there collect deferred that us satisfy we a acceptance. that So criteria

components. the decommits the come answer are we question, week And literally your Sami, the to expecting

us, on back they only not So contract to that and needed lot to of right, the why to them, magnitude extra we the getting the waiting having capacity And just surprise a components. we expedites we're frankly, half key build of which when get components quarter was is struggled, our resolve looking by to manufacturing way of pay the orders them. in

sometimes Sometimes and we could we them, couldn't. get

So going Manufacturing McCool, of QX we constrained And with QX. you environment as believe our and Platforms, this about and combined Head who is more add to components John very into that? continue of to decommits have to knows

Sure.

part I Just those nature specific decommits, think very the reasons for of of decommits. we each the that see

through Some yield, suppliers can the capacity, tester that. work logistics be as issues

on there's say part So really I supplier. for It depends and decommits. what means what wouldn't any generic those

with Loop next the Your comes question Najam of Fahad Capital. from line

that seen. that you time, visibility you've last Jayshree, ever best had the you said

visibility You entire calendar for pretty that had you the 'XX. much said

are the demand So maybe the customers I'm your assuming with setting about conversations 'XX. you already picture calendar having

present can that the best a little seeing having? visibility maybe mean can 'XX? -- your have regarding a on And if the you by you you you color So quantify what of the you're that calendar you bit do are with maybe customers dynamics --

our Last XXXX. was quarter, strong for Thank you, very visibility Fahad.

very This thinking enterprises to in and plan to our XXXX. strong particular, in now that XXXX. it some here. quarter, are have start for to add be They we're visibility that, QX starting I Cloud the But would Titans about also continues for

is suggest this strong So that year. all this demand to the for

to have always demand first be to be least strong Anshul, always Things half all for in could moved a could demand want my Cisco next others of from perhaps and so year the at I orders purposes. purposed more to clearly around. never do planning you across be expect career But add change, and seen We even that? strong.

own chain that cloud as very storage companies Jayshree, no supply understand well. longer customers it. I compute constrained. are is build think understand Sure, struggling They well to their these of Many and

which they're planning with their And right their own the demand along now. underlying means good, are So for teams XXXX is strong. businesses

could model cloud, appropriately you of us follow dynamics can going customer. understand cloud from revenue X function understand, it's into so the on on one, to was that ability us more we I If -- cloud titan kinds your digest revenue help just up, Can the forward? and Titan help it them? is your deferred supply customers' you a Anything can the

it's periods multiple you shipping very product, waiting can acceptance we the back across take And customers. it's perspective, right? No, unusual think for rec that to so where for They're the cycles standard life the Yes. the this. I for deploying at of again, us that look if kind historically we're product. have a product but not revenue us it's to rev of see we're just from actually So beginnings

we're deferred $XX QX, in up the but still You'll million have first perspective. down revenue seen half in was we draw then we will that about we deferred over built $XXX said product a for QX, from million time. What and roughly

the question line UBS. from with David next Your Vogt of comes

a a quick Just follow-up. and question then

of parts is and the So chain commits the maybe your a availability follow-up. make just lockdowns that CMs. what’s kind And just in you from on in of a partners components effectively? XX it vendor reduction just simply it in or share Relative to you're Is quickly complete what world? that Asia supply other with just set us then impact? we've from little ago, days would the in seen Or a of mismatched recent a and on bit seeing the been terms color more can

of in is margins the guidance play for margin. more well just does out that the the think mentioned of points your or to the to expedited for a QX of or the terms separate I of sort You basis in as XXX -- that in to that include are mix gross you shift costs mix hyperscaler gross XXX year? mentioned, a Does cost Ita, had going how rest

Yes.

I of those points estimate, think think could is kind if basis decommits of us. what like, at really the an XXX to we cost looking you XXX

mix, being this decommits et that. impact more kind to customer by that separate the at of cetera. quarter, It's end beginning that's quarter, then and of of kind we looking of the for the what's really saw So last driven

mix. separate to it's So the customer

Yes.

decommitys, part, a kind each also say semiconductors, the I think supply are story. raw of each orders some that So are we've focused on And in waiting in seen a particulars and on still China or I for supply-demand would with constrained device the for the think test semiconductors of increase imbalance. material capacity, don't piece, has lockdowns by equipment. to We've trying in more chain perturbation that I pointed test general. terms really around seen separate have They're That's suppliers again, by issue some equipment. led

each So and it's the board across to device. very specific

And say that, I also call. to think clarify to it's our last safe it a lot to -- since changed it's just safe also

couple of to are hard I So our but -- improve lot working gaps want have commitment a them have us, a of We that for their vendors don't to to causing X because vendors X or know they're we decommits. name

wasn't maybe the any Or there issue, your some meaning in of that there's Was issues some between competitors? issue that competitive and yourself decommits? allocation the

No. Not we of. know that

pumped just the in That cycle.

that No, of we're none aware it.

line of with Your Rod Sachs. next question the comes from Hall Goldman

of what some very your here. for what line know a that just that it's likely time. predict, don't to it hard year? this to could first that revenue guess helpful come at obviously, to kind very deferred reducing wanted I if for but looks Curious of think time release That's Does was thank take today, that over gauge back, I XX you deferred inflated to for for I'm the the on you looking aggregate I what the really you back normal come sort backlog, could is And revenue you a happen number. order in then If And you, of us. months? just know know us. I don't in we Ita, trying quantify based all also, backlog to all, back clarifying guide. is? the know like. level the I -- at

a of I of different guess. areas kind few questions there, So

Yes.

drawing revenue, forecast, it when on really guidance. don't the like the out in like we're we deferred I to think will said, down I think but we I call

So that's the $XX the million. reference to

at XX% down growth would don't all this this that turning Obviously, down a the rate. I turning right? draw assumptions to balance think time, for think point, come we doesn't in our achieve the we XX% rate. I think is and But growth year-over-year

share. the let as number at well. point, backlog, backlog, on -- the on comment means it's think us for I don't of I order time, cetera, Jayshree for the know I'll metric to not with to It's any you have a impact me, a But not if share. of meaningful this et

don't it. we've No unless and stayed from strength we anything away order can Yes. Rod, backlogs. ship mean These

to qualitative our quantitative fashion, a about we'll the matters you and but number fashion, continue in in that keep visibility only demand telling So a is shipments.

Your Amit question next of Evercore. with from the line comes Daryanani

fair I'm basis? TTM rate. I at the just It of think, dot $X.X seems cost perhaps but a more a help question be the my purchase sizable guess to I is connect commitments, and the versus heard think over $X.X number you really versus in Analyst billion this is sure $X.X purchase current see was context, a in purchase sequentially, lot bit billion. multiyear commitment like could me maybe commitment I if it number on what, around, really here was correctly, Are a XX% put you about you it linear math is not Day? growth between of the up billion. I durable sustainability versus on talked a supply growth goods locking the that do sold you Or Just on the

observation. Amit, Yes, Yes. No. good

as $X-plus it for 'XX. it multiyear into well. a this billion. And just for I 'XX 'XX absolutely you're think is right, not is leads and billion It's we $X.X to commitment jumped This now. also from perhaps

wanted extended our only commitments. the lead getting times we to that secured make are we worse, sure Given and

a long-term for placing we're So multiyear growth it. a demand, bet planning accordingly on double-digit and

And to read or more so less we're you years. demand for except on about don't it, any bullish multiple and planning any we're need to

the of from Your Leopold next question James. comes Simon with Raymond line

deployment to begin take trying a is it data time I line you sales sense like how to them wanted is, they of data describe a what on does spread you from construction, for into if your to make long in back reflect the sense see if then I'm maybe center. your number the period center So the initial purchases experience, from Hopefully, Basically, could hyperscale upgrades? a of for hyperscale get you what out a day a that of and terms spending over of how for you given would makes -- years?

so build-out it what Anshul, because This they there's yours does middle are answer. the putting then actually this. think make want what to and smack do. actually deployment. sense design they're period the going there's to of is a Yes, a to I you there's of and in then planning on do, And

absolutely, geos Jayshree. work we Cloud the in And Titans, is of different. with our think different regions. sometimes build-out different they regions, When Sure,

grow actually But with racks over are can X- midsized time supply up generally planning as as for regions, is last would of are can actually customer. first DCI they equipment some be And hundreds X-year the to showing the and of the cannot this the these to a megawatts say or of before minute, you major DCI be many deploy buildout be decide about the regional sometimes the same. gigawatts, it will net-net, added. cycles which or racks they where they In network. just network In take always start well. regions, needs and So can built or smaller

planning really the but part, is years. X we X So don't to last really the control

Blair. the next from with Jason Ader line comes William Your of question

not I'm or And deferred to going a ask supply. question revenue about

question My the that. side. is hear to happy be you'll on So enterprise

I faster Wondering than if deliver know mandates made software difference. of but competitors even supply Maybe great. guys comment of a some has if you competitors continue don't subscription that's do true, you to there. be that your your And any is your helping also examples would that. ability some of And business? can win on to know whether well You from

Thank stirring question. repeat for Yes. Jason, the No. you, us

say If really the steam stand-alone and think with X I'd at cases, up business been you momentum, our picked step in last In we're it's back look XX enterprise than years. our companies larger enterprise some who've I around years. now

with to post-COVID, our our I architecture. and has so that the campus It is sooner. is want They EOS, where could X earlier. really X the well business build they we all to with off data do spine growing different and and do X do vision think reasons, reason approach cloud products fact enterprise an probably centers, leaf can very especially supply architectural X to is little we it wish now, for that

So for and they're whereas really coming approach, a it to rinse repeat. was us historically, design different

difference. makes huge a that So

service forcing lower them as can alluded vulnerabilities existing it's to. with network, down use of we're experience what and the in experience peers both it only them And consumption in they've subscription the is frustration and is had to good customers' cloud seeing that the and really with you critical customers, from of they client to going case a They we're way their take not and a third, I fatigue have want one and think, one or technology choice. cases. There that they across from a lot quality, who've a alternative, a way options. our point where is second the better of view, could perpetually, and such buy industry us giving The many more been where us

has enterprise long But helped certainly, our the least the that's at would got I I adopters. say high-end all in momentum, case a cement We've customers. of go enterprise enterprise mid-market. the the high-end for with to this think really way

line Your Ittai Kidron from Oppenheimer. with next the of question comes

quarter, I margin, to for trying of of an to And -- model parts I about think guess to a a commitments and the Why until the the just gets future I'm and pricing Or every customer I know you over? but the why can not roll have your this on don't decommits? move And as an invoice do as that guidance guess to on that happens. like just you things value certain purchase on are purchase empty this change, age questions. pricing things you overly in variable price think couple filled What's operating gross price of impact margin. Ita, something or I of related would you an an gross just get X yourself? foreseeable going box And the model, increases your like clients be whereby components? not surprised in

Yes, our to procurement recruit we department. you need into

confused. billings I my team little think might be a

Good Yes. question, Ita. Where to start?

that. right? really see increases But impact that. increase -- pass -- we price tough do through. things, do. of the on a mean, the bit Ita, them increases will on, need December, I They to think that's are we'll consider little start benefit QX, So side price Yes, do kind of that we when price increase to are I to sustained before costs we hard, customer. pricing where we'll we'll the and in from is look last and price really rolling maybe of kind But

So we'll prior to one start et look should then and one need decide to are some the from having based cost do see we through how and QX. if backlog, we of the But in these some see that. on cetera, another burned and benefit we'll increases sustained

Stanley. with of from the Morgan comes question Meta next Marshall Your line

deferred clarification, a back bring But to to Sorry Ita. revenue. just point of it

revenue of kind of You that had grew balance. last deferred of bit. didn't quarter recognition by the noted obviously, But year the any XX% a the for kind kind of deferred outlook the include of quite revenue balance

are on or end just I clarify at will the of revenue we deferred where XX% the so even kind now And the were or we to at without of beginning year where kind is the of be want that of

Yes.

half. of draw I grow was year-over-year, revenue from $XX of to think, So the think We'll year, QX down million. and right? based as on balance. for revenue Meta, in But end we best million down think our saw But draw guidance, least, an the don't the half, us is our to beginning versus drawing think happens that. anything We'll us deferred It's down commentary and very $XXX the you think precisely. the picking about annual second really it opening the I of it XX% it at at contemplate obviously we're product up right? it, right? deferred the do I the first what we'll see did of out QX hard what way forecast it building be around not statement not again, $XXX the But million year I at

And inventory fair Okay. amount. balance small I it. a maybe a Got mean, has follow-up. the grown by just then obviously,

wanted get be around Or parts? it of there takes sense is concerns any of? that just Or get are longer the to mindful of of that any obsolescence a should not inventory? Just confirm a of, as we to all

conjunction a approach again, products, really perfect, with anything ton than up we're it have Yes. I we're mean, It's we we're looking now purchase more but right to shipping in itself definitely little pick mean a isn't and necessarily mean I not taking time-bound bit right? obviously, chunk, the that's XXXX up materials, guess we're I raw but making the a And that else, the everything and because inventory customers. I but is a risk we're I there, commitment think be that. and balance on we commitments again, that for balance up much, through doing trying the can. right? won't

that's what So think right to I do now. we have -- that's

of Your Paul next Cowen. Silverstein line comes question from the with

north your Jayshree, that regarding questions or second sure quarter just about secondly, almost XX%. To best either or not incremental X And the like of it to second quarter first numbers, first I half Microsoft-Meta ever the And backlog asking well the any I'm I'm result growth. for of a about is the just guidance, But that could announcement. all for that it. the that permitting, demand of translates growth risk provide get is XX% talking a you you or to you're XX% year, supply hoping, we're provide insight at the off, seen. Anshul hoping appreciate you're, guidance cannot looking that's do growth the will somebody outstanding some could -- 'XX, and results you've answer, only year-over-year it quarter of and XX% do on or you into year, that. sounds At insight I the environment

mean we of use course, for from cases. partners the So and in to always I've seen our they had open. partner, are do XXX% answer of use of help doesn't consider preferred and a they've that, you cases They've other business. get so have use And other chosen said, to And very quote expanding. the always you the partnership, may multi-vendor like Microsoft for us. release. cases strategic Microsoft time, time and The earnings We the

change , it with So add means them, doesn't status to that? Anshul open. want always all at to our and but they're you be going obviously multi-vendor to

just And XXXX-XXXX for We to with several so can come. worked architecture, up for what Sure. on paper them way they Paul, build span possible, and discussions what product, our be not them. for long all but we with our current Microsoft so the generations to deep. relationship is

we've So position that leadership continue. had will

As position, a can we'll healthy be in announcement. get going believe stay by they but to Jayshree and this Ita? distracted multi-stores, we not we're mentioned,

right, coming the for Paul, to the Yes. yes, back growth, close And mean, XX% then, it you're first to was I half. guess, I

we second would the an think I outlook of XX% have half. for

If going have could But the to uncertainty right? yes, we cautious. just more, do decommits, it's respect that XX%, and So are I'm we for right? these causing off not components that of and some that these I think we're could kind of we all to necessarily handful be but supply, for now, solve decelerate saying of about of

a ask Can I just clarification quick

Yes.

driving a the numbers. satisfying Had on the deferred this lot of much these backlog? to going is of like call, you're shared a is demand? of out folks on in people How pulling just How it What's sounds terms of also it in? much just think make

think in don't actually for So right? deferred don't that thinks think $XXX the -- I we're I using drive first I million right? to guidance the half, our anybody are numbers, up

It's organic absolutely. demand,

X. in ship. to We talk have just or about And have that. we an all backlog. We deferred, don't X have We increase

the line Samik of question comes Your next Chatterjee with JPMorgan. from

on I you and in the quick discussions And revenue, of customers? enterprise Jayshree, an also from are if which terms I about here. seeing you we've concerns you can to ones if can hearing the guess you that customers. clarify you the one order investors the were give if update of can with any momentum X double. of any these us current just have macro to your looking the if ask mean, strong been weakness campus in with I on is in vertical enterprise Maybe mentioned you respond enterprises the that you trends. how

be if your to But the there? an of from can give to you update better, track you sort momentum should us expectations. that just on Sounds relative

Samik. Yes,

We change in no momentum. strong. It's seeing enterprise are the

later seen haven't We will maybe any on. slowdown, it

just demand moment, the things Smith, who looking campus, for at very the Chris very team the for story. impact door creating always Ashwin trends, whole are certainly their products. have inflation knocking You a and as with strong. But knows? are of the similar They're customers. the And at the

by that to is but quarter direction. a and Analyst make on showing shared trend, only XXX I trend goal a least me had you grow in Day, but we asked quarter, we've I that double alone to quarter X think Our And is X this doesn't with XXXX. X at as you million this year, will

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New comes question line with Research. next from Ferragu of Street Your the Pierre

a in noisy is Pierre environment.

So is Antoine behalf questions. Pierre’s this asking on of one

And your X? do see have second How sitting competitor? on products? landscape? you seeing your And chips becoming thoughts you you're possibly per this the Spectrum could in a share shift XX.X when competitive to expect maybe you terabits in So NVIDIA's VCR how please

Well, vertical captive more is think we've a always on when as and X NVIDIA's choose customer that. viewed and Spectrum companies for There vertical I And we to times when NVIDIA they were continue view are opportunities. partner, stack. DPUs Mellanox, focus a the their as a especially NICs, stack for

with competitor Arista XX to poised want map? horizontal be be a them road customers. the breed best Anshul, see a And we continues as choice you terabit and at best-of-breed, to add preferred to is As of the to don't all.

let now just XX.XX me Pierre, just is So you the remind that ramping.

core we're not maybe others are projects development matter, someone well So take years is for on doesn't least very gain our with And announcement right? Just we well. really customers because with announced along are XX the chip happy next more high-volume as of out, the doesn't But And the working mean that. customers. gen. on many really It's either. at X

ready We will be in time.

next with Your Fargo. the comes Wells line from question Rakers of Aaron

in big broader If large more seeing of Titan AI around any kind seeing? that some Cloud A these go of if offer up lot incremental wanted have to I'm based? you've any of obviously you thoughts on questions talked couple my this of customers. of deployments Arista. stuff that but it up size architectural one of back trajectory past. you're you just opportunity, bring been last and Jayshree, continue to can the of I to some opportunity this conference answered, become your context curious We're around the the asked at you're quarters. seeing large Fabric, calls other about, for Just what the

the it's based innovation network be architecture. changing, the that clusters, to high-performance bring compute-intensive, can't the with deal workloads that think back-end -- networking that as What on is envelope came in bus on or scale Ethernet a bus-based seems primarily the pushing ability Yes. AI or interconnect because it much when HBC predictable are strategic a is network was new more just et see be and I InfiniBand-based of But the really a architecture, IO-based cloud latency, to cetera. called. Very network, the are that to first whole to and the and Aaron, alone they like latency. it we I They with and here this front-end pioneered data and it's focus the with innings. up leaf-spine Arista much often really forefront we're pushing

and right started the years with specialty workloads clouds deployment large overnight. place So early think it's cloud But cloud ago. It's say take But not X starting it's next emerge much and X of of going to X as customers, over the to enterprises will itself you're the like this going well. years. and to some to happen penetrate I

next Liani of of Your America. comes of Bank the from Tal question line

worse. The I'm one follow going you On and the say chain getting question. to one clarification tradition supply of clarification. one hand, is

you're for strong a -- you're giving hand, other getting quarter. the very On guidance next

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Right.

just not sudden So because for because lead supply extended the that were times, surprising but because decommit. that, worse of getting chain of planning the is of we because

to and we it they're suddenly commit revenue. and freezes to a these out the don't supply X our have build whole product components, when ship trying ability So last and chain to just it

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Microsoft a to due So on we which of the second Meta quarters, expedites the these was double mix, as cloud well that and other gross margin. our have pressure gross margin both titans question, couple commitments are as adding the and next cloud and pressure from for your

with at as best cloud Do We're execute our buying Meta, you away. elevated Microsoft especially wanted these we Customers take answer to as Anshul? going and what if question very can. want come it best to to and costs. do even means we the very, going components So there, We're first. to that's

are Well, these These don't it the other largest cloud of way. any market, to are Sure. and cloud have, X wouldn't and have the leader control the the world, networking. some We great we customers in in we are right? companies

but get, road them, leveraged, product our to well. we these investments get exposed developing whether development, and benefits are those as benefits are map, scale several the we product there's customers of the it's it's and manufacturing, line yes, highly it's whether economies on So whether getting

that mentioned and happy and a these result And we are -- of be earlier, and well outcome. that Jayshree both expected benefit to as the happy XX% of growing customers doing are earnings that, that the So we are them with call CapEx that as year. well. or customers either just increasing this we last are from

with Suva question next comes Your line Jim from the of Citigroup.

I and one time actions Congratulations, your the Jayshree, teams about to and question, and either lag the pricing orders. have Anshul. between your is that

just be more better and just December that knowing the adjusted to I logical wouldn't rightfully go it selfishly and Jayshree, now are a to the since orders putting price I in some prices more orders. Ita times that about and Because that price see, few a going color in increases. lagged you're the to you've wanted lot Or pricing visibility? be would increase? get it prices wanted give mentioned December customers you smartfully Ita all So on pricing and future? saying up that economically, are to But

congratulations thank Jim, the Yes, for wishes. and you

away. we increase very difficult control of the pricing made The effectiveness in that about right is November. pricing to you we a to So spoke

first of we notice. all, So some them give

have. we So historically,

in orders backlog flight the Orders And and by don't pricing. affected the get affected get by pricing. don't so also

the QX QX, now getting getting of Orders though orders everything pricing, and will what will that's in new pricing, new trying to in the XXXX. old shipping that we're with So a say. chunk new or late pricing. all reflect we're QX we're and the even said That's will good done, come QX and have QX,

is we it We pressure its we answer And are costs. once contemplating you but on -- a have going. second price again, increase the if not question? make help now, that Does tremendous the given effect again,

And compared to since changed. does. X, things really is, months X been now. It's point November, my It have

you're So it like of more kind if November guess sounds but I dynamic just it was wondering I since with last contemplating, was pricing. your

shaking we've been No, thoughtful again. over not and very up pricing over about Yes.

second X our one. Some only once, it of competitors pretty a but have we done much done it are times. contemplating We've

Your next Cleveland question comes Ben the from Research. line with of Bollin

seeing Jayshree managing on a you're in the your of durability or you orders and it. now? risk on bit and far titan thoughts and of monitoring commented you Ita, I'd type the hyperscale. how different around bookings seeing risk pull That's little of you're in thoughts the customers? could perceived right financial forward? and But I And hoping be advance cloud verticals touch that any around Jayshree, how on was your also, thoughts you're orders you're with seeing interested excessive then commitments enterprise the or from from

Okay.

authenticity orders of right? it I durability about asking our our understood you're So if and correctly, orders, of

That is correct.

service provider, relationships, double or orders, providers, the booked not our conversations through channels, may we cloud relationships fulfill with cloud are don't but customers, very First be much first. so orders ordered, We there second question believe double our we orders are of intimate your of some. we majority But regularly. -- dialogue of all, are our because answer have enterprise, really to these

So of minor kind. at be There percentage, could a no to this on booking but major. reason any going there's we nothing double point have believe that

customers planning X-year terms to for of again, our horizon. X- In durability, a are

the X- is X-year believe of horizon I durability So to orders this strong. our in

to to it. there's us, to risk Of course, But part, them for our seen and a for have changes. willing orders get the in they've make they product wanting may are wait always cancelable that most and committed consistent stayed be we and

durability So authenticity good. and is

of Erik question the line from next Our Suppiger JMP Securities. with comes

you to times longer telling comment, think the of point of lead some presumably your telling then that's terms of -- QX to And terms your you do how Do you And are products? in XXX competitors just in in Ita, your how could customers QX. times? XXX starts compares what that and lead your just terms time you One, dissipate basis for customers lead QX? what that are of impact, after to their

it's But think we're other and I look, getting mean, the with in QX. I through relief and pricing right? I then QX start things we that from at I'd think Yes. and QX, hold that probably tough, should least QX, QX. some

and times, varries lead by by product it now. And decommits varies right Yes. on it really

– were us. things line last king we was doing top But the our degraded super we have on this and and asked for of the we I of November. well, So thought if I think jungle peers and were you all for us

lead in weeks many are and months. measured definitely So many

Do lead you than times shorter your strive competitors? have to

we We strive hope I intentionally. lead time to better think have with up competitors, then come we don't execute do and is at we done and than so. continue better, our one not to and another, What we do least promise

that do your competitor do shorter? you your -- this, leaving are have you ask noting me Let customers for lead competitors times your

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Notter line Jefferies. comes George Your next of from question with the

on mind? componentry you it Is the is purchase I guys that how very prices ultimately do just terms about? billion understandable. it Is this, your high-cost gain a The I the in guess right corrects you something to share where more of having and case guess in think Or caught commitments. And lots in simply it's supply normalize? chain getting risk of worth big now? opportunity a side the other I in the see with I $X.X had if risk certainly, environment, another impressive of number. play question an number, of this

I've and it. in to you my simply of obsolete. thing likely is about it, really And first we've think a And the I it's career. I seen least sensible smart you these products, worth do procure very few your are that get George. components think here newest been your

purchase with Second commitments quarters purchase thing is years arrived yet. don't take going arrive. multiple to not They're arrivals. confuse to They've or

multiyear products we So as 'XX, think or, cases, at a could commitment a this our is some purchase in be investment common well. of thing lot as wise this third And that as look components the that in 'XX in arrive will new 'XX. of for a

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you How in you safety And is net Got that? about deliveries terms the guys of out it. valve any push cancel there for those to ability or or orders? do think

moment. at rather the don't. they we'd that pushout, don't want Regarding safety We valve

have view. been industry, of if are you them, semiconductor the can they managed basis be in orders time around the of generally point most working from a but So noncancelable,

Your Piper line with the next from question James Fish comes of Sandler.

across so wanted And have? give are to Suva's that why Thanks noncancelable a it likely getting given circle the the if additionally, of questions of what too. being pull-in with the implementing see needed, of side, are worse, verticals price of most that like potentially you're orders the have as are these of most terms others in for the much what been just supply not buyers implement confidence actually is that squeezing can more getting mine you're can pass-through smart here of back answered, but space on chain in pricing, then question follow-ups. you're customers magnitude to seeing me I on you seeing not not

think Noncancelable they're said because I both Yes. done No, are the easier they based first take one. contractual terms. orders good James. on I'll are questions, than

we can And we terms contracts. question? other -- where what do was will we So But at speaking, in of the long-term generally look that. it, have

Pricing.

Or pricing? question was Right. impact again? what Pricing one, the of the and

We not not -- heard pull-in it but a kind actual on second up. have more pricing I it gives more all it's step was mean taking that of guys necessarily know as the what you and about It getting confidence of you we're presents itself. Yes. orders the it,

I James, I in, not think pull key but think, the is yes. word planning. better

purchases. and When this X times next obviously are are look at not this looking their weeks, they year they year, the worry at So about could lead year.

their now but So having plans and for year. -- to they're this only consider their but year, next budgets not

has you're -- seeing an as I the demand Anshul so not X. to So think I often quarter, year definitely, say, likes maybe this but just year, of extra this

So I from of are point term. think longer view, that they planning

comes question next Tom Your the from line KeyBanc Blakey Capital Markets. with of

about is software. question My

largest everybody quarter. little So this question. last line and opportunity in you timing. hang software ratable can a terms just percentage could dive to subscription the percent in software up, and just of ask my I'd software percentage percentage X growth dive in I'll solutions strong -- what what’s it's important saw to It But growth XX-plus business solution, The the the to a to represent just are? bit services. take this quarter, XX% love deeper line be this guys terms the largest a bit Maybe slowing opportunity of of line, take what of a little of Business just from deeper mind,

And business take doing Monitoring are businesses, they're for the of are and generally DANZ CloudVision we analytics, continue could classify work We X the but and The automation sort to cetera. that hunting, you the don't subscriptions. know. definitely And progress. buckets. new They're just licenses important perpetual Fabric, Then like could licenses, subscription And revenue. our would I alluded them, the our as AVA this for us. as These do still in trails be et be subscription. to, go it's it in make bookings, our we well, small there. software call multiyear very products, routing that for as better observability, you is sensors strong Tom, here. I've licenses, with These network-as-a-service. often revenue threat

get the And these so like X then the right? services as would When years, there's that's in well And XX% be do something the next buckets in few really range we viewed can together smaller. be to and product, this QX bucket. you that year double that sometimes the in on saw to percentages quarter tends renewals the high strongest be our to this mid-teens services to and you can tends service that -- bucket, typically teens.

tend recurring product but when terribly dwarf is it these and software are to this very your is year. and they're really strong they like components, So important, X our

-- helpful. And very new just quick delays the products This was I customer. delays That's big hear I that in. Did in you titans. here. thought deferred I referred Was causing squeeze this one is last you has that and one past, about a a that There's cloud accurate? to it new uptick. cloud there right? The Was not to, in commented heard revenue many Ita say happened

No.

where some it's time. for It's And not stuff So pretty new on in enterprise in is products. -- existing the half the the the then there too, really side, deploying cloud. it's there, new the much use because first customers, we're customers enterprise new cases,

question. time have We for last X

last Ho the with Your Woo comes Jin from question Bloomberg of line today Intelligence.

clarification dependent where from better is a outlook. half getting there's little assume to the chain supply it the right second environment? no now? changes does on on Is a that Just bit Or the that de-commit that

think, here. I going we're look, to mean quarter I Yes. this take by quarter

don't continued the think is take think that full right? changes et it year, assuming quarter-by-quarter. we'll a constrained reference think world to But our environment. much, I cetera, I the we

concludes Quarter Earnings Networks Thank This the First again. you, XXXX Arista Call.

interest on you of website. our and joining you today, additional posted for information access Arista. the our in on for section a you results, which presentation, We can your have Thank Investors provides thank us which

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

now disconnect. You may