Q4 2023 Arista Networks Inc Earnings Call

Operator: Welcome to the fourth quarter 2023 Arista Networks Financial Results and Earnings Conference. During the call, all participants will be in a listen-only mode.

Welcome to the fourth quarter 'twenty to 'twenty three arts that 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 and instructions will be provided at that time.

Operator: After the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time. If at any time during the conference you need to reach an operator, please press the star followed by zero. As a reminder, this conference is being recorded and will be available for replay from the Investor Relations section of the Arista website following this. Ms. Liz Stein, Arista's Director of Investor Relations, you may begin. Thank you, operator. Good afternoon, everyone, and thank you for joining us.

If at any time during the conference you need to reach an operator. Please press the star followed by zero.

Could you remind you that this conference is being recorded and will be available for replay from the Investor Relations section at the Arista website. Following this call Ms. Liz Stein <unk> director of Investor Relations you may begin.

Liz Stein: Thank you operator, good afternoon, everyone and thank you for joining US with me on todays call are Jay for you Arista networks Chairperson and Chief Executive Officer.

Liz Stein: With me on today's call are Jayshree Ullal, Arista Networks Chairperson and Chief Executive Officer; Ita Brennan, Arista's outgoing chief financial officer, and Chantelle Brightup, Arista's incoming chief financial officer. This afternoon, Arista Networks issued a press release announcing the results for its fiscal fourth quarter ending December 31st, 2023. If you would like a copy of this release, you can access it online from our website.

Liz Stein: Either Brennan arrested outgoing Chief financial Officer, and Chantelle bright up Arista as incoming Chief financial Officer.

Liz Stein: This afternoon Arista networks issued a press release announcing the results for its fiscal fourth quarter ending December 31st 2023.

Liz Stein: You would like a copy of this release you can access it online from our website.

Liz Stein: During the course of this conference call, Arista Networks management will make forward-looking statements, including those relating to our financial outlook for the first quarter of the 2024 fiscal year. Longer-term Financial Outlooks for 2024 and beyond, our Total Addressable Market and Strategy for addressing these market opportunities, including AI, Customer Demand Trends, Supply Chain Constraints, Component Costs, Manufacturing Output, Inventory Management, and Inflationary Pressures on our Business, Lead Times, Product Innovation, Working Capital Optimization, and the Benefits of Acquisition, which are subject to the risks and uncertainties that we discuss in detail in our documents filed with Specifically, in our most recent Form 10-Q and Form 10-K, and which could cause actual results to differ materially from those anticipated by these statements. These forward-looking statements apply as of today, and you should not rely on them as representing our views in the future. We undertake no obligation to update these statements after this call.

Liz Stein: During the course of this conference call Arista networks management will make forward looking statements, including those relating to our financial outlook for the first quarter of the 'twenty 'twenty four fiscal year.

Liz Stein: Longer term financial outlooks for 2024 and beyond.

Liz Stein: Our total addressable market and strategy for addressing these market opportunities, including AI customer demand trends and supply chain constraints component cost manufacturing output inventory management and inflation play generic pressures on our business lead times product innovation working capital optimization and the bench.

Liz Stein: Fits of acquisitions, which are subject to the risks and uncertainties that we discuss in detail in our documents filed with the SEC.

Liz Stein: Specifically in our most recent Form 10-Q, and Form 10-K, and which could cause actual results to differ materially from those anticipated by these statements.

Liz Stein: These forward looking statements apply as of today and you should not rely on them as representing our views in the future. We undertake no obligation to update these statements. After this call.

Liz Stein: Also, please note that certain financial measures we use on this call are expressed on a non-GAAP basis and have been adjusted to exclude certain charges. We have provided reconciliations of these non-GAAP financial measures to GAAP financial measures in our earnings press release. With that, I will turn the call over to Jayshree. Thank you, Liz.

Liz Stein: Also please note that certain financial measures. We use on this call are expressed on a non-GAAP basis and have been adjusted to exclude certain charges. We have provided reconciliations of these non-GAAP financial measures to GAAP financial measures in our earnings press release with that I will turn the call over to Jay Shri.

Jayshree V. Ullal: Thank you, everyone, for joining us this afternoon for our fourth quarter 2023 earnings call. 2023 has been another memorable year for RISTA. We gave initial guidance of 25% year-over-year revenue growth and instead achieved well beyond that at 33.8%, driving revenue to $5.86 billion, coupled with a record non-GAAP earnings per share for the year of $6.94, up in excess of 50% annually. Back to some Q4 specifics, we delivered revenues of $1.54 billion for the quarter with a non-GAAP record earnings per share of $2.08 due to a one-time International contributions for the quarter registered at 22.3%, with the Americas at 77.7%.

Jayshree V. Ullal: Thank you everyone for joining us this afternoon for our fourth quarter 2023 earnings call.

Jayshree V. Ullal: 1923 has been another memorable year for Arista we.

Jayshree V. Ullal: We gave initial guidance of 25% year over year revenue growth and instead achieved well beyond that at 33, 8% driving revenue to 5.86 billion, coupled with a record non-GAAP earnings per share for the year of $6.94 up in excess of 50%.

Jayshree V. Ullal: Annually.

Jayshree V. Ullal: Back to some Q4 specifics we do net revenues of 1.54 billion for the quarter with a non-GAAP record earnings per share of $2 eight.

Due to a one time favorable tax rate.

This isn't software support renewals contributed approximately 17% of revenue.

Jayshree V. Ullal: Our non-GAAP gross margins of 65, 4% was influenced by improving supply chain and greater enterprise mix.

Jayshree V. Ullal: International contributions for the quarter registered a 22, 3% with the Americas at 77, 7%. This was one of our strongest performing international quarters in recent history.

Jayshree V. Ullal: This was one of our strongest performing international quarters in recent history. Shifting to annual sector revenue for 2023, Cloud Titans contributed significantly at approximately 43%. Enterprises, including financials, were strong at approximately 36%, while the providers were at 21%. Both Meta and Microsoft had greater than 10% customer concentration at 21% and 18%, respectively.

Shifting to annual sector revenue for 2023 cloud Titans contributed significantly at approximately 43%.

Jayshree V. Ullal: Enterprises, including financials was strong at approximately 36%, while the providers were at 21%.

Jayshree V. Ullal: Both meta and Microsoft are greater than 10% customer concentration at 21% and 18% respectively.

Jayshree V. Ullal: Despite multiple capex reductions last year and the normal volatility of CloudTitan and AI pivots, we cherish our privileged status with both M&M. Speaking of AI, in the fall of 2023, Andy and I attended the 50th Golden Anniversary of Ethernet at the Computer History Museum. It truly is a reminder of how familiar and widely deployed Ethernet is, with its speed increasing by orders of magnitude, from a shared collision rate of 2.95 megabits for file-printed shares to a terabit Ethernet switching in the AI and ML era. AI workloads are placing greater demands on Ethernet as they are both data and compute-intensive across thousands of processors today. Basically, AI at scale needs Ethernet at scale. AI workloads cannot tolerate delays in the network because a job can only be completed after all flows are successfully delivered to the GPU clusters. All it takes is one culprit or worst-case link to throttle an entire AI workload. Three improvements are being pioneered by Arista and the founding members of the Ultra Ethernet Consortium to improve job completion time. Number one, packet spraying. AI network topology needs packet spraying to allow every flow to simultaneously access all parts of the destination.

Jayshree V. Ullal: Despite multiple capex reduction last year, and the normal volatility of cloud Titan and AI pivots, we cherish our privileged status with both N I know.

Jayshree V. Ullal: Speaking of AI in fall of 2023, Andy and I attended the 50 of Golden anniversary of Ethernet at the computer History Museum. It truly is a reminder of how familiar and widely deployed Ethernet is with a speed increasing by orders of magnitude for Michelle collision 295, Megabits will file printed <expletive> to attack.

Jayshree V. Ullal: The net switching in the AI and ml E mail.

Jayshree V. Ullal: I workloads are placing greater demands on Ethernet and see a bulk data and compute intensive across thousands of processes today.

Jayshree V. Ullal: Basically AI at scale needs Ethernet at scale AI workloads cannot tolerate the delays in the network because the job can only be completed after all smells a successfully delivered to the GPU cluster at all it takes is one culprit of worst case to make to throttle and entire AI workload.

Jayshree V. Ullal: Improvements are being pioneered by Arista and the founding members of the Ultra Ethernet consortium to improved job completion time.

Jayshree V. Ullal: Number one packaged screen AI network topology needs packaged spring to allow every flow to simultaneously access all parts of this destination.

Jayshree V. Ullal: Arista is developing multiple forms of load balancing dynamically with our customers. 2. Flexible ordering.

Jayshree V. Ullal: Mr developing multiple forms of load balancing dynamically with our customers.

Jayshree V. Ullal: It is flexible ordering pizza and AI job completions is the rapid and reliable bulk transfer with flexible ordering using Ethernet links to optimally balance AI intensive operations. Unlike the rigid ordering of Infiniband.

Jayshree V. Ullal: Key to AI job completion is the rapid and reliable bulk transfer with flexible ordering using Ethernet links to optimally balance AI-intensive operations, unlike the rigid ordering of InfiniBank. Arista is working closely with its leading NIC vendors to achieve this. Finally, network congestion. In AI networks, there's a common in-cast congestion problem whereby multiple uncoordinated senders can send traffic to the receiver simultaneously.

Jayshree V. Ullal: Mr is working closely with its leading vendors to achieve.

Jayshree V. Ullal: This.

Jayshree V. Ullal: Finally network congestion and AI Netflix, there's a common in costs congestion problem, whereby multiple uncoordinated centers can send traffic to the receiver simultaneously.

Jayshree V. Ullal: Arista's platforms are purpose-built and designed to avoid these kinds of hotspots, evenly spreading the load across multipaths across a virtual output queuing VOQ lossless fabric. In terms of annual 2023 product lines, our core, which consists of cloud AI and data center products, is built upon a highly differentiated Arista extensible operating software system stack. It is successfully deployed across 10, 25, 100, 200, and 400 gigabits. Our cloud networking products deliver power-efficient, high-availability zones without doubling the cost of redundancy as data centers demand insatiable bandwidth capacity and network speeds for both the front-end and back-end storage and compute clusters. The Corps drove approximately 65% of our revenue.

Jayshree V. Ullal: Arista platform is a purpose built and designed to avoid these kind of hotspots evenly spreading the load across multi packs across our virtual output chewing V O Q losses fabric.

Jayshree V. Ullal: In terms of annual 2023 product lines, our core which consists of cloud AI and data center products.

Jayshree V. Ullal: Built upon our highly differentiated Arista extensible operating.

Jayshree V. Ullal: Quest system stack.

Jayshree V. Ullal: It has successfully deployed across 10, 2500, 204 hundred gig speeds, our cloud networking products deliver power efficient high availability zones without doubling the cost of redundancy as datacenters demands insatiable bandwidth capacity and network speeds for both the front end and backend storage and compute clusters.

Jayshree V. Ullal: The car drove approximately 65% of our revenue.

Jayshree V. Ullal: We continue to gain share in our highest performance switching of 100, 200, and 400 gigabit ports to attain the number one position at approximately 40 plus percent, according to industry analysts. We have increased our 400 gigabit customer base from 600 customers in 2022 to approximately 800 customers in 2023. We expect both 400 and 800 gigabit Ethernet will emerge as important pilots for AI backend GPU clusters.

Jayshree V. Ullal: We continue to gain share in our highest performance switching of hundred 204 hundred gig ports to attain the number one position at approximately 40 plus percent according to industry analysts.

Jayshree V. Ullal: We have increased our 400 gig customer base from six 600 customers in 2022 to approximately 800 customers in 2023 weeks.

Jayshree V. Ullal: We expect both 408 hundred gigabit Ethernet will emerge as an important pilots for AI backend GPU clusters.

Jayshree V. Ullal: We are cautiously optimistic about achieving our AI revenue goal of at least $750 million in AI networking in 2025. Our second market is network adjacencies comprised of routing, replacing routers, and our cognitive campus workspaces. We continue to make progress on campus, aiming for the $750 million revenue by 2025 that we have shared at many Analyst Days. Our investments in cognitive wired and wireless, zero-touch provisioning, and the introduction of Agni, Arista guardian for network identities, as well as Ava sensors for threat mitigation, are resonating well with our campus customers. The post-pandemic campus is seeking network-as-a-service overlays and zero-trust networks embedded in with high availability, observability, and consistency across our OS and management domain.

Cautiously optimistic about achieving our AI revenue goal of at least $750 million in AI networking and 2025.

Jayshree V. Ullal: Our second market does Netflix adjacencies comprised of routing, replacing routers and all cognitive campus Workspaces, we continue to make progress in campus aiming for the 750 million revenue by 2025 that we have shared at many analyst days.

Jayshree V. Ullal: Investments in cognitive wired and wireless zero touch provisioning and the introduction of Agni Arista Guardian for network identities as well as Ive a sensitive subject mitigation is resonating well with I can't discuss tumors.

Jayshree V. Ullal: The post pandemic campus is seeking network as a service overlays and zero Trust network embedded in with high availability observer ability and consistency across our OS and management domains.

Jayshree V. Ullal: We are also successfully deployed in many routing edge and peering use cases. Just in 2023 alone, we introduced six EOS software releases across 600 new features and 50 platforms. In the fall of 2023, we introduced our WAN routing system with a focus on scale, encryption, and WAN transit routing capabilities. It has positioned us well, giving our customers a seamless enterprise LAN and WAN portfolio. The campus and routing adjacencies together contribute approximately 19% of revenue.

Jayshree V. Ullal: Also successfully deployed in many routing edge and peering use cases, just in 2023 alone. We introduced six AOS software releases across 600, new features and 50 platforms.

Jayshree V. Ullal: In fall of 2023, we introduced a win writing system with a focus on scale and Christian and when transit routing capabilities.

Jayshree V. Ullal: Positioned as well, giving our customers a seamless enterprise Lan and Wan portfolio.

Jayshree V. Ullal: The campus in routing Adjacencies together contributed approximately 19% of revenue.

Jayshree V. Ullal: Our third category is network software and services based on subscription models, such as Arista Acare, Cloud Vision, Dan's Monitoring Fabric or DMF observability, and advanced threat sensors for network detection and response. Arista's subscription-based network services and software contributed approximately 16% of total revenue. We surpassed 2,400 cumulative customers with Cloud Vision, pivotal to building a modern operating model for the enterprise. Please note that perpetual software licenses are not included here and are counted inside the core or adjacent markets. While 2023's headline has been mostly about AI, we are pleased with the momentum of enterprise and provider customers as well. Arista continues to diversify its business globally with multiple use cases and verticals. We have more than doubled our enterprise revenue in the last three years, and we are becoming the gold standard for client-to-cloud-to-AI networking with one EOS and one Cloud Vision Foundation.

Third categories, Netflix software and services based on subscription models, such as Arista eight care cloud vision, DANZ monitoring fabric or D. M. S observer ability and advanced threat census fund, that's a detection and response.

Jayshree V. Ullal: Arista is subscription based Netflix service is a software contributed approximately 16% of the total revenue.

We surpassed 2400 cumulative customers with cloud vision pivotal to building a modern operating model for the enterprise. Please note that perpetual software licenses are not included here are not counted inside the poor or adjacent markets.

Jayshree V. Ullal: One 'twenty 'twenty seems headline has been mostly about AI. We are pleased with the momentum of enterprise and provide our customers as well.

Jayshree V. Ullal: Arista continues to diversify its business globally with multiple use cases and verticals, we have more than doubled our enterprise revenue in the last three years and we are becoming the gold standard for client to cloud to AI networking with one U S and one cloud vision Foundation.

Jayshree V. Ullal: Our million dollar customer logos increased steadily in 2023 at approximately 35% as a direct result of our campus and enterprise momentum. Three principles continue to differentiate us as we are poised to be a market share gainer in the enterprise. One, best-in-class, highly available, proactive products with resilience and hit list upgrades at multiple levels, to Zero Touch Automation for predictive client-to-cloud one-click operations that relies less on human staff or manual operations and is instead software-driven. And finally, prescriptive insights based on AIML Autonomous Virtual Assist, AVA, algorithms for increased security, observability, and root cause analysis.

Jayshree V. Ullal: Customer logo has increased steadily in 2020 three at approximately 35% as a direct result of our campus and enterprise momentum.

Three principles continue to differentiate us as we are poised to be a market share gainer in the enterprise one best in class highly available proactive products with resilience and hitless upgrades at multiple levels to zero touch automation for predictive climbed to cloud one click operations that relies less on humans stuff or manual operations.

Jayshree V. Ullal: And as instead software driven.

Jayshree V. Ullal: And finally prescriptive insights based on AI ml autonomous virtual assist Eva algorithms for increased security observer ability and root cause analysis.

Jayshree V. Ullal: Our foundational network data lake architecture and the ability to gather, store, and process multiple modalities of network data is the only way to reconcile all the incongruous silos for network operators. While legacy vendors that are 30 to 40 years old are aiming for consolidation, Arista remains the only pure play networking innovator, earning top spots in Forrester Wave's programmable switching and customer validation in Gartner's Voice of Customer for Campus in 20 In December 2023, we conducted one of our largest customer events called Innovate in Vegas. Well, well, not my favorite location.

Our foundational network data Lake architecture, and the ability to gather store and process multiple modalities of netbook data is the only way to reconcile all the incongruent silos for network operators.

The legacy vendors that are 30 to 40 years old are aiming for consolidation Arista remains the only pure play networking innovator, earning top spots in Forrester waves programmable switching and customer validation and gardeners voice of customer for campus in 2023.

Jayshree V. Ullal: In December 2023, we conducted one of our largest customer event called innovate in Vegas, well well not my most favorite location, our customers and prospects found it very exciting and compelling for their network transformation initiatives. They resonate deeply without Arista to Dod all vision building best of breed.

Jayshree V. Ullal: Our customers and prospects found it very exciting and compelling for their network transformation initiatives. They resonate deeply with our Arista 2.0 vision of building best-of-breed, data-driven networking platforms. In summary, as we wrap up another fantastic year in 2023, I am so proud of the team's execution across multiple dimensions. They have all worked tirelessly to improve our operational metrics, such as lead time, growth margin, and on-time shipping. Simply put, we outpace the industry in quality, support, and innovation. We set the direction for the future of networking, working intimately with our strategic customers. Despite limited visibility at this time, we reiterate our double-digit growth of 10-12% from Analyst Day, aiming for approximately $6.5 billion in 2024. With that, I'd like to turn it one last time to review our financial metrics with Ita Brennan. Ita?

Jayshree V. Ullal: <unk> data driven networking platforms.

Jayshree V. Ullal: In summary, as we wrap up another fantastic year in 2023.

Jayshree V. Ullal: I'm, so proud of the team's execution across multiple dimensions.

Jayshree V. Ullal: Have all worked tirelessly to improve our operational metrics such as lead times gross margin and on time shipments simply put we outpaced the industry in quality support and innovation.

Jayshree V. Ullal: Set the direction for the future of networking working intimately with our strategic customers.

Jayshree V. Ullal: Despite limited visibility at this time, we'd be at.

Jayshree V. Ullal: The rate of double digit growth of 10% to 12% from analyst day, aiming for approximately $6 5 billion in 2024.

Speaker Change: With that I'd like to turn it one last time to review our financial metrics with either Brennan, Peter Thanks, Treasury and good afternoon. This analysis of our Q4 and full year 2023 results and our guidance for Q1, 'twenty 'twenty, four and non-GAAP excuse all noncash stock based compensation impacts certain acquisition related.

Ita M. Brennan: Thanks, Jayshree, and good afternoon. This analysis of our Q4 and full year 2023 results and our guidance for Q1 2024 is based on non-GAAP and excludes all non-cash, stock-based compensation impacts, certain acquisition-related charges, and other non-recurring items. The full reconciliation of our selected GAP to non-GAP results is provided in our earnings. Total revenues in Q4 were $1.54 billion, up 20.8% year-over-year and towards the upper end of our guidance of $1.5 to $1.55 billion. Services and subscription software contributed approximately 17% of revenue in the fourth quarter, up from 16.8% in Q3. International revenues for the quarter came in at $343.5 million, or 22.3% of total revenue, up from 21.5% last quarter.

Speaker Change: These charges and other nonrecurring items.

Speaker Change: A reconciliation of our selected GAAP to non-GAAP results is provided in our earnings release.

Speaker Change: Total revenues in Q4, or 154 billion up 28% year over year and towards the upper end of our guidance of one five to 1.55 billion sorry.

Speaker Change: Services and subscription software contributed approximately 17% of revenue in the fourth quarter up from 16, 8% in Q3.

Speaker Change: International revenues for the quarter came in at $343 5 million or 22, 3% of total revenue up from 21, 5% last quarter.

Ita M. Brennan: This quarter-over-quarter increase largely reflected a healthy contribution from our in-region EMEA customers. Overall Gross Margin in Q4 was 65.4%, well above our guidance of approximately 63% and up from 63.1% last quarter. As a recap for the year, we continue to see incremental improvements in gross margin quarter over quarter with higher enterprise shipments and better supply chain costs, somewhat offset by the need for additional inventory reserves as customers refined their forecast products. Operating expenses for the quarter were $262.7 million, or 17.1% of revenue, up from last quarter at $255.6 million. R&D spending came in at $165 million, or 10.7% of revenue, consistent with last quarter, but reflecting lower levels of This reflects the timing of prototype and other costs associated with the development of next-generation products. Sales and marketing expenses were $83.4 million, or 5.4% of revenue, up from $79 million last quarter, with increased sales compensation and travel costs.

Speaker Change: Quarter over quarter increase largely reflected a healthy contribution from our in region EMEA customers.

Speaker Change: Overall gross margin in Q4 was 65, 4% well above our guidance of approximately 63% and up from 63, 1% last quarter.

Speaker Change: As a recap for the year, we continued to see incremental improvements in gross margin quarter over quarter with higher enterprise shipments and better supply chain costs somewhat offset by the need for additional inventory reserves of customers to refine their forecast product mix.

Speaker Change: Operating expenses for the quarter were $262 7 million or 17, 1% of revenue up from last quarter at $255 six months.

Speaker Change: R&D spending came in at 165 million or 10, 7% of revenue consistent with last quarter, reflecting lower levels of new product introduction costs versus what we experienced in the first half of 2023 and what we expect for the first half of 2024.

Speaker Change: This affects the timing of prototyping and other costs associated with the development of next generation products.

Speaker Change: Sales and marketing expense were $83 4 million or five 4% of revenue up from 79 million last quarter with increases increased sales compensation and travel costs.

Ita M. Brennan: Our G&E costs came in at $14.3 million, or 0.9% of revenue, up from $12.1 million last quarter, reflecting some seasonal fourth quarter spending. Our operating income for the quarter was $744 million, or 48.3% of revenue. Other income and expense for the quarter was a favorable $54.5 million, and our effective tax rate was 16.8%. This lower-than-normal quarterly tax rate reflected the release of tax reserves due to the expiration of the statute of limitations and some true-up of jurisdictional earnings. This results in a net income for the quarter of $664.3 million, or 43.1% of revenue. Our diluted share number was 318.85 million shares, resulting in a diluted earnings per share number for the quarter of $2.08, up 47.5% from the prior year.

Speaker Change: Our G&A costs came in at $14 3 million or 9% of revenue up from $12 1 million last quarter, reflecting some seasonal fourth quarter spending.

Speaker Change: Our operating income for the quarter was 744 million or 48, 3% of revenue.

Speaker Change: Other income and expense for the quarter was a favorable $54 $5 million and our effective tax rate of 16, 8%.

Speaker Change: Slower than normal quarterly tax range of effect with the release of tax reserves due to the exploration of statutes of limitations and some true up of jurisdictional earnings mix.

Speaker Change: This resulted in net income for the quarter of $664 3 million or 43, 1% of revenue.

Speaker Change: Our diluted share number was 388 5 million shares resulting in a diluted earnings per share number for the border of $2 and he says up 47, 5% from the prior year.

Ita M. Brennan: Now turn to the balance sheet. Cash, cash equivalents, and investments entered the quarter at approximately $5 billion. We did not repurchase shares of our common stock in the quarter.

Speaker Change: Now turning to the balance sheet cash cash equivalents and investments ended the quarter at approximately $5 billion.

Speaker Change: We did not repurchase shares of our common stock in the quarter three.

Ita M. Brennan: To recap our repurchase program to date, we have repurchased 855.5 million, or 8 million shares, at an average price of $107 per share under our current $1 billion board authorization. This leaves $144.5 million available for repurchase in future quarters. The actual timing and amount of future repurchases will be dependent on market and business conditions, stock price, and other factors. Now, turning to operating cash performance for the fourth quarter. We generated approximately $526.5 million of cash from operations in the period, affecting strong earnings performance combined with some increase in deferred revenue, offset by reductions in taxes payable.

Speaker Change: To recap our repurchase program to date, we have repurchased $855 5 million or 8 million shares.

Speaker Change: As an average price of $107 per share under our current $1 billion Board authorization.

Speaker Change: $144 $5 million available for repurchase in future quarters, the actual timing and amount of future repurchases will be dependent on market and business conditions stock price and other factors.

Speaker Change: Now turning to operating cash performance for the fourth quarter, we generated approximately $526 5 million of cash from operations in the period affecting strong earnings performance combined with some increase in deferred revenue offset by reductions in taxes payable.

Ita M. Brennan: PSOs came in at 61 days, up from 51 days in Q3, affecting the timing of shipments and seasonal strength and service renewability. Inventory turns were 1.07 times, down slightly to 1.1 last quarter. Inventory increased slightly to $1.95 billion, affecting the ongoing receipt and consumption of components from our purchase commitments and an increase in switch-related finished goods. Our purchase commitments at the end of the quarter were $1.59 billion, down from $2 billion at the end of Q3. We expect to continue to reduce our overall purchase commitment number.

Speaker Change: Yeah. So it was kind of a 61 days up from 51 days in Q3, reflecting the timing of shipments and seasonal strength in service renewal billings.

Speaker Change: Inventory turns were one 0.07 times down slightly to $1 one last quarter.

Inventory increased slightly to $1 95 billion, reflecting the ongoing receipt and consumption of components from our purchase commitments and an increase in Switzerland agent finished goods.

Speaker Change: Our purchase commitments at the end of the quarter or 159 billion down from $2 billion at the end of Q3.

Speaker Change: We expect to continue to reduce our overall purchase commitment number. However, we will maintain a healthy position when I used to key components, especially as we focus on new products.

Ita M. Brennan: However, we will maintain a healthy position related to key components, especially as we focus on new products. Our total deferred revenue balance was $1.51 billion, up from $1.195 billion in Q3. The majority of the Deferred Revenue Balance is services-related and directly linked to the timing and term of service contracts, which can vary on a quarter-by-quarter basis. Our product-deferred revenue balance increased approximately $153 million over the last quarter.

Speaker Change: Our total deferred revenue balance was 151 billion up from $1 195 billion in Q3.

Speaker Change: The majority of the deferred revenue balance and services related and directly linked to the timing in term of service contracts, which can vary on a quarter by quarter basis.

Speaker Change: Our product deferred revenue balance increased approximately $153 million over last quarter as well.

Ita M. Brennan: This was ahead of our expectations for the quarter and yet again shows that this balance can move significantly on a quarterly basis. As of now, we expect this balance to decline somewhat in Q1'24, but still be up significantly from the Q3'23 level. Accounts receivable days were 72 days, up from 44 days in Q3, affecting the timing of inventory receipts and payments. Capital expenditures for the quarter were $6 million.

Speaker Change: Ahead of our expectations for the quarter and yet again shows that this bounds can move significantly on a quarterly basis.

Speaker Change: As of now we expect the sponsor declined somewhat in Q1, 'twenty four but still be up significantly from Q3 to 23 levels.

Speaker Change: Accounts payable days were 72 days up from 44 days in Q3, reflecting the timing of inventory receipts and payments capital expenditures for the quarter for $6 million.

Jayshree V. Ullal: I would now like to turn the call back to Jayshree. Thank you, Ita. First of all, for an incredible eight and a half years as our Chief Financial Officer. We're going to miss you a lot and wish you all the best in your next innings. And if you ever miss an earnings call, please come. We'll invite you to one.

Speaker Change: I would now turn the call back to January fishery.

January Fishery: Thank you Lisa first of all for an incredibly late in the half years as our Chief Financial Officer, we're going to Miss you a lot and wish you all the best in your next earnings and if you have a miss in earnings call. She's come we'll invite you for one now to describe our Q1 2020 full guidance, it's my pleasure to introduce our.

Chantelle Breidup: Now, to describe our Q1 2024 guidance, it's my pleasure to introduce our incoming Chief Financial Officer, Chantelle Breidup, for her very first earnings call at Arista. Welcome, Chantelle. Thank you, Jayshree. Ita, congratulations on all that you have achieved during your tenure with Arista. Your partnership during our transition is greatly appreciated. Since joining Arista, I have been impressed by both the outstanding leadership team and the highly innovative engineering team, who both serve a set of marquee customers that are redefining the future of networking. Arista began shipping products in 2008, and in 15 years, the annual bandwidth of the data centers has grown 350-fold. In just the past two years, the annual bandwidth has doubled, with Arista shipping a cumulative 75 million ports in that time frame.

January Fishery: Incoming chief Financial Officer, Shantou dried up for her very first earnings call at Arista Welcome Shunto. Thank you Jay Sri eight congratulation, but I'll, let you have changed during your tenure with Arista partnership during our transition is greatly appreciate it.

Shantou: Since joining Arista I have been impressed by both the outstanding leadership team and the highly innovative engineering team and both serve a set of marquee customers that are redefining the future of networking.

Shantou: Arista began shipping products in 2008, and 15 years the annual bandwidth of the data centers is around 350 bolt.

Shantou: And just has just the past two years the annual bandwidth has doubled with the rest of shipping a cumulative 75 million ports in that time frame or acceleration in the data center switching market in recent quarters as evidenced by our market share gains in the 20 plus percent range of both ports and dollars I am thrilled to be joining Arista is such an exciting time.

Chantelle Breidup: Our acceleration in the data center switching market in recent quarters is evidenced by our market share gains in the 20 plus percent range of both ports and dollars. I am thrilled to be joining Arista at such an exciting time. Now, turning to our outlook for the first quarter of 2024 and the remainder of the fiscal year, we remain confident with our analyst debut, which called for fiscal year 2024 revenue growth of 10% to 12%. This reflects our outlook for moderated cloud spending after multiple years of accelerated growth combined with a continued growth trajectory in the enterprise business. For gross margin, we reiterate the range for the fiscal year of 62 to 64 percent, with T1-24 expected to be at the lower end due to a heavier cloud mix, including some expected release of deferred revenue.

Shantou: Now turning to our outlook for the first quarter of 2024, and the remainder of the fiscal year, we remain confident with our analyst day deal, which call for fiscal year 2020 for revenue growth of 10% to 12%. This reflects our outlook for broader branded cloud spending after multiple years of like celebrated growth combined with our continued growth.

Shantou: In the enterprise business for.

Shantou: For gross margin, we reiterate the range for the fiscal year of 62% to 64%.

Shantou: With Q1, 'twenty four expected to be at the lower end due to a heavier cloud mix, including some expected release of deferred revenue.

Chantelle Breidup: In terms of spending, we expect to invest in gross spending faster than revenue, in line with our analyst debut with an operating margin of approximately 42% in 2024. This incremental investment may include go-to-market resourcing and increased new product introduction costs to support our product roadmap. This latter trend is already evident in Q1 2024 as R&D is expected to rebound from the unusually low levels in the second half of 2023. On the cash front, we will continue to work to reduce our working capital investments and drive some further reduction in inventory as we move through the year. Our structural tax rate is expected to remain at 21.5%, back to the usual historical rate, up from the unusually low one-time rate of 16.8% experienced last quarter Q4 FY21.

In terms of spending we expect to invest in growth spending faster than revenue.

Shantou: In line with our analyst debut with an operating margin of approximately 42% in 2024.

Shantou: This incremental investment May include go to market Resourcing and increased new product introduction cost to support our product roadmap.

This ladder trend is already evident in Q1 'twenty four as R&D is expected to rebound from the unusually low levels in the second half of 2023.

Shantou: On the cash front, we will continue to work to reduce our working capital investments and drive some further reduction in inventory as we move through the year.

Shantou: Our structural tax rate is expected to remain at 21, 5% back to the usual historical rate up from the unusually low one time rate of 16, 8% experienced last quarter Q4, FY2023.

Chantelle Breidup: With all of this as a backdrop, our guidance for the first quarter, which is based on our non-GAAP results and excludes, this concludes any non-cash stock-based compensation impacts and other non-recurring items as follows: revenues of approximately $1.52 to $1.56 billion. Gross margin of approximately 62%, and operating margin at approximately 42%. Our effective tax rate is expected to be approximately 21.5% with approximately 319.5 million diluted shares

Shantou: But all of this as a backdrop our guidance for the first quarter, which is based on our non-GAAP results and excludes excludes any noncash stock based compensation impacts and other nonrecurring items and thus follows.

Shantou: Revenues of approximately 152 to 156 billion gross margin of approximately 62% and operating margin at approximately 42%.

Shantou: Our effective tax rate is expected to be approximately 21, 5% with approximately $319 5 million diluted shares.

CFO: In summary, I am excited to lead our Vista 2.0 journey as CFO, we will migrate our best of breed products to best of breed data driven platforms, enabling our impressive talent $60 billion with that I'll now turn the call back to Linda for Q&A.

Chantelle Breidup: In summary, I am excited to lead Arista's 2.0 journey as CFO. We will migrate our best of breed products to best of breed data-driven platforms, enabling our impressive TAM of $60 billion. With that, I now turn the call back to Liz for Q&A.

Linda: Thank you Chantelle.

Linda: We will now move to the Q&A portion of the Arista earnings call to allow for greater participation I'd like to request that everyone. Please limit themselves to a single question. Thank you for your understanding operator take it away.

Liz Stein: Thank you, Chantal. We will now move to the Q&A portion of the Arista earnings call. To allow for greater participation, I'd like to request that everyone please limit themselves to a single question.

Linda: Thank you we will now begin the question and answer portion of the Arista earnings call in order to ask a question. During this time simply press Star then the number one on your telephone keypad. If you like to withdraw your question press the star and the number one again, we asked that you pick up your handset before asking.

Operator: Thank you for your understanding. Operator, take it away. Thank you. We will now begin the question-and-answer portion of the ERITSA earnings call. In order to ask a question during this time, simply press the star, then the number 1 on your telephone.

Linda: Questions in order to ensure op.

Linda: Quality. Your first question comes from the line of Aaron Rakers from Wells Fargo. Please go ahead. Your line is open.

Operator: If you would like to withdraw your question, press the star and the number 1 again. We ask that you pick up your handset before asking questions in order to ensure optimal quality. Your first question comes from the line of Aaron Rakers from Wells Fargo. Please go ahead. Your line is open. Yeah, thanks for taking the question. And Ita, it's been great working with you. I wish you the best in retirement. Um, I guess my question is, you know, Jayshree, just obviously the focus on AI and the build out of the backend networks based on 400 and 800 gigabit ethernet. I'm just curious, like, you know, as you as we are. Thank you.

Aaron Rakers: Yes, thanks for taking the question and it's been great working with you wish you the best in retirement.

Aaron Rakers: I guess my question is just obviously the focus on AI and the build out for backend networks based on a 408 hundred gig Ethernet I'm just curious like as you as we go.

Aaron Rakers: <unk> through these last three months how has your views evolved.

Right.

Can you just remind us of the cadence of kind of product cycles that really set the table.

Aaron Rakers: For risks and this AI opportunity as we move through 'twenty, four and particularly into 'twenty five thank you.

Jayshree V. Ullal: Thank you, Aaron. And yes, we will all miss Ida. So our AI performance continues to track well for the 750 million revenue goal that we set last November at Analysts Day. To give you some color on the last three months, I would say it's difficult to project anything in three months. But if I look at the last year, which may be, you know, the last 12 months, it's a better indication.

Speaker Change: Thank you Erin and yes, we've aloneness EDA. So our AI performance continues to track well for the $750 million revenue goals that we set last November at analyst day to.

Erin: To give you some color on the last three months I would say difficult to predict anything in three months, but if I look at the last year, which may be a last 12 months is a better indication. We have participated in a large number of E I bids.

Jayshree V. Ullal: We have participated in a large number of AI bids. And when I say large, I should say they're large AI bids, but they're a small number of customers, actually, to be more clear. And in the last four out of five AI networking clusters, we have participated in Ethernet versus InfiniBand. Arista has won all four of them for Ethernet. One of them still stays on InfiniBand.

Erin: And when I say large I should say their large AI bits, but there are a small number of customers actually to be more clear and in the last four out of five AI networking clusters. We have participated on Ethernet versus Infiniband Arista has won.

Erin: All four of them for Ethernet one of them still stays on instead of band. So he's a very high profile customers. We are pleased with this progress, but as I said before last year was the year of trials. This is the era of pilots and true production truly sets and only in 2025.

Jayshree V. Ullal: So these are very high-profile customers. We are pleased with this progress. But, as I said before, last year was the year of trials.

Jayshree V. Ullal: This is the year of pilots, and true production truly sets in only in 2025. Thanks. You are next. Your next question comes from the line of Tal Liani from Bank of America. Please go ahead. Hi, I'm trying to find.

Speaker Change: Great you on that.

Speaker Change: Your next question comes from the line of Liana <unk> from Bank of America. Please go ahead.

Liana: Hi, I'm trying to find them because.

Jayshree V. Ullal: We don't have the backlog yet. Blast. I'm trying, The Bulletproof Executive 2013,... Service cell cycle is low, that background. How does it work between server demands? Yeah, so Tal, first of all, as you know, Ida and I or Chantel and I would never really comment on bookings, orders. We find these all to be kind of useless metrics because, ultimately, what matters is what we ship, which is revenue. But just to sort of answer your question on the ratio of CPUs, or for that matter, GPUs in the future to the network, typically, we have to have the CPUs or GPUs come in before we can outfit the network. They kind of go hand in hand.

Liana: Because we don't have the backlog contribution of last year.

Liana: I'm trying to kind of dissect the numbers and see what's the correlation with.

Liana: Core data center business.

Liana: Traditional compute so each server sales service sales cycle is low.

Liana: We see some declines in servers it doesn't mean that at least in the short run excluding.

Liana: Tobacco contribution.

Liana: There is also a decline could be orders.

Speaker Change: How does that work between server demand and switching demand. Thanks.

Yeah. So first of all as you know what you're doing and I are shut down and I would never call. It really comment on bookings orders. We find these all to be kind of use those metrics because ultimately what matters is what we ship, which is revenue, but just sort of answer your question on ratio of Cpus or for that matter Gpus in the future to the network.

Speaker Change: Typically we have to have the cpus or for or Gpus come in before we can outfit the network. They kind of go hand in hand, but as you know and they all have you been waiting for the Gpus and in the last couple of years, they've been waiting for everything with a long lead times, but I would say generally in the leaf architecture. They go.

Jayshree V. Ullal: But as you know, in AI, we've been waiting for GPUs. And in the last couple of years, they've been waiting for everything with a long lead time. But I would say generally, in the leaf architecture, they go hand in hand, where you have to create a rack of, you know, 1000 servers, or whether they're CPUs and GPUs. And generally, they look to rack and stack the cable, the CPUs, and the network together on the spine, which is our, which connects all of our blades, that decision can be made independently, even if the processors are not available. So on the leaf, it's more correlated; on the spine, it's not.

Speaker Change: Hand in hand wave to create Iraq of you know 1000, and servers or whether their Cpus and Gpus and generally they look to rack and stack the cable the Cpus in the netbook together on the spine, which is R which connects all of our leaves that decision can be made independently even if the process does that not available so.

Speaker Change: On the leaf it's more correlated on the spine it's not.

Great. Thank you.

Jayshree V. Ullal: Thank you. Your next question comes from the line of Sebastian Nagy from William Blair. Please go ahead.

Thank you.

Speaker Change: Your next question comes from the line of Sebastian <unk> from William Blair. Please go ahead. Your line is open.

Jayshree V. Ullal: Your line is open. Great, thank you. I just wanted to start and echo everyone's comments and wish you the best, Ita. It's been a pleasure. My question has to do with Whitebox.

Sebastian: Great. Thank you I just wanted to start on Echo everyone's commentary and wish you the best either it's been a pleasure.

Sebastian: My question has to do with White box people have been talking about the threat for white box since <unk> has been around and it hasn't really impacted Arista <unk> ability to grow can you maybe articulate why you believe in the world of AI networks more of the market would not move to white box or vice versa, maybe why more of the market would move away from white box.

Jayshree V. Ullal: People have been talking about the threat of Whitebox, you know, since Arista has been around, and it hasn't really impacted Arista's ability to grow. Can you maybe articulate why you believe in the world of AI networks that more of the market would not move to Whitebox, or vice versa, maybe, why more of the market would move away from Whitebox? It's a good question, Sebastian.

Speaker Change: It's a good question Sebastian Thank you.

Jayshree V. Ullal: Thank you. Look, I think Whitebox is here to stay for a very long time if somebody just wants a throwaway commodity product. But how many people want throwaway commodities in the data center? They're so mission critical, and they're even more mission critical for AI.

Sebastian: Look I think white box is here to stay for a very long time, if somebody just wants to throw away a commodity product, but how many people want throw away commodity in the datacenter.

Sebastian: There is so mission critical and they're even more mission critical for you or if I'm going to spend you know multimillion dollars on a GPU cluster then the last thing I'm going to do is put a toy networking right. So to put the sort of in perspective, then we will continue to coexist with white box that will be use cases, where arista is blue box or.

Jayshree V. Ullal: If I'm going to spend, you know, multi-million dollars on a GPU cluster, then the last thing I'm going to do is put a toy network in, right? So to put this sort of in perspective, then we will continue to coexist with Whitebox. There will be use cases where Arista's Bluebox or a standalone Whitebox can run either Sonic or FBOS.

Sebastian: Oh, Standalone white box can run either sonic or F boss, but many times the U S software stack is really really something they depend on for availability analytics automation and then the you know you can get to your network for zero cost, but the cost of downtime. This millions of millions of dollars.

Jayshree V. Ullal: But many times, the EOS software stack is really, really something they depend on for availability, analytics, and automation. And there's, you know, you can get your network for zero cost, but the cost of downtime is millions and millions of dollars. So we have always embraced Whitebox.

So we have always embraced white box, we coexist with it but it continues to be a relatively small use case in the larger mission critical data centers for enterprise and cloud companies.

Jayshree V. Ullal: We coexist with it, but it continues to be a relatively small use case in the larger mission-critical data centers for enterprises and companies. Thanks, Ashton. Thank you, Jayshree. == Notes == Your next question comes from the line of Matt Nicknam from Deutsche Bank. Please go ahead, your line is open.

Speaker Change: Thanks, Max interest issue.

Speaker Change: Yeah.

Speaker Change: Your next question comes from the line of Matt nickname from Deutsche Bank. Please go ahead. Your line is open.

Jayshree V. Ullal: Hey, thanks so much for taking the question. Maybe a higher-level strategy question. We've seen two of your key networking peers scale up through sizable M&A over the last several months. So can you talk a little bit about how you view the value of such scale in order to maybe better serve and target both the cloud and AI titan as well as the enterprise vertical? Yeah, no, Matt, that's a good question.

Matt: Hey, Thanks, so much for taking the question maybe a higher level strategy question. We've seen two of your key networking pure scale up through sizable M&A over the last several months. So can you talk a little bit about how you view the.

Matt: The value of such scale in order to maybe better serve and target both the cloud and AI tightened as well as enterprise vertical. Thanks, Yeah, No. Matt. That's a good question I think on the cloud and AI are we feel pretty booked up to deal with those customers.

Jayshree V. Ullal: I think in the cloud and AI, we feel pretty bulked up to deal with those customers, because they don't look for size and bulk; they look for, as you know, networking innovation capabilities. And this has been Arista's heritage for 10 years, and will continue to be with the AI cycle for the next foreseeable 10 years. In the enterprise, there are multiple markets, and size helps.

Matt: Customers because they don't look for size and bulk they look for as you know networking innovation capabilities and this has been a rich heritage for 10 years and will continue to be with you I cycle for the next foreseeable 10 years on the enterprise there are multiple markets and size helps I think if you are targeting b.

Jayshree V. Ullal: I think if you are targeting the, you know, early adopters, Arista's traditionally done very, very well there, and the last three years are a good example of how well we've done there, both in the data center and on the campus. If you look at the next category of sort of the, not necessarily the screaming early adopters but maybe the fast followers, I think Arista will continue to do well there in the large enterprise. We are so underserved and underpenetrated in both the Fortune 500, 5000, and the global 2000 that we have a long, long ways to go. You know, we probably have 20% of those customers; we've got 80% of them left to go. And that I'm not even talking about the mid market and the SMB, which is a whole other market that we are underserved in. So absolutely, we need to make more investments in enterprise there. When I look at what Anshul, Chris Schmidt, and Ashwin are doing, this is exactly where we're doubling down.

You know early adopters of has traditionally done very very well there and the last three years is a good example of how well we've done that both in the data center and the campus. If you look at the next category of sort of the not necessarily the screaming early adopters, but maybe the fastball doors I think Arista will continue to do well there in the large enterprise we are so underserved.

Matt: Underpenetrated in both the Fortune 505, 1000, and the global 2000, we got a long long ways to go you know, we probably have 20% of that those customers. We got 80% of them left to go and that I'm not even talking about the mid market and the SMB, which is a whole another market that'd be an underserved and so absolutely we need to make more.

Matt: Investments in enterprise there when I look at Bot onshore Crishman, Josh we're not doing this is exactly where we're doubling down this is exactly where we doubled down in the last three years post pandemic and we have more than doubled our revenue and increased our local presence because of this investment in the enterprise.

Jayshree V. Ullal: This is exactly where we doubled down in the last three years, post-pandemic. And we have more than doubled our revenue and increased our logo presence because of this investment in the enterprise. I can't comment about consolidation of vendors, but when vendors don't grow, you know, five plus five sometimes is ten, but you have to be careful with integration. Five plus five can sometimes be seven, too.

Matt: I can't comment about consolidation of vendors, but then and just on growth.

Matt: With five sometimes a stand but you have to be careful on integration five plus five can sometimes be seven two so that's somebody else's responsibility not mine I think we can get a lot of organic growth.

Jayshree V. Ullal: So that's somebody else's responsibility, not mine. I think we can achieve a lot of organic growth. Your next question comes from the line of Meta Marshall from Morgan Stanley. Please go ahead, your line is open.

Your next question comes from the line of meta Marshall from Morgan Stanley. Please go ahead. Your line is open.

Jayshree V. Ullal: Great, thanks. Jayshree, maybe just a question, you noted limited visibility and I understand that this early in the year, but would you say that it's the timing of when some of these back end pilots scale into production? Is it the kind of level of front end spending? Is it enterprise projects? Just like where you're finding just more commentary on the visibility comment?

Great. Thanks.

Fishery, maybe just a question you know you noted I'm limited visibility and understand that this early during the year, but would you say that it's you know timing of when some of these back end pilots you know scale into production. It is the kind of level of front end spending is it enterprise projects, just like where are you.

Matt: We're finding just more commentary on the visibility comment and then a second question. You know you guys noted on the gross margin, but it's a portion of mix and kind of supply chain cost coming down, but just if there's any one bias towards what led to the gross margin upside in the quarter. Thanks.

Jayshree V. Ullal: And then second question, you guys noted on the gross margins that it's a portion of mix and kind of supply chain costs coming down. But just if there's any one bias towards what led to the gross margin upside in the corner. Thanks. Yeah, I mean, maybe I'll take that last one.

Speaker Change: Yeah, maybe I'll take that last one first I mean, a lot of the upside in the fourth quarter was really just customer mix right. I mean, we were we were weighted heavily towards enterprise in Q4, not for any particular reason it just happened to be that way and that kind of drove the margins higher.

Ita M. Brennan: First, I mean, a lot of the upside in the fourth quarter was really just customer mix, right? We were weighted heavily towards enterprise in Q4, not for any particular reason; it just happened to be that way. And that kind of dropped the margins higher.

Jayshree V. Ullal: And Amita, to answer your question on enterprise and AI activity, I think Arista continues to drive the concept of EOS, multi-domain routing, campus, high availability, mission critical enterprises for multiple verticals. We're making good progress there, and this is going to be the heart of our mainstream innovation and go-to-market. On the AI side, we continue to track well. I think we're moving from what I call trials, which are connecting hundreds of GPUs to pilots, which are connecting thousands of GPUs this year, and then we expect larger production clusters. I think one of the questions that we will be asking ourselves and our customers is how these production clusters evolve. Is it going to be 400, 800, or a combination thereof?

Speaker Change: And to answer your question on enterprise and AI activity I think Arista continues to drive the concept of U S. Multi domain routing campus high availability mission critical enterprises for multiple verticals, we're making good progress and this is going to be the heart of our mainstream innovation.

Speaker Change: And go to market on the AI side, we continue to track well I think we're moving from what I called trials, which is connecting hundreds of Gpus do pilots, which is connecting thousands of Gpus. This year and then we expect larger production called clusters I think one of the questions that we will be asking ourselves.

Speaker Change: And our customers is how these production clusters at all or is it going to be 400, 800, or a combination thereof are the role of ultra Ethernet consortium and standards and the ecosystem all coming together very similar to how we had these discussions in 400 gig will also play a large part, but we're feeling pretty good about the activity and I think.

Jayshree V. Ullal: The role of the Ultra Ethernet Consortium and standards and the ecosystem all coming together, very similar to how we had these discussions about 400 gigabit, will also play a large part. But we're feeling pretty good about the activity, and I think moving from trials to pilots this year will give us considerable confidence on next year's numbers. Great. Thank you. Your next question comes from the line of James Fish from Piper Sandler.

Speaker Change: Going from trials to pilots this year will give us considerable confidence on next year's number.

Speaker Change: Great. Thanks.

Speaker Change: Thank you. Your next question comes from the line of James Fish from Piper Sandler. Please go ahead. Your line is open.

Ita M. Brennan: Please go ahead. Your line is open. Hey, thanks for the question. Maybe Ita for you, and I'll miss having you on here. By the way, congrats on retirement. But what's causing the delay, being able to ship, so we saw that product deferred revenue jump as much as we did? Or should we think about this as normal to see this level of jump in Q4? Based on what you've disclosed in the past, it doesn't seem like this is a normal jump. I guess, what's the hang up?

James Fish: Alright, Thanks for your question.

James Fish: Maybe either for you all.

James Fish: Miss having you go on here by the way congrats on retirement, but whats, causing the go way being able to shift that we saw that product deferred revenue jump as much as we did or shall we think about this is normal to see this level of jump in Q4 as it is based on what you've disclosed in the past. It does seem like this is a normal jump I guess.

What's my hang up and with supply chain starting to go the other way, it's probably more readily available could we actually see the price increases you guys have a vacuum of past now have to be given back at some point in 'twenty four 'twenty five.

Ita M. Brennan: And with supply chains starting to go the other way and supply more readily available, could we actually see the price increases you guys have enacted in the past now have to be given back at some point in 24, 25? Yeah, Jim. I think the deferred, if you think back to how this works, obviously, it's been shipped for it to actually be deferred, right? So I think that's, you know, it's just timing.

Yeah, Dan I think the you know the deferred if you think back to how this works.

James Fish: Obviously, it's been shipped them for it to actually be in deferred right.

James Fish: So I think that's it's just timing and when we've talked about this lots over the past I'm sure since I was going to talk about it again in the future right is that it's really as just purely timing of shipments and where we have some new type projects new capability that we're trialing with a customer and that's causing it to get caught in the deferred but it's not it's not a fundamental.

Ita M. Brennan: And we've talked about this lots over the past, and I'm sure Shantel is going to talk about it again in the future, right, that it really is just purely timing of shipments. And, you know, where we have some new types of projects, new capabilities that we're trialing with a customer, that's causing it to get caught in the deferred. But it's not, you know, it's not a fundamental underlying driver of the business. You know, I think about pricing, and very little is happening in terms of pricing adjustments. That's kind of out of the ordinary.

James Fish: The underlying driver of the business I think on.

James Fish: On pricing and there's very little that's happening in terms of pricing adjust.

James Fish: Adjustments, that's kind of out of the arteries, just normal pricing environment, where we continue to.

James Fish: Pete for business I don't think there's anything particularly different there that we've seen.

Ita M. Brennan: It's just a normal pricing environment where we continue to, you know, compete for business. I don't think there's anything particularly different there that we've seen. Thanks. Your next question comes from the line of Ittai Kidron from Oppenheimer. Please go ahead. Your line is open. Thanks and congratulations to you as well, Ittai.

Speaker Change: Thanks again.

Speaker Change: Oh.

Speaker Change: Your next question comes from the line of each high Kidron from Oppenheimer. Please go ahead. Your line is open.

Speaker Change: Thanks, and congrats to you as well later I'll Miss you.

Speaker Change: Joe Good luck of course to you in your new role.

Ita M. Brennan: I'll miss you. And Shantel, good luck, of course, to you and your new role. I have a couple of ones for you.

Speaker Change: I have a couple of ones for me first of all on the on the cloud makes it kind of declined a little bit on the year. Maybe you can tell us what are your underlying working assumptions for 'twenty four and then more broadly on the 'twenty forward guide.

Ita M. Brennan: First of all, on the cloud mix, it kind of declined a little bit on the year. Maybe you can tell us what your underlying working assumptions are for 24? And then more broadly on the 24 guide.

Speaker Change: So until he died.

So it feels like.

Speaker Change: You are talking about about $600 million increase year over year revenue feels like half of it can already come.

Ita M. Brennan: Shantel, Ita, it feels like, you know, you're talking about about $600 million increase year-over-year in revenue; it feels like half of it can already come from the AI networking giving your 25 targets, and you seem very comfortable about your 25 targets, so I would think your 24 should be comfortable as well. So why should the rest of the business generate only 300 million to get to your annual targets? Why such aggressive conservatism here on the guide?

Speaker Change: From the AI networking, giving your 'twenty five targets and you seem very comfortable about your 'twenty five targets would think year 'twenty for should we be comfortable as well.

Speaker Change: Hawaii, if I assume that two to 300 million come from networking. This year why should the rest of the business generates only $300 million.

Speaker Change: Get to your annual target.

Speaker Change: M y.

Speaker Change: Aggressive conservatism here on the guidance.

Speaker Change: Okay, let.

Speaker Change: Let me take the first question and then I'll pass it over to return center for what you call. It conservatism.

Ita M. Brennan: Okay, Ittai, let me take the first question and then I'll pass it over to Ittai and Shanta for what you call conservatism. So, first of all, our cloud mix is very strong and very good. But I think what you should take away from this is not that our cloud mix came down, but our enterprise did really, really well. And since 100% is the total pie, when something does really well, then the others look less so.

Return Center: So first of all I ask all cloud makes us very strong very good but I think what you should take away from this is not that our cloud mix came down, but I enterprise did really really well and since 100% of the total pie when when something does really well then the others look less so so we're doing well on all three sectors and we are very proud of the enterprise momentum.

Return Center: I is going to come it is yet to come into that suddenly in 2023 as I said to you. Many many times. It was a very small part of a number but it will gradually increase.

Jayshree V. Ullal: So, we're doing well in all three sectors, and we're very proud of the enterprise momentum. AI is going to come. It is yet to come. And certainly, in 2023, as I've said to you many, many times, it will be a very small part of our number, but it will gradually increase. Okay, Richard, one of my fantastic CFOs, wants to take the conservatism question. I'll start my call with that. Thank you, Ittai. It's nice to meet you. Thank you for the well wishes.

Return Center: Which one of my a fantastic CFO wants to take the conservatism questions.

CFO: So I'll start the call with that thank you <unk>. Thank you for the well wishes.

Yeah, I think coming into <unk> and 'twenty for it's a balanced view in the sense of we wanted to have multiple options to get to our year and so we'll work through what those mixes are and how to get to that performance that we've laid out for our guidance I think that G. III very eloquently put in the sense of 'twenty three 'twenty four 'twenty five, but what we expect from AI going from trials to pilots to production.

Ita M. Brennan: You know, I think coming into 2024, it's a balanced view in the sense that we want to have multiple options to get to our year. And so, we'll work through what those mixes are and how to get to that performance that we've laid out for our guidance. I think that Jayshree very eloquently put the sense of 23, 24, 25 on what we expect from AI, going from trials to pilots to production. And so, we'll work through what that means in 2024. But I think to change anything in Q1 at this time, we're just going to go one quarter at a time, especially with me coming in, and we'll see how the year progresses. Very good.

CFO: And so we'll work through what that means in 'twenty to 'twenty, four but I think to change anything in Q1 at this time, we're just gonna go a quarter at the time, especially with me coming in and we'll see how the year progressed.

Speaker Change: Good luck.

Speaker Change: Yes.

Your next question comes from the line of Alex Henderson from Needham and company. Please go ahead. Your line is open.

Alex Henderson: I can't believe you leave so I'm going to Miss you.

Alex Henderson: Yes.

Alex Henderson: So go ahead.

Alex Henderson: Now she said she will miss him.

Chantelle Breidup: Good luck. Thank you. Your next question comes from the line of Alex Henderson from Niederman Company. Please go ahead. Your line is open. Eda, I can't believe you're leaving us. I'm going to miss you.

Alex Henderson: Yeah.

Speaker Change: I'm sorry go ahead.

Speaker Change: No go ahead of holiday.

Speaker Change: So.

Speaker Change: The question.

Speaker Change: It really is.

Speaker Change: What are you hearing from the field, particularly in the enterprise segment, there's been a lot of noise about.

Jayshree V. Ullal: I'm sorry, go ahead. Now go ahead Alex, take your question. What are you hearing from the field, particularly in the enterprise segment? There's been a lot of noise about indigestion of large amounts of volume that have been shipped to various companies.

Speaker Change: Digestion of.

Speaker Change: Large amounts of volume that had been shipped to various companies.

Speaker Change: And.

Jayshree V. Ullal: Clearly, there's some concern that the... oversupply over the last year into the enterprise market. I think you've talked to a lot of CEOs, what are they telling you in terms of where their IT spending intentions are for 24 months, where are they saying the spending is going relative to, uh... networking gear versus, uh... alternative uh... spending priorities That's a good question, Alex. You know, I certainly talked to a lot of CIOs and CEOs.

Speaker Change: Clearly there is some concern that there is some some over supply over the last year into the enterprise market.

Speaker Change: I think you've talked to a lot of Ceos, what are they telling you in terms of where their spending intentions are for 'twenty for them where are they saying.

Speaker Change: The spending is going relative to the.

Speaker Change: The networking gear versus the alternative of spending priorities.

Speaker Change: And that's a good question, Alex I, certainly talked to a lot of CR and Ceos and if I rewind the clock to January last year.

Jayshree V. Ullal: And if I rewind the clock to January last year, things were a lot spookier then; we were going through this whole financial crisis, Silicon Valley Bank, this, that, the other, and if I look at, if I now fast forward to a year later, our momentum in the enterprise is actually stronger now than it was a year ago. I think customers are looking for that innovation, the modern network model, CICD principles, bringing DevOps, NetOps, SecOps, all of this together. And so Arista continues, in my view, with a large TAM we have in the enterprise of at least $30 billion out of that $60 billion. To have the opportunity to really deliver that vision of client-to-cloud, break down the operational silos, and I would say today that CIOs recognize us as the pure play innovator more than any other company. Great, thank you.

Speaker Change: There's a lot of Scoop people then we were going through this whole financial crisis Silicon Valley Bank. This that the other and you find out that if I've now fast forward to where you're a leader our momentum in the internet purchases actually stronger now than it was a year ago. So all this I think customers are looking for.

Speaker Change: That innovation modern network models see ICD principles, bringing Dev ops net op SEC ops.

Speaker Change: All of this together and so Arista continues in my view with a large Tam we havent the enterprise or at least the 30 billion out of that 62 to have the opportunity to really deliver that vision of client to cloud breakdown the operational silos and I would say today. The CIO has recognized us as the pure play innovator.

Speaker Change: Than any other company.

Speaker Change: Great. Thank you.

Jayshree V. Ullal: Thanks, Alex. Your next question comes from the line of Atif Malik from Citi. Please go ahead, your line is open.

Speaker Change: Thanks, Alex.

Speaker Change: Your next question comes from the line of OTI <unk> Malik from Citi. Please go ahead. Your line is open.

Jayshree V. Ullal: Thank you for taking my question. Jayshree, thanks for providing that comment on the four wins against InfiniBand. Now, your networking competitor announced a collaboration with NVIDIA on Ethernet AI enterprise solutions last week. Can you talk about what this means for your Ethernet back-end business, if anything? Yeah, I don't understand the announcement as well as probably my competitor does. I think it has more to do with UCS and Cisco Validated Designs

Yeah.

Atif Malik: Thank you for taking my question and thanks for providing that comment on the por wins against Infiniband now your networking competitor announced a collaboration with Nvidia on Ethernet AI Enterprise solutions last week, but can you talk about what this means for your Ethernet backend business if anything.

Atif Malik: Yeah, I I don't understand the announcement as well as probably all my competitor does I think it has more to do with Ucs and Cisco validated designs.

Jayshree V. Ullal: Specific to our partnership, you can be assured that we'll be working with the leading GPU vendors. And, as you know, NVIDIA has 90 or 95% of the market, so Jensen and I are going to partner closely. It is vital to get a complete AI network design going.

Specific to our partnership you know you can be assured that we'll be working with the leading GPU vendors and as you know Nvidia has 90 or 95% of the market. So.

Atif Malik: Jensen and I are going to partner closely it is vital to get a complete D. I you know network design going he was also be working with our partners in AMD and Intel. So we will be the Switzerland of X to use whatever the GPU might be and we look to supply the best network camera.

Jayshree V. Ullal: We will also be working with our partners in AMD and Intel. So we will be the Switzerland of XPUs, whatever the GPU might be, and we look to supply the best network ever. Thank you. Your next question comes from Tim Long from Barclays. Please go ahead. Your line is open. Thank you. Yeah, Ita. I'm gonna miss you as well.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of Tim Long from Barclays. Please go ahead. Your line is open.

Tim Long: Thank you yet either.

Jayshree V. Ullal: Good luck. So wanted to follow up a little bit more on that AI, Jayshree, you talked about those wins. Could you just talk a little bit about a little bit more color there? Do you think these deployments are going to be more solely sourced? Or will there be multiple vendors? Did you face kind of a different competitive landscape than usual in these?

Tim Long: Sure as well good luck.

Tim Long: So wanted to follow up a little bit more on that AI G. Sri you talked about those those wins could you talk a little bit about.

A little bit more color there.

Tim Long: Do you think these deployments are going to be more sole sourced or will there be multiple vendors did you face kind of a different competitive landscape than the normal.

Jayshree V. Ullal: And what do you think about the breadth of this business? I'm sure it's a lot of the really large customers, as you said, right now, but can you talk a little bit about how you see this moving forward, whether it's other service providers or the enterprise vertical? Thank you. Yeah, thanks, Tim. Okay, so let me just step back and say the first real, consultative approach from Arista is to provide our expertise on how to build a robust back-end AI network. And so the whole discussion of Ethernet versus InfiniBand becomes really important, because, if you recall, a year ago, I told you we were outside looking in, everybody had an Ethernet, everybody had an InfiniBand HPC cluster, that was kind of getting bundled into AI.

Tim Long: In these in and what are you thinking about breadth of this business I'm sure. It's a lot of the really large customers. As you said right now, but can you talk a little bit about how you see this.

Moving into whether it's other service providers or the enterprise vertical thank you.

Speaker Change: Yeah. Thanks, Tim I'm, Okay. So let me just step back and say the first real consultative approach from Arista is to provide our expertise on how to build a robust back end network and so the whole discussion of Ethernet become versus Infiniband becomes really important because if you made me.

Speaker Change: A call a year ago I told you we were outside looking in and everybody had an Ethernet everybody had an infiniband HBC cluster that was kind of getting bundled into AI.

Jayshree V. Ullal: But a lot has changed in a year, and the popular product we are seeing right now as the back-end cluster for our AI is the Arista 7800's AI spine, you know, which in a single chassis with north of 500 terabits of capacity can give you a substantial number of, you know, ports, you know, 400 or 800. So you can connect up to a thousand GPUs just by doing that. And that kind of data parallel scale-out can improve the training time dimensions, large LLMs, massive integration of training data, and of course, as we shared with you the other day, we can expand that to a two-tier AI leaf and spine with a 16-way CMP to support close to 10,000 GPUs non-blocking. This lossless architecture for Ethernet, and then the overlay we will have on that with the ultra-Ethernet consortium in terms of congestion controls, packet spring, and working with a suite of UEC mixes, is what I think will make Ethernet the default standard for AI networking going forward.

Speaker Change: But a lot has changed in a year and a popular product. We are seeing right. Now is the backend cluster for our AI is the Arista 78, hundreds AI spine, which in a single chassis with north of 510, a bit of capacity can give you a substantial number of ports.

Speaker Change: You know 400 or 800, so you can connect up to 1000, Gpus, just doing that and that kind of data parallel scale us can improve the training time dimensions large llm's massive integration of training data and of course as we shared with you at the analyst day, but you can expand that to a two tier IV from spine with a 16 way CMP to support.

Speaker Change: Close to 10000 Gpus non blocking this lossless architecture for Ethernet and then the overlay we will have on that with the Altra Ethernet consortium and tons of congestion controls packet screening and working with our suite of you Phoenix is what I think will make Ethernet D default standard networking goes.

Jayshree V. Ullal: Now, will it be sole-sourced? Gosh, I would be remiss if I didn't tell you that our cloud networking isn't sole-sourced, so probably our AI won't be, too. But, you know, today's models are moving very rapidly, relying on, you know, high bandwidth, predictable latency, and the focus on application performance requires you to be sole-sourced initially. And over time, I'm sure it'll move to multiple sources. But I think Arista is very well positioned for the first innings of AI networking, just like we were for the cloud networking decade. And one other thing I want to say is that although a lot of these customers are doing AI pivots, these AI pivots will result in revisiting the front-end cloud network, too. So sort of this AI anatomy is being really well understood. And if you take a deep look at the centerpiece of it, which is all the GPUs, they have to connect to something very reliable, and this is really where we come in.

Speaker Change: Forward now will it be sole source gosh, I I I would be remiss, if I didn't tell you that our cloud networking isn't sole sourced so probably already I won't be too it would be but you know today's models I'm moving very rapidly relying on up you know high bandwidth predictable latency the focus on application performance.

Speaker Change: Requires you to be sole sourced initially.

Speaker Change: And over time I'm sure it'll move to multiple sources, but I think they're just very well positioned for the first innings of AI networking just like we were for the cloud networking to a decade and one other thing I wanted to say is although a lot of these customers are doing AI pivots. These AI pivots would result in revisiting the front end cloud network too so.

Speaker Change: It sort of this AI and that to me is being really well understood and then if you take a deep look at the centerpiece of it which is all the gpus that they have to connect to something very reliable and this is really where we come in and.

Jayshree V. Ullal: And so this, you know, being actively involved has. We're going to pay a lot of dividends, but we're still very much in our first innings of AI. Great, thank you. Your next question comes from the line of Ben Reitzes from Malias Research. Please go ahead.

Speaker Change: And so this being actively involved has is going to pay a lot of dividends, but we're still very much enough first innings of AI.

Okay, great. Thank you thank.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of Ben Reitzes from Melius Research. Please go ahead.

Jayshree V. Ullal: Hey, thanks for the question. And obviously, Ita, it's been great working with you. Thanks for all you've done for us.

Yeah.

Ben Reitzes: Hey, Thanks for the question and obviously, it's been great working with you. Thanks for.

Ben Reitzes: All you've done for us I wanted to ask about your guidance and the conservatism from another lens here.

Jayshree V. Ullal: I wanted to ask about your guidance and the conservatism from another lens here. With regard to 2024, since your November 9th Analyst's Day, some things have changed. Microsoft, Meta, and Google have all raised their CapEx forecasts for 2024. Obviously, your guidance for 2024 stays the same. And I know you're usually conservative. And then, for 2025, AMD upped their TAM very significantly for AI. And, you know, by a multiple.

Ben Reitzes: With regard to 2024 inch for November 9th Analyst day, some things have changed.

Ben Reitzes: Microsoft Meta and Google have all raised their capex forecast for 2024, obviously your guidance for 2024 stays the same and I know, you're usually conservative and then for 2025.

Ben Reitzes: AMD up their Tam very significantly for AI and by a multiple and I guess, they're seeing something.

Jayshree V. Ullal: And I guess they're seeing something, you know, that many of us are seeing with regard to future demand, and you've kept your guidance at 750. I just, with that backdrop, and the changes since November 9th, and you guys keeping your guidance, and I understand you're conservative, do you mind addressing your conservative conservatism or your guidance from those lenses, both with regard to 2024 and 2025, Jayshree? So Ben, I'm going to let my two CFOs speak to the conservatism, and then I'll add more color. How about that? Who wants to go first?

Ben Reitzes: With that many of us are seeing with regard to the future demand and you've kept your guidance at $7 50, I just with that backdrop and the changes since November 9th in you guys, keeping your guidance and I understand you're conservative do you mind addressing.

Ben Reitzes: Your conservative Chisholm.

Ben Reitzes: Chisholm over your guidance from those lenses, but with regard to 'twenty four 'twenty five J Shri.

Speaker Change: So then I'm going to let my two CFO speak to the conservatism and then I'll add more color how about that who wants to go okay great.

Jayshree V. Ullal: Okay, great. Ben, nice to meet you. It's Chantal.

Speaker Change: Nice to ensure its on top of it you know I think that.

Chantelle Breidup: You know, I think that, you know, a change from November to January, February time frame wouldn't change our guidance for the year. Kind of similar to the question before. I think that our guide right now resembles where we think we're at in the sense of what will materialize in 24. We'll take it one quarter at a time. At a time, the reflections of the changes you're mentioning, the timing of that, we have to wait and see. There's no guarantee that it's within our 12-month guidance time frame, and, you know, we'll watch and wait and see. Yeah, I think that says it all. I mean, all the drivers that you mentioned are great drivers.

CFO: You know what changed from November to January February time frame I don't think it would change our guidance on the year kind of similar to the question before I think that ties our guide right now resembles where we think we're at in the sense of what will it materialize in 'twenty four it will take it one quarter at a time at a time.

CFO: The inflections of the changes you're mentioning the timing of that we have to wait and see there's no guarantee that's within our 12 months gotten time frame and you don't we'll watch and wait and see but treasury I.

Speaker Change: I think that says it all I mean, all the drivers that you mentioned or are great drivers. It's the timing of everything Thats always complex right. So we'll take it a quarter, it's time and see how things play out.

Ita M. Brennan: It's the timing of everything that's always complex, right? So we'll take it a quarter at a time and see how things play out. And look, if our conservatism changes to more optimism in the second half, or more likely in 2025, we'll keep you posted. Alright, thanks a lot.

Speaker Change: Look if I conservatism changes to more optimism in the second half or more likely in 2025, we'll keep you posted.

Speaker Change: Alright, Thanks, a lot take care of them.

Jayshree V. Ullal: Take care. Thank you. Operator, we have time for one last question. Thank you. Your final question comes from the line of Carl Ackerman from BNP Paribas. Please go ahead. Yes, thank you for squeezing me in. And good, good evening from Paris.

Speaker Change: Operator, we have time for one last question.

Speaker Change: Thank you.

Speaker Change: Your final question comes from the line of Karl Ackerman from BNP Paribas. Please go ahead.

Karl Ackerman: It's open.

Karl Ackerman: Yes. Thank you for squeezing me in and.

Karl Ackerman: Good good evening from Paris.

Jayshree V. Ullal: So there have been several companies within the optimal supply chain that indicate the market for 800 gigabit and early deployments of 1.6 T ports will begin to inflect later this year for front-end networks. And so I guess why would I be wrong to conclude that your hardware sales would be a leading indicator of that? And I guess as a result, shouldn't cloud tighten revenue grow at least in line with your outlook for 2024 of double digit growth? Thank you.

So there have been several companies with me off to our supply chain that indicate the market for 800 gig and early deployments of 160 ports will begin an influx later this year for actually front end networks, and so I guess why would I be wrong to conclude.

Karl Ackerman: Your hardware sales would would be a leading indicator of that and I guess as a result shouldn't cloud Titan revenue grow at least in line with your outlook for 2024, a double digit growth. Thank you.

Jayshree V. Ullal: Yeah, thank you, Carl. Again, history is a good indicator of the future. And if you look at our 400 gigabit, everybody asked me the same question. They said, "How come 400 gigabit isn't taking off in 2019 or 20?" And it turned out it took our ecosystem several years. And, of course, the pandemic didn't help, whether it was optics or NICs or the whole entire thing coming together

Speaker Change: Yep. Thank you Carl I'm again, I'll step our history is a good indicator of future and if you look at our 400 gig everybody asked me. The same question you said, how can 400 gig isn't taking off in 2019 or 20 and it turned out it took our ecosystem several years and that was supposed to pandemic didn't help when it was optics of Nick so the whole entire thing.

Jayshree V. Ullal: And I don't doubt we will have trials for 800 gigabytes this year, but I think real production 800 gigabytes will happen in 2025. I'd like to be proven wrong, and maybe it'll come in sooner, in which case, like I said, we'll let you know. But at the moment, this is our best case prediction. Thanks, Carl. This concludes the Arista Networks fourth quarter 2023 earnings call. We have posted a presentation which provides additional information on our results, which you can access in the investor section of our website. Thank you for joining us today and thank you for your interest in Arista.

Speaker Change: To come together and I don't doubt people have trials for 800 gig this year, but I think real production 800 kick will happen in 2025, I'd like to be proven wrong, and maybe it'll come in sooner in which case like I said, we'll let you know but at the moment. This is our best case predictions.

Speaker Change: Thanks Carl.

This concludes the Arista Networks' fourth quarter 2023 earnings call. We have posted a presentation, which provides additional information on our results, which you can access on the investors section of our website. Thank you for joining us today and thank you for your interest in Arista.

Speaker Change: Please wait the conference will begin shortly.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: Yeah.

Operator: Please wait; the conference will begin shortly. Please wait; the conference will begin shortly. Please wait; the conference will begin shortly.

Speaker Change:

Speaker Change: Yes.

Speaker Change: [music].