Arista Networks (ANET) 31 Jul 232023 Q2 Earnings call transcript

Welcome to the Second Quarter 2023 Arista Networks Financial Results Earnings Conference Call.

During the call, all participants will be in a listen-only mode. After the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time. [Operator Instructions] As a reminder, this conference is being recorded and will be available for replay from the Investor Relations section at the Arista website following this call.

Ms. of you Director begin. Arista's Stine, Investor may Relations, Liz

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

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

we our statements from these of views update representing forward-looking are that call. these During risks rely of Form will in conference specifically, our and our Arista trends, make XXXX cause could those customer recent addressing third capital manufacturing fiscal subject undertake today future. innovation, call, obligation including forward-looking for addressable the for beyond, and to optimization, on detail These actual outlooks them XXXX component quarter inflationary filed and XX-K, outlook costs, the product in the this the relating strategy market year, supply our which anticipated and inventory Form to constraints, materially in this business, benefits market course demand to financial most as our Networks on uncertainties the longer by statements management, to and our working and of output, pressures and as the statements, management including results for AI, apply SEC, differ XX-Q financial term chain times, the those total opportunities, lead these which and of statements. with in acquisition, documents not you should after no discuss We

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

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

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

of July, in support of contributed last the and happy a billion and for with Liz, everyone. $X.XX. day quarter approximately revenue. $X.XX share revenues software We you, Thank a per Services delivered of earnings XX.X% renewals non-GAAP

was improve Our supply this expect consistently quarter and influenced stabilize year by non-GAAP do higher of XXXX. gross and margins contribution. enterprise overheads every margins We gross chain XX.X% improving in

International the contribution XX%, at at with registered XX%. Americas

As surpass are XXX ports, cumulative customers, cycles XXX three workloads. gigabit our enterprises, and million to going we AI migration XXX cloud the in XX gigabit cloud XXX we networking gigabit with and in for experiencing the XXX migration refresh

enjoyed their cloud to increase During titan support a the tech customer and customers brings networking networking compute AI CapEx business storage expanded their refresh, for and cloud cluster. classic offerings. have significant and past in we Each cloud couple different our of years, for of ever-growing mix needs, and

elevated a prior slowdown grow Therefore, spend their near-term XX% has signaled in We Analyst titan we cloud will specific excess CapEx we AI from of moderate, annually One XXXX. with titan XX% cloud expect forecast customer do levels. favoring previously however, of in that project, demand versus Day in our investments. to

exciting. is opportunity AI The

changes, multi-vendor and There are AI their the EOS a IP. review founding lot build and of Ultra member down on a that to to scale software Consortium on networking AI. proud Arista in classic customers Ethernet considerations mission cloud cloud based Ethernet for largest Arista is open, at proven AI adapting is is a thereby AI. networking of our As these and our investments plans, on doubling

AI high number performance of traffic of comprises making completion synchronized a to different slow that AI the small cluster. demands it and job collisions them of flows, bandwidth prone are down as time

achieve petascale generating our EOS to along and that AI scale spine leaf of parameters with GPUs, As throughput. cloud they and Arista's for connect platforms also clusters, capabilities consistent billions of performance thousands must

such packet features balancing predictable field pick to EOS and choose performance. developing workloads. can and for balancing advanced programmable achieve flows as now been report and that header Customers efficient has analyzers intelligent AI their can better rebalance load Arista and of load entropy

also Arista's visibility for to large accuracy and of is phase at improve important microsecond-level traffic Analyzer the to in AI large language new datasets microbursts. address the counters reports training Network and detect monitors windows models.

Our networks, Presently, middle the back-end AI XXXX, leading early XXXX. well strategy customers. for to with are tech and pilots platforms our AI trials in are resonating of in in we

the seamless in cloud deployments front-end In of ahead, network. an We expect a will cohesive and to back-end XXXX larger and and networking AI decade clusters and extension production beyond. networking become form

enterprise center to non-cloud experience both the in momentum good continue category, In data we campus. and

a illustrate customer with Let wins. me few

a first -- seeking devices, win more. to single a complete Their to binary platforms, and campus modernize fully highly customer campus universal across included customer where where image various an campus CCTV, campus locations, is set communication automated was new presented The large customer path campus. legacy cognitive workflow. features. classification and with the a is modernization. display internal their small Arista EOS is on optimized a continued API built-in The boards, there automation a all endpoints The best-of-class much international a and was IoTs, mandated

over zero-trust to were data VXLAN as points. proved (ph) and to pivot] enterprise network instead traffic Distributed within at architectures extension. analyze strategically the silo operational critical telemetry integration approach real-time [at of paramount This mitigation The opposed be throughout security. strict in and X this and relying to capabilities visibility streaming traditional capture on sensors positioned LX emphasizes AVA the network next obtaining solely The involves acceptance. the campus win with routing advanced Layer both center EVPN of VPN

whole centers spine days. This for public change both of LAN made operate environment million hundreds single complex hard modern Arista's sites. the a was all with with were connecting the large in to magnitude their large campus locations controls total simplify routing to dramatically a XX network. challenged model. data and win touch implied reduction routing to campus environment. was An ownership use demonstrated dollars, final customer that They and impacting within that WAN in redundant cloud across was upgrade of on cost any MPLS with XX% operating the of several WAN and sector, automate possible a The Arista could to

see is power a here the model. network vision cloud all EOS transform stack. theme can support which of a platform diversifying software low to is recurring wins, the business a quality, modern innovation, and operating its our and single You customer across these enterprise a to TCO with and Arista

I Ita, our of Ita investment, you possible demonstrated small Chief of year Before fast-growing always with She CEO. type has a past employees and been thank had next and and delivered our years. you only revenue. CFO the very, a Ita, eight both Officer. shareholders. vision XXXX. share Arista would contribution. with to Ita steady is These sometime She year career G&A often and for between at financials your away, so you growth will miss X.X% prioritizing and business that a rare Undoubtedly, very Financial our profitability we a in are and as shared when friend and next pristine displayed has with only retire. leadership the Ita Arista company like in tech to you retire customers, planning to partner I has has hand the stellar for

for Over to you metrics. financial

Thanks, with last the whole Arista working an team eight you and Jayshree. over the That’s very experience kind. It’s amazing years. been

our results our A is analysis all non-recurring charges GAAP for and compensation full guidance reconciliation the based items. Now non-GAAP to acquisition selected and related impacts, back This non-cash to results of release. provided on in our numbers. excludes earnings QX of non-GAAP are and stock-based our certain other QX

XX.X% $X.XX were revenue billion XX.X% $X.XX the XX.X% well International last guidance and $XXX.X QX. up for in quarter, QX in total of billion, revenue, million upper quarter. end from Services software contributed subscription quarter year-over-year and of up to from of above at in the up revenues the revenues Total came of XX.X% our approximately $X.XX XX.X% billion. or

This quarter-over-quarter cloud reflected the and shipments robust our and reduction increase in our prior customers which healthy were a quarter. domestic EMEA to customers in some titan contribution APAC in enterprise from largely unusually

XX.X%, was guidance from last with in and approximately XX% line Overall our in quarter. gross of margin XX.X% QX up

with the somewhat chain We to as product gross additional inventory forecasted reserves higher incremental shipments in better continue by some their margin costs, mix. quarter-over-quarter for supply refined enterprise see need offset customers improvements and

quarter spending came introduction Operating R&D were $XXX.X XX.X% or $XXX.X $XXX.X in the the million primarily $XXX.X in costs and million revenue, new expenses for quarter product or at higher million. at of XX.X% last This period. a reflected million up up headcounts last from from increased quarter. revenue, of

Sales and marketing with costs. was million $XX.X demo or in headcount compared products the revenue to X.X% and $XX.X quarter million last increased of expense

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

was Our $XXX.X operating XX.X% or of income the million quarter revenue. for

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

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

quarter, market share. the of Now turning $XXX.X ended common of $XX approximately repurchased to million In investments We've our Cash, shares $X.X cash $XXX.X quarter average equivalents future The now and repurchased current $XXX at at an X amount sheet. authorization. and price we price per billion. actual the stock balance per for repurchases repurchase the million our other million or million at of leaves $XXX factors. Board a available average business conditions, billion be and quarters. stock dependent and This future will under an of on share $X in price timing

two in $XXX.X performance, linearity turns reflecting $X.X in from cash XX period, up from cash components an related commitments of strong earnings in increase switch from DSOs performance came last operating in Inventory at down of to times turning in good capital. Now days, in to in from operations the days offset approximately billion our by X.X X.X QX, quarter collections from generated million in prior were XX $X.X with Inventory reflecting We ongoing of the and the investments strong goods. increased a times, billion receipt period, purchase working quarter. the partially quarter. the reflecting finished billings. down quarter,

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

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

directly term revenue linked from and revenue Our vary can in down services The quarter-by-quarter which billion, $X.XXX on related is balance contracts, was timing billion majority a the of of to total deferred and QX. service the balance $X.XXX basis. deferred

revenue payable QX, up approximately were receipts days days, and from timing Accounts million $XX last payments. inventory deferred XX in product quarter. declined of from days the XX Our balance reflecting

horizons planning turning delaying new of signals. demand demand customer roadmaps years The beyond. demand before To place customers a times providing driving chain disruptions lead particularly for the outlook cloud true, last supply titan our elevated of to the results visibility horizons necessitated crawler to priorities is future purchases, over true and and quarter and improving now and when global planning later need shorter who This signals, recap, changing our of to Now customers the now third is couple and elongated in year. following orders. technology year rapidly are

return In supply create redundant customer to side, against the On year-over-year spite our where time, with needed, of for ship we the excess well plans reduced XXXX to for calls continue careful deployment to shorter visibility, most which gradual previously XX%. outlook, lead inventory. growth improvements committed are supply improvements in times, of now we to incremental executing but some also expect targeting to not

supply the maintaining end reflecting On healthy benefits the gross through cloud the of we margin progress reasonably and contribution. while year, front, continued a chain expect manufacturing

to investments. and spending Now turning

R&D continue a overall as include will our go-to-market talent. the prioritize We'll the to teams and focus the through on we investments We carefully. year. the monitor opportunity targeted environment move and macro hires This add to seek as

that end focus of chain inventory On use year. our should represent the to we'll in Also, to capital the continue while tax a XXXX optimization, on as been the expect some cash quarter. of have in and significant October working continued payments front, cash growth a deferred you reminder, supply will through and

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

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

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

Thank you, Ita.

request single Operator, the Q&A a participation, now call. themselves Arista the like allow question. To you to understanding. away. to for will move please earnings Thank portion limit take greater We everyone it of for I'd that your to

you. Thank

of Your the the Ng will William comes from We [Operator first now question earnings the Instructions] call. begin line portion with Q&A of Sachs. Arista Goldman

a Hey, outlook relative Mike if talk the to cloud you commentary talk revenue would the last in about to this gotten Thanks revenue? better reconcile wondering Sachs. the about little helpful. earnings year be more call? titans If What's versus year-over-year just of cloud you. this context enterprise, XX% Ng in upgrade moderating. for question. growth of near-term trying Goldman is could was you -- excess I'm titan the about growth versus the on from bit it for that I could Thank just

Yeah. Thanks, Mike.

I pretty clear and our stronger our quarter-over-quarter, continues get think And it's from momentum enterprise that strong. cloud better. is to

two got networking cloud the and classic now. the AI. it's components There's However, then

phenomenal. just on and out are cloud, and AI, So you we're on reconciling the last about. years been feeling the have more double which we down this that how of And we know world stronger even stronger two

still while it's it’s moderating, good. So pretty

Thanks, Mike.

Jayshree. Thanks,

Question.

from Tim with Barclays. next We'll take Long our question

just XXXX I the comments talked or cloud pipeline -- some year there, about cloud the can stages more AI. of move talk guys bit that. you sounds I about you. the between give And kind you have a hoping a two you the on or going kind expanding there's an the could One, that AI you. titan think growth Thank technologies? little curious debate? versus to you play inside to clusters. those update related if of you you Ethernet talk how next It competition -- of your Jayshree, into the How your just can and or the a things diversifying InfiniBand do trialing some that area. around like about that's more few was dig to being large been you big Ethernet you think out? Thank second, think see two you entire Can us customers? with I'm

than first of participation a the my to Arista's in time your Tim. majority back And we're the the the I the Right? all, been has of for you, getting end. But what say will is Thank question. Maybe shorter answer of in Okay. be gist play think like first to, I'd end front ever of network. chance

So but think the AI, there's network, of front of clearly on bandwidth counting ramifications not we some end we're when that. the

production. trials we're So of of proving, something new, get we work truly incremental, to that's testing, before lot brand pilots, thinking into do in

that NVIDIA-specific basically can mostly networks. Today, CXL. not PCIe, you are very, the the There's back Then proprietary technologies very end does customers is clusters, get like server I a participate. of medium would they there's are generative say there AI in on Ethernet. and where NVLink of network, that three well built think networks within where One small Arista classes inference, more may use

is this an the to ChatGPT-X InfiniBand. available with For you're large And just the language training that parameters. especially ChatGPT-X, Ethernet about is where talking not is technology and clusters But the models, of parameters, advent not billion but large today, with only shine. of extremely will trillion aggregate customers

HPC with is bundled InfiniBand GPUs. with familiarity being years of an often obviously, XX, in environment XX the So,

the right of happen. why Ethernet, are Ultra is I'm technology proud of the a Ethernet long-term which Consortium what to doing But so number vendors that make and is

was to an And, near-term, a I say, on want be lot InfiniBand, networking. in focused going HPC term, network. purpose designed Arista neither outside But Ethernet there's InfiniBand Arista AI perfectly participating watching So more longer be AI. on was that will and will general technology, and to for Ethernet of in. be more were focused

to doing I improve important. with Ethernet very is we the AI are think So work for UEC the

helpful. Okay. Thank very you. That's

with our take next from question Stanley. Marshall Morgan We'll Meta

Thanks. Great.

deployment that of just kind might that next to upgrade of the or Thanks. the current they're one kind you're There upgrade completing kind of between changes commentary, time change cloud real kind cycle? the does revisiting current of titan or Just mean are cycle are be seeing the deployment upgrades? there plans of

Yeah.

Sorry.

Sorry. addressing the you Meta, to Ita? were question

the the kind wants on whoever cloud answer order. addressing changes to commentary titan in I was guess to about the I of

Anshul. it, for Go

a that their AI. quarters, the into Sure. customers, but one in rotation you the to with Meta, of had reprioritize upgrades is the not the at cloud or business AI. for and their upgrades, It's of there’s last the ChatGPT, especially been look this deployments advent when done they're since few they

the the as competitive But the trying future, ahead. slowing. the get back well. battle to they'll titans and seen largest we in between You've standard infrastructure signs or the world of adding that largest in the see believe refreshing we to And computer be

Difficulty] for eventually long have you [Technical to I always eat. so

classic So I see mix time. think networking we over of will and nice AI a cloud

time a facilitated I to to then within think, gotten And for -- than see. the years. of waiting of have what them lead the of think over kind coming that's used again, little longer we're pretty start kind But here Yeah. we've Yeah. couple that soon, time going last lead improvements I bit we’ll

Thank you.

Thanks, Meta.

Ben We'll from take with Bollin question Cleveland our next Research.

taking question. to are you Could more speak you had was see and where times you levels where talked inventory everyone. those at evening, some for you approach the manage you think -- that about I little within customers. taking lead Good Ita, accounts? employ strategies hoping talk a a that where question I see you. you Thanks to could bit about inventory you. Thank to managed levels you presently, might and congrats. for

Yeah.

chain all time I early the lead to been certainly and to currently goal I try want plans. I mixed supply year it The customer here, that And itself, is inventory was come around a the mixed demand the the we side it products. of it being across showed of very think, understood process disruption. reasonable deployment maybe we just that year. do supply put commentary make look, process, like, to the continue to, we when back lead are sure deployment to and certainly into whole this of as that schedules or across other really is through times through get end diligent way our to think products. we've up But mean, chain six-month the trying

need, So what customers it's we they really prioritize understanding being of it make understand again, that and when kind more, to that. sure need able and,

on what on when side very have supply making we of the focused really these Again, of we then schedules this have of a just -- you what's And and when and you of the this is kind happening. side demand, honestly, it's other that. doing, chain the sure accelerated deployment continuation So were understand other timing.

you. Thank

We'll with Chkaiban take from our next Antoine question Street New Research.

rapidly? Hi. taking Thanks please deployment for a customers? the Little the opportunity provide two longer at other open an of my to question. a of question, of the Does with bit clusters accelerated door update is but can lot AI hyperscalers increasing your on business two hyperscalers the the beyond term you network the complexity potentially largest as

So asked that, very them. do this and with to how often, gets doing well we we're continue

in before, are mentioned all titans of I size. As not the terms same

we haven't to well Some have ahead who believe but and but are losing with not not just as we largest they're doing with them with we're small our that opportunity we're technologically we just of big changed. others And It's the we still do as is nothing to potential, two opportunity continue It’s still them, us. customers. has very the And and well invest very materialize. seen the anybody. them,

Anshul. Exactly,

us. AI time. X would Ethernet providers high-end we'll to And large customers, -- early cloud way trial not think datasets Titans, trialing the look it's large cloud will with is that more have now. our over only opportunity but the in years customers with ahead enterprises our And us other and very I Tier XX at also then datasets, of there's cloud have we

titans I still customers have cloud some list end biggest, in expect will XXXX, the large a of So of up only being not ones. the of to which but

Antoine. Thanks,

Our next Amit Daryanani comes question Evercore. from with

you I ‘XX fair like for really, like a Hello. investors when of fear, I on the you think been helpful? some realized guess always, it's had looks you maybe, calendar calendar ‘XX, time into just guide if Jayshree, really early debate, you mean, could but of cloud today about digestion. be takes Yep. to talk nice different it the my sort how frame, be for I would think helpful. question could do you congrats the on here. calendar bit puts the And a ‘XX versus Arista and Thanks, that and that next quarter look Arista. is ’XX there's what in ‘XX does And would about and year, is

Yeah. very and our for Stay question. But Analyst doubled really gave one. XXXX stronger a to our that we're and speaking, But Day they're a Anshul opportunity November. have getting different in the we AI back you'll end. cloud the of whole use of It from our we've company years good qualitatively today end use have sometime ago. stronger. guide three even to in when number worked on a us titans team that just than addition cases That's isn't cases. Right? a tuned and cloud down And titans, the just to Clearly, broad front have of lot

me, and end seamless on in as to and will front the titans. back So the end more even and goes cloud between get time cohesion important holistic

broader Three years not as routing, it a as well represent later, much billion. of that Both X us three data they were classical us center $XX and, probably opportunities, know, We for target it's of represent enterprise. opportunities, larger in AI years stronger also ago, go these was again, Tier strong see you north years they to course, $XX TAM, also we're of and campus, billion. ago, providers allow the but and three

more So are we lot deeply much I candy a got and we beyond diversified, more while appreciate feel we that. M&M,

Amit. you, Thank

with Liani of Tal from America. question Bank next our take We'll

I for order XQ years. time of I rather growth from How go, implied When drawdown? few And is Hi, of you your the function before in this the good a revenues? one trends tough growth I'm there us so give sharp at so asking you have end coming Can the have deceleration why a XQ, I'm elevated the the a look you is XX% in it for ask guidance backlog of backlog? about and is much than information days you Thanks. if XX%, -- to is wondering Ita. rest XQ because it's it's growth. reason backlog some

mean, I about haven't orders. we look, talked backlog and

talked of in deployment if we terms believe that you the slots. back there I the So And, that mean, the it's go my backlog just the drawdown, deployments more are we've again, terminology well will and and sign XXXX. deployments think -- not, et up into to cetera. do to Right? think I ongoing commentary, I don't necessarily of

orders the difficult how patterns, (ph). given [stopping the very So it's and that language]

I terms will already into that and But have you planned think in scheduled XXXX. are of deployments deployments,

it -- it will show it through of kind the year, my and quarter end kind of incrementally continue some QX. the back by go we think quarter-over-quarter incremental, to as of to but I still improvements I'd guide at we're look taking quarter to

closer as see until orders you where get need we'll of don't customers into year. shorten, the to that the the it time. now. of lead kind demand mean, there. And incremental think into QX, period take lead time of again, stands. time the way back And, is our end think time we it's more get year, of visibility know I for into similar that dynamic and lead you certainly I and -- place commentary will as to about kind on next that's is, some But, improvement to QX So Right? I don't get some

business it'll -- somewhere Right? I ‘XX on. is [Technical think know or CapEx to time -- a the for you Tal, in cloud Jayshree. as whether the ‘XX Look, goes years shall difficult asked exceptional in know the more see. And difficult last is reality we'll we think this is Difficulty] strong And we repeat strongly I between and it’s that networking. two of in or comes be question. cloud

And as urge be a year, of go at enterprise mix numbers. they in AI, that Ita to, I as in even nice So our three-year got a Tier always deployment quarter continue look X everyone good and clouds, but one to through business three-year has they and And our think to the as we as things. we've one digits double think bring alluded of will and really or I CAGR. CAGR not in and

Great. Thank you.

Thanks, Tom.

next Sebastien our Naji William take from with question We'll Blair.

Thanks do in still six Is down And question. you robust visibility you maybe just just we term, Can pipeline few your now improve or from Great. that months? base? pretty around closer for historically visibility maybe it's are think to given like update months, a into us generative that the the taking customer three on longer the these help just AI seems been of could what many where have that hyperscalers decent visibility next years? over it

XX areas. the products good on six cloud classic lead the have Yeah. networking, say we That's many mix, -- In speaking. across months, cloud, really months. the to I a less reduced your I would so since times than -- multiple have six in Enterprise, generally Sebastien. I to break given it's question visibility into

a and development. early However, it's since lot cycle do on greater AI, we an is it have more to joint

patterns. three can of you different migrations with it visibility on So going think as,

question next our with from take Chatterjee JPMorgan. We'll Samik

slowdown question. the taking Thank or a rate you're visibility front sort gears But XXXX? the obviously, you. you talking about seeing you give for thanks the that at I a What Maybe growth how in a about to you shift here enterprise, rate cloud enterprise, into into orders are Jayshree. can do Hi, if bit And XXXX. my going when to side slowdown look bit on here that growth of on terms of you XXXX? in think sustaining into

we the every just about good enterprise. an area high business vertical, financials. sector, And transportation, and of Look, Schmidt, banks, Ashwin, great about. insurances. we entire feel Samik, the it's our scenario Anshul, globally I that in public not We're execution diversified in just really Chris healthcare, the in think, have pretty education, this We're team, from end where major

So issue, macro about I were worry feel enterprise, barring any XXXX. the we for thing which is always

in doesn't will economy, enterprise. worry strong have don't macro If about let year and down the we have you to So us a

you. Thank

take Rakers Wells our We'll Fargo. question next with Aaron from

the about of kick There's When the and around ask component the I'm cycle start cycle. you Yeah. just focus maybe you really that when for timing of a think merchant curious, side guess of product how just from on gig in in? Thank taking terabit not, to I materializing silicon suppliers you XXX to we wanted to AI, lot cadence. key cycle gig that? your see that's tied believe but deployments maybe of of starts it's do XXX XX.X do I the supporting question. obviously and one silicon, curious to the

Aaron, we from for XXXgig. when the and the gig buy to are gig, XXX AI reality had get anxious being especially, and cases. same by XXT puller different gig, the completion XXX times. to both, to and was went XXX are teams, use very hands XXX world discussion continue gig The customers reduce the gig the possible, AI it, job to quickly data move on their clusters, switching XXX as as

So traction you'll see early there.

at to spines study on for bought be XXX But clusters we'll they gig And that going volume we does gig. as not the just get are few last gig. should ‘XX. mentioned, follow upgrade years see, to in for that going trial DCI and in everything so or the ‘XX classic ramp You'll into for XXX XXX mean

longer think a I cycle. that's to be going

in So you that deployed get XXX cycle parallel as we enter and XXX, ‘XX. will in see ‘XX, XXX, XXX,

Thank you.

Aaron. Thanks,

Niknam next Deutsche our question Bank. take Matthew We'll with from

envisioned gross wondering as improvements on cloud is well? just over margin, of to chain, evolved relative from second in And quarter? XQ. half in it I'm also XQ you or purely about messaging the as greater Is function the incremental to supply and easing year the enterprise chain, can how I relative think you're question. that's maybe the taking of for last Thanks. a there the titans if that contribution thanks talk Hey, relates supply

I mean, costs freight, improvement we're we that the releasing them. inventoried kind with supply improvements of side. definitely with we're chain the now seeing and of were dealing seeing We're improvements and we're on things just the some and expedite with

year. shift cloud mix So small it's quarter, as this underneath I that. is in good strong out from some still we're well, mix coming think this a but There

a kind a this heavy still smaller to in very of cloud without year. enterprise back we're like not it's much mix part. So, There's mix healthy a creating

can more we'd past. chain stuff in incurred it's back supply So out -- our the we the where that

shout in a team, out, both job John Yeah. I the have chain. of of want and give Senior Brillhart, optimizing our done new a Mark supply McCool, Manufacturing, Anshul's to fantastic VP

playing those gross our improvements quarter-to-quarter a are So really role in margins.

Thank you.

take We'll Fish Piper next James our question from Sandler. with

the about, for returning grow supply to Ita, titans of XXXX? digits double about assuming wanted for next talked believe, but level guys been it and talking But asked just asked for have to some should might we I a discuss normal you of I fair assume visibility cloud you backlog, thanks of the already. guys as to it about I that aren't Is that And you is questions question. follow-up this fair year? don't environment still from to underneath year. that in early around or many part think perspective a the know hyperscalers think prior kind about still Hey, your

Yes.

that and did think is I think XXXX. year. forget planning an way We're deployments that, Right? we kind I the we And some still of important it’s absolutely back, executing on right? that right, all time part of this still through cloud

So in cloud the business of a significant of piece still in the is XXXX.

normal lead And, we XXXX expect just to in terms Yes. confirm, setting in a James, times. more of

to assume right You're that.

Thanks, James.

Leopold next from with Simon We’ll James. question Raymond take our

conventional and what's the cloud the see business maybe around slowing. you to in Thanks a wanted for are that I question. enterprise public cycle, unpacking wisdom enterprises could if forces your secular taking by recessionary of then driving need think that is the challenge the bit in adoption terms little do challenged of on I

of do much to gains? much could share we products, market cycles, you. to is if How success et cetera, related unpack How what this general traction? happening? see So enterprise you the Thank

common haven't one a time. high-quality, friendly data campus long experience, very time. architecture Sure, in are long Well, a result is had a you very, long, an course, would supportive, have customers ask say. me enterprise winning for across enterprise, why But Simon. center our their market number routing share software of high say, gains. our traction, a leaf They had if would alternative perspective, the one, of I I a That in from spine haven't we we very

number in quality the for has the seeking to Arista the enterprise that cloud operating one reason So, architectural is I model think our They experience. a move architecture are into chosen. that shift modern been

word right. talking and In fact, and use about tricky it’s just the the quite We lot, Anshul I were a call. cloudify

Our high-end enterprises are really their on premise. however looking for the cloud principles, but

In the on on customer. terms it of and depends the shift the between workloads workloads in the cloud enterprise,

But move want seeing mission-critical a the on of still on the their lot customers applications premise. cloud. to You're e-commerce their of the stay workloads some mid-market

to hybrid decisions strategy dominate data continues enterprise center. our for the the So,

routing to as Secondly, cake. the observability, cetera. well campus layers more our and entry adding et as security, is zero-trust into the

So, and our better. getting and is product breadth better depth

I model, discussion, would product I now operating been depth wrong, we're engaging and I got invest it she was what five work to to say, with we've especially, in you States, for, years years I at enterprise. So, me Anshul, now ago, years I -- do remember was United right say maybe? been customers -- the and a had three So, internationally. cloud more and persuaded to do these when that say and more we've Ita actually, the the five to she want where in

making have we us all gold have the into at things enterprise. in who we seat table standard a are I So, gone and a the clearly, think really there. these we And are

Thank you.

Simon. you, Thank

question We'll Vogt with take UBS. our from next David

want 'XX back to the that mentioned question, growth. of Great. go Jayshree 'XX help Thanks, maybe congratulations, bridge double-digit commentary 'XX and point guys, I just to the for the Ita. of sort to strong taking to

I get to robust of where where of to years? from we high-teens recognition deployments cycles. bridge to XX% to going to enterprise walk there mid-teens know next talked a to kind widespread XX% And about the your through, and the next business 'XX, I trying couple 'XX is more think trials growth in the 'XX see trying not low But from think to I'm of across of to revenue in has mean enough start remain And not, to growth you kind perspective. growth you're of kind upwards get that that over in just giving you've pilots does guidance. you're in AI past Thanks. year? if incredibly to are that today

that's think to you that. Analyst But go we're conversation want the really to for now to as Day So, a I don't 'XX ready honestly. well. do good

I think, we obviously, are very focused internally.

robust As Jayshree different more reiterated business lot earlier a the is drivers. with many on,

through through a It those As but cycles. that business. will healthy and ebb period, you been a healthy it's go has business flow, still cloud

but of So, to assemble for Analyst the them, the got blocks, save lot going I we've we're how think building a for the we'll maybe Day.

legal We'll next assured least for double-digits more. plan that aiming rest But year. share the at David, we are

from And there. so, go we'll

Thanks, Great. again. congrats, guys. And

Thank you.

Securities. take next Suppiger question Erik our We'll JMP with from

Yeah. hear you on them forth? is how taking and Anshul. so At right us of about Maybe into through a so work with translate of it How Thanks do and volumes this for the demand the purchasing walk the point for of kind work? cloud now. buying Can for lot question. their GPUs does GPUs just titans what switches? We their trials

network quarter be deployments [Technical but quarters they recipe, no build actually some and fine-tune things. more, These of Sure. before is they're very to months or buying -- released test to a it general, There But few Difficulty] cluster everything benchmark large timing a it in Difficulty] connect. till to off production. sometimes, of couple and takes on the could depending their the [Technical uniform GPUs, is when

sort can basis, you couple So, of quarters can there. minimum you of couple of think a get of before the months, a that as

year Sometimes it production. really about you into a before ramp to up adds

Thanks, Erik. Great.

We'll next from Jefferies. with take our question Notter George

now I terms about I about there with of in also Hi, guys. is by and and Certainly, participation milestones a product in you AI. you to XXXX participation? through there lot. assume done that I then of development, that's the Could Ethernet. ask walk acceptance, Thanks then presume. inferencing comments you I your guess market wanted participate applications new us sort Arista's see on And large and that increasing today between is

we're there be So what correct? training, is I think any great. really Thanks. would talking more about color

Yes, George.

the you AI, question purchased. planning is And then think I said, XXXX there's and is as being at tons because year as of how being for can of GPUs a look So, connected. really it tons I

or So, they're to on going problem. depending technologies, large, biggest different because focused are on the large that's whether the small, I'm they medium, but stay

an networks. are technology, them right even say Ethernet or just bus maybe to smaller IO of a or a You non-networking some for

or we're focusing things larger speaking, than But GPUs. on are that generally much XXX even X,XXX

thing. first the that's So

cetera, cluster, is the the just into what before, In is is they basically fast time, to they application, the is planning And quick language go the foundation. InfiniBand. GPUs, uncommon that. cases, large et and explained the what would datasets, and where model like how size get it the technology of what what network with their not their as some need lot going is planning of is GPUs just is, an what do a their bundle to So, I existing be

what entropy, XXXX, pilots what's the connect, can to the really what's us where with efficiency, That's into today. what's better more rolling see many et out is, But trials latency, where the cetera. are the is, performance they're what they see to doing and we the they're see drop to how

because of Now, to I what we 'XX, happen that? translate expect them say, you'll will in X,XXX but to next 'XX, some, maybe call, year like seeing, this Anshul, do you majority X,XXX what start will GPUs, in pilots, something

that range. right. That's In

that okay. In X,XXX to at GPUs X,XXX XXX about type range, clusters. gig

actually So it. on put we production will workloads some

networks out And taking good is network is -- pivotal taking is to your most GPUs buy So, XXXX getting But why all even critical. kinks is your but not test I to the in and call want is GPUs just of a why important you and so out X,XXX GPUs. so pilots. -- testing so network of X,XXX, real maybe out smaller this when them the because to XX,XXX, these XXX,XXX, the expensive XXXX, and the of you XX,XXX, have

If dollars. on if you millions, not those cycles thousands, have of idling wasted you GPUs,

crucial think that's next most network Anshul? are these expensive the out I where GPUs and years so, And two the to really of in. these comes getting

with do these to which this or I deployments, customer of or add gigawatts milestone. key you the years, is thing site a what of GPUs couple and the megawatt takes ready our and does XXXX milestones one get is (ph) one capacity. does nothing That know, has scale] to there deploy If enough of not are can the floor more the why a is getting [large here, turn key to as have megawatts ramp. switches, power X,XXX thousands GPUs. you that have is many And certainly This site which a on to

still space are good really Yeah, power and vital. like Simple point. things

Thanks, George.

We'll from with BNP our Paribas. Karl question take next Ackerman

concern adopt that customers of Thank Jayshree, some XXX gig focus the your potential well WAN if been you for could that very the gig transition hyperscale the you. as on customers aware cycle dual-sourcing may be XXX We're Yes. some there's strategy. cycle. gig, investor white helpful. for continue an to you. upgrade in reuse box on But more XXX as comment just Thank solutions on to risk it will to

Sure.

the our of questions probably will somebody gig, an really traffic. about a the XXX software as right these of much aware, gig, white the always But So, just asked you well element it's you're and how availability, get throw in the ask looking one most Arista now this. performance gig, if it's networks, white is to you think there more less for XX question gig, as remained the some it quick whether mission-critical power box I of XX something from box at stack with popular or of some build box of XXX and the most be has out time XXX and gig, IPO, about

cost putting by if you something, save make if you to is the need box, box that dwarfed of something, So, total in you far even save the the OpEx work.

white our of cloud we continue customers. titan box coexist to will in that believe with So, we some

Meta Microsoft a it's stack wins. SONiC the or both to and will a the our run white of end FBOSS day, box whether software But blue at box, and that We case with the along the of EOS. continue in really it's

Thanks, Karl. Operator, question. time one have we last for

take We'll question from last you. Thank Melius Research. Reitzes with our Ben

ask a me I wanted Jayshree Congratulations, team. and about thanks there. enterprise sneaking to Hey, in for again. lot

the just in that I comments cloud were but around of terms detect, people were the things all titans to made guide. seems and better able the enterprise you performance think much the so

well? gained that And share, the pickup you 'XX? into around pick And you of picked you but you did up up whether enterprise kind in So, in color demand -- addition in more mentioned the market the to see just you enterprise market do gaining market sustaining as did and that share.

the What Hey, mean market the follow you don't question. you. Ben. pickup? Thank I by do

was Did demand able quite titan pick commentary was up? Because everybody the after enterprise clearly outperformance cloud was conference to week. and the subdued surprise, call as a the predict this last

market or market up? picking board? So, was share all Is the I is the it demand across mean, picking up

enterprise probably by dwarfed would far demand to has subdued, our that, that always been and of however, the you cloud say I not strong from excellence our performance.

it. You didn't it noticing and now you're notice

Arista XXXX Thanks Networks quarter second call. concludes the Ben. earnings This

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

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

You disconnect. may now