Arista Networks (ANET) 1 Nov 222022 Q3 Earnings call transcript

Welcome to the Third 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 Stine, 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 third This ending XXXX. XX, September 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

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

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

this a quarter afternoon support Services XXXX the for delivered for share of the $X.XX. joining per call. renewals Liz. earnings We revenues you Thank us record approximately with earnings quarter non-GAAP our software contributed revenue. for XX.X% of you, Thank everyone and of third billion $X.XX

Our of titan pressured supply by well as to higher as chain costs margins substantially escalated due non-GAAP a XX.X%, mix. was gross cloud

some the expect trends XXXX. reflecting finally, of Cloud specialty providers, was and stronger was into cloud followed these largest Americas influence. titan by once We XX%, vertical, service continue to at again contribution XX%, cloud providers. then with and at financials International our enterprise customer

Arista’s to and customer both I to specialty Sadana, would light Cloud titan [indiscernible] some Operating our providers. Officer Our QX in relevance results and cloud shed reinforce this. cloud like XXXX invite on Anshul Chief

you, Jayshree. Thank

keeps Our the providers partnership stronger. cloud specialty with getting titans and

technical this supply pilot have deployments. to years, several during the the taking While attention X achieved last with most our customers high-volume we from products period, our chain for got of milestones labs to

We center deployed WAN the cases have than spines, data backbone, cluster white mine before, data and interconnects, successfully in lease use center Edge. designs, more including

are Meta of deployments. deep starting fixed and They using latest a XXX-gig are our appreciation modular our The expertise debuffer execution. with with switches continuing have titans, customers and Microsoft new these XXX-gig their in Our journey. and

cases too. our continuing use expand with are other We the to titans

very healthy these and smaller to continuing and The grow with too. but clusters ports. are spine relatively they have While grow too DCI same regional the designs are smaller, are similarly just specialty well. providers they partnerships have cloud continuing as fewer designs, and to They

like industry our and competitive are customers in a some We diversity.

you, to very partnerships. are well we However, some and grow execution to Jayshree. share our maintain given positioned and quality, our Back

Thanks, Anshul.

and category growth year with north of use XXXX expect and portfolio ever you XX% in our cases, of since We IPO. as are this from cloud product Anshul. contribution one we best titan Therefore, from this revenue a heard diversified experiencing

Speaking extensible consistent carrier Connect, content quarter of on and platform, as cases, such system, and in this delivery, as Arista’s QX. multiple for our next Enterprise networks, EOS of peering, cloud-grade architectural power products, Metro well foundation use routing built Arista NetDL, Edge, Edge new operating a is routing introduced phase network routing the core. mobile data lake, Cloud as

We have to legacy successfully routers transformed modern routing.

encryption. and securing from speed deliver up for eliminating performance innovative RX our to provides transit, of XXX-gig, Arista’s way that continues For market Arista’s began ago. customers technology our routing X in years series portfolio all we bottleneck wire the data TunnelSec XX-gig inline traditional the to adjacent sector latest encryption

previously, mentioned our As continues. customer momentum I

have in market share us number leader years Our many to last doubled logos $X according the X XXX, XXX-gig XXX ports and at a analysts. position market in million placing industry and Arista’s climbs

me use all with on The wins principles. customer recurring remember is based cloud to and Let data its illustrate such with many cases is few this Arista business cloud theme center, campus, that routing, edge a diversifying year. as

strength twofold. interconnect Based Fabric, Arista’s the use data growing for is a was win CloudVision provide in of the standards providing or an in sector, enterprise monitoring routing. version secure and the the center solutions. international Arista’s DMF, positioned code first uniquely a ever center to diverse single was using data and industry DANZ advantage our in solution in and Our Arista highlights Monitoring stack. The campus on financial cases, center, Americas single competitive NetDL with capabilities binary EOS data next win

integration centers their with a days lowest programmatic go to across do stack intervention years, validation errors Arista’s data we upgrades automation. patches, provided offering no code First, live multiple bug the of in could if incumbent center vendor. industry. ownership. new several take total time, not they used much than Traditionally, patches, that to customers U.S. continuous months, much handle software reassurance APIs, better peers zero security dime with deployed single within with better few our it integration with a Also, DevOps was single with just or cost human can our the data

platforms campus and provided that our its cloud-managed in Our upgrade customer way, The a using was infrastructure. our cloud locations third across win sector. continuing Arista Ethernet model. and a This to load to next win looking more Spine infrastructure healthcare network in This in the Arista’s cognitive offering moving into cloud-operated zero legacy hospital multiple in to the data and period network-as-a-service demonstrates strength over The to that by provisioning sector. vulnerabilities. all scale. route massive WiFi shows and real-time public applied balances Arista’s X-year cognitive connect the for campus a compared international single customer client, the to visibility, were incumbent way Internet XXX-gigabit offers campus the also alternatives also and to advantage troubleshooting with center to lowest pane software WAN higher. DWDM, This, Edge. move wanted the to security health Edge and Edge the to the and of with checks, and glass to vulnerabilities Arista’s Spline WiFi was significantly presence

CloudVision. bespoke Our based strategy was client delivering VXLAN of relevance with final direct VPN, vision rules, customers’ design vision class and ability over our the sharing for and an Arista access Layer superior technology, realize quality, segmentation on Tier a more customer world to continues is network, ability see market virtual the November via our managed to Arista X operational look cloud as forward compelling rate private to encompasses of Day encryption help flow building of Overall, international delivered less service share routing only Thursday, Analyst by not to macro provide part real at provider, benefits all Arista’s support, full solutions routing and remote this our for sites. customers could X a line gain advantage. XXXX. you whereby solution. a win The and emphasizes that service data network. This This promise the transit but on to We a secure in X, our

our financial to Now, I specifics. turn will over Ita for

results of in demand period revenue of Jayshree down consistent of revenues acquisition-related our products provided margin $X.XXX A revenues our release. and requiring QX This in for analysis cloud and fees. billion and to business, the non-GAAP contributed XX.X% to in purchases down from constraining in quarter, is is based quarter from largely revenue, strength or $XXX.X earnings our non-recurring excludes basis. while charges second QX. our particularly third XX.X% of and other results XX% This larger and continued in selected midpoint billion, accelerated of continued and good a and with shipments, the were upper impacts, the well range U.S. our year-over-year growth all all to Thanks, guidance revenues broker This compensation grow in in stock-based approximately challenges cost QX software XX.X%, XXXX GAAP certain our full came $X.XXX in higher QX at and on XX%. on $X.XXX for non-cash services product remains total guidance non-GAAP the the the healthy items. subscription guidance Total Services reconciliation reflected and gross Overall revenues, in of XX% across quarter. reflected Overall, of software of to more above supply above of quarter, million our International with supplier end our the throughout XX% just expedite areas the QX XX.X% decommits, in was billion. for up and range ongoing afternoon. customers.

sourcing cloud reflected and or Sales the $XXX.X mix $XXX.X revenue reflect costs $XX.X and lower last with fees. X.X% X.X% $XXX revenue, or million million. expedite of of Operating both up to marketing new revenue, $XX.X current the at our were mostly million expense expenses spending with in R&D discussed, was This component consistent million slightly lower XX.X% increased at higher quarter. came primarily a levels costs. period previously in introduction product last G&A As or quarter of and headcount were mostly from ranges broker of quarter costs last or and gross million flat period XX.X% revenue. for of at healthy margin

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

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

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

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

performance, overall X.Xx, period, reflecting in down supply were improve. for up XX component higher earnings performance delayed decommitted $X.X working $XXX.X somewhat offset and operating of quarter. quarter. operations due switch-related generated future the peripherals last to shipments, from days, for and Inventory our by increase inventory inventory components assets prior the in X.Xx supplier cash reflecting flat to to from decommits. components an and million from third receipt We million turns in quarter. of cash Increases goods turning shipments finished once the other in to strong conditions increased came these including in reverse increased billion This in investments. should by the are quarter, driven transit. prior Now, capital quarter, Inventory DSOs in at trend for in $XXX.X mainly the

$X.X lead multiyear environment. and time from number was down These commitments strength purchase QX. the overall billion, in current and Our commitment the supply long billion for purchase demand quarter reflect $X.X

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

the million, contracts, vary services can timing down revenue the Approximately from in receipts $XXX deferred of quarter, total with on were quarter-by-quarter days clauses balance from XX service balance and timing term down last million. for our related $X QX. and linked majority revenue and days to basis. down of a million of larger product expenditures new Capital deferred $XXX largely payable quarter Our related XX is $XXX customers. Accounts the The revenue million reflecting acceptance directly was days, inventory balance, of QX, billion deferred the for products in represents were the $XX.X to which customer-specific payments. from

the the year-over-year growth, what our market for at healthy the with and for QX the approximately growth from our contribution revenue year XX% sectors came coming guidance calling balanced Now of stubbornly We our our into has titan a somewhat constrained midpoint turning by we cloud customers of remained environment. supply a in supply. now fourth constrained to heavily outlook XX% for revenue across expect quarter, year

titan demand contributions cloud somewhat Demand approximately original businesses provider strong, Meta now and revenue by XX% and to for our a also from with from has are been but customers year from perspective, Our major of expected enterprise Microsoft. our the our supply. account with expectations constrained exceeding revenue for

of margin fees decommits in with combined gross continue operating for some quarter, allowing gross bottom in demonstrating billion mix. need healthy increased nonrecurring and billion; model of response as XX% for healthy of expedite purchases backdrop, is the the expect non-cash margin excludes of $X.X continued any lower margins and is to items margins, the approximately ad-hoc non-GAAP significant approximately operating a for again and We which business pressure from a supplier compensation with With quarter based margin broker guidance expect the flow-through line the cloud revenue for the fourth this resiliency we to follows: with Even as approximately XX%. XX%; our gross of $X.XXX results scale. all impacts revenues to other to stock-based on quarter,

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

Ita. you, Thank

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

Instructions] from [Operator Your Barclays. with the question of line Long first today comes Tim

line is open. Your now

just was guys bit a pretty talk you there. you. could been enterprise of strategy. Thank and Obviously, about hoping growing campus kind I well the have you little

million [Technical year you If update you bogey Difficulty] could the kind the mentioned of have for $XXX and

lost him. We

Difficulty] [Technical

think I Obviously, question, half target? only million what and your and is campus how is you heard it, your doing enterprise even interpret – status Why Tim, which will and business you to I that But is I back say though get campus on the we the should are don’t have order perspective year. very from $XXX of of we completed expect our strength we an will $XXX to we strong when at million. would point, the receive this strategy

We are very supply constrained.

yet So $XXX if shipment not are we hit the will a and from revenue we sure million perspective.

could touch better wireless if just LAN on a am like sorry, you now. sounds bit doing It the I that’s little contribution.

Sorry was muffled about a I that. little.

we are with contribution. wireless LAN pleased Yes. very our No,

become early we Mojo year. XXXX was triple-digit a acquired in expect it single-digit business you small – wireless If to back And think and contribution XXXX, business. next a Networks we XXXX, late the very LAN

Thank you, Tim.

you. thank Okay,

Henderson comes line next question Needham. the with Your from Alex of

Your line is now open.

first fact normalized much. Spectacular quarter, year. a Great. are more for into see the bring set does the And to XX% trajectory. And Thank for earlier, really you of mechanics for the alternatively? the at and reversion you the we if back had be in still difficult against constrained are about where that as results I constraints happens, might you longer, how we environment sound even How comps address supply think about ourselves in we Thanks. last that up we Can half very least And move XXXX. extremely or going be invite the we range? than have the the just you to margins year, that me question should forward. results guess do year thinking next that you to of of we boils persist, Clearly, down we go as the growth? would strong more growth the into

some of and words, and the to let speak are Ita asking thank Alex, kind you the I’ll up tee certainly for about. it you details

want to I’m say for the of executing. all, First just I of proud very team

know, here we going be expecting are growth. you we into to you year came As XX% telling the it’s XX%. And

Chris of the only Schmidt and all and Ashwin, of, proud it but and Anshul cloud be from contribution rest we the team, larger. business, huge call lot the get cloud not the on by as especially to numbers a on as the a enterprise So titans,

us year. about think to just think have you volatile as X you across annual on not of Arista getting to to sustain know, every So I’d as XX% to the going have an is love difficult be and a business, numbers larger, it. basis. you to X-year it’s But CAGR, growth a

still a I think So we TAM. have

definitely spend, do I it’s we’re with XXXX. best a gives said before, to the etcetera, having said we I the feel can to recession year. Having, add. very predict that think, our And do CapEx and would if loan going confident We’re of in relief, well us will supply of difficult, even ever as difficult uncertainty that, well. years But in well. to one Ita, comps XXXX be though we like some beyond chain as you

when And to right? do accelerate to might to margin hard inherent see model kind we’ll it you in Thursday, spending nicely go business, see the model. that up for how the But doubt operating more very catch that Obviously, if that to the that’s the for kind next talk accelerate the works Alex, same rate of the flows for with time you there you is look and we impacting though the like of kind that think, period, the of even business kind gross cloud of year like this, to model, next and the you kind of no that I that flow gross that growth right? As rates we is never what back the margin business it’s of us accelerated through talk kind in line through growth mix right? of see when we Yes, be margin some about variability really

one of. be proud It’s to

Thanks so much.

Thanks, Alex.

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

open. is line now Your

wants ask next year? I your to what’s shouldn’t for everybody outlook guess you what is I know, which

more a wait days, Paul. couple of You

Just a days. of more couple

did seeing? if much, a any meaningful customer else Is numbers share Asking Any you macro macro impact, be products one in sort selling outlook. but can of you’re it’s is asking, at so and of a as week had to solutions. decisions affecting would as last everybody identify what it declining that the iota Any thoughts thoughts driver your terms appreciated? very of from

think bellwether is for a Look, don’t Arista macro. I

we’ll confident So that of place that is softening our But speak I center been that. let we’re about going there our of Enterprise near-term the And enough geographically, very see more to whole it’s has say They the in If a spend on we energy pundits say data strength, Titans, there, and think on Campus. had better. it’s economists I crisis, fair And both it’s Cloud strong. would effect there. even point just Brexit, of But war, to the pandemic, execute have a Europe. all small. would at things to some the I the numbers are lot

So so overall, far, eye is an not it, We’ll yet for vigilant good. keep on macro issue us. so but a

wrong, Jayshree, you’re any appreciate elongated in not I’m And historically, vendor enterprise. business. duress, in in me have bringing if a like appreciable their It’s put you’re growing or but especially nothing. be just that orders, cancellations to to vendors new deferrals change not times I infrastructure that enterprise a result seeing cycles, but declined you’re from would not small, in cutbacks, economic correct to yourself? most or clear, of sales seeing extent changes organizations off is your

any I don’t think Arista Right. vendor. a new is more

vendor. especially I best-of-breed think any… in networking, And unlike see, the are we we what

Non-incumbent.

goes directly, lead labs for storage, times. long is just would scale. a if is a intense to struggling more There proof-of-concept Yes very, networking we’re [indiscernible]. or very qualification all in question spend. anything, I say cycle with your that And this testing strategic Paul, unlike server answer is

any our wait us. you And give if you’re for to for advantages, looking best doesn’t operational would and advantage. prefer windows particular best-of-breed customers switching So

their patients. want So course, test we don’t of to

to execute. can We’re to everything going do we

commitment, got in our better. even but execute seeing that we’ve You’re purchase to

response. the you. Appreciate Thank Alright.

Thank you.

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

now open. Your line is

how the help wanted to a Thanks get bit about of for I the question. order little purchase to taking commitment. think understanding

a Just XX-Q like I’m bit looking down above most about what the of commitment of and number mentioned of what And a sort the ways just prior filing, billion. we implied there it. little to with we But billion, for the overall modeling year. had you into it’s if to is is struggling you are street a that think commitment at the well XX-month $X.X $X.X that try could today of came next back revenue,

You certainly you higher hold could order give some levels you. have either if revenue I’m could us or Thank could these higher how commitment? write you could advice much wondering on than purchase to expect. inventory you we off interpret inventory,

terms thinking really goal Simon, the and ahead, to in about make need just the whatever to that’s growth XXXX components in is the reserves the but of of revenue for it risk seeing XXXX, kind that terms So but you ask we’ll some you’re them. believe the can to cash, question that’s worth assumption purchase E&O we than that’s the in limited then year right? try is think And is up early-stage is right? provide get some to match there this I a obviously, we and of rate are we’ll right? you’re about and to of have but support guidance, numbers multiyear, of are maybe place products it why about Analyst perfectly it where need commitments products we not the kind really we and of Yes, well, can able longer-term being business, Day. this and we your again, for again, to is when tying the [indiscernible] the just products these put when more being have that’s – we and kind talk So And the multiyear,

you. Thank

Simon. Thanks,

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

open. Your line is now

them get and you’re timing stronger-than-expected seeing are Great, than just Thanks. and they of just more recognized of getting the being the deferred the Jayshree, whether orders the and comment product from results. projects there kind than to on of is are if if revenue, or that kind Titans stronger And of expected? thanks. of changing them greater year actually kind led wanted this that kind kind to you’re Cloud ability due you on could Ita to that maybe upside serve some of if

Thanks, Meta.

Cloud say, concentration. fully would saying, continues be And we this wish think us said be could expect I often So more greater we relationship XX% Meta, hearing with more. wish I Microsoft I and think our Anshul if Titans they call, ship with and ship strong especially you as could couldn’t has that the partnership they be than it’s better. and be fair them were to I to too. who to

I don’t a shipping So think case it of is more.

it’s level, partnership a from at and the since of think at engineering actually you’re design strategic operational the dealing level, I case demand daily, do and more. the Anshul, network them – very I level, a at at with you the say this procurement level some like

leading from strong. Meta, their be there so and just the They want do demand the these customers of build-outs. strong. revenue deferred That’s what’s timing to customers these raw from some demand strength, and continues to is on. not Yes, is more into

they type regions. how many of to Building at and very DCI they distances. XXX-kilometer execution. strong. very, with centers our ads look XXX-gig big look strong. and you data their at If want That’s And regions build love it’s you out, very

Jayshree As mentioned, if them happily it well. more could get would product, they as take they

in a all, where years X cycle to all customers. our about healthy compared So outcome with very cloud in ago, phenomenal a but

at all for on look contributor I Matt, right? a deferred mean and point. is the year-to-date, at not deferred, year it stage, the really the If at this nothing the And you

thanks. Great,

Thanks.

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

Your open. is line now

duration broader I’m thinking to but think curious starting – and maybe when customers, you get was for talk better then all visibility little seeing it’s I’m ends, better? this balance. bit Is I we Good it also has hoping about curious seeing you’re could from you when you’re know still the we’d Is sure evolving afternoon, included, how That’s shrink? demand everyone. longer? a influencing that just a you Thanks. gotten are taking would What the me. question. from And directionally to perspective, it for there? really longer. supply it it’s when of getting it how supply love the about Thanks

lead questions, particularly visibility really our visibility, the asked X right of of had Okay. it what’s Hey, we’ve our now from Ben, kind is two getting of so And a to direction our approximately now, our longer? Is you months year. because visibility? providers. cloud that Generally, times,

So it’s of chain and but we to the approval get for Anshul we have staying then what components getting are very large effort, smaller concerted system sadly, can’t to and our reasons got you. without not is that made despite not the one seeing same the tell get But components. and myself about it what is Ita, better when gosh, such purchase directionally, I’d we on Board And a – longer, supply we going is all which commitments, in components. exactly the a to be are a build wanted we last a revenue we spot is all multiyear the except almost handful few you

into in long the as XXXX. will shortages, we we expect our lead XXXX. several think And persist I networking, for especially for go for to industry I have subsidies this and next months before, still do So said the times

all of the sight system. short can’t relief see in until don’t get lot we components build means of few a the So a components can we being still we

So a to really expect expect but us only from year us it’s see improvement improving, – now.

Thanks, Jayshree.

Thanks, Ben.

line Matt Niknam question of from Bank. next Your with comes Deutsche the

Your line is now open.

you so for Hey, much the thank taking question.

On the for guide margin. non-GAAP the income op

point you guide talks XXX down think step despite gross stable I I know nearly did this ish So quarter. basis a XX% about the margins.

the revenue in talk sneak just where on then one if So I And about could you follow-up incremental can deferred wondering see you question. investment. I’m just for opportunity if

a – I’m perspective? XQ revenue looked like from outlook deferred Thanks. dipped deferred sequentially. about about the it for into revenue deferred just $XX dipped So million baked wondering what’s

Yes.

million. $XX decline QX about is So product in the on deferred, the deferred

services, in So there. there is a contract timing piece of it stuff just service and is

the really, linked to So of $XX million. is about that’s kind revenue directly the thing

right? the operating that’s impact, we’re in the other deferred, expenses So that QX no then question guide, deferred and was and the no question. And For assuming right, margin.

I flat in think QX. were look, we pretty on much OpEx

that plan, obviously. wasn’t the of That timing. Some is original

of recover. that some So will

back little the a some some as of QX, of So of tend of to – QX dynamics. maybe a we’ll and end and the be head commissions kind right? just into we then see some well, as at combination things kind it’s sales of normal higher And the year, other timing

very much. you Thank

Thank you.

to Thanks, Welcome your Matt. first call.

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

now Your is open. line

Jayshree, at recent double-digit you my you data. said you centers or think data Thank for question. clouds were said think conference, you of grow a that if I connecting the revenue, industry you taking could investor of recall, I

chain question had versus do So Is outlook to understand? previous that you’re help supply that improved Can understand double-digit that what I year, would to a that earlier? well if the want your us you what response next thinking? you you

Yes, Fahad. I’ll try.

terms of unless we specifically would to continues real and supply I guide issues. will years be year, supply there next hope Specific demand, digits for if will expect think double-digits. fully year, macro in think some to we double-digits, is I come chain to we chain relieved, next grow I Analyst Day. constrained, double would be But at again, grow still grow to if

next must either it year. well So way, do

I follow-up. have one

well. question of how It’s a

of storage but titans cloud the cloud there so customers of of level networking significant is the a inventory having constraint that what’s the I some has inventory server [indiscernible]? been and What’s buildup? there space in as evidence risk the and mismatches equipment, your understand on

little, Very Fahad.

that any add that? understand have important Anshul, on think you do in of to a it’s to networking. to I want been to has nobody inventory position kind

Fahad. Yes,

can Our we customers consume everything will ship.

any soon. inventory time worried not We out are build about

it. you. Thank Appreciate

Thanks, Fahad.

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

now Your is open. line

Do right now the sense above should you of diversity your a probably activity of I be run cloud you you projects get and and think cloud couple – great of always And a or course, you’re Jayshree, how timing below I’m long-term cloud projects. punching the guys is and you just your Thanks, do the you a given where timing about And guys where really should guys whatever standpoint? below on from share questions. with kind weight, and at that of ahead Ladies. kind be or quarter. there guess if weight calling want suppliers. talked of

That’s Ittai. – welcome back,

That’s chatted haven’t really long We a in question. time. good a

weight our think tough in a demand, terms of do You we’re one. our at I even had to above punching weight. ask

In it’s about want to maybe the Anshul, terms talking you cloud do by I’m way, below but add our weight, the of myself. actually only that? not to guys, supplying,

match. I’m like diversify. terms not demand, boxing customers But and refer of to supply, in to Well, our cared overall

already most think plans. their have I set customers

a big any claims partnership we And truly healthy. from couple like is about dramatic our because on. of here They product. now, a The from of worried not expecting talked occasion. not like years We’re changes that be Even customers our in many In be one roles, we’ve and how the us take all that. someone well. takes there end, of roles, If they’ll other we the too. ahead in and will really share done share of companies on

forward cases, So to done as result, going do continue in a because and well, WAN actually our and expansion and use the routing we’ve as is other well. Edge of expectation we’ll

Got it.

year-over-year share able is basis. maybe as there, in a in a the down current on get that there one mean I’m obvious kind wondering be having think out be you XX%, in did of it’s but XX%, the growth get a perhaps I the traction in able environment, still weakness there. you’re to well, – that that XX, to U.S., business Europe XX. if Okay. the gains maybe And talk and share even not should about your would as you’re gains and you’d of And there follow-up, the Jayshree, But over over guess I Europe, weakness

environment, perhaps what So consider maybe they later that’s on help that with likely current back Paul’s have – to element? you your Europe? could do environment, to question, the me go maybe hindering going and think just got question to you just understand customers stick a change what deeper into And less this are a maybe in going what’s that in previous

none rate you top at reason because slower answering substantially the So at I seeing exactly in may seeing of in them there reasons their see of economy, really we is – weakness, overall recession the countries, the time France, I the very – Europe from including mentioned Europe. was we that Germany, to are are question don’t But if demand and I our look all, all generally you GDP no, be if worldwide. UK growing parts through. all, in to of things three be more no on, softness a broad strong at at mission of Europe be if look everywhere, Specific for sense, some Arista, would in and you growth it the If are investing. a

have have think but because far double small of we only should We so be fine. I So is the digits, sign numbers, can we do seen. to recession grow able that we still

good. luck. Thanks. Got it. Good Very

we Europe year-over-year well. did you, Just in growing are we to – as correct

alright. Okay,

have of in these influence lot Yes, I Ittai, them. a numbers, cloud

of is So business the that it in-region kind when you depends strip growing. out,

tell Ita, Okay. grow? you did point, us U.S. Can without U.S. that the Well, titans? much grew how the on maybe, the

my no. of Off the top Yes. head,

by we year-end. do U.S.,

the at We’ll on verticals show the year-end for business. of Yes. those done you

luck, it. Appreciate thanks. Good

Thank you.

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

open. line Your now is

go gross relatively Thanks, XXXX, margin where your XXX the product a we to your to margins taking higher. points your and almost back If but today, maybe go I basis guys similar less, were little mix for I the back gross – think margins just want performance. question. was to to were bit almost I XXX titan are

So, as and from with can somewhat cycle? the XX% quick supply we a business basis. growth kind lower how that couple maybe about delta of progress just structurally a and/or And chain the over OpEx, new much on of disaggregate margins on is XX% how years kind of we titans has a versus freight, been Meta. that is Thanks. think then Microsoft of should some question, year-over-year to sort Is expedited of of that we

Yes.

mix I business. the the there mean on margin cloud is think piece, in more gross I

we seen. that seen than have I think ever we have

highest This is have the had. we mix

have don’t and remember, mean the points – I forget basis have also about to expediting we points. XXX talked still stuff fees But basis XXX the we that there. is

I our in for QX will there think guide. while, be that a certainly

that costs optimizing a those every of for in way. two, were you because I And time we back it’s business think kind you When the of right. So, supply. combination right. costs, period, of could run hamstrung in think are Today, we

these to particularly inefficient right it’s right, now, be So, with de-commits. honest,

So, some gross need improvements then the that, to side for of and we margin kind well. get to we of drive on out start as can

if on except growth XX% we historically, back look probably have in times you the right. OpEx disruption, the side, been XX%, OpEx on think in type of I range

about that’s I not way mean think So, bad it. probably a to

maybe Got a it. And just quick follow-up.

side? So, it years sounds chain. characterization like titans your the relatively on X years of over structural supply Is call to fair expedite the the fee margins X unchanged and are that last, the a outside product it, on

product I have to – mix I happening that got mean what’s of think the right. on – is really some it – right. more as more to degree, depends you there, mix part is there the product there But to would do is have you disaggregation get a to well.

guys. Thanks Okay.

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

Your line is now open.

what Thanks from competencies, lot own just more started you the to networking we the focus solution you have nothing side, cloud on guess I of than an shift their to level buying on your broader themselves? them could come an good existing for the for on profitability customer cloud their of vertical, building of seeing organically often perhaps on customers a the start base, companies want taking Congrats engagement done? own to wondering, quarter. increased core my you more starting question from buy seeing company. that building is a, are is questions. And start of newer more cloud then, on traditionally I the to titan seeing you which them with expansion side, beyond understand, are we see b, from And resources you a it importantly, these they you on as other focus to am the are

The two a in always Thank buy. and build have you. titans I will in. Okay. take had of it cloud I combination will take parts. it

think they to us. same networks, at level look or in the and build that’s with us. changing. continue to products the cloud themselves, not They think titans don’t they At closely recognize with sourcing at in partnership But technologies. it’s are run FBOSS, layers, SONiC an I absolutely some really time, whether value have engineering very working co-develop and to own but mission-critical the I So, their the

of themselves, partnership. of do direct great both without are They say they you for say, would it investment buy. is cost more Anshul, believe really costs, because unique and getting partnerships the And they really us making built or on both. me, want despite best the their are of that? a to some to So, their they are these, where I co-developed getting get not all best focus

And because can huge competitive is, Wall misunderstanding they The things, faster to said, companies people can it’s in a possible cheaper hey, keep cloud Street a that’s go at the tender. look a general, have But want total There have to Sure. every these sometimes of something way business go save money. to reality Amit, they faster. they advantage, benefit to is overall and that’s impact. find their exploring on side if in get people them.

build with well. what FBOSS, it not you we the or these hardware the we and That’s So, do because of just IP, Meta some integration. as is or some it’s with developed there co-development Microsoft, side on SONiC own the seeing some whether build most cheaper. do their are secret There products They bit a is there stacks companies is sauce. some of

cases similar The the an other with basis. use titans themes same on us are explore ongoing

will I continues So, these are And to we execute the majority not new discussions top customers. continue to from Clearly, think the come well. our business to of us. two

We are happy with that.

like we others possible. decision wait impact, in am where to but way general you in have changed actually with that’s bit a nothing People is engaged industry. running point companies on explore are the are there and to and of The as status are maintained happy will options years a then get previously, the us I several those projects, to going let’s with we But talked been working quo long us, has get with there. in little other but to

the can question. Operator, take we Amit. Thanks next

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

open. Your now line is

and congratulations Yes. on a to taking as Thanks wanted questions well question. quarter. a of for more bit the ask the little I technical

networks, of just some are as you think us your guys, as cloud incremental titans terms where Thank the as topic idea business with this cloud any in that thoughts the about you of am on you XXX you. set adjacent about well, curious the AI specialty well representing think at of gig titans? cycle. the driver are we As cloud an I if the your growth on we And updated traction fabric on think level seeing and could XXX-gig at you for

the only seeing Unquestionably, in rest think still gig of and majority of of enterprise we the XXX XX, titans, more and I gig, customer and on is not are base. in cloud more also the combinations the while XX but XXX

And guess, it’s the are thing remember speeds, an never recall level you in to customers XX I to into XXXX. had We had XXX may again the we so numbers, doubled double I to to in are But an just XXX. of a gig permutation XXX of here isolation they terms not and they would in combination Just or XXX. multiple set if that XXXX. we on really say cases. customers. but There together, is important important contributor, multiple are And use XXXX

of Some uplinks. them are

Some native connections. of are them

Some of solutions. DCI are Anshul them, alluded, routing as

use XXX of case. about a market the XXX, early days, is because and have to together combination share we it and in number a and AI good cluster cases, still reason, right XXX talked new software for one management. right emerging have with work in this really The our is So, they It’s spine some. some as

demand. that predictable at talk add but additional fuel performance XXX and latency to is push about more of and emergence applications case really for gig it the use Analyst speed will bandwidth our Day, gig XXX going to We more the and

you. Thank

Thank you, Aaron.

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

open. is Your now line

that, word assume you. of word, you Jayshree you I seen or continual a but event think growth, is a made currently, to know that. you were is. a to elaborate market not strength past I literally, comment just and campus in have be what saw for a Could any going or little or where the the expansion can expansion expansion. like in you in Thank if maybe you expansion it’s noticed there the and seeing to purposes got is lot new give that, that I that the your new you. some for I Thursday? press of because are release market Thank Because on focus But behind Ita, it on I bit

better than the to center read many we of is the But I are meant. data entering viewed more couple trying expansion and visibility say more the quote the at into day, market of if end my portfolio, our are securing look new company. markets you about we like with a At Maybe new And you Arista as days. solutions routing, better like in like diversified and will campus subsets a with even talk market encryption, of indeed, observability. we more

undoubtedly, a more markets the So, data many pure that we moving from company are in becoming locations. center to center data different

you much. so Thank

Thank you, Jim.

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

open. Your line now is

one. in you about last cloud guess a much at think of I we with But Thank addressing you. similar me cases just relative use how your to the of growth additional growth should beyond squeezing sort is traditional that that sort switching. it’s how to wanted Jayshree, coming customers, are growth of we question the understand, as for look Hi. I Yes. Thanks to here. from

sort follow-up designs, have here probably we And next about example, cloud or is are you a for DCI routing, think the much think of we the in that just like – the sort you So, momentum seeing of with that should quick visibility is the progressing how years, of how to how there. from of customers? about growth given contributing As of on? strong couple terms

So, other some switching in or cloud Facebook is as companies, about cases, of Meta we on that leaf and with use new the the engagement think outside is spine? and that traditional of

expand them important the leaf it’s spine a think they titans is or whether would the even and I it’s explode and First, scale their super level building centers, understand mega these going really Samik, data presence. to regional as at that cloud spine, expand and leaf to though be level, a

journey will that organic began that we on – will we that depend So, growth continue. them that And growth with our growth.

DCI into said, In also may titans. and to cloud use the use the addition WAN, I expand and new the regional, more of especially new the areas, have expand we data It cases specialty particularly would would growth to cloud those cases. to spine, as locations centers with as that, other new may will on as new for But providers. cases say the AI we expansion looking – in sources use scale well both of existing Anshul be

of the other. half one dozen a Just and

Thank you.

Thanks Samik.

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

now Your line open. is

idea. back just And I been mix supply of you the I product titan building XX%, you question the know question, are last Hi kind that guys environment. guys. to idea. customers what are have you And Anshul, couple companies wanted it’s guess inventory. building inventory have XX% look the very of earlier chain or growing in growing XX% sales that guess Many quarters, the been your the right? pretty supports I building at of if might shift business, the guess year-on-year, on pretty cloud Thanks you company outstanding additional that have much. XX% detail an And potentially the customers titan given go I wondering of am I I I in dismissive own year-on-year, own growth. were your I guess would that their So, cloud inventories. to

in your I it inventory aren’t wondering how m and think do I Thanks. know you stuff. important So, building an customers guess I question is exactly

in get other you calls phone in when get I others the the gets, our I have sign daily internally are customers would the that of say company number or about the George, because I on or that best worry what’s side, going question. a is is good asked Jayshree buffering. shipping. get we on to

are customers still and it come possible. where and computer teams gear desperate, are on. still the for are up few handout. in so up, places to quickly most a show they But calibrate cases, light can as So, deployment up There are to the for the these customers roughly waiting they as

timelines, generally where are and still the can’t nowhere to execute such in they that the At we constrained. start this close project realize of today’s from. constraint to a point, short. long But some time. been recover. have over COVID, period, has will You came that people the Since means world And

So, opportunity I to have time, they if will yet it supply eventually ‘XX, will think customers a by of there an end take recovers today. and the think I comfortable, will feel I long but when that’s maybe say George, buffer not up, will

Okay. you. Thank

question next of Sami Badri Your line Suisse. comes with Credit the from

is Your now line open.

go to I margins. Hi. gross Thank you. wanted to

references I margins. trajectory the Ita, you have regarding think two of made just this on call

comment we you gross I made a XXX think be I think to the for said that basis see the an there least And regarding are probably you points you points, not XXX to going while. it’s basis improvement to from now. at a margins year then said going in other

imply So, bit first that at least be modeling we XXXX, does quarters? in couple more should line of the That’s a that first maybe little of through margins last half gross to question. the

could shift ports and with give XXXX, you of idea like ports on XXX-gig XXXX? if a what is question how in give switches many us to how Second an or look percentage were that us of you shipments maybe in like total would many kind

Yes.

gross the on Just margin.

we that honestly. I I gross it’s kind get model not are of think out bad until think the given constrained idea from where as margin being today, we constraint, to a under

I to think that’s yet are and a kind we when very that it’s improve. not carrying, that clear exactly starts real cost of

idea show bad a these real to there until on guess demonstrable we to de-committed and it not predictability, parts. are it’s more I able think I hold yes, kind So, of improvements

answer on are gaining though we I are to if even but numbers question, customers, don’t XXX And guess uplink. Yes. – your gig, them to of have we exact as most I had

under So, the well maybe just a That’s say guess. is small. X%. ports would good penetration number I of our even still is XX%,

much XXXX, piece. gross to we that not margin sub-XX% increase in quite and And than thank yet? or like that that you higher sharp But then for a you when into go are answering seeing almost obviously from

will No. XX still migration. go migrating be XX still the this gig to largest XX and gig think of into the and If we XXX from are ‘XX, gig is to gig way people

see gig. that result will deployment XXX of a As migration, of more you

gig will from small. be still to it go XXX XX. will So, Maybe X

you Thank much. very Perfect.

Thanks.

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

line open. Your now is

to Hey. also Very don’t you your Well, want nice I do quarter as Ita, results. others emphasize metric, as in really much space. it’s and know a

a Maybe have than confidence visibility. asking here way others. different You in still visibility and in that

currently that turn on any guys process four a As backlog quarters, down here Are in to change starts six we going thinking in Is how million about quarters, for deferred then you your in level? normal lastly, And kind it are was supply chain eight how takes were actually long thought seeing more of normalize, with that’s services as was next to rates? to back year? $XX only down and cancellation million. just revenue – aggregate, that about product $XX what’s quarters, you

So, why services here? impacted trying to understand being is

mean would of just We all service the piece. with timing start agreements, Yes. I it’s right. services the the about

you going that services have renewal day right. then about you towards least of are one, contract, And deferred it I revenue perspective, a going revenue of to contract comes you are could deferred when of from amount on X-year you the is, it’s if to have. a the that think a X-year, have you have deferred If can the amount venue what contract, sign maximum

right. side, etcetera, the So, services I change flow, just contracts lumpier it’s not the the on services mean have the seen how the on on the is And but is then thing truly the timing guess I mechanics business. any of right. in purely cancellations, product, on obviously The we services

supply that’s am out we so are backlog point, and the this I given just getting still the there not intensely quite age I to are I on. very on do focused at to think not we on to that we uncertainties to going point. are mean some ready seeing of products Anshul’s kind customers of try

think we hard lead as visibility now, we lead on that to expect I But are customer improvement. time right And working shrink. times improve,

that. away from So, are we year a

Got Thanks. it.

more Operator, for one have we time question.

comes KeyBanc. line Tom Your last the Blakey from with of today question

Your line is now open.

squeezing Thanks and for Halloween, Happy everybody. in, me Hey.

half, simple the the that a cadence be curious from kind cloud the in am do to at high-XXs half. And arithmetic, of that kind you seems implies It the cumulative here enterprise mid like of flattening maybe service that second need Looking I characterizing half. service over of providers, the uptick that – for year, of specialty financial providers, I kind your imply to get revenue will if of out XX% the it second I if about in to correctly to am big titan revenue. the

there on, spend And to on more we you. Thank comment helpful, a a than my as other? those characterization maybe the little be of titans and is correct. just relying follow-up, particular comment about actual are correlation So, a CapEx one more too. And would bit cloud

at obviously, Yes. I and think mean I I look we shipments. mean as year, have revenues ramping the ramping been you

off of been And a So, cloud kind lower with from grown as right. cloud ramping base, has well, have started faster. obviously. we It

recovered seen you last So, there. it did year, definitely from it XX%, need was pretty to lowest is it’s like, – it have recover, if and at so which much we we the

exceeded But The the we the the a have demand of the in, demand came first it’s on can. been out constraints, trying think etcetera, to rest much has our the first FIFO business, into certainly when I as stick we is – there. of bit the kind year. given of shipment to as we expectations

And more so constrained. that been has

that I to as of improve, think next into start we will head kind expect see to year. here hopefully, we

Meta of half versus into you. maybe year? the Microsoft the second Thank

Yes.

to wait think. that, I to have will We year-end for

Okay. Q&A of End everybody. Thanks

Networks This XXXX concludes third the earnings call. Arista quarter

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

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

disconnect. now You may