Arista Networks (ANET) 30 Oct 232023 Q3 Earnings call transcript

Welcome to the Third Quarter 2023 Arista Networks Financial Results Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded and will be available for replay from the Investor Relations section at the Arista website following this call.

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

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

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

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

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

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

XX.X% Our margins supply improving chain enterprise of non-GAAP by gross was overheads contribution. higher and influenced

before, registered in As with quarter will XX.X% every we XX.X%. Americas and contribution year XXXX. International stabilize at gross consistently have improved at next this margins have said year

As lead predicted, Arista's supply expect are chain we in steadily XXXX, to and XXXX. times improving normalize and in it

We Analyst Day of XX% are versus calendar prior for now growth the projecting annual XX% our growth year. XXXX forecast

storage been of the During classic have cloud planning our networking clusters. mix and AI Titan past year, different networking and Cloud customers compute their a for

customers industry X of historic compute with has Titan on installed service. Cloud attain customers been definition to Our based classification than our of likely or million greater

becomes Apple combine Titan AI one providers. Looking favorable total future. shift AI represent while to new greater and new OCI the the cloud cloud of investments sector. the than our to category sector, customer to this sector Cloud ahead, projected a of mix result combination, and called specialty due This we revenue in is AI expected XX% AI Titan Oracle And of spend member will Cloud a as into and

architectural enterprise This differentiator. continues unique a truly on on EOS, is focus system of with Arista and momentum, operating based modern stack. terms CloudVision software In extensible to foundation and single superiority multi-domain, our

unmatched a our campus, by enjoy be routing, WAN cases, stack industry quality We execution our our is and one truly across with to have have customers software uncompromised or breadth data strong come The demonstrated center consistent use appreciate. our peers. of release that and predictable of infrastructure cadence branch power the

me a Let wins. customer with few illustrate

a EOS, their often subscribed first modular created Arista's HPC service published of coupled for of interconnect providing model. clusters, with switch offering. state-driven switching the win real-time an Ethernet EOS is Our are compute, where which telemetry, combination leveraging a GPU platform our customer is customer international foundation with for its one, as a high-performance perfect services

next one their expansion AI sector of our utilizes initiative. the CloudVision. with Arista This operational public in ] Arista showcases simplified with [ models Our grant-funded project

high customer low architecture require leaf the design AVD, for Arista on remote do into chose entire as ratings, models, to campus a data couple latency our software not MSS, single mitigation high spend. workloads security as the the and customer core a network. fabric campus AI we leverage of the sites. last X of threat across least, build operations. networking. This of compelling modern is with were an operational customers cost X-tier the because These of low a based campus macro all of for to need Campus refresh center AVA importance of power A bandwidth sensors able able total innovation model best-of-breed Arista well customer from segmentation, and a their which high way AI a platform was the access of as This customer out was of for trust the comprises agent validated delivered with of innovative The major years to campuses network and fines EVPN-VXLAN and and switches. Arista's XXX-gig campus combined our a excellence scale, Cognitive X wired well solution. granular example spine offer as New but illustrate several X with buffers The ago, a deep a based visibility. complete lossless is underscores network, for looking headquarter

like with for industry our the vulnerabilities trajectory to setting that, hand specifics. Score financial We with Promoter the pleased and lowest are our gold the I'd our cloud highest Net and CVEs CFO, in to standard with Ita, for networking. And

QX contributed billion, $X.XX acquisition-related full provided of and of revenues results $XXX.X noncash of of selected third reconciliation guidance based million or from non-GAAP QX. all QX nonrecurring and International in the QX quarter. 'XX release. Total is quarter and end afternoon. non-GAAP certain in GAAP our and items. revenues our last billion. other upper our excludes the revenue, results of XX.X% approximately $X.XX in above analysis subscription XX.X% $X.X on to our the our This from well to and in A XX.X% XX.X% of compensation quarter, Jayshree, is came and at guidance stock-based impacts, up year-over-year Thanks, good XX.X% for in billion earnings up up total for charges were revenues software Services

This guidance shipments quarter. in and QX gross quarter-over-quarter well increase in reduction Titan APAC largely up reflected customers. Overall domestic contribution our a healthy from approximately and our and in XX.X% Cloud XX.X%, margin XX% EMEA was above of enterprise from last customers some to

new in than at increased lower XX.X% offset last reflected revenue, headcount We quarter higher need somewhat mix. Operating by million their primarily and chain in down and $XXX.X headcount X.X% revenue, increased or costs, introduction million quarter, inventory or better R&D costs. as continue improvements shipments supply in with $XX the customers $XXX.X demo additional down quarter million with reduction million. and refine XX.X% product gross quarter-over-quarter or $XXX.X came of more for was with margin $XXX.X the reserves to marketing period. Sales from by consistent This costs enterprise the at expenses forecasted quarter. spending from see incremental revenue, last last product for in were of of product offset million expense some

costs last some and came revenue, amounts G&A down recovery quarter of the million reflecting prior X.X% from debt in recorded Our or at periods. bad of $XX.X in

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

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

the authorization. share common quarter. and per million the million program and stock be price under The leaves recap $XXX.X average Now an in and have stock repurchase This board future repurchases $XXX.X We in at on market million other shares future the shares of business sheet. of investments To or to our $X actual turning and approximately cash dependent repurchase factors. will our Cash, billion. quarters. balance billion date, current price X equivalents $X.X for quarter of repurchase timing not to available did our we amount into reported conditions, $XXX at

ongoing QX, reflecting approximately in the X.X% XX from days some of operations from in the good linearity strong component receipt We taxes from with operating increase payable. to a switch-related performance quarter. and last to up generated the cash collections of cash combined million last turning quarter increase strong DSOs flat X.Xx, were the $X.X and an in consumption performance, from and earnings purchase revenue reflecting Now days, for commitments deferred and reflecting billings. Inventory period, $XXX in billion, XX down third remained quarter come goods. quarter. finished at at Inventory in our turns

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

to purchase expect commitment as optimize supply decline we continue We further overall our the to number position.

position as key on new to we products. However, components, a healthy will related especially we maintain focus

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

days of inventory XX quarter $XX Our days, last the $XX.X down product days the were were timing by deferred expenditures quarter. XX Account received million. Capital increased QX, million from payable revenue in from reflecting for payments.

horizons for with shortened the lead steadily Customer have our Now planning for improving concert to turning time. outlook fourth quarter. new in deployments

to continue expect ship create previously some plans careful time to but improvements to inventory. not committed the for also were side, against On we customer needed targeting most supply deployment supply redundant

expect of approximately XXXX improvements outlined revenue our year-over-year we As now which guidance, our to to for XX%. calls incremental growth in make outlook,

we in margin approximately quarter, On reasonably contribution. the the manufacturing ongoing cloud of chain reflecting healthy benefits a front, maintaining gross while supply and fourth margin expect XX% gross

investments. and spending to Turning

monitor the macro in targeted in sees to go-to-market R&D expect opportunity team carefully, to environment acquire We talent. and hiring as overall while the the engaging

non-GAAP fourth margin is This stock-based on fourth operating based in our guidance $XXX compensation approximately while has increases incremental follows: working quarters, approximately is capital impacts On to any of backdrop, tax of the have will a $X.X Revenues in front, quarter XXXX approximately as payments the deferred at as been our October. XX%. all margin XX%, cash million. With recent a other significant cash billion, to in items use excludes for and year-to-date moderate the of to which $X.XX of noncash represent and of gross begun billion results this nonrecurring approximately quarter,

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

Ita. Thank you,

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

[Operator first Instructions] Chatterjee line of JPMorgan. Samik Your the comes with question from

Titans have how results. congrats think of for about just I the know demand expectations companies terms us you XX can year sort of of if ago. Jayshree, question the in simple, an Cloud about shown sort guess you and it when orders some X momentum enterprise were and cloud Thank their the where on last keep the well. have XX of days, talked of we give on your the up to I to and outlook as update CapEx for next relative verticals, days

would an on last you So double-digit helpful. target a call, year. about for the And that update on growth talk next be did

that in So still to how relation Day. are Investor into you going the thinking on -- number

Thanks. Okay. Analyst beyond. double-digit has sharing to all, for least team and year on at just forward Day. more we are of first a to always years reiterate, Samik, projected next detail growth our looking But

know, last goal see XX share in declines in XX unchanged, and our the significant our to or remains lead but change as you. more times we days. declines Coming you don't we'll that So days, improve, improvements last as with visibility the back

on to on we see the of to and continue together. momentum both enterprise, push see a continue expected We cloud good, and combination AI good

Street the Your comes line next New with Antoine question Research. Chkaiban from of

spend to weighting in you deployment infrastructure, on sustainable cluster rebound So this this the vast because to traditional think traditional a So is accelerated keen And hear I'm majority year? of next is infrastructure workloads is AI traditional right? deployment on clearly fair run expect year. still how infrastructure it

further front many it at over doesn't mean spending Yes. stop doubled a the and clearly guess on this few AI end, years, My they're year, double an Antoine. as Thank back hand on cloud Anshul my for like customers some end. cannot the as prioritized thoughts. and And that thinking and network share to continue with the AI, is on our at to last spending the the back which down year. I'll We've on I'd look more down we end next but of AI always looked front AI. end. are you bank thoughts, But of without cloud end cluster they of you, build they'll front favoring we to as said

AI full the In is a see to investments back expect see end greatly while and as focus front today future, the more we'll well. network. on the cycle we end here, the the of So in

said is Jayshree, right, everyone's rest on, right it's at priority get touched that's now, will the right you spot time. AI and the

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

sequential the question, services. I very on fourth quarter, are a mid-single XX% improvement, you digits, the about improvement seen we we've One seasonally, simple think about thinking Pretty one quarter? low And nice call out? would that for how in digits. Anything single

finally contract. usually than think And periods the Yes. kind flush of see and some they line. now I every we signed quarter. there's consumed to we've do on services then actually somebody of services you intended or Look, contract, the a pop been faster It's again, the prior a into when negotiating renewals either has

higher look I of back see growth services. happens that time. changes from it talked time it that. changes of don't historically, maybe It's to you an a just We've time. this in these ongoing little spikes from teens to on do basis if kind mid fundamental the think we to you'll time don't growth have I little So kind year-over-year. think about -- bit

Paribas. from question with of Ackerman BNP comes next the Your Karl line

maybe this backlog? backlog in question a could and normal where be is suppose But upside I combination outlook end super thoughts coming terms Pre-pandemic is some your for of your and of bookings prior down of to up Ita. any in better relative helpful. may the quarter working Just levels? the a from

specifically. don't Yes, backlog about Karl, talk we

lead I expect to think changes times right? talked are they shortening. get are that about time, what we visibility we we I improve, to better, -- lead are [indiscernible] times seeing the horizons time customer dynamic have said to that dynamic. is in as we the kind that of We've are place you where some see customers, So think over seeing that have as reduction orders planning

out remarks, And We you are that. working with that of prepared I specific But into mean, still numbers, kind if we time made -- again, we haven't and will deploying some that's be my in of, year to plans. just from giving we deploying equipment plans listen terms next customers laying their still done ago.

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

talk more a could enterprise of was numbers side. here. the on I Congrats set you nice bit hoping a on little

their versus where over here better the trends? clearly. You're maybe just about, seeing But this data seeing I have a strength of rates are strength you side, can more some is, qualitatively, in as severe talk And the of really the very you away. drop your peers good really, seeing lot backlogs growth is gone a the coming context are from maybe campus think

don't that You having seem be to issue.

would And the center, the really that be offset the and growth. data about I'm campus like to enabling versus So you wondering is what to extent can talk what's the that helpful.

wanting investment to and out, back significant and and our data with investing it's share words some Anshul X an enterprise Historically, years, heritage. the And you we made high-performance in enterprise. we some and few forget seen in customers largely And versus modern if is seeing original health WAN you into ago, But comprised leaf latency CloudVision. architecture care, to a routing cross-section we to you your X uniform for see including a for storage see the in that business and much to and cluster, one and spine been actually spine on enterprises. And and wired X-tier a have HFT, setting enterprise enterprise We operating business we more universal border Again, answer education, tone transit. across data was can't expect distributed in uptick had leaf model the low that too. the I'll a center a look exciting where the Arista. financials. in the of connects verticals, on wireless to last a question remarkably Okay, of, compute high-tech we're campus, never a do building pretty a more center started it Look, have step and leaf, the say rightly can ask small leaf, that XXXX, pointed seriously better Amit. years based a enterprise today, back It's a Arista and that both. and architecture compute yes cluster surely a

is this here. Anshul Amit,

this mentioned, the Jayshree customers to led they move the quality, higher one Kohli with campus team sell OS the architecture, now being them new bring across today, world. We visibility Ashwin one one us every to have and we longer the for in center automation CloudVision. as them. but And Schmidt risky Arista for And and in block around CIO worried coming for this and the both great many able a no Chris many, resonates are are about countries data to on board space. a for that's message the That by in being kid

We are, facto and they like the in it. fact, becoming de

is It's momentum good customers this around just the the and more by continues. to team, execution and the why more So getting world.

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

cluster I for both us Anshul, and what progress thoughts opportunity, you've opportunity around your helpful. able a as bit in see preexisting back-end you hoping shared how color you wins might net comment little any And in and developing make was network about would be to the previously? with new that you around Jayshree the versus GPU be particular

more that an Anshul and breathes than lives I Sure. do. Again, this is area

or didn't we InfiniBand. even Today largely So back-end some ago, as see was see Ben a I comments. executive if give But was by you months few and one others the AI and something network years I'll all still on dominated the adopting -- of the InfiniBand. both very is dominated, Ethernet X is major InfiniBand we're strategy are look I designs them at looking at networking, of dual it, for

networking you're products AI a think define they're favorable with to the more become based Ultra is Ethernet doing and Consortium more spec, more to going and work I UEC. see So to the particularly going Ethernet, on to

see between singular front-end back the using You're a going the IP end protocol. connection to more of a as and

especially of feeling of we're a end of there rollout encouraged back and, end production Anshul. very course, you, front be that will Ethernet. Over so lot on to based And XXXX, in

specialty customers the Titan Jayshree. Ben providers been ours. well as Sure. great of Cloud our Thanks, as partners have

co-development is high. of level on these products like get DPUs. that's just know, the It's of space, at partnership in done engineering So the utilization in maximum of projects. we've previous a you previous them. needed this are that going networks lot fine-tuning and we as to these back-end in And cycles, There's with good

run teams the So is possible, feeling the our customers goal activity it, their to can much, And as higher are clusters much quickly jobs than it. before. the faster. scale as is enjoying these good about We're so

well Jayshree comments more have. the this all on too, but You've topic, and we heard good activity from as past, on the have that front on analyst in the here you

this entropy one especially packet the to so efficiency that add and of just time It's the end-to-end lot I thing engineers And about and critical think the language job just is days. a has not about team, these really our become from early know something large latency. our latency. about it's is models completion

end-to-end. this working really we're So

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

know, of meaningful last kind and Jayshree, you'd XXXX. I a that was to AI for to then you bit. little see opportunities quarter, volume last off deployments think these dovetail commented want in just that it I 'XX expect in I pilot question

in then I some high spend all, AI Or single-digit network you it's And you can that First past, of in kind do compute context see spend of reaffirm intensity fabrics give that cloud you to, view? infrastructure how these relative the us all? think for at networking on has on that, environments? percent been of changed of classical

I the X November later reaffirm that First and view of Day. more on is all, question easy. at Aaron, Analyst our first

a say of you the everything GPUs networking cetera, back and higher the now, XXX-gig percentage words, XXX, Coming and its started I and to some may XX, et than not switches it's the perhaps rest and session. higher attend it to In in versus XX% are governed the lot too. But XXX, So in XXX-gig, tell not XX%, of changed get hasn't XX, you too even with and by spend between the optics that cases, XXX lot a different and high-speed the other if would cables XXX. I more where XXX-gig, this optics networking.

continue -- XX% to XX% range. that So we you'll see to

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

to And growth nearing quarter. stabilize that recovers not Or go the and from quarter you the XX% confident that in to more estimates. to better Jayshree, last understand XX% than you I the materializing? I'm look there? for agree are growth X if then consensus And been to has the tone of declining do from like any this and stays the at Do definitely the you next of you And in X changed how that. we last more there about months quarter. something your up numbers. is at the and going the And it risks quarters adjustment sound after looks down want kind that rate optimistic. looking it's end rates like troughs made that QX of

What do you think Ita?

been we through so So year the comps decelerating think, high. kind just the we've the are talking about Tal, I growth of as of move because look,

obviously, the cloud expecting if next so the there is and moderation to talked again, side more you that growth. discussion had about about But on think of the I business year. far look 'XX we've at double-digit are the next week, we've some come we

the of and believe laid XXXX. I I of about, -- executing that kind upside that right? guide So we of So lending price of into moderation the to what default, laid giving We're the almost by the and you think out, within a upside I we balance in 'XX, 'XX we've executing the But right? well, we're do of some within balance head we're we think as that on some there's kind for think we've of discussions out plan talked the well.

I think tone song focus on or because enthusiastic and need And I really quarter. something sign felt that my this to Tal, last a quarter I and maybe

But quarter. happy last you're pretty

So...

a kind at ] I'm the [ gal happy moment. of

between We reading are the lines.

question of from comes Your the next Naji Blair. Sabastien line William with

about revenue change the OCI result in the share in inclusion new change this Titan becoming of material the provide a Oracle? segment. the breakdown ask in to portion there? Or at and you that wallet this and larger can is Cloud of AI business wanted I Arista's Was of revenue? Anything

Yes. No, we share We don't it wallet on definition. Arista. on of do it based do based

So become cloud top-tier well. I belong investments think addition their in category tightening in customer the OCI meaningful has AI as a to and they and cloud

of reasons Arista, for as is definition, good that's yes, happened of they warranted. And and the to change be customer a nice very So classification well.

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

customers Anshul, other building back if kind the And very kind on clusters, terms and as of the in largely Titans or that providers. some maybe some just today, large discussion Jayshree what just classify out AI of of some building is are the those you're opportunities of some guys forward? going networks? end these Tier people just other of what of Or amongst represent focused Cloud outside commentary you of and on seeing specialty these those X

scale. is providers this The doing Tier what X cloud Tier are doing just the a Meta, exactly smaller X Sure. Anshul. at is

in companies them, get that together scale. the to actually clusters, real thousands very fine-tuning we're a at similar the designs these GPUs not cloud, their smaller GPUs Many the is working with very, there. But them. estate are but type thousands if out of is of sort build activity they hundreds just features, of of to on trying can the So maybe

with X happy that to very X this It's that we're it's not the just and activity positive very customers. the board. limited across this or So in is see ecosystem

also GPUs is. for like else everyone they're think I waiting

seeing interesting not that scale. are on I projects with enterprise the and only one clarify against very So the some to But also that there's scale, lead common problem issues. smaller time we're Anshul comment

we HPC So a clusters, clusters from in for lot not too day. are trying customers what with the of AI different back small saw

Yes.

from Michael question Sachs. Ng comes next Goldman Your with line of the

just I R&D. outperformance We the an may quarter. just you And I think that I helped unseasonal costs saw product wondering a going more the if that had way introduction should us little talk lower understand one to was Any aspect introductions trajectory in the product decline bit OpEx mentioned have help quarter-on-quarter. of on about forward we think you it. OpEx? could of about

mean is lot right? of R&D lot the I of got sold Yes. products a a now. timing, right We've it projects, labs different of lot a through different kind of

in kind is of shows when cetera. So going et project there to be some volatility happens, terms of spend when the the spend up,

QX. forward, the QX we think just the There's nothing I of I even were into coming guide quarter. timing, some we a even because products of kind unusual in about to in So again, in expect in lower this for maybe quarter labs. And volatility that. than anticipated it's that come R&D back kind that the all just of going be may through lot there going

hard, the down. too. come spending chips down, on Michael, So is when our our is hard when are spending the chips But

expect Andy, new So of variability, products some lot, the prototype are -- in high we've and to on. Anshul, our and a have all got working lot Ken, pipeline a that you

So next X to number we quarters. up go over expect that the

Malik next Citi. from line Your the with Atif of comes question

custom well. like Jayshree, and your $XXX recent then terms as hyperscalers at it's chip. has Ethernet Oracle Project and one switch in leading million orders merchant Open whether of very Broadcom talked Ethernet Compute at about of the peers adoption confident chip sounded providers And Meta Conference, AI Marvell in

thoughts help And curious switch your ship chip merchant was about providers? between and Arista? So the does on dynamics I custom that how

team in my suppliers. Arista Yes. for XX, of lot past one favorite Atif, Korea proponents years engineering in Broadcom the work we best-of-breed our something of major the chips. built silicon. a best-of-breed companies, but last It's on and been their merchant -- have has We look to chips team XX strong our of being with decided before, we

building Cavium, It's you merchant chips, here, and you area right with Arista silicon the have enable with how more communication just merchant or But really well. you and forward generative whether and features, and can't build we what at Intel, as but at very analyzer only balancing, frequent not of just -- the latency are can have area we not impressive. improve has is build other chip, with not for price suppliers you but course, is you we ahead. The build is And campus root don't where an and clearly that in Of this have to an this our deal time it's genetic also performance, to portfolio worked this all excels, have load issue drivers, and if silicon really look you done important in AI important. and system-wide fundamentally with system. and as you Broadcom going job well. cloud silicon a one metrics density, the power, that just for completion and networking we'll these look as to But is software a portfolio share just the the you rule out can't past, that look AI to the you

next hear to lot going a more about You're week. this

stay So tuned.

Melius from the with Research. comes Reitzes Your next Ben line question of

should mix a is it the Jayshree what you about first going gross it? discuss or that reason lead times, year? there bit a half. just your behind would the little are cause 'XX it of and to other little And other back mean, margin levels issues that kind next of degradation I go year a be XX% Other it from to than would commentary or levels next down? any the half talking more Ita, can we the moderate in

Jayshree's what gone year. Ben, improved think seeing we commentary commentary and have been So we've through is, it as the my incrementally I

to it stabilize. expect We

we've to had So but not to that next year we become again, where will decline. so some We intention will a these then to after expect it it it more mix on outlook we where discussion say it down seeing another next before. this go think that and dependent provide we we've on was more on will than obviously and -- been But customer week, more thing similar it stabilize that think to improvements. starts it incremental too. Again, was period stabilize more the not

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

to vertical if Titan could. or now, Cloud vertical Titan wanted hit just Cloud I on I the AI

-- the take share Ita Is a in bit or dynamics there? think, a you down one where little while little opportunities bit hyperscalers. any of Could on I market are and was you could something know talk just other could parts about become about timing? larger secondly, been updates but little that trial then that like talk potential it if command. other a X titans cloud something and your just little I activity sounds here, some quarter. comments this different it at And there might there's a that's customers. Or

good Just to mean, going it's XXXX in again be in I terms a cloud of cloud, year us. for

some -- that I there's because have the if little balanced but we think and mix shift see know if a that. Anshul, come to you doing we able towards into could, mix been saying we're there we not enterprise we been we've towards been to to and I you'll some been cloud. that do that take did year supply don't want wanted, it's we when bit huge can, a but other pleased has shift enterprise,

of Sure. engagement backbone, are, next Tim, my many a more small routed titans customers The cases customers still good positive. know, bit topic. WAN levels, in versus the on for very our as you Then use other but build with are little cloud we'll touch well. week, customers whole the

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

quarter. great So

Just year offering kind the early of side, product CAGR rate clarify to talk here, next to growth differentiates you are for double-digit trying been feedback? XX-gig a for beyond, and I Just on years specifically when beyond? there? and you multiyear here. released just What down what's a for talking about or guess and the 'XX And clarify Jayshree, recently. that guys and new 'XX about you 'XX then

do Okay. product question Well, answer first? Anshul, you want the to

going These XX-gig our ultralow-latency switches. XXXX the very, low trading the to world Sure. launch now Jim, announcement can the XX, very are latency. at recent upgrade from Series. of the high-frequency the was XX infrastructure whole And

You're in XXX now nanoseconds XXX X, cross-point about X about but also layer technology, talking features about introduced talking nanoseconds, to these... you're at X we layer with

to XXX put just to be Anshul, it the day, And nanoseconds. perspective, back in used this in

That's right, when going it keeps down.

clarification. saying, to numbers. than faster company, 'XX yes, exact I and for Yes, light. a a myself at the but speed making digits James, double aiming we're was as you wasn't give And forecast either in or I just of least Anshul, years for beyond, any

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

of What improvements is into at seen the your even go I'm yours? gross in the wondering that there. since now customers normalizing, prices A just the to last your maybe looking excellent there start quick odds have back, specifically couple kind the more question now something and are -- probably larger that margins. to details what come much And of go? can Ita, gross room more on you down pressures for recovering financials customers how coming years with are not Nice COVID, perhaps could much -- margins you in of of potentially the pricing margin.

as start are between just dollar gigabit always I'll and the go SerDes another one we saying speed prices is down technology Ittai, density, down. from coming to always factor coming the the per by

CapEx where in, again, of value in our competitive really independent pricing this, gross and to always I change Where the pressure OpEx. we're alluded comes doesn't as is versus deals. So margin,

a cloud of cost with of So fatigued attention because -- all have singular X-year stable willing obtain we our we the total customers single-digit are now because very vulnerabilities technology. industry fact the paying reasonably of the Arista expect are be the advantageous peers quality. factor. to but the of that in especially TCO software-driven enterprises, we pricing poor These because our competitors quality a approach, XXX to of a expect and operational that have lot pay to and them for with while be given our significantly that of to to vision, XXX The

the is customers as is gross try want started. The executing margin ever that we margin gross has we've Jayshree market since of emphasize report it competitive, a and mentioned, very what negotiate I been this, been we is result on. to pricing. why The Ittai, not to simply the reason

doing I think we'll so. continue

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

get your where this as has is see comment year-to-date. to what you revenue in just a been like essentially you to last quarter-to-quarter. versus XXXX, I would better the on progress it enterprise context, lumpy year-to-date percent to XXXX. year? a given was where how customer concentration understanding be And big in wanted if it that appreciate of were willing of I'd able I sort can be in But

proud at even our love know, I what we concentration, year, it. we was Ita? they're outsized very you Microsoft, customers, if we're -- I numbers, some and Simon, XX%, if of concentrated, Meta the last as And the was had recall

Microsoft was XX%.

XX% to XX%.

of and While down north the spending, seen due possible we to AI still strong CapEx in be of it's but they many you've very shift contributors expect come continue to going as our may to us. And to XX% there's forthcoming that continue for strategic them news results. XXXX customers get the the larger in -- we at and very X even we important years, denominator look to as

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

differently. question, I put little just want follow a Simon's up maybe bit to on it

share the shift those comparably cases going Oracle markets new unchanged if Is to and it? over with the you of it at about the if I enterprise and to to are Meta the forward use combined XX% financials, grow that think to at kind shift AI term and the inclusion normalization across like through your going reflects of the dynamics update, And is with that long Microsoft. to going Titans some cloud much trend of that market you So and look that us does be there? help suggest to looks way of sector cycle? AI XX% how maybe the think Can

deep your this one. really on analysis is Yes. David,

is simply reported innocently both we're which right million significant, OCI a their AI And become just say that cloud this, server a and vary me more AI Meta, making year, matter. But such company spend any than that. course, titans all Oracle $X our Oracle a will for or is that their of Arista. too and vertical. mix cloud of Microsoft both any is, an the -- or every installed Let we for as is going not and component into important company greater other now of how seeing Don't on We're as much is now. combined to assumptions read that

future numbers going and that to will of honest these be Historically, Yes. David. we've trends forward-looking about It's more how AI the forward. you change the a do previously. been this It's think really more impact, talking doesn't impact really about

just is now, [indiscernible] AI much important I it's right. Yes, that right

the become important, You this to XX% forecast. as know go will that. normally of north it combined But have starts we then

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

point lead book-to-bill to and backlog you question then don't you my after know when a congrats. X? time about have normalized will want X reach And taking or think you Or give to at level? quick for or what times at us your talk than Thanks a back that. but I follow-up your a can will I return sense what greater

about book-to-bill, if talk not don't going is to Jayshree you backlog, talk about Erik.

to talked business. thing for I we'll that. are customers right? kind that but business there. we're and a of Jayshree time turns to some had positive So continue the think, not times how And much back improvements. improved, about still we're progress, ago. making We're lead the the And do we're honestly, That's still making for we not

to just add, time, with the purchases. AI. obviously, changes the When There was were very these of then back mix components. years exposure the be can't forecasts time to risk from get making progress May of quite a of ago, especially were I and a you all cloud And and look right. I'm because made. team large short want we you multiyear has X proud the We

So multiyear as trend. overall it's and business look a at book-to-bill at it you our on very an given measure But hard time. to backlog have to if

be lead Can times normalized level? you at will just comment a then on the when

Yes. our we expect And in normalized to said XXXX. just improving and be we like it think gross I been this. margins consistently It's

Operator, one last we time for have question.

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

[ made Happy folks. Great. a cut I ]. Halloween

stack if up towards available Q&A. you? partners if silicon has just is provider that one there made the So to curious going service merchant intention earlier actually chip routing. think that was in after there's And I moved of silicon the the on piece your any I'm on a mention merchant

XX.XX chip was Sure. Jericho latest Woo the you announced that to Broadcom their on believe referring Jin, I are recently. announcement

QumranXD. the Yes,

QumranXD, exactly.

now a orders the it's entry, our a and So Broadcom we to been partner build great XX.X. a features. bandwidth just continue time, so new And same products. as for and know, products to we've not doubled used been is We've switches will going long of a these for family, building to same that you be new on while, speak. can that This

really expect with you the future products But really So in as well. some changed. variants nothing those -- us can from

and Just continues succeed. innovation merchant to continues silicon

et the Power stack Woo right we the I want engineers made the AI, And investment, in And better last hard the has problems. the to have they in over our and the VXLAN, say, power years, these of are stronger. cloud, routing BGP in of EVPN, Jin, power routing, XX require Internet, build just to thousands in investment gotten cetera.

chip. not we just It's these name how it's a algorithms. chip the So to complicated routing do

concludes Arista XXXX Earnings Third This the Quarter Call. Networks

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disconnect. now may You