Arista Networks, Inc.

Good afternoon, everyone, and thank you for joining us. With me on today's call are Jay Shriulal, Arista Network's chairperson and chief executive officer, and Chantel Brightup, Arista's chief financial officer. This afternoon, Arista Networks issued a press release announcing the results for its fiscal third quarter ending September 30th, 2024. If you would like a copy of this release, you can access it online at our website. During the course of this conference call, ERISA Networks Management will make forward-looking statements, including those relating to our financial outlook for the fourth quarter of the 2024 fiscal year, longer-term business model and financial outlooks for 2025 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 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-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. 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. And thank you everyone for joining us this afternoon for our third quarter 2024 earnings call. We delivered revenues of 1.81 billion for the quarter with a record non-GAAP earnings per share of $2.40. Services and software support renewals contributed strongly at approximately 17.6% of revenue. Our non-GAAP gross margin of 64.6% was influenced by both pressure from CloudSight and customer pricing, offset by favorable enterprise margin and supply chain hygiene. International contributions for the quarter registered at approximately 18%, with the Americas very strong at 82%. Clearly, Q3 2024 had a lot of bright spots in the quarter, and we are encouraged by the strength and momentum of the company. At the recent 10th anniversary in June in 2024 celebration and vision event, we covered a lot of ground and what we would have otherwise said in an analyst's day. So today I'd like to briefly expand on our Arista 2.0 plans for 2025. We believe that networks are emerging at the epicenter of mission critical transactions and our Arista 2.0 strategy is resonating well with customers. We are, we believe, the only pure play network innovator for the next decade. Our modern networking platforms are foundational for transformation from silos to centers of data. This can be a data center, a campus center, a WAN center, or an AI center. At the heart of this is our state-oriented, publish, subscribe, network data lake, EOS software stack for multimodal data sets. One simply cannot learn without having access to all this data. So it is all about the data. We provide customers the state foundation for data for AI and machine learning, without which AI and ML would just be buzzwords. Arista is well-positioned with the right network architecture for client-to-campus data center, cloud, and AI networking. Three principles guide us and differentiate us in bringing this data-driven networking. Number one, best-in-class, highly available, proactive products with resilience and hitless upgrades built in at multiple levels. Two, zero-touch automation and telemetry with predictive client-to-cloud one-click operations with that granular visibility that relies less on human staff. Number three, prescriptive insights for deeper AI for networking, delivering AIOps and AVA algorithms for security, observability, and root cause analysis. Networking for AI is gaining a lot of traction as we move from trials in 2023 to more pilots in 2024, connecting to thousands of GPUs. and we expect more production in 2025 and 2026. In our vernacular, Arista AI centers are made up of both the backend clusters and frontend networks. AI traffic differs greatly from cloud workloads in terms of diversity, duration, and size of flow. The fidelity of AI traffic flows where the slowest flow matters, and one slow flow can slow down the entire job completion time is a crucial factor in networking. Our AI centers connect seamlessly from the back end to the front end of compute, storage, WAN, and classic cloud networks. Arista is emerging as a pioneer in scale-out Ethernet accelerated networking for large-scale training and AI workloads. Our new EtherLink portfolio with wire speed 800 gig throughput and non-blocking performance scales from single-tier to efficient two-tier networks For over 100,000 GPUs, potentially even a million AI accelerators with multiple tiers. Our accelerated AI networking portfolio consists of three families with over 20 switching products and not just one point switch. At the recent OCP in mid-October 2024, we officially launched a very unique platform, the distributed EtherLink 7700, to build two-tier networks for up to 10,000 GPU clusters. the 77R4 DES platform was developed in close collaboration with Meta. And while it may physically look like and be cabled like a two-tier leaf spine network, DES provides a single-stage forwarding with highly efficient spine fabric, eliminating the need for tuning and encouraging fast failover for large AI accelerator-based clusters. It complements our Arista flagship 7800 AI spine for the ultimate scale with differentiated fare, and fully scheduled cell spraying architecture with a virtual output queuing fabric, saving valuable AI processor resources and improving job completion time. I would like to now invite John McCool, our Chief Platform Officer, to describe our 2024 platform and supply chain innovations after a challenging couple of years.

John, over to you. Thank you, Jayshree. I'm pleased to report The 7800R4 spine, along with the 7060X6 AI leaf that we announced in June have entered into production, providing our customers the broadest set of 800 gigabit per second Ethernet products for their AI networks. Together with 800 gigabit per second parallel optics, our customers are able to connect two 400 gigabit per second GPUs to each port, increasing the deployment density over current switching solutions. This broad range of Ethernet platforms allows our customers to optimize density and minimize tiers to best match the requirements of their AI workload. As our customers continue with AI deployments, they're also preparing their front-end networks. New AI clusters require new high-speed port connections into the existing backbone. These new clusters also increase bandwidth on the backbone to access training data, capture snapshots, and deliver results generated by the cluster. This trend is providing increased demand for our 7800R3 400 gigabit solution. While the post-pandemic supply chain has returned to predictability, lead times for advanced semiconductors remain extended from pre-pandemic levels. To assure availability of high-performance switching silicon, we've increased our purchase commitments for these key components. In addition, we will increase our on-hand inventory to respond to the rapid deployment of new AI networks and reduce overall lead times as we move into next year. Our supply chain team continues to work closely with planning to best align receipt of these purchases with expected customer delivery. Next-generation data centers integrating AI will contend with significant increases in power consumption while looking to double network performance. Our tightly coupled electrical and mechanical design flow allows us to make system-level design tradeoffs across domains to optimize our solutions. Our experience in co-design with the leading cloud companies provides insight into the variety of switch configurations required for these tightly coupled data center environments. Finally, our development operating software with SDK integration, device diagnostics, and data analysis supports a fast time to design and production with a focus on first-time results. These attributes give us confidence that we will continue to execute on our roadmap in this rapidly evolving AI networking segment. Back to you, Jayshree.