Arista Networks Inc Q2 2025 Earnings Call Transcript

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

Question: George Notter - Wolfe Research LLC - Analyst : Appreciate it. I guess, I wanted to -- the results are terrific, certainly, but I wanted to ask about the competitive environment. I know many investors in recent weeks and months have been looking at some of the growth at Celestica and certainly NVIDIA's networking business and kind of projecting some of that strength on as being negative for Arista. I guess I was just curious about your perspective on that. How you see the competitive environment? How you see your differentiation? Anything you can say there would be great. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 05, 2025 / 8:30PM, ANET.N - Q2 2025 Arista Networks Inc Earnings Call

Question: Meta Marshall - Morgan Stanley & Co Ltd - Analyst : I guess just on some of the strength that you're seeing in terms of cloud. I know it's getting increasingly hard to kind of differentiate front-end and back-end. But do you attribute some of the upside that you're seeing this year towards starting to see front-end upgrades maybe quicker than expected? Or is this just kind of back-end demand being stronger than expected?

Question: Ryan Koontz - Needham & Company LLC - Analyst : I want to ask maybe a question for Todd, Jayshree. Just about the fit for Velo with your traditional go-to-market motion, which has been heavily direct and you expect Velo to really beef up your channel efforts and working with these MSPs. Can you expand that a little bit?

Question: Antoine Chkaiban - New Street Research LLP - Analyst : Can you please remind us what's required for scale-up technologies and how that differs from scale-outs? Are traffic patterns more predictable, easier to manage? And how do you see the competitive dynamic evolving? Does this create more differentiation for Arista or more room for white box compared to scale-out?

Question: Michael Ng - Goldman Sachs Group Inc - Analyst : I just have one and one follow-up. I guess for Chantelle. I'm just wondering if you could just comment a little bit more on the deferred revenue or the billings growth. What was the primary driver there? And I was wondering if that was a contributor to the magnitude of the guidance increase that we saw. And then second, Jayshree, you mentioned the path towards $10 billion in 2026. Quite a ways out, but maybe you can just speak to some of the things that you're seeing. I know you talked a lot through it, but the confidence in that number and things that could break in the right way that could result in that number even being better.

Question: Simon Leopold - Raymond James - Analyst : I know you don't like to give us specifics on customer contributions. I guess what I'm really trying to see if you could help us is understanding how that might be shifting given that it does seem like there should be some broadening with the Neoclouds, the sovereigns and enterprise. But at the same time, some of your biggest customers are growing their spending significantly. So any clues or hints or quantification you can offer to help us better appreciate what your concentration and largest customer mix looks like and is trending towards?

Question: Tal Liani - Bofa Merrill Lynch Asset Holdings Inc - Analyst : I want to talk about the sustainability of growth. Tomahawk 6 was delayed. And the question is whether there is any correlation between the delays in Tomahawk 6 and your growth? Are customers buying more now than before, maybe they waited for it? And then also another -- like a follow-up on the sustainability of growth is also sustainability of margins. At 49% -- almost 49% operating margin, when do you start to upset your customers, your big customers because they have an alternative to buy white boxes and it's cheaper. Do you have that much of a differentiation that justifies paying a lot more for a product versus white boxes, assuming that on white boxes, the manufacturer doesn't make 49% margin?

Question: James Fish - Piper Jaffray Inc - Analyst : Great quarter. Jayshree, for you. We've talked a little bit in the past about blue box and white box. I guess what are you seeing on sort of the blue box side versus full system with some of your main customers? And Todd, you can't escape me here. The VeloCloud side of things. Obviously, that space has evolved where it's gone into the SASE mode. Jayshree, you even said like, hey, we're going to partner with our security partners for a full SASE. But do you need to think about that more directly just because it is becoming a world where customers are looking for a full SASE offering from one throat to choke as they say? I guess how are you thinking about a broader SASE offering as opposed to just having the SD-WAN part?

Question: Samik Chatterjee - JPMorgan Chase & Co - Analyst : Yeah, hi, thanks for taking my question. Jayshree, strong set of results here, and congratulations on the strong outlook as well. If I go back to your comments about the ability to meet the $750 million AI back-end number even as the fifth customer is absent now, is that largely stemming from bigger cluster size deployments from your existing Tier 1 customers? Or is something else moving around in terms of timing of those deployments relative to expectations? And just as a follow-up, I think the fourth customer you had earlier referenced was much slower in terms of activity. So can you just give us an update on that front?

Question: Aaron Rakers - Wells Fargo Securities LLC - Analyst : Yeah, thanks for taking the question. Also congrats on the quarter. This probably builds on a few of the earlier questions. But Jayshree, I'm curious as we think about the sovereign AI opportunity, whether or not that's factoring at all into kind of what you're seeing currently? I know you alluded to a fifth customer, which was a sovereign falling out. But I'm curious how you think about that opportunity set, what you're seeing as far as customer engagements. And if we should kind of think about that as becoming a more material incremental driver as we look through 2026 and beyond.

Question: Atif Malik - Citibank Cameroon SA - Analyst : Hi, thank you for taking my question. Jayshree, you talked about Scale-Up Ethernet to be incremental to your TAM. Curious if you have any sense how big this TAM is in three years.

Question: David Vogt - UBS AG - Analyst : Jayshree, I just wanted to maybe pick your brain a little bit. You mentioned scale-up. But can we talk about the competitive or maybe the technical opportunities with scale-out with Jericho 4 that was announced today or yesterday and how you're thinking about kind of what that means for your technology position with regards to sort of distributed AI going forward? I know scale-up is an incremental opportunity, but maybe just kind of share your thoughts on where you stand scale-out.