Arista Networks Inc Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: David Vogt - UBS - Analyst : Alright, thanks guys for taking my question. So maybe Jayshree and Chantelle, can you maybe just dive a little bit deeper on how you're thinking about the impact of tariffs? Obviously, product deferred revenue is up sequentially. We recognize that it's uncertain going to the second half of the year. So maybe from a top line perspective, how are you thinking about what your customers are telling you? What can you share with us and just give us a sense for, how you thought about it relative to where tariffs are today versus what maybe is proposed by the administration? So, I assume that it's kind of the status quo of where we are today is kind of underpinning your outlook, but any clarity would be helpful.

Question: David Vogt - UBS - Analyst : Great, thanks Jayshree. Thanks, Chantelle.

Question: Amit Daryanani - Evercore - Analyst : Thanks for taking my question. Jayshree, I think it's been a fair amount of noise and speculation in record on the four or five backing AI customers that you have and sort of the different things they are exploring. Just from your perspective, can you talk about how are these customers and aggregate progressing for the back ramps and is that one to one ratio for the front end and back end still impacting your perspective?

Question: Amit Daryanani - Evercore - Analyst : Thank you.

Question: Atif Malik - Citi - Analyst : Hi, thank you for taking my question. . REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 06, 2025 / 8:30PM, ANET.N - Q1 2025 Arista Networks Inc Earnings Call Chantelle, you talked about 2Q being seasonally stronger. Can you give us a bit more color? Are you seeing any full forwards, because of the concern on tariffs?

Question: Aaron Rakers - Wells Fargo - Analyst : Yeah, thanks for taking the question and congrats on the results. The product deferred revenue balance, from $990 million up to like $1.2 billion, I can appreciate the timing of that and kind of given the tariff backdrops, somewhat difficult, but I'm curious of how we should think about that from a forward perspective and in particular? Is it tied to kind of the distributed Etherlink platforms or the 51.2T silicon? Are we still kind of early innings and seeing those, actually materialized from a production deployment perspective and that might be tied to that that product deferred or any kind of color around that would be great?

Question: Aaron Rakers - Wells Fargo - Analyst : Thank you.

Question: Ben Reitzes - Melius Research - Analyst : Hey guys, thank you so much for the question. I wanted to just on the second half; in order to be in 15% range or 15 to 17, you have to kind of get into the single digits there. So just wondering, with the cloud providers that you serve, I, and, when they get the stuff from Nvidia, it's not, I thought it was non-canceable, etc. And there's pretty good visibility on what they're going to do? With either XPUs and GPUs, because this stuff has kind of a long lead time and the orders are already made. So I'm just a little confused as to why you really don't know, so much about the second half, at least on the top line, given, these orders are non-canceable for so many of the hyper scales that you deal with?

Question: Ben Reitzes - Melius Research - Analyst : Okay, thank you, Jayshree.

Question: Samik Chatterjee - JP Morgan - Analyst : Hi, thanks for taking my question. Just maybe if I can go back to the, Tier 4 Tier 1 that you're working with, on the AI back end and the progress that you updated on that front, are these customers now giving you more visibility just given the tariff landscape and that you would need to sort of build inventory for some of the finished goods and, can you just update us how they're handling the situation on that front. And particularly then as you think about, I think the investor focuses a lot about sort of 2026 and potential sort of changes in the CapEx landscape from these customers at that point. Are you getting any forward visibility from them, any sort of early signs for 2026 from these customers? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 06, 2025 / 8:30PM, ANET.N - Q1 2025 Arista Networks Inc Earnings Call

Question: Karl Ackerman - BNP Paribas - Analyst : Yes, thank you, Jayshree. How do you see the general cadence of [Pipperscalars] deploying 800 gig switch ports this year? I asked because I believe your Etherlink family of switches became generally available in late 2024, and I'm wondering if these switches relate to your growth of deferred revenue in the last couple of quarters?

Question: Michael Ng - Goldman Sachs - Analyst : Hi, good afternoon. Thank you for the question. Jayshree, I was wondering if you could just expand upon your comments about, your confidence in achieving the $10 billion, midterm revenue target a little bit sooner than, previously expected, and how do you kind of balance that, longer term or midterm optimism with some of the choppiness that we see now?

Question: Antoine Chkaiban - New Street Research - Analyst : Hi, good afternoon. Thank you for asking me a question. I'd love to get your latest views around co-packaged optics, and Vi introduced its first CPO switches, GTC for scale out, and I was wondering whether that had any impact on your views regarding CPO adoption in backend AI networks in coming years?

Question: Antoine Chkaiban - New Street Research - Analyst : Great. Thank you, Jayshree.

Question: Meta Marshall - Morgan Stanley - Analyst : Great, thanks. I wanted to kind of ask about you reiterated the $750 million back end target, but you've kind of had this $1.5 billion kind of AI target for 2025 and just wondering, is achievability of that more dependent on kind of the tariffs given kind of some of the front end spend, or just how are you thinking about that $1.5 billion number?

Question: Meta Marshall - Morgan Stanley - Analyst : Great, thank you.

Question: Matt Niknam - Deutsche Bank - Analyst : Hey, thanks so much for taking the question. Can you talk a little bit about what you're seeing on the macro front and I guess more specifically how that's affecting spending plans and sales cycles across the different customer sets, whether it's cloud now, Titans, Enterprise, or even Tier 2 cloud and some of the service providers customers?

Question: Tal Liani - Bank of America - Analyst : Hi guys. If you go back a few years, we've seen your customers being nimble and buying ahead of development, for example, you remember when Microsoft responded to the litigation you had with Cisco and bought kind of 6 quarters worth of equipment in four quarters. I remember it happened and the question is whether the entire market behaves this way now, meaning we know tariffs are coming later in the year, whether this ranks you're seeing is the result of early purchases of customers ahead of tariffs in order to save some dollars. So the question is twofold. Number one, if it happens, will you ever know about it? Meaning, do you have enough visibility over the deployment schedules to know that they're buying ahead of the demand? And number two is just the answer of what do you think about kind of the question and whether there is you know early ordering of equipment things.

Question: Tal Liani - Bank of America - Analyst : Got it. Thank you.

Question: Sebastian Naji - William Blair - Analyst : Yeah. Thank you for taking the question. I mean, I think there's a lot of focus on AI demand, but some of the cloud titans have also been reporting, really robust growth in the non-AI parts of their cloud businesses. So could you maybe comment on what you're seeing on more of that traditional cloud titan demand and whether that's trending ahead of expectations for the year?

Question: James Fish - Piper Sandler - Analyst : Hey, thanks for the question here. Really a follow up on [Samik]'s, one before, what functionality about the blue box actually makes it defensible versus what hyper scalers can kind of self-lo and then Chantelle on the inventory side, I know you always tell us to look at inventory and purchase commitments, but how are you feeling about where we should expect inventory turns sort of throughout the year and long term just given the latest wrinkle here on the supply chain?

Question: Ben Bollin - Cleveland Research - Analyst : Yeah, good afternoon, everyone. Thank you for taking the question. There were some comments you made, Chanel in the prepared remarks regarding variability and customer acceptance of the product deferred, especially around tariffs. Could you share a little more detail? What does that look like? Does this relate to the absolute size of their deployments, and uncertainty in the bomb, just any other considerations we should be aware of?

Question: Ryan Coons - Needham and Company - Analyst : Great, thanks. Thanks for keeping me in. I want to ask about the kind of emerging neo-AI opportunities out there. I think there's a general perception that most of them are buying, Nvidia to find clusters and networking. So I wonder if you could comment on those trends, their interests in moving past InfiniBand, and also other opportunities developing with some of these folks to kind of multi-source their AI connectivity to different providers?

Question: Ryan Coons - Needham and Company - Analyst : Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 06, 2025 / 8:30PM, ANET.N - Q1 2025 Arista Networks Inc Earnings Call