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Arista Networks (ANET)

Participants
Curtis McKee Director of Corporate and Investor Development
Jayshree Ullal President and Chief Executive Officer
Ita Brennan Chief Financial Officer
Andy Bechtolsheim Founder and Chief Development Officer
Anshul Sadana Chief Operating Officer
Samik Chatterjee JPMorgan
David Vogt UBS
Sami Badri Credit Suisse
Alex Kurtz KeyBanc Capital Markets
Tal Liani Bank of America
Fahad Najam MKM Partners
Paul Silverstein Cowen and Company
Jeff Kvaal Wolfe Research
George Notter Jefferies
Rod Hall Goldman Sachs
Jim Suva Citigroup
James Fish Piper Sandler
Jason Ader William Blair
Ryan Koontz Rosenblatt Securities
Ittai Kidron Oppenheimer
Meta Marshall Morgan Stanley
Aaron Rakers Wells Fargo
Pierre Ferragu New Street Research
Tim Long Barclays
Amit Daryanani Evercore
Simon Leopold Raymond James
Woo Jin Ho Bloomberg Intelligence
Jon Lopez Vertical Group
Call transcript
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Operator

Welcome to the Third Quarter 2020 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 Web site following this call. the to turn now will call Mr. over I and McKee, Director Development. Corporate of Curtis Investor begin. may you Sir,

Curtis McKee

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

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

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

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

Jayshree Ullal

for Thank you, we quarter and Curtis. your Thank XXXX earnings infrastructure during recognize you, At everyone challenging role all supporting afternoon responsibility global To families private you are with, global in the for call. hope communications times. we that our Arista, and us these our third this during safe pandemic. and joining start

supply of We are and our initiatives business working the software continuity contributed non-GAAP assist Back manufacturers, delivered services and and for million people of a life. closely We to $X.XX. to with Arista ACA contract XX% employees, Foundation quarter customers chain, QX with per support share and renewals XXXX. $XXX.X earnings revenue. to in approximately

service margins In enterprise the enterprise higher in direct gross Asia quarter. services The providers and fourth influenced of this customers momentum is a to non-GAAP service are We again our apply our and we providers’ Arista's is cloud and new XX%. titans approximately and trends, approximately of verticals. are registered all financials XXXX, combination customer in sector million result campus is What and once and largest is and also cloud diversifying record and is quarter second cloud dollar a by place, sectors, and enterprise our customers, followed vertical by QX Our titans mix performer financials XX%, was cloud a cite our a at software number traction vertical. providers, which XX% service this clear contribution. to now largest approximately Pacific XX.X% for across logos were consistently support cloud With and Tier place. X and third are providers respect now roles

be Day have The experienced absence cloud Despite not COVID this revenue European in tight dollar characterized XX-plus the decade has volatility, Americas of cloud Asia for was tightening business tough particularly in plan. will the had quarter. international XX%. best double-digit years by this emerge to believe we light a QX our at contribution like Arista’s also a aiming we deferred four mix, the from year, quarters, business momentum pandemic strong and strategy storm year, beyond. but In in billion our growth physical a would addressing returning and networking. consistent Arista In past we related terms XXXX in of But to the comp. only recovered shed with on reset can stronger, Analyst some The geography XX% the past growth for of

core second a spline campus edge flagship cloud major Arista building leaf X, The last across expect and X as Tier our cloud in the We enterprises. topology consists replacing market our decades three with IoT endpoints, service of a as workspaces. wired market years. spine the and recent the major is WiFi edge product EOS two entry few for use-cases routing cognitive brings and of new a to network. rather disrupt routing the the line multi-year X, and products, do expect contributors. and from devices incumbency largest the core five center well We cognitive, or spine, unified for tier hallmarks with campus next growth and data fine adjacencies, few One, our business of our our cycles our and upon campus Two, routers into verticals. The our number lease of peering

Security. mandates that typically Our software, and going AI CIOs driven shadow of A-Care, into cloud, ground networking. third combined through our network Arista contracts. from is driven, based that Security security line. A network, opinion, comprehensible network. We adjacent hunting driven, spec router security data in dataset. and very our stack, raw advanced category use on provides on Campus and software a like metamorphosis, is Awake cloud perimeter across means the multi is software data the the a increased and Switch In the secure acquisition network recent contributor security driving The aspects with isn't for XXXX secure network a this of the EOS natural the blurs multi-year and automation, priority to need models, their services, Elaborating detection a believe for predictive, moment for CloudVision, The is for a latest alerts CloudVision, seamless, of Customer subscription-based entry are truth. CSOs Arista's foundational. our state acquisitions IoT monitoring is strategic new Big product category. line Arista’s or monitoring response of such on this Security Arista is the autonomous industry silo storing switch Cloud the Simply software product of proactive, point visibility to data. into software a and big of our observability acquisition focus as Cognitive subscription Awake and IT with Awake Networks transforms are additions

response our highlight models. the safe teleworker example invest to OT coupled by today's We double recent both zero fitting in XXXX, like the industry campus are as IoT and home, chassis, would elastic with rolling introduction COE we But announcement boundary upgrades, campus office, unified witnessing the invite to to go-to-market of and is I our detection data dashboard engineering and a and tracker work-from-home. campus visibility and the the driven launch We for feeds flagship with touch into Cognitive performance our end generation massive transition our edge our combination This video a for Bechtolsheim, the Campus cognitive a combined a A failover leading model, wireless of deployments. Andy? and user both application. chassis security network COVID wired between secure high Chief portfolio Founder do encryption. for XXX workspaces. into of campus is and Awake Officer flow is for the today. in and definition delivering to density, Series of blurring next resilience the expect Development for the Andy transit era Arista's flexible and

Andy Bechtolsheim

Yes. markets like networking that right the campus for We market prime of real innovation a and that. example is are

are Series products capabilities security, is to of platform delivers of other XXX-gigabits X more gigabits access than launch key With its the a visibility next per more and where power throughput, modular chassis, our competitor. chassis, XXX generation has X throughput. in we X XXX level has point The uplink which our we that any more second more X introducing class. upto performance, With times each can WiFi is points. This XXX access single nearest the of performance a of WiFi support complement support performance full XXX a

visibility availability, the the of encryption being power system, XXX addition WiFi through which secure every XXX MACsec new Arista's compact handling. also The campus performance, competitor. unmatched in legendary the density Combined offering from breaks with communication entire XXX closest offers the our the than XU network. port, In more security, ground supports reliability EOS on offers and

Jayshree Ullal

one Thanks, That could excited, Andy. I'm I great. use home. was at

is economics boss and level routing adjacent key us rich two to another stack, interconnect, as for lead five-year this EOS. by software approaches, beyond now lease to silicon lower advanced bring customers see intra switches to three and expensive routing use scale, two a market use us been accelerating and carry extending and labor. routing layer and via endeavor resiliency, of and higher fruits cloud protocol layer the the terabit programmability. Next offering for routers cases Arista the legacy to a together support, classical has This a for WAN Arista's We're great see four union density cases. generation bringing and routers. us power -- spine merchant to disruptive We're of DC starting alternative multi routing inter-DC modern compelling

with Our early are investments stack BTP standards-based and traction. simplification Arista's and routing in routing EVP of the segment yielding

service three have many cases. important use-cases, and pairing multi-access Tier for layer including We these a edge, Tier two interconnect, fine X few use layer customers X, of won VPNs provider

network as Our data cloud design with center expand core continues to the universal Arista for pioneer.

one ethernet market FBOSS the in flexible gigabit customers. with software and been SONiC, for our leadership number conflict XXX-gig open position to leader, the have early XXX partnerships and titan with market We cloud driving switching

clusters scale. storage We compute have beyond the been pushing at cloud and AI local

Anshul? CloudVision on across the traction. our hosted and Operating Sadana, cloud. series entire network. customer will API with the AI driven availability, a color As quarter, cloud network-wide Anshul This managed automation, Clearly, add Chief delivered cloud and a time in driven Officer, as five agility, more state an enterprise of principals our we some enabling analytics, service their database in

Anshul Sadana

the ever their The of facilities product a done cloud you, a in future. companies to has our the the Jayshree. leader than Cloud last co-develop are our and quality Arista and transition. driving execution, we've more the over engaging is a nimble architectures work with highly based related on are product impressed customers. silicon for advent Thank us decade ability with networking been to discuss

gen winning gig. XXX on We products, RFPs and are gig new XXX next both

now to DCI have WAN used We and by encompass from footprint leaf expanded legacy data center supported routers. traditionally and our Edge spine cases

lot a talk about quo. status of have maintained boxes XXX white there's While customers and gig, our

use scale grow. and they're to internally years. feature have to cases If for products are technology in the currently our them us some white this on used by few use boxes at makes support. for future not are today white Customers Cloud white Arista to companies design. boxes. continuing products may change a status Whereas and to our scale for transition We use massive from seen position boxes switches developed customers in quo. This upgrade continuing who use lean covered more for and a rich continuing anything, a

working Our in have value cloud we with and here. customer customers high us, immense satisfaction see

that competitive highly competition. are significant is that told Savvy ahead will titans see fights. pretty we we Our and influenced marketing share it we unlikely Hence cloud are are being is shift. portfolio of by

been major gig all products times gig Our by our RX use quantified XXX cloud customers Series several now cases. for XXX have

We will to Jayshree. on. keep marching you Back

Jayshree Ullal

will Thanks cloud Well said be Anshul, and success. we marching the on on. titan

rooted So CloudVision. in and networking, driven across with LAN, a across data software vision data diversification WAN, products It's more traces customers, in now network, sets summary, managed built and cloud clear Arista's verticals. by customer

We a edge, trends have network. in data transformative built archiving unified across architecture, the IoT computing, new harnessing the

customer of quality which with strategy, I And couldn't network this and clients our resonate our we more customers cloud in migration to our places on the innovation, call from Our be the in siloed legacy places support to our vision. cognitive upbeat cloud. networking,

of Officer Chief Ita cumulative more the over deployed With XX-years. XX Financial Ita? to I ports have will turn over We past that, million for financial our it a specifics. now

Ita Brennan

good and afternoon. Jayshree, Thanks,

our compensation year-over-year, non-recurring QX GAAP is and our results, QX results end from down Total provided other XXXX guidance based related $XXX and the QX our $XXX.X guidance announce items. million up X.X% of reconciliation prior impacts, quarter. million, upper all release. selected the revenues me or for non-GAAP XX% $XXX in well to charges stock Let Full based earnings in above to were million on excludes acquisition non-GAAP our of certain non-cash our and

to total revenue, quarter. While the million we with continuation on support of and extent saw $XXX.X Service for in approximately slightly lead revenue up quarter. front, International remain supply in second the chain from of software represented last total XX% some constrained into shipments at down the extended some somewhat from improvements times quarter XX% XX.X% QX. revenue, or of came XX.X% revenues

approximately was While the mix last quarter-over-quarter to in region businesses did titan Overall, QX the with deployments to above XX.X%, shift was we consistent of the in XX% on of the of XX% in quarter. year-over-year see basis improvements our also. customers, midpoint incremental due geographical some gross and our cloud a and guidance in by location our margin largely

in personnel employee and $XXX.X revenue, marketing came introductions spending continue the with up This expenses $XXX.X up the product quarter spending million We quarter component of our last investments Operating Sales expenses quarter. XX.X% continued million freight increased $XX.X $XX.X the year quarter to quarter from elevated compensation from new from period, XX.X% in R&D and at -- began variable revenue, last top period. COVID and for the million million costs million of recognize We million. and were performance revenue, or or last related increase improve. as the third to including at increased related of for $XX.X $XXX.X to X.X% increased expense other line during costs. operating up reflected or costs. incremental in costs

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

came down at $XX.X quarter at costs last of G&A or from slightly approximately revenue, in Our $XX.X million X.X% million.

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

the gain number share down investments a diluted income diluted prior on quarter Please $X.X of Our earnings was for note was million in in included one-time for and quarter share of that the the of resulting other shares, expense XX.X $X.XX, from the million. per year. XX% sale

of In now financials of Awake on being throughout focused approximately of interest a quarter. current addition, The environment, material things and million we rate per quarter all other given Xth The $X coming current low the purchase on on equal, closed other October expect for are year. integrating the acquisition acquisition would the income have we Security accounting. will not impact

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

$XXX over a of to 'XX. million As shares we organization now worth our reminder, repurchased shares or commencing million have QX X.X in $X three against billion Board years repurchase

execute net authorization. third We $XXX.X against working to capital opportunistically reflecting allocation, of and the income level expects the In consistent continue operations a of quarter, cash generated from overall million investment. to in capital solid us of terms performance which remaining

through to turns products. Inventory from prior in were components million the to inventory at billings certain down We from as increase expect quarter, the lead buffer days DSOs attempt Inventory the continue X supply disruptions. to from of QX, X.X the $XXX against we period. end buffer the linearity $XXX any and strategically year days, we in future down last quarter. to million in came reflecting as up improve continue chain increased XX COVID-related of XX and to times period in times, levels in

million in QX. $XXX total was deferred million, revenue down from Our $XXX balance

deferred The our exclusively revenue reminder, services-related. can now level renewal, services which a the million. quarter balance is Accounts basis. from up directly timing revenue of linked is inventory payable for to our service and of in almost on reflecting expenditures timing payments. XX were of a term were As QX, the the vary XX Capital $X.X days, quarter-by-quarter of days receipts days and

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

incremental have is the and some market. with business, in remained healthy, trends. economy seen our increased While has impact Activity on the in our underlying across provider part cautious of underpenetrated us a for and the we we sectors rates remain what improvement relatively around enterprise COVID-XX of win business

In cloud to solidly continued our combination addition, current of fiscal comparatives, combined XX% XXXX. rate consistently needs the titans consensus with to against for growth we XX% We and have favorable believe over a these year trends, execute the customers. of supports of year

gross the gross margin XX% with XX%, driver. key of we customer reiterate our On margin continue front, to will remaining to mix outlook the overall

spending and to investment. Turning

to carefully and results-based growth the the support to spending, business. This expansion to While go-to-market R&D continue business. we in campus will across committed and in manage includes innovation to go-forward, investments enterprise continued are we making investments support

it we in to opportunity our remind an of happen operating While would XX%. plus resumed especially won't this growth, of you or overnight, long-term environment minus targets top margin of line take

items gross margin as million to for is of quarter, is operating impacts follows; discussion this based current situation to and a all our for inherently chain. fourth Finally, of COVID-XX continue non-GAAP mitigate new noncash and our XX% however, understanding to to XX%. as will and and the on backdrop, approximately With above as to results reflects approximately our of excluded of revenues and $XXX the its stock-based challenges guidance of we our approximately which impact margin need guidance compensation uncertain other QX to supply our attempt million, unfolds. and monitor This is, outlook nonrecurring $XXX and business XX%,

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

Curtis McKee

Thank you, Ita.

Arista everyone like request time please question you going Thank Instructions]. are a may to portion for call. earnings single Operator, Q&A constraints, to limit to Due to the you that understanding. move go themselves to now ahead. of your the We [Operator I’d

Operator

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

Samik Chatterjee

Jayshree, ago. keep about everyone recognize that you to than it think days a lot sound XX you call growth double-digit simple. just I confident returning would more I'll on the did

improve what's heard driving starting expected ago? that. it Is customer you. that you Thank of increased wondering what I'm XXX-gig in the some to driving So as we the or to quarter is spending underlying it a coming confidence wins that's

Jayshree Ullal

and got always I of a think got foundation of people Arista, when But change. and the Arista start you customers and and our I We've planning didn't we traction. used products look to became think have the fundamentals at strong and superior customer had they COVID their spends. COVID, very to new uncertainty norm,

So and customer QX our all balanced for out. and whereas verticals we and our I sectors saw a were Whereas say across figuring in still QX. QX, wouldn't traction same things very all the we

think bullet unchanged strategy, combination sector. an differentiated product just us highly four I we're silver winning but there's a confidence. newfound on every the So a And of humming no gives cylinders all in and

Operator

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

David Vogt

Maybe a week last entertain That transaction guys you great. holistically would Can kind that share we Inphi question, forward me. could maybe announced big on just it move your as and you was proposed Marvell industry the XXXX? into for might of mean thoughts be picture if the industry what

Jayshree Ullal

the digital semiconductor Inphi. and you Maxim, analog But decades I'll came know, try. I mean, semi from been now consolidation lot Marvell world video of ago. arm, in as a there's I two

to and the semiconductor way innovative is the get smaller but are this ones producing are larger need look I ones to think some large -- real are trying companies technology scale. at the

and optic both and We been the partner something XXs an very Marvell They've important and that in have very impressed technology with for best-of-breed Inphi. lacks. side, it's us they are

especially Marvell. of to hopefully, cloud strength the So the help will bring, some they

Operator

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

Sami Badri

Arista Anshul that on comment then just to future. boxes. a comment earlier that swap you in some deploy the white made And by customers wanted a just may white product I in and made for out transcript regarding today a check boxes feature-rich eventually the

it place in centers that design rationale Can process out? why deploy and maybe thought just explain the transition would eventually there for you they've data in box just the white box us swap a would down want or to gone with that filled would is then white route? do or infrastructure why the Now behind they after they take box to equipment white

Anshul Sadana

situations the in one where scale grow, And the dimension remember, our just that a as both has reach needs by when getting grows and more more need Sami, And their not than their point but from for directions, talked customers one. even word they complicated. happen. is timing, many, build couple at take to these they ongoing and the years and But about network But functionality they just space mentioned, certain many out future is do analysis in on of going And in as that not our discussions are well. miss I do in on to market trends they are today. competitive want internally. start stay looking years least EV these as issues certainly to a

Operator

comes the Markets. question of next Alex KeyBanc Your Kurtz Capital from from line

Alex Kurtz

well Jayshree. everyone's congrats Glad and the to safe Arista, on hear doing at and quarter,

maintenance becoming comments Can business. products, renewal growth portfolio couple this where years, the internally maybe of on and software a in software designed software whether or that Just to of maybe accelerate to acquired, base about big of a software of roughly in base of XX% demonstrate we're software? your your you the you portfolios to XX% value XX%, of the kind really can didn't cloud these if go back have expand and ago that at these that years titans bigger couple looking of and business, of

Jayshree Ullal

to and it's services, you we our it's observant subscriptions. when not think just note that I of business, of very renewals XX% it's say software

because titans, So titans have build of to they themselves. than and greater, It they these be resources the contribution. starting can with to would be cloud XX, Can to especially to and greater think Yes. XX? the already tools XX, have XX it's be harder tend it a many cloud

and the to segment say would important certainly network we software verticals but is subscription take can subscription and are our networking, pieces. stool it of adjacent other where contracts all in may titans components four in likely not networking this of our bits while capability. multiyear it I triad They as So more think part service an an the core embrace cloud a entirety. take I But have would

Operator

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

Tal Liani

have growth. I in trends the a on Product the question quarter.

are it's XX%. are XX.X% year-over-year not services about products up X.X%, growth revenues overall between down but and So services. down and even Product is

So both I'm steeper to understand trying versus understand the in I'm in strong sides. trying to growth the products? decline services

Jayshree Ullal

So first, subscriptions again, our multiyear contracts. many remember, includes services software of and

product. is So it's whereas not services just very clearly product perpetual

deferred So this look, software, never trend, with except much with the comps think product. But into I say year. getting the revenue better with helped and us services I we to from to we're last year do read too can stickier and only wouldn't

Ita Brennan

and think, I grow the recovering business Tal, recovering. then a and And continue of be to should that. more on software meaningful of is top mean, the services product the but to piece it layer is I continue

You that year and next see as can in the into well. guide commentary QX for our

forward. particular point think they're both time, but at to grow we this should they go So start different in drivers as just I

Operator

from next Your Fahad comes line of question MKM Partners. the Najam from

Fahad Najam

in inventories happening, much? demand are of the why ramp your so things. quarters? expecting Are gone significantly, significant are you A at awful. understand your couple the I of couple can up have what's like your up us look next it forthcoming investors seems just capital, help while working But also accounts If a you payable

Ita Brennan

our And still finished that COVID. of products Fahad, materials some the work for some No, portion to we position sufficient it, the again, in more than you'll that have get we a that if on react increase around doing that able is really do other that the expanding to good we're goods were in see we're we're buffers products. do react Q But is maybe COVID to have to around if quarter more we're look I first at right we components. uncertainties a to better you what file uptick the from the wave. is and that the we but was There and particular goal of at end some shocks when raw still think, buffering, of

optionality it really we've and focus around is sure So making more just a got flexibility.

Operator

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

Paul Silverstein

going kind of think end ask during get your I your growth? I'm expect to I could -- to say XX% in revenue that you there, you Jayshree, next I think double your enterprise the you by but are growth Are year, XX% get for in you go service consensus for call, to to to the digit said your for heard providers to if I number. endorsement outlook the you the it campus of to for what you portfolio expect XXXX. and And cloud, you of and saying expectations double double? through you financials campus the your can ask double-digit To

Jayshree Ullal

double. campus announcement getting if six don't particularly we product you I to our be we didn't achieved this last the but you our feel four may know, that if it traction we're -- XXX today quarters it we said are that we So four we've recall, And know with take our us and as last achieved feeling at pretty still will million. quarter. six good, first quarter yet would have we or said is first year campus. We're young to here, kids and

definitely that $XXX we do So double hope the $XXX end revenue, of can is the goal million yes, XXXX to million better. to and by in let's

we're comfortable annual that? of XXXX. very call segments, too it's terms consensus but to answer do you a think with Ita, In want the breakdown early I for to

Ita Brennan

well. and is between the resumed of this think, performing We that feel the Paul, not rest do stuff the cloud about, there at growth -- the to been point. then business campus like talked try you going has also vertical to we're growth by it between has I and services,

have I at what verticals to which there, it this and do to between think not we'll I plays point. all ways And going different we're those of to we're think get exactly out. you take multiple to see drivers, how going try

Paul Silverstein

Can I you trust get I definition… this, ask has that by cloud healthy you there, to be

Jayshree Ullal

said think it titans like it be I upbeat started especially can tone, be you at noticed growth flat down Anshul's. also flattish. feeling year. we're this will the year will then next And grow a I We think point, hope I to -- we’ve cloud No, cloud -- saying our and be can

Operator

Wolfe the Your next Jeff from Kvaal question line Research. of comes from

Jeff Kvaal

I that another I one you a two chain over that behind the some resolved. of if the partner And and was And little of a that of wondering wouldn't XXX issue pall in to to wondering the the thought guess, help is particular a part layer at with giving assumption there's of mind in customers your little starts when the in could is, us XXXX Thanks. supply guidance. process semi question one I'm cast you XXXX. if then us was other outlook. bit bit the

Ita Brennan

the for the what we at I few a with minutes the think I guidance, Again, much rationale various talked mean drive the the there about for ago. Paul multiple starting you revenue are into we're pretty got the pieces, look if we've of for those to different XXXX. will pieces seen trends those and software, year the well. positive feeling more solid looking reflected grow, good, then vertical business more of enterprise rest being all and But revenue in then business, window wins plans in the feel I not ratable we to service -- today. in across the at sectors, that some of And next business. et understand traction confident around cloud, those we've obviously, like of piece of continues think cetera, And drivers their as the

where and and like we feel those for and out come guidance, the those that's blocks to we multiple of are put different together building ways So the good about I next building blocks year. in think kind

Jayshree Ullal

think Ita this I said best. Jeff,

both small we're improve and deployments We number. because the XXX-gig. us CapEx a XXX-gig even huge in these indicator which expect cloud to some a trends titan of on XX-gig, But be for bulk will isn't based XXXX, projections,

the center the landscape, I in overall think white as status new and is we're box it, much seeing everyone to campus, and share routing competitive fears And and data look a cloud. in forward quo gains roles unchanged.

Operator

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

George Notter

give where in could routing routing? us you're and in maybe of you use the what about of in sales cases now Very you're interested then forward, for there? be to are forward? driving are different hear the or also, routing today? use And in your will commentary sense amount pursuing revenue in looking cases percentage space. you that cases a you Maybe And going all you what definition of applications, you about of kind use talk could success And

Jayshree Ullal

Tier particularly And difficult is providers, we break off we've Tier down, turned routing told corner it providers, X big only those started but take always a cloud. these X US, telco and X together. the of lot winning Tier year, elephants as tended on I've use as It's always go trend a time. because you, to But what and the for not saw service But this and the internationally. in we aimed or to of switching we winning, sort the cases be

of happy very were Some the of us. them multi-vendor EVPN, from with just combination BGP stack

Some cases. of use them were peering

could others economics, get So resilience features these are And routing all we're then disruptive love in well customer classical with better the very routing but doing they know cloud better they come base cases that to also, well. use from very, us. and as from and programmability, that have

some for We have time. been

to of is all that combination providers, the not five is say permeating routing just it the all our this verticals. service So with now

George Notter

that you the or the attribute allowed feature one delivery service there in product is to? provider to delivery space, quarter or And you can turn has anything that

Jayshree Ullal

service a one never it's providers as as list long It's If you the know do, feature. well them. of we

success. more and it But more there's it So working feature we've as been four to always to combination has you do, I for the think one of George, know. years, five to led

Operator

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

Rod Hall

just question you lot go of like additional and do And enterprises, there. revenue will because rollout? time of you absolute then issue of become when in deferred an I revenue guys 'XX enterprise. accelerated growth be housekeeping seems think would main again? is, The XXX-gig kind housekeeping you a really the building a back in to one. wanted sequential QX. if up Do slow And spending wanted think that a product revenue least have then also ask see there's guys It I to we'll deferred to anything, at

curious, look the Thanks. think any you? few on or just next does revenue quarters forward So do like that how for you pulling you're continues enterprise,

Ita Brennan

set, or it difficult it's mean, when we'll very the deferred, cetera, tends for requirements, current have I to accounting. under forecast be acceptance. particularly product think customer different lastly differentiated I on always the et to for some

of this more be It's But going predict to a some be hard a product at not differentiated we'll So there see. it's point. forward. would deferred very get to to would that that or difficult to have bar. It

Jayshree Ullal

enterprises some to end back after still slightly they if year. the are demand the of say by product pull more. anything, buy love of hopefully good we're supply few quarters. improve I and our in, will versus experiencing The want And would Rod, I'll that a say just feels to and constrained tough opposite shortages be it

So no pull-in for sure.

Operator

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

Jim Suva

that And outlook your XX%, you XX% My and congratulations consensus strong into with for the comfortable like outlook Facebook you and materially But you. very last for XX% and up would heartfelt XXXX, most up I things, week? that team supposed when ready be getting were I that during XX%. up that question regarding mentioned It's that outlooks results gave to additive? bake notable And to you're the is for wrapping CapEx really CapEx their to you're COVID. to that. outlook [XXX%]. and Does provided an believe Thank we up recent know earnings is be but of

Ita Brennan

be see for That's and see of we this mean, goes going comfortable what with current always CapEx So we networking puts view where takes right? is the it on from there. as I XXXX, to today. feel Jim, as and today has we'll Yes, what of correlation its we'll to our There's see. then challenges, of

Jayshree Ullal

Jim, the thank you for question.

leases, capital. includes you building know, CapEx As the

generally So very with networking it's component I I around Ita talking as and very, less earlier, Anshul, too, the were small. was is than X%. or

up watching be So tends But and but because lumpy it CapEx this CapEx. specific as are to overall keep volatile. any we'll trend, to it's then an pleased that year based is we next quarter-by-quarter make hard going the decision on

Operator

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

James Fish

over September imply of last a of impact this quarter? slowdown also it To DSOs negatives the you a the travel. insinuates more just in COVID-XX push best Ita, front-end-loaded your backlog strong the freight or cost And net the what on OpEx higher of positives understanding, was but went lower that a QX? have into was to either lack of more quarter then would we heading needing that business

Ita Brennan

quarter against We I mean, you quarter, and very the good we and back-end-loaded can high end right? a driver biggest last balance quarter. DSO of then is this drives traction some the actually quarter, that was last with were that, collect exited at just the the through

that and I have constraints So supply -- we still payable some saw accounts receiving in Jayshree were inventory, think chain well. in still mentioned, we the you we as were

we don't or little sales through out going a good bit and probably So of margins. but product it the bit seen the exactly coming that I'm against to little et and know had line expenses, marketing so well. is. of a that there's gross you've million try the still comes in we cetera, as quarter, a is travel, collect because the margin impact were some to into of in marketing And couple quarter. to what balance loaded a that end There size back the COVID I

Operator

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

Jason Ader

are this logos there. just from customers working that of winning side, types campus to buying what of home. actually just stuff you're the and me On lot surprising new the wondering It's then stuff a

question. the part first the that's of So kind of

Series that the think a accelerate part of of And traction the could some do Second big your Is question XXX it the portfolio? you product. in campus hole your market? actually in this is

Jayshree Ullal

are First buildings back pleasantly or to their am it's surprised headquarters, of coming vertical-dependent, even know. you be I all, smart though as people you'll not that really as

need ones need business-critical fashion. far more and in a performance and back distributed go and healthcare elastic the logistics of do and Some to connectivity some of do the

of So I can but would it's testing. them you Catalyst plan a proof-of-concept better, what The old of a There's excited change are some emphasis comment it noticed building in that specific the want is thought back, because it chance we than installed I'm to lot rather whole very you gives wire, billion a and do base old the them way Anshul, buildings can't also on think the now on of campus also wireless plan of And the beauty with the there's giving not unified the And age. called to be. just is we we're -- that? is smart products you XXX. ripe in my more seeing.

Anshul Sadana

our with a doing, There's immense lot of and by them. of enterprise in from When excited not you customers. And there enterprises, but that of lot and but let's aren't Series, the the portfolio. change driving is thinking office, are in And there refresh what's the go the and people feedback is consistent to feature broadening what in important not also campus. But upgrade as automation, really they our very absolutely they're high certain density thinking that's lot that's the office, well. ahead that benefits there companies so are XXX a give refresh. let's the this certain not the the driven Jason, interest enough employees a of high POS, the CloudVision, at look visibility to set, XXXX type in and to the Fortune need employees yes, we're companies since in even performance are

If need with by products. are conference to has you we day, your debugging to in you those don't the capabilities and want and video deliver move jiggered, the be the itself resolve of middle our on

Jason Ader

Anshul, from is… which catalyst comparable Cisco is the that

Jayshree Ullal

a think series them. there's I series. of XXXX and couple XXXX There's the

Anshul Sadana

XXXX. the And CAS

Jayshree Ullal

the the and the And one but older ones the XXXX, are shipping XK XXXX. presently is the

Operator

of the comes from Rosenblatt Your next Koontz line Securities. Ryan question from

Ryan Koontz

at of Obviously, terms type channels the displacing of the building XXXX again the campus And how Global over you I circle wonder if could enterprise in customers? kind your look opportunity big and feel you technology. and competitive to you're there. incumbent out influence great terms of we guys Thanks. progressing larger have front back there in do these

Jayshree Ullal

have if to are at I mature. year of look XXth XXth or we you campus. year. XXth And our in understand we second They're their very in our think to competitors, they're that

on work to So models. got definitely, we've go-to-market do

X,XXX over them we and of focus have existing is our When our want first area So some CloudVision customers. them, use EOS facilities love us. there and of to of our

will And progress the the international I investing for have think strong go-to-market a but certainly more Chris something is not second channel on that last years, channels. Mit three up two, we signing by Rashman. The the and in. third we will Ashwin continue everybody, side. enterprise making to on We're the under are led be we in we focus been invest And see is, Kohi

it's the the So we're the part to and our see of traction, that. better in center it's to to labor whether years us data three starting enterprise campus just two and achieve taken of fruits or

Operator

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

Ittai Kidron

from couple some of drill just were kind down of the me, questions asked. to maybe A

cloud, you're the clearly, on more First, bullish here.

my guess there. you finally to So campus right at moving impression hear. just supervisor, Cisco a on then it's in whole Can refresh? campus it your that fixed it But the category that now separation. massive couple Customers plane not on chassis looks the And piece POE, sort a you've refreshed that? great all. online, Is but there, of on a question look back solution XXXX. back features pigging decline. that architectures, whether you modular this at congrats clarify into I includes this like track I have data of is got cool on always new a and was XXX, Jason on of had Facebook when

really So about And to help going the when me year. contributor really the opportunity understand doubling you to for campus your this this next is here? or a in confidence is talk through how much be material that business thereafter? Is

Anshul Sadana

our refreshes plans say network wouldn't titan year cloud model, next are the in our I server models. all Facebook guidance Ittai, the but of in our for that

have little today we that the that. then customers we data using and decouple bit for from have Let's a our

year that side. confident coming we're next on growth there that So is back

Jayshree Ullal

prior in involved our And on the XXX, I both chassis have lot Anshul and lives. been in a

are large will obviates it's anything our got employees, that stampable. unnoticed which then large for constraint, one XXX. more distributed in is that And which under the more XRU. for I have need little to headquarters, be things there's stackables. today high-density announcement really port, And buildings, the think the our any if XX the XRU need Customers a and distributed you moving do of probably

XXX-gig the need You of uplinks. protection investment

You and and need the density power. footprint

need operational management. You the power

the security. need You

is You in on gone more minds, from to rolling upgrades. chassis discussion being least I And cable our visibility, happened, at has think failover the discussion. physical for a automation, always much time an plant need of the security what's

had center. You need in that properties you the the all data

So is to coming us. that market

a -- contributor we to time it is to qualify, So feel new XXXX. good that product, take there's number will it's but a it our in

Operator

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

Meta Marshall

Security what XXXX. contributor understand on it's traction from be Thanks. could touch Awake sort to of of more material kind just not a your that you're acquisitions Big to and Switch with just wanted Maybe and seeing existing -- material QX, I whether customers to but

Jayshree Ullal

to a it's XXXX contributor think definitely I in bookings. strategic

may the network software, subscription contracts As multiyear in models. follow you revenue software and as know,

it influencing experience, will decisions and center their material how operational helping XXXX? -- data with and in And are our huge on campus. in to those So their their the strategic architectural general, it's But customers' Probably very experience differentiator. be operational small. a both

so now firewall the firewall It's perimeter the the monitoring, hunting. analysis and then is because data collapsed. important or autonomous capability observability, of threat So in-line the just

So October. the ability the to do acquisition that is we in closed just Awake

that? to But can you So the it's is tell. interested tell thing want we Anshul, too one add it. everyone's early to in to

Anshul Sadana

and Big an to AI a the there's as well campuses space IoT actually sensors the side. need way I different. in think market very, very is and you be Jayshree, unmet in well are the work with monitoring technology this And environments, Switch with going today as right. and very a With and

Operator

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

Aaron Rakers

we a Intel. think in to in server you're But and guidance. want not to back of question. the just go kind through you the historical 'XX, your give obviously, Ittai's time, cycles and Because one I can refresh big of a if of pulls business I in you've of your And appreciate cycle server Facebook you back factoring that backdrop? that refresh for how look as into how got, to go context do about context

you about that business? pushed cycle. you. curious effect just A&D on got think CPU to how I'm pull-through You've Arista's into Thank service

Jayshree Ullal

don't I think it's much. Aaron, changed

typically course get to the two get got happens And to the and in, is what the one there's lag buildings network. a and you Of got to power then the quarter on you cooling servers. the

of year. felt And the we ahead service Hopefully, cycle why gain so the year. feel pain clearly, it comes of last is which the us, we'll next we did

Operator

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

Pierre Ferragu

switching, and I three, market, outside had to horizon, services. segments your much you how remarks over growth year going like going Jayshree, of your campus five routing, you that from versus do is switching opening how from these opportunities core come you was market? mentioned to and still your software is in wondering to a maybe additional time of come switching think core your in growth And much

Jayshree Ullal

Speakers] perspective, How where software adjacencies Well, Ita Is a underpenetrated, and it leave innings about both [Multiple will and not enough is that? early services two From our that I telling in grow good new answer? me at market. this core we we're to question. vision the answer a we're in the faster network think markets those segments, than

Ita Brennan

good a That's answer. enough

Operator

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

Tim Long

in telco your the at vertical? order, on It hit bottom still the just towards seems it's we least results. like Can of the pecking

do and or just What the the penetrating that cases further you routing telco use get So which features, think Thank the more going? security what's going you. do well regard that it addition you of in maybe Is networks? on there? increasing often on

Jayshree Ullal

will the two bell they very features, or think one remarks, it, my I and opening if well, routing cloud, operationalize missing whistle. you know said we're every I as and service better unlike is in adopt very design as or early even our in Tier time. won where traction it's then want And taking X well. still taking have We're us X. part in this four, good Tier X in the making some X five we But years. wins of Tier year, providers

the So numbers are small.

them think us. make So in order I need to spend to they from break, more

Operator

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

Amit Daryanani

expectation growth 'XX. go this for sales I calendar if to just guess, double-digit I back maybe

out is more infrastructure understand, And an to about is are like 'XX? that? when your do the they hear operating getting organic growth sounds into calendar total statement, historically wondering that need than further how been. that expenses that how we a it vectors think much play you I trying talk I'm and have perhaps And then growth revenue statement, in Just to broadly, expanding does about calendar the diversified 'XX,

Jayshree Ullal

the… upfront, have Amit, We're as talk future products organically. take question just Ita, products want based that to maybe, M&A the we now on discussion. is it you not absolutely factoring in any to or about And

Ita Brennan

Yes.

metric-driven to we'll And on to the everybody to operating benefit as model around in side, do we we'll should that, is bit investment be that growth My that have maybe room a to the that, the certainly make the meantime, make. to the margin. investments line than little did top term. think our more very find XX% that. top on line kind us investments In growth, And of a that growth the we're to of see. line investments longer the the with remind target do right But returning lot gives reserving term. near that's target But those we'll top the have I and we model help with the go we the right of forward. script

Operator

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

Simon Leopold

existing XXX-gig, is it to if of you. mean of that If a not Thank a sense XXX-gig, chassis, but to share customer wanted we does Arista? And customers? swap a XXX it for wants on losing one data you take scenario Arista center for assume scenario. Is in upgrade a card what your kind change to I for your an of that line swap upgrade of chassis? risk a

Anshul Sadana

all broadly, architecture also of [XXXX] series, Simon, lean support XXX series, there news some them haven't technologies. products the And we customers since these talked series, of with XXXX mentioned, not at while XXX-gig staying types The RX four good in all some is XXX-gig the in certain are just [XXXX]. of gig. about we looking at but the we're the the

that aware well of need now the to of certain XXX-gig are well. benefit poised in we as cases grow from actually very, very or So

Operator

comes question Intelligence. next Your line Ho the Woo of from Bloomberg from Jin

Woo Jin Ho

So an here. intermediate-term question technology

So question been the asked. has

a least. for to Marvell little not and like data the in that about talking sounds considered the been past? we a the cloud has lot growth opportunity complex may if present more NVIDIA in So of center. get Does bit we a in starting at architectures DPUs It DPUs the given have you

Anshul Sadana

engines. for say change sets a don't But that any of where Remember, a is bit been the DPUs lot helps early come new instruction the on in architecture this because have types special the world compare is might like outlooks the we major in to us even have benefit see This so of engines, offload many, the us, incumbency. too terms servers, marketing especially or drives there maybe many disrupt is from will offload around years actually at. looking impact of to for networking and far, and a

Jayshree Ullal

CPU. away don't have they been need generally they for co-processors, the think a take I

Operator

Lopez of Your Jon final Vertical from question the comes from line Group.

Jon Lopez

each a takes for in two periodically services gone the say, I just that? want make dependent as is revenue side. of there the about think quarters. I talk there should second course now trending has more, we Are and just think about deferred the renewals in that? happen clarification if the last that on And So I through anything that the about you deferred in year? lower understand. we puts that had also, Is can marginally Ita, to one Ita just And of sequentially that XXXX? on sure larger

Ita Brennan

be it's up I deferred move three really item. renew in because doesn't those what exactly now pretty will revenue really around. to line one term the The Yes. will but line the over recognizing time. deferred almost year show renewals, it by you're But it move whether it's I of more is. going consistent, difference it and or all just No, mean, any around the in business revenue timing that the services make it will that's and years, still

going multiyear So if to a a go is on up. have we contract, big that renewal number

just next or come might renew some year it decline we increase won't back and revenue. that recognizing because do we're to it As the later, slightly of one

just around negotiating are out. a it's move to but closing going we business a and not it's So driver. more bit It's how

Curtis McKee

Call. This Earnings concludes the XXXX Arista QX

a us And be can please section We our of for joining on which presentation, Thank safe. provides information everybody, have today. posted additional which fiscal the our website. you results, on access Investors you

Operator

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

disconnect. You may now