Arista Networks Q1 2025 Earnings Call Transcript

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Provided by Quartr
May 6, 2025
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Operator

Welcome to the First Quarter twenty twenty five Arista 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. Instructions will be provided at that time. As a reminder, this conference is being recorded and will be available for replay from the Investor Relations section on the Arista website following this call.

Operator

Mr. Rudolf Viragio, Arista's Head of Investor Advocacy, you may begin.

Rudolph Araujo
Rudolph Araujo
Head of Investor Advocacy at Arista Networks

Thank you, Regina. Good afternoon, everyone, and thank you for joining us. With me on today's call are Jayshree Ullal, Arista Networks' Chairperson and Chief Executive Officer and Chantal Rydup, Arista's Chief Financial Officer. This afternoon, Arista Networks issued a press release announcing the results for its fiscal first quarter ending 03/31/2025. If you want a copy of this release, you can access it online at our website.

Rudolph Araujo
Rudolph Araujo
Head of Investor Advocacy at Arista Networks

During the course of this conference call, Arista Networks management will make forward looking statements, including those relating to our financial outlook for the second quarter of the twenty twenty five fiscal year, longer term business model and financial outlook for the 2025 and beyond, our total addressable market and strategy for addressing these market opportunities, including AI, customer demand trends, tariffs and trade restrictions, 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 acquisitions, which are subject to the risks and uncertainties that we discuss in detail in our documents filed with the SEC, specifically in our most recent Form 10 Q and Form 10 ks, 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. This analysis of our Q1 results and our guidance for Q2 twenty twenty five is based on non GAAP and excludes all non cash stock based compensation impacts, certain acquisition required charges and other non recurring items.

Rudolph Araujo
Rudolph Araujo
Head of Investor Advocacy at Arista Networks

A full reconciliation of our selected GAAP to non GAAP results is provided in our earnings release. With that, I will turn the call over to Jayshree.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

Thank you, Rudy, and thanks everyone for joining us this afternoon for our first quarter twenty twenty five earnings call. I'm sorry, I have a bit of a cold, so if I sound nasal, please excuse me. Wow, what a year it's already been with all the sea sowing of tariffs. We had a good start in q one twenty twenty five with the momentum of generative AI, data center, cloud and campus enterprises, where we achieved our first two billion dollars quarter, doubling just 11 quarters after our first billion dollar quarter. Software and service renewals contributed approximately 17.1% of revenue.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

Our non GAAP gross margin of 64.1% was influenced by efficient supply chain without tariffs, yet I might add, and a nice mix of enterprise and cloud customers in the quarter. International contribution for the quarter registered at 20% with The Americas super strong at 80%. Clearly, Arista is redefining the future of data driven networking, working intimately with our top customers as we march on in the evolution of data centers, campus centers, branch centers, and AI centers. Our cloud and AI momentum continues as we remain confident of our 750,000,000 front end AI goal in 2025. We are progressing well in all four customers and continue to add smaller ones as well.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

At the GTC event in March of twenty twenty five, we heard all about NVIDIA's planned GPU road map every twelve to eighteen months, and Arista intends to be the premier and preferred scale out network for all of those GPUs and AI accelerators. Traditional GPUs have a collective communication library or CCL, as they're known, that try to discover the underlying network topology using localization techniques. With this accelerated compute approach, the discrepancies between the discovered topology and the one that actually happens can impact AI job completion times. Arista's e billing portfolio highlights the accelerated networking approach, bringing that single point of network control and visibility as a differentiation. This makes it extremely crisp to identify and localize performance issues, especially as the size of the AI cluster grows to 50,000 XPUs with the Arista AI spine and least network designs.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

Moving to campus and branch center trends. In today's AI wave, customers can no longer tolerate LAN and WAN silos. The concept of what comprises a user or a device or a site fundamentally changes the building of a branch or campus in 2025. Agenetic AI makes us question the very definition of what we might even consider a user. Future campus and branch centers could be centralized or distributed, or they could be dispersed across laptops, smartphones, a house, an airplane, or any other location on the move.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

Data and applications can be located anywhere and add more dimensions, whether it's a data center or a public cloud or campus. Therefore, Arista's cognitive campus portfolio features our advanced spine with power over Ethernet wired lease capabilities along with a wide range of cost effective wireless six or seven indoor and outdoor access points for the newer IoT and agentic application. Our enterprise momentum continues. These initiatives are contributing greatly to customer momentum, and so let me highlight a few customer wins we have achieved. Our first customer win is in the federal sector, which is new to Arista, where Arista secured a strategic net new campus switching deployment with a major civilian agency displacing a long standing incumbent.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

Arista delivered the digital transformation for their return to work to office policy with resilient campus designs featuring Wi Fi readiness and deep integration of CloudVision for real time telemetry, automation, and compliance. This mission critical high performance deployment positions us for a broader entry in the federal market. Our next win comes from a high-tech sector where Arista expanded its partnership with one of our business development partners following years of engagement. The customer made a strategic decision to transition key parts of its data center and campus networks to Arista, marking our first wins with them in both both areas. Arista's consistent architecture across platforms based on a single and superior extensible operating system was a key differentiator.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

The rollout spans key platforms all managed through cloud vision for automation, compliance, and visibility. With successful Wi Fi evaluations underway, Arista is poised to complete and deliver client to cloud experience. And our final win comes from a web3.0 infrastructure space where Arista was selected to support the build out of a decentralized global backbone for distributed systems and blockchain networks. As the project shifted from metro expansion to upgrading core network capacity, Arista seventy two eighty r three routing at scale paired with our seventy one thirty series for ultra low latency edge formed the new hundred gigabit WAN spine. With edge processing, this delivers advanced security, programmable traffic filtering all at scale.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

It marks a strategic pivot towards high performance and reliable routing where legacy routers fall short. You can see that all these three wins across three sectors underscore Arista's growing momentum as customers modernize their networks in response to legacy complexity, vendor consol consolidation, and mission critical debt demands. As I wrap up, I want to share our conscious focus in cultivating our next generation of leaders. We have been fortunate and blessed to have a cohesive team for the past fifteen years, but sometimes we must accept changes. Financial success gives people choices to our risk, especially our Arista executives.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

Some may retire, while others may elect to pursue new ventures. In the next phase of Arista2.0 leadership, it's important to know that some things remain unchanged and steadfast. Our engineering brains and bench strength, for example, with Andy, Ken, Hugh, as well as new vice president of software, Siva Narayanan, and new vice president of hardware engineering, Alex Rohde, continue to be stronger than ever. You know Arista's reputation for a plus engineering team, and this is a renowned hallmark in the Valley. With the summer leave of absence of John McCool, Mike Cappas has been appointed as our new VP of manufacturing.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

Mike has been with us over twelve years and that is doing just a fantastic job navigating the supply chain and uncertainties of tariffs. On the enterprise sales side, our dynamic duo, chief customer officer Ashwin and chief sales officer Chris, are driving success globally, expanding campus, data center, and AI footprints with increasing market share. Chris and Ashwin have brought changes in the sales and SE leadership team internationally, both in Asia and in Europe. For The Americas sales, we have promoted a sixteen year Arista veteran, Chris Belmer, to senior vice president. Chris embodies the combination of customer empathy, product expertise, and always doing the right thing.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

You can see common traits across all these executives with incredible and tenured talent, strong cultural synergies, and a mission to delight customers. We are executing very well, and we aim for 10,000,000,000 revenue and beyond sooner than we previously expected. Speaking of Arista two dot o executives, over to you, our CFO, Chantel, who epitomizes our core values at Arista and recently expanded her responsibilities to include legal, IT, and CSO functions.

Chantelle Breithaupt
Chantelle Breithaupt
Chief Financial Officer at Arista Networks

Thank you, Jayshree. I am excited to extend my scope to cover these key functions. With that, there are a few organizational announcements to make regarding these teams. Our newly named leaders include Sandra Yuan, promoted to be our VP of information technology, Jason Bevis, promoted to be our cybersecurity leader in CISO, and Sean Christopherson, who tomorrow becomes our general counsel, replacing Mark Taxay, who has decided after many dedicated and successful years at Arista to try a new adventure. Congratulations to all of you.

Chantelle Breithaupt
Chantelle Breithaupt
Chief Financial Officer at Arista Networks

By promoting proven leaders from within, we are reinforcing our culture of excellence and positioning ourselves for continued success. With that organizational momentum, let's review our financial results. Total revenues in q one were $2,005,000,000 up 27.6% year over year and above the upper end of our guidance of 1,930,000,000.00 to $1,970,000,000 This year over year growth was led by strength in the cloud titan vertical and non cloud performing better than expected. International revenues for the quarter came in at $4.00 $6,000,000 or 20.3% of total revenue, up from 16% in the last quarter. This quarter over quarter increase reflects normal quarterly volatility and includes the impact of an unusually high contribution from our Americas customers in the prior quarter.

Chantelle Breithaupt
Chantelle Breithaupt
Chief Financial Officer at Arista Networks

Gross margin in Q1 was 64.1% above our guidance of approximately 63%. This is down slightly from 64.2% both last quarter and Q1 FY 2024. The Q1 result above our guidance was driven by a stronger than expected mix of non cloud revenue and includes a minimal impact from the absorption of applicable tariffs. Operating expenses for the quarter were CAD327.4 million or 16.3% of revenue, down slightly from last quarter at CAD332.4 million. R and D spending came in at CAD209.4 million or 10.4 percent of revenue, down from $226,100,000 last quarter.

Chantelle Breithaupt
Chantelle Breithaupt
Chief Financial Officer at Arista Networks

This reflects a low double digit year over year headcount increase, offset by lower new product introduction costs in the period due to timing of prototypes and other costs associated with our next generation products. Sales and marketing expense was $94,300,000 or 4.7% of revenue compared to $86,300,000 last quarter with a mid single digit growth in headcount versus last year. Our G and A costs came in at $23,700,000 or 1.2% of revenue, up from 1% of revenue in the prior quarter. Income from operations for the quarter was $957,400,000 or 47.8% of revenue. Other income for the quarter was $90,700,000 and our effective tax rate was 21.2%.

Chantelle Breithaupt
Chantelle Breithaupt
Chief Financial Officer at Arista Networks

This resulted in net income for the quarter of $826,200,000 or 41.2% of revenue. Our diluted share number was 1,279,000,000 shares resulting in a diluted earnings per share for the quarter of $0.65 up 30% from the prior year. Note that this reflects our four to one stock split in December 2024. Now turning to the balance sheet. Cash, cash equivalents and investments ended the quarter at approximately $8,150,000,000 During the quarter, we repurchased $787,100,000 of our common stock, our largest repurchase quarterly or annually in Arista's history.

Chantelle Breithaupt
Chantelle Breithaupt
Chief Financial Officer at Arista Networks

In April, we repurchased an additional $100,000,000 for a total of $887,100,000 at an average price of $88.97 per share. To date, we have repurchased 13,300,000.0 shares at an average price of $87.55 with 34,000,000 remaining in the existing $1,200,000,000 board authorization. In May 2025, our Board of Directors authorized a new $1,500,000,000 stock repurchase program, which commences after we have completed repurchases under our existing $1,200,000,000 authorization. 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 first quarter, we generated approximately $641,700,000 of cash from operations in the period, reflecting a growth of 24.9% compared to Q1 fiscal year twenty twenty four.

Chantelle Breithaupt
Chantelle Breithaupt
Chief Financial Officer at Arista Networks

DSOs came in at sixty four days, up from fifty four days in Q4, driven by billing linearity. Inventory turns were 1.4 flat to last quarter. Inventory increased to approximately 2,000,000,000 in the quarter, up from $1,800,000,000 in the prior period, reflecting an increase in finished goods. This is an intentional action regarding both tariffs and in the support of ramping new products. Our purchase commitments at the end of the quarter were 3,500,000,000 up from $3,100,000,000 at the end of Q4.

Chantelle Breithaupt
Chantelle Breithaupt
Chief Financial Officer at Arista Networks

This was driven by a continued investment in chips as well as an increase in buffers due to the tariff uncertainty. From a cash flow perspective, we will continue to optimize our working capital investments with some expected variability in inventory due to the timing of receipts on purchase commitments. Our total deferred revenue balance was $3,100,000,000 up from $2,800,000,000 in Q4 fiscal year twenty twenty four. 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 by approximately $219,000,000 versus last quarter.

Chantelle Breithaupt
Chantelle Breithaupt
Chief Financial Officer at Arista Networks

We remain in a period of ramping our new products, winning new customers, and expanding new use cases. These trends have resulted in increased customer specific acceptance clauses and an increase in the volatility of our product deferred revenue balances. As mentioned in prior quarters, the deferred balance can move significantly on a quarterly basis independent of underlying business drivers. This may be further amplified in 2025 due to the uncertainty around tariffs throughout the fiscal year and the resulting buying patterns of our customers. Accounts payable days were forty nine days, down from fifty one days in Q4, reflecting the timing of inventory receipts and payments.

Chantelle Breithaupt
Chantelle Breithaupt
Chief Financial Officer at Arista Networks

Capital expenditures for the quarter were $32,000,000 In October, we began our initial construction work to build expanded facilities in Santa Clara, and we expect to incur approximately $100,000,000 in CapEx during fiscal year twenty twenty five for this project. Now turning to our outlook. Given the nature of the current macroeconomic environment, we will start with the second quarter and then move to fiscal year twenty twenty five. As is demonstrated by our Q1 results, we have seen good momentum at the beginning of fiscal year twenty twenty five. As Jayshree highlighted, there are opportunities across all three customer sectors, inclusive of Gen AI, data center, cloud and campus enterprises.

Chantelle Breithaupt
Chantelle Breithaupt
Chief Financial Officer at Arista Networks

That combined with favorable mix has allowed for better than expected margin outcomes. Building on this momentum, our guidance for the second quarter is as follows: revenues of approximately $2,100,000,000 this reflects stronger seasonality in Q2 than prior year trends and anticipated outcome of the tariff uncertainty gross margin of approximately 63% including the absorption of known tariffs for the Q2 period and operating margin at approximately 46%. Our effective tax rate is expected to be approximately 21.5 with approximately 1,272,000,000.000 diluted shares. Now turning to the full fiscal year '25. Despite the macro uncertainty, we remain confident in the demand from our cloud enterprise and providers customers.

Chantelle Breithaupt
Chantelle Breithaupt
Chief Financial Officer at Arista Networks

As in the as is in the case of many other companies, the second half holds significant ambiguity related to the tariff scenarios. Given these unknowns, our guidance for FY '25 currently remains unchanged despite the strong results and guidance we are reporting today. We believe we can deliver results in the gross margin range of 60% to 62 even as we anticipate known possible tariff scenarios within Q3 and Q4. This is possible through a mix of supply chain optimization, tariff absorption and potential price increases if required. As we move through the quarters, we will continue to revisit the annual guide, hopefully, in an environment unconstrained by tariff uncertainty.

Chantelle Breithaupt
Chantelle Breithaupt
Chief Financial Officer at Arista Networks

Energized by the current momentum, we continue to focus on operational discipline and innovation, ensuring we deliver strong outcomes for customers and shareholders. Now back over to you, Rudy, for q and a.

Rudolph Araujo
Rudolph Araujo
Head of Investor Advocacy at Arista Networks

Thanks, Chantal. Just a quick clarification before we go into q and a. Jayshree meant we were retrading our back end goal of 715,000,000, not front end AI. With that, we will now move to the q and a portion of the earnings call. To allow for greater participation, I'd like to request that everyone please limit themselves to a single question.

Rudolph Araujo
Rudolph Araujo
Head of Investor Advocacy at Arista Networks

Thank you for your understanding. Regina, please take it away.

Operator

We will now begin the Q and A portion of the Arista earnings call. Our first question comes from the line of David Voigt with UBS.

David Vogt
David Vogt
Managing Director at UBS Group

So maybe Jayshree and Chantal, can you maybe just dive a little bit deeper on how you're thinking about the impact of tariffs? Obviously, product deferred revenue is up sequentially. We recognize that it's uncertain going into the second half of the year. So maybe from a top line perspective, how are you thinking about what your customers are telling you? What can you share with us?

David Vogt
David Vogt
Managing Director at UBS Group

And just give us a sense for how you thought about it relative to where tariffs are today versus what maybe is proposed by the administration. So I assume that it's kind of the status quo of where we are today is kind of underpinning your outlook. But any clarity would be helpful. Thank you.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

Sure, David. I'll I'll start and maybe Shantel can clarify. You know, when we when we began this adventure on tariffs, we were actually trying to get out of Mexico as fast as we could because the expectation was Mexico would have a tariff in q one. As the news came about, you know, we literally find ourselves in the middle of an ocean trying to figure out which country to go to because the the tariffs, as you know, the reciprocal tariffs are much higher in some of the Asia countries. So we're grateful for the measured approach that we do not have to deal mostly with any of these tariffs till July 9.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

We are absorbing whatever tariffs we do have to deal with from China and other things. But should that change, we expect it to have some effect that Shantel, alluded to in our gross margins that we have taken into consideration for the year. And, some we will absorb and some we may potentially have to pass to our customers, but we don't know what we don't know. So we can just go at this one quarter at a time.

Chantelle Breithaupt
Chantelle Breithaupt
Chief Financial Officer at Arista Networks

Yeah. I think the only thing I would add so I think in regard to the top line, Jayshree, completely, we saw the momentum in q one. You saw our guide in q two, which is, I think, linearity wise, a stronger q two than usual. We're holding the year. That's not because of our demand outlook.

Chantelle Breithaupt
Chantelle Breithaupt
Chief Financial Officer at Arista Networks

It's because of the fact we just wanna have any surprises after the pause. So that's why we'll take it quarter by quarter. On the tariff side in regard to gross margin, you know, if you were to take those commentaries, that puts the range of, gross of tariff impact to be one to one and a half points at the top layer with no mitigation. So that kind of bookends the impact we expect Worst case scenario without any mitigation to Jay's three point, there may be a point where we have to have the price increases, but we're looking to mitigate through absorption, and tariff and supply chain fungibility. And so from that perspective, tried to book in the impact.

Chantelle Breithaupt
Chantelle Breithaupt
Chief Financial Officer at Arista Networks

We see momentum on the top line, and we'll update quarter by quarter.

David Vogt
David Vogt
Managing Director at UBS Group

Great. Thanks, Jayshree. Thanks, Chantal.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

Sure, David.

Operator

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

Amit Daryanani
Senior Managing Director - Equity Research at Evercore

Thanks for taking my question. Jayshree, think there's been a fair amount of noise and speculation intra quarter on the four or five back end AI customers that you have sort of the different things exploring. Just from your perspective, can you just talk about how are these customers and aggregate progressing, for the back half ramps? And is that one to one ratio for the front end and back end still intact in your perspective?

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

Yeah. So first, let me start with the four customers. All of them are progressing well. One of them is still new to us. They've been in InfiniBand for a long time, so they'll be small.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

I would say two of them are heading towards 50,000 GPU deployments by end of the year. Maybe they'll be at a hundred, but I can be most certainly sure of 50 k heading to a hundred k. And then, the the other one's also in production. So I had talked about all four going into production. Three are already in production.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

The fourth one is well underway. So I think our back end number of 750,000,000, I'm feeling good. I'm feeling confident. And if you knew more or less about tariffs, maybe I'd feel more confident. Right.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

On the front end ratios, yeah, we've said it's generally one to one. It's getting harder and harder to measure front end and back end. Maybe we look at this whole AI cluster differently next year. But I think one to one is still a good ratio. It varies.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

Some of them just build a cluster and don't worry about the front end, and others worry about it entirely holistically. But it does vary, but I think the one to one is still a good ratio.

Amit Daryanani
Senior Managing Director - Equity Research at Evercore

Thank you.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

Thanks, Amit.

Operator

Our next question comes from the line of Atif Malik with Citi. Please go ahead.

Atif Malik
Atif Malik
Analyst at Citigroup

Hi. Thank you for taking my question. Chantal, you talked about 2Q being seasonally stronger. Can you give us a bit more color? Are you seeing any pull forwards, because of the concern on tariffs?

Chantelle Breithaupt
Chantelle Breithaupt
Chief Financial Officer at Arista Networks

Yes. I think that I wouldn't call it significant or material, but enough in the sense that we wanted to be pretty clear on that top end guide. So yes, some, but, I wouldn't say significant.

Atif Malik
Atif Malik
Analyst at Citigroup

Thank you.

Operator

Our next question comes from the line of Aaron Rakers with Wells Fargo. Please go ahead.

Aaron Rakers
Aaron Rakers
Managing Director & Technology Analyst at Wells Fargo

Yeah. Thanks for taking the question, and congrats on the results. The the product deferred revenue balance, you know, from 900 and, I think, 90,000,000 up to, like, 1,200,000,000.0, I can appreciate the timing of that and kind of given the tariff backdrop, you

Aaron Rakers
Aaron Rakers
Managing Director & Technology Analyst at Wells Fargo

know, somewhat difficult. But, you

Aaron Rakers
Aaron Rakers
Managing Director & Technology Analyst at Wells Fargo

know, I'm curious of how we should think about that from a forward perspective. And and in particular, is it tied to kind of the distributed ether link platforms or the 51.2 t silicon? Are we still kind of early innings in seeing those, you know, actually materialize from a production deployment perspective and that that might be tied to that that product deferred? Any any kind of color around that would be great. Thank you.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

Right, Erin. If you remember, we had a similar phenomena way back in 2016 when we had hundred gig deployments in the cloud. I may be testing everybody's memory. But I think there's a similar phenomena going on here with all our EtherLink platforms. You mentioned the distributed EtherLink, but it also includes the 7,800 spine and the EtherLink, 51 t standalone switches.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

We're experiencing a lot of interest in these products, but everybody is new to AI. They've never really put together an epic design, you know, for four rail or eight rail or how does it connect into the GPUs and what is the NIC attachment, what is the accessories in terms of cables or optics that connect. So, you know, this movement from trials to production, causes us to bring a whole ecosystem together for the first time. So you can see that's why it's impacting our deferred revenue some, and this kind of time frame can easily be twelve to eighteen months. In in the cloud days, it used to be more like six months because it wasn't as new.

Aaron Rakers
Aaron Rakers
Managing Director & Technology Analyst at Wells Fargo

Thank you.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

Sure.

Operator

Our next question comes from the line of Ben Reitzis with Melius Research. Please go ahead.

Ben Reitzes
Managing Director – Head of Technology Research at Melius Research LLC

Hey, guys. Thank you so much for the question. I wanted to just on the second half, you know, in order to be in 15% range or 15 to 17, you know, you have to kinda get into the single digits there. So just wondering, you know, with the cloud providers that you serve, I I and, you know, when they get this stuff from NVIDIA, it's not I thought it was noncancelable, etcetera. And there's pretty good visibility on what they're gonna do, you know, with either XPUs and GPUs, you know, because this stuff has a has kind of a long lead time and the orders are already made.

Ben Reitzes
Managing Director – Head of Technology Research at Melius Research LLC

So I'm just a little confused as to why you you really don't know, so much about the second half, at least on the top line, given these these orders are non cancelable for so many of the hyperscalers that you deal with? Thank you.

Chantelle Breithaupt
Chantelle Breithaupt
Chief Financial Officer at Arista Networks

Yeah. I think thank you for the question. I'll start, then maybe Jayshree might have commentary. I think it's more from the perspective of not having to update the guide for every permutation and combination. I think we prefer to update the guide once we have an answer on the pause then.

Chantelle Breithaupt
Chantelle Breithaupt
Chief Financial Officer at Arista Networks

So it's not it's not that we don't have a view. It's more we just wanna update the guide once with all the known variables changed with some significance. Jayshree, anything you wanna add?

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

Yeah. No. Listen. I think, you were right to be confused. We're also confused about the tariffs.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

If there were no tariffs, we'd be even more optimistic about the second half. So we're being careful, measured, because we don't know what the tariffs we don't. We don't know if the country will go into recession. But, specifically, a comment on visibility and enthusiasm and momentum, I think you've heard it from us. We're seeing it on the cloud.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

We're seeing it on AI. We're seeing it on campus enterprises. So if there were no other variables, we'd be even more bullish.

Ben Reitzes
Managing Director – Head of Technology Research at Melius Research LLC

Okay. Thank you, Jayshree.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

Sure, Ben.

Operator

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

Samik Chatterjee
Samik Chatterjee
Executive Director at JP Morgan

Hi. Thanks for taking my question. Just maybe if I can go back to the four Tier 1s that you're working with on the AI back end and the progress that you updated on that front. Are these customers now giving you more visibility just given the tariff landscape and that you would need to sort of build inventory for some of the finished goods? And can you just update us how they're handling the situation on that front?

Samik Chatterjee
Samik Chatterjee
Executive Director at JP Morgan

And particularly then as you think about, I think the investor focus is a lot about sort of 2026 and potential sort of changes in the CapEx landscape from these customers at that point. Are you getting any forward visibility from them? Any sort of early signs for 2026 from these customers? Thank you.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

Right. Right, Samik. Yeah. So we definitely have all the visibility in the world for this year, and we're feeling good. We're getting unofficial visibility because they all know our lead times are tied to some fairly long lead times from our partners and suppliers.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

So I would say 2026 is looking good. And based on our execution of 2025, and and plans we're putting together, we should have a great year in 2026 as well for AI

Operator

next question comes from the line of Karl Ackerman with BNP Paribas. Please go ahead.

Karl Ackerman
Analyst at BNP Paribas

Yes. Thank you, Jayshree. How do you see the general cadence of hyperscalers deploying 800 gig switch ports this year? I ask because I believe your Ethernet family of switches became generally available in late twenty twenty four. And I'm wondering if these switches relate to your growth of deferred revenue over the last couple quarters.

Karl Ackerman
Analyst at BNP Paribas

Thank you.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

Yeah. No. That's a good question. You may remember, Carl, that I alluded to this earlier in 2024. The majority of our AI trials were on 400 gig at that time.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

So you're right to observe that with our ethylene portfolio really getting introduced in the second half of twenty four that a lot of our 800 gig activity has picked up in 2025, some of which will be reflected in shipments and some of it which will be part of our deferred. So it's a good observation and an accurate one that this is the year of 800, like last year was the year of 400.

Operator

Our next question comes from the line of Michael Ng with Goldman Sachs. Please go ahead.

Michael Ng
Michael Ng
Analyst at Goldman Sachs

Hi, good afternoon. Thank you for the question. Jayshree, I was wondering if you could just expand upon your comments about your confidence in achieving the $10,000,000,000 midterm revenue target a little bit sooner than previously expected. And how do you kind of balance that longer term or midterm optimism with some of the choppiness that we see Thank you.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

Michael, I knew somebody would ask that question. I'm surprised it took so long. So if both of you remember the analyst day in November 2023, I had said it took nine years to get our first five billion, and I thought

Analyst

seem to wanna go away, which is really looking for the update on on white box. I I know you've talked about this quite a bit in the past. It seems as if it's maybe come back. And if you could help us understand how you split your business with white box, competitors and how you see that shifting, if at all. Thank you.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

Sure. First, I wanna say, which I've always said, that white box is not new. It's been with us since the beginning of time. In fact, when Arista got started, a couple of our customers had already implemented internally various implementations of white box. So there is a class of customers who who will make the investments in engineering and operations to build their own network and manage it, and it's a very different business model.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

It operates typically at 10% gross margins. I don't think you want Arista to go there. And it's very hardware centric and doesn't require the the rich software foundation and investments that we've made. So first, I'll start by saying we we will always and will continue to coexist with White Box. There are times that you you've noticed this too, that because Arista builds some very superior hardware, that even if they don't use our EOS, they like to have our blue box, as I often call it, the Arista hardware, that's engineered much better than any others, with a more open OS like Sonic or FBOS or at least the attributes of running both EOS and an open source networking system.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

So I think we view this as a natural part of selection in a customer base where if it's a simple use case, they're gonna use something cost effective. But if it's a really complex use case like the AI spine or roles that require and demand more mission critical features, Arista always plays a far bigger role in premium, highly scalable, highly valued, software and hardware combinations than we do in a standalone white box. So we'll we'll remain coexisting peacefully, and, we're not in any way threatened by it. In fact, I would say we work with our customers to make sure as they're building permutations and combinations of work white box that we can work with that and build the right complement to that with our EtherLink portfolio.

Analyst

Thank you.

Operator

Our next question comes from the line of Antoine Gaben with New Street Research. Please go ahead.

Antoine Chkaiban
Equity Research Analyst - Technology Infrastructure at New Street Research

Hi, good afternoon. Thank you for letting me ask a question. I'd love to get your latest views around co packaged optics. NVIDIA introduced its first CPO switches at GTC for scale out. And I was wondering whether that had any impact on your views regarding CPU adoption in back end AI networks in coming years.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

No. It had no impact. It's very early days. I think you've you've seen you know, Arista doesn't build optics. But Arista enables optics, and we've always been at the forefront, especially with Andy Bechtelshein and his team of talented tech individuals that, you know, whether it is pluggable optics with, LPO or or how we define the OSFP connector for MSAs for a hundred gig 400 gig, it you know, it's it's something we take seriously.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

And our views on CPOs, it's not a new idea. It's been demonstrated in prototype for, I don't know, ten to twenty years. The fundamental lack of adoption to date on CPO, it's relatively high failure rates, and it's mostly been in the labs. So what are some of the advantages of CPO? Well, it has a linear interface.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

It has lower power than DSP for long haul optics. It has a higher channel count. And I think if pluggable optics can achieve some of that in the best of both worlds, then you can overcome that with pluggable optics or even co packaged copper. So Arista has no religion. We'll do co packaged copper.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

We'll do co packaged optics. We'll do pluggable optics, but it's too early to call this a real production ready product. It's still in very early experiments and trials.

Antoine Chkaiban
Equity Research Analyst - Technology Infrastructure at New Street Research

Great. Thank you, Jayshree.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

Sure.

Operator

Our next question comes from the line of Meta Marshall with Morgan Stanley. Please go ahead.

Meta Marshall
Meta Marshall
Analyst at Morgan Stanley

Great. Thanks. I wanted to kind of ask about you reiterated the $750,000,000 back end target, but you've kind of had this $1,500,000,000 kind of AI target for 2025. And just wondering, is the capability of that more dependent on kind of the tariffs given kind of some of the front end spend, or just how are you thinking about that 1 and a half billion number? Thanks.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

Sure. I think, we're aiming for the $7.50 because it's more measurable. The 1 and a half is a nice goal, but sometimes we can't tell whether it's AI traffic or cloud tariff traffic. Sorry. I got tariff on my brain.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

Regarding tariffs, I don't think it'll have a material difference on the $750,000,000 number or the 1,500,000,000.0. We got the demand. So unless we have some real trouble shipping it or customers change their mind, I think we're good with both those targets for the year.

Meta Marshall
Meta Marshall
Analyst at Morgan Stanley

Great. Thank you.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

Sure, Meta.

Operator

Our next question comes from the line of Matt Niknam with Deutsche Bank. Please go ahead.

Matt Niknam
Matt Niknam
Analyst at Deutsche Bank

Hey, thanks so much for taking the question. Can you talk a little

Matt Niknam
Matt Niknam
Analyst at Deutsche Bank

bit about what you're seeing on the macro front?

Matt Niknam
Matt Niknam
Analyst at Deutsche Bank

And I guess more specifically, how that's affecting spending plans and sales cycles across the different customer sets, whether it's Cloud9, Titan's enterprise, or even tier two cloud and some of the service providers' customers? Thank you.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

Sure. And, Shantel, you may also have a view on this. Love to hear that. You know, I've never been a good soothsayer or forecaster of, macro trends. Going back to my years at Cisco and now, recessions don't give you a warning.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

They just happen. And at the moment, we do not see any warning of a recession. In fact, we're seeing the opposite. We're seeing a lot of demand, whether it's people pulling it in for tariffs or just the general excitement of Arista's products. So if unless things dramatically change with tariffs, which force a recession, Arista is really experiencing good momentum.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

And therefore, it's very difficult for me to predict a recession unless something outside from a macro happens.

Chantelle Breithaupt
Chantelle Breithaupt
Chief Financial Officer at Arista Networks

Yeah. And I would add to that. You know, if you think about the providers enterprise, campus specifically, very pleased with our campus, you know, q one outlook that we results that we had. Campus has shown some strong momentum, longer sales cycles, but continued strong momentum. Enterprise, you know, we continue to win new logos and have great land and conversations with our enterprise customers.

Chantelle Breithaupt
Chantelle Breithaupt
Chief Financial Officer at Arista Networks

The providers, the neo clouds, you know, are demonstrated interest and lots of great conversations there. So I think across the spectrum, we haven't seen anything that indicates a recessionary, kind of tangent in the conversations.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

I guess

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

we read we read the doom and gloom in the news, but we're not feeling it here.

Chantelle Breithaupt
Chantelle Breithaupt
Chief Financial Officer at Arista Networks

Yeah.

Operator

Our next question will come from the line of Tal Liani with Bank of America. Please go ahead.

Tal Liani
Tal Liani
Analyst at Bank of America

Hi, guys. If you go back, can you hear me?

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

Yes, we can.

Chantelle Breithaupt
Chantelle Breithaupt
Chief Financial Officer at Arista Networks

Yes, we can hear you.

Tal Liani
Tal Liani
Analyst at Bank of America

If you go back a few years, we've seen your customers being nimble and buying ahead of development. For example, you guys remember when Microsoft responded to the litigation you had with Cisco in both kind of six quarters worth of equipment in four quarters. I remember it happened. And the question is whether the entire market behaves this way now, meaning we know tariffs are coming later in the year, whether the strength you're seeing is the result of early purchases of customers ahead of tariffs in order to save some some dollars. So the question is twofold.

Tal Liani
Tal Liani
Analyst at Bank of America

Number one, if it happens, will you ever know about it? Meaning, do you do you have enough visibility over the deployment schedules to know that they're buying ahead of the demand? And number two is just the answer of what do you think about kind of the question and and whether there is, you know, early early ordering of of equipment. Thanks.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

Yeah. No, Patel. These are very thoughtful questions, and thank you for reminding us. Back then, we were like, you know, 3 to 500,000,000 a quarter business. They're a lot bigger now.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

And even if our customers try to pull it in and get it all by July, we would be unable to supply it. So that would be the first thing. So I'm not seeing the pull ins that are that really material in any fashion. I am seeing a few customers trying to save a dollar here, a buck there to try and ship it before the tariff date, but nothing material. Regarding pull ins for four to six quarters, again, our best visibility is, you know, near term.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

And if we saw that kind of behavior, we would see a lot of inventory sitting in our customers, which we don't. In fact, that's causing us to ship faster and ship more.

Tal Liani
Tal Liani
Analyst at Bank of America

Got it. Thank you.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

Thank you.

Operator

Our next question comes from the line of Sebastian Najee with William Blair. Please go ahead.

Sebastien Naji
Research Analyst - Technology, Media & Communications at William Blair

Yes. Thank you for taking the question. I mean,

Sebastien Naji
Research Analyst - Technology, Media & Communications at William Blair

I think there's a lot

Sebastien Naji
Research Analyst - Technology, Media & Communications at William Blair

of focus on AI demand, but some of the cloud titans have also been reporting really robust growth in the non AI parts of their cloud businesses. So could you maybe comment on what you're seeing on more of that traditional cloud titan demand and whether that's trending ahead of expectations for the year?

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

That's that's a really good question too, Sebastian. See, I don't know if you remember. Again, two years ago, I was very nervous because the entire cloud titans pivoted to AI and slowed down their cloud. Now we see a more balanced spend. And while we can't measure how much of this cloud and how much of it is AI, if they're kind of cobbled together, we are seeing, you know, less of a pivot, more of a surgical focus on AI, and then a continued upgrade of their cloud networks as well.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

So compared to '23, I would say the environment is much more balanced between AI and cloud.

Sebastien Naji
Research Analyst - Technology, Media & Communications at William Blair

Thank you.

Operator

Our next question comes from the line of James Fish with Piper Sandler. Please go ahead.

James Fish
James Fish
MD & Senior Research Analyst at Piper Sandler Companies

Hey, thanks for the question here. Really a follow-up on Simon's one before. What functionality about the blue box actually makes it defensible versus what hyperscalers can kind of self develop? And then Chantal, on the inventory side, I know you always tell to look at inventory and purchase commitments. But how are you feeling about where we should expect inventory turns sort of throughout the year and and long term just given the latest wrinkles here on the supply chain?

Chantelle Breithaupt
Chantelle Breithaupt
Chief Financial Officer at Arista Networks

Sure. Do wanna go first, Jishi?

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

Yeah. Let let me give you a few attributes of what I call the blue box. And I'm not saying others don't have it, but Arista has built this as a mission, you know, although we're known for our software. We're just as well known for our hardware when you look at everything from a form factor of a one RU that we build to a chassis. We've got a tremendous focus on signal integrity, for example.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

You know, all the way from layer one, multi layer PCB boards, a focus on quality, a focus on driving distances, a focus on integrating optics for longer distances, a focus on driving max sec, etcetera. So that's a big focus. The second is hardware diagnostics. Internal to the company, we call it Arista Boot. We've got a dedicated team focused on not just the hardware, but the firmware to make it all possible in terms of troubleshooting.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

Because when these boards get super complex, you know, you you you don't even know where the failures and you're running at high speed 200 gig 30. So it's things are very complex. So the ability to pinpoint and troubleshoot is a big part of what we do. And then there's additional focus on the mechanical, the power supplies, the cooling, all that all of which translate to better power characteristics along with our partners and chip vendors. There's a maniacal focus on not just high performance but low power.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

So some of the best attributes come from, you know, our blue boxes, not only for 48 ports, but all the way up to five seventy six ports on an AI spine or double that if you're looking for dual capabilities. So well designed, high quality hardware is a thing of beauty, but also a thing of complexity that not everyone can do.

Chantelle Breithaupt
Chantelle Breithaupt
Chief Financial Officer at Arista Networks

Yeah. And I think regards to the inventory turns, you know, I think, I am pleased in the progress we've made. We've kind of gone from the range of one turn to 1.4 turns this quarter even with some of the buffer we've put in for the tariff uncertainty. I think generally, your question is forward looking, what turns are we looking for? We're always looking to make improvements.

Chantelle Breithaupt
Chantelle Breithaupt
Chief Financial Officer at Arista Networks

The only wrinkle we have is this length of duration on the tariff cycle. So we work every month, Mike Capas and I and his team, to look at the inventory turns and forecasting. We aim to go higher. The only thing I would say as a caveat is what we need to do in the second half depending on the tariff scenarios.

Operator

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

Ben Bollin
Analyst & Partner at Cleveland Research Company

Good afternoon, everyone. Thank you for taking the question. There were some comments you made, Chantal, in the prepared remarks regarding variability and customer acceptance of the product deferred, especially around tariffs. Could you share a little more detail? What does that look like?

Ben Bollin
Analyst & Partner at Cleveland Research Company

Does this relate to the absolute size of their deployments, uncertainty in the BOM? Just any other considerations we should be aware of? Thanks.

Chantelle Breithaupt
Chantelle Breithaupt
Chief Financial Officer at Arista Networks

Yeah. No. It's a great question because I added that last comment, this go around in the sense of the new unknown of the tariff uncertainty. And there I was just mentioning or, you know, trying to give transparency that there may be quarters as we progress through these tariff scenarios where our customers decide to pull in and where we can accommodate. And if it's a new use case or new acceptance clause that would, you know, impact the deferred revenue.

Chantelle Breithaupt
Chantelle Breithaupt
Chief Financial Officer at Arista Networks

So it's just another item to consider, and we'll continue to discuss. But that's the Right. That's the general you know, just in the sense of adding the uncertainty around that.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

Yeah. To add to add to that, Ben, you know, obviously, tariffs are an unknown, but I wanna go back to that white box, blue box question. We had a customer, again, material, who said, you know, I can't get these boxes. I can't make them run. I cannot get an AI network.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

And then one of my most technical sales leaders said, hey. We we got a chance to build an AI cluster here for a few hundred GPUs. So we jumped on it. You know, one, obviously, that customer is small and had been largely using white boxes and is now about to install an AI leaf and an AI spine, and we had to get it to him before the tariff deadline. So it's an example of not material, but how quickly these decisions get made when you have the right product, right performance, right quality, right mission critical nature, and you can deal with that traffic pattern better than anyone else can.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

So it happens. It's not big because we got so much commitment in a given quarter from a customer, but when it is, it's we act with great deal of nimbleness and agility to do that.

Rudolph Araujo
Rudolph Araujo
Head of Investor Advocacy at Arista Networks

Regina, we have time for one last question.

Operator

Our final question comes from the line of Brian Kunz with Needham and Company. Please go ahead.

Ryan Koontz
Senior Analyst at Needham & Company

Great. Thanks. Thanks for squeezing me in. I wanted to ask about the kind of emerging neo AI opportunities out there. I think there's a general perception that most of them are buying, you know, NVIDIA defined clusters and networking.

Ryan Koontz
Senior Analyst at Needham & Company

So wonder if you could comment on those trends, their interests in moving past, InfiniBand and also are there opportunities developing with some of these folks to kinda multisource their AI connectivity to different providers? Thanks.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

Yeah. That's a good question, Ryan. So in fact, we're seeing more adventurous spirit in the Neo Cloud customers because, you know, they want to try alternatives. So some of them are absolutely trying other AI accelerators, like Lisa and AMD and my friends there. Some of them are absolutely looking at Ethernet, not InfiniBand as a scale out.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

And that momentum has really shifted in the last year. With the Ultra Ethernet, consortium and the spec coming out in May, I I just wanna give a shout out to that team and what we Holbrook has done. So I think Ethernet's a given, but there's an awful lot of legacy of InfiniBand that will obviously sort itself out. And a new class of AI accelerators we're seeing, you know, more niche players, more internal developments from the cloud titans, all of which is mandating more Ethernet. So I think between your two questions, I would say the progress from InfiniBand to Ethernet is faster.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

The progress from, you know, the renowned the the the the the ones they know and the high performance GPUs from NVIDIA versus the other is is still taking time.

Ryan Koontz
Senior Analyst at Needham & Company

Helpful, Jishri. Thank you.

Jayshree Ullal
Jayshree Ullal
President, CEO & Chairperson at Arista Networks

Absolutely. Thank you.

Rudolph Araujo
Rudolph Araujo
Head of Investor Advocacy at Arista Networks

This concludes Arista Networks first quarter twenty twenty five earnings call. We have posted a presentation that provides additional information on our results, which you can access on the Investors section of our website. Thank you for joining us today and for your interest in Arista.

Operator

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

Executives
    • Rudolph Araujo
      Rudolph Araujo
      Head of Investor Advocacy
    • Jayshree Ullal
      Jayshree Ullal
      President, CEO & Chairperson
    • Chantelle Breithaupt
      Chantelle Breithaupt
      Chief Financial Officer
Analysts
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Key Takeaways

  • In Q1 FY25, Arista reported $2.005 billion revenue (up 27.6% YoY) and a 64.1% non-GAAP gross margin, driven by strong cloud, AI, data center and campus demand with software and service renewals at 17.1% of revenue.
  • Arista remains confident in delivering $750 million back-end AI revenue in 2025 with four Tier 1 AI customers (three already in production) and maintains a ~1:1 ratio of front-end to back-end AI spend.
  • For Q2 FY25, the company guides to approximately $2.1 billion revenue, ~63% gross margin and ~46% operating margin, and expects FY25 gross margins of 60–62% despite tariff uncertainty through supply-chain optimization, absorption and potential price adjustments.
  • Arista secured three major strategic wins: a net-new federal agency campus switching deployment, a high-tech customer’s first combined data center and campus rollout, and a Web3 backbone build-out using the 7280R3 and 7130 series for ultra-low latency routing.
  • The company ended the quarter with $8.15 billion cash and executed a record $887.1 million share repurchase, and its board has authorized a new $1.5 billion buyback program.
AI Generated. May Contain Errors.
Earnings Conference Call
Arista Networks Q1 2025
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