Conference Transcript - ANET 2026-05-14

Ryan Kuntz, Analyst — Needham

Hello, and welcome to Needham's 21st Annual Technology, Media, and Consumer Conference. I'm Ryan Kuntz. I'm really excited to host Arista Networks here today, joined by CFO Chantel Breithrop and John McCool, SVP, as well as Rudy Arroyo, VP of IR. So welcome, guys. How are you doing?

Chantelle Breithaupt, CFO

Thanks for having us, man.

Ryan Kuntz, Analyst — Needham

Excellent. Well, Chantel, let's start with your excellent quarter you guys had. Can you maybe walk us through how you felt about the results, obviously beating expectations, and what's some of the kind of key demand drivers in your first quarter work?

Chantelle Breithaupt, CFO

Yeah, thank you. We were very excited as a company to report our results. I'm very proud of them as a team. We're very pleased with the 35% revenue growth. And if you take that, Ryan, with the change in deferred revenue, it's actually 54% of revenue forward-looking kind of growth. I'm very excited by that, right? We raised FY26 again to the $11.5 billion. Twice in the last two sessions with you guys raised the year, which is great. And if you guys go look, I encourage you all on the call to go look at our latest earnings deck, where we actually also raised our three-year CAGR outlook to be 20-plus percent. So, you know, a lot of great news, a lot of great momentum. So super excited. You know, as Jayshree said, we've never seen more demand than we see at this time. And we're really encouraged. We're encouraged by the progress we see in AI and the adoption of our 100 gig Etherlink portfolio. We're proud to be winning new logos across all the sectors, all our customer sectors. And, you know, the proof of concepts for campus are really working well. We have a high win rate where we can get in there and look at the campus where we're only 3 percent market share today. EPS growth, I think, was stellar. So sum it all up.

Ryan Kuntz, Analyst — Needham

we're super excited and feeling the momentum. Excellent. And within the quarter, you know, hyperscalers, your big customers, obviously a big contributor there. Some of your neoclouds, I'm sure, can maybe walk us through your thoughts about how your different customer segments

Chantelle Breithaupt, CFO

contributed in Q1? Yeah, I think that we said, you know, it was a really great quarter across the board, but in the sense of we saw some really strong performance from the AI specialty provider segment, which, of course, is across the AI portfolio. So I think that's continuing to do well. And so from that perspective, I think all of those segments are showing really great signs

Ryan Kuntz, Analyst — Needham

for the year. Super. Yeah, you mentioned the nice step up in deferred. I think it was up, what, 100%? Yep. Year over year, just incredible. I mean, can you remind us again, what's going into deferred and what's driving that acceleration here for investors that they should be paying

Chantelle Breithaupt, CFO

attention to. Yeah, I think it's really important for investors to understand and to go look at the earnings deck because we have some analysis and trending, I think, helpful to position where deferred is for rest over time. But just to remind, what goes into deferred, so we talk about the $3.5 billion of AI revenue in the P&L this year, but most of what's sitting in deferred is AI use case and product. And so you have to look at both combined to look at the AI demand that we're seeing across the board. And it's not that we just put it in once and it's aged over two years, things come in and out of the deferred into the P&L. So it's rotating, it's refreshing. And so I think from that perspective, it's important to look at the earnings deck pages we have, but it's a sign of growth and momentum, you know, in the sense of the AI demand that we're

Ryan Kuntz, Analyst — Needham

seeing. It's clear, incredible demand environment right now for yourselves and a lot of your peers and your ecosystem partners, I'm sure. And with regards to your full year, you know, raising that to 28%. What were some of the puts and takes there? Coming out of the quarter, I think some of the investors were maybe a little disappointed that you guys didn't pull the second half up as much. And how would you characterize your constraints there on your ability to raise your full year a little more relative to your supply environment?

Chantelle Breithaupt, CFO

Yeah. I don't think the year guide was in the sense of necessarily tying it to the supply environment for this year, I think. And John will take us through probably a little bit during your questions in the sense of the supply environment. It's a when, not if to us. I think you have to take our, I think I would take it the inverse way, Arista raising twice. And we never assume 100% of everything's going to work in our guidance philosophy. So I would take it as, hey, Chantal and Jayshree raised twice in the last two quarters, and we're only in May. So let's keep watching the future quarters. And if everything can fall into place, we'll see where we can get too. I think that's how I would take it versus always trying to meet what people expect from us from a guidance perspective. That's not new. So, you know, we'll get it. Yeah. Trying to be

Ryan Kuntz, Analyst — Needham

conservative as you guys are and, you know, beaten race. We like that. If I had to choose a philosophy, I would choose that one. For sure. And John, how would you characterize the supply environment and some of the puts and takes and what you guys have been successful in doing? You obviously tie up a lot of capital in terms of commitments with your strategic big partners like Broadcom. Kind of walk us through your thoughts on some of the things that are going well and some of the challenges you're feeling right now in supply.

John McCool, Other

Sure. Let me start with the going well. If you think about Chantel's comments on deferred, the actual supply chain team had to deliver both the deferred revenue plus the revenue that was recognized. So 54% growth year after year. So we have a lot of busy folks, and our suppliers are very eager to support us to fill this demand. That said, the entire supply chain environment with the AI demand is really pressing capacity on foundry. First, we saw that with memory and how that played through. There's a lot more fabs with memory on silicon. There's some concentration in those fab cycles. So that's what we're up against is, you know, an environment that's really booming across the board and really having to drive that to turn it into finished goods and ship. So we're really comfortable with, you know, our execution so far and we'll continue to drive it.

Ryan Kuntz, Analyst — Needham

As regards to your updated guidance, you feel like you're, you know, have everything you need in place in terms of supply chain to execute on the guide and hopefully chase some upside there?

John McCool, Other

We're very comfortable with the guy, both margin and revenue, for sure.

Ryan Kuntz, Analyst — Needham

Excellent. And can you maybe walk us through how you use purchase commitments to really lock in that supply? Your purchase commitments were up pretty strong.

John McCool, Other

Yeah. Is that around memory? It's across the board, but in the areas where there are constraints, specifically as we look ahead into 2027 and what we're seeing from the demand environment. But it also helps us in short term get very tighter with those suppliers in terms of our demand today.

Chantelle Breithaupt, CFO

Yeah. And the only thing I would add, John, to your comments is that that raised $8.9 billion, it is across everything. The majority, I would say, is chip related. And it's a 52-week lead time, right, John? So we're leaning into your point into 27. So getting ahead of making sure that that's sorted for what we need to deliver in 27.

Ryan Kuntz, Analyst — Needham

These TSMC guys are going to be pretty busy, I think.

Chantelle Breithaupt, CFO

I think they've been busy for a while.

Ryan Kuntz, Analyst — Needham

Great. Well, maybe shift into customers and what's happening in the AI domain. It's been a huge success story for you. I remember back a couple of years, a lot of questions, you know, what was Arista's role in the AI backend? And you're certainly proving that out and just knocking down some great wins. I think in a quarter you announced that your fourth AI customer had moved their back end from InfiniBand over to Ethernet. What brought that customer over and how do you feel about that going forward, all of your AI accounts there?

John McCool, Other

It was the same trend we've seen on other ones. That particular customer was kind of early on, had made some investments in InfiniBand. and the full NVIDIA stack. But the compelling reason to move to Ethernet is multi-vendor support it, agnostic to the endpoint, so NVIDIA GPU, AMD, something you build on your own inference engine, same capability as your front-end network, your back-end network, so the operational simplicity around it. And I would just add, you're seeing the same dynamic around NVLink and ESUN starting to come up, the industry rally around that. And while that's not a near-term thing in terms of revenue, I think that also has bearings in terms of the architecture going forward.

Ryan Kuntz, Analyst — Needham

Super interesting. Maybe Chantel talking about price a little bit, I think you announced some price changes to offset the memory costs. How is that flowing through the income statement here relative to price changes?

Chantelle Breithaupt, CFO

Yeah, I think that back to John's point, I think the supply chain team's done great work over the last few quarters. And you've seen various companies talk about different quarters in the last three to four where memory's been in their conversation. Our philosophy or our approach and strategy was to, you know, understand the market, understand where we thought the pricing was going to go across to us. And the kind of the adage, you know, measure twice, cut once. So we wanted to be sure we had a pretty good line of sight and visibility into what the cost was going to be for us for the next few quarters. And so with that, Ryan, we did a price increase, which customers never love, but at least it was a well-known topic. Our goal was to be margin neutral over the time of the backlog converting to new orders. And so I would say that kept us in our 62 to 64 gross margin guide, which we've been talking about for, I think, three or four quarters now. So I'm super excited we've been able to hold it through that. You know, we've earned the value and trust of our customers to have those commercial conversations. So we're pleased with the result, but never like to deliver a price increase to the customer. So I think margin neutral is best planted, and that's allowed us to keep our guide.

Ryan Kuntz, Analyst — Needham

Sure. I mean, everyone in the hardware industry is feeling that one pretty hard. And you guys exposed to both DDR4 and DDR5 across the portfolio?

Chantelle Breithaupt, CFO

Yeah, not the same equal weighting, but yes, to both technically.

Ryan Kuntz, Analyst — Needham

yeah great um you know as you think about your uh your your ai revenue bogey here 3.5 billion which is uh you know raised from 3.25 uh that that just counts your is that just count your four large customers there and not others that get added new logos that you had yeah i think

Chantelle Breithaupt, CFO

that 3.5 billion you know the way i like to look at it is you look at it as a percentage of the 11 five. We're talking 30% of our revenue. Not too many years into AI totally is a pretty good win rate. I think that, but it covers more than the four customers. I think that you heard a couple of quarters back, you know, you could technically count about a hundred customers across NeoCloud, some large enterprise, the four we talked about. The four initial pilots were just to take you along the journey with us as investors and community, how it was going with the larger ones, but it covers where AI we think is the predominant use case. So we're proud to work with some of the largest customers, but some of the smaller ones that are starting to get into their inference conversation.

Ryan Kuntz, Analyst — Needham

I'd like to explore that, if we could. Just discussing some of the neoclouds, what the neocloud kind of procurement model, how that might differ from a hyperscaler type model, and then maybe talk about inference. Could you guys dive into that?

Rudolph Araujo, Head of Investor Relations

Sure. Yeah, I can probably jump in on that one, Brian. So I think the new clouds have kind of evolved a little bit, right? Like I think when they started, a lot of it was looking for a rinse and repeat kind of reference architecture kind of model. Frankly, they needed allocations of compute, which bound them on networking decisions, right? What I think what they realized is they were all starting to look the same, right? So how do you differentiate in a crowded new cloud market in terms of what we bring to the table? And I think what they realized is the network is actually pretty critical to that differentiation, right? Because the network can mean the difference between job completion times taking longer or shorter. It can mean the difference between power utilization being higher or lower. It could be the difference between time to first token, you know, when we start talking about inferencing, et cetera. So what we're starting to find now is that they are actually realizing that they can't just be bound into these agreements based on what's good for compute, because having the best in class compute is no use if you've got a substandard network, right? So that is opening up the market for sure. I think the other thing is they are definitely not buying at the same levels as the largest hyperscaler, right? So that's perhaps stating the obvious, but they are also the folks that need a little bit more hand-holding, right? They don't have the experience necessarily of having built these large cloud networks, et cetera. So we're also seeing a higher attach with Cloud Vision, for instance, and with our capabilities that gives you AIOps kind of visibility into it. So that's kind of a little bit of an interesting dynamic there relative to the hyperscalers.

Ryan Kuntz, Analyst — Needham

Super interesting. And maybe to follow that up, you guys have talked about both, you know, scale across as well as scale out kind of that dynamic. Can you maybe unpack that for us a little bit and, you know, where you've come from and how you see the market evolving in the back end there for you in terms of opportunity and what's driving your revenue?

John McCool, Other

Yeah, I think it's interesting to us because we saw a similar dynamic in the beginning of cloud. once we were able to connect all the servers in the data center in a two-tier spine-leaf architecture, the question was, how do you expand? Because I don't have the physical capacity in this data center for more CPUs. Now it's GPUs. So scale across is becoming kind of the next generation of the leaf spine architecture and the universal spine to interconnect. So we see all different use cases, but specifically where you want one logical AI cluster across multiple physical instances.

Ryan Kuntz, Analyst — Needham

And scale across sounds like it's in the pretty early stages of buildup.

Chantelle Breithaupt, CFO

I would say relative to scale out, you know, and I think in the sense of, and I know, Rudy, you're going to jump in. This is a very exciting topic for us. I think so. The only thing I would say is that it's fairly new, but you can see how it might be required because a lot of this is when you need these kind of federated space, land, access to power, cooling scenarios. And I think that's part of what's driving that need. But Rudy, I know you wanted to say something.

Rudolph Araujo, Head of Investor Relations

I was going to say exactly that. And the other side of that coin is as you start talking about inferencing, Brian, you brought this up, you know, inferencing is increasingly like how do I get as close to the edge as possible, right? Because, you know, if you're sitting in New York right now and you're asking, you know, you're trying, you know, you've got an agent running on your device and you're trying to interact with a model, you don't want to be waiting, you know, seconds. You want it to be far more time. And so that's the other thing that's going to drive, I think, scale across. So we're very excited about it, partly also because it's a very unique product set that it takes to be successful there, right? and we've shown success there. We've got the products. Frankly, a lot of our competitors that we would run into and scale out don't have the product set to compete and scale across. So I think we feel very good about it, but it is relatively early to the point Chantel and John are making.

Ryan Kuntz, Analyst — Needham

Excellent. Yeah, it's great. And lest we forget about good old cloud, front-end cloud, and I think the backend has pretty much sucked all the thought out of the room and the attention, but maybe tell us what's happening in the front-end networks these days. That's been your core business where you've been such a dominant leader for so long. How's the front-end changing to adapt to some of the new AI requirements, and what do you see happening in the boring old cloud business?

Rudolph Araujo, Head of Investor Relations

Yeah. I mean, it's funny, right? I mean, how forgotten, at least in the analyst world or in the world it is. I mean, for us, it's certainly a tremendously important piece of the puzzle, right? From an upgrade cycle perspective, if I can call it that, most customers in the front end are still in the 400 gig era, right? At least at the hyperscale level. Some of them are maybe even the 100, 200 gig era because, frankly, the applications that we're using today are working just fine, right? I mean, you know, we're on a web conference. You know, we're all coming in nice and clear, you know, going over those 200, 400-day networks. It is triggering a cycle, especially as this agentic traffic pattern starts to become more, you know, commonplace. It is going to trigger that cycle. probably next year is when you start to see the front-end networks kind of get upgraded. I mean, we're certainly having conversations right now, so maybe more planning phases right now, but maybe next year is when you start to see the 800-gig kind of upgrades just as the AI clusters start to go into the 1.6 era, right? So you're probably seeing a generational gap between the front-end and the back-end kind of naturally, if you will. The other thing, by the way, is, again, inferencing is having a huge impact there. And frankly, we didn't touch on this, but inferencing is also having an impact and agentic is also having an impact on the enterprise side. And we can talk a lot about that as well. I know it's not front end, but I just wanted to kind of

Ryan Kuntz, Analyst — Needham

get a- I'd like to hit enterprise too. Yeah. That's great, Rudy. Yeah. On the enterprise side, you're having these early discussions, I'm sure with big fortune 50 types and financial And I can imagine those are the leaders leaning in here. Like, where are those discussions with you about architecture and build out? Who's going to hold their hand, you know, to go do these sorts of things? I mean, do you think there are, you know, traditional guys like, you know, your competitors that are maybe deeper, more deeper entrenched in enterprise that are going to get, you know, their fair share? Heather, how do you think about the enterprise kind of AI build out to complement where they already have, you know, quite a bit of private cloud out there, I'm sure, where you guys are very strong?

Chantelle Breithaupt, CFO

Yeah, I think one thing I'll add or at least start with and the team can chime in. You know, I think one thing that we've heard from some of the larger customers, because part of that 3.5 billion is with enterprise customers, as we mentioned. So part of what they are starting to think about as they go through their refresh cycles, as they think about new data center builds, campus and data center, you know, to be fair, is what is their AI landscape? What is their AI goal in the company? And one thing that we're finding is really great in the conversations, when you can have one operating system like EOS across all of those components, it's super easy to have agentic AI sit on top of that because you're only having to hook into one operating system. You can imagine having an agentic AI kind of portfolio where you're trying to go over different operating systems, not as easy to hook in, not as easy to be ubiquitous experience. I think that's a great, like Ken thought about that maybe 20 years ago, not sure, but he designed something perfectly built for it. That's things we hear from customers. We're hearing them pull in their campus refresh earlier to try to get into this, get ready for at the edge agentic AI inference. Those are some of the things we're hearing, but Rudy or John, anything you want to add?

Rudolph Araujo, Head of Investor Relations

Yeah, I think, Shantel, you hit maybe the most important thing I hear from customers, right? They're realizing that AI within the enterprise is not just a campus issue. It's not just a data center issue. It goes across the branch, the campus. It's like Shantel's point, that unified operating platform across all of those is really something that's exciting. It's frankly the other thing they're asking us and we've heavily invested in is what is our AI strategy for, you know, AI for networking, right? We've talked a lot about AI for networking and AI ops. And we've come to invest there in Ava, which is our autonomous virtual assist, driving better outcomes, if you will, for customers and being able to do everything from root cause analysis to helping them automate as much of the network operations as they like, right? Like this is not about, hey, you don't need a network operator anymore. It's about how can we augment what the network operator is doing and make their life more efficient, if you will.

Ryan Kuntz, Analyst — Needham

Really great, Rudy. Let's shift gears to one of my favorite topics coming out of OFC, which was the XPO announcement. And I went in very excited to hear about it because I hadn't done a ton of work on it I was probably a little behind. But wow, I walked away from OFC and saw just the broad industry endorsement and was so impressed. So can you maybe walk us through kind of how you got there, how you built such strong support, and what it means to Arista for that to be adopted as an industry standard?

John McCool, Other

We have a very passionate founder, Andy Bechtelschein, who over many decades has really led the definition of many MSAs working with these partners. It goes way back in terms of his development. The most recent before this was OSFP. And we anticipated that at some point, the thermal dissipation would be such that the conventional state-of-the-art would not be able to contain that. And that really was an enabler to the products you see today and our leadership in those deployments. And we're seeing the same thing happen as we go to 1.6T and beyond. The OSFP form factor was great, but won't be able to carry the industry on the next generation. So he's been working with the team here at Arista and the optics team with those partners and building it out. And we engage with them in testing and definition. So it's been a real great collaboration with the industry. Yeah, it's a super cool solution. Go ahead, Chantel.

Chantelle Breithaupt, CFO

I don't want to stop you from saying it's super cool. What were you going to say?

Ryan Kuntz, Analyst — Needham

No, go ahead.

Chantelle Breithaupt, CFO

But I think that we're very proud because it's industry leaning, right? But as far as what it means for us, it's open to the industry and may all people play competitively in it. But I think for us, again, it's another thing where we've been kind of ready. We've got our product portfolio already thinking about it for the next generation of things. And so I think it just places well to be ready for something that the whole industry, hopefully, and our customers, more importantly, will benefit from for years to come. Right. And so for sure. Yeah.

Rudolph Araujo, Head of Investor Relations

Yeah. The other aspect of this that sometimes I think doesn't get fully absorbed is the front panel density that this can add. right? So being able to shrink those rats opens up a whole bunch of other scale-up technologies from RF to micro LEDs, et cetera, that are far more power efficient, right? So it opens up, I think, an entirely somewhat tangential benefit, but a super important benefit as these clusters start to get more and more dense, and the front panel density is becoming a limiting factor, right not to forget by the sheer amount of sheet metal uh you know less sheet metal that you need and the structural costs that frankly aren't paying the bills right like they're just sure

Chantelle Breithaupt, CFO

dead weight it will yeah i think that i think that's the stat we would throw out there is you know 40 plus 40 plus percent footprint reduction just to give the audience an idea of what we're

Ryan Kuntz, Analyst — Needham

talking about yeah and so you're really you're saying not just for scale out but there are other applications for that same technology that you can embed on that sled, that XPO? Yeah, I mean, scale

Rudolph Araujo, Head of Investor Relations

up is probably the most interesting one because it came to the point where it was this easy definition, right? If you're within the rack and scale up, if you go outside the rack and scale up, well, we realized that we need more compute in that scale up domain. And so now we're thinking of ways to go across multiple racks, but still stay within that coherent memory kind of scale-up domain. Well, technologies like this are gonna enable that, right? Because it gives you a lower power way to interconnect these across a larger physical distance where copper is really gonna, you know, struggle, right? So not only is there a direct benefit, you know, from an optical perspective, but I think it opens up other avenues. And like everything Andy always does, right? It's completely open standards-based, There's nothing prepared, and there's no, like, hey, you have to have Arista to get this to work. But I think, to Chantel's point, it really continues to show the thought leadership that we bring to the table and how we move the industry forward with these open standards.

Ryan Kuntz, Analyst — Needham

Super cool. So when do we start seeing products in customers' hands and supply chains start to ramp? What's the timeframe that this starts to impact the industry?

Rudolph Araujo, Head of Investor Relations

So I think this is really something that will probably be most impactful in the 3.2 TEM. right? So 1.60, you're still going to continue to see. And frankly, I think if Andy was here, he'd tell you, OSFP is not going away, right? The majority of updates out there for the foreseeable future will be OSFP, especially when you count the enterprise and things like that. But I think for XPO specifically, you'll start to see the first product setting come out next year, and Really large ramps in that 3.2 terabyte era, where its value is much more impactful than, you know, to John's point, right, where OSFP would struggle.

Chantelle Breithaupt, CFO

Right. And the only other thing I would add to that is I think, you know, about a quarter ago, so everyone thought 3.2T was when you'd have to go to CPO. And I think this shows that now we have a whole longevity, even at 3.2, that that's not required.

Ryan Kuntz, Analyst — Needham

Exactly. Great. Great. Maybe shifting to the neoclouds, I know we touched on them already, but you talked about a more consultative sale. Can you maybe unpack that a little bit for us in terms of what your role is in working with them? They're not probably as deep and sophisticated as some of these hyperscalers have been doing this for decades. So how is Arista's role evolving with the neoclouds and AI

Chantelle Breithaupt, CFO

specialists? Yeah, I can start and the group can chime in. So I think I personally think neoclouds is a fascinating segment. You know, every one of them is different and a pleasure to work with, but they all, they come to us differently. Generally, they come to us because they know we have the bigger cloud experience. So they would like more of that, like what Rudy and John described, but there are different scenarios that we come into it. There's the scenario where the team has experience and they know us and it's a best of breed open conversation, High win rate there because everything, our portfolio of Etherlink suits that very well and all the things that Rudy mentioned. Then there's the example like what Ken Duda mentioned in our earnings call where the first try of it with the team, team capable but in a different scenario, they went with a different solution. And now they've come to us because they realize the capabilities required of their incumbent technology and architecture didn't serve their scale-out needs. And so Ken Duda did a very good job, I think, articulating that scenario. we see those and we see things that when people feel emboldened to go to different XPU vendors they come to us because they know we're agnostic to the XP so we see they come at us from different angles but we are known as being a great provider to them for their for their AI needs I don't know Rudy and John if there's anything you want to add but yeah I mean

Rudolph Araujo, Head of Investor Relations

in terms of the selling process what's done well for Rista is this deep engineering to engineering partnership, right? Like, so having our really, you know, folks that are working on some of these largest networks be in that consultative selling process with the NeoCloud is something that they appreciate because like, frankly, they're breaking new ground and they're trying to do this at kind of the speed of light, so to speak, right? They do, you know, what normally might've taken a year or two years to RAM, you don't have that luxury anymore. The only other thing I'd add, and I'll tie this back to your previous question about optics, right? Like, one of the things that they appreciate about working with us is we don't lock them into, oh, well, if you want to do this, you have to go down the CPO route, right? Like, we still give them that optionality. You know, if they want to go down CPO, you know, we're thinking about open CPO and things of that nature. XPO is obviously there. You know, your LPO is an option. You know, traditional OSFP, fully retimed. You know, like, whatever. They don't feel as locked in, and I think that's something that they're really beginning to appreciate because, as I was saying earlier, ultimately, they've got to bring dollars and cents in the door from their end customers. And to be able to do that, they need to be able to differentiate from the neocloud down the street, right? And how do they do that if they're all running the exact same architecture, if you will?

Ryan Kuntz, Analyst — Needham

Makes sense. I want to go back and touch on Agentec. It's going to come up more and more and more. I think it's really starting to impact companies' core business with all the different agents that are being rolled out. You know, how is that affecting the architecture of your customers? We hear about more CPU content, locating CPUs closer to GPU clusters. I mean, how does this affect, you know, ERISA's demand equation and the conversations you're having with customers in terms of agentic infrastructure?

Chantelle Breithaupt, CFO

Do you guys want to start or do you want me to start?

Rudolph Araujo, Head of Investor Relations

Yeah, I can start. But so Shantai kind of touched on this a little bit earlier, right? Like people are starting to think about, okay, what does this new bandwidth pattern on the, you know, look like, right? You know, in our traditional world, maybe, you know, it's a little bit more bursty, right? You go to a chat GPT, you know, kind of more chatbot, kind of a world of LLMs or generative AI. It is still bursty, but maybe the bursts are slightly bigger, if I can use that term. you get to an agentic thing and these things are talking to each other all the time, right? So how do you kind of manage through that process? So as Shantel touched on, Wi-Fi 7 is becoming maybe a sooner cycle than you normally would have seen with these Wi-Fi generations. They're also thinking about things like, what does that mean from a power over internet perspective, right? Because now you've got all of these smart devices that are all across your environment that are also becoming agents in themselves. So how do you enable them? How do you enable them to be securely connected to your network? So zero-cross networking is another aspect to the conversation that they're having. And then, frankly, kind of the bread-and-butter stuff around things like routing and encryption on the wire and multi-tenancy, stuff that, frankly, I think most people would think is boring until maybe six months, a year ago, but it's become super important now. And again, I'll repeat what I said earlier. We're one of the few folks that has the products to play in that space, right? So we like our shot as we get into that. The competitive, it's not that there's no competitors, but it is a different competitive environment than I think you see with maybe scale-out, for instance.

Chantelle Breithaupt, CFO

And I think that, sorry, go ahead, John.

John McCool, Other

Just one of those boring parts that Rudy's talked about that's baked into the architecture. Whenever we see like a mission critical application, we see a thrust in those customers looking at observability, what's happening on my network. So now you can imagine all these agentic communications, this new type of workload, what kind of visibility can you provide customers to see what's actually going on? That's going to be pretty important as well. Is that where your telemetry kind of has a lot to offer? Absolutely. Not just the telemetry itself, but the architecture or the state-based architecture and be able to stream information is going to be critical.

Ryan Kuntz, Analyst — Needham

Yeah. That's, that's a big differentiator for you guys. I've heard a lot about that. You know, for guards to 1.6 T coming, you know, how are you thinking that, you know, the long way to Tomahawk six, you know, how, how is that going to impact your, your, your, your mix and demand and is this just a normal generation or is this, Does this bring any kind of accelerators to the demand equation to keep up with all this bandwidth?

Chantelle Breithaupt, CFO

Well, I think we're not pre-announcing anything, just to be clear in the conversation the way you asked the question. But I think you can count on us to be ready when the cycle's there, to be ready with the great products we usually do. So take that as we'll be ready when the market's ready and everything comes together from an ecosystem perspective. I think, I don't know if there's anything there, Rudy or John, we talk about in the sense of accelerating at this time. You know, clearly there's a demand in the portfolio and the customer set, but Rudy, anything you want to add?

Rudolph Araujo, Head of Investor Relations

I mean, you know, I guess just one interesting data point, right? Like I think we released our big products. I mean, John will probably keep me honest here, 2019, I think, give or take. You know, the 800 big products came out in 2024, right? All that, what, five years? It's not going to be five years to get to. I know we're not pre-announcing product, but I can tell you it's not going to take five years to get to 1.6T, right? And people are already talking about 3.2T. So in that sense, the pace of innovation is absolutely rapid, right? I don't think it's anything we've seen in the world before. And frankly, you know, that's why when Jayshi says, look, this demand environment is nothing like I've ever seen before. And by the way, she's seen a lot, right, in this industry. That is saying something. But in terms of how customers think about it, it is the next generation of networking. The uniqueness, of course, is the cooling infrastructure is changing, right? Definitely. We now want to see a mix of air-cooled and liquid-cooled. So that's, I think, an interesting dynamic that customers are still kind of trying to get their hands on because this is breaking new ground for everyone. And it's part of the reason why Chantal talked about new use cases, new products, et cetera. This is some of that complexity that comes in. It's not just about can we shift the product out the door? It's can the customer also be able to absorb that and get value out of it. And that's where I think we come into a partner. It's a model that's worked really well for us. And we see no reason to change from that.

Ryan Kuntz, Analyst — Needham

Yeah, this shift to liquid cool data centers, I mean, I didn't see this coming. Mechanical engineering would be so cool again.

Chantelle Breithaupt, CFO

It's back.

Ryan Kuntz, Analyst — Needham

It is. Let's just wrap it up here. But let's talk briefly about campus and your progress in campus and Wi-Fi a little. Can we touch on that briefly?

Chantelle Breithaupt, CFO

Yeah, I would love to. You know, I think that if you look at, you know, I think last year was our first real external kind of accountability model. And we hit that revenue of $800 million. We raised the target this year to $1.25. So 55% growth for ourselves with you guys to hold ourselves accountable. Super excited. You know, you've heard others talk about there's a great refresh cycle happening in the next couple of years. We're definitely participating. We're winning in campus, not even being in the data center yet, which validates our portfolio. Our proof of concepts are very well received. I think that's – so we're just – we're super excited with campus. Our portfolio is there to meet their needs, including this agentic AI conversation. Rudy, anything you wanted to add on the – or John?

Rudolph Araujo, Head of Investor Relations

55% in context, right? Like it's a market that's growing single digits. But, you know, and immediately we're starting from a low base. I mean, our share is probably in the 3%, 4%, 5% range today. But, I mean, that is just tremendous growth. So, I think, you know, just as much as we're excited about the AI opportunity, I think the campus opportunity is incredibly exciting, especially because there's far more customers building campuses than there are customers building AI, right? So, it's a different selling motion. It's a little bit slower of a ramp, et cetera. But it is a long game, and we're in it for sure.

Ryan Kuntz, Analyst — Needham

That is great. Well, super. I mean, I really appreciate you guys joining today. Any last comments you wanted to make, Chantel, to investors? Just wrapping up where Arista is delivering.

Chantelle Breithaupt, CFO

We raised our year twice in the last two quarters. We had 55% across the P&L in deferred revenue, exceeded EPS expectations, and so we'll continue to deliver value to you guys, and hopefully you're as excited as we are on the demand

Ryan Kuntz, Analyst — Needham

that we've purveyed to you today. For sure. Well, thanks for joining.

Chantelle Breithaupt, CFO

Really appreciate it. Thank you. Have a good day. Bye.