Arista Networks, Inc.

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 at the Arista website following this call. Ms. Liz Stein, Arista's Director of Investor Relations, you may begin. Thank you, Operator.

Good afternoon, everyone, and thank you for joining us. With me on today's call are Jay Sriyulal, Arista Network's President and Chief Executive Officer, and Ida Brennan, Arista's Chief Financial Officer. This afternoon, Arista Network issued a press release announcing the results for its fiscal third quarter ending September 30th, 2023. If you would like a copy of the release, you can access it online at our website. During the course of this conference call, Arista Network's management will make forward-looking statements. including those relating to our financial outlook for the fourth quarter of the 2023 fiscal year, longer-term financial outlook 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 time, 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 the SEC, specifically in our most recent Form 10Q and Form 10K, 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. Also, please note that certain financial measures we use on the 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, and happy Halloween, everyone. We delivered revenues of $1.51 billion for the quarter with a non-GAAP earnings per share of $1.83. Services and software support renewals contributed approximately 16.8% of revenue. Our non-GAAP gross margins of 63.1% was influenced by improving supply chain overheads and higher enterprise contribution. As we have said before, gross margins have consistently improved every quarter this year and will stabilize next year in 2024. International contribution registered at 21.5%, with the Americas at 78.5%. As predicted, Arista's supply chain and lead times are improving steadily in 2023, and we expect it to normalize in 2024. We are now projecting 33% annual growth versus our prior analyst day forecast of 25% growth for the 2023 calendar year. During the past year, our Cloud Titan customers have been planning a different mix of AI networking and classic cloud networking for their compute and storage clusters. Our historic classification of our Cloud Titan customers has been based on industry definition of customers with or likely to attain greater than 1 million installed compute servers. Looking ahead, we will combine cloud and AI customer spend into one category called cloud and AI Titan sector. And as a result of this combination, Oracle OCI becomes a new member of the sector while Apple shifts to cloud specialty providers. This new cloud and AI Titan sector is projected to represent greater than 40% of our total revenue mix due to the favorable AI investments expected in the future. In terms of enterprise momentum, Arista continues to focus on multi-domain modern software with architectural superiority based on our single EOS extensible operating system and cloud vision stack. This is truly a unique foundation and differentiator. We have demonstrated our strong execution and uncompromised quality with predictable release cadence that our customers have come to enjoy and appreciate. The power of our one consistent software stack across a breadth of use cases, be they WAN routing, campus, branch, or data center infrastructure, is truly unmatched by our industry peers. Let me illustrate with a few customer wins. Our first customer win is an international one, where the customer is providing services for their interconnect of high-performance compute, HPC clusters, which are often its foundation for GPU as a service offering. Arista's Ethernet modular switch coupled with EOS, created a perfect combination of a switching platform with real-time telemetry, leveraging our EOS state-driven, published-subscribed model. Our next win showcases our expansion of Arista in the public sector with their AI initiative. This grant-funded project utilizes Arista's simplified operational models with Cloud Vision. New AI workloads require high scale, high ratings, high bandwidth, and low latency as well as a need for granular visibility. This build out of a single EVPN VXLAN-based 400 gig fabric is based on deep buffer spines and underscores the importance of a lossless architecture for AI networking. This last but not least customer is an example of a campus man. Couple of years ago, the customer was looking to do a complete refresh of their aging campus network, which comprises of four major headquarter campuses, and several remote sites. The customer was able to leverage the Arista validated design models, AVD, all the way from data center into the campus network. The customer chose Arista because they were able to offer best-of-breed operational excellence, as well as security with our zero-trust AVA sensors for threat mitigation across the entire campus of wired switches. Arista's innovative macro segmentation, MSS, combined with leaf access and CoreSpine delivered a compelling two-tier cognitive campus solution. These three customers illustrate our power of the platform and software innovations for a modern network model with a low total cost of operation. We are pleased with our trajectory, setting the gold standard in our industry with the lowest CVEs and vulnerabilities and the highest net promoter score for cloud networking. And with that, I'd like to hand to Ita, our CFO for financial specifics.