Arista Networks(ANET.US) Q3 tawag sa kita: Sinabi ng CEO na higit sa 100 AI customer ng Ethernet ang pumasok sa AI super cycle, unang tinukoy ang kita sa 2027 na $18.5 bilyon

Nalaman ng APP ng Pananalapi ng Zhihui na noong madaling araw ng Nobyembre 4 sa Beijing (pagkatapos ng trading ng Nobyembre 3 sa oras ng Silangang Amerika), inihayag ng cloud networking equipment provider na Arista Networks (ANET.US) ang mga resulta ng kanilang Q3 2026 na nagtatapos noong Setyembre 30, at agad na nagsagawa ng conference call pagkatapos ng market close.

Ang kita noong third quarter ay $3.66 bilyon, tumataas ng 20.5% quarter-on-quarter at 58.5% taon-sa-taon, na siyang pinakamataas na quarterly growth rate mula nang maging listed ang kumpanya, lagpas sa tinatayang gabay ng kumpanya na humigit-kumulang $3.3 bilyon, at mas mataas sa consensus ng Bloomberg na $3.33 bilyon. Ang non-GAAP na gross margin ay 64.0%, bumaba ng 1.2 puntos vs. noong nakaraang taon, tumaas ng 0.6 puntos vs. nakaraang quarter, mas mataas sa humigit-kumulang 63% na gabay ng kumpanya; non-GAAP operating profit margin ay 49.1% (last year 48.6%); non-GAAP net income $1.53 bilyon, tumataas ng 56% taon-sa-taon; non-GAAP diluted EPS $1.20, tumaas ng 55.8%, mataas sa Bloomberg consensus na $1.075. GAAP diluted EPS ay $1.22, tumaas ng 82.1% taon-sa-taon, mas mataas kaysa sa non-GAAP na batayan—ayon sa decomposed financials ng APP ng Pananalapi ng Zhihui, pangunahing sanhi ng inclusion ng mga strategic investment gains na humigit-kumulang $134.5 milyon sa GAAP results (hindi kasama sa non-GAAP). Bukod dito, napabilang ang kumpanya sa S&P 100 Index noong Setyembre.

Sa presyo ng share, sumipa ang presyo pagkatapos ng anunsyo ng earnings, tumaas ng hanggang 12%; sa oras ng pag-publish, halos 7% ang taas sa overnight trading.

Mga Fokus ng Merkado at Tugon ng Management

Ang halaga ng quarter ay hindi mismo Q3 earnings kundi ang unang pagbigay ng management ng forecast para sa 2027: tinatayang kita ay $18.5 bilyon (38%–40% growth), malayo sa consensus ng Bloomberg na $16.4 bilyon; ang target para sa AI networking (AI fabrics) ay $7 bilyon, doble mula sa baseline ng 2026 na $3.5 bilyon, ang cognitive campus ay target na $2 bilyon, tumataas ng 60% (2026 baseline $1.25 bilyon); gross margin guidance ay 62%–64%, operating profit margin ~49%. Kasabay nito, iniangat ng kumpanya ang 2026 full-year revenue guidance sa ika-apat na beses ngayong taon sa $13.3 bilyon (+48%).

Ipinahayag ni CEO Jayshree Ullal ang cycle ng demand bilang AI supercycle: “Sa 2026, kabilang tayo sa AI supercycle; ang mga customer ng Ethernet AI ay higit na sa 100. Sa katapusan ng 2027, inaasahan naming higit sa 10 gigawatt ang mga deployment na sumasaklaw sa mahigit 10 uri ng computation accelerators. Isang kahanga-hangang tipping point ito sa loob lang ng tatlong taon.” Inalala niya na tatlong taon na ang nakalipas ay 4–5 AI customers lang sila, at may 50,000–100,000 NVIDIA GPU lang, at karamihan ng networking ay proprietary InfiniBand.

Sa pag-aalala tungkol sa supply assurance (Susquehanna’s Mehdi Hosseini ay nagtanong kung lahat ng chips at storage ay na-securena), tugon ni President at COO Todd Nightingale: ang kumpanya ay “may malalaking strategic agreement investments sa silicon, PCB capacity, at memory,” at may “napakataas na kumpiyansa” sa kakayahang mag-supply batay sa 2027 guidance, kahit hindi lahat ng orders para sa susunod na taon ay 5 quarters advanced nag-place at “hindi lahat ng orders ay naayos na.” Dagdag ni CFO Chantelle Breithaupt, “may demand visibility kami sa susunod na dalawang quarters, at ang procurement commitments na lumobo sa $11.4 bilyon ay patunay ng kumpiyansa.”

Unang Pagbigay ng 2027 Guidance: AI Dobli sa $7B, Campus +60%

Unang beses nagsiwalat ang management ng 2027 framework: revenue na $18.5 bilyon (+38%–40%), AI networking na doble sa ~$7 bilyon, pinakabilis lumago; campus business $2 bilyon (+60%), “mas mabilis sa merkado”; gross margin 62%–64%, operating profit margin ~49%, tax rate ~21%. 2026 baseline: full year revenue $13.3 bilyon, AI ~$3.5 bilyon, campus ~$1.25 bilyon.

Pinaliwanag ni Ullal kung bakit mas mababa ang total growth sa AI segment growth: “Kapag may mga business na 60% o kahit 100% growth, at ang total ay 38%–40%, klaro na may ilang business na hindi ganoon kabilis. Kumpiyansa kami na lalahok ang lahat ng business sa double-digit growth.” Isinama niyang hindi ito conservative: “Ang simula naming guidance ay mas mataas na kaysa sa mga dati naming forecast, i-enjoy ninyo ito, sana mas lalo pang gumanda.” Itinaas din ng kumpanya ang total addressable market (TAM) ng 2030 sa “higit $200 bilyon.”

AI Networking: 100+ Customers, 10GW Deployment, at Scale-up Timeline

Ayon kay Ullal, may tatlong klase ng AI network ang sinusuportahan ng kumpanya: scale-up (in-rack), scale-out (in-cluster), at scale-across (cross-datacenter). Scale-out at scale-across pa rin ang bulk ng kita; “split ng dalawa ngayong taon ay 70/30,” 2027 ang scale-across ay “at least one-third o mas mataas pa,” ang flagship ay ang 7800 AI Spine. Sa scale-up, ipinakita ng kumpanya sa OCP Summit noong Oktubre ang in-rack scale-up design, kabo lani AMD, Arm, Broadcom, d-Matrix, Meta, Microsoft, Qualcomm, atbp, batay sa ESUN Ethernet scaling, pinakilala ang Etherlink SU-144 architecture na kayang mag-support ng 144 accelerators kada rack at extendable to 1,024 XPU; magsisimula ang scale-up trial sa 2027, volume production sa 2028, sa panahong iyon magiging 144 port/rack, at halos 1,000 XPU na cross-rack interconnect. Inaasahang hindi pa meaningful ang scale-up revenue contribution sa 2027, magsisimula sa 2028.

Tungkol sa 10GW metric (tinanong ni Michael Ng ng Goldman Sachs kung ito ba ay industry number o Arista-specific), tugon ni Ullal: “Hula namin, sa dulo ng 2027—mostly makikita ang exponential ramp noong 2027—mahigit 10GW ang ide-deploy,” kabilang dito ang bagong GW-sized deployments at GW capacity na nagmumula sa scale-across ng existing datacenter; sa scale-across ay 4–5 klase ng XPU na, sa 2027 may dagdag na ~5.

Enterprise at Campus: Security-Driven, Multi-Year Cycle

Inilahad ni President at COO Todd Nightingale ang tatlong nanalong deals: isang Asian network service firm, dahil sa strategic pivot to AI, ay pinili ang Arista (EVPN-VXLAN-based 100G/400G platform for AI frontend); isang leading hospital group, pagkatapos ng rigorous zero trust evaluation, ay pinili ang Arista na may MSS (Macro Segmentation Service) for dynamic security segmentation; isang regional resort/ casino ay nag-upgrade ng mission-critical network gamit ang Arista routing/campus switches.

Itinulak ni Founder at CTO Ken Duda ang security sa puso ng AI narrative: katuwang ang Anthropic, Google, OpenAI, atbp, inilagay ang cutting-edge AI security sa vulnerability discovery process (tulad ng “Glasswing” project), at dahil sa single EOS operating system architecture, CVE vulnerability count ay “wala pang 100,” pinakamababa sa industriya sa nakalipas na 20 taon, sabi ni Ullal “10x–50x gawin na lang kaysa alternatibo.” Sa campus, sabi ni Duda, “papunta sa amin ang enterprise market”—halos lahat ng malalaking kumpanya ay spesipikong tinuturing na critical network ang campus/branches; dagdag ni Nightingale, ang upgrade cycle ay mahaba, pagpapalit ay nangangailangan ng panahon, “inaasahan namin na multi-year cycle ito.”

Mga Detalye sa Pananalapi: Malaking Dagdag sa R&D, Inbentaryo at Commitment Expansion

Ibinahagi ni CFO Chantelle Breithaupt: international revenue $682.5 milyon, 18.6% share (last quarter 23%), ang pagkakaiba ay dahil sa rehiyon ng sales ng major customers, tatlong major region ay double-digit year-on-year growth; operating expenses $545.3 milyon (14.9% ng kita), R&D $408.5 milyon (11.2% ng kita, huling quarter $278.1 milyon), dagdag sa liquid cooling, high power switches, at AI software—sa R&D jump question ng Wolfe Research, sagot ni Duda ay infrastructure upgrades para sa hyperscale AI, at liquid cooling; sabi ni Breithaupt, 9%–11% ng kita ang R&D, 3.0% sales/marketing expense.

Operating cash flow halos $1.2 bilyon; inventory $3.2 bilyon (last quarter $2.5B); purchase commitments $11.4 bilyon (last Q $9.7B), kabilang ang bagong multi-year memory deal; deferred revenue mga $6.8 bilyon (last Q $6.9B), product deferred revenue bumaba ng $86M quarter-on-quarter. Sa tanong ng UBS tungkol sa relasyon ng deferred revenue sa 38%–40% guidance, sagot ni Breithaupt: “Ito ang pinakamaraming deferred activity quarter pero stable ang balance habang naggrow ng 58.5% ang kita, senyales ng malakas na demand”; inaasahang mas mataas ang year-end deferred revenue kesa last year. Sa matindi namang tanong ni Tal Liani ng BofA na “decoupling ng orders at deferred income,” sagot ni Ullal: “Gusto mong gawing physics problem ang demand, wala akong sagot… ang importante ay ang trend: may demand sa AI, enterprise, campus, datacenter—pinakamagandang posisyon ng kumpanya sa 18 taon ko rito.”

Sa tanong ni BNP Paribas kung ang 2027 guidance ay nakadepende sa bagong power infra or deferred income, maliwanag na sagot ni Breithaupt: “Hindi nakabase sa deferred income ang guidance,” batay ito sa 2-quarter visibility at major customer communication; dagdag ni Ullal maraming new products and new use case sa 2027.

Q4 at Full Year Guidance

Q4 guidance: revenue $3.9B–$4.0B (Bloomberg consensus $3.57B), non-GAAP gross margin 63%–64%, non-GAAP op margin 48%–49% (consensus 48.5%), non-GAAP diluted EPS $1.26–$1.30 (consensus $1.139), diluted shares ~1.28B, tax rate ~21%. Ibig sabihin, 2026 full-year revenue ~ $13.3B (+48%), ika-apat na beses na itinaas (dating $12.6B, consensus $12.7B).

Tungkol sa major customer structure (tanong ni Ben Reitzes ng Melius), sagot ni Ullal “diversification ang key”: Microsoft at Meta ay “pinakamalapit na 10% customers,” inaasahan ang dagdag na 1 o baka 2 pang 10% client sa 2026, “feeling namin at least 3, maybe 4,” depende sa shipping capability. Sa tanong sa network front-end cycle (TD Cowen), “sin-wave” ang sagot: kasalukuyang focus ay backend AI networking, ang front-end ay susunod; isang 10% customer ngayong taon ay nag-front-end refresh ng ilang daang G, possible magbago next year.

Buong Tala ng Meeting

Mga management na dumalo: Jayshree Ullal (Chairman & CEO), Chantelle Breithaupt (SVP & CFO), Ken Duda (Founder, President & CTO), Todd Nightingale (President & COO), Rudolph Araujo (IR Lead, Moderator)

Mga analyst na nagtatanong (sunod ng pagtatanong): Michael Ng (Goldman Sachs), Meta Marshall (Morgan Stanley), Ben Reitzes (Melius Research), George Notter (Wolfe Research), Amit Daryanani (Evercore ISI), Tim Long (Barclays), David Vogt (UBS), Simon Leopold (Raymond James), Joseph Cardoso (JPMorgan), James Fish (Piper Sandler), Tal Liani (BofA), Ryan Koontz (Needham), Karl Ackerman (BNP Paribas), Jin Marcote (Deutsche Bank), Daniel Zhu (Bernstein), Sean O'Loughlin (TD Cowen), Antoine Chkaiban (New Street Research), Ben Bollin (Cleveland Research), Mehdi Hosseini (Susquehanna)

Moderator at Introduksyon

Inanunsyo ng moderator ang pagsisimula ng tawag, paalala ukol sa forward-looking statements at safe harbor. Ipinakilala ni Rudolph Araujo ang mga kasaling management, nilinaw na non-GAAP ang batayan ng diskusyon (tanggal ang stock compensation, intangible asset amortization, atbp), at ang reconciliation ng FY2027 non-GAAP guidance sa GAAP ay “hindi kayang ibigay nang walang di-makatuwirang pagsisikap,” pagkatapos ay ipinasa kay Jayshree Ullal.

Jayshree Ullal (Chairman & CEO) Prepared Remarks (Unang Bahagi)

Ipinahayag ni Ullal na ang revenue ngayong quarter ay $3.66B, +58.5% YoY, “pinakamalaking YoY revenue growth natin ito mula nang maging listed tayo.” Ipinunto niya ang bunga ng Arista 2.0 strategy sa 3 taon: mula datacenter patungo sa “centers of data,” gumagamit ng iisang EOS OS (5A Principles: Agile, Automated, Availability, Analytics, AI) mula client, branch, campus, datacenter hanggang cloud at AI center; may network data lake framework for automated/conversational troubleshooting agentic companion. Ang “network-centric acceleration” ay trend na sa 2026: mas maraming customer ang kinokonekta ang backend at frontend ng AI datacenter. Nakuha ng kumpanya ang Forrester datacenter portfolio leadership, at Gartner Leaders Quadrant sa campus wired/wireless at datacenter.

Tungkol sa pagbabago ng AI industry structure, sinabi niyang ang industriya ay mula “compute-centric vertical stack” patungong “network-centric” holistic approach: dahil variety ng heterogeneous models at accelerators, kailangan ng open networking platform; may at least 25 switch ang Etherlink suite para sa scale-up/out/across, optimized for XPU utilization, job completion, at token latency. Sa OCP Summit ng Oktubre, pinakita ang in-rack scale-up design kasama ang AMD, Arm, Broadcom, d-Matrix, Meta (MTIA), Microsoft (Maia), Qualcomm; may orthogonal/backplane/high-density cable at hetero cross-rack designs; trial ng scale-up sa 2027, ports per rack 144, cross-rack 1,000 connection, volume sa 2028. Lumilipat ang industry mula centralized training patungong distributed inference, prefill, decode na mas mataas ang networking intelligence requirement; ang well-designed networks ay “batayan ng optimal token efficiency.”

Sa AI customers: “Noong simula ng AI journey, we talked about 4–5 AI customers with ~50,000–100,000 NVIDIA GPUs, karamihan ay naka-InfiniBand. Sa 2026, nasa AI supercycle na tayo, lagpas 100 ang Ethernet AI customers. By end-2027, over 10GW deployment ah, across 10+ accelerator types. Remarkable turning point in 3 years.” Ipinakilala rin ang Arista AVA (Autonomous Virtual Assistant) na may MCPprogrammable API, allows AI agents-network stack interactions, and cross-domain event correlation.

Ken Duda (Founder, President & CTO) Remarks

Pinag-usapan ni Duda ang dual effect ng AI sa network security. Maganda: AVA ay real-time data driven, tuloy-tuloy na monitoring, troubleshooting, root cause isolation across campus, WAN, datacenter, cloud. Masama: AI ginagamit na para maghanap at mag-exploit ng security holes, “real network security is now necessity, not optional.” Sa nakalipas na buwan, nakipag-collab sila kina Anthropic, Google, OpenAI para integrate cutting-edge AI security sa existing software security pipeline, at bilang key infrastructure provider, natawag sa mga AI-driven vulnerability discovery projects (original: “Project Class win”, posibleng “Glasswing”).

Four principles ang security ng EOS: (1) Single, high-quality OS—20 years, <100 CVEs, industry lowest; (2) Process isolation—isang bug, di apektado forwarding/function, shared state resists lateral movement; (3) Seamless upgrades—repair on affected module lang, no maintenance window; (4) CloudVision compliance dashboard—real-time tracking ng advisories. May zero trust network (ZTN): MSS for dynamic security control, NDR (Network Detection & Response) for proactive threat detection, native line-rate full-port link encryption para protektahan datacenter traffic nang walang performance loss.

Todd Nightingale (President & COO) Remarks

Ikwenento ni Nightingale ang enterprise business surge at 3 cases: (1) Asian network service firm (pivot to AI for speed, scale, resilience) chose Arista over old supplier, EVPN-VXLAN 100G/400G as AI frontend; (2) Healthcare: leading hospital group, after detailed zero-trust eval, chose Arista, goal secure patient data and cloud integrate, R3 core switches centralized routing, CloudVision as-a-Service at automation, plus MSS for system-wide automation; (3) Hotel: award-winning regional resort/casino unified datacenter and campus using Arista routing and campus switches, for gaming floor mission-critical app. Lahat pareho: EOS quality/reliability, seamless customer security integration, TAC supports enterprise transitions.

Jayshree Ullal Prepared Remarks (Part II: Guidance)

Nagpasalamat si Ullal sa supply chain at manufacturing teams sa “industry-wide constraints and shortages.” Ipinahayag: “Binabago namin ang 2026 annual guidance ngayong taon for the fourth time, to $13.3B, 48% annual growth.” Ang “total addressable market (TAM) in 2030 mahigit $200B,” multi-year growth opportunity. Unang beses ang 2027 guidance: “38%–40% growth to ~$18.5B. AI networking fastest growing, double to $7B; cognitive campus healthy 60%, much faster than market, 2027 ~$2B.” “This year lagpas $10B na kami, both 2026 and 2027 double-digit billions, pero Arista way: innovation, quality, profitability, efficiency, zero debt.”

Chantelle Breithaupt (CFO) Prepared Remarks

Sabi ni Breithaupt, “Trifecta: revenue pace, net profit, EPS all record high,” op margin above 49%, and nag-invest beforehand sa R&D, inventory, supply commitments. Pumasok ang kumpanya sa S&P 100 noong Setyembre.

Financial details: core revenue $3.66B (+58.5%, guidance $3.3B); international $682.5M, 18.6% (last Q 23%), difference mostly dahil sa region sale ng major customers, lahat ng main regions double-digit growth; gross margin 64.0% (prev yr 65.2%, last Q 63.4%), supply chain efficiency offsets cost, improved by client mix; op expense $545.3M (14.9% ng revenue, last Q $411M); R&D $408.5M (11.2%, last Q $278.1M), more liquid cooling, high power switch, AI SW; sales/marketing $110.9M (3.0%, last Q 3.6%); G&A $25.9M (0.7%). Op profit $1.8B (49.1%); other net gains $138.6M, tax rate 20.9%; Net profit $1.5B (41.9%); diluted shares 1.278B, diluted EPS $1.20 (last yr $0.77, +55.8%).

Balance sheet: cash & securities $14.4B (last Q $13.3B); May 2025, $1.5B buyback, may $817.9M pa; op cashflow near $1.2B, gained sa earnings at intentional inventory build; DSO 59 days (last Q 68), inventory turnover 1.6 (last Q 1.7); inventory $3.2B (last Q $2.5B), asahan na mag-iba-iba, pwedeng mag-seasonal high; purchase commitments $11.4B (last Q $9.7B), chip orders for new business & AI; deferred income ~$6.8B (last Q $6.9B), mostly product deferred, dropped by $86M—new products, customers, and AI bring more customer acceptance term at deferred swings, “deferred can swing a lot per quarter even apart from the underlying business;” Accounts payable 48 days (last Q 57), capex $100.7M, Santa Clara expansion will be done in months.

Guidance: Q4 revenue $3.9B–$4.0B (meaning FY2026 above $13.3B median); Q4 margin 63%–64%, op margin 48%–49%; diluted EPS $1.26–$1.30 (diluted shares ~1.28B), tax rate ~21%. 2027: revenue +38%–40% (~$18.5B median), gross margin 62%–64%, op margin ~49%, tax rate ~21%.

Q&A Segment

Michael Ng (Goldman Sachs): Nagtanong, ang “>10GW, 10+ accelerator types” ba ay industry or Arista number? Paano pinalalawak ng compute diversity ang chance ng Arista sa networking?

Ullal: AI shifts compute to network-centric; company supports scale-up, out, across na AI network. “By end-2027—2027 exponential ramp year—more than 10GW ang deployments.” Partial ay new GW, pero existing GW captured rin sa scale-across. Scale-across naabot na 4–5 class XPU, 2027 dagdag pa around 5.

Meta Marshall (Morgan Stanley): Composition change ng scale-across/out/up through 2027?

Ullal: 2027 scale-up still early, “not yet material number” until 2028. So in 2027, mostly out and across: scale-across “at least one-third, maybe more”, this year about “70/30”, next year 70% may drop, 30% up. Sa scale-across via 7800 platform, “kapag million XPU na ang kinokonek, zero tolerance for error.” Most demand ngayon is backend AI, palalaki ang overlap ng front and back dahil sa inference growth.

Ben Reitzes (Melius): What about the two 10%+ customers, are they landed, and will they stay in 2027?

Ullal: “Diversification ang key”—diverse accelerator, diverse model, diverse 10% customers. “Pinakamalapit na M&M (Microsoft and Meta), expected sila at least sa 2026, hope longer, expecting at least one and maybe two more. Depende kay Todd/team/tamang shipping—binigyan namin sila hanggang Dec 31.” Sa tingin namin, “at least 3 or maybe 4 10% customers” ay okay na okay kami.

George Notter (Wolfe): R&D jump ba ay one-off o normal na?

Duda: Invest for new AI network opportunities—hyperscaler partnerships depende sa pag-unawa sa particular na pangangailangan; liquid cooling major infra and tech upgrade.

Breithaupt: Keep R&D 9–11% of revenue, may peak sa ilang particular quarters; more detailed 2027 guidance to follow.

Ullal (interject): Mataas talaga prototype spending this quarter—Duda: dahil sa scale-AI opportunities.

Amit Daryanani (Evercore): Ang network centric industry, mas maaga ba nang aambag ang Arista sa system design? Sa 38–40% guide, gaano karami ang “in the bag”, gaano karami pa ang kailangang makuha?

Ullal: Past mainly scale-out/across, pero dahil sa deepened accelerator partnership, mas maagap na kami makakuha ng behavioral data—collab with Cerebras, work with Microsoft (Maia), years na—nag-optimize ng buffer, SW, maximize ng efficiency; output ng scale-up design reflects sa out/across.

Breithaupt: “I trust the guidance and supply chain,” internal execution, external supplier agreements—kaya umasenso ang commitments. Usual visibility ay two quarters, next half dapat matiyak, pero flexible product mix means alam namin saan mag-push.

Tim Long (Barclays): Bakit mas mabilis lumaki ang campus/branch this year/next vs industry? Multi-year ba ito?

Duda: “Enterprise market is coming to us.” Lahat ng key firms tinituring ganap na critical ang campus/branches, at security events pinalakas pa ito; kailangan reliability at mabilis patch/infra adjustment—EOS near-zero downtime is core enabler.

Nightingale: Long replacement/upgrade cycle for campus gear, users need time to learn/shift; “multi-year cycle, as expected.”

David Vogt (UBS): Tumataas ang purchase commitments by $2B but deferred falls—sa context ng 38–40% guide, how to interpret these two?

Breithaupt: All to support end-customer needs. Purchase commitments includes new multi-year memory (sa 10-Q), may konti pang increase by Q4, prepping for 2027. This quarter pinakamalaking deferred income activity, still flat balance, as revenues surged 58.5%—that’s very healthy demand; expects year-end higher than prior year-end.

Simon Leopold (Raymond James): Baseline ng 2027 campus/AI target at switching evolution CPO/optics, ano epekto sa Arista?

Breithaupt: Baseline is 2026 guidance $13.3B, AI ~$3.5B, campus ~$1.25B.

Ullal: Optics ang core ng Arista strategy (chief architect Andy Bechtolsheim, orig: “Andy Bessen”): “Gamitin ang copper kung kaya, pero lapad ng cable >1–2m, pluggable optics/lasers pinaka-wide deploy ataccepted na. Andy pioneers OSFP; new coherent/LPO optics can go long range without DSP; extra small pluggable optics for high panel density in progress, >150 supplier support. Sa nakikita namin, foreseeable future dominated by pluggable optics.” Sa mas mataas na rate, near-packaged optics/open CPO as add-on—Arista pushes for open CPO (pluggable light engines/picobyte module pre-test), “maybe market 2028–2030, not soon. But until then, long live pluggable optics.”

Joseph Cardoso (JPMorgan): 2027 guidance, bakit mas mabagal ibang business, ano assumptions—high base, supply-constrained, at iba pa?

Ullal: “When some are 60–100% up, but overall 38–40%, siyempre may mabagal. Very confident double-digit lahat, some more, some less.” AI, enterprise, specialist cloud, front network all performing. “Eh noong start-2026, concern pa namin kung maggrow ba ang front-end—see-saw pa yan.” Guidance “not conservative, higher than before. Please enjoy, hope for even better.”

James Fish (Piper Sandler): Bakit usually 1–2Q lang ang visible guidance, ngayon, malayo ang 2027? At saan nanggagaling confidence sa 2028 scale-up?

Breithaupt: This early, strong guidance is well-thought: Ken, Jayshree, at team “made sure to feel secure”, 2Q visibility, 2Y customer/tech dialogue, “as always, second half pans out as planned.”

Ullal: Scale-up ay tough market—doesn’t always favor SW; but for non-NVIDIA accelerators, we have the best HW. “Like we watched InfiniBand become Ethernet, ngayon UA Link/NVLink, ESUN ang hinaharap.” Takes years; “with just 2Q visibility, behind it is 2Y work,” kaya confident sa 2027 at 2028.

Tal Liani (BofA): Guidance up, but total and current deferred trend is down—driven ba ito ng new orders or deferred release? Is deferred losing predictive ability?

Ullal: “Physics problem mo ginawa ang demand, wala akong sagot. I don’t forecast deferred. Deferred is strong function of new use case/new product”—use case finished, $millions out, new product, $millions in; trend is up over time, “but won’t grow forever.” Big picture: “demand in AI, enterprise, campus, datacenter—best position ever in my 18 years here.”

Breithaupt: Don’t worry about quarterly deferred swings; guidance and demand confidence high; deferred just reflects the period’s balance sheet item. “As said last quarter: year-end deferred will be above last year’s—P&L did its job without relying on deferred.”

Ryan Koontz (Needham): With scale-up products—more optics/liquid cooling, paano ang delivery model—own rack o partner? Product plan?

Ullal: “We’re still working it out.” Core ang switch, pero kailangan i-design kabuuang rack, iba iba partnership—may gusto full rack, may manufacturing partner, Arista lang switches. “Every path is tough”—three rack designs: orthogonal, cable backplane, cross-rack, lahat unique, roll-out details to follow in coming quarters. One thing certain: “Massive switches coming out, many liquid cooled.”

Karl Ackerman (BNP Paribas): 2027 forecast base ba sa new power infra approval/funding? Needs aggressive deferred income use?

Breithaupt: “Guidance is not based on deferred.” Based on 2Q visibility, biggest customer dialogue, cloud and enterprise run rates. “But demand signals are very strong.”

Ullal: And clarify: “No deferred in guidance, but 2027, like 2026, will have tons of new products and use cases.”

Jin Marcote (Deutsche Bank): After SU-144 is mass-produced 2028, paano gross margin vs current switches? Ilang customers ang committed?

Ullal: “Since IPO, long-term gross margin 60–65%. Ngayon narrowed to 62–64%. No change apparent.”

Daniel Zhu (Bernstein): Sa scale-across, concentrated ba ang customer—cloud lang o may telco/small customer/inference?

Ullal: Pareho: colo and small use case pick 7280 small platform; big firms multi-datacenter, prefer large AI Spine (576 port), Tb class, multi-GW deployment. “Most income focuses on 7800, geo concentrates more on 7280.”

Sean O'Loughlin (TD Cowen): Saan ang front-end network sa cycle—market fixated on 800G+ backend, nasaan na traditional frontend?

Ullal: “Sinusoidal 'yan.” If backend focus, frontend slows, then reverses; 6Q–2Y balancing but one year bias; one 10% client pinalakas ang frontend in one year, possible reverse next. “Right now, backend and AI network demand, frontend will follow after.”

Antoine Chkaiban (New Street Research): AVA commercialization—given recent infra security events, paano quantify opportunity? Product o service revenue?

Duda: “Early stage pa lahat.” AVA just released alpha via CloudVision, pricing model pending, “no forecast or data to share yet.”

Ullal: But outlook good—EOS architecture solid (“from 30 to 67 vulnerabilities, lahat naayos namin, kaya nakapatong ang AVA; others have thousands and can't keep up”), “we feel AVA can be monetized in coming years.”

Ben Bollin (Cleveland): Enterprise vs hyperscale business lead times; progress of enterprise share capture?

Nightingale: Enterprise shorter lead time—switches not highest tech, lower ASP, more buffer stock; AI/hyperscale DC components and finished goods longer. Market push strong this year, good event response, biggest customer meeting ever in December; sales execution “amazing,” expansion next year.

Ullal: Added that recent year investments by Nightingale and sales leadership in US, core sectors, and intl are “paying off.”

Mehdi Hosseini (Susquehanna): Sa $18.5B 2027 guide, all chips/storage locked? Some worry memory tighter in 2027, downside risk?

Nightingale: Proud sa strategic partners, besides silicon, heavy long-term investment sa PCB, memory (as stated), “very confident in forecasted supply. But, of course, we don’t order everything 5Q ahead—hindi pa every order in place.”

Pangwakas na Pananalita

Inanunsyo ni Rudolph Araujo ang pagtatapos ng call, paalala na posted na ang supporting slides sa IR site, at pasasalamat sa lahat ng sumali.