Arista Networks (ANET) 13 Feb 232022 Q4 Earnings call transcript

Welcome to the Fourth 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 fourth This ending XXXX. XX, December issued Networks a quarter the for its Arista results fiscal press

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

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

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

call over turn will to With that, Jayshree. I the

this joining Arista. year you, fourth afternoon XXXX time. certainly Liz. record And avoided Valentine’s this earnings Day call. for we you, everyone, for quarter Thank XXXX glad us Thank has on a I am been our

You a XXXX. to growth might $X.XX EPS with memorable at instead per beyond a Analyst an annual for November a driving year, we revenue for Day, XX% well year. Indeed, XX% have of that of share given achieved $X.XX, you in billion the and an XXXX XX% non-GAAP translating growth recall, had of earnings of growth guidance to

quarter, approximately revenue. back earnings get the Services QX XXXX We billion the Let’s per of specifics. and some XX.X% with of delivered non-GAAP contributed renewals to support $X.XXX share $X.XX. a for software

gross non-GAAP performing concentration. overhead the at XX%, our by Americas with of international recent one was registered in XX.X% quarters our chain strongest influenced was history. Our XXXX. margin supply and International in tightening at This XX.X% cloud contribution

and and our titans and providers terms largest of verticals, QX was then In place, three XXXX at cloud cloud followed In of the place. enterprise providers we sectors instead the specialty segment will at at service XXXX, fifth report fourth, third verticals. by first, financials

triple-digit enjoy significantly at XX% partnership than and Clearly, XX%, and greater XX.X% XXXX, now at growth revenue XX% financials XX%. Meta providers Shifting approximately to strong cloud resulting strategic at continue contribution we M&M. are were with approximately Microsoft customers far to respectively. strong Both a and Enterprise the a in and titans approximately annually. sector XX%, contributed the for was together segment at while

I’d Operating Officer, on that, now light shed our Sadana, more performance. cloud tightening invite Chief Anshul to to With like our

Thank you, Jayshree.

Internet their is are midst networks. backbone edge next-gen several massive titans the and The grew reshaping Our in Both key stronger with even and our these and partnership tails deploying partnerships. footprint, year. XXX, cloud with XXX of at of the XXX-gig Microsoft their Meta global last products of

much proud all products cases. our have to pretty into designed these are We of use

other the we folds. high-density, continued with design This our near-lossless titans ramped well. past year, XXX-gig, wins and XXXXRX In WAN grow addition, edge had spine. as to in business additional series, backbone, We our

We output care X and systems. based introduced XXXX Jericho on to also several systems new virtual modular deep and buffer products the XXXXRX on X Timeout based [ph] our

appreciate XXX high-quality While we products good first we and high-speed XXX-gig to applications, XXX-gig. X artificial system, RAC that will This partnership multiple EOS, greatly network our many of supports SONiC with XX-terabit products matured and continue cloud we with as portfolio, our cloud of with X scale broken launched engineering with customers out also high-volume XXX-gig the as ports copies such our and switches. has operating year, cases routing expertise. use resilient We Microsoft to past x also support now co-develop have intelligence. add data our with our unit Internet be our product, Arista who These on lake-based table. can furthered

is Our skills our deployments. work Azure on with Bing them well and very monitoring automation received and for

throughput Timeout improve these XXXX phase efficiencies. datacenter high At helped and very XXXX, Meta, the using and are our with the fabrics co-developed them cluster as FPaaS which and platforms, we deployed and reliability EOS products. power have such

in and series smoothly are with AI in now their generative backbone XXXX deployed deployments in production. the Our engines and recommendation

with there good are We our we them we these next-generation spend. plans. AI next-generation cases architectures optional grow are successful. The don’t in cloud to networks control don’t where a CapEx involved our use is control customers. are we and example business their into macro. But to an when We do not generally continuing are cloud to core they with spend, customers’ make

exciting given here. partnerships Our a way of our a pace segment This cloud and decade. innovation come last has journey over long the very the still is market

Jayshree. Back to you,

year a as Anshul. of Thank with with been non-cloud both have our and of XX% the registered decade momentum Meta these was for our category, to over the as the of well such revenue confident phenomenal year. both We share a them AI Wow, cloud partnerships nurtured with Microsoft campus In use and meaningful direct throughout indeed a titans expanded the solid total of have cases XXXX enterprise expect result workloads. you, we remain and these greater XXXX. in again than number once our we and contribute million-dollar customers of in

have cumulative X,XXX customers. We surpassed now

switching analysts. have to deployed that In now and from one that terms number we cloud continue In earned cycles. the data already and cloud share the XXXX upon have highly believe with gain XXX-gig to product grown will enterprise EOS approximately staff revenue We high-performance across built the have successfully This a category, XX% the teens is in lines, we XX, XX, center products one, XXX-gig the XXs. spending to three categories: and market Arista XXX drove XXX and of our industry of position according we our strong differentiated speeds. core XXX, and

XXX We have in XXX also in to XXXX. XXXX from doubled our over XXX-gig customers

short market aiming but million to second comprised fall and campus we network of did exceed for We in Our We extreme our chain doubled replacing our to revenue routing, cognitive revenue is routers orders $XXX in due million XXXX, our momentum supply our and $XXX adjacencies are of campus. campus by maintain shortages. XXXX.

for XX this CloudVision and who to have full spines, versus based proud of Our and third investments campus we wireless in CloudVision are interest of incumbents on wired generated demand years, Considering shipping year very market in only XX our is significant customer have been our the cognitive execution. CUE. clients, and

customers. extremely network-as-a-service edge-as-a-service and well campus with campus based cognitive resonating a NetDL by is for and on our being embraced vision Our

EOS data deployed deploy We and customers transit routing and Enterprise have such with for cloud edge with Ethernet. also single protocol, successfully WAN, it’s securing TunnelSec as center data metro precision in center, now mobile can data profiles. EVPN delivering use-cases, many whether or and networks, peering for encryption, multiple in performance interconnect exchanges a

revenue. Just XXXX alone, as new tuned platforms. new XXX WAN we software more functionality. campus contribute XX% in approximately routing we across in introduced XX adjacencies will releases, be XXXX new for transit The EOS X together and Stay features introducing of

on third as category and models, services such is our advanced sensors Observability, and Eva network Our network contributed for total subscription-based based Arista’s CloudVision, software XX% services DMF approximately A-Care, NDR of line. software securities. product with Arista subscription

prior operational up to really and platform network from We X,XXX integration note the excellence. data-driven are X,XXX exceeded compelling cumulative delivering that continuous agility, is CloudVision and customers, year proud a

wins non-cloud Arista’s well. continue as

massive has provider theme. to prospects the diversify customers cases. momentum the benefits Helping and its and our Arista’s realize continues Arista multiple a contribution software globally modern recurring has business our are well. and XXXX operational enterprise customers, as pleased these automation cloud of our with headline we use been from While customers been with with

a at. earned And shed a the table that few seat have examples let at so we me

general for Day data Fabric first X, chose highlights their to their their conversations, platform visibility EVPN X, Arista’s Layer DMF, The X leaf customer many spine, for the for management DANZ reduce and travel leaf/spine is critical cloud infrastructure. quickly all in of more environment. solution, VDI also initial to Our the it RX customer operational our using example universal offerings. their The was operations out-of-band into leveraged design our industry. Monitoring network a gain X risk. our customers’ CloudVision chassis to Like Day Day transitioned but ask presented wins We center the

wired win second solutions. with Our campus and proceed to the highlights Arista’s wireless financial best-in-class cognitive customers’ with choice

it opportunity, for became us their every a differentiator adviser. competitive. with we key again As as was once CloudVision trusted quickly campus was

Arista’s relevant virtual Cloud architects environment, Our Test, such as gave the experience. training hands-on

by commitment and high-quality our low unmatched to count with CBE Our EOS single peers. was

and Tier MPLS operating CloudVision are and highlights compressed providers. make with the automated routing, X to customers deployment cloud-like and third of continues now Arista reliable middle stack, fully on Arista’s zero-touch X model. routing delivered Regional segment provisioning, and providers long-range high-density, service in where Tier EVPN expanding network. services EOS MPLS the evolution their are our using top on that for a This driving looking core footprint. of deploying XXX-gig regional inroads service optics together of win

elastic, flagship for leaf/spine with Our pod CloudVision-based real-time and chose international telemetry, buffers real-time demands performance. by latency, our for and spine providing highly and sector HPC chassis lasting really impression. next a with visibility. customer anchored best-in-class high-performance This leaf, deep our the education and XXXX created win computing. one VXLAN-based technology is Arista between edge a automation, an compliance low combined Consistent in

built-in announcements win this one of workloads Our The for in differentiation this InfiniBand big encryption solution XXX, in for automated full is Ethernet Hadoop and Arista’s was capabilities. us deployments. cluster comprehensive with visibility quarter’s customer the chose sector, upgrade telemetry, our selected instead XXX-gig final In ensuring where exciting clear international saw operations, real-time the the XXX-gig hitless case, in fabric. an data for customer of government

a we is to that bring changer every make XXXX, data-driven key As to positioned our data network. cloud is well transformation of principles part of aspect networking. in and enter A to game this as source Arista client cloud the

into moving are as routing Arista such the Zero Trust functions security observability Software WAN, U.S. for stack. and

building upon are to complete network We heritage predictive datasets experience, proactive operations multiple sources. platforms, a from and prescriptive bring our cloud unifying

and using reconcile data. and silos. Our network of their and autonomous virtual can techniques operators ML compelling And NetDL very gather, multiple can architecture network a assist, AI way, AVA, processing is language natural combination. store Together, or this architecture modalities this and different process all

is TAM of $XX start platforms products is Arista journey. best-of-breed Arista’s from address X.X XXXX as billion X.X migration ahead. best-of-breed expanded to of we the our our

quality, qualified collaborative top uniquely as and focus we deployments this that principles this a to to with undertake we build are and excited realize center on that And partners, software our support. are notch vision. journey, work It world-class availability, worldwide is bring of networking. based data-driven We to customers with on ecosystem to X.X data modern foundational AI-driven

am their to of thank work Herculean special for A Aristans one proud patience execution of efforts. our chain to worst dimensions multiple for our across hard ever their all support despite and us backdrops so team’s summary, customers you supply last and In year to and witnessed. I the the

XX% stronger. of our now as taught mentioned XXXX for November revenue. Our and emerge tireless we we that in expect XXXX valuable us mission annual growth to Analyst $X.XX terms Day aim we at outlook the lessons We in reiterate billion

Ita for financial Now to I it turn over specifics. will

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

of year-over-year above billion, $X.X QX billion. up our in the and $X.XXX revenues guidance upper to well of Total XX.X% end $X.XXX billion were

in basis. growth remained approximately shipments we consistent software lingering supply some While in in of somewhat Services quarter, improvement component QX. more experienced revenue the services overall the reflected shortages parts. XX.X% on in a to a handful while largely has with XX.X% subscription quarter, of from and constrained This in grow product fourth software and down continue on contributed revenues,

International revenues quarter. or from revenue, XX.X% $XXX XX% the million the total in at of quarter for third up came in

our customers the titan This outsized up due year quarter-over-quarter to domestic from largely Overall, contributions strength the largely increase was quarter. region cloud and reflected XXXX EMEA U.S., improved in growth however, XX% of the in from customers. our year-over-year,

Overall XX%. gross was the guidance QX to range of XX%, XX% margin midpoint approximately of in at our

the in at of and This million to revenue, continue costs in reflected increased $XXX.X last supply the revenue, expenses $XXX.X combined quarter a We were cloud up XX.X% with recognize period at costs $XXX.X primarily product million XX% $XXX.X million. million or incremental headcount period. Operating up R&D last chain or mix. spending from came introduction of new in for healthy quarter from the quarter.

X.X% million compared or quarter with Sales million headcount and and were last compensation $XX.X revenue expenses. increased of higher $XX.X marketing to expenses variable

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

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

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

the the ended to of $X.X we investments sheet. billion. Now common cash balance our turning $X.XXX at equivalents approximately repurchased the Cash, and million stock. quarter quarter, In

will have on other price factors. repurchased $XXX shares amount and and X.X billion with market under million Board repurchase repurchases per $XXX This conditions, million for the of business or million average share. As actual a our and an us reminder, at available for be The leaves existing we year, stock $X $XXX authorization. dependent of price timing future

the We in working reflecting cash operating due delayed generated earnings of turning capital. strong from performance We period, mostly growth increase experienced for a $XX million fourth of supplier inventory cash in shipments, offset the by shipments future quarter. to performance, Now with receipt the to for in approximately operations significant components including decommits.

receivable significant in We quarter. with the a the end also service shipments DSOs renewals and accounts the towards in in ramp experienced product growth of quarter and

days higher DSOs down in in came the service $X.X to prior in at days, increase the the XX in period. were of X.Xx, XX from reflecting up X.Xx renewals turns QX, growth and the from billings quarter, an last peripherals switch-related up linearity goods. $X.X key inventory from in of component quarter. Inventory finished in and increased in billion billion period, Inventory reflecting

billion, at Our $X.X at purchase the billion down $X.X the commitments QX. quarter end of from the end of were

We expect optimize times component quarters decline supply and improve position. this future number work lead to to as continue in our we to

excess extended focused lifecycle have the on early products we reminder, a this As help of risk commitment purchase mitigate to obsolescence. or strategy

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

Capital For in expenditures and days reflecting the clarification, days million. down of represents deferred XX revenue quarter to the receipts this from million. related of days, payments. approximately products QX, XX $XX.X inventory Account year a the for timing payable were reduction in were $XX in

customers, remains our the areas earnings in cloud for healthy contributions response constrained ramp demand. quarter outstanding the ability business. coupled and driven shipments first year across our acceleration to somewhat an was the outlook to of demand our year other from to by this of product Supply the turning limited Now, throughout in with XXXX revenue beyond. growth and a and titan

our into we to we As supply and final for reducing customers. lead forward head XXXX, look side the on the resolving kinks times

As but our reduction should XXXX market across expect This we growth all our reflects for year-over-year sectors, as Day, outlined times we approximately to expect see visibility. revenue at demand lead Analyst in of that to improve, achieve healthy continued some recognizing XX%.

versus the of progressing expect difficult accelerated year quarterly QX, trends, year-over-year as moderating year-over-year In terms in more growth you should comps.

inflated gross in the parts items we gross combined margins. continue expect with margin will quarter. the to first On pressure consuming cost other the this, healthy cloud continuing and broker And contribution, front,

improvement we Beyond see the and that, through with parts to should year broker we the fewer some optimize as move steady the opportunity manufacturing ramp.

year. making turning and the Now spending investments. investments move cognizant through overall and We to the be prudent we of to remain environment will we macro which

however make team to should opportunity in us as secure to talent. go-to-market targeted sees You R&D hires expect the and the

income the cash Section spending. business front, tax needs was deductibility of On XXX, capital $X.X payments much incremental an was the by year defers a working by net billion of cash FY where which generated the R&D consumed additional the XXXX under

remain chain the expect in optimization As supply should times areas million we income we a capital to the with contribution $XX exiting or we growing in the continue need move million year focus quarterly into and extended. to balance lead our QX, on $XX XXXX, head supply as risk through increase should recognizing Interest working while year. where of towards higher for of

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

a Our is of shares. with to XXX tax basis expected million rate XX.X% post-split be shares on effective diluted approximately

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

Thank you, Ita.

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

William with ahead. Ader [Operator Instructions] Please line Your from the comes Blair. first of Jason question go

open. line Your is

for is on know I the incredibly trend. all supply lead visibility time the because now ask, I chain but revenue. Good revenue of orders wanted trending to We strong order that you. you how Thank are some issues, on afternoon, right Ita, everyone. just guess, Yes. the versus maybe all

don’t talk you about Jason, and we Yes. really know, orders as backlog.

I think business. healthy demand of obviously, the the we about talk XXXX. guidance we’re reaffirming of various the And did kind across pieces for

support Jayshree, there I want if to is for that. good So that. don’t know anything you add to

No.

you I good. well. think trends XXXX Order in it said were

has if and in pretty our the wait effects ‘XX, tone watch that are we our see broader positive at macro will the guide but moment. and We effects

So from far thus on macro no impact significance of orders?

will, we Jason. to something have we state, When

So far, we don’t.

Thank Fair you. Okay. enough.

Jason. Thanks,

you. Thank

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

open. is line Your

what on quarter. weaker think on this helpful their growth you guess, you as complicated, in titan think I That in even the function against for growth you a or that’s as box I plans side, question of on up in white as taking congrats networking potential how would you ‘XX the strongest do you think do kind bigger really growth. sense the look workloads that three help and CapEx be about ‘XX, the versus think do my it narrative gain more solutions, could you the side when then calendar share stacks you of And cloud the Thanks maybe is across folks? verticals there around for and beyond, about especially really get like XX% see think the Thank where do a you. well?

look kind I’ll XX titan break look titan cloud cloud XXXX, from to down? and if be service contribution the But this providers well. to you’ll the well of momentum that to still XXXX. right, on when side. as remember low me let those at XX And between one, mix. If take the are healthy does a you cloud XX. go XX-XX-XX. was the nice say which I second. – split, we’d as actually strong, we continues XX%, was few providers We I How you as two we the X had very went back was would I It had guess, even think first have I’m on and if to specialty a enterprise I very at Anshul a sure and will have numbers. called will see Tier and If Okay. a words Well, be outsized titan

think will in look of I it – will somewhere So guess ‘XX my is ‘XX and it split. terms between

We quarter the will as see progressed.

In we the that of terms white like like believe future the It’s cases from of specific that. titans, coming point things and things of an to on that CapEx exactly – workloads, bandwidth. pointed look, is or commodity, this of use I track really our cloud at the don’t at impact our equivalently is as factor future which new CapEx, don’t titan eventually, cloud on indicator but our Anshul progress CapEx very multiplicative like a progress. a coming has out, seat AI box from, strategic table and

Microsoft use a to But And that imagine real will strong. what cases I for ‘XX. working we table, especially been and this are with I at seat it have continue we we’ve So XX the beyond believe will Meta. think on be years, we the can will and see to continue

Thank you, Amit. operator. take We question, our next can

Our of the comes from Cowen. line question Paul next ahead. Please go with Silverstein

Your line is open.

just hope want XX and do clarification. I a was backwards? XX Thanks. you’ll I to have or was I Meta sure you that said Microsoft make into

on Yes. Microsoft, XX. Meta XX.X and

Okay.

Microsoft sense and – it, for that Now for in your revenue customers Meta? question, switches know various Meta cloud much how few of in visibility with cases the use for what’s your was and what to general in if years over its of of AI-driven? growth Microsoft much on next in and AI and as how portion demand you general, course growth your impact was including cloud and of the titan the the titan your Any

see We workload very, cloud in use titan very as innings. and first it’s our Yes. all for case AI the customers. Clearly, important a

just We’re beginning.

we far. additional see very, small is case. portion of It a as very ago, use use so our like XX So AI networking very much cloud years an cases

ahead. of lot a So upside

Jayshree? to possible quantify, it Is

material. Too early not It’s to quantify.

I appreciate. Okay,

Paul. Thanks,

Wells from Your Fargo. next Rakers of Aaron the come with will line go Please question ahead.

Your line open. is

Microsoft is last is on kind congrats that as look the small. – and as for questions. up of titans, you XX% contribution on still I guess, Anshul, total the pretty the Meta cloud cloud taking Yes. at your adding two maybe you question Thanks and this for quarter contribution titan Is the that and compare to building well. other

So Is starting with do the driver? that opening And you’re or it else up that see? What’s cloud we how start about maybe growth you’re little AI can to Anshul, when for to an opportunities is that a something opportunities, incremental you engaging other unpack bit. you? think as it

Sure, Aaron.

of First first we with for M our and there. are the all, of proud contributions the M achievement two

we were cases But before, titans, And them, think the strong are in we partnerships very I decide Those from essentially future, to industry with edge. opportunities and the very routing us, is too. buying the point use clear to or this buy and happens, At Whether but we at there if well the DCI or from on not have we other those. the well. them. WAN it or will more topic pales start we other out in will Meta, cases or I materialize, the switches outside, engaged in I yet. know. will it and be do don’t with not X been today X, compared fairly which be use but get like chase it the On in say or well We That we it’s year where we opportunities in will wait opportunity. When think that And to any these is It’s business a growing, insignificant market is well. also And customers to as big are ready. Microsoft to if we there. to shift of go in market. continue comparison happening touched very, some perform

Good. you. Thank

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

Your line is open.

congratulations I get and difficult an everyone, deceleration seems very, to make progress we Jayshree, kind mean throughout in My expect growth. it to because Ita the get it steep sure to that all. – also want as I would I the like then at a year wouldn’t throughout to revenue revenues to right of I same that is, negative to look that on very we and of revenues, Ita go think great the XX% results. that comment was a expect you. when year-over-year with the XX%. Thank of deceleration, question And made even average for comps heard them at decline you guess just

Or it can is the my help or but Or missing just definitely kind conservatism? it pieces? like me I’m you in doesn’t growth wondering, seem works. So with some the of is negative there math

Yes. we negative No. growth. No, didn’t talk about

look you why much really year-over-year year, rate will accelerated see right? the So If a trend then QX the move guide, you’ll our at stronger with last you seeing it post growth you’re that’s QX, through year.

revenues So think no a I as There earlier kind quarter-by-quarter after to that. and it quarter-by-quarter. negative look a better basis at is QX, of start to on it’s – of quarter-by-quarter certainly in kind growth

quarter-over-quarter number was last of a lower on kind just kind QX a from revenue there back the on of trend. you better year out. grow get answer I think if you’ll much

and Great. Valentine’s Thank you. and you for congratulations to the Happy all details of

Thank Jim. you,

all Jim. isn’t about it? you, comps, This is Thank

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Yes.

and impact spending about been it and So thoughts might and I cloud relation how some any of switching data routing related to relates portfolio. of going workloads equipment, to those was non-AI Meta, if particularly and large your workloads centers that you. you their data their as announcements that architecture sort Thank in to the have dissect just to able related your you’ve to on AI run trying around together ask centers changes same and on customer, to recent and announcement

Yes.

can few network. the on foresee them any the And some of and on when into spine. spine, thousands of a bandwidth AID the work the we major be back say going of AI end, you of changes on AI it build-out all I’ll has into front to need detail. management the can get continue have been end obviously, spine, control hundreds straight Clearly, a distributed Samik, these the can And don’t So words you with the the where fabric and the flagship congestion architectural We you and clusters. lossless the for GPUs, required. that XXXX have in Anshul based have

So an say of efficiency, there the look the distributed, no AI to get grows, long-term, as the but customers as fabrics in the for look just words? no In or but or market more larger Anshul, these will architecture. same. change, be naturally more dramatic in we short-term, these shift for change evolution major few

right? spending some Samik, just down missed keep sort that catching to the slowed do ago, years up few So Meta to a there got spend in mind, out. of is

have to it to to back what they tied any the sort go discussing go our change So networking Jayshree the of buildings how letting are what’s spend. believe trend. nights are from optimization so understand we know CapEx is second, we The don’t in And out far, of the are facilities built, or an to projects. mentioned you there average either

taking Got Thanks it. Thank my question. you. for

Samik. you, Thank

Please Liani Bank of the go next comes America. Your Tal from ahead. question with of line

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Hi. non-cloud titans. that want to is one no ask I part asking other about the the about,

portion? than to this to accelerate growth year, the coming the all, year this out Thanks. non-cloud area did is, year? or What question year, back So last titans of if So this – it titan titans? you or about what of first is components non-cloud case if pressured cloud on And when comes that’s drives this cloud what XX.X% from year And answer XX.X%. the was the more allocate I last the on grew titans, happens to it allocation? cloud

Got it, Tal.

absolutely first the cloud allocation. algorithm. first are first of the all, titans very they not. so out do a many We in, any So first It’s much the And clearly out. were first therefore, of in, don’t

momentum and they is the the that customers way this enterprise were demand we high, given we this in out supply, XXXX. Our of and in But it worked how as in revenue. fully the terms constrained in year, turn get very is expect their will

for Is underlying there – growth growth of what better what supplies, driver versus XXXX? the are acceleration, are components, the outside the for drivers driver component – XXXX underlying

very are they I think similar.

momentum. about some me talk You enterprise the heard of

is the X bringing of consolidation telemetry consolidation that in Observability their centers working we’ve for CloudVision. looking features operational in securities, case. use a data routing use telemetry, on one. all and better advantages of data really center. are of another for huge and automation, to their bear has better better terms customers a our Our case, a over Routing been of years third with the Campus been

So very ‘XX. XXXX we’re in similar themes seeing that to

you. Thank Great.

Tal. Thanks,

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to couple that fairly you my think, I had between split were, of routing? The it and revenue adjacencies fair it’s I taking is question. switching clarifications. a of XX% CapEx assume evenly cognitive for Thank

repeat Sorry, couldn’t the I question? Fahad, you can hear.

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Got it.

learning titan machine how TAM we to and – architectures big thinking this be about opportunity, For AI does replacement and prospective how this should InfiniBand my with cloud opportunity? how pervasive of the Because becoming and with about so thinking be more should Ethernet, displacement speak? question, we InfiniBand

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opportunity. legacy So InfiniBand it’s both, not just a

is? think big opportunity do the how roughly So you

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year, say to $X $X going people billion. Some billion some say say it’s people billion, some $X a

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answers. the Appreciate you. Thank

Thanks, Fahad.

comes the with go ahead. next question line Street Ferragu of Our Pierre New from Research. Please

Your line is open.

Thank Jayshree, about like wanted evening. still an area. catch you. comes And edge Good this said, and up I gearing. on and routing opportunity – back routing what interesting as intriguing to you

is strong shape dynamics that how dynamics does what the understand is exactly what that’s all So we Is long market the opportunity significant market you how And does like work? a anything over that give beyond I’m then like case, how how opportunity the it if from Like an types today? a Is that And peering there – and like And of to very sizing, not time? cloud coming can how the strong, create so in clients, give like are in there? operators clear my markets? replace question in it’s long-term up the So in you? buying large in opportunity legacy on very you players from the still about existing market have ecosystem. for of players? where routing it a other would us Arista sense of that, could run. should you us And terms peering incumbents think – be,

your perspective I’d Anshul, on love Yes. it.

market served off. but than kick it number think me router The traditional industry market. We XX bigger that years router the a mostly market being the market market. provider for some legacy Arista to by be more the a participating in market is major of experts providers. routing And much servicing that’s we very the service traditional has traditional is Let and that’s in, been a service player don’t expect

added we’ve it. same part hard software. separate is routing to our much so Routing now hardware, It’s system. switching different the However, sometimes features. It’s of

we’ve timing look added last and just talk services, EVPN, routes. VPN, Ethernet VPLS, go SyncE, OEM routing the million multi-cap at with heard you over X you gateway year, If can that scale, MPLS Anshul about, edge capability,

successful deployments, in and scale portfolio routing supporting are cloud in. XXX-gig our is to something we is really very So transitioning the

the providers. successful So hand, service traditional in we’re on one not super

and the we in moderately the are providers. few Anshul, add enterprise we successful cloud. On between, words? want then other a lot are a ourselves hand, finding of in to And specialty successful hugely you the in cloud

another look market of if Sure. to enter scale-out CDN started Netflix approach a at It’s angle how the companies Period of SDN these through you edge. some architecture. here, we this an have Spotify, to companies and like

and our and SDK that, do we take cases these titan, our customers You in and all allows out, customers, X use these the router. versus Arista is traditional the providers, the full-feature legacy router cloud the to the simple can scale cloud, which automation the architectures. like a well it provide from Tier And why we very do

Thanks for Great. answers. your

Thanks, Pierre.

comes Genovese Securities. Rosenblatt with the Michael line Your of question from Please go next ahead.

is open. line Your

increase an AI guess data much. versus current some center, sense Thanks – I give chat the multiplier or spend higher way doing networking new Great. so content just and to amount let’s on case the think an sort of switching I just use switching AIs? with for intensity Is mean AI there theoretically to the us of put AI? of in about of the chat, you can in the a

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becomes So more [indiscernible] then can the essentially networking you you bandwidth add bottleneck non-blocking. become and

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every again, the that’s magnitude I a a But of doesn’t traditional apply bandwidth But you one number, with GPU use. need use compute network a order that’s about rough more generalization, case. a if Xx clusters need single to So than would today.

Thank you.

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

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we conditions of terms Thanks. throughout supply seeing expecting faster I in were of did than there how of kind currently. about inventory improving year and at of you’re release and the margins think as to kind looking the Thanks. of maybe the year wanted upside throughout just of just kind that gross just Great. the overhead that chain, of sense what and you’re on or the was to QX part – in it you loosen get a

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Yes.

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Meta. Thanks,

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line Your is open.

the into quarter. the are quarter, talking super and you when talk come you starts normal back duration wanted to so a backlog, point book I worst the line come and little about. don’t between balance come to you first a on your ship backlog the to margins but to know gross on balance supply we’re about, in push congrats starts your – so And that in availability think chain environment? but and Thanks. ship orders conceptually in can Great. the that just actually bit on the issue do what get I that more which fairly the I that

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could had in just quarter? decommitted Did Thanks. the clarification. that say I I fourth one heard you a thought the in I you If presentation.

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you. thank Okay,

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line question from Barclays. Long with Tim go ahead. next of Please comes Your the

open. is line Your

Thank you.

a kind campus Just the of business. two-parter on

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Sure.

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we So, very are competitive there.

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Okay.

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

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nice Thanks finish A me. ladies. of for questions and couple year, for the

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Yes.

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think has remember from to right. your tens hundreds, this if vendor I gone I

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and ‘XX. to both partnerships, specifically, supplier come with not redesigns our question So, our campus with your numbers back and answer we in in expect fall of to short the fully

luck. Thanks. good. Good Very

you. Thank

the Our with Ben Please from ahead. will next line Bollin of Cleveland question come go Research.

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to what opt campus. a times with thoughts bit customers how who afternoon you overall? on increase a facing little that as question. Thank they you lead in opportunity. everyone. about could Good to share are are from I talked they you the are renew Any where bit little the piggyback campus. Do risk go-to-market for perishable? doing What goes or It’s better shares responding that a on also times are your lead to taking talk bit differently, here? wanted And Thanks on then have? the they little choose Jayshree, or market that about you.

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the question question? or to your that share second of goal What part is the Our moment. second grow was at

Go-to-market strategy.

we Oh, building customers. in what very But cumulative Well, mid-market our been our is the near-term, go-to-market the go-to-market. strategy. a X,XXX has much target are to

take time. We to things closely work going are partners. Those channel with

go-to-market And say have customers. is our a will over So, enterprise would I strategy. mid-market initial time, our more we

Thanks.

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

Your line is open.

quarter. Day, Valentine’s Happy ladies. Great

Is normalized back kind given ‘XX the wins, levels it enterprise think kind you or the on Ita, AI of flow follow-up there something the a just cash a with gains for way expect by level a inventory And year? turns or then, as where else? get cash to on share is to you about overall flow, end backlog? of to Thanks. including what’s additional to growth, going titans your cloud being an hyperscaler everybody driving in what’s between confidence? acceleration just the that commentary Just ‘XX Is just I it else. and it a suggest of of guess does mainly for bit or

take first, not will Jim. I to yet kind number call one I end the turns Maybe year. Yes. the that am of a for ready of quite

through I hopefully, And certainly think grow, from half. out flatten we inventory there. can dollars then probably the first

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will the basis. absolute come through as we I for an you dollar of be half, first year. to think probably for continue back looking should to kind inventory to But go I certainly on the you grow So,

wishes. the for James, you, Thank

in say I think I would word, momentum. one

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Next question operator.

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

open. is line Your

to second. you Thank taking a want my just for Great. to everyone pivot call. Meta back I for

XXXX new other how that forward. using more about, spending Would company been of assets kind And talked colocation on company to gear forward. grow off total growth rest needs also we the growing going I impacts ‘XX titan public ‘XX Anshul thoughts think of just in the of intensity ‘XX the on in meet Thanks. the they going to it, in and just so up titans are business get love the triple-digit also the kind rates about business in level, capital – going going your to it’s mix addressed they that architecture the Arista maybe and kind spending teens and think that in the if that And your at talking percentages, grows in end of then is addition somewhere potentially suggest the between does to ‘XX? that on of to have its low going

just going the That not to Anshul, for one, a to say want We that ‘XX. with it to is answer be rest? history triple-digit you was one beautiful certainty. And definitely that and the in year can take books.

Sure.

message so efficiently Meta the think On as us possible similar on, their optimize. question, business efficiently and experience to the and as I is around David, high-level

very mentioned, So, And don’t back. and a projects with. are cut so getting architecture Obviously, start base large like to on, in are those you colos you need nice have. as to

our very smaller cases. as you If an well all fit you use of have products a only in these side, have example, size. already a cluster X-megawatt But

given concerned. So, as to we today many no been message have years many, today. visibility, impact from as significant tell impact don’t don’t We near-term, we is in basically out what to believe that’s the big are far the we have there can networking is networking But we any right.

Great.

Thank you, David.

line comes Markets. Our go the Capital Blakey next KeyBanc Tom with from of question Please ahead.

line open. is Your

launched into at squeezing was on this ‘XX questions starting the then wondering here line type line. wins, drivers new enterprise, wins have year, rip-and-replace is maybe test implied, is just question financials getting But the that quick if a it’s that Yes. anyway, F&E And at in the Ita. the to think opportunity. that’s I – large end in a XXXX driver kind the of kind type the much an rip-and-replace was in of my And specifically, are Ita how again, ‘XX. Thanks and more F&E more a of for which growth in ago. last more mind in back of of acceleration many of like of driver you for like enterprise me And kind that I if product rear or cloud I maybe here. a of

impact you. is gross up, margin the and just helpful. be enterprise mixing enterprise, Thank operating As what mix us that remind more would be margin should for towards

gross I we and neutral Operating think first. improving through cloud as I the margins, kind have the the talked about is part margin versus actually is of rest. year, pretty that I that. one Maybe between take obviously quickly kind we mean will of it, of go the mix

that there any is don’t I driver So, know big there.

No.

sales We more marketing cloud, have lower technically on much the driven. and

So, it’s not the same.

back means it just F&E clarify. and enterprise, to financials your for think Going I rip-and-replace to financial,

product test existing then Yes. am existing plug talking can an you just just kind play Exactly. product specifically I install. emulate where network the about and new of over cloud an and the Arista

Okay.

getting do that of is financials – want are enterprise seeing that spreads in to they more and job. one staff So, their common is nobody the we

to tools integration, has strategic operations more this and their continuous want only because for a they continuous deploy our them continuous it. design DevOps, NetOps, really them all have So, give train also their bring to Arista to do how where automation, is test been automate SecOps, them and to with the not you you And introduction have tool and together. work and but teach of of

that where to more then not and first sort up and of center data a this end it the will use first these will rip-and-replace, So, cases. they use – gradual will land expand of identify do but necessarily being on, they expand evolution case

and as year. their gets existing the with into that are evolve rip-and-replace a begin depreciation use completed a then legacy but enterprises it’s not on most a gradually case we to So, go rip-and-replace,

a it’s multiyear a usually deployment, with begins it of use and type So, of couple cases.

Thank you, Jayshree.

Thanks Tom.

Thank you, Tom.

Your line go JMP Erik Please next with the from ahead. Securities. question comes Suppiger of

Your line is open.

Yes. Valentine’s. Thanks and in for fitting Happy me

of architecture. that smooth On patterns. then of I front, purchasing am that curious, on out a kind likes have modular or the your the more some more of you the any becomes the talked becomes Meta from the purchasing a scalable which we you case Does do And available, see of behavior on, am I changes of over the as with if on they purchase wondering just adopting how about Ita, secondly, Meta? balance if balloon much control the inventory might commitments, do in it take inventory sheet – take your inventory you have do in, inventory the get you of available? buying

I Yes. as think are don’t – mean word. Difficulty] I [Technical inventory. are balloon a certain where suppliers times lead No, like I there

continue will we So, do to that.

mean the around, purchase on I work [ph]. aging why, about as should at move we take well. come start as will I lead time on the that a over to as to That’s lead manufacturers. I down the with contract little with Day think time, number commitment, those the Analyst this times talked contract bit mean we obviously,

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model. fits their very, are already and very very well efficient So, we this in

Thank you next question. Operator, Erik.

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

line Your open. is

Great.

for in ones. two Just me quick

pricing margins? is one increases the First then Ita. price for about to through some the us And I kind visibility, question that Jayshree. you that of visibility? of and on the type effect from quantification talk same the the your of a given guys Could of is Jayshree, you Can you customers. have of some months for of we the put kind in gross it have that on guess some second you see number had just benefits an of ballpark us with visibility update biggest give portfolio

Yes.

on, I it, But the basis. when from of we to some overall track is some piece starts tracking in check, pricing the environment, the that growth it harder something did goes it are But of are there as in to on lost it not think of that dynamic I be pricing. definitely just the we an It’s there. time for gets benefit and the kind business. in pricing ongoing we starts for mean getting – sure, kind uptick on

And quarters because a lead Sami, then now. than to visibility. times I And year, times the that the think we that a in longer will we to longer have it’s of past, than Maybe cycles. visibility to planning as were down our as visibility. planning terms visibility, guess, much seen year’s was very greater as three a the tied If cycles in I And improve, the got lead were when – year were much then reduce. visibility

you, Thank Sami.

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

line open. is Your

am what and you guys about just there. curious environments. why am should Hi think about there. from curious forward in Thanks. share logic AI going the I is you HPC take I InfiniBand

big two reasons. is There Yes.

to of think we XXX, greater performance the cost-effective options I anybody is there. striking on than X.X about very in past, and Ethernet much start and talking Today, Ethernet XXX, always in terms was as bandwidth InfiniBand. are terabits, the

cases. been I more The for high-performance InfiniBand think has historically, other compute is, use

We workloads the has Ethernet don’t does. in bullish InfiniBand fact particular any impact its on where very AI on believe and advantage we and, are Ethernet,

Thank you, George.

question. for We one have time last

final the Simon comes line James. question go Raymond Your of Leopold Please ahead. with from

is open. line Your

verticals if the maybe you margins? wanted campus market and Thanks affects for million whether been I I dig by recovery to that wondering therefore, mix, has headwind more taking. or really million. And in know you. Wondering increase campus about ‘XX ultimately, the whether into your a back. bounces gave little bit considered not that an particularly a gross the margin us unit if business, a $XXX that’s it’s target to constrained, more in Thank or

headwind Yes. margin. to gross No

feel I the I on business we good can product just said, good campus side, as – very campus the execute. has Our gross margins. that

more we On side, work. go-to-market the have

can’t, the So, I And optionality self will number. the work am really well, then likely the more giving if that do be exceed we we that our could if we $XXX million. some

This Simon. quarter Networks’ Thanks call. Great. earnings XXXX fourth concludes Arista the

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

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

disconnect. now may You