Arista Networks Inc Q3 2024 Earnings Call Transcript

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

Question: Samik Chatterjee - JPMorgan - Analyst : Hey, thanks for taking my question. A strong set of results, but if I can ask one on the guidance, if you don't mind. Jayshree, you're guiding here to the $750 million of TI target that you had issued previously and you're also guiding to meet your campus revenue target. So if I take those two into account, it does imply that the ex AI and ex campus business is only growing single digits next year. This is on the yields of coming through a double-digit year in 2024 where you comped backlog digestion in 2023. So just maybe have parse through that as to why there's a significant (inaudible) in the non-AI noncampus business implied in the numbers? And what maybe is driving that -- in your expectations, what's driving that outlook? Thank you.

Question: Samik Chatterjee - JPMorgan - Analyst : Thank you.

Question: Antoine Chkaiban - New Street Research - Analyst : Hi, thank you very much for taking my question of. Can you maybe provide an update on the four major AI trials that you gave in the past? How are things progressing versus your expectations as of 90 days ago. And when do you expect the move to production to happen? And what scale are we talking about?

Question: Antoine Chkaiban - New Street Research - Analyst : Thanks for the color.

Question: Tal Liani - BofA Global Research - Analyst : Hi, guys. NVIDIA in the last quarter the launch of the Spectrum X, it shows that in data center switching their market share went from like 4% to 15%. Does it mean that you're seeing increased competition from NVIDIA? And is it competing with you on the same spot? Or is it more competing with white boxes? And the second question is about white boxes. What is the outlook for white box participation in Gen AI? Is it going to be higher or lower than in front-end data centers?

Question: Tal Liani - BofA Global Research - Analyst : Let's go with NVIDIA. Give me the gift of --

Question: Simon Leopold - Raymond James - Analyst : I'll tag team with Tal. So we'll partner once again here. I do want to look at this competition or competitive landscape broadly in that what I'm trying to understand is how it may be changing with the advent of AI. So not just hearing from you about white box, but also competitors like Cisco and Juniper and Nokia. So really an update on the competitive landscape would be helpful.

Question: Simon Leopold - Raymond James - Analyst : Thank you.

Question: Ben Reitzes - Melius Research - Analyst : I wanted to ask a little bit more about the $750 million in AI for next year. Has your visibility on that improved over the last few months. I wanted to reconcile your comment around the fifth customer not going slower than expected. And it sounds like you're now in 5 on 5, but wondering if that fifth customer going slower is limiting upside or limiting your visibility there? Or has it actually improved and it's gotten more conservative over the last --

Question: Ben Reitzes - Melius Research - Analyst : Okay. Thanks.

Question: Karl Ackerman - BNP Paribas - Analyst : Thank you. Jayshree, could you discuss whether the programs are engaged with on hyperscalers? Will it be deploying your new EtonLink switches and AI spine products on 800-gig ports. In other words, have these pilots or trials been on 400 gig and production beyond 800 gig. And I guess if so, what's the right way to think about the hardware mix of sales of 800 gig in '25?

Question: Karl Ackerman - BNP Paribas - Analyst : Thank you.

Question: Ryan Koontz - Needham & Co Inc - Analyst : Great. Thanks for the question. I was hoping we could touch base on your campus opportunities a bit. Where are you seeing the most traction in terms of your applications? Is this primarily from your strength in core moving big bits around the campus core? Or are you seeing WiFi? Can you maybe just update us on the campus applications and verticals you're seeing the most traction in? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 9:30PM, ANET.N - Q3 2024 Arista Networks Inc Earnings Call

Question: Ryan Koontz - Needham & Co Inc - Analyst : Thanks so much.

Question: Amit Daryanani - Evercore ISI - Analyst : Good afternoon. Thanks for taking my question. I guess I'm hoping you could spend some time on the sizable acceleration we're seeing both on your total deferred number, but also the product deferred number is going up pretty dramatically. Jayshree, historically, when product default goes up in such a dramatic manner, you actually end up with really good revenue (inaudible) in the out years, and you're guiding for revenue that REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 9:30PM, ANET.N - Q3 2024 Arista Networks Inc Earnings Call you decelerate in '25. Maybe just help me connect like what's the delta, why product different what makes the acceleration that we historically has.

Question: Amit Daryanani - Evercore ISI - Analyst : Okay. Got it.

Question: Meta Marshall - Morgan Stanley - Analyst : Great. Thanks. Jayshree, I just wanted to get a sense of, clearly, you keep -- clearly have these four main trials and have added a fifth. But just how are you thinking about adding other either Tier 2 opportunities or sovereigns or just some of these other customers that are investing heavily in AI and how do you see those opportunities developing those for Arista?

Question: Meta Marshall - Morgan Stanley - Analyst : Thank you.

Question: Sebastien Naji - William Blair - Analyst : Yes, good evening. Thanks for taking the question. Just specifically on the Ethernet or Etalin portfolio, could you maybe rank order or comment on what you see as the opportunity across each of the three families a single-tier lease spine and then the tolling switch as we're going into 2025 and beyond.

Question: Sebastien Naji - William Blair - Analyst : Sure. Great. Thank you, both. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 9:30PM, ANET.N - Q3 2024 Arista Networks Inc Earnings Call

Question: Aaron Rakers - Wells Fargo - Analyst : Yes, thanks for taking the question. I wanted to segue off the competitive landscape and just ask you about when I look at your 2025 outlook as well as the midterm model that you provided, it looks like you're making some assumptions of some margin declines. I'm curious of what's underlying those expectations of gross margin declines? Is it mix of customers? Do you expect multiple 10% plus customers in 2025? Just any help on what's factored into that -- those margin expectations?

Question: Atif Malik - Citi - Analyst : Hi. Thank you for taking my question. Jayshree, some the recent conferences, you've talked about every dollar spent on back end is at least 2 times on the front end. What signs are you looking for to see the lift from AI on the front end or classic cloud from the pressure on the bandwidth.

Question: Atif Malik - Citi - Analyst : Thanks so much.