ANET - Earnings call transcript Q4 2024

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Operator

Welcome to the Fourth Quarter 2024 Arista Networks Financial Results Earnings Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded and will be available for replay from the Investor Relations section on the Arista website following this call. Mr. Rudolph Araujo Arista's Head of Investor Advocacy.

begin. may You

Unknown Executive

Breithaupt, Good the us. Regina. Ullal, and you quarter a XX, and thank Networks' afternoon, December Officer. Thank Networks ending for Arista me afternoon, its on joining issued Chantelle Officer; Executive With and release Jayshree Chief today's for Financial Chairperson This announcing you, press Chief everyone, Arista's results call XXXX. Arista fourth are fiscal

online copy a the you on of our it website. If you want can release, access

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

the including manufacturing demand component business. acquisitions, Our capital chain and constraints, inventory that to AI, most output, Lead and supply uncertainties working optimization total the and pressures statements. benefits those Form market specifically to market the anticipated customer times, strategy in materially could actual differ in filed addressable trends, documents by on costs, and results Form we with XX-Q and cause for management of inflationary risks detail addressing recent and innovation, our our from our are which SEC, subject product opportunities, which these in XX-K these discuss

been update are certain our have basis These certain on this after forward-looking statements that representing future. a we rely expressed adjusted in use views charges. statements please to obligation these on non-GAAP as apply Also, as them the to of undertake today, measures not and you call exclude this and on should financial note We call. no

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

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

Jayshree Ullal

quarter call. XXXX Thank afternoon you, our for this earnings joining fourth for us everyone,

leader as engineer a Arista. First, of Liz her our our Special thanks Rod may lead that know for of to duo to both Araujo, many Hall warmly new Stine you supported systems Director as Rudolph and like advocacy, IR welcome our strategy. leadership IR of IR IR for by I'd tenure, at

Well, memorable and Arista. year XX% revenue an growth. I been with initial We think XXXX XX% has to for of guidance all that you'll a annual agree defining started

With AI, well growth, margin operating XX.X%. almost of achieving we generative the non-GAAP momentum that a $X of at achieved record coupled beyond have a with XX% billion revenue of

adjusted X:X on a quarter, of me back revenues the Before dwell stock to XXXX for per $X.XX that I QX non-GAAP more, with let specifics. split. recent We for billion the of $X.XX, earnings get share delivered

was and well Our margins supply in Americas strong non-GAAP quarter XX.X% mix registered gross of chain and software influenced of XX%. good at a with International contribution enterprise for as super the quarter. by at XX%, the efficient the as manufacturing

shifting Now revenue to sector for XXXX. annual

XX% concentration contributed and Both the a approximately. was member AI approximately financials greater at this category. customers while keeping which of Apple, that XX%, Meta Our were titans XX.X%, than in new are approximately at and and and at cloud approximately XX%, mind strong includes Microsoft respectively. XX% significantly Oracle now XX% providers, at is Enterprise

AI we know, joint cherish much. you XX we collaborate as over partnerships them of with and has deeply It As very spanned our engineering privilege years innovative cloud both with products. and

drove and of core as automation front-end the availability, approximately stack and product AI This across back-end our demand, bandwidth XX% and agility high deployed built cloud extensible off It OS and a power and of data capacity successfully line centers is XXX insatiable and XX, and AI XXX both highly terms speeds. network core compute speeds differentiated, data delivers products product gigabit efficiency, XXXX Ethernet for XXX, XXX, XX, storage, center lines, our zones. In annual revenue. are

the according and #X performance industry market share and share to category highest at XX% analysts attain XXX position to the continue the than XXX, gain switching to gig greater of market XXX in ports of We ports.

We in of last clusters an XXXX. We in base the back-end revenue XXX in have optimistic to -- AI AI we Ethernet emerge billion expect in our as approximately to year $XXX which back-end gigabit achieving AI XXXX. XXXX. We increased X,XXX XXX-gig customers about our in customer cluster million remain includes $X.X AI goal centers,

Our of routers and AI-driven going is the routing, network replacing comprised market adjacencies cognitive campus well.

well and well provisioning zero-touch extremely sensors being wireless wired, customers. mitigation cognitive our in as threat for as network investments received Our identity by is campus

a conserving across group and IP campus different, our compelling security, deep our of management. stack and the introduction and alternatives seeking stacking without addresses for software legacy is are embedded CloudVision Our in of switched modern our proprietary open SWAG is very with innovation incumbents zero-trust network customers example recent to methods. post-pandemic availability observability high fitting networking, aggregation efficient with The

much are more ahead. We to and committed XXXX goal million $XXX the in

peering deployed and cases. We edge use also successfully routing, have in

Just software across in XXXX releases features together offerings. campus routing greater core adjacent than and new introduced XXX contribute alone, EOS with The adjacencies XX% approximately we and revenue. X our of

response. category based such on subscription services software is as network models, A-Care, advanced observability sensors network DMF Arista for third Our detection security and CloudVision, and and

the of and to a literally and count into designs our go deploying XX% CloudVision as a customer Note perpetual over to approximately validated or Arista's building licenses software network CloudVision day. total We not service added adjacent XXX revenue. do is pivotal here core X services that contributed enterprise. the and in Arista subscription-based customers new translating sections. network

diversify use AI. and multiple Arista been with verticals. clearly cases XXXX its the While has continues to generative headline globally business about

cloud innovator client foundation. networking differentiated choice viewed and AI with are positioned of our for network ideally to modern the campus as We to

public Exchange are network of the to ports looking and we unify Arista silos for connect, outcomes. We mission-critical across transactions. our well of epicenter X.X anniversary exceeded not strategy a the of celebrated customers. have with only exceptionally resonating but their of drives XXX XX,XXX the tenth Arista In data our X and founding. past Stock as base, networking our is installed in consolidate milestones XXXX, optical of going XXth Customers York with New cumulative customers million anniversary at decade,

Our foundational best-of-breed from places for modern can it, data, centers in or campus centers AI platforms are unique regardless the of transformation location. very campus centers of the centers to a position of their for or as we in it networking. center WAN These us and or call incongruent data-driven equity innovator as silos data a data, centers reside as

both traction front-end I've networks. traffic in the at size constructed of duration centers of and AI you the shared Networking AI often, clusters And gaining of as for flow. the we workloads terms greatest also production back-end Arista with and into greatly as of from world's cloud AI These building are diversity, with some is XXXX, differs move fidelity scale.

to training our Just for AI and back-end portfolio connect one of slow flow switch. Therefore, centers accelerated AI completion job consists flow portfolio. switches, over seamlessly a workload. Etherlink This front and of X can X point Arista networks WAN compute not time the just Arista storage end Etherlink networking the entire with XX cloud classic families

Foundation prescriptive our our that platforms support doing with data AI for customer's networking well, for superior the state with to called and network instrument functions. have deliver and ops about software Data published curating subscribed AI We Network higher-level A networks functions. product also predictive strategy with and care Lake our it's Our is proactive,

pleased first $X mark software are subscription for We revenue service billion for in surpass to the the the and XXXX category. time,

York XXXX, Santa London, in X very New large we Clara, and In conducted California. customer events

Simply which customer deeply XX% as respondent resonating are products industry Net superior XX, Score partners and we Promoter support put, and the to in customers strategic we and satisfaction. exclusive strategy events. differentiated of these quality of Our with over the X,XXX translates outpaced touched highest in

we course, do and that vulnerabilities network steadfast lowest and innovation. security Of with the

aim In $XX November year a turning has point we been summary, as continue of in XXXX set a digits a with breakaway Analyst Day. billion has CAGR been back we to XXXX for It revenue that Arista. annual pivotal way double for key

pay momentum, Arista. guidance. have to exuberant a live encourage our of community I attention do the outcomes for stated our our in While appreciate dynamic on would which We of most from you positive support I changes, to resulted analyst world in

are we XXXX, how we've upper in across core and In the rooted our at $X.X in customer for double-digit investments. of approximately the approximately in principles dimensions. our X,XXX XX%, on aiming and engineering culture. proud outstanding incredibly at growth navigated range revenue. XXXX our year The based XXXX multiple Arista employees at executed of progress I'm reiterate driven We and guidance leadership billion now of has team

networking from of with are struggling Arista's with future customers the While customer intimately our redefining legacy data-driven our strategic customers. incumbents, fatigue

Chief transitioned a to in Financial and and over to less I'd that, welcome our turn With time, it one core Chantelle, and Chantelle, to year. has become like anniversary. year Aristan record happy than who you, Over again, to Officer

Chantelle Breithaupt

great congratulations I excited the has CFO for, have first and hoped I about been and full could than Jayshree, journey on XXXX. Arista's year you, am Thank My ahead. more as

the Now on to numbers.

and QX excludes acquisition-related our non-GAAP items. results our and XXXX compensation nonrecurring based full is this QX, charges As reminder, guidance analysis our certain year of other XXXX a and stock-based for impacts, all on noncash

share-related GAAP earnings A is stock X:X in all in our to to are reconciliation selected split results provided post-split numbers of non-GAAP In XXXX. a the our reflect on addition, December full provided basis release.

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

XX.X% year achievements last from revenues product contributed in QX. million XXXX, total and XX.X% approximately X fourth growth, revenue, fiscal $XXX.X delivered of by quarter, pleased XX.X% subscription of down at have in we XX% up in for the sectors. came or from For quarter in Services revenue all driven quarter. are the our XX.X% software revenue of to in International

was This global quarter-over-quarter domestic from of large customers. the relative increased decrease mix our driven revenue by

of The overall the slightly in from and XX% in XX% XX.X% XX.X%, gross was guidance prior year. to the margin above down QX

associated to continued with of delivered from year, or the R&D revenue, for increase the at next-gen of at X.X% with XX.X% of finishes from revenue, product R&D costs last the of $XXX.X were revenue, is of This management. discussed call margin the supply products million. of improved came costs compared prior for chain QX This expectations recap and the combination and earnings up or our a innovation. of million inventory XX.X% QX QX. This due our a at a result up moving year. Operating timing development XX.X% on year XX.X% the matches $XXX.X XX.X% $XXX.X to demonstrating quarter. in focus last other regarding the largely the engineering of gross quarter we quarter for a from in expenses As million spending

channel programs. million X.X% was or revenue, driven both from expense up was million in of and $XX.X by This marketing and investment Sales quarter. $XX.X headcount continued last

came Our at costs X% scaling from quarter, reflecting million $XX.X revenue, million or investment G&A up last company. in continued $XX.X in of the

This for operating quarter an of of to contributed for finish achievement. the income on revenue. income year or 'XX was the million team of impressive fiscal $XXX.X XX% $X.X XX.X% to Arista strong Our QX billion Congratulations operating revenue. this result or

for million for income taxes. reserves $XXX.X rate due effective of in the a the This XX% the revenue. to favorable rate expiration Other statute in quarterly million, lower-than-normal XX.X%. release This tax and expense quarter was limitations our changes of of state the tax $XX.X reflected and tax quarter favorable the income net of resulted or and was of

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

For FY XX.X% 'XX, increase to of pleased year-over-year. per delivered a share $X.XX, a earnings have diluted are we

the common $XXX.X Of $X.X at $XXX.X repurchased approximately per In million the marketable to repurchase price average billion ended 'XX, the at share. billion. in we our million sheet. Within quarters. price remains XXXX, available of program stock approved common share. $XX.XX Cash, securities and $XXX the equivalents turning fiscal balance in per at we of future repurchase May repurchased average stock our an Now quarter for million of of $X.X cash an quarter, $XX.XX

factors. conditions, stock The of dependent actual business and be other market and repurchases price amount on will timing future and

quarter. XX days reflecting QX, performance a X.Xx, the deferred We billion $X cash in approximately strong tax Inventory marginally team. reflecting in of Now at the to by were and earnings came diligent from management increase turning finished Inventory operations from revenue, payments. performance income to period, strong fourth cash collections increase generated an quarter. reflecting billion, XX offset days, up the combined operating performance DSOs from inventory turns last for by X.Xx increased with in in shipments timing across and of the raw down in goods. an $X.XX

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

deployments. activity products represents this in and prior new chips related to quarters, mentioned AI purchases for As expected

We purchase overall will continue to commitment rationalize our number.

and this healthy we demand to meet to improve related in a continue However, quarters. number some maintain expect components customer to lead have key position future to and times variability in

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

our acceptance increased of product Our increased was and have cases. and increased $XXX continue introductions, approximately balance new product and resulted and deferred a million magnitude customer-specific variability customer quarter. have in deferred balances. new customers last XXXX that clauses expanded the preferred revenue with to year the by revenue of These over have will use Fiscal contracts trends trials

$XX.X to XXXX. inventory We QX, began were million. we CapEx 'XX expect the from quarter XX days, work In reflecting in project. during this our build into up to million expenditures payable October, Clara, and expanded and for expect payments. $XXX XX in continue fiscal the we of timing Accounts facilities days this were fiscal approximately Capital in to days receipts incur Santa construction for initial

Now remainder 'XX the first turning the for year. and of of fiscal outlook quarter to our XXXX the

confidence seen AI, at 'XX specialty along cloud 'XX in This $X.X XX% initial providers, year gain growth XX% to enterprise up our beginning view reflects the have the volatility of continue is recognition of combined We revenue place and for cloud, This the with FY we the outlook our or and market for of year. in our XX%. our fiscal billion. from the guidance now since that approximately to outlook

situation For in mix expected to fiscal of range Similar anticipated 'XX gross to of range margin, long-term quarter. XX% customers. with and the and for business monitor due XX% continue the to year the tariff fluid QX be we others of thoughtful above company our we the will short- our both to in reiterate the the to the both industry, be outcomes to and the

the XX% In we in innovation, in the company, expect and resulting terms to continued in scaling of margin XX% sales spending, XXXX. of to operating invest outlook

variability On purchase commitments. our timing in will the receipts to optimize due capital continue to the work some cash inventory the front, we of working to with component on investments expected

at the from quarter, the Our structural tax up usual onetime rate XX.X%, low historical to rate of is rate, expected experienced to unusually back remain XX.X% last 'XX. QX FY

quarter approximately as priorities, the all first operating of this at a gross Revenues is a follows: approximately approximately QX year With to for our backdrop, of trends in billion customer's outcome stronger and timing prior seasonality as than margin guidance $X.XX and of slightly billion. XX%. XX% our the margin $X.XX of

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

are Arista we enthusiastic outlook about at summary, the and In ahead. general networking XXXX

customer's fair centers ready of Combined across to impressive needs realize portfolio TAM. the are share market are all an billion solve spirit, $XX our to Arista data. team with our we our ready have We of and the

IR too, the Rod I, that, over and Q&A. you, welcome Back like With to team. would Rudy, to Rudy for to Arista

Unknown Executive

Thank you, Chantelle.

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

Operator

Instructions]. [Operator

first at line will Ng the of Our Michael Goldman Sachs. question from come

Michael Ng

next-generation hyperscale compute out into gating the about talk that the how And the of you the AI tied for. ASICs year custom how the I video Are the be switches that could a look deployment Arista Thank to production. to the or like and is you're might back side? switches timing chips watching you just you if end factor rolled question. sale was in wondering for of expect of out these on

Jayshree Ullal

you, Thank Yes. Michael.

GPUs calls, funding want I committed is say to awaiting AI It that and out prior I are but stalled. mentioned still Arista First, is think. just Cloud not clusters X our X one little some bit a I to a They of is too, Titan. in

some come X, out XXX,XXX some of X year, rolled X for year color, them. spend jgive talk I a are expected But but this out cumulative let remaining year, customers So we to this about won't hope of they'll me -- you the next the back GPUs.

well going And -- rolling GPU can imagine, it's they're X independent you very the numbers. of of with back be them class be generation out next much large pretty we're on end. to we'll fairly So of NVIDIA of do one will the that, -- But they all for waiting major GPUs.

one, so we -- right they've migrating from now that solution, historically Ethernet viable fourth InfiniBand On still a the been is to we're are InfiniBand. proving

go pilot still out of and doing We're to X, installed X production expected X one in this into we're so out of in well the year. and year. XXX,XXX expect Fifth to GPUs we very the And be next X

Operator

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

Amit Daryanani

always impact vendors I your been to there's the growth. clearly, revenue over for think it's of guess, impediment an decade, the I your Jesse, perspective And this box the don't last concern But mix the that around you white company. especially the maybe networks, you see comes evolving OEM AI share do versus when it network can to how white solution? back-end box

end, successful help understand just as aware maybe the we do something they should back help different front well? differentiators there Or that Arista the extend about? networks is be us And the be on

Jayshree Ullal

XX so vu say the on We've a question, you so just sure Gosh, years first for lot the large. I but And thing on asking it. this I'm this TAM is through going least seems to and minds. deja is this of huge like been cloud. a thank for it's at want

phones coexists the on back Apple an you are coexist are AI will different X the much components, the of operating iPhone boxes white lead there AI always cluster, end and and typically with that at the When AI spine. other with types. like of non-EOS, We look systems

The aggregates AI the lead of therefore, Almost spine if back-end spine to Arista-branded these first, will, generally all and And you connects EOS. the all point examples the leads. seen, AI AI connection. the XXX% the is GPUs we've is AI of in

of features, can You've got capabilities other scale, AI routing, difficult very that to lot do environment. rich any to do awful vary. an be leads The in are would that

the of -- all the X a are X X X of example the the the are of I X example, kind for spine. lot, So mentioned let's out the out of [indiscernible] in customers EOS hybrids. take

Some of them hybrid know, SONic in and and number with real an where And or EOS co-develop it's them have use coexist a form a OS. some FBOSS. you we as of of combination cases open of

So for box most different provide to folks. will and and part, I'd say strokes different Arista white coexist just for like that will

Now of and only smart importantly, in the a you XXX I real software you so features, AI alternate amount automatically the because connection. GPUs in terms of a most now lot and upgrade come time, scale but foundation down connection accelerate at your like routing to the that right analytics because want and XXX network right differentiation, ideal load of different and congestion and differentiators, don't give you deployments system GPU tremendous and can cost trouble, personal is visibility is not queuing, provides an explained balancing, see and to we our you in of visibility gig, if to sort a have the that control,

which a and there much costs as amount a as differentiation GPU in Xx more even valid So tremendous typically of CPU.

Operator

at Tim question Long comes the line of from Barclays. next Our

Timothy Long

right, gave, on Titan heard numbers looks Obviously, them, you touch numbers, one it the to Cloud wanted a parter based Meta on few down the I I year-over-year. like if of there.

it that If we kind where Titans going looked other -- that. other looks lot. think the there the was already. Cloud of I Is extremely than went the And the rest on I the touch the of strong anything know, math for with XXXX. Oracle Titans, don't then in up Oracle shift else Cloud it in could a on other if like you do

Chantelle Breithaupt

Yes.

their that that in use of XXXX to by XX%. more number influenced CapEx, CapEx of our So year was Meta's Meta where efficiency is Meta. to their mind XXXX are we was down Meta, speaking and a Keep obviously in cases XX% specifically of numbers in

you're be doing with all shouldn't the and So happy being cloud XX% Microsoft just I and in correlation Meta probably manner in, being general, titans others say well, cloud to a revenue in they're not in we're timing very strong we AI slightly as their XXXX CapEx some And and 'XX. numbers of In and well. fully that cases. greater than confuse I use our between expect demand, and would well our customers, down lower with seeing XX% customers are to their performing our shipments. they're we Specific added but in

Operator

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

Benjamin Reitzes

[indiscernible] Tim question. Long my

margins. I'm to about ask gross that going So Yeah, guy. [indiscernible]

accelerate at going I the they Cloud being the about margin Do So obviously, mind you Titans a that vis-a-vis to because giving think does margin implies gross rest Titan quarter. after pushed midpoint first gross pushing in the guidance? gross so down little the throughout color margins, that mix just is down between on go do much year would mean more? the the Cloud that XX% what though your in significant some year. higher the a gets throughout of And

Chantelle Breithaupt

you perspective. Sorry, from absolutely, think I Ben, right, it Jayshree. that No, got

some on 'XX question. and a mix. to entered guidance first this talking about Jayshree to gave the the it As last quarter, into as kind still enter is timing we of QX year remains we and thoughts

is it little is just the specific were absorbed we I a it some tariffs mix driven. say a So bit There mix-driven on quarter in number. This price would last was driven. if China conversation. that questions have of

quarterly the our absorbing we'll through are behalf as But we customers. mix of So driven, to that on otherwise, year. it's the guidance continue update and do we

Jayshree Ullal

just was time. of job ahead a going planning to fantastic for that has the on John add I done China Sorry,

that? related most to the absorbing it related mix is So you while say some the and of of costs, to is it the China we're Would tariffs.

John McCool

progress. to We've Absolutely. working China been good for on happy made time right. and we've some report mitigation That's

Operator

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

Meta Marshall

just investors about you of you just over see another you've month, back DeepSeek on past of of as seen how the ratio end, kind thoughts of of topical this Great. and the been talked to front we've about the versus question investments? kind that has as changes X:X think changing kind kind around from Maybe some end training

Jayshree Ullal

deep but you, see can many DeepSeek this a I you think going stocks, certainly and I have see CPUs, Well, actually as AI that Meta. positive go Yes. GPUs, fixed a efficiency to substantial now class because Thank gains new accelerators where of you're beyond training.

So that could or of and be or count lowers token the inference some sort experts the therefore, of cost. which mixture and reasoning

I like models So here engineering these thing all up the options is there and accelerators. our who I and of kinds network Arista for is what different of many think types building training eye-opening for about And are one. these isn't are the only can experts scale all different XPUs all all

X So a phenomenon, customers evolution across training I think limited more not CPUs this will is of become distributed of will be and a to type back-end and only range but a nice just AI more GPUs. how

Operator

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

Aaron Rakers

seeing deployments and sovereign on do on your networking thoughts broader like vis-a-vis the both opportunities about opportunity front-end in that? of any one you how has of what you in questions customers, involvement recently Stargate, Jayshree, context newer do the Cloud conceptualize AI and announcements gotten just for of have we've I'm then thinking the obviously, Arista you're kind your Stargate is just curious, see business? of like of you when Titan And back-end set some the

Jayshree Ullal

AI Thank quite Stargate are Yes. you, sovereign related. Aaron. and not

one, me the let first. Stargate So take first

and the approached provides to projects If the X I building you single and blocks. of think the there's how who as look scale networking. a you integration vertical look more of scale-out it we've out we have Stargate vendor processor, the then like provides at more connected GPUs the There's the separate up, this, and us largely together. the classically to to come software rack at looked when who libraries, scale and visibility point a see and at and starts But where you'll control provide of more start all GPUs

This for new the is to not -- more extremely is and accelerators inference, and different and definitely 'XX, label a new in pluggable phenomenon, 'XX see training a of than you're type XXXX going of a which of class version. AI but current class

the type optimistic say, So projects Law Andy of we're this personally of Moore's about of Bechtolsheim the in number next-generation in need these it. improvements shall for we and pushing a design is of performance very involved XXXXs coming X.XX. in have you and from XXX boost the more density which XPU, to that boost the we you saw can means gig more per scale network back, to performance and is of

There are and other of like things to consider copper optics. co-packaging and liquid cooling

So is middle that going Arista team there on best-of-breed as lots that McCool's hardware in the working well John team on is of as Andy's is.

Operator

Our next question Citi. comes at from the line Malik of Atif

Atif Malik

out... calling you appreciate I

guidance. pay attention To the to

much this year also, Is talk fifth the X how talk And TAM AI? the number is are where back-end despite or upside from for coming XXXX, customer. or if Can can X million broad-based Now you billion customers? the $XX it AI stalled or about sales $XXX reiterating year? is the you to you this

Jayshree Ullal

Okay.

I'll first, question your Atif. second take So

out $XX center would data and XXXX, observability. TAM AI, and the cloud I campus and them say the discussion. I'm roughly On billion separately in X/X calling routing security obviously, X/X and is X/X this purpose that is not absorbed for is enterprise. of into is and And

$XX billion $XX billion. to that roughly billion to to on So get each $XX

-- help back coming out was original to which again. question, me So your

Atif Malik

fee. back in end million $XXX The

Jayshree Ullal

yes. Yes,

momentum this we're that see I And where. we're customers break to going number way I -- we $X.X enterprises. cumulative down year. as on of not and going said, think we're So which ready cloud to our increased help guidance you tell to and deploying well billion, in both AI, us it our and a X with I'm as XXX,XXX to GPUs is

that we'll the in early know don't we much better and out see $X.X do billion definitely think the half. But that confident I call Chantelle we'll feel year. historically second -- I the so we in can that

if visibility having that So helps.

Operator

Chatterjee Samik JPMorgan. of Our next the line question with comes from

Samik Chatterjee

box you box like how the maybe customers? Jayshree, bring network the last value end more in that's one to EOS key in few up that of landscape in and again, up and sort the mind to to sort which the white and keep software we of your you the come white the in of sort player, a Can the particularly of value of lot I days, what a Arista? of competitive the should discussion back of sort between rate drivers can outline the some competition of of of do is topic emphasize layer in are EOS terms

Jayshree Ullal

Samik. Sure, Yes.

First of all, $XX,XXX, GPUs diamond right? when going of thread. a these that diamonds, buying You're on piece a expensive cost like not string to they're you're

to mission-critical So to first visibility, whether blue you thing or high a box, cetera. some box, say you've I have want availability, got you software, want to et other EOS network, it analytics, white need call mission-critical is functions,

and spine I that have As not AI see leaf network. mentioned, is And deployment yet they're spine want a reiterate, also an EOS-based. typically I to I to

year, customers for is spine AI And product And [Ecolink] of also year that it of FBOSS that this with happen. or major Coming is all installations, for an and last features with have EOS both our provides really for deploying it. engineered the combination, happen a we availability of we benefit But kind X for EOS telemetry, been the XXXX the in in and also soon, example Meta, I'm which VXLAN, the won't that. flagship is our future. can't that switch. is leaf options course, not product spine see in jointly routing, saying the the that of distributed high product

AI difficult EOS in use highly resilient a view, So non-AI Arista without or cases. in it's system my imagine to

leaf, corners. the cut you can On

You a may buffers, have installation. can you go smaller smaller with

some imagine So in non-EOS. do will can for build with experiment to fairly experiment smaller you operations have to to again, a large that, people that staff I the have do want configurations it. and to But

a also element. that's critical So

don't take the a to less So that unless customer, have Cloud staff. chance you're you're you large likely Titan because

to staff their customer have use So except cloud in use is so. and well operations AI cases, may do all alive EOS and cases where in certain all, the the specific in own

Operator

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

Benjamin Bollin

how your opportunities your intensifying. Jayshree, strategy and on refresh in it be as evolving I'm enterprise may like within interested looks GXXXX that thoughts are

Jayshree Ullal

significant listen, of at by for and classic data center Chris our business, the a a have AI led very cloud. Yes. threats, effect from a trickle-down X high-end always our of is to the we're area From major our looking Ashwin natural us. product we cloud point investment enterprise, products No, and view,

our the so campus, strong today. enterprise or be it it's portfolio I've is as data never And the whether seen as center

the in challenges So just of time. execution and a And right? lot our is takes really that go-to-market, our

Global As never our you the the steadily stronger. especially And in we've has we count, pointed we invited as projects customer but been investing XXXX to, slowly of out know, there. number get been

year next working more in contributions and bringing I'd you international. and see see area We're [indiscernible] the hope tell can numbers, the like in from to new on strength leadership some team so. One as significant there some are or it, to is our and

Operator

line of Ryan Our next the Company. from & Needham Koontz question with comes

Ryan Koontz

Jayshree, your your there's about in its effect a maybe optics. opportunities chatter should comment about investors your map to sell? and been you Can speak TAM road about can place lot on co-packaged you think the and -- lately that, of how

Jayshree Ullal

optics been Well, XX reminded a me years. first has new idea. all, of is not that Andy XX around co-packaged It's to

it why reason, of concept failures so optics had a has relatively is far fundamental proof weak go through let's still the co-packaged adoption is field and most of because in today. So of

of important switch problem. on optics been and the flexibility of the network networking, manufacturing. you some serviceability a and most get lose once back to that troubleshooting. you So And is That's going co-packaged a and don't you PCB, a attribute the solder reliability

are number well call fan a as alternatives big of we pluggable copper a as co-packaged can LTO that of this we're and as like emerging, it. linear drive or Now optics complement

the Now we optics co-packaged it has some metrics now. that see right improves if also of

channel example, X-channel count For pluggable it pluggable a channel do we optics optics, higher the as has well. than can higher standard industry but of

more XXX can committed of and that. even gig. But some nice technologies And our LEGO feel and XXX match that to the CPO pluggable things that approach and reliable. preferred these PCB. that a to important haven't so CPO soldering on and pluggable gets far, CPC I we only mix customers So they switches think see better them change if both and gig be will we alternative can will a optics at can be have improve, And or CPC

Operator

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

Simon Leopold

was you been maybe could of hoping revenue. I a meaningful double-click cognitive on the It's adjacencies. part

XX%. you said think I

your about part how expectations in If are your expectations. trending business how could of elements XXXX the a that more growing is the offer you for that and color of bit little

Jayshree Ullal

and and No, campus, you the up signed million. that's $XXX imagine, to the routing important, Yes. as an already we've both can

right? which often in of -- So enterprise our related, don't expect routing year, in measure clearly, is use out Now difficult isolation. we it and $X to it's -- case, said, over to we particularly provider I've billion, service $X.X billion this be the as it's that

routing definition the of to very has combination a the be a with we're being hardware. software So strict about dedicated running it

So there. for and we don't example, if count their it hardware is routing, shared switching across

the bit numbers more I be that's just in a think to you strategic core. shortchange sometimes a we goes But I it want So little piece. of the aware, very and

You to is add fact evolving. the SD-WAN that the market that now

from you MPLS, about just tunnels and you backbone. but routed and need not do It's a encryption really how migrate

don't in for about falls tell providers. really the service So and backbone enterprise the spot combination of our you a in sweet the both edge the SD-WAN I initiatives. need to and into routed campus Arista,

there's of to set are of We competitor where competitors who of those very parting one lot campus and a or fatigue do see on acquisition. from We are with keen the if subscription another fees, trying a you there. very, will, models merger a

provide who the leave. spine extend and particularly traction they a same and breed. So our center Arista familiar customers and campus can can center where already spine is And are innovator using that to that universal there pure-play data we're wireless wired of best they're getting only with us, data

more security be Trust automation, for Zero management CloudVision it much much, we're campus domain, products. So as traction, using a seeing or observability our with

I them are So Chantelle, we exceed billion. want expect you those to meaningful, say few both think to words? of and a $X

Chantelle Breithaupt

are I'd completely only intent. which showing add, your Yes. the to The other things points, Jayshree,

for are a things other campus fold. The couple

who's a into time of lot lead times with spent us, First coming has John, here getting us is, this better year.

lead that, the great times We're conversation. excited So and customers well. we about seem have very pretty as a excited

We actually growing Jayshree, bringing in, also is preferred first campus a win. the your but curated us wins point revenue. the partner we've some we're where on have DC through a only And program, international DC because the particularly excited bringing we're international, campus not seen earlier, to

So just couple enthusiasm points to more add to for a the XXXX.

Operator

Our next the question of at America. from will Liani Tal line come Bank of

Tal Liani

start Or on this routing enterprise. XX% one drives just year. centers? questions, grew growth and it? Two you regular see AI. and of AI enterprises because investing of Is it Enterprise one What do on data applications to for

it license Or numbers, not it do to now how you is was it? Others is to used And with of license. then it Routing when like a elaborate sell terms second is just is versus optics? small Can a used opportunity, the -- big routing. The What software thing but are the you be hardware differentiation in What software? is routing? on about a opportunity it your it just with bundling others? be? how

Chantelle Breithaupt

to Well, routing. enterprise take Jayshree, start with I and Yes. want you can

into coverage. for years. I One kind of growth and would think 'XX ways I vectors So continuing into following few describe our in are enterprise, there is the a 'XX and

and and headcount. we've sales and marketing into we seen 'XX. double-digit had You've going headcount 'XX, sales increase marketing in 'XX, invested in in 'XX

getting kind just we're mentioned We're have We get do have that into using we're international partner program more coverage. on. working do a to logo new preferred the So that I enterprise. campaigns also of We focus.

land part that of expand are motions think I vectors. so And all and those the growth

speaking to specific conversation, theory that the the a of the from companies. of kind to Global the seeing move customers, perspective, I it's some banks and with more you're would XXXX, for XXX AI tier higher say and great in Fortune

is moving and of a bit so describe that some service theory the then they're on-prem the way cloud actual whether of working And from they're inference. mostly to. beginning, training doing they're with speaking providers And it at bring cases they deciding to time. takes they kind They're use it and

those making they're decisions. So

early part of So days, I having are that. think we're to great Jayshree, really want that? those for cover but the you AI did conversations

Jayshree Ullal

Yes.

to the So last York software has It was of service in I New But cloud are described, for on center. routing, as getting you was bank part large offering more enterprises, there. to more critical enhancement. a with important a a routing where, large meaningful and well just the as as our the it rightly been we providers and data snowing was as always very week. Tom, of

was it It's pretty the center. there cold, core not is time. not but fabric. super a And it also data a the campus. use just So most hub, to us all of so they're And into WAN stayed take It's that indoors spoke. build case I then It's as looking amazing. the not for routed routing

mentioned And you features.

of happened all. is the is MPLS, tunnelSEC, segment BGP, portfolio which routing, features it the center, data encryption, think and OSPS, largely Arista is got more much building I were our VXLANSEC, with complete, XX% we what for features. routing cloud But MapSEC we today,

routing, for So obviously terms in what in in we're best have apologizing the software support and the quality we we no stack more and industry. don't of have

hardware software we us successful. XXXX now ourselves a that workhorse So a we very of has selling lot and the while particularly SKUs, a for are in with platform lot finding real SKUs, dedicated are of been

Operator

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

Antoine Chkaiban

to in service love latest perspective your what I'd on you're providers AI. get hearing from

their driven AI. in anticipation demand that out One traffic mentioned building providers of of because they're seeing by AI your service network driving increase for an competitors they were in

well. could you So comment as on if just wondering that

Jayshree Ullal

you do neo the generally mean service the providers cloud? Antoine, or classic

Antoine Chkaiban

providers? service classic The

Jayshree Ullal

Okay.

So we there uptick haven't huge yet. seen a

earlier seen I seeing providers we I have class want going cloud that cloud, grant to differentiated a ask, as Tier a be think of provide answer whole service lot sovereign a to there. are new have and specialty a funding, X money, want emerge Neo there. of real there's money in AI some you activity cloud, question maybe much didn't we experimental. But somebody the to we didn't answer -- the and more And that

yes, specialty early lots too of clouds to of providers, Neo call. But service seeing So we're and that. providers, examples

Operator

Bank. Our next Nickman the line of from Matt Deutsche question comes with

Matthew Niknam

I and sheet. balance of on worth you're Chantelle, $X cash sitting on for billion mean, now Maybe equivalents the

of you an just maybe XXXX. heading prioritize into cash uses So on update how

Chantelle Breithaupt

Thank not strategy for capital our FY allocation very the performance. has coming Yes. No, pleased into it's you great. 'XX. changed question. the And We're with

to reiterate appreciate I remind, so. of to and Just and do kind the opportunity

what saw very First that to all, cash be continues a the investment. do through sense investing get what priority. Organic still did reasonable can of Repurchasing, we and where that you a can and we respectable 'XX of return willing in we 'XX. through to

to sense probably R&D, on you that activity. looking So back that's we're -- the least one inorganic one in still probably the sales, company and the office scale the the scale the in the is sizable saw that's

focus X, in the first would So and I how remain 'XX. that's on we

Operator

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

David Vogt

get principal a thinking XXXG 'XX Jayshree, have of XXXG a and you at I How how your the think sort about into in XXX a question beyond? at different ultimately parts some but that mentioned of about and customers. So deployments have how for of evolution are in Obviously, plays you you network been and XXX into of I just speed there. M&M sense obviously in out 'XX, X.X, not about the driver. beyond. wins trying X.X, There's 'XX but out know to some

Jayshree Ullal

see some Cloud X, In years. even every transition being are speed No, typically XXX faster. very in to X transitions It from X used at speed to we The because of that Meta to of take think our almost good we maybe gig, question. X when gig certainly cycle XXX, example, Titans a XXX years, AI, that that's or Yes. went right? I getting AI for took

say, real would what say chips do XXX have yet, 'XX I production maybe in because maybe of the is gig. we So year would John, into don't the real I XXX really 'XX, XXXX see say, 'XX. was And coming more 'XX and gig. X.XT you and late I picture in

So gig XXX like ago. I X talk and a of on hype hype on talk lot remember there's just years it, and

think long to I and you're realistically, a gig. see XXX XXX runway going But for

of awaiting NVIDIA X.XT, which own into get kind reason customers the accelerators we measured as of to thoughtful cooling GPUs, are still be AI their actually liquid that that part with and going it's of push Now would or is many our I bandwidth. think

to or So push going out and it new will year that's X. new bandwidth, a GPUs require

Operator

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

Karl Ackerman

nearly outlook because you million the I XX% $XXX and so for $X.X another or Could year-over-year and outlook relative billion. services sequentially discuss balance your full for your the to services asked year? March up grew revenue and is deferred

So the outlook be for that helpful. would very

Chantelle Breithaupt

don't We parts guide usually of Yes. the that. piece

keep the of is bit would all the So say sense product, in up catching mind I especially kind of thing is timing in with to that services a little of post-COVID. to

of would don't parts. probably piece kind the forward. you best guide So few that's I take that your We looking the years, trend over see guide and the last

Operator

William come Our will next line the Blair. Naji with Sebastien of from question

Sebastien Cyrus Naji

a few but the clusters solutions a bit, custom this some GPU ASIC from then and discussion months general NVIDIA about that last of talked of purpose the your the there's between You over little from been view, lot approach just longer would does over popular other? there versus X differ more chip customers. And is pull one in the the I guess types? term, maybe Arista's across your in these Arista opportunity

Jayshree Ullal

Yes. absolutely. No,

NVIDIA. Thank for And guys it GPUs see competitor. I -- you, I've think been said opportunity spoke gives them, the that predominant that an for and as see us. to a a you NVIDIA to I us always this, market don't Jensen, that's about often connect way. because I thank that you,

connect we accelerators. can AMD built connect forward, that not we we we AI in-house to to and but them, GPUs only move in As see

So the X look in holder XX-XX. market in or a share guess think are I But active now, early probably of dominant years development X, me would NVIDIA what them if you could ask XX%, lot it with is it stages. to from XX%. like be

and to scale-out be I be opportunity for bundle choose all for accelerators. the specific GPU be there'll customers think could types Arista of by vendors more And opportunity agnostic. best-of-breed. to less So We'll network

Unknown Executive

Earnings Networks' Call. Quarter This XXXX concludes Arista Fourth

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

Operator

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

Arista Networks (ANET) 18 Feb 252024 Q4 Earnings call transcript