ANET - Earnings call transcript Q3 2021

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Operator

Welcome to the Third Quarter 2021 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 given at that time. [Operator Instruction].

conference from recorded at the website this this available will the reminder, following replay for Investor call. a is and being be Arista As Relations section Ms. may Director Investor Arista's Stine, Liz - Relations, A you begin. of

Liz Stine

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

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

the of Longer-term make conference those our XXXX including outlook Fourth the Arista Networks the for for to this XXXX fiscal Quarter forward-looking course financial and of year. statements, management will beyond. relating During outlook call, financial

and with the these of innovation total for -- including supply COVID time Our supply constraints in acquisitions, risks SEC. and of and on opportunities. benefits to impact the our the subject documents are which -XX uncertainties strategy market business, product our lead our shortages filed in and that we and impact The on detail inventory of potential manufacturing addressable addressing of discuss purchases, business, imply the market the

today, XX-Q on call of exclude Specifically anticipated charges. note we adjusted these as Also, by those future. from Form them and and a These obligation cause update XX-K, after statements as statements this most to use recent are apply that differ certain undertake materially to non-GAAP on financial please been no and should basis actual certain the in our these expressed have our measures you We Form and on results this views not representing call. to which could forward-looking and statements. rely

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

Jayshree Ullal

delivered welcome XXXX to us our And Thank Liz. Quarter everyone will you, for earnings afternoon analyst per and day call. Pacific virtual for earnings $X.XX, at experience. be by X:XX revenues Acare earnings you, share non-GAAP the Time. of renewals call million your of with quarter, Thank Third record first contributed approximately this Today's record services Standard XXX.X software our joining XX.X%. for PM We followed

the Cloud million-dollar again by Our momentum. enterprise. Cloud influenced fourth Call providers logos We being mainstream margins for to our chain healthy XX.X% followed commentary. once pleased International contribution No new our by XX% XXXX, third second All with service customer Arista's our was enterprise vertical financials with the record was was and is non-GAAP XX% without Titan of contributed with Americas close specialty providers top gross and at diversity customers at in at days these remain Titans and customer place. growth, at at cloud growth. tied strong and Earnings enterprise complete and QX verticals In including quarter. supply a

edge XXXG delivery, fail-over carriers and customers customers We they're Arista's you. EOS techniques. routing, ownership XX% with ICS, of as for gaining rapid much of unified we've of deployments board, as complex deriving cases. alternative EVPN, third-generation, remains copper, the to new XX ideal appreciate X, our debt support in we've well. many as time. improved segment immense X shared for price planning and RX-series We're delivers forecast clearly routing capex X excess built legacy traffic are commitments according transformation to and Lead and memory, hikes of acute list throughout with of benefit mindset EOSX.XX, series to This based total years. Arista high of have this our across our demand and pioneered and rich with price on escalating these the historical and lead key router we strong has Cloud this increases build, ranging to XX% switching products partners substrate, in to and weeks cases approximately routing these benefits. share acceptance deliberate Since progress and XX well XXXG, next these service as billion connectors, silicon, doubling their with routing of three today's offset customers We to with with steel enterprise deliver our changing high-performance invest, increased and to as crisis prices announced so patience high have XXXX analysts. entire second as an recently the are market use costs. has market chain the of the We its supply effective to as But purchase averaging and to X that increased midst XXXG, R XXX% spine Titans, and long simplification founding more with been use Customer XXXX, understanding as year. November [Indiscernible] to very Arista times to Similar orders edge from from prices cost the times extended to navigate large our from our for and routing about chain supply in we Arista features. and products components in above Arista platforms. with freight provides routers our engineering, Recently, labor. of truly turbulent thoughtful far from witnessed

the adoption provisioning edge edge is edge VPN Metro the second multi-cloud a protocol And the is case programmatic new into across XG edge. The and Metro Ethernet final services similar a fabric. for one multiple that stearing, traffic brings is first The ran

area wins, routing examples adjacencies. edge and theme our bet to would with with With the big strength the specific customer in names XG this of like routing. network highlight campus scale-out is radio of aggregating I Continuing worldwide our

adopted and learn delivered experience. an was services, operations first or provider Italy backbone complexity get superior The LTE-U for Arista for next-generation routing a their let routing transformation. backbone, that fresh protocols. and approach services solution a modern of EVPN to in routed take and LX edge customer and CD with along segment them reducing service Arista international with This the on to

replace Connecticut and affirm advantages was who The us decision education customer with rough stability Arista's using providing transformation second standardized at CEN Peering to across XXX manageability. of edge, XXX-gig to relationship VPN large engineering legacy a between and service with and on routers. instrumental mPES Arista. that The gig them the network, and choose ISVs, the being scale in R EOS density Internet series the Arista

we The on strategy, next built XXXX. Securities for make of Ita. Officer Arista to example new continue you built Melbourne, campus Brennan, international growth million doubling endorsed networking. SILO it's infrastructure liability. at then is ASX without Pacific, XXX and more campus is An goals a and of Arista's I datasets and insights in to series, progress and we've partner real-time afternoon. proactive spec performance utilizing and our non-trading on Exchange, the Sydney, pass this for was cloud Cloud devices international XXX With Cloud build data-driven Asia in sacrificing Second backbone XP and the multi-year and towards look traffic between phase delighted layer customer a its platforms sites Arista's for Australia, an campus financial of goal broader client in to across providing in next-generation vision campus, customer to programmatic the this and - we platforms, environments. customers Perth. this our over are brought based in cognitive to the We our Chief engineering to routing the Analyst sharing In Day Australian segment strongly for the with our specifics, relationship for and of will the in to we it Arista's all believe prescriptive summary, quality in the predictive a who operations, wired now cognitive and cloud U.S. consistently, rich and routing Ita experience. well-positioned our core trading forward corporate Vision network Operating later And of customers in and the with growth. Edge finally, our of Arista win

Ita Brennan

and year-over-year to expense Thanks, impacts, reflected certain compensation end quarter or and results period, Jayshree, offset it's revenue of We reconciliation results of QX above is XX.X% our commended $XXX selected and QX XXX.X R&D in supply XXXX QX XX.X% stock-based increased some to This upper at our guidance excludes spending is charges, and of XXX the This million our $XXX.X to of the non-GAAP for Services million revenue, industry-wide XX% and last guidance of Total incremental from $XX.X of non-cash Sales gross million quarter million. in Operating in revenues product Overall provided million. were non-recurring revenue, release. revenue last variable the and a third our the introduction based period. up basis, software down were in guidance XX.X% analysis the our afternoon. on International revenues acquisition-related up see and mix quarter in items. from can or in and all for $XXX from from marketing shift quarter the and million. end QX. we reflected continue good lower expenses of Cloud full chain by in other XXX.X and other XXX or volatility XX.X% these million, on for were healthy Titan or non-GAAP at of constrained last of the quarter. headcounts remained XX.X% earnings a our shortages period costs total Shipments million came approximately of spending enterprise revenue and healthy of GAAP and new our a in XXX.X as and down disruptions. to upper from down QX geographical range continued in EMEA quarter. supply in at demo in $XX.X from quarter-over-quarter with up were and in million period. navigate This second was region chain expenses from a the from costs performance X.X% XX% in COVID-related mix contributed business. of XX.X% carefully employee-related quarter, the in XX businesses the higher A the subscription a at margin revenue recognized with customers in APAC our a XX%. our approximately quarter

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

but Our G&A with last X.X% from revenue, quarter costs committed $XX.X line in normal of million down quarterly or seasonality. slightly

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

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

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

As be timing acquisition increased stock market Board over repurchases three April conditions, years, had a other QX authorization $X additional shares The requirements, business price, and the repurchase recap, at actual XXXX, will or future the X.X end October on adding worth million to of repurchased opportunities, beginning amount factors. the $XXX our in an Board In of and we and repurchase shares $X billion million billion authorization Directors list by XXXX. business of a amount. for dependent against XXXX, of

continued for reflecting to XX to period the billings XXX% increased turning cash days inventory of operating strong cash in net million quarter, in quarter, were the in the up and Now last at and in supply operations XXX.X XXX.X linearity period. slightly investments the from QX, Inventory X.X reflecting generated the income We period. times Third chain. the of from million came prior in the up consistent from DSOs XX with Quarter. performance in returns of performance in million inventory $XXX

certain continued to buffer we and a products. As components

billion in time new X.X commitments for QX. number of purchase increased X.X This improved demand quarter visibility. for to components reflects combination the and from up the billion many increased Our

mitigate to the continue help newer obsolescence. to lifecycle of products prioritize early for in We inclusion risk this strategy

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

XX acquisition a As amounts. inventory of a new existing XX Accounts down days were in new and levels introductions payable and a for customer and Santa testing, healthy specific with the product customer the days of a with Capital parts with and engineering hardware on to of These expenditures including conjunction customers. receipts use clauses center reminder, days purchase construct related reduced in deferred CapEx acceptance combined in in currently payments. cases increased approximately QX, and data in from new we're resulted the trends, expanded were of upfront revenue significant rate, timing XX period Clara. million, reflecting of higher XX.X land, quarter building product have million

over We will coming details of quarters. project, provide more this

our Now, beyond. Fourth guidance and turning for the to Quarter

of to healthy This expect all environment. difficult sectors, market approximately XXXX revenue As outlined of for across full-year achieve the demand a we year-over-year impact supply in now the tempered continued XX%. growth reflects our guidance, by

gross costs we outlook margins, of the and a increases constraints elevated to to key reiterate to driver gross of mix volatility On potential continue overall our basis. pressure quarter-by-quarter front, continue with as remaining on customer the XX% our on with industry supply price margin current XX% offset. outlook, customer a margin logistics Based gross

Turning to investments to growing R&D across to and the in and innovation business we expansion. remain support committed spending investments, go-to-market to marketing our support and sales our

as margin Fourth XXth, of Arista adjusted that record will for of Finally, is on million, non-GAAP goal approved on based close XXXX. receive trading which November $XXX of every The to share for gross is begin and and of also will shares has XX% split. stock X excludes a &XXX X split to impacts for any Directors guidance of the we X XXXX, additional today November our business items the approximately approximately XX, of stock-based on a of on XX%. revenues this held. operating And announced Board a non-recurring other compensation Arista's as at Each shareholder backdrop, non-cash margins Quarter, follows; million results XX%, basis

Our Pre basis be call on our will the Liz. now with to effective shares. of approximately to XX diluted I tax rate expected -split XX.X% million approximately turn shares is back Liz.

Liz Stine

Ita. you Thank

request themselves Operator, for you are We question. to the everyone portion to move away. a constraints, please that single going time now Q&A it like Call. Arista Earnings the limit Due of to would to to understanding. take Thank I your

Operator

asking of We sound will optimal Arista the ask ensure portion in now begin pick Instructions] order up Call. the We Earnings quality. you [Operator Q&A that questions your handset to before

the Your first question Samik of Morgan. comes Chatterjee with JP from line

Samik Chatterjee

Thanks for Really strong impressive. congrats taking the my question result. on and

think and give if customers strong cloud and broad-based, in But think So, this that level seeing the press broad-based into that about of we demand? Jayshree, do you Thank the what do mentioned then talk you what seeing customers of me Cloud seeing enterprise how does can year, think of you're the generally, year? about I think demand let just growth sustainability how you're turn you're I the from demand kind Would you you highlighted to of release. screen you. video seeing demand is magnitude and how you're next that that it

Jayshree Ullal

for Thank my you, for employees entire the proud It's leadership I my good and and Samik, here. team us wishes. congratulate getting really moment, a

audio my and script, demand mentioned as across is verticals, across I very across strong, in sectors X I well. product all lines, X think X as all all

was I -- I that So, is I growing. our annual we the a verticals now. positively you what Cloud rank parts years volatile In financials, and a back growing was enjoying the its Titans, just to highlighted enterprise our highlight if -- many are growth some two every it sector pieces me it's Titans ago, sector I -- XX% bad enterprise. just right they very, well, would that lver not the you rate not Cloud different growing. would I obviously treat, of not but trick. to you vectors, And if And Halloween are ways, feel is Ita we enjoying doing tell ask as we're growth say volatile spell and very a them, we're even also there really growth back; are come a market of rough the and of would had of SiSo but some have remember, that in it sell

I use think see in to use expect mentioned, to it's in arrived in-service for would lot the are verticals the well. been fair of But and in sector, providers routing obviously and cases years, not growth a double-digit growing Cloud I as not largest a -- enterprise the enterprises routing only to has far enterprise. are say couple all we Arista the but our -- I is of and momentum of We've by continue say. these this Titans, double-digits cases as also

So, the we're at just business our enjoying very diversified momentum moment. of

Samik Chatterjee

Congrats again. Thank you.

Jayshree Ullal

you. Thank

Operator

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

Fahad Najam

Thank you you visibility. taking on my a the question I to wanted ask for questions.

certain weeks. that giving weeks in lead guidance extended XX are well. presume from forward-looking turn have you times components as customers mentioned to You XX your I'd

So, us can in any can. us seeing you help visibility are quantify sense way you and give a you the on that

Jayshree Ullal

and words Sure, to say that. could you some I will Ita add few

plan becomes these times visibility and building lead X normal said we're orders, in it's Ita this thing Cloud on that's like lot ahead. with two a we've the a really visibility more. normally, no will. to Titans, ahead to case, or and the us one to a forecast ever first and enterprise This or is very X are are now tightness of has important well, I planning allowing long Ita kind improved as right our to but up build if because get quarters, the In on components, me team build right to very we're building a demand. and because inventory be entire Visibility think to it's are to good future used lead that best year The quarters. like had the of it more And team nobody's Typically, the doing, different. you Cloud year. now, and times

early and Visibility hundreds and to believe year, also problem providers strategic again, cloud several this by with now specialty suppliers talk these starting is in we suppliers term. a on have head last we increase Enterprise our as -- we've interface Visibility had we've months a to year. of Although -- long we is start Cloud them in year. to that's and the the make and on exceeding a X as

in So, purchase to able now and plan general, we're well the buy orders to ahead components forecasts. of

Liz Stine

something Ita, add more? you to want

Ita Brennan

Yes.

the add demand and this, just be lead and time you obviously thing think out because about think when I times different. the hard of are quantitative the frames to only I'd it's too bookings very

revenue the I think business focus perspective obviously we'll revenue metrics to from and -- from on the numbers then and and will of kind just the continue bookings but ebb a right what's etc., commitments, to with the getting now types happening drive to you need driving. purchase because just visibility that customers we're a of able to be of we are lot flow

Fahad Najam

I appreciate the answer, you. thank

Ita Brennan

Thanks, John.

Operator

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

Rod Hall

fees in has I'm cogs like question. seen they're my compensate a COGS the talked those your just expedite high some to Broadcom would wondering unwind, and during because you might And and of if other how see you you the at the of has of we've able to business to I season guess the about visibility getting expedite set they comments. products the level higher it earnings are fees, phenomenal prices and factoring results companies the are in how for cost positive whether like point. this Thanks affect this really then the some maybe early into echo talked are These from regarding we seeing is question for costs forward the that and that year, those part at just curious again, margins you've environment. what next I you're

Ita Brennan

And those instituting because I costs just want But so to is -- the expedite the kind mix help fees, the offset gross has don't particular the I been and offsetting haven't and process some help. a as seen think in think across we incrementing this. kind in seeing you -- more seeing are of I in but been talk those costs, to margins of are supplier, Income enterprise that of everybody the base. supply today statement we're Jayshree mentioned, some price will etc., we that's increases, heavy, of about

XX% that you still I to mix mix to business. The the as but customer more being still as the think we're volatility of driver. comfortable thinking is see the biggest range quarter-by-quarter reasonable, will just be about some going XX%

when and over some in see other margins the The we price increases cost of we we've a heavier gross couple Cloud etc. have mix the corner managing quarters. will what we're etc., last of some with particular lower seen

Jayshree Ullal

And wishes, for the thank good you Rod.

Rod Hall

no problem. Jayshree, Sure,

there. the getting Are Just willing they conversations curious a are knowing little what like customer about customers? -- increase question bit are are that -- things Cloud what accept price more of expensive? a to the Just

Jayshree Ullal

I very would rich including customers willingly increases, Titans. is Cloud say accepting nobody understanding, all our but the are price

Rod Hall

Right.

Okay. lot. a Thanks

Liz Stine

Thanks, Rod.

Operator

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

Jim Suva

reaction the I what if of of next further customers When And what the you. lead be about you long. actually I'm build maybe you is spectacular. some like, something to you. implement for It was order. wondering or Truly forecast so ask you're may And more your internal? competitors. some is have just couple that of Thank of much of sounds your build times to you got years to how going versus that? the it's ahead Thank did And it looking

Jayshree Ullal

entire team. the out John of I Susan Hayes, just manufacturing to a Anshul, First big give all, want McCool, shout to and

me rarely traditional commits, are anybody buffers, back, for most wishes. expedites. been The model kind supplier the for you does thank on just-in is forecast, it lead some of based everybody has very and there's Jim, for but And times pay time. to Let step just built -

all, expedites life. it of are first [Indiscernible] at doesn't supply look matter If It a chain of in is. XXXX, which way you

Often can buffers. across-the-board. have orders, Cloud them weeks of ahead, ahead. about, but surprising it plan but think makes it we industry at all we from And shortages -commits not which the see isn't coming we're lots suppliers. heads to used the You de is involve the been the to of with is how months and just There’re Everybody There's get sometimes you there's high-tech special, no components not talking it. tougher. of just has some rough at industry industry automotive to literally. compete and expedites countries That's consumer CEO

So, it's a team we a last very start together late was Either when thought trained a oversubscribed process. head it? year We I When put got starting. by the plan.

So, had keep would things worse. well But heads. we've of be better, ahead if definitely And these everyone. have gotten things getting we

to So but vendor now a doubling we're relationship and them add good, just without to not of head And vendors. be of but just say, strategic our hence vendors, start pool us, the with inventory. understanding that larger, much to we've of is troubles is increased but This the they're to one two have and and of patient of to committing the both committing head-start short-term have. any the our naming we the or we long-term XX% have relationship us nature

Jim Suva

Thank again, really to big and your entity. you you. you, Thank entire and congratulations

Jayshree Ullal

you. my Thank team. Say to kudos

Operator

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

Paul Silverstein

comment third your to quarter? year? would [Indiscernible] care Jayshree, Two questions. the chain gigs quarter expect XXX-gig you the Facebook and taking for Were fourth it's if I do may. supply on And you their revenue know from Microsoft challenging. there in questions in I with XXX in any next outlook for Thanks from any

Jayshree Ullal

to see, but I'm was overall. just there revenue checking XXX-gig

I and trending any first last increased XX As there XXX XXX check XXX from about the logos so on need to have gigs. whether I told category to the our in definitely over was the year last double XXX-gig you were customers. time, customers, customer to half XXX gigs. we

Let off beg the me question.

Ita Brennan

to we quarter, Paul, here been on is deferred activity we've, before verticals, revenue probably etc., the heavy whereas other Cloud the we just this it had relevant probably not I'm commentary I Titan becoming have more that's balance where going think but talked deferred about say, has had -- too, the more of maybe some

Jayshree Ullal

so Just we work to revenue, trying have to some

Paul Silverstein

specifically. specific the since that maybe of or lot Just to deferred being not, question. is Microsoft, issue question revenue that's booking the specific assume best it's I a

Ita Brennan

think we me products. mixed towards new Cloud stepping deferred I grew our and when revenue includes that

Jayshree Ullal

So, XXX-gig and XXX-gig.

Paul Silverstein

comment [Indiscernible] give Would any about [Indiscernible]

Jayshree Ullal

the at going how We Analyst Day are by then? to

Paul Silverstein

can XX minutes. I wait

Jayshree Ullal

apologize shorter, [Indiscernible] right. I I our late, it analyst up but keeping day hours? two make you for All will think be will

Paul Silverstein

Yes.

Ita Brennan

So, you too stay won't to long. up have

Paul Silverstein

appreciate. I

Operator

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

Sami Badri

you kind dialing wins and Thank increasing to if about Jayshree, talking win to bullet continue couple Enterprise with winning the reasons that to a -- why the for you've you're as point of mentioned you times reference were really you of question. as what up far sales vendors customers? this Can the through momentum. us But key sounds with momentum; Enterprise comprehensive key to hearing you used resonating can and walk you other many just with is about solutions. just pitch call on the highlight dependable and people very what them channels for us the because most are sales of very like

Jayshree Ullal

And at the it, but but. again, day, analyst I'll some do

enterprise routing has and our [Indiscernible] contributing much as to segmentation, large to well, Big think portfolio broader way as the of as increased and Goodyear, now well. to software Awake customer Cloud to security US and well everything as First in for software, observability, acquisition well - from ACare Cloud client campus [Indiscernible] Vision, from a the relevance very Switch Wi that's center, from Fi. [Indiscernible] center cloud designs data of I all to all, our the going data

completeness has of the nature portfolio the our So, helped. and innovative close

about quality one boxes, not The Customers just but innovation, and second thing have not much that's Cloud innovative one helped a silo love that, an enterprise have device customers, is -- our the finally, Power now having at operate customers. OS, of much will. TCO. One, as Vision. much products, having if and the we talked experience in lower got One we just the support these we but -- And invested better image, with of you

our I is team Krishna or Our the of and enterprise led by and third the began investment, Ashwin really of Kohli seeing and entire sales we're not This investment XXXX. results think that. worldwide year and fourth in

getting onto second the own I were we're coming just and coming and year our first The into of kind we're in think campus. we holistic And in fashion. complete now and a

Operator

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

Jason Ader

for Thanks question. the

gap want to backlog to my in of now need that how the demand, do or maybe gap there much are supply, But First, and horrible us right some XXXX? question anything customers better. and say quantify is time understand book-to-bill there air you in is that risk is where help guys ordering you between over I in demand you any can an a see might could or numbers;

Ita Brennan

running Yeah, know to bookings about Jason, larger some folks timing talking that. hard you from plans? we're get lots what's really times, -- perspective. are course, talk we and to There's have can of of focused have think have the trying that's no these in of and bookings and we're internally we it to these And bookings. I context, boundaries to - that. and a what will periods more sounds certainly, think it's deployed put When as deploy business it difficult how building And where seeing that's our so deployment have going lead and been you're fair about our share going just that really we're matter. around the What accelerated I on I bookings well.

numbers understand demand lots times, that deployed. have, making of We've of business demand. getting, Not we and so we're important. question, going obviously actual it's visibility to and but on about pull-ins less we extended have you these we when are the the the way, that etc., the how just how about much are ducking your becomes lead you think booking’s focused talked I get think push-outs sure

Jayshree Ullal

excited We're what And going I want just to get about revenue. said. get going Ita to We're not excited our about echo deploying to with backlog. customers real

and responsible hell And the always cancelable some to we're demand share is may that of improving orders; supply. some and no the may be It's that and materialize you been, fulfilling supply have outstripping about they're a them of question hard certainly and backlog to on as supply, remember, work as we as Company, going with best the not.

Liz Stine

please. Next question,

Operator

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

Meta Marshall

impact the related or difficult margin currently, and it's related we types? the to chain see quantify gross Thanks. to supply revenue realized to mix with step-down more us the margin any of way in should the gross I guide the if help more as but chain supply Thanks. impact

Ita Brennan

it mix as the Paul we've the some last best way That's operating of of the about think offsetting about, think customer the larger a and was range customer the, cost deferring to as of that talking I as some been effect. couple definitely It's some impacts for we've well, of is quarters. well. the upper that revenue of end been at

to the forward, us I So, more back towards see business when back the of of think mix that time-to-time. will balanced, of comes quarters from bottom the I should end something look kind think of these outside I range you

and end I okay. think maybe a of we'll period can but boss. still long the be I could the for vague four the be even and pressuring while where of net range believe for time, will we there quarters, that we stay mean, think be bottom range, the over I break quarters we in range

is definitely days I the price that, that increase from that as end and here benefit increases look range, offset element some living there basis of help assume wouldn't can I of some the we forward. you a a this, There's that upper So, customer will do an element ongoing this. that but will of we customer think of on cost at to

Meta Marshall

but forward like spending the Traveo, see in you price increases Got would increases. from QX say that but to QX, further expect impact XXXX. it. impacts of probably price won't And would not just I most the guidance,

Ita Brennan

Yes.

Meta Marshall

Thank you. Congrats.

Ita Brennan

Meta Thanks

Meta Marshall

Thank you.

Jayshree Ullal

Meta Thanks

Operator

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

David Vogt

question Ita. for guys, This capex both, visibility. the question. is a the just taking for you, follow and to and Hyperscale Jayshree on guess I capex Titan I the Thank Cloud Great. want and up

reflected you does of to we is clearly your I you data that a of XX% weeks, the to -- the does year that think forward? expansion the confidence. a But about visibility. about how pricing, XX%? given it fairly think couple by your 'XX you XXXX, think you. to the it from expansion then the some way offsets thinking that guidance about think cut the in think well chain there on that's can And it going we're price more higher availability significant way year hike this I about just about Does the do that quantify a we mind, sort have expansion going supply even to trajectory, in Thank when bit implement hyperscale’s, balance the impact is there's the into we as follow-up documented by little it's going a so reduce center center the we a Is -- of be availability, that you're data model how in in versus more noted components? and it know strength should than that? margin than don't or out there and yet, it price How XXXX? have in but

Ita Brennan

tried the and transparent offset that. of We've us kind looking side on in customers cost we're with terms be very to to what help seeing them for of

to make on increase seeing we've cost we're transparent side been that. we're and looking looking we've not been margin So, definitely offset open to help on very or margin for the what in and that,

Jayshree Ullal

visibility the to and stay XXXX, guess and tuned give analyst I Yes, give try a sum we'll on XXXX question you visionary on would say of and XXXX better I day, you ask a on for and beyond. your statements

David Vogt

you guys. thank Great

Ita Brennan

David. Thanks

Operator

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

Amit Daryanani

from think clearly coming XXXX you you in market you. solutions you a I them coming some second do would sizable could the would in gains competition so, and to are on as about couple have December, maybe come of (ph.) motivate And that I think you from share And based the customers on to Whitebox vendors share today then understand; do you. the your traditional think if the look you. years have? to this, see you use congratulations of gained when I Alex or Arista Thank guess, Perfect. that at more guide these you love what as Whitebox year. well to up, my performance the I'd next of think Thank part do midpoint for so?

Jayshree Ullal

to each coming would of the I issues, much supply related chain year gains share and Enterprise with more say, other. our questions from all good is this very Titans. and Cloud Both

white-box. from our share not fair the necessarily in our peers getting industry, Just

will product to the -forward and this. also you later supply boxes has do fast advantage, Arista If better the I an have to some in Anshul probably product to white capability, than of ability years, often think not but alluded just in rapidly

market s of decision any our shift make We that. boxes. guesses Titan direction the preclude part I'm that but to on so to So, the buy and past when he's the don't that, than of has next in many spoken wasn't but this may forward versus not be gains year, Cloud rather it in growth the and Anshul neither for of the year. strictly certainly I it white Arista look share make going could

Amit Daryanani

Perfect. Thank you.

Operator

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

Pierre Ferragu

is Titans terms happening of, same displayed how And how that's if planned aligned what's [Indiscernible] I side, question. it's or very see routing [Indiscernible] the something the today as last what you that wondering first that have the is you price. say I XX% Thanks was with you do the a in the spending side. and Thanks, inside is Cloud the I for year have CapEx been you And with which one-year happening we taking clients. within in on And front, along then more set is next my wondering, visibility the data DCI visibility, more line impact the came on by changing, of a lot. I'm by more your and on visibility so there XX, that was or Cloud on switching outside center week. that between intrigued would

Jayshree Ullal

Titan by proliferated, one questions has a Cloud Arista Thanks, lead take my been center. is to 's rack they customized very Martin, team use been of DCI, data AI intro only part the phenomenon I'll use-cases of do use what think top until I good the use-cases, But have cases, special others, Anshul, data outside second first, but not most cases. Pierra. Both for routing recently presence center and has watch again

we're and its datacenter the getting them. fair with of And a to Arista is work doing lot and proof-of-concepts both within opportunity So, share respond. outside of then testing

Facebook they at developed back of plot Regarding joint jointly in takes billions out capex them. we actually they the now surprising always numbers development percentage nowhere FBOSS they're and, But them we're with on our course, the the come done necessarily. with of with us useful we've with and are because products the have spend in spend, to Titan close five-years, relationship

in past but were developing We the XXX of the we with we're pleasantly surprised. our have shared gigs. next-generation them, you not We surprised, were with completely that product

Pierre Ferragu

Thanks, Jayshree. That's great.

Jayshree Ullal

you. Thank

Operator

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

Aaron Rakers

congratulations and well for question me. the taking for Thanks as

billion what last most that's purchase one was commitment. to year. is think to think relative exiting the up stands X.X I over it number the plus your that out XX I me And

to to ease into June some and the just best part as quarter, curious, the would going half, think component those higher going degree your think constraints this back expectations, whereas assessment And XXXX to you're on and of that Thank kind of starting the point. of these some into start certainly I do right, the we now, XXXX of of mid maybe move stand second shortened at that down. into carry where normalize visibility lead into kind well you times, of or you. this I

Liz Stine

And muted? -- line presenter, is are your

Ita Brennan

that Yes. Sorry about did when that don't know that. when -- stop? Where I I happened.

I think Aaron, help how Sorry, can you what [Indiscernible] me the you that got? much with of

Aaron Rakers

any -- I didn't it. apologize. of I actually hear I

Ita Brennan

That's have think end we managing get better push-out is times that's the there. -- probably with start. that see I two things happening. view Let a of probably lead We've were probably now of We we XXXX again our dynamics the to directly. products and seen the me start vendor before

as suppliers contract engage manufacturers, that's those looking directly to and we're commitments, in driving longer purchase those to gone broaden out etc., managing to And have through gone that, we're and other having addition it increase some of seen components. we're normally would with In the that kind then through now we've chain, suppliers and supply also the directly those well. with vendors also out

number both of those think is I of making combination the so, And that increase.

focus to trying on products have life long and products are new cycles. We that

we've in So view. [Indiscernible] the terms little we'll bit that. a things to there And more of are point think But us longer that taking yet gives longer don't -- a do improving. where continue I leeway

Jayshree Ullal

that of a Aaron, It business. to is Anshul, chains. business, we've here with got very got our is important and think to part the getting Ita, to this our the product see situation we investment important decision consciously of the we've made supply in prolonged an myself as decision-making customers, have we invest in and this an because invest to process

Aaron Rakers

Very helpful. Thank you.

Jayshree Ullal

Aaron. Thanks

Operator

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

Ittai Kidron

great quarter. for Thanks. of Congrats, couple I guess questions a Hey, me. ladies.

a to the bit this you doing of volume is with little are purchase does more in that this same lock your to yours give components the us you or regards in with all, Can also lock response whether commitments. suppliers? does it First price buying? color competitors of a for And the

Ita Brennan

earlier, right mentioned to working off the Yeah. own our of even. on we've that No, back do it's as year strategy, at totally I think started last and Jayshree beginning

just So that. continuation a of

as happening what's and supply start was in the is the directly opposed breadth that deal anybody the Ittai? to change the of with we I'm and kind question, of to right doing, directly sorry, think And of manage the biggest what else think biggest just in the chain now. chain anything supply second etc. part to driver need I I up understanding that's happening suppliers and obviously your the what's the of that driver

Ittai Kidron

lock the volume for also it lock prices you in Does forward? it does going just or into

Ita Brennan

in past, time things kind a change start and what pricing over to we'll pricing mean, see in some lot, it that pricing they when of as that, volume of you're these but the now to that loosen plays Athens. to isn't of is to market in when commitment is can out, today seen make things there get how commitments as is of kind But right are some base we've price that time, the in that up price. but that I as you making have start commitments, Yes. but obviously the better, you long-term element as

Jayshree Ullal

you. Thank

Operator

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

Simon Leopold

question. for the taking Thanks

to leave but on you by managements Thank call. of remember sounds see high-five in opportunity, on on in expand a I I it was what's you overshadowed told at As maybe public the I'll probably my CapEx want a a trajectory. that. little you you. which could datacenter, wanted of part to if it's stand bit going sense business to that where never early in get in just better like the your career,

Jayshree Ullal

Thank you, Simon.

five. We will virtual high take your

campus business have win Enterprise large campus has table the the and wins to before now many the relevant see customers. a starting datacenters. We're think logos of these data I been we center a Enterprise very to where of with seat we Enterprises don't win because

to network. core data looking I think important is campus the whether together, to are the modernize enterprise the very customers us their conversations, the strategy, on it's there ability the in your and build silo center, of all and datasets or to bring [Indiscernible]

still most direct, numbers for talking from we're river and fulfilled about campus. is success our over And of time channels will add component that a will change enterprise and will we our that further hope our we of engagement But to-date also pretty and and the from There's nascent. to years. the in that will albeit strategically next channels. extremely customers standpoint, by strength with still obviously, a grow think to So, XXX small our are XXX, be it doubling few although relevant

Simon Leopold

Thank you.

Jayshree Ullal

Thanks, Simon.

Operator

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

Tal Liani

I you totally up what already, to goes want increases? you're as accounting. didn't I'm I'm price just [Indiscernible] cheaper everyone margins are the to the happens just versus since components, pricing two I is kick-in. it it's on margin mean questions. I you your it, you campus of switching, then on are the right can us hear maybe assuming they recording higher? component still they and are And trying again understand it kicking Hi evolution -- increases said wrong. I or I on second, if so targets, just go want you and [Indiscernible] else? with give goods When Can the Does pricing One now apologize, about an kicked in, have if that just where I’m it's it. update understand just like over guys. sold if your cost

Ita Brennan

Yeah.

Jayshree Ullal

Go ahead.

Ita Brennan

necessarily Tal. recognizing. expedite expenses being last again the the up have flow some we costs. line burn other of some see supply then in inventory passing price Those to are some pricing we'll in hopefully, being combination that chain be such like up of It's with different the and we a through will of we've as that increases been chunk that well. inventory, period some perfect. obviously It's quarter; those lining that scenarios, look better chance as and those, a it to increases QX. But with and of up end the inventoried the that some at will we there's are we recognized won't going There up There those of price that end We start better, are costs customers all onto as higher doesn't costs will the with be complex; various increases. at will had

of that. some offset help will that So

Jayshree Ullal

we the from And committed And -- end months year year. away million are campus, of finally, X had we the last achievement the Tal, $XXX on double year. to sitting this we here the

goal set next So, we to we [Indiscernible] for believe new we will and will a year. have

Tal Liani

we but just probably about tonight, going general, discuss so just margin, to do think I going gross going back in And the it to you're know it. how Got margin forward?

Ita Brennan

the of discussion part later. definitely It's

Jayshree Ullal

Right.

-- you November already and which already, continue see it, realize able effective the next that it offset will believe customers year by price be cost think and will time escalating we was depend our really be often margin increase low-end If gross I pressured be the you enterprise, mentioned margin Xth we Cloud mentioned heavily the a could mixed we on effective -- with to that mid-to-high-end, the said, and gross if Titans, was we the we XX And we're are like be on mixed have Ita on the on on could XX been. of having mix. there. the as we the to on to

Tal Liani

you. Thank Great.

Jayshree Ullal

Tal. Thanks

Operator

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

Ben Bohlen

transition for Thank the as start the Titan you spilling you XXXX I Cloud view XXXX build-out bit and the on into see question. saw different more talk be XXX, out behavior, you they and for and you from any thoughts a puts was similar Thanks. little taking to about how to or XXX, hoping with enterprise how new -- afternoon. what XXX takes would technology current any could interesting. you Cloud Jayshree, duration, Good technology build-out versus both

Jayshree Ullal

Ben. Sure

be Cloud the will think Titan different I than behavior behavior. the Enterprise

spine see and layers XXX of technology, been On data to an the the in the And speeds datacenter Cloud Titan, in much center within inflection rack. and XXX at you're going even early gig datacenter. always of top gigs, they've rapid to the a faster more especially uplinks to and especially adopter the or

optics uptake know, so after gigs, live year goes XXX availability customer continue year this XXX the on -- the the XXX-gig gigs. of are see see and well, We late -- to gig than challenged and is XXXX last starting switches year I our and even really late early to basically adopters gigs. end end of the of of this is ecosystem XXX say. of into of And Primarily very together. year, by as gigs in would That's was inflection like this expecting year. to start XXX will the this an expect we're will The you at we year co-exist the XXX customers, high-end, XXXX, ever base as and XXX this in inflection still view, happily the more well to enterprise in XXX adoption we gig my start XXX with and But year. and and of enterprise obviously and have,

hundred characterized the speeds, can enterprise. continuation of as think mainstream new, next inflection the of XXX few in be I four years adoption like two higher gig and and best hundred and the

Ben Bohlen

Jayshree. Thanks,

Operator

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

Erik Suppiger

make you Congrats has perspective? a components? market curious, terms been difference share well you've market? affected disadvantage that is XXX a your a but that in of the and have constraints from gig or been advantage the It any does doing like XXX-gig for factor? Yes. And there, Do how access sounds

Jayshree Ullal

can products. XXX-gig all as are both. our We're I'll of versions it's both. in for same we're XXX We're are XXXX to XXX been as one constrained speeds. tell components, are especially you. gig most my Eric, market very the gig just and popular on be strong and doing because of popular well components At XXXX what during I I'd we share say constrained a the platform, XXX-gig too. the flagship continues dependents factor But [Indiscernible] in XXXX

necessarily So, different thinking supply-chain, the one is not over speed It's for other. everything.

Erik Suppiger

Are anything optics different? the

Jayshree Ullal

optics better that, than actually The of than the year for actually other it's is last coming for not terms XXX in up, ecosystem different XXX-gig gigs. improved

Erik Suppiger

good, thank very you. Okay,

Jayshree Ullal

you. Thank

Operator

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

George Notter

Thanks. running think you I what trying you books Hi, ordering, statement rather than paraphrasing back meant Could look are earlier, what effect. just guys. as you see guess I'm much. something to assume that, go to Thanks about the excess I'm wanted on business that they to expand that. I to to just very said to I were try through back curious that, you to order could go customer opposed orders you but expand need or maybe a and really upon demand I and you on

Jayshree Ullal

only that's Does the the our customer out has to of long customer puts all about and constrained other well, to to there's having built forecast order. and what sense? supply we in lead the still disciplined purchase meant. orders of rather built orders we're actually chain, Since long built of on said plan bit. times, and order because times. is a way purchase make to It's what being gone little window buying order extremely It's customer we when these the that inventory to ahead And forecast, the a just-in-time around, lead George, than

us I the chain a those make of making will favor commitment. that we're will eventually who kinds improve, those constraints, So, hope supply which of bet purchase

having and customer we're in. fast, there the even orders to early come get so, And in before

George Notter

those purchase Are flexibility any Out they have do curiosity, of you side? commits? your on on cancelable

Jayshree Ullal

the components limited Most been of we've don't them. components products componentry risk we careful to like the We've new that - cancel, Semiconductor made. cancelable, there's that's need but to investment taking choose picking in across way business and believe the is the non run. common are We just

George Notter

Super.

much. very Thanks Okay.

Jayshree Ullal

George. Thanks,

Liz Stine

Operator, we more have one time for question.

Operator

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

Jon Lopez

outlook times. for of a your stuff to quantities Analyst to XXXX now, topic. the in the they've so you're that purchase one last in the like at or If rest apologize about extent introduce have you your into The same me what supply you squeezing carried. can largest like think many can't than same. that look revenue larger what Day. roughly XX? extent in dollars doubled I risk, actually few and XXXX on get much the competitive Thanks alluded commitments you either and the of I will we because I influence inventories in my we do as if been cover as doing we you're a maybe are understand is, hopefully XXXX, has weapon But like and evolving the be competitor, This or can collectively the here fast in fairly their also, now question recently, ever envisioning guess think to multiples same as

Jayshree Ullal

think I there's right? that, that a I shaping Almost are more think right line than we supply no that doubt is constrained. our revenue demand, now. is so factor

purchase have newer length that's significant products Then we're ahead that it important. new suppliers that we're doing of we of products a with expanding think the what and breadth And purchase them. carefully very again, commitments, kind -- is of commitments. we're think I on time those times terms of lead we of looking in definitely the recovering supply working I are doing. at lives the are the So, again, expanding factor, And on the with

the take So customers, it worth It's through and think time is But I taking inventory normal that a carry. really, and why it obsolescence only of normally could lead in change seeing time it than not longer then but obviously some that's stuff. a We're to components it's products we'd doing making. that and but the us not CMs past we're would discussion bet consultation to in risk, a things burn used the environment. etc. lifecycle have it's we but set We're a making is really with in if the broader for you're because that offer up the suppliers tying directly, somewhat cash it risk components through it we're also for etc., doing uptick. some That's to the big of now come of not that an supply

Jon Lopez

Understood.

Okay, thanks thoughts. for the

Jayshree Ullal

Okay, very thank much. you

Liz Stine

QX the concludes call. This Arista XXXX earnings

of presentation us a which We on our you joining additional Investor you fiscal can for website. the section have results, on posted provides access our Thank information which today.

Operator

This concludes thank for you participating. today's call conference and

You may now disconnect.

Arista Networks (ANET) 2 Nov 212021 Q3 Earnings call transcript