Arista Networks, Inc. Q2 FY2025 earnings call

• Arista experienced momentum in Q2 2025 with record results, achieving $2.2 billion revenue. • Software and service renewals contributed ~16.3% of revenue. • Non-GAAP gross margins were 65.6% influenced by efficient supply chain and inventory. • International contributions were 21.8% and Americas 78.2% in Q2. • Raised 2025 annual growth to 25%, targeting $8.75 billion in revenue due to increased momentum in AI, cloud, and enterprise sectors. • AI center strategy complements data center focus, with scale-up and scale-out back-end networks and scale-out front-end networks. • Acquired VeloCloud to offer modern branches in the Agentic AI era, filling the missing void in distributed enterprise solutions. • Welcomed Todd Nightingale as President and Chief Operating Officer to bolster leadership for growth to $10 billion in 2026.

In Q2 2025, Arista Networks achieved total revenues of $2.2 billion, surpassing the plan by $100 million. Software and service renewals contributed approximately 16.3% of revenue. Non-GAAP gross margins were 65.6% due to efficient supply chain and inventory benefits with a nonmaterial tariff impact. International contributions for the quarter were 21.8% and Americas accounted for 78.2% of revenue.

• Raised 2025 annual revenue growth to 25%, targeting $8.75 billion. • Q3 2025 guidance: revenue ~$2.25 billion, gross margin ~64%, operating margin ~47%, effective tax rate ~21.5%. • Campus revenue target for 2025 is between $750 million and $800 million, inclusive of minimal VeloCloud acquisition impact.

• Market competition, including coexistence with white box vendors and NVIDIA's participation. • Supply chain constraints, component costs, manufacturing output, and inventory management issues. • Tariffs, trade restrictions, and inflationary pressures. • Risks related to forward-looking statements, including actual results differing materially from anticipated statements.

Q: George Notter from Wolfe Research asked about the competitive environment and Arista's differentiation.

A: Jayshree V. Ullal stated Arista's innovation, differentiation at platform performance, feature, and customer intimacy levels remain strong despite competition.

Q: Meta Marshall from Morgan Stanley inquired about cloud strength and front-end vs back-end upside.

A: Jayshree V. Ullal said the pendulum is swinging to a more balanced deployment of cloud and AI, with AI traffic putting pressure on front-end cloud as well.

Q: Ryan Koontz from Needham & Company asked about VeloCloud's fit with Arista's go-to-market.

A: Todd Nightingale responded that VeloCloud fills a hole in the enterprise campus portfolio and complements Arista's go-to-market through the channel and MSP motion.

Q: Amit Daryanani from Evercore asked about the reason for raising the 2025 guide from 17% to 25%.

A: Jayshree V. Ullal mentioned strong activity translating into confirmation across enterprise campus, AI, and cloud sectors.

Q: Tal Liani from Bank of America asked about growth sustainability and margin sustainability.

A: Jayshree V. Ullal stated Arista's efficiency and customer appreciation for support, quality, and innovation, and mentioned Tomahawk 6 is in labs with new products to come next year.